Oil and Gas Tab 2019

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2019 Oil

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Roswell Daily Record Oil and Gas

Daily Record Staff John Dilmore Editor Misty Choy Managing Editor Alison Penn Reporter Lisa Dunlap Reporter Alex Ross Reporter

and other contributors

Barbara Beck Publisher SaraLei Fajardo General Manager Manny Gonzalez Advertising Director Aric Loomis Composing Mary Morgan Graphic Designer

Dave Sterling Composing

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Melanie Page, Melissa Page Advertising

Cover designed by Aric Loomis

Correspondence: The Daily Record welcomes correspondence and suggestions for future topics. Mail correspondence to P.O. Box 1897, Roswell, N.M. 88202 or editor@rdrnews.com. Submissions: Call 575-622-7710 for writers’ guidelines. The Daily Record is not responsible for loss or damage to unsolicited materials.

The Roswell Daily Record and its associated publications are published at 2301 N. Main St., Roswell, N.M. The contents of this publication are Copyright 2019 by the Roswell Daily Record and may not be reprinted in whole or part without written permission of the publisher. All rights reserved.

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Friday, April 26, 2019

Betty Young carries father’s mantle at Read and Stevens

By Lisa Dunlap Roswell Daily Record

Betty Young remembers when her father, Charlie Read, would head out for several days at time to check the status of his company’s oil wells, sleeping in his car and taking along some crackers and sausages for meals.

She considers him and a few other local businessman, such as Lee Harvard and Eddie David, to be among the pioneers of the independent oil and gas industry in the Roswell area.

They had come to the area in the 1950s when major oil companies such as Gulf Oil and Mobil Oil had offices here. When those majors decided to pull out in the mid-1960s and return to Houston, Midland and Dallas, a few

decided to stay in Roswell and start their own companies.

Charlie Read began acquiring oil and gas leases in the Permian Basin when oil sold for about $2.82 a barrel and then in 1969 joined landman Norm Stevens in creating Read and Stevens Inc. Now Betty Young heads the oil and gas exploration company. She became chairman of the board in 2018, about a year after her father passed away.

“We have taken that gift and we are going forward with the company,” she said.

The company, which has about 22 employees, operates about 112 wells in Eddy and Lea counties and participates as investors in another 250.

See YOUNG, Page 4

Lisa Dunlap Photo

“It is an exciting field. There is never a dull moment,” says Betty Young, chairman of Read and Stevens Inc., standing beside the company’s sun emblem in its Penn Plaza offices.

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Young speaks often about what she considers to be the tremendous contributions the industry and especially the early independent operators — the “Giants” — have made. She said the industry has been crucial in the growth of the state of New Mexico through its royalty payments to two state permanent funds and its contributions to the general fund.

Like her father before her, she has weathered the booms and busts of the industry, something anyone involved in the industry should be prepared for, she says.

“Oil is doing very good right now,” she says, “but that could change tomorrow.”

The company includes several family members as shareholders, including her sister’s husband, Tom Beall, head of VF Petroleum based in Midland, who became president of Read and Stevens when Young took on the chairmanship.

Young didn’t always see herself in the oil business, but she had a life that prepared her for taking on challenges. She was deaf as a child and learned to read lips and speak because her parents did not want her to rely only on sign language, thinking it would limit her ability to communicate with others.

(As an adult, she received cochlear implants.) She said that others would point out that she had accomplished a lot by doing so well with a disability, but she had never thought much about it.

She also paved a unique path among women by becoming a computer coder in Chicago, where she met her husband, Jim. They returned to New Mexico to start a computer ser-

2019 Oil vice company and raise their children, Christine and Andrew. As personal computers came onto the market, they helped companies learn how to use them for their accounting or business processes.

Later she joined Read and Stevens in the accounting department, eventually becoming its chief financial officer.

She said that automation and computerization has transformed the industry. Much of running an oil and gas business today, she said, is about financial projections and data analysis.

Another major development to revitalize the Permian Basin is horizontal drilling, which involves the controversial “fracking,” or fracturing, of layers of sediment beneath the surface. While the method means more oil is able to be extracted, the process also costs about $8 million per well, eight times what it costs for a vertical well.

Young said the industry strives to be environmentally conscious and has worked with the knowledge it had on hand at the time to make what it felt were prudent decisions.

She said that operators have sought to limit their carbon footprints by reducing the amount of developed pads per lease, have explored technological improvements to reduce negative environmental impacts and have worked to reduce gas flaring and its consequent methane release as much as possible.

But she says that at the current time, flaring has a lot to do with pipeline capacity and functioning, which oil operators can’t control.

While she thinks renewables could be major parts of the New Mexico energy sector in 30 to 40 years, she does not think that it is reasonable to expect a pronounced decrease in

oil and gas production in the short-term and said any regulations of the industry should be made with its economic contributions in mind.

“Don’t make those rules without asking us what is cost-effective for us to achieve the best environmental situation for New Mexico,” she said.

Young has served her industry as a member or board representative with the Independent Petroleum Association of New Mexico, the Independent Petroleum Association of America and the New Mexico Oil and Gas Association. She also is an assistant governor with the Roswell Rotary; has been a deacon for her church, First Presbyterian; worked on the board for the Presbyterian Ear Institute in Albuquerque and Choices; and once served on the board for Chaves County Character Counts!

“Betty Young has been strong and loyal supporter of the Independent Petroleum Association of New Mexico, and she is highly regarded as one of the champions for independents in Southeast New Mexico,” said Jim Winchester, executive director of IPANM. “She continues to inspire the next generation of women to break into an industry that needs more gender diversification.”

Although the career in the petroleum industry was not the one she originally chose for herself, she said she has grown to love it.

“It is an exciting field. It really is,” she said. “There is never a dull moment.

You do have a routine, but there is always something new to do every day.

There’s all sorts of challenges.”

Senior Writer Lisa Dunlap can be reached at 575622-7710, ext. 311, or at reporter02@rdrnews.com.

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Armstrongs part of Roswell’s past, present and future 2019 Oil

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Friday, April 26, 2019

By Curtis Michaels Special to the Daily Record

The Armstrong family settled in the Roswell area in the late 19th century when a young cowboy came to town and married a girl from Alabama. Their great-grandson, Bob, started Armstrong Energy more than 40 years ago.

Now his grandchildren are growing up here.

“My great-grandfather was a cowboy,” Bob said.

“He moved to southeast New Mexico in the 1890s.

He and my grandfather started Armstrong and Armstrong, a highway construction company. My older brother Bill had it until he sold it.”

The Armstrongs are still involved in ranching and farming. One of their brands, the Slash-X, is the inspiration for another of their companies, Slash Exploration. That company operates in support of the primary company, Armstrong Energy Corporation.

“We’re an operating company,” Bob said.

“Which means we take oil and gas leases, analyze the development potential, and if we think they’ll produce we arrange to have wells drilled. We operate them from the point of drilling until they’re plugged, which we hope is many years later. We also transact with other companies where we have a lease. They’ll want a term assignment. If the well produces, the lease continues.”

Armstrong Energy has been a part of Roswell and its economy for a long time. Bob didn’t start out in oil and gas, though.

“I have a legal background,” he said. “I went to law school and worked for a local firm. They did a lot of oil and gas title

Curtis Michaels Photo

The “Slash-X” brand comes from a ranch the Armstrong Family owned near Hope, New Mexico. work. Because of the industry in Roswell, there were a lot of other firms that did title work too.

I started my company in 1977. There were three of us. Me, my wife and I had a part-time secretary.

We’ve grown from there.

I’ve enjoyed coming to the office every day since.

“In about 1981 I was ready for this to be an operating company. Jack Ahlen, the geologist, brought the information to us and we started drilling and operating in

1982. The first five years we acquired leases and worked with other companies, or we participated to a certain extent.”

Kyle Armstrong, fifth-generation Roswellite and Bob’s son, joined the company full-time a few years ago.

“I’m fortunate to stand on the shoulders of giants,” Kyle said. “I’m an attorney by training as well. I moved back to Roswell about three years ago. I practiced in venture capital, high tech start-

ups, and imports/exports.

Since I have a background in acquisitions, I got involved. Then I got to be more active in day-to-day operations.”

The Armstrong family knows Roswell’s energy history intimately.

“Having been born and raised here in Roswell,” Bob said, “I remember when some of the major oil companies had offices in downtown buildings. Then they started moving the offices, with engineers, geologists and

landmen to Midland, Dallas and Houston. A lot of those geologists didn’t like living there and they started coming back in the mid-60s. They worked independently and as consultants. Eddie David is a good example. He worked for Texaco and moved back to Roswell.

“The industry in Roswell has played a significant role since the 40s but then we started losing the major companies. The independents grew here next. Now with horizontal

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drilling being more costly, the major companies are starting to come back. It’s going to have an impact on employment throughout southeast New Mexico.”

“In the late 1800s and early 1900s we had the cattle barons,” Kyle said.

“From the early1900s into the 2000s, oil and gas have been how this area is defined.”

They work to stay ahead of technology whenever possible — history has taught them to pay close attention.

“The industry has changed over the years,” Bob said. “Let me give you an example of what’s happening now, with horizontal drilling. In the past, with vertical drilling, you might have multiple vertical wells being drilled in four square miles of acreage. With horizontal drilling, you drill one well and then drill horizontally from that one point up to 24 wells with only one penetration site. This doesn’t work everywhere.

Some formations can’t be drilled horizontally.”

New technology brings new careers and businesses.

“There are opportunities that come out of technology,” Kyle said. “There’s the technology of recycling produced water and the technology of methane capture. There are a lot of emerging technologies that we need to have here to maintain the economy.

“We’ve got labs in New Mexico. This is where the action is. There’s no reason why we can’t be looking to create opportunities to keep future generations motivated to stay here.

How do we, as a state, as a local community, retain and capture as much See ARMSTRONGS, Page 6

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investment money as we can?”

Of course, technology and opportunities include the competition.

They’re paying attention to that as well.

“When you read about alternative energy,” Bob said, “not only are they referring to solar and wind energy. They mention natural gas to produce electricity. Natural gas is not an alternative energy. Alternative energy will continue and it’s important. But a lot of those alternative energy developers have to use oil and gas to do their work.

“I’m on the National Petroleum Council. It’s an advisory council for the secretary of energy.

In 2005 they did a study that indicated that the fossil fuel industry provided roughly 92 percent of all energy globally. By 2030 it would probably be reduced to 85 percent. Because of solar development, it’s going a bit further, but in my grandchildren’s lifetime, oil and gas will still be two-thirds of global energy.

“In the early 1970s, Richard Nixon thought the oil and gas reserves were depleted. He reduced the speed limit on highways to 55 miles per hour to preserve the oil that was left. The industry has seen its ups and downs, but it’s going to be here for generations to come.”

One of the greatest challenges the oil and gas industry faces is government regulation.

The state determines royalties which feed into much of the state’s economy. There’s been a lot of conversation across

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These signs are the first thing one sees when stepping out of the elevator on the way to Armstrong Energy Corporation’s offices. the table in Santa Fe during this last session of the Legislature.

“Royalties impact the longevity of a well,” Kyle said. “The current highest rate is 20 percent. If it goes up to 25 percent certain wells can become uneconomic and we get what we call premature shutdown. I’m vice president of the Independent Petroleum Association of New Mexico, representing southeast New Mexico, so I’ve been in Santa Fe quite a bit. There are initiatives that concern us. The new administration has been willing to sit down with the industry. There’s the old saying that good compromise leaves everyone unhappy. I think there’s a recognition that the industry is important to the state.”

“The Oil and Gas industry provides at least a third of New Mexico’s budget,” Bob said, “and has for a very long time. There’s also a permanent fund that’s used for education. The state owns mineral rights in about a third of the state, so you need a

lease from the state of New Mexico and then you pay royalties, which go into the permanent fund. The size of the permanent fund is about 17 billion dollars and I believe it’s the second largest sovereign fund in the country.”

While fighting in the halls of government for the most economically sound laws, oper ating companies like Armstrong Energy have a significant impact on the local economy.

Every well they operate requires contracting with a variety of companies.

“Armstrong energy corporation employs 25 people,” Bob said. “We’re fixing to hire two more people in the very near future. We operate mainly in Chaves, Lea and Roosevelt counties.”

“On each well we drill,” Kyle said. “We contract with six to 10 different companies.”

“We feel strongly about what we can do for the benefit of everybody who lives in Roswell,” Bob said. “Our family has been active in Roswell and will remain so.”

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Xcel Energy: Powering a booming region

By Curtis Michaels Special to the Daily Record

As a major energy company, Xcel Energy serves eight states.

Based in Minneapolis, Minnesota their presence in the Permian Basin has been vital to the company, to the area’s energy needs and to the regional economy for decades.

That presence is on the upswing.

“What we’re seeing over the last five to 10 years and what we think we’ll see for many years to come is historical,” Mike McLeod, community service manager for the region, said.

“Horizontal drilling and hydraulic fracturing have c h a n g e d t h e e c o n o mics and the availability of oil in the Permian Basin and we’re right in the middle of that. We’ve been on an incredible build-out since 2010.

We started planning in about 2008. We heard from our large industrial customers that this activity was going to ramp up just like it has.

“We have four operating companies under the Xcel Energy brand.

Southwestern Public Service serves in Texas and New Mexico. Our corporate office for SPS is in Amarillo. Roswell is the regional headquarters. We also have operations in Colora do, Minnesota, Wisconsin and the Dakotas.”

Xcel sees the future of oil and gas in New Mexico as a solid investment for a long time to come.

“It makes a huge impact on the econo my of the whole state,” McLeod said. “Almost the entire surplus that they (the Legislature) got this

Friday, April 26, 2019

year came from the oil and gas industry.

“It’s the heartbeat of this area. The majority of the growth in the past seven or eight years has been in the oil and gas sector.”

They do face challenges though.

“We have political challenges,” McLeod said. “We have regulatory challenges. People think because where regulated we don’t have competition, but we do have competition. Industry has choices in how they want to do business. In the oilfield, they might make the choice to use natural gas to generate electricity and they’ll get it from us.”

With renewable energies coming in, and with changing ecology-based standards, Xcel looks to the future without flinching.

“We’re anticipating greater advances in technology,” Mcleod said, “with our goal of 80% carbon reduction and ultimately 100%. We don’t plan on doing that by simply not operating fossil fuel plants. We plan to integrate technology to help us capture the carbon and still allow us to, for instance, burn natural gas.

“We believe renewables are an important part of the equation but it’s not the entire equation.

Our CEO and our corporate culture encourage employees to be thinking and looking for ways to use technology to make our jobs more efficient, cost less and be safer.”

Wes Reeves, senior media relations representative for Xcel, out of Amarillo, said they’re

Submitted Photo

Xcel Energy’s regional headquarters building in Amarillo, Texas. exploring all avenues of opportunity that come with new responsibilities.

“It’s our position as a company to ultimately reduce carbon emissions,” Reeves said. “I was asked what this means for the big oil and gas customers. I said they’ll benefit as much as anyone from renewable energy because it’s low cost, it’s available, and it builds the regional economy.

“Our clean energy future is predicated on new technologies, like those that help capture carbon emissions, and battery storage for wind energy. There are a lot of different developing

technologies which open up other career fields, related to oil and gas, in southeastern Mexico.

There are going to be a lot of bridge technologies along the way.

“There are decades of development in oil and gas. I don’t see that going away. Our largest revenues come from oil and gas.”

Innovations require initial investments, which then must be paid back. Xcel sits right in the middle of that economic structure. Balancing their customers’ needs with their investors’ needs and legislative requirements is no small job.

“We have a lot of technical innovation available,” Reeves said, “and we want to use that. One of the challenges we have is paying for it. Getting the rates, getting the regulatory treatment we would need to bring on new technologies. Sometimes it requires a capital investment. We are a very capital intensive business. It’s been a struggle to upgrade our rates to pay our investors back. We’re really eager to take on things like advanced metering, which we are moving toward. We could move faster if it didn’t cost as much. There is a give and take there.”

“Because we are so heavily regulated,” McLeod said, “it’s always a challenge knowing which way the regulatory bodies are going to go.

We work really hard to stay in unison with regulators. Our investments are long-term. When we build a power plant or a transmission line, we plan for it to be there for decades. Cost recovery is one of our challenges.

Everything we do we’re trying to keep reliability high and costs low.

Those are a couple of our driving forces.”

Xcel keeps a welcoming eye out for how they

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can work with new energy resources and new technologies.

“We build a lot of new high voltage transmission lines,” Reeves said, “to increase the capacity of the system. We do this to keep up with the economic growth in southeastern New Mexico, which is largely driven by energy. It has a great side benefit in that it makes it possible to export renewable energy. When you have industry that drives infrastructure development, anybody can use that infrastructure. You can grow your economy with that infrastructure, but you have to be able to build it, and oil and gas is why the economy has grown so much in the last few years. The role of oil and gas has been huge.”

X cel E n ergy cu rren tly serves 117,017 customers in New Mexico and employs 219 New Mexicans. They’re actively seeking employees as

2019 Oil older ones retire and as the economy grows.

“All big industries in the region are looking closely at the younger generations,” McLeod said. “We’ve had a lot of generational turnover.

People that are 55 and above are looking at retiring within 10 years, and that’s a lot of our workforce. We’ve really put out a huge effort in the last few years to recruit at colleges and high schools.

We have programs to bring interns on. There are so many opportunities for young people to stay in southeastern New Mexico. Getting the kids to stay will be a huge boost to the economy.

“We have various career paths. We have a lot of people who come on as linemen and servicemen. They train to work out in the field. We have a skilled labor path, and we have more of a professional/office-oriented path where we have accountants, engineers, marketing, sales and media relations. We have a wide swath of career

pathways.

“We do a lot of in-house and vocational training because our industry is unique. We have people who come in at an entry level position, who decide to get an education change career paths.

“I came right out of college with an electrical engineering degree. I interviewed with southwestern public service right out of Texas Tech.

The first position I took was in Roswell. I’ve been here are going on 37 years. I started as a design engineer. Then I worked as an operations engineer. Later I went more on the business side. I’ve been regional manager for about 10 years.”

Xcel Energy will be working in the Roswell area for decades to come.

Constantly working to improve the efficiency of their work, the ecological response and the safety of employees keeps them innovative and growing.

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Submitted Photo

Pictured are crews erecting a new distribution feeder line.

Smith: ‘There’s nothing but opportunity here’

By Curtis Michaels Special to the Daily Record

Derik Smith is an outlier in the oil and gas industry. Whereas most of his peers grew up in it, he’s only been in it for a few years.

“I graduated from law school,” Smith said. “About a year before that I had come to the conclusion that practicing law didn’t interest me. I had friends in East Texas who were subcontracting and I needed something to do. I had no idea what I was doing. I just went out there and taught myself. I went to Oklahoma and back into Kansas, where I’m from. Then I moved to Santa Fe. We had our first kid and business moved down here so we

came here.”

Smith and his partner own Elkhorn Land and Title, one of only a handful of oil and gas title companies in Roswell.

“We’ve got about 25 to 30 subcontractors at any given time.

Half of them live here, Carlsbad, Lovington and Hobbs. The rest come in from out of state.

There aren’t enough people here to fill the need. Mostly it’s title research. There’s ancillary work as well. “ W e h a v e c lie n t s , m o s t ly from out of state, that hire us regarding an interest in the general area. We contract typically with oil and gas companies.

We research title. We negotiate leases. We contact other companies that may own something

and facilitate the exchange. Or we may confirm what they own, step back and let them negotiate among themselves.”

Many in the oil and gas industry are busy working with legislators in Santa Fe to ensure their futures. Smith isn’t as concerned with politics as most of his peers.

“The land commissioner ran on promising to shut down fracking on state lands. She’s not doing that. Every month she’s putting up four to six thousand acres to lease for oil and gas. Things are continuing as they did under the last commissioner. She’s a trustee. She has a fiduciary duty to whoever benefits. Every election cycle they complain about being too reliant

on oil and gas revenue. But then they’re going to increase spending by 10%. They’ll be as reliant on us next year as they were last year. They’re going to nibble around the edges.”

His biggest concern is getting enough employees for all the work that piles up.

“Over time, every few years, the number of documents filed with the county double. It’s burdensome going through all that.

We need more and more people to clear the same amount of title.

There’s more work than people to do it here. Technology hasn’t changed much for us, it’s all document work.”

From his perspective, Roswell is rife with opportunities both in and outside the oil and gas

industry.

“When you look at the resource we have here,” Smith said. Three years ago there was a federal lease sale for $35,000 an acre and it blew the roof off.

Last week I heard about a private transaction well north of $100,000 an acre. The geology here is that good.

“I don’t see how the future in oil and gas couldn’t be solid.

My advice is to ignore the politics and look at what’s going on around here, especially in Roswell. There’s nothing but opportunity here.

“If you’re willing to live here and you look around there are plenty of needs to be met.

There’s very little competition here in most any industry.”

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Lawmakers see talk of regulation as harmful

By Alex Ross Roswell Daily Record

For decades, the oil and gas beneath New Mexico have been major cornerstones of the state’s economy.

Crude oil production in the Land of Enchantment has nearly tripled since 2009 and in October 2018 reached a record high of 772,000 barrels a day, according to the U.S. Energy Information Administration.

New Mexico ranks third among states in oil production, surpassed only

by Texas and North Dakota.

An abundance of natural gas also exists within New Mexico, with reserves comprising nearly four percent of all reserves within the U.S., and in the last five years production has quadrupled, according to the U.S. Energy Information Administration.

Oil and gas does much more then generate electricity or fuel vehicles — it also helps power communities and counties, especially in southeast New Mexico, home to the Permian Basin that encompasses part of southeastern New Mexico and southwestern Texas.

Artesia in Eddy County is also home to the Navajo Refinery, the largest of New Mexico’s two oil refineries.

State Rep. Jim Townsend, R-Artesia, whose House district includes southern Chaves and Eddy counties, said oil and gas offer some of the best jobs in the state in terms of hourly wages.

Without jobs and investments pumped into those communities by oil and gas companies, Townsend said southeastern New Mexico’s population would

Daily Record File Photo

Pictured from left are State Sen. Bill Bert, R-Alamogordo and state Reps. Greg Nibert, R-Roswell; James Townsend, R-Artesia; and Candy Spence Ezzell, R-Roswell at a recent meeting of the Chaves County Federated Republican Women. be more sparse and its economy much less developed.

“Without oil and gas, we would be desolate,” Townsend said.

The oil and gas industry has a cascading effect on the local economy, indirectly creating service jobs and bringing in businesses from other sectors of the economy.

Dollars those oil and gas employees earn are pumped back into local businesses and are used to pay property taxes, the revenue municipal and county governments depend on. Schools within those communities educate the children of oil and gas employees, and those employees belong to local social organizations.

“The industry, it effects everybody. It effects our schools, our churches,” Townsend said. “I mean it

is what drives us.”

Oil and gas is also responsible for a large share of the state’s revenue — about 45 percent — and is a prime source of the state’s current $1.1 billion record surplus.

“What if you had two incomes and you got half your income from one job?

That job would be pretty important to you,” said state Sen. Bill Birt, R-Alamogordo, whose district includes parts of Otero, Chaves, Eddy and Lincoln counties.

The economic relationship between New Mexico and the oil industry reached an important milestone on Sept. 25, 1922, when the Midwest Refining Company drilled the first commercial oil well the Hogback No. 1 on the Navajo Reservation near Shiprock in the northwestern part of the

state, according to the American Oil and Gas Historical Society.

It produced 375 barrels a day, and eventually Midwest drilled eleven additional wells, laying the foundation for the hub of oil production known today as the San Juan Basin.

The search for oil began in Hobbs in 1927, when Midwest drilled a discovery well in a farmer’s pasture, according to the Historical Society.

Midwest Oil No. 1., the discovery well of the Hobbs oil pool, was completed Nov. 28 and was producing 700 barrels of oil daily, according to the Historical Society.

Despite the long history between New Mexico and the oil and gas industry, industry proponents and legislators say that continued investment and

expansion are not guaranteed.

Local legislators such as state Rep. Greg Nibert, R-Roswell say oil and gas companies take a host of factors into account when evaluating whether or not to do business in New Mexico. Nibert said one of those factors is the state’s legislative and regulatory environment as it relates to the industry.

Nibert said some of the legislation passed or proposed this past session is viewed as burdensome and hostile to oil and gas and other extractive industries.

“So when companies look at this, at what state government is trying to accomplish, they have to factor that in,” he said.

Two bills that failed to gain traction during the most recent session of the Legislature are cited as

examples of that risk.

Senate Bill 459 (SB 459) would have banned the practice of hydraulic fracturing — commonly known as fracking — within the state for four years.

The legislation that was introduced in February by state Sen. Antoinette Sedillo Lopez, D-Albuquerque would have temporarily prohibited the issuance of permits for oil and gas development in New Mexico that involves the practice of fracking.

The ban would have remained in effect until July 2023, during which time the state would work to examine the possible effects of fracking on public health, safety and the environment.

“The oil and gas industry is bringing in record profits and that is great for them, but at what cost to our state, our people and our land?” she asked when she introduced the bill in February.

Critics said the move would have caused oil production to drop dramatically in New Mexico.

Nibert also mentioned Senate Bill 398, a bill backed by New Mexico Commissioner of Public Lands Stephanie Garcia Richards, that would have hiked royalties on top-performing oil and gas leases on state trust lands, which would in turn generate additional revenue for schools and hospitals.

A press release from the State Land Office issued in February said the bill would increase the royalty rate for high producing oil and gas leases on state trust land from the current 13% to 25%. The new amount would mean an additional $1.2 billion to

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$2 billion over the course of 30 years for the Land Grant Permanent Fund.

Lawmakers say that even talk of such legislation might be disincentive enough for companies to pull out of New Mexico.

“When you say things about an industry whether you actually do anything about it or not, that message just reverberates throughout the industry and they are going to put the brakes on,” Birt said.

Such talk fosters a climate of uncertainty that could force companies out of the state, moving their operations to neighboring Texas. New Mexico would not collect any of the benefits in terms of state revenue or jobs.

New legislation that passed this session

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though is likely to alter the relationship between the extraction industry and the state.

The Energy Transition Act, House Bill 389 (HB 389), was passed by the Legislature and signed

by Gov. Michelle Lujan Grisham. The ambitious bill seeks to wean utilities and rural electric cooperatives in New Mexico off fossil fuels when it comes to electricity generation.

New Mexico law already required that 20 percent of all electricity within the Daily Record File Photo state come from renewable energy sources.

State Rep. Phelps Anderson, R-Roswell According to the fiscal impact report for HB 389, retirement of coal fired Grisham said. “Crucialthe Energy Transition Act power plants. “This leg- ly, the Energy Transition would require 100% car- islation is a promise to Act does not leave affectbon-free generation of future generations of New ed workers and neighbors electricity by 2045, after Mexicans, who will ben- behind. We look out for considering safety, reliability and costs to cus- efit from both a cleaner each other. With this law, tomers, according to the environment and a more we seal that promise.” robust energy economy State Rep. Phelps Fiscal Impact Report.

The act also authoriz- with exciting career and Anderson, R-Roswell, said es a mechanism for the job opportunities,” Lujan renewables will make up

Friday, April 26, 2019 a large share of the state’s energy portfolio, but that mandating that utilities pivot to 100% renewable so quickly will have consequences in the form of higher bills for rate-payers and a hit to state revenue.

“New Mexico’s long contributing source of revenue does not exist with wind and solar,” said Anderson.

As for climate change, he said that the Energy Transition Act will do little to combat the problem of climate change, which is a problem far larger than New Mexico.

“New Mexico’s contribution on climate change is so insignificant it can’t be measured even if we achieve 100% renewable energy policy,” Anderson said.

Townsend said he believes the state Legislature needs to be in favor of dispatching the cheapest, most abundant, saf-

13

est source of energy, but it is not up to government to decide what source that should be.

“You can’t build an economy picking winners or losers,” he said.

Rather those decisions are something that is the function of industry and the private sector through innovation and the market, which have been responsible for so many discoveries and advances in technology — not government. “That’s why we have horizontal drilling and all these other technologies that have come about, is because we got out of the way and let American energy run it,” Townsend said.

Breaking news reporter Alex Ross can be reached at 575-622-7710, ext.

301, or at breakingnews@ rdrnews.com.

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Wildcatters’ spirit reflected in stripper-well operators

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By Curtis Michaels Special to the Daily Record

The United States is the largest producer of crude oil in the world. Last year it pumped more than 10 million barrels per day.

An oil well can produce upwards of 100 barrels per day, some quite a bit more than that. A well that has quit producing enough to pay for itself will often be sold off by one of the bigger operating companies, rather than being capped and shut down. These are called stripper wells.

There are nearly half a million stripper wells across the nation that produce 18 percent of the crude oil.

A stripper well produces less than 15 barrels of crude oil per day, and

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most produce less than three. Combined they produce nearly two-million barrels of crude per day.

Rory McMinn is a stripper operator.

“I’m third generation in this industry,” he said.

“It’s ingrained in us. It’s no different when you talk to a dairyman or a rancher. Once people get involved in the industry it grabs you. It’s very hard to leave. If you do leave you always come back.”

McMinn and his partners own stripper wells near Roswell.

“I have three business partners,” he said. “We own 62 wells. All of our wells are located within 25 miles of Roswell. We acquired our wells from other operators. My best producer is in the neighborhood of 2 barrels a day, and my worst producer is in the area of a quarter of a barrel every other day. Because we don’t have a lot of overhead we can run these poor economic producers and we can cover our costs and make a little money on it.”

With a tighter profit margin, stripper operators have to organize to protect their interests.

They’re supported by the Independent Petroleum

Producers Cooperative, the Independent Petroleum Association of New Mexico, the New Mexico Oil and Gas Association and the Permian Basin Petroleum Association.

Most of these organizations keep lobbyists on staff.

“There probably are more stripper operators than there are major operators,” McMinn said.

“I was unable to attend this session, but IPPC and IPANM did a fantastic job representing us.

“When we go overseas and deal with a foreign entity trying to produce oil and gas on their soil, we have to deal with concessions. One of the things we have to factor in is political risk. It’s true now in New Mexico as well.

“The other concern we have is there’s no moderation in politics. It’s either the pendulum swings far-far right or it swings far-far left. There’s nothing in between where everybody can do business and be happy.”

There’s a balance between economic security, ecological responsibility, and profitability that all oil and gas producers work to maintain.

With society taking a longer look and demanding ecological responsibility, that balance has become more public than in past years.

“The attitudes across

the industry,” McMinn said, “regarding maintaining and taking care of the environment have changed over the generations. The next generation is even more concerned about it.

“The issues of today are produced water, which typically has a high chloride content.

Then we deal with the crude oil itself. We’re managing and handling those liquids as they come out of the ground and we’re directing them into various containers.

We’re trying to sell the oil and we’re trying to move the produced water to either reuse or to proper disposal. The problem is once you get it above ground, you’ve got to handle it.”

Since the first commercial oil well was drilled in New Mexico in the 1920s, Southeastern New Mexico has never been the same.

“You drive for miles and miles,” McMinn said, “and all you see are pumping units and tank batteries and oil field related equipment. Communities like Maljamar and Lovington and others were formed around the oil and gas industry.”

The independent, self-reliant nature of the original wildcatters who changed the landscape forever is very much alive and well in today’s stripper well operators.

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Submitted Photo

Pictured are local Desk and Derrick Club representatives during a recent event recognizing club officers. They are, left to right: Ellie Gallagher, past president; Janice Starnes, director; Carol Smith, director; Lori Gomez, vice president; Wendy Northcutt, president; Anna Carreon, director; Jackie Hewett, secretary; Patti Stacey, treasurer; and Irma Cunningham, director.

Desk and Derrick Club is focused on education

By Alison Penn Roswell Daily Record

The Desk and Derrick Club of Roswell provides education and professional development as related to the oil and gas industry.

Club President Wendy Northcutt, Treasurer Patti Stacey, Secretary Jackie Hewett and Ellie Gallagher, immediate past president and parliamentarian, emphasize the educational component of the club for members and nonmembers alike in the oil and gas industry.

For members, club representatives said what is learned at the

meetings allows them to bring relevant information into their workplace.

They said employers are supportive of the club and education of their employees is vital.

The four women represent Matador Resources, Nuevo Seis Limited Partnership Mineral Rights, Transwestern Pipeline Company, LLC and HEYCO Energy Group in various professional roles.

“I knew nothing about it — but I love it,” Gallagher, an accountant, said about the industry prior to joining Desk and Derrick. “I’m gung-ho, all in — I love being around other people who work in

the industry and understand its importance ... a lot of people think negative things about the oil and gas industry. It’s nice to be around other people who understand its importance and the positive aspects.”

The nonprofit club has 70 years of tradition and was organized for women working in the industry by Inez Awty Schaeffer and expanded to the Association of Desk & Derrick Clubs (ADDC).

Roswell’s club began in 1952 with 43 members and Edna Mae Bear was the first elected president. Representatives clarified the club is open to anybody interested in

the oil and gas industry and men are welcome also.

Currently, Desk and Derrick Club has 31 members and is open to new members. The club meets at noon on the first Tuesday every month at the Elks Lodge at 1720 N. Montana Ave. For prospective members, their first lunch is free.

Hewett compared the monthly meetings to seminars with different speakers presenting various topics, from the environment and drilling, to pipelines and more.

She also said presenters from Los Alamos and Sandia Labs have visited the club to discuss the

hydrogen energy industry.

Every April the local club has a joint meeting with a sister club in Artesia and joins in on field trips. An industry appreciation dinner is also hosted by the club for those in the industry and their employers.

They also explain the club is an international organization with four regions. Roswell’s club is part of the west region.

The ADDC has a regional meeting and a national convention annually. At these annual events, Gallagher said she has seen members ranging anywhere from 20 to 90 years old.

More information about the club can be found on the website and Facebook page. President Northcutt may also be reached at 575-623-6601 or emailed at wnorthcutt@matadorresources.com.

“There’s just so much misinformation out there ...” Stacey said. “A lot of people don’t understand that what comes from the oil and gas industry affects your everyday life. It’s not just gasoline that goes in your car. It’s the plastic bottles that your pill bottles come in.

I mean it’s almost every aspect of your life you can tie back to oil and

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gas industry and people don’t realize that if it wasn’t around they would miss out on a lot.”

Hewett listed that cellphones, pharmaceuticals, make-up and more would not be available without oil and gas. She said the club conducted “a magic suitcase” project where they brought a suitcase full of petroleum products to classrooms and “blew people away.”

The club also has an educational tool called “Bitofun” with puzzles, games and educational information about oil and gas for students, along with a teacher training manual.

On a larger educational scale, Northcutt said teacher salaries and other public education funds are dependent on drilling and can face significant impact when production costs are down. Hewett and Gallagher added that acquiring energy is complicated and expensive.

The group’s golf tournament upcoming on May 31 is the largest

fundraiser for scholarships to Eastern New Mexico University and New Mexico Tech. From their annual energy dinner last year, Northcutt said the club donated $21,000 to Eastern New Mexico University.

Northcutt said the club collaborates with other organizations, such as the New Mexico Landmen’s Association and Roswell Geological Society.

Stacey and Northcutt said the industry aims to protect and help sites where gas and oil is being extracted. Hewett said this process is called reclamation and said the misconception, that companies would want to pollute the environment where they and their families live, was nonsensical. Stacey said the oil and gas industry is “not out there killing everything and leaving destruction in our path.”

Northcutt stated that oil and gas is a “highly regulated industry.”

For Roswell’s future oil and gas industry involvement, the club said they hope growth is similar to Carlsbad with more major companies moving in. Hewett called the incoming office for Devon Energy Corp.,

a Fortune 500 oil and gas producer, “a big feather in our cap.”

Hewett recalled a particular trip to the Permian Basin Oil Show Odessa, Texas. She said club members and Mayor Dennis Kintigh represented the city by wearing matching shirts to attract vendors and energy and oil and gas business to Roswell.

Kintigh said he remembered this day trip being in October 2014, involving Desk and Derrick Club, Roswell Chamber of Commerce and Roswell-Chaves County Economic Development Corporation.

“The oil and gas industry is a much bigger deal in Roswell than most people realize,” Kintigh wrote in a statement. “That is partly due to no highly visible examples of the industry. Desk and Derrick help to remind all of us who do not work in this industry how significant it is — not just to Roswell or the region but the whole state and arguably the nation.”

City/RISD reporter Alison Penn can be reached at 575-622-7710, ext.

205, or at reporter04@ rdrnews.com.

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O&G professionals stand on shoulders of giants

By Curtis Michaels Special to the Daily Record

People who work in the oil and gas industry today talk about standing on the shoulders of giants. The men who drilled for oil created fortunes and employed generations of New Mexicans.

They were natural leaders. They were independent-minded. They were courageous. They had the audacity to strike out on their own and the perseverance to succeed.

Charlie Read and Norm Stevens were two such men. Both men left Gulf Oil to develop and manage energy in the Permian Basin of Southeast New Mexico and West Texas. They called themselves Wildcatters. The slogan they coined, “Get your oil from U.S. Soil” is still the company motto.

Norm Stevens died in 2016 at the age of 92.

Charlie Reed died in 2017 at 94.

Read and Stevens is still thriving and it’s still serving Roswell and the Permian Basin. Their current Operations Manager, Matt Murphy, has a long family history in oil and gas in the Roswell area.

“My father was in the business,” Murphy said.

“My grandfather and great-uncles were too, so I’m in the third generation. My father was a Stanford Petroleum Engineer. He went on a GI bill after World War II. Our family’s been in the industry about 100 years now.

“I started riding with him to well sites about 50 years ago. I was working in the oil field by my freshman year in high school. I knew pretty young what I wanted to do. I didn’t go to col-

lege right out of school.

I never stepped into a college classroom until I was 24. I went out here to Eastern and I worked.

It took me over three years to get an associate’s degree. I went to New Mexico Tech after that and studied petroleum engineering. During that time I had internships with Unical in Louisiana for two summers. Then I moved to Wyoming and went to work for a local operator in Gillette. He also had a service company and was doing contract work in Russia. He got some concessions and licenses to re-enter and develop oil and gas fields in Southern Russia. I traveled over there to help with that development.

That’s how I started my international career, in 1995.

“When I came back I started my own companies in Gillette, Wyoming.

I divested those companies in 2006 and 2007. I went back international and I worked primarily in China and a little bit in India. About 30 percent of my work has been international.

“That last international stint was a rotational job — 28 on, 28 off. I was rotating out of Roswell from 2008 to early 2015. When I came back I started consulting here.

We had some pretty good success. Read and Stevens asked me to come on full-time later as their operations manager. I got some good hands-on experience along the way before I got my formal education. Looking back I wouldn’t do it much differently.”

Read and Stevens has ranked in the top 50 of more than 600 operators

of oil leases in New Mexico for years. They operate more than 200 wells. Like any successful oil and gas company, they rely on people who can stand back and look at the big picture. They hire people who look to the future with the courage to create it by responding to and adopting new information as it comes along.

“You have to adapt and stay up with the technology,” Murphy said.

“Otherwise you become antiquated. When I was in high school we didn’t learn about computers.

We had to learn how to become computer literate as adults. The thing that’s made the industry here in New Mexico the number three producer in the country and has made the U.S. now the number one producer in the world, is technology.

I’ve had to learn horizontal drilling and hydraulic fracturing. It’s a continual education to keep up with technology.”

Keeping up with technology is only one part of that big picture, however.

They have to stay on top of the laws and ensure they’re represented so that they can continue to help shape southeastern New Mexico’s economy and develop energy.

“We’ve recently had a changing of the guard and we’re seeing more and more regulation,” Murphy said. “Over-regulation is the biggest challenge the industry is facing. The recent regulation that’s been passed is going to make it less economical to operate. There’s never been one documented case of groundwater contamination with hydraulic fracturing in New Mexico. The

industry as a whole has become better at protecting the environment and the workers.

“Right now the state of New Mexico has a very high surplus because of oil and gas production.

We’re as wealthy as we’ve

ever been in New Mexico.

The state has a big financial surplus from oil and gas development. That’s what’s going to pay for improvements in our education system. We now have the funds to put more money into educa-

tion and infrastructure.

That money has to come from somewhere.”

Read and Stevens employs more than 20 people, and contracts with multiple companies that employ hundreds more.

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State’s oil production soars to record 250 million barrels and

Friday, April 26, 2019

Special to the Daily Record

New Mexico’s oil boom continues to reach new heights as recently-published data shows oil production reaching a record-high of 250 million barrels in 2018. The United States Energy Information Administration reports that oil production climbed an impressive 46% from 2017 to 2018, surging 78 million barrels past the previous record of 171 million barrels set in 2017.

“New Mexico’s oil and natural continues gas industry continues to be the economic backbone of our state,” said Ryan Flynn, Executive Director of the New Mexico Oil and Gas Association. “Record energy production is not

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Chase Foundation: Giving back through education

By John Dilmore Roswell Daily Record Mack Chase has been called a man of few words with a good heart. Those characteristics are reflected in the works of the Artesia-based foundation that bears his name.

Those directing the efforts of the Chase Foundation — in which the Chase family is heavily involved — aren’t focused on generating publicity for the organization. But they don’t really have to be.

The foundation is represented by hundreds of young New Mexicans who, without ever having to say a word, are telling its story even as they tell their own.

Day by day, year by year, they’re continu ing their educations and building careers thanks in large part to scholarships awarded by the foundation. And most are doing so right here in New Mexico.

Approximately 70 percent of the scholarship recipients who’ve completed their educations live and work in the state.

“What they want to do ... is to bring these kids

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only good for jobs and the communities where we produce oil and natural gas, it means important funding for our public schools and the entire state budget while protecting our environment and natural resources.

“The only impediments to more growth for our economy and oil and natural gas production are regulatory uncertainty and detrimental policies crafted in Santa

back to be leaders and come back into our community — and give back to the community and the state,” said Richard Price, the foundation’s executive director. “So we really try to make an effort to get these kids to come back in this area, and I think we’ve kind of been successful because there’s been a lot of opportunities.”

Preparing young people to take advantage of opportunities, by awarding scholarships to help fund their educations, is the Chase Foundation’s primary focus.

“College education and the costs have just kind of skyrocketed, so this is a program to basically help families, more than anything — help families being able to go educate their kids,” Price said.

The work began in 2006.

Since then, approximately 1,400 scholarships have been awarded to Artesia High School grads. Twenty-two million dollars in awards have been distributed, and between 450 and 500 Chase Foundation scholars have earned their degrees.

Fe. Together, our focus should be on finding ways to safely continue the growth that is helping turn New Mexico around, not hinder it.”

New Mexico natural gas production was also on the upswing, coming in at a 10-year high of 1,488,471 million cubic feet for 2018 marketed production. New Mexico last passed that figure in 2007, but still lags behind the all-time high of 1,695,595 million cubic feet produced in 2000.

New Mexico is the

Currently, there are 350 kids in college who’ve received foundation scholarship funding.

Speaking to the spirit of philanthropy on which the foundation was founded, Price said, “It’s pretty amazing, when you look and see — why would a family want to do this?

There are so many other things that they could go do. But through their generosity, they wanted to make a difference, and so they said, ‘Let’s start this.’

“I don’t think there was really any vision at first ... of where we were going or what we were going to concentrate on. It’s just kind of what we saw as a need ... kids having an opportunity to go to college. ...

“I think one of the testaments to the Chase family is, number one, their generosity. But they’re really wanting to give kids an opportunity.

“The thing that always astounds me is we have a yearly deal where the students come together with the family and sit down and eat. There’s very few kids this family knows, yet ... ‘I’m going to take a

chance on you.’”

Price emphasizes that the foundation doesn’t just award the young scholars funds and hope for the best. Over the years a number of programs have been developed to help the students find success.

“We’ve seen where you would need to have additional programs to try to make a good solid investment in a kid,” he said.

“We’ve had to put a lot of programs together, mentoring programs, new scholar orientations — we do school visits. It’s not like we hand (them) a check and say, ‘See you later.’”

Over the years, Chase Foundation scholars have attended hundreds of colleges in more than 40 states. Of course, within New Mexico, the foundation maintains strong relationships with institutions of higher learning and for many kids, it makes perfect sense to pursue their degrees right here in the Land of Enchantment.

“We do have probably a higher percentage ... because you take the lottery, then what we give them and some of the

third-largest oil producer in the United States, having cemented the position with rapidly increasing production in the Permian Basin. New Mexico oil producers are showing no signs of slowing down, having also reached a monthly production milestone of 25.3 million barrels of oil in December.

Earlier this year, oil producers Chevron and Exxon Mobil announced higher production forecasts for their assets across the New Mexico-Texas Permian Basin.

Exxon Mobil said it plans

to produce the equivalent of 1 million barrels of oil per day in the basin as soon as 2024, while Chevron expects to produce 600,000 barrels per day in the Permian by the end of 2020 and 900,000 barrels a day by the end of 2023.

Increased production has led to rapid growth for communities in southeast New Mexico, but it is also having an impact around the state. The New Mexico Tax Research Institute reports that New Mexico’s general fund and

John Dilmore Photo

Richard Price is executive director of the Artesia-based Chase Foundation. schools’ participation and they can go pretty much and walk out of school debt-free,” Price said.

Close to 40 percent of foundation scholars are able to graduate without college debt.

Mack Chase, a legend in the oil and gas business, needs no introduction to the people of southeast New Mexico. Beyond his exploits and accomplishments in the industry, his generosity is also well known. Any number of

public schools are benefitting from considerable increases in oil and natural gas taxes and revenues. Total industry contributions to the state in fiscal year 2018 totaled $2.2 billion, including $822 million in funding for public schools and nearly $241 million for the state’s universities, colleges, and other higher education institutions.

“The future is very bright for New Mexico, and we can expect record highs and new heights to be the norm for New Mexico if the state remains

people and organizations have benefited over the years as he and his family have found ways to give back to their community and state. Few ways of giving back could have more long-term impact than the foundation’s focus on education. It’s in keeping with the generosity that’s characterized the Chase family’s efforts, in education and other areas.

“When they see a need,” Price said, “they want to help people.”

a favorable place to do business,” added Flynn.

“New Mexico’s Permian Basin is among the best in the world for oil and natural gas production. We are rising to the challenge of driving New Mexico’s economy, and we can continue to safely develop our oil and natural gas resources and enjoy robust growth for the foreseeable future.”

Based in Santa Fe the New Mexico Oil and Gas Association (NMOGA) represents the oil and natural gas industry in New Mexico.

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Economic impact of O&G seen throughout state Friday, April 26, 2019

Special to the Daily Record

Editor’s note: Information below is from the New Mexico Tax Research Institute’s recently published report on the state and local revenue impacts of the oil and gas industry for fiscal year 2018 (FY18).

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in this report represents a conservative estimate of the total state and local revenue and spending attributable to the industry.

Table 1 presents FY18 General Fund recurring revenue attributable to oil and gas production. ...

Revenue attributable to the oil and gas industry comprised $2.2 billion in FY18 or 32.3 percent of total state General Fund recurring revenue. Oil and gas revenue increased by $465 million from FY17, comprising one half of total General Fund recurring revenue growth.

The uses of this revenue, as determined through the state budget, were as follows: • $822 million of support to public education; • $240 million of support to higher education; • $858 million of spending for other programs funded through the General Fund, including $290 million for health and human services; • $237 million to the revenue surplus, of which a portion was spent on non-recurring purposes and the remainder was added to the state’s reserves which reached a total of 20% of recurring spending.

In addition to General Fund revenue, oil and gas revenue provided an additional total of $1.55 billion to state and local budgets in FY18. The larger components of this amount are listed below: • $679 million of royalty payments to the Land Grant Permanent Fund; • $493 million of Oil and Gas Severance Tax payments, the bulk of which are used for capital outlay spending with a remainder going to the Severance Tax Permanent Fund; • $192 million of ad valorem tax payments to local governments; • $99 million of Land Grant Permanent Fund distributions to beneficiaries other than the State General Fund.

Note: Estimated revenues attributable to oil and gas production were calculated based on various reports from state government and limited to amounts that can be tied directly to industry activity. The estimates do not include potential “multiplier” effects of the industry on, for example, household spending by employees or business purchases and net income of suppliers to the industry.

Thus, the aggregate amount attributed to the industry

... The estimated $188 million GRT attributable to O&G operations represents an increase of $84 million, or 81 percent compared with FY17. This is attributable to the sharp jump in drilling activity in New Mexico during FY18 as illustrated in Figure 2.

After plummeting to less than 20 active rigs at the end of FY16, the rig count began a dramatic increase around the middle of FY17 that continued all the way through FY18 ending up at over 90 rigs by the end of that year.

During this period Taxable Gross Receipts (TGR) in the Mining industry increased by an average of $200 million per month or $2.4 billion per year.

On average, each rig was associated with an increase of $5 million dollars of TGR per month. ...

Personal Income Tax: Personal Income Tax (PIT) revenue attributable to the O&G industry was estimated from two sources. TRD reports the amount of Withholding Tax paid by passthrough entities operating oil and gas producing businesses. This represents the income tax due from the

owners of interests in oil and gas production. The total amount was $41.3 million in FY18.

PIT attributable to wages and salaries paid by the O&G industry in FY18 was estimated using data from the NM Workforce Solutions Department (WSD). WSD uses information from Unemployment Insurance reports to prepare a “Quarterly Census of Employment and Wages” (QCEW). The QCEW reports total employment and total wages by industry.

For this report, two industries were included: Oil and Gas Extraction (NAICS 211) and Support Activity for Mining and Oil and Gas Extraction (NAICS 213).

Since the latter group may include some non-oil and gas related activity, the total was reduced by 5 percent, which reflects the non-oil and gas share of the GRT base during FY18.

PIT liability associated with the total wages shown in Table 3 was estimated by comparing the average salaries with the Personal Income Tax tables. The result was an average effective tax rate of 3.85 percent, yielding estimated PIT liability of $55.5 million. ...

Corporate Income Tax: In the 2017 edition of the Tax Expenditure Report, TRD presented calculations showing that in tax year 2015, then the most recent data available, the Mining and Oil and Gas sectors paid a total of $65 million, or 22.5 percent of the total $290 million of Corporate Income Tax (CIT) paid by all industries. This share was reduced by five percent to reflect the oil and gas industry’s share using the share of total GRT paid by the industry. ... The State pays film credits out of CIT collections before transferring the residual to the General Fund. The allocation of Total CIT collections and the oil and gas share is shown in Table 4.

EDUCATION SPENDING SUPPORTED

BY OIL AND GAS REVENUE The largest single category of General Fund recurring spending is public education. A total of $2.6 billion was distributed from the General Fund to local school dis-

See IMPACT, Page 28

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NM oil and gas revenue Oil group CEO sees no slowdown in US production reaches record high in 2018

By David Koenig AP Business Writer

The American Petroleum Institute is the energy industry’s lobbyist in Washington. These days it is led by Mike Sommers, previously the chief of staff for former Republican House Speaker John Boehner.

Recently Sommers talked with The Associated Press. His answers here have been edited for brevity.

Q. The U.S. is now the world’s biggest oil producer. What does that mean for the industry and investors?

A. The most important component is what it means to the United States.

It’s given our lawmakers an incredible amount of flexibility to help lead the world. No longer are we subject to the whims of an oil cartel in the Middle East. We’re the world’s swing oil and gas producer, and that’s exciting for American leadership.

Q. At a recent big energy conference

in Houston, there was talk by Shell and BP about investing in renewables.

Are U.S. oil companies going to be left behind?

A. I don’t think there’s any threat of them being In this photo provided by left behind the American Petroleum ... They are Institute, Mike Sommers c o m m i t t e d poses for a photo. to reducing their methane emissions.

Q. Are you worried about Norway’s sovereign wealth fund reducing its oil and gas holdings? Could other inves-

See PRODUCTION, Page 26

CHEVROLET BUICK CADILLAC

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Special to the Daily Record

New Mexico state revenue from oil and natural gas production has reached a record high according to a new analysis from the nonpartisan New Mexico Tax Research Institute.

The report shows that New Mexico’s General Fund and public schools benefitted from $2.2 billion in oil and natural gas taxes and revenues in fiscal year 2018, an all-time high and an increase of $465 million from fiscal year 2017.

“Across New Mexico, communities and public schools are seeing the enormous impact and benefits provided by a thriving oil and natural gas industry in our state,” said Ryan Flynn, executive director

of the New Mexico Oil and Gas Association. “2018 has been a record-breaking year for oil and natural gas production in New Mexico, and as a result our state has unprecedented opportunities to invest in public education, build new roads and invest in other parts of our economy. Record-breaking can and should be the new norm for New Mexico, but that also goes hand in hand with continuing the policies that have allowed oil and natural gas development to flourish.”

Oil and natural gas revenue pumped $1.06 billion in funding for education in fiscal year 2018, supporting nearly $822 million for primary and secondary education, and $241 million for the state’s universities, col-

leges and other higher education institutions. That’s an increase of $128 million over 2017 funding levels.

While most of New Mexico’s oil and natural gas production is concentrated in the southeast and northwest corners of the state, population centers along the Rio Grande corridor like Albuquerque and Las Cruces benefit the most.

Oil and natural gas revenue supplied Albuquerque Public Schools with $205 million, while Las Cruces Public Schools brought in $59 million. The University of New Mexico led higher education institutions with $60 million, followed by New Mexico State University with $50 million.

See REVENUE, Page 26

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tors follow?

A. This industry of course relies on the availability of capital, and you know we’re continuing to focus on making sure that investors in this industry understand everything that this industry has done to reduce the environmental footprint while meeting consumer demands for more affordable energy.

Q. Is current U.S. production sustainable?

A. The reports that we look at, particularly (the U.S. Energy Information Administration), project that this continued production within the United States is going to go on for a long time. The United States as a leader in this space is good

of course for the American consumer, but it’s good for American industry as well. The (International Energy Agency) report that I recently saw was that even under the rosiest scenarios for renewables, oil and natural gas will still provide over 50 percent of the world’s energy needs in 2050. So the future is bright for this industry.

Q. Will U.S. offshore oil drilling increase?

A. We need access to these offshore resources to continue to supply the American consumer’s demand for these products, so we’re working with the administration to make sure that these resources are available (for) the opening up of new resources off both the Atlantic coast and the Gulf of Mexico.

Q. Are you happy with the Trump administration on energy?

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A. This is an administration that has really focused on what they call the energy-dominance agenda, and I think that they have been really focused on making sure that consumers have access to safe, reliable and affordable energy that is also produced in an environmentally-sustainable way. That’s what this industry delivers on every single day.

Q. In your state of the industry speech, you seemed to dismiss the Green New Deal.

A. We know that climate change is real, but we also know that the solutions to climate change have to be real as well. This country has undergone a real energy revolution in the last 12 years as a consequence of the fracking boom in the United States, and that has allowed for (a shift) from coal to natural gas, and that has led to

the air being cleaner today than it has been in a generation.

Q. Are environmentalists wrong because they think we should move directly to renewables and not use natural gas as a so-called bridge fuel?

A. Of course wind has a future in the United States, and of course so does solar, but natural gas has to be around when the sun doesn’t shine and the wind doesn’t blow. Consumers are demanding more sustainable fuels. This industry is responding to that, but they also continue to demand that those fuels be affordable, and that’s what natural gas has delivered on and will continue to deliver on I think for many, many generations to come.

Q. Even in places like the Permian Basin in West Texas there is some local opposition or concern about the impact of

fracking on water use, truck traffic and pollution. What’s API doing about that?

A. One of the reasons why those continue to be concerns is because we don’t have the infrastructure built up to support the energy boom. So I do think that those issues are going to continue to diminish as we are able particularly to build pipelines to these communities to support the boom that’s going on, particularly in the Permian. But you know some of the same people that are complaining about that environmental impact of trucks, etc. are also those that are blocking the infrastructure. There are new technologies that are being advanced in the oil fields today to make sure that we are recycling water, for example.

Revenue Continued from Page 25

Driven by bustling activity in the Permian Basin, New Mexico leaped California and Oklahoma last year to become the third-largest oil producer in America and has been on a record-breaking streak ever since. New Mexico is producing oil at record levels, and has seen a record number of drilling rigs operating within the state. Mostly concentrated in the Permian Basin that straddles Texas and New Mexico, drilling rigs are a leading indicator of future production activity and output. Late last year the United States Geological Survey reported that the Permian’s Delaware Basin holds 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids. That’s the largest pool of oil and gas reserves ever identified by USGS. “The future is very bright for New Mexico, and we

can expect these trends to hold for the foreseeable future if New Mexico remains a favorable place

for oil and natural gas producers to do business,” added Flynn.

The oil and natural

gas industry is New Mexico’s top economic driver, responsible for more than 100,000 New Mexico jobs

and accounting for $2.2 Billion in tax revenue for schools, health care, and public safety. The New

Mexico Oil and Gas Association (NMOGA) represents the oil and natural gas industry in New Mexico.

2019 Oil

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tricts during FY18.

32.3 percent of this amount, or $822 million, is attributable to revenue from oil and gas production. An additional $744 million was distributed from the General Fund to institutions of higher education in the state, of which $240 million is attributable to oil and gas production. Thus, a combined total of $1.06 billion in support of public and higher education in FY18 is attributable to the oil and gas producing industry.

Table 5 presents education spending supported by oil and gas revenue in each county. Information from the Public Education Department was used to calculate countywide totals of State General Fund distributions to each school district and charter school. Information from the Higher Education Department was used to calculate countywide total State-funded distributions to institutions of higher education. The oil and gas share of this spending is the 32.3 percent of total General Fund revenue comprised of oil and gas revenue.

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OTHER STATE GENERAL FUND SPENDING SUPPORTED

BY OIL AND GAS REVENUE Table 6 presents a summary of General Fund spending by major category with the oil and gas- funded share of each component. In addition to $1.1 billion of education spending, oil and gas revenues funded another $878 million of spending on other General Fund budgets. Spending on health and human services was by far the largest single component with $533 million funded by oil and gas revenue.

Recurring FY18 General Fund revenue was well in excess of the forecast amount on which the budget was based. Hence, recurring revenue exceeded recurring spending by $734 million. 32.3 percent of this amount, or $237 million, was due to oil and gas revenue.

The large surplus of recurring revenue, plus non-recurring revenue, enabled $122 million of the total surplus to be spent on nonrecurring purposes and another $690 million to be transferred to General Fund reserves, which reached 20 percent of recurring spending at the end of FY18.

OTHER STATE FUNDS AND LOCAL GOVERNMENT REVENUES In addition to General Fund revenue, oil and gas production added $1.55 billion of tax, royalty and investment income revenue to other State funds and to local governments. ...

Capital outlay spending supported by oil and gas was about $119 million in FY18.

This was lower than the typical amount due to budget-saving measures adopted in the previous budget making cycle.

See IMPACT, Page 29

Alton’s Power Block Gym, Inc. 1300 N. Virginia Roswell, New Mexico 88201

Alton & Betsy Shields Owners (575) 623-5481

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OIL AND GAS PRODUCTION AND SALES REVENUE The total marketed value of oil and gas produced in New Mexico increased to almost $16 billion in FY18, an increase of 47 percent over FY17. Both oil and gas prices were higher, as was gas production. The largest contributor to growth was the 33 percent increase in the volume of oil production, from 153 million barrels to 204 million barrels. Details are presented in Table 8.

AP Photo

This file photo shows oil rigs in the Loco Hills field on U.S. Highway 82 near Artesia, one of the most active regions of the Permian Basin.

OIL AND GAS PRODUCTION RELATED TAXES New Mexico collects several excise and ad valorem taxes based on the marketed value of production. Total collections from these taxes was $1.16 billion in FY18, an increase of $356 million or 44 percent from FY17.

LOCAL AD VALOREM TAX REVENUES Table 10 presents FY18 distributions of local ad valorem taxes from the oil and gas industry. New Mexico imposes two ad valorem taxes, the Oil and Gas Ad Valorem Production Tax (“Production”) and the Oil and Gas Production Equipment Ad Valorem Tax (“Equipment”). These taxes are intended to serve in lieu of property taxes on oil and gas producing property.

The Production tax is due monthly while the Equipment tax is due annually. Taxable value for these taxes is defined in the same manner as for the Oil and Gas School, Severance and Conservation taxes.

Funding support for this report was provided by the New Mexico Oil and Gas Association. Research was conducted by Thomas E. Clifford, PhD with research assistance from Matthew Sluder. The following State agencies provided staff assistance and/or on-line information: N.M. Taxation and Revenue Department, Department of Finance and Administration, Public Education Department, Higher Education Department, Department of Workforce Solutions, State Investment Council, State Land Office, Legislative Finance Committee. These entities are not responsible for the conclusions or any errors contained in this report.

Key New Mexico, Texas oil highways getting upgrades CARLSBAD (AP) — A key highway in southeastern New Mexico and another West Texas are getting much-needed upgrades to accommodate the rise in traffic from the region’s oil and gas boom.

In New Mexico, the state’s Department of Transportation is working to renovate U.S. Highway 82 — the main highway for oil field traffic between Eddy and Lea counties.

The agency is investing about $58 million in federal and state funds into the project, which would improve 32 miles (51 kilometers) of U.S. Highway 82 between Artesia and Maljamar.

The project is expected to be completed this winter, officials said.

The highway is now only

a two-lane road, which has been overburdened during the recent boom in oil and gas.

Meanwhile, the Texas Department of Transportation recently announced it’s making improvements on the West Texas side of busy U.S. Highway 285.

Officials warned that while a bridge-class culvert is being replaced at Four Mile Draw, traffic will be reduced on the highway between Pecos and Orla.

“Delays can be expected. Alternate routes are strongly encouraged if possible,” the agency said in a statement.

Work on U.S. Highway 285 comes as both states try to make improvements on congested highways to fix pavement damaged by heavy trucks

transporting oil.

A $90 million rebuild of the first 22 miles (35 kilometers) of U.S. Highway 285 in New Mexico from the Texas state line has only about $20 million in funds identified, records show.

The highway upgrades are a top priority, said Timothy Parker, New Mexico Department of Transportation engineer for a district that contains Eddy, Lea, Chaves and parts of Otero and Curry counties. “(U.S.) 285 is one of the most deadly highways in New Mexico — definitely one of the busiest,” Parker said.

“Focusing and having everybody together on the same page will really help those projects.”

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C&J Drug Screening can do the same for non- regulated companies in need of a drug testing programs. Did you know that approximately 69 percent of all drug users are employed?

Using drugs impairs decision making abilities and physically impairs people. This can cause tremendous consequences to the employee, co-workers and your business. Alcohol abuse can cause the same effect.

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Companies with drug and alcohol programs will have: ◆ Increased morale. ◆ Decreased workplace accidents. ◆ Reduced employee theft. ◆ Increased productivity. ◆ Reduced employee turnover. ◆ Decreased cost of insurance, such as worker’s compensation.

Drug and alcohol programs are worth the minimal cost to employers compared to the cost of not having a program.

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We are a small business and that means we can give personal attention to your drug and alcohol testing needs.

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