As oil prices continued to plummet, the state of New Mexico hoped to give some relief to the industry by allowing wells to be shut down without rescinding land leases on State Trust land or charging penalties.
The New Mexico State Land Office announced an “emergency” rulemaking process for such a policy, opening a public comment period until April 17, and planning a tele-hearing on that day.
The new rule would exempt oil and gas producers to stop producing at wells on state land for at least 30 days, with a possible extension up to 120 days as to be determined by State Land Commissioner Stephanie Garcia Richard.
The move was in response to a plunge in the price per barrel of American crude oil as the COVID-19 pandemic continued its spread and sap of global demand.
The potential resolution of a price war between Russia and Saudi Arabia, which led to a global oversupply of petroleum, offered some respite but Garcia Richard said the damage could already be done to the state’s economy which is largely reliant on oil and gas production for revenue.
“The COVID-19 pandemic brought home, almost overnight, the risks of our dependence on oil and gas. This was compounded by Russia and Saudi Arabia’s relentless price war intended to bankrupt American producers,” Garcia Richard said.
“Here in New Mexico, the ripples of this situation hits hard, not only when thinking about the state budget, but within communities where people rely on the boom for jobs to support their families.”
The drop in price and subsequent reduction in oil and gas production could especially impact public services such as healthcare and education, she said, making relief for the industry essential for all New Mexicans.
Source: Adrian Hedden, Carlsbad Current-Argus
Photo Source: Colton Sturgeon from Unsplash