After a legislative update, we focus on the multi-billion dollar cost we will pay this decade for NM’s failure to regulate the gas & oil industry. This post points to the critical need to pass transformational environmental regulation in 2021. Read on!
Yesterday was surreal — with five hearings, there was much to absorb. We have experienced three bills killed via tabling, and we are hearing disquieting comments in committee hearings about some of the bills we support.
Despite the largest budget surplus in state history, we are hearing the same old “this isn’t a good time to spend reserves, the permanent fund, or the general fund.” During one hearing yesterday, I had an exchange of texts with one of our best legislators. We were reacting to the ever-present Chamber of Commerce and its readiness to oppose spending any money on anyone or asking business to do anything ethical. Her comment: “They are beyond ridiculous. I am sick of their Chicken Little sky is falling if you even suggest something to help people.”
Just to underscore how pervasive and insidious the Chamber of Commerce is, below is their hitlist of bills to oppose. Virtually every one of them is on our list of Transformational or Priority Bills. Shameless.
As the day wore on, I heard “the sky will fall” from lobbyists for gas and oil, banking, insurance, and business, all stating that this is not the time to do anything. As today’s feature piece makes abundantly clear, our historic and continuing cowing to these lobbyists is simply intolerable and is coming at a huge to price to those who our legislators are supposed to be representing: us.
While three bills have been killed, many others are moving swiftly and some others have not even been scheduled, so keep the faith.
Actions for Today & Friday
TODAY, Thursday at 4pm, a Zoom Conversation with Speaker Brian Egolf. We will be pressing him on our general concern about the inordinate influence of lobbying and about 7 specific bills we are supporting. You do not have to be an expert on the legislative process to participate. We just want the Speaker to see that New Mexicans are engaged. You don’t need to be a constituent to join the Zoom. So please join us for that important conversation. Click here to register for this conversation.
Our Weekly Legislative Huddle, Fridays, 3:30-4:30 pm, so that is TOMORROW! Here is the link to register for the Zoom meeting. We need to strategize about what to expect and about what is coming next week. You must register each week.
County Ward Elections. We’ve been so absorbed in tracking the legislative session, we totally overlooked this — a very big oversight for which we apologize. Our subscribers look to us tor timely information and for how to be engaged. It is just inexcusable that we failed to alert you about the elections. In Santa Fe and likely in most counties, the deadline to register for these elections has passed. If you have registered to participate in your Democratic Party ward and county elections, please participate.
NM Desperately Needs Bold Leaders
Retake has written many times about our looming gas and oil crisis. But over the last four years virtually every single effort to pass legislation to increase funding to support inspectors, or to regulate gas and oil, increase bonding levels for leases, raise lease costs to at least mirror neighboring Texas, or in any way curb leaks or emissions, the gas and oil lobbyists show up in droves and remind us of our economic dependence on their revenues. They threaten that if we do anything that increases their costs they will pull up stakes and move to Texas.
Today’s post relies on an exhaustive report from Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy,” which lays out in grim detail just how badly our leadership across many decades has failed to protect our land, water, and economic future. First this:
“Satellite images of the land outside Artesia, New Mexico, show an arid brown landscape pockmarked with dots. Zoom in a bit, and a semiregular grid pattern appears, which could be mistaken for a suburban development. Zoom once more and the truth becomes clear: oil drilling sites, thousands of them. Each of these wells will one day need to be cleaned up: the borehole plugged and the land restored. When abandoned, wells like these will leak methane and other pollutants into the atmosphere for years.
More than 1,500 miles east and north of Artesia, among rolling hills of Appalachia, there are streams tinged orange by acid mine drainage and mountaintops flattened by companies seeking the hard, black coal seams underneath. Many of these companies are now bankrupt, or shadows of their former selves, while the industry’s legacy persists in billions of dollars in cleanup costs.”From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
Unless we demand bold action from our legislature, this is our future. I don’t know Pennsylvania’s advocacy efforts, but I am guessing they had been crying out for a decades, predicting exactly what is unfolding in Appalachia. I am guessing that in Pennsylvania they also had a state budget to balance, gas and oil revenues filling their coffers, and a gas and oil lobby that, like NM Oil and Gas Association, are all too willing to pack hearing rooms and fill campaign coffers to ensure the wells continue… until they don’t, and then industry pulls up stakes. Pennsylvania’s situation is our future unless we can motivate our legislature to develop the spine and the foresight to choose a different future.
New Mexico and Pennsylvania are not alone in being beholden to and then abandoned by extractive industries.
In 2013, Wyoming took in $239 million in revenue from federal coal leases, money that went to public schools, according to a High Country News analysis. By 2019, that number was zero. Last year, Wyoming – which, like New Mexico, is also suffering from oil and gas’s decline – enacted enormous budget cuts, with more on the way…
This future was avoidable, says Shannon Anderson, an attorney with Wyoming’s Powder River Basin Resource Council. Anderson argues that state leaders denied coal’s decline for more than a decade, missing multiple chances to diverge from its mineral extraction dependence and diversify the economy. But when the money is good, she explained, state lawmakers have little incentive to change, even when the warning signs are clear.”From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
Sound familiar? The report from Capital and Main cites Clark Williams-Derry, an energy finance analyst with the Institute for Energy Economics and Financial Analysis who indicates that the coal industry and the gas and oil industry have the same fate: bankruptcy. He indicates that other states have experienced this already, NM’s experience will differ due to the immense scale of extraction in the Permian Basin. But he ultimately concludes that the boom we are experiencing is fueled by desperation from Wall St. and is entirely unsustainable. The bubble, like all bubbles, will burst.
“This accelerated slide may come as a surprise to New Mexicans, since this same period coincided with a drilling boom in the Permian Basin, driven largely by advances in horizontal drilling technology – and lots of capital from Wall Street. Even while fracking companies struggled to show profits, investors continued throwing money at the industry, what Williams-Derry describes as a “bubble mentality on Wall Street.”From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
In 2018, this speculation-driven boom in the Permian led to the largest single federal oil and gas lease sale in history, with revenues from that sale allowing the state to increase education funding by almost half a billion dollars. But that is simply not sustainable, as the industry is in a state of collapse. And just as Pennsylvania and Wyoming have learned, when the bubble bursts you are left with mega corporations turning up their hands, bankrupt, but only after extracting huge profits, despoiling the environment, and leaving the environmental and economic mess to the abandoned states. And this is exactly how morally perverse the gas and oil industry is.
“In Appalachia, the name “Patriot Coal” remains notorious. In 2007, Peabody Energy Corp., one of America’s largest coal operators, created a new company, Patriot, which contained all of its financially risky assets. Patriot would subsequently take on a similarly bad batch of mines from Arch Resources, another coal giant. The bankruptcy was almost inevitable, “a company created to fail,” according to the United Mine Workers of America. Coal miners lost pensions and benefits, and states remain on the hook for enormous reclamation costs. Patriot survived long enough to pay its executives several million in bonuses before going bankrupt a second time in 2015.”From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
And it gets worse. Much worse.
Last spring, Whiting Petroleum issued nearly $15 million in payments to its top executives, while Chesapeake Energy – one of the original fracking companies that drilled in the Permian – gave its executives a combined $25 million before declaring bankruptcy. One company took millions of dollars in CARES Act stimulus money, declared bankruptcy and gave the exact same dollar sum to its executives, the New York Times found. Similar executive payouts by bankrupted – or soon to be bankrupt – companies became infamous in the coal industry during the 2010s, in what was dubbed “Coal’s Bankruptcy Decade.”From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
Capital and Main goes on to describe example after example of oil companies selling off wells that can no longer produce so they can escape liability for cleanup, or concentrating those toxic assets in a single subsidiary and letting it go bankrupt, leaving workers without pensions and states with billions of dollars of cleanup costs.
It isn’t as if this gas and oil strategy has been done secretively. As the Capital and Main makes clear, this is exactly how the mining industry has behaved, the coal industry, and now the gas and oil industry. Capital and Main points to how bonding requirements on state land are wholly inadequate in NM and on federal land those requirements are almost non-existent. Federal “regulations” allow a single corporation to pay a “blanket” bond of $250,000 for all their wells nationwide. And how far does $250,000 go?
The NM Oil Conservation Division uses a very modest estimate of reclamation costs of $37,500 per abandoned well. The state currently has a backlog of more than 700 orphaned wells that need to be plugged, which Oil Conservation Division Director Adrienne Sandoval estimates will cost at least $24 million to plug and at least another $34 million for costs related to reclamation. This translates into an average cost of $116,000 per well to plug and clean up. Using that estimate–which many claim is woefully low, the cost to plug and clean NM’s 57,000 active wells would exceed $6.5 billion. And how prepared is NM to address this inevitable cost? Total bonding available in NM is $2.2 million to cover $6.5 billion for cleanup. And yet, somehow, Adrienne Sandoval, OCD Director can claim that “it is always something we are being proactive about.” With one word changed in that comment, you’d have it exactly right: “It is never something we are being proactive about.”
Capital and Main uses but one example in NM to paint our grim future. Hilcorp Energy is the largest producer in NM and it has 11,500 abandoned wells, $1.1 million in bonding available, and an estimated cost of plugging projected to be over $1.2 billion. I would like to hear exactly how are we being proactive?
Capital and Main points to the only solution that can protect the state: bonding, regulation, and enforcement. Every time any environmental organization tries to impose higher bonding or increasing lease costs or impose penalties for leaks, New Mexico Oil and Gas Association and their criminal colleagues cry “the sky is falling…. we can’t possibly make a profit if you inject anything that increases our costs and we will go to Texas.” Well, as Capital and Main points out NM’s future points in only one direction if it doesn’t summon the gumption to stand up to the gas and oil industry. And given the way in which Senator Antoinette Sedillo Lopez is treated by her own colleagues for having the temerity to tell the truth about the situation, I am not terribly optimistic about the prospects of simply pausing current leasing while we study the situation.
““If the systems aren’t fixed and the enforcement isn’t there, we are traveling down a pretty phenomenal path of destruction,” Eddy says.’From Capital and Main: “Coal’s Cautionary Tale for New Mexico’s Economy“
I highly recommend you review “Coal’s Cautionary Tale for New Mexico’s Economy“ Capital and Main’s analysis of the situation. Our state leadership’s failure to lead has put us in this ditch, and if we don’t move them to take action we and our future will soon be six feet under.
To that end, the bills below each could play a role in addressing the problems outlined above.
- SJR 3 Environmental Rights Act. AKA The Green Amendment.
- SB 83 Local Choice Energy
- SB 86 Use of Water for Oil & Gas Operations. Killed in Senate Conservation.
- SB 112 Sustainable Economy Task Force.
- SB 155 Energy Transition Act Changes. Killed in Senate Conservation.
- HB 9 Climate Solutions Act.
- HB 15 Sustainable Building Tax Credit.
- HB 51 Environmental Database Act
- HB 106 – SB 84 Community Solar Act.
- SB8 Local Government Air Quality Regulations.
- SB 58 Electric Vehicle Tax Credit.
- SB 149 Prohibit New Fracking Leases.
- SB 296 Increase Penalties for Enviro Violations, passed Sen. Conservation along party lines, on to Senate Judiciary where, despite voting yes, Sen. Cervantes promises “to bring his powder.”
That is 13 bills. Two are already dead, almost certainly the fracking moratorium faces the same fate, and today may see the only other bill that would in any way regulate the gas and oil industry quite possibly be killed as well.
I started this post describing “the sky is falling” cries from industry lobbyists, not just in gas and oil, but in utilities, banking, insurance, real estate, and business — all bemoaning requests to do anything on behalf of the public good. But that is not their charge; it is profit, pure and simple, and our needs be damned.
I want to close by saying that Retake is adding another bill to our priority bill list: SB 336 Voting for 16 Year Olds. NM is never going to address its myriad challenges unless we invite those who will be most impacted by our failure to lead: youth. All you have to do is listen to the testimony of the YUCCA advocates in virtually every environmental hearing. They get it, but apparently our legislators don’t.
In solidarity and (somehow) hope,
Paul & Roxanne
Categories: Environmental Justice