President Joe Biden’s decision to impose a 60-day moratorium on oil and gas permitting on federal lands has government officials in New Mexico scared and confused that it may be a sign of bad things to come.
Biden signed the moratorium in a major executive order push on his first day as president in a bid to reverse as many policies of the previous administration as possible in line with his campaign’s climate change agenda. There are now fears the temporary moratorium will become permanent.
This will be a problem for oil-producing states such as New Mexico because a lot of their state income comes from royalties and taxes collected from oil and gas drillers. In New Mexico specifically, a lot of oil and gas drilling is done on federal land, writes David Blackmon for Forbes, and the state is now set to lose millions in royalties should the drilling ban become permanent.
Some New Mexico officials have said they did not anticipate the move from the White House although, as Blackmon notes, this is hard to believe given all the talk about banning drilling on federal land even though Joe Biden personally denied he planned an all-out ban, saying he would only consider banning new drilling.
Fracking on federal land is just 10 percent of the total U.S. fracking industry, but for New Mexico, it’s much more—65 percent of the state’s oil and gas production takes place on federal land. This makes the state, which houses part of the Permian shale play, a lot more vulnerable to unfavorable presidential decisions than other oil-producing states. Last year, this led many drillers to secure drilling permits for months and even years ahead in anticipation of Biden’s win in the November elections.
This will insulate them from the 60-day moratorium, but if it becomes a permanent fixture, most drillers in New Mexico will run out of permits, and the future of the industry in that state would become questionable.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com