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New Mexico has become the first major oil-producing state to see its production rate rebound to pre-pandemic levels, but according to legislative analysts cited by the AP, the situation remains volatile.
The report cited a briefing by the state’s Legislative Finance Committee, in which the committee reported that oil and gas production in New Mexico had hit a record high in March, at 36 million barrels of oil and 188 trillion cu ft of natural gas.
In further good news for the industry, a consulting company present at the briefing said President Biden’s moratorium on new oil and gas leases on federal lands will not have an adverse impact on New Mexico’s oil and gas production. The reason is that most of the federal lands previously open to oil and gas leasing are already leased out and producing.
The White House paused new oil and gas leases on federal lands in January, saying it would review the margin for potential changes in the existing regulation for the issuance of oil and gas leases. The news was initially worrying for New Mexico, where most oil and gas production comes from wells on federal lands.
Recently, however, the moratorium was blocked by a Lousiana federal judge with a preliminary injunction. Thirteen states sued the federal government for the ban, including Louisiana, Alabama, Alaska, Arkansas, Georgia, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah, and West Virginia. On their case, Judge Terry A. Doughty of the U.S. District Court in Monroe ruled earlier this month that the White House had no right to stop leasing federal lands for oil and gas drilling without approval from Congress.
Meanwhile, New Mexico is enjoying some of the lowest breakeven prices for oil in the country, at $26 per barrel of oil for existing wells, the briefing also revealed. This would normally motivate more oil and gas leasing, but the uncertainty hanging over the U.S. oil industry could discourage drillers this time.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.