Copyright © 2021 Albuquerque Journal
National debate over the future of leasing and permitting regulations on federal lands is rapidly intensifying, and New Mexico – more than any other state – is in the thick of it.
President Joe Biden ordered an indefinite pause in January on all new leases for oil and gas production on public land and water to allow the U.S. Interior Department to conduct a thorough review of federal policies. Interior, in turn, will host a first-ever nationwide forum Thursday to collect public input on how best to manage federal lands in the future.
It’s all part of a broad, unprecedented initiative by the Biden administration to elevate climate change and clean energy development to a top national security issue – possibly the country’s No. 1 priority. That includes wide-ranging policy proposals and programs that could fundamentally transform the national economy from the bottom up.
The future of oil and gas production and consumption, which accounts for the majority of all U.S. carbon emissions today, is squarely in the crosshairs as the country embarks on a new path to a low- or no-carbon economy. That transformation is already underway, but the speed and extent of disruption as the U.S. transitions to a carbon-free future will be largely determined by today’s roaring national debate over new federal policies.
‘Credit’ for NM?
New Mexico will play a key role in shaping those policies, starting with the oil and gas leasing and permitting issue, because the state accounts for the majority of U.S. onshore production on federal lands. Gov. Michelle Lujan Grisham asked to directly participate in the Interior Department’s policy review in a letter sent to Biden last week.
The governor said she supports the transition to a clean energy economy but wants to ease the local impact of forthcoming rules and regulations by allowing New Mexico and other states to receive “credit” for local efforts to lower carbon emissions and pollution from fossil fuels. That’s critical for New Mexico as new federal policies take shape on oil and gas, which contribute about one-third of the state’s operating budget every year.
“Under the governor’s leadership, the state has become a strong model for how to responsibly regulate the oil and gas industry,” Governor’s Office spokeswoman Nora Meyers Sackett told the Journal in an email. “We want to be sure that the state gets credit for the Lujan Grisham administration’s solid track record of environmental protection and enforcement. New Mexico deserves a seat at the table, and we are optimistic that, working together, the state and federal administration can craft medium- and long-term policies that will ensure New Mexico is not punished for its high concentration of federal lands.”
Lujan Grisham has pursued aggressive clean energy policies that exceed many, if not most, other states. That includes new rules and regulations now being finalized to reduce methane emissions from natural gas production by 98%. It also includes the state’s Energy Transition Act, which requires all local public utilities to transition their grids to 80% renewables by 2040 and 100% carbon-free generation by 2045.
It’s unclear how a state credit proposal would work in practice. But in a March 10 webinar with the Greater Albuquerque Chamber of Commerce, Lujan Grisham said her plan is potentially tantamount to a waiver from federal requirements.
“The basic strategy is … create a program that gives credit to states that are well beyond where the federal government and other states are in terms of climate change initiatives, cleaning up the environment, curbing carbon emissions and having an all-of-the-above energy effort,” Lujan Grisham said. “You do that, (and) New Mexico’s going to get an exemption, a waiver. I feel as optimistic as I can that we win this. I just don’t know what the win is exactly going to look like.”
The governor said she’s working with other western states to craft the proposal. But her public stance on the issue, plus her clout as a Democrat who Biden previously considered for a Cabinet post, is propelling her into a leadership role, said Daniel Fine, a longtime energy expert and research specialist with New Mexico Tech in Socorro.
“She’s shaking things up by calling for the right of states to clean up the environment and decarbonize before the federal government steps in,” Fine said. “That position is more advanced than many other states, including Wyoming. It puts individual state rights above Washington bureaucracy.”
The governor’s position has earned praise from both Democrats and Republicans. But until Biden administration policies are clearly defined, industry leaders remain highly concerned and reluctant to make any new major investments in local oil and gas development.
Many fear that Biden’s temporary lease pause could turn into a permanent ban on federal lands. Indeed, some environmental groups and liberal Democrats in Congress are pushing for that.
But newly confirmed Interior Secretary Deb Haaland said during Senate hearings on her Cabinet nomination that the pause will not become permanent. And many mainstream conservation groups are only seeking regulatory overhaul to better protect public lands and raise royalties and fees on industry activity as the country transitions over time from fossil fuels to clean energy.
Even if Biden did support a ban, he’d need congressional approval, said Mary Greene, public lands attorney for the National Wildlife Federation.
“We’re pushing to reform the regulatory system to make it better,” Greene told the Journal. “At the end of the day, the Biden administration doesn’t have the authority for an outright ban, which would have to come from Congress. That being the reality, we want to update a system that’s been broken for decades.”
Democrats have introduced new bills in the U.S. House and Senate for regulatory overhaul, indicating support for continued oil and gas production on federal lands under a modernized framework. That includes hiking royalty rates for onshore production from 12.5% to the offshore rate of 18.75%, and raising land rental fees, minimum bid amounts to obtain leases, and bonding rates for cleanup and remediation.
Environmental groups also want more federal lands reserved for things like parks and outdoor recreation, more restrictions on oil and gas production near sensitive natural and cultural sites, and more public input on leasing decisions.
“The big thing we need is for taxpayers to get their fair share for the oil and gas industry’s use of public resources, and a full accounting of the carbon costs and public health impacts from that activity,” said Aaron Weiss, deputy director of the Colorado-based conservation group Center for Western Priorities. “There will be a fundamental transition to a clean energy economy in the U.S., but that will take time. The question is, how long will it take, and how do we take care of local communities and citizens during the transition.”
Rather than stopping federal land production, the Biden administration is seeking to “monetize” carbon emissions by raising the costs for oil and gas activity, Fine said. That likely includes the imposition of an economywide carbon tax, an idea that’s now gaining momentum in Congress and even among major industry groups like the American Petroleum Association and the U.S. Chamber of Commerce.
Those groups adamantly opposed the idea in the past. But they now support it as more acceptable than strict new federal regulations or mandates on carbon reduction that Biden could pursue as the U.S. reenters the Paris Agreement on climate change, Fine said.
Still, with the prospect of far-reaching policy changes coming fast and furious, uncertainty reigns in the oil and gas industry. Local producers say operators are already taking refuge in Texas, where, in contrast to New Mexico, most production occurs on private, rather than federal, land.
Answers to come
For better or worse, the regulatory uncertainty will diminish in coming weeks. The Biden administration is expected to define new U.S. goals under the Paris Agreement during a global summit the president will host on Earth Day next month.
And come what may, producers aren’t likely any time soon to abandon the Permian Basin in southeastern New Mexico, which holds some of the most productive shale oil fields in the world, said Raoul LeBlanc, vice president for nonconventional oil and gas at global consultant IHS Markit. Society will continue to consume oil and gas for many years to come despite the transition to non-carbon resources, and New Mexico will benefit.
“The Permian Basin is one of the few places we continue to foresee significant growth going forward in the U.S.,” LeBlanc told the Journal. “… It might not be the last one standing in the energy transition, but it won’t be the first to go either.”