Economic Impact of New Mexico’s Pit Rule Explained

I (and I believe this is true for most economists) have always found the economic impact of taxes to be relatively straightforward. But regulations, particularly those pertaining to the environment, are a bit more difficult to figure out. After all, we all want a clean environment and environmentalists constantly remind us that regulations can push society and lead to resources being allocated to cleaning the environment.

This all leads me to the Pit Rules which have been adopted here in New Mexico. I have intuitively understood that the Pit Rule likely represented an overreach on the part of New Mexico’s regulators, but the ins and outs of drilling for oil and gas can be quite difficult to parse. So, I was pleased to see “Pit Rules Dry Up NM Drilling” which more clearly explained the economic impact of New Mexico’s pit rule than any analysis I’ve seen yet.

The article refuted Joanna Prukop, Former Secretary, New Mexico Energy, Minerals and Natural Resources Department, and her article, “Don’t Blame the Pit Rule…” Mr. Maxey, the author or the anti-pit rule piece displays far superior understanding of the oil and gas industry and how public policy impacts the migration of businesses between different political jurisdictions in a constant search for policies that are sensible.

I’m glad to see the oil and gas industry stick their necks out and oppose anti-business policies. Hopefully this is a trend that will continue and grow.

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3 Replies to “Economic Impact of New Mexico’s Pit Rule Explained”

  1. The issue of the pit rule reminds me alot of the addage,
    “If you think education is expensive, try ignorance.”

    If you think requiring oil & gas producers to line the open pits they dump noxious chemical-laden waste into is expensive, how expensive will it be to clean up the polluted groundwater fouled by seeping waste?
    I can guarantee it will be much more.

    Are you really advocating for the sacrifice of what is easy and common sense prevention of a future significant problem for the short-term feel-good benefit of the economy???
    Where is the long-term vision here?

    “In a constant search for policies that are sensible,” I would not include Mr. Maxey’s assessment nor would I trust his “far superior understanding of the oil and gas industry and how public policy impacts ….” as he has no objectivity in this case owning part of an oil production company, incorporated in TX no less, and boasts of working for Chevron USA which has done grievous harm to the wilds and people of Ecuador with their pit practices there.

  2. As of July 16, 2011 the drilling activity in New Mexico is UP 17.1%. This is according to the Hughes Baker Rig Count which is the sterling standard in the O&G industry.

    1. Drilling is up 17.1 percent? From what? The record low levels after the economic crash? That’s no increase, that is merely a slight improvement from record low levels of drilling the year before. Fact is, drilling in New Mexico is at it’s lowest level in decades..while drilling everywhere else in the country is way, way up. Every state where they is natural gas has seen massive increases in activity, while New Mexico remains stuck in reverse. Thanks to regulations that were not scientifically sound, nor even needed. Does government kill jobs? Oh yes, it does.

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