New Study Details Difficulty of Oil and Gas Investments in New Mexico

As oil and gas prices rise, theoretically, New Mexico’s oil and gas industry should be booming and bringing a great deal of revenue to the state. Unfortunately, with an ever-increasing regulatory burden, the industry is moving elsewhere (particularly to Texas) where taxes, regulations, and corruption do not place such a heavy burden on those attempting to do business. Finally, a study has been undertaken to prove what operators in New Mexico’s oil and gas industry have been saying. The Canada-based Fraser Institute has done an international, provincial, and inter-state analysis of the barriers to investment in oil and gas exploration and production. The report is available here.
New Mexico fares poorly in the study beating out only Colorado, California, Alaska, West Virginia, and Pennsylvania in terns of the overall Extent of Investment Barriers (chart on page 30). Since the study relied on survey data, comments from those who actually do business in the various jurisdictions were a part of the data. Comments about New Mexico included:

Corrupt government. Furthermore, politicians want to stop development but they still want the income.
The state should rely on one agency to police the oil and gas industry rather than every agency,
county, and city, having a separate permitting procedure.
State government is extremely ‘anti-oil’; very hard to make a profit.

The study is an interesting read. Even more interesting will be the impact New Mexico’s increasing regulatory burden will have on one of the state’s most important industries and tax revenues over time.
Jim Scarantino and I will be discussing the findings of this study with its author Gerry Angevine on Saturday’s show at KIVA AM 1550 starting at approximately 9:15.

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