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.

An Opening for Obama on Cuba Trade?

We have certainly been critical of President Obama’s bailouts and his interventionist federal policies, but he has a real opportunity now to bring another nation, Cuba, into the fold as a trading partner. This opportunity is something Obama can take credit for and following through on the logical next step, eliminating the US trade embargo and travel ban would strike a blow for freedom.
Obama has already taken a small step by allowing U.S. telecommunications firms to start providing service for Cubans and ending limits on family travel and money transfers by Cuban Americans in the United States to Cuba. These are good moves, but I am hoping for real change in our Cuba policy from Obama that would finally restore Americans’ legal right to visit and trade with Cubans.
Such a move would have the following impacts according to recent studies:

— Embargo costs the U.S. between $3 and $4 billion in lost exports per year. (Preeg, Center for Strategic and International Studies, 1998.)
–Lifting sanctions on agricultural exports to Cuba for the 50 states and 22 commodity sectors, will result in increases in exports of $1.2 billion per year. (Rosson and Adcock, Texas A&M University, 2001)
–Such increase in exports would stimulate an additional $3.6 billion in total economic output and 31,262 new jobs in the U.S. labor market. (Ibid,Rosson, 2001)

Obama’s top economic advisor, Larry Summers, says trade liberalization with Cuba is “a long way off.” Hopefully he is merely posturing and that Obama turns out to be a free trader in a way that his predecessors going all the way back to Eisenhower were not. Nonetheless, it is one issue on which free market advocates can be cautiously optimistic relative to Obama’s policies.

Title Insurance Reform Achieved During 2009 Legislature

Kudos to our friends at Think New Mexico who achieved a big success in the recently-completed legislative session with the reform of title insurance, a form of insurance that is required when you purchase a home. As Fred Nathan, the head of Think New Mexico, pointed out, until the passage of these reforms, “Only three states in the country allow the government to set prices for the title insurance industry: New Mexico, Texas and Florida. As of 2006, all three states were in the top five for the price of title insurance, according to a 50 state comparison performed by”
While the legislation introduces some reforms, it does not create a purely free market. It does, however, move New Mexico in that direction. As Barry Massey of the Associated Press notes:

The state will continue to establish a price for title insurance but insurers can charge a lower rate in a county if it’s approved by the superintendent of insurance, who runs the division of insurance in the Public Regulation Commission.
Regulators also are to provide the public with information about title insurance rates for residential property. A listing of rates on the PRC’s Web site will allow consumers to shop for the best price.
Another provision in the legislation will provide for greater discounts on title insurance policies for homeowners refinancing their loans.

A fiscal impact report containing more information on the legislation is available here. The Governor is apparently going to sign the bill shortly.

An Unregulated Free Market?

Has the current economic crisis been caused by “an unregulated free market” as some in the media would have us believe? To a libertarian or small-government conservative, the answer is clearly “no,” but specifically listing the many ways in which government policies have led us down the current, destructive path is another matter. This is a great posting that explains how we got here and the myriad ways in which the supposedly “unregulated free market” has been undermined and twisted by government policies.

Are We Living Atlas Shrugged?

Depressing as it may seem, at least for those who are familiar with the book, as Stephen Moore of the Wall Street Journal points out in this interesting article, we seem to be living in the world of “Atlas Shrugged.” After all, government is standing the way of success and subsidizing failure like never before and if Obama lives up (or down) to expectations, things will get a whole lot worse in the years ahead.
Fortunately, I think the American people are beginning to realize what is happening and what has happened under the Bush Administration, but we will be in for some tough battles ahead.

We’re Against Everything…

At least that is what the folks over at the blog Urban ABQ believe. Apparently, we’re also intellectually lazy. But is it true?
Yes, we at the Rio Grande Foundation oppose the taxpayer-financed Albuquerque streetcar, the taxpayer-financed Rail Runner, and the taxpayer-financed Albuquerque arena. But does that mean we oppose “everything?” I believe the evidence points elsewhere.
For example, we support the Heritage Marketplace development which has been killed by the City of Albuquerque. Also, we’d support the parishioners at St. Francis Xavier Catholic Church who were outlined on the front page of today’s Albuquerque Journal. It turns out that the churchgoers would like to cook home-made food (tamales, menudo and homemade goodies like bread pudding and bizcochitosfor), but the City health regulators are forcing them to buy food instead.
The fact is that we at the Rio Grande Foundation support private sector efforts and realize that those who use and abuse government power by forcibly taking other people’s hard-earned money via taxation are pushing ideas that would otherwise not garner financial (as opposed to political) support from enough people to be viable.

Killing Economic Development in Albuquerque

We at the Rio Grande Foundation have been quite critical of the powers that be when it comes to economic development in Albuquerque. While some projects like the streetcar, Winrock Mall, and the downtown arena/convention center (to name just a few projects) receive special treatment in the form of tax breaks and taxpayer subsidies, other projects (like the Scientologists’ proposed building downtown) are given the runaround.
Now, SunCal, a company that has been involved in the fights over TIDD’s, has experienced the wrath of an Albuquerque government that seems to not care about jobs or economic growth at a time in which both are at a real premium. The New Mexico Business Weekly has an interesting article about SunCal’s Heritage Marketplace project, a 12-building, 20-acre, mixed-use development at Ladera and Unser NW.
According to the article:

SunCal and said two anchors were lined up for the project as designed by SunCal. To make the changes the city requires, it will add 15 percent to 20 percent to the project’s construction costs.
City planners had a different vision. They wanted the plan to conform to the city’s design guidelines, which call for open plazas with pedestrian and bicycle amenities in new shopping center developments. Strip center development is viewed unfavorably. The commission saw a more urban project with less parking and didn’t want the center to face heavily trafficked Unser Boulevard. SunCal argued it couldn’t attract retailers if their stores didn’t face Unser. Unser is a state road, Route 435, and new turn lanes are an issue.

So, we have a company, SunCal, that is looking to invest millions of dollars (without demanding subsidies) by building a new commercial development in Albuquerque and the City says “thanks, but no thanks” because the development doesn’t fit the hopes and dreams of a few bureaucrats….don’t you just love government?

Presentation on Federal “Card Check” Legislation

I presented on an issue I normally don’t get to talk about at the New Mexico Restaurant Association‘s legislative panel today. Federal “card check” legislation will be a top priority of the next Congress, particularly if Obama is elected President. The following are my brief comments:
Passage of the “Employee Free Choice Act” is one of the Democrats’ top priorities in 2009. The legislation which is also known as “card check” was introduced in both the House and Senate as HR 800 and S. 1041.
So, what is “card check” and why is it important to the business community, especially restaurants? Today, employees are entitled to a private-ballot election when deciding whether they want union representation in their workplace. These elections are overseen by the National Labor Relations Board, which has numerous procedures in place to ensure fair, fraud-free elections.
1) If adopted by Congress and signed by the President, the “Employee Free Choice Act” would allow unions to abolish secret ballot organizing elections for unionization votes. Rather than giving employees the ability to make a private decision in a secret ballot (as is currently done) as to whether or not to unionize, a union would be certified if organizers could convince a majority of workers to sign union cards.
Unlike the current secret ballot system, the cards would be signed in public, often under the watchful eye of party bosses and others who might threaten and attempt to coerce people who would otherwise wish to contract privately with their employer. Abolishing the secret ballot exposes workers to the kind of intimidation high-pressure tactics which secret ballots are designed to avoid.
As bad as some of the controversies we are seeing in the election over allegations of fraudulent voter registration and voter intimidation, we can at least take comfort as voters in the fact that the particulars of how we vote is not public information that can be used against us. Union bosses wouldn’t like it very much if employers got to stand over their employees’ shoulders and watch how they voted, I don’t see why union organizers should be able to do that when they are organizing a union.
2) A second component of the “Employee Free Choice Act” is binding arbitration. This aspect of the law would require the federal government to appoint a mediator and impose a contract if management and labor cannot come to an agreement. It would allow either party (usually the union) to delay coming to an agreement in the hope of getting more in binding arbitration than they would get in bargaining.
Obviously, if one party in a negotiation has no desire to come to an agreement on a particular issue, this further tilts the likely outcome of the negotiation to the benefit of the unions.
3) Lastly, the legislation as it is now written would increase penalties for employers, but not for unions or others, who violate union organizing laws.
The Employee Free Choice Act passed the House 241 – 185 in March or 2007, but did not make it to the Senate floor for an up or down vote this Congress.
As far as New Mexico’s delegation is concerned, Wilson and Pearce voted against it and Udall voted for it. The New Mexico House of Representatives passed a memorial in support of the federal “Employee Free Choice Act” on February 4, 2008. I have passed out a roll call vote listing from the Foundation’s new legislative tracking site As an aside, I’d urge all of you who have business in Santa Fe to take advantage of this free and easy to use site. It is much more user-friendly than the Legislature’s site.
So, why are the unions pushing this issue right now? First and foremost, unions have shrunk dramatically relative to the overall workplace over the years. In 1973, private sector unions could count 25 percent of the work force as members. That number is down to about 7.8 percent of the work force currently. Public sector labor unions have not experienced the same decline with membership remaining consistently between 35 and 40 percent of the work force over the same time period.
The fact is that private sector unions are desperate for members and they want to use this fall’s Democratic electoral landslide to increase membership. Many elected officials and Democratic Party activists are enthusiastic about this legislation because strong union support could cement electoral gains for years to come.
Regardless of the political implications associated with this legislation, it is hard to believe that a party that calls itself “Democratic” would undermine a core tenet of the Democratic process, the secret ballot.
If you as a business owner are concerned about this issue, it seems doubtful that the House of Representatives will move to the right after this election. Nonetheless, with three new House members in New Mexico, it is probably still worth talking to them. The real action, of course, will be in the US Senate. Also, while New Mexico’s House of Representatives is on record as supporting the federal legislation, the Senate may not be as enthusiastic about passage of a Memorial.
Certainly, it would not hurt to explain what this legislation could mean to your employees. You can’t be afraid to approach your employees with information. After all, a recent Zogby poll found that union members themselves believed, by an 84 percent to 11 percent margin, that employees should be able to vote on union membership. You will likely receive a receptive audience if you provide non-biased information in a non-threatening manner about the potential negative impacts of this legislation and get your employees involved.
While it might seem that Congress will be more than happy to pass Card Check legislation, it will be easier to preserve the secret ballot in Congress than it will be to head off anti-democratic card-check unionization drives at your work site.

Redistributing Wealth

Barack Obama has clearly expressed his desire to redistribute wealth in American society. Unfortunately, while such sentiments may sound nice to the average voter, there are a number of major political and moral problems with such redistributionist policies. Who is to be in control of redistribution efforts and what right do they have to simply take from one group of individuals and give to another? How much redistribution is enough? After all, as this link shows, the wealthy already pay far more in federal taxes than the rest of us. Where does it stop?
Here is one blogger’s humorous take on wealth redistribution and how it works when boiled down to the personal level. Stealing from the “rich” and giving to the “poor” sounds great in concept until your wealth is being taken away.

Big Surprise: Financial Intervention Failed

While it will take quite some time to discern the success or failure of the massive government intervention we have seen throughout the US economy in recent weeks, one policy — the ban on short-selling — has already been proven a failure. As the article points out, “The short selling ban hasn’t stopped the decline in bank stocks. An index of the 34 U.K. financial stocks on the banned list has fallen 22 percent since Sept. 19, compared with an 18 percent drop for the FTSE 100 Index of the largest U.K. companies and 10 percent for the FTSE All-Share Index.”
This is no surprise since government intervention in the economy caused this mess at the outset. As this article points out, it was government policy that created the Great Depression as well. Hopefully policymakers stop these interventions and let the economy run its course, but at this point there is no guessing what will happen next.