ENERGY AND ENERGY-INTENSIVE INDUSTRY ECONOMIES

Electricity Production in New Mexico

Figure 6: Electricity generation by source in New Mexico from https://www.eia.gov/

New Mexico ranks 40th in electrical generation in the U.S., with 34,075,584 MWH generated in 2020, and a summer capacity of 9,098 MW (Figure 6).1 Coal and natural gas fuel the largest share of New Mexico’s in-state electric generation, but coal’s share has steadily declined in recent years. In 1990, about 90% of in-state generation was fueled by coal, but, by 2020, coal-fired generation contributed 37%. New Mexico’s coal-fired power generation declined in part because of strict air quality regulations, more competitively priced natural gas supplies, and California’s decision in 2014 to stop purchasing coal-fired generation from other states. Three of New Mexico’s 10 largest power plants, including the two biggest, were coal-fired in 2019. However, three of the generating units at the state’s largest coal plant were retired in 2013, and two of the four coal-fired generating units at the second-largest power plant were shut down in late 2017. That power plant is scheduled for retirement in 2022. A third coal-fired power plant, also one of the state’s 10 largest in 2019, was retired in 2020.

As coal’s share of generation declined, the contributions from natural gas and renewables have increased. Natural gas fueled 43% more power in 2020 than it did in 2011 even though there was only a 6% increase in natural gas-fueled capacity. In 2020, natural gas-fired power plants accounted for about 36% of New Mexico’s in-state utility-scale electricity net generation, up from 22% ten years earlier. Renewable resources, primarily wind, provided 27% of the state’s utility-scale net generation in 2020, up from about 6% in 2011. Still, the state ranks low in current production of electricity from renewable resources, at 40th in the nation. Most renewable energy is generated from wind, followed by solar photovoltaic sources with minor amounts of hydroelectric geothermal, and biomass.17 Any new proposed electricity generating capacity is slated to use renewable energy or natural gas. 

Revenue from energy

New Mexico has a diverse energy economy that is dominated by the income from oil and gas obtained from more than 2,000 oil and gas fields located mainly in the San Juan Basin in the northwest and in the Permian Basin in southeast New Mexico. In addition to oil and gas, NM also generates energy from coal, wind, and solar energy, and although it has no nuclear generation, it does have the nation’s second-largest amount of known uranium reserves.1 The state is a net exporter of energy; in 2019 it consumed 738.86 BTUs of energy and generated 4327.27 BTUs.

A recently published report by the New Mexico Tax Research Institute shows the state’s oil and natural gas industry provided $5.3 billion in state and local tax revenue for fiscal year 2021 – the highest figure ever recorded in New Mexico history (Figure 1).2 Revenue jumped more than $500 million from fiscal year 2020 on production growth and improving market conditions, as New Mexico also became the second-largest oil producer in the United States.3 Currently, natural gas output is nearly 10 percent of the U.S. total and crude oil output almost reached 3 percent of the annual U.S. total production. Cumulative renewable energy investments in New Mexico in 2020 totaled about $6.5 billion, employing 3,500 people. State and local tax revenue from the projects totaled about $34.8 million last year, with much of that funding going to public services like education.4

Figure 1: Oil and gas sales revenue per fiscal year in New Mexico (2)

Wind in New Mexico

In 2020, renewable resources contributed ¼ of New Mexico’s power generation. Wind energy accounts for 21.2% of those resources, ranking New Mexico as the 13th leading producer of electricity from wind in the United States.13 Wind energy projects in the state of New Mexico have already been responsible for significant revenues. Two projects, Broadview and Grady Wind are believed to have brought over $1 billion dollars in total revenue to the state over a three year period.14 A new project from Pattern Energy called Western Spirit has started commercial operations, and is expected to bring about $3 million per year in new property tax revenue for Torrance, Lincoln, and Guadalupe counties over a 25 year period. It is also expected that Pattern Energy will contribute an additional $6 billion in wind energy and related infrastructure projects in the state over the next decade that will increase state revenues.15

Solar in New Mexico

New Mexico currently has 1,252.5 MW of installed solar (ranking 19th in the nation) and is projected to grow by some 2739 MW over the next 5 years. There are 13 manufacturers among 73 solar-related companies in the state which have contributed to a total $2.4 billion dollar investment and 1,880 current jobs in solar power.16 One company in particular (PNM) has invested more than $270 million on large-scale solar energy centers in New Mexico. They have more than 1 million solar panels at 19 different solar sites which provide 157 megawatts of clean energy for the state.

Coal in New Mexico

Coal has historically provided an important contribution to New Mexico’s state budget, the third largest source of revenues from mineral and energy production. In 2019, coal production ranked 10th in the nation. As in many other states, the importance of coal has declined as a source of revenue in recent years (Figure 2). Tax revenues– severance, resources excise, and conservation taxes, and royalties from coal on state land were $24.9 million in 2012.5 In 2019, the state reported $514 million in coal production value, 1089 direct and contract employees in the industry, and approximately $14.4 million in state and federal revenue6; the U.S. Office of Natural Resources reported about $6 million in revenue generated from coal mined on Federal leases in New Mexico.7 As of 2019 New Mexico had nine permitted coal mines, with three in operation (Navajo, San Juan Underground, and El Segundo). It is worth mentioning that the Navajo coal mine is located on the Navajo Indian Reservation and therefore under the jurisdiction of the Federal Office of Surface Mining, others are permitted by the State of New Mexico. The coal-fired plants in New Mexico are the San Juan Generating Station, operated by Public Service of New Mexico and the Four Corners generating station operated by Arizona Public Service. The retired Escalante generating Station was operated by Tri-State Generation & Transmission Association and in the future may be converted into a hydrogen power plant.8 Coal from the San Juan mine supplies the San Juan Generating Station. Coal from the Navajo mine is used by the Four Corners Generating Station. The Lee Ranch mine was supplying the Escalante station. All active coal mines are in the northwest quadrant of the state.

Figure 2: Federal revenue from coal on federal lands in New Mexico, dollars (7)

Oil and Gas in New Mexico

Figure 3: Production of crude oil in New Mexico (EIA-914 monthly production report)

Most oil production in New Mexico is from the southeastern part of the state in the Permian Basin. New Mexico has now exceeded North Dakota to become the 2nd largest oil producer in the nation. As of December 2019, the EIA reported that the state had crude oil reserves estimated at 3,456 million barrels accounting for 7.8% of the nation’s reserves.1 Natural gas is produced in the Permian Basin, as well as the San Juan and Raton Basins in the northern part of the state. New Mexico ranked 8th in gas production in 2020. The state’s natural gas production has increased greatly since 2015, with much of that increase due to gas produced in the Permian Basin.

For the fiscal year running 7/1/2020 – 6/31/2021, the State of New Mexico derived about 35% of its general fund revenues from taxes and royalties on oil, natural gas, and CO2 production. These taxes and royalties have contributed more than 90% of the principal in the Severance Tax and Land Grant Permanent Funds, the earnings on which are used to fund education and other state government operations.9,10

Figure 4: New Mexico natural gas production from 2012 to 2020 (EIA-914 monthly production report)

About $5.3 billion in revenue came to New Mexico from oil and gas production in the last fiscal year, a $500 million increase from FY 2020. FY 2021’s revenue set a new record, surpassing $5.16 billion generated in FY 2019, and providing $2.96 billion to the State’s General Fund along with $358 million in local taxes and another $1.95 billion in state taxes and royalties. The revenue provided about $1.04 billion to public schools and $275 million for higher education in New Mexico. According to statistics from the New Mexico Oil and Gas Association, the state’s oil and natural gas industry supported 134,000 jobs in New Mexico in 2021, both in direct and indirect employment.3

In 2020, New Mexico produced 373.7 million barrels of oil, 1.95 tcf of natural gas and 66 bcf of naturally occurring carbon dioxide and preliminary numbers indicate that 2021’s hydrocarbon production will surpass those numbers significantly.11 As of November 2021, New Mexico had record-high production of natural gas and crude oil, averaging 7.1 billion cubic feet per day (Bcf/d) of natural gas and 1.43 million barrels per day (b/d) of crude oil. (Figures 1, 3, and 4). The production increase between March and November 2021 was the largest monthly increase on record for New Mexico.

Carbon Dioxide Production in New Mexico

Bravo Dome is a 99% pure natural carbon dioxide source field located in northeastern New Mexico, operated primarily by Occidental. The CO2 produced there is primarily used for CO2 enhanced oil recovery in the Permian Basin. This production has regional economic significance. Federal revenue in 2021 was ~ $950,026, and the state of New Mexico received about $607,754 in tax revenue.6,7  In Union County, New Mexico, more than 20% of tax revenues stems from the Bravo Dome. Harding County, New Mexico gets 70-80% of its tax dollars from the Bravo Dome operation.12   

Figure 5: Federal tax revenue from Bravo Dome CO27

Pipeline Infrastructure in New Mexico

Figure 7: Pipelines in New Mexico (https://www.eia.gov/state/maps.php)

New Mexico has pipeline infrastructure for long-distance transportation of crude oil, refined products, natural gas and CO2. As of 2018, New Mexico had 6,440 miles of natural gas transmission pipelines and 14,347 miles of natural gas distribution pipelines. 69% of New Mexico’s natural gas transmission system and 42% of the distribution system were constructed prior to 1970 or in an unknown year. It has been also reported that in New Mexico are 2,055 miles of crude oil pipelines and 2,164 miles of refined product pipelines (Figure 7). It is also estimated that 45% of New Mexico’s petroleum pipeline systems were constructed prior to 1970 or in an unknown year. Equipment failure and corrosion are main causes that led to interruption of supply through the pipeline and cost $2.88M and $15.20M, respectively.18 Recent reports indicate that New Mexico is pipeline-constrained, particularly for natural gas pipelines in the Permian Basin19,20 and for oil transportation in the northwest.21

Also, in New Mexico two major CO2 pipelines – the Cortez and Bravo lines extend across significant parts of the state. Cortez pipeline is operated by Kinder Morgan, the largest transporter of CO2 in North America. It stretches 500 miles and transports approximately 1.2 bcf/d of CO2 from the McElmo and Doe Canyon fields in Colorado to a distribution hub in Denver City, Texas. Similarly, the Bravo Pipeline transports CO2 from the Bravo Dome field in New Mexico to the Denver City hub. Capacity is approximately 1.5 billion cubic feet of CO2 per day.1 The primary market for the CO2 pipelines is to customers using CO2 for enhanced oil recovery (EOR) in mature oil fields in New Mexico and West Texas. However, in the future pipelines could conceivably be used to transport captured anthropogenic CO2 to potential storage sites in the state.

Other energy-intensive or related industries in New Mexico

New Mexico’s industrial sector and transportation sector each account for about one-third of state energy use.22 The transportation sector uses more energy per capita than it does in almost three-fourths of the states; the state ranks 4th in the number of miles traveled per vehicle per year.23 due to a low population density and lack of alternative transportation. The industrial sector includes extractive industries such as mining and production of oil and gas, as well as power generation, and although readily available statistics do not break down use by subsector within the state, it is presumed that much of the energy used in the industrial sector within the state is used by these industries, and agriculture given that New Mexico has a relatively small manufacturing sector.24  More recently, companies such as Facebook and Amazon have established large facilities in the state. Facebook states that their facility in Los Lunas will be powered 100% by renewable energy.25

New Mexico has no nuclear power plants, but it does have the second-largest uranium reserves in the nation. There are no active uranium mines in New Mexico, but substantial amounts of uranium were mined in the state between 1948 and 2002, and the state produced about 37.5% of the total U.S. tonnage between 1947 and 2002.26 With efforts to reduce carbon emissions, there is renewed interest in nuclear energy. Several companies have plans to recover uranium by in-situ leaching. Two new uranium in-situ leaching plants are in development in New Mexico’s San Juan Basin. Those plants are in the permitting and licensing process and will have an anticipated combined capacity of 2 million pounds per year.

References

  1. New Mexico State Energy Profile Overview: U.S. Energy Information Administration (EIA). Accessed February 1, 2022. https://www.eia.gov/state/index.php?sid=NM
  2. New Mexico Tax Research Institute: State and local impacts of the oil and gas industry, Fiscal Year 2021 Update. Accessed March 7, 2022. https://cdn.ymaws.com/www.nmtri.org/resource/resmgr/studies_and_reports/2020_Fiscal_Impacts_of_O&G_r.pdf
  3. Oil & Natural Gas Delivers Record $5.3 Billion to New Mexico State and Local Revenue in 2021 – New Mexico Oil & Gas Association. Accessed February 1, 2022. https://nmoga.site-ym.com/news/588758/Oil–Natural-Gas-Delivers-Record-5.3-Billion-to-New-Mexico-State-and-Local-Revenue-in-2021.htm
  4. Federal stimulus could boost New Mexico renewable energy, study says. Accessed February 15, 2022. https://www.currentargus.com/story/news/local/2021/08/03/federal-stimulus-could-boost-new-mexico-renewable-energy-study-says/5455599001/
  5. Natural Resources Research: Coal. New Mexico Bureau of Geology & Mineral Resources. Accessed February 15, 2022. https://geoinfo.nmt.edu/resources/coal/home.html
  6. 2020 Energy, Minerals and Natural Resources Department Annual Report, Office of the Secretary: Accessed February 18, 2022. https://www.emnrd.nm.gov/officeofsecretary/publications/
  7. Revenue, U.S. Dept. Interior Natural Resources Revenue Data. Accessed February 18, 2022. https://revenuedata.doi.gov/downloads/revenue/
  8. Oil and Gas Severance Tax Registration and Filing. NM Tax and Revenue Data. Accessed March 7, 2022. https://www.tax.newmexico.gov/businesses/oil-and-gas-severance-tax-registration-and-filing/
  9. Grover, H. The retired Escalante Power Plant may be converted into a hydrogen plant. The NM Political Report. Published April 20, 2021. Accessed February 18, 2022. https://nmpoliticalreport.com/2021/04/20/the-retired-escalante-power-plant-may-be-converted-into-a-hydrogen-plant/
  10. Oil & Gas Program. New Mexico Bureau of Geology & Mineral Resources. Accessed February 18, 2022. https://geoinfo.nmt.edu/resources/petroleum/home.cfml
  11. GO-TECH : ONGARD Data by County. Accessed February 18, 2022. http://octane.nmt.edu/gotech/Petroleum_Data/county.aspx
  12. Nelson C. Why energy companies are drilling for a greenhouse gas in New Mexico. The NM Political Report. Published December 14, 2020. Accessed February 18, 2022. https://nmpoliticalreport.com/2020/12/14/why-energy-companies-are-drilling-for-a-greenhouse-gas-in-new-mexico/
  13. Energy Conservation and Management. Accessed February 18, 2022. https://www.emnrd.nm.gov/ecmd/wind/
  14. Hedden A. New Mexico continues growth in wind energy, industries embrace transition. Carlsbad Current-Argus. Accessed February 18, 2022. https://www.currentargus.com/story/news/local/2020/06/20/new-mexico-continues-growth-wind-energy-industries-embrace-transition/3210294001/
  15. Pattern Energy Completes New Mexico Wind Project | California News | US News. Accessed February 18, 2022. https://www.usnews.com/news/best-states/california/articles/2022-01-06/pattern-energy-completes-new-mexico-wind-project
  16. New Mexico Solar. SEIA. Accessed February 18, 2022. https://www.seia.org/state-solar-policy/new-mexico-solar
  17. SAS Output. Accessed February 18, 2022. https://www.eia.gov/electricity/annual/html/epa_04_07_b.html
  18. State of New Mexico Energy Sector Risk Profile. Accessed February 18, 2022. https://www.energy.gov/sites/default/files/2021-09/New%20Mexico%20Energy%20Sector%20Risk%20Profile.pdf
  19. Latest Oil, Energy & Metals News, Market Data and Analysis. Accessed February 18, 2022. https://www.spglobal.com/commodity-insights/en/n
  20. Economic Importance of New Mexico Oil and Natural Gas Infrastructure, Report prepared for NMOGA and API from the Legislative Transportation and Infrastructure Committee, 9/4/2019; Accessed February 18, 2022. https://www.ogj.com/general-interest/economics-markets/article/17296964/moodys-permian-basin-pipeline-constraints-to-limit-2019-production
  21. Northwest New Mexico Regional Transportation Plan 2021 prepared for the Northwest New Mexico Regional Transportation Planning Organization. Accessed February 18, 2022. http://www.nwnmcog.com/uploads/1/2/8/7/12873976/0000.pdf
  22. Table C11. Total Energy Consumption Estimates by End-Use Sector, Ranked by State, 2019. Accessed February 18, 2022.. https://www.eia.gov/state/seds/sep_sum/html/rank_use.html
  23. Average miles driven per year in the U.S. (2022). Accessed February 18, 2022. https://www.thezebra.com/resources/driving/average-miles-driven-per-year/
  24. 2019 New Mexico Manufacturing Facts. NAM. Accessed February 18, 2022. https://www.nam.org/state-manufacturing-data/2019-new-mexico-manufacturing-facts/
  25. Comment DS. Facebook announces Los Lunas data center expansion. Accessed February 18, 2022. https://www.datacenterdynamics.com/en/news/facebook-announces-los-lunas-data-center-expansion/
  26. Uranium Resources in New Mexico. New Mexico Bureau of Geology & Mineral Resources. Accessed February 18, 2022. https://geoinfo.nmt.edu/resources/uranium/nmresources.html