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By Morgan Lee, Mead Gruver The Associated Press
SANTA FE, N.M. — New Mexico has a booming government budget: Teacher salaries are rising, residents can go tuition-free to an instate college, moms will receive medical care for a year following childbirth, and criminal justice programs are being funded to reduce violence in the city.
The reason behind the spending spree — oil. New Mexico is the No. The No. 2 crude oil producer in the United States and the top recipient for U.S. disbursements to support fossil fuel production on federal land. However, a budget stuffed with petroleum cash has a side effect. It also highlights how difficult it can be to turn state rhetoric regarding climate change into reality.
State governments in the nation’s top regions for producing oil, natural gas and coal have by far the highest per-capita reliance on fossil fuels — led by Wyoming, North Dakota, Alaska and New Mexico. The revenue funds essential public services from highway maintenance to prisons. In Carlsbad (New Mexico), oil infrastructure property taxes underwrite a high-school performing arts center, expanded sporting facilities, and elementary school remodels.
Gerry Washburn, superintendent of schools, stated that none of this would be possible without oil revenue.
“We can’t slow down in that area and what we do to fund schools until we have a legitimate replacement” for oil and natural gas income, he said. “Whether you’re in the middle of the oil patch or in an area with no oil and gas drilling going on, those policies are going to impact revenue in every school district in the state.”
According to a study done by Resources for the Future (a Washington-based nonpartisan economics organization), federal, state and local governments get $138 billion each year from the fossil energy industry. The study was not a recommendation for energy policy. That’s equivalent to the annual state spending of New York and Texas combined.
The majority of cashflow comes from gasoline and diesel retail taxes in all states, but energy-producing countries have the greatest dependence on fossil fuel income through a range of taxes and royalties. According to Daniel Raimi, a co-author of the study and a fellow at Resources for the Future.
“That’s a really challenging dynamic if you think about a shift away from fossil fuels,” he said. “They’re going to be faced with the question: Do we raise our taxes on our residents or do we reduce the level of services we provide?”
New Mexico’s oil and natural gas accounts for 42% state income. This share is increasing due to the wars in Ukraine and record-setting oil output in the Permian basin, which runs across southeastern New Mexico. Additional oil income flows to an interest-bearing trust that provides early childhood education.
Soaring fossil fuel industry profits also allowed the Democratic-controlled New Mexico Legislature to try to tackle the highest-in-the-nation unemployment rate and persistently high poverty. To offset inflation, lawmakers provided $1.1 million in tax relief and direct payments up to $1.500 per household.
Moreover, legislators resisted climate initiatives that could restrain petroleum production this year. A bill to limit climate-warming pollution in transportation fuel production and distribution was rejected by the legislatures. This is a West Coast state action. New Mexico also rejected a state constitutional amendment to protect clean air.
Democratic Gov. Michelle Lujan Grisham (Democratic Gov.) is running for reelection in November. She stated that her administration works to limit oilfield methane and diversify the economy. New mandates require electricity production from solar, wind, and other renewable sources. However, she cautioned against any restrictions on oil exploration or production, which are still the lifeblood for the state budget.
“We can work very effectively with oil and gas producers to both meet clean energy standards … while still managing pretty incredible exploration of fossil fuels to meet the current energy demands of the world,” the governor said in April.
Colorado makes it difficult to maintain income in blue states such as Colorado
Blue states, where Democrats are often focused on global warming, can make it difficult to protect income from oil and natural gas production while also acting on climate change.
Colorado’s Democratic Gov. Jared Polis has an ambitious clean energy plan. He also aims to preserve $1 million in annual oil and natural gas production tax revenue. Polis has used real-time evidence to support air pollution restrictions. He cited drought, climate change and fire as examples.
Polis, a tech entrepreneur and wealthy, threatened last year to veto any proposal that would impose per-ton emissions fees on polluters. Will Toor, executive director of the governor’s Colorado Energy Office, said the state’s not targeting fossil fuel production — only the industry’s emissions.
On Colorado’s northeastern plains, Weld County Commission Chairman Scott James said state regulations stifle new drilling needed to support production and government revenue, especially for schools. The county is located in the middle of a vast oil field that stretches from Denver into Wyoming and Nebraska.
“I agree with the overall mission of reducing greenhouse gas, but there’s an environment that exists at the state Legislature that we must electrify everything, we must mandate it, we must do it now,” James said. “And these technologies are not yet ready for prime time. We simply don’t have the capacity to do it.”
Rural and economically isolated communities could find it hardest to adapt to a low-carbon economy, said Montana-based Headwaters Economics researcher and economist Kristin Smith, who studies public finances in North Dakota’s Bakken oil region. She anticipates “very hard decisions” about cutting areas like public health care and policing.
Some of the world’s largest oil-producing countries are moving forward with their climate agendas.
Pennsylvania was the first major state to adopt a climate-pricing strategy. It joined an 11-state regional group that sets a price for carbon dioxide emissions from power plants and lowers them.
Democratic governor Tom Wolf’s initiative comes without approval from the Republican-controlled Legislature in the nation’s No. 2 state for natural gas production — and a major exporter of gas-generated electricity. A per-well drilling fee on the state’s booming Marcellus Shale gas industry has rained cash on rural counties and municipalities for nearly a decade.
Washington County, south of Pittsburgh, has reaped more than $100 million over the past decade. That’s equivalent to $500 per resident — a “game changer,” said county board chairwoman Diana Irey Vaughan. The windfall was used to pay for improvements to parks and bridges, among other things.
Greg Vitali, Democratic State Representative, is an advocate for stronger climate mitigation action. Vitali said that local governments that depend on gas drilling money can simply use traditional tools like property tax to get by.
Wyoming, the most populous coal state, also wants zero emissions
Wyoming, the state with the highest coal production, is dominated by Republicans. It has bold goals to reduce greenhouse gases to zero, even though fossil fuels account to more than half of its revenue.
The vision calls for eventually capturing carbon from coal- or gas-fired power plant and pumping it underground. This could allow for an increase in oil production in the middle of the state. Wyoming leaders are also looking at alternative fuels like hydrogen or nuclear power, which produces less waste.
Meanwhile, government income has been eroded by a decade of declining coal consumption. Republican Governor. In March, Mark Gordon, Republican Governor, signed a reduction in the coal tax. This means that approximately $9 million per year will be slashed to support the coal industry’s economic viability.
The state — one of only two with no taxes on individual income, corporate income or gross receipts — must confront its dependence on fossil fuel money eventually, said Jennifer Lowe, executive director of the Equality State Policy Center, a government watchdog group.
“At some point, there’s going to have to be a come-to-Jesus moment,” Lowe said.
Mead Gruver reported out of Cheyenne in Wyoming. This report was co-authored by Marc Levy in Harrisburg (Pennsylvania) and Jim Anderson in Denver, both Associated Press writers.
