Fracking in New Mexico

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Fracking in New Mexico
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Regulation
Regulatory agency Oil Conservation Division
Estate ownership Split[1]
Resources
Fossil fuels present Oil, natural gas and coal[2]
Fracking
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Fracking in New Mexico depends on available energy resources, the location of these resources, applicable laws and regulations, politics, and the power of environmental and industry groups. Decisions by policymakers and citizens, including state and local governments and ballot initiatives, affect if and how fracking occurs in a state.

Fracking background

See also: Fracking

Hydraulic fracturing, or "fracking," is the process of injecting fluid--mostly water and sand, but with additional chemicals--into the ground at a high pressure to fracture shale rocks and release the oil and natural gas inside.

Recent technological advances in oil and gas drilling--horizontal drilling and hydraulic fracturing--have created a wealth of opportunities and challenges for states with fossil fuel reserves that can be accessed through the combination of these two technologies. The increased use of fracking has been an economic boon for many states, not only those with fracking, but also those with supporting industries, such as frac sand mining or associated machinery manufacturing.

Opponents of fracking argue that the potential negative environmental and human health impacts could be significant. Although wells have been fracked for over 65 years in the United States, concerns have been raised about whether federal, state and local regulatory agencies can keep up with the recent rapid increase in fracking activity, and adequately protect the environment and human health. As with any type of energy extraction, either traditional or renewable, there are economic, environmental and political tradeoffs.

History

The first commercial oil well in New Mexico was drilled in 1922. A significant oil field near Hobbs, New Mexico was discovered in 1927 and the first well drilled there (Midwest State No. 1) produced 700 barrels of oil per day. This discovery resulted in the state's first oil boom.[3]

Currently, New Mexico is the nation's third leading oil and natural gas producing state. There are 10 counties in the state that are producing natural gas.[3]

Economic impact

The use of fracking, often in combination with horizontal drilling, has made it possible to extract supplies of oil and natural gas that were once economically unfeasible to extract. This has led to significant growth in the domestic oil and gas industry, and in the supply of domestically produced oil and natural gas. The growth in activity has impacted the economy in direct ways, such as increased capital investments (from both the U.S. and other countries), royalty and lease payments, and government revenues in the form of fees and taxes. The increased supply of natural gas and oil has also affected electricity prices, manufacturing, service industries and employment. In many places, fracking has increased employment in the mining (oil and gas) sector and supporting industries, such as the restaurant and housing sectors. Consumers and manufacturers have also benefitted thus far from lower oil and natural gas prices, and increased demand for pipeline, drilling and other ancillary equipment. As demand for natural gas and oil grows, however, prices are expected to rise.[4]

Taxes, fees and revenue

Fracking booms can increase local government revenue through increases in property and sales taxes, which can help compensate for the costs detailed below. The primary revenue streams from fracking--mineral leasing revenues and severance taxes--go to state and federal governments. As of June 2013, New Mexico employed five types of oil and gas severance taxes.
The state's Oil and Gas Severance tax is:

  • "3.75% of taxable value of oil or gas severed and sold
  • 1.875% of taxable value for enhanced recovery project oil and gas
  • 2.45% of taxable value for well workover projects in excess of production projection
  • 1.85% or 2.8125% of taxable value for stripper wells."

The revenue collected from this tax goes to the severance tax bonding fund. Remaining revenue goes to the severance tax permanent fund.[5]

  • New Mexico has an Oil and Gas Conservation Tax of "$0.19 of taxable value sold of oil or gas." This revenue goes to the state oil and gas reclamation fund and the state general fund.[5]
  • The Oil and Gas Emergency School Tax is 3.15 percent of taxable value for oil, 1.58 percent for oil stripper wells producing less than $15 per barrel, and 2.36 percent for stripper wells producing oil worth between $15 and $18 per barrel. For natural gas the tax is 4 percent of taxable value for natural gas, 2 percent for stripper wells with an "annual value less than $1.15 per MCF", and 3 percent for stripper wells with an annual value between $1.15 and $1.35 MCF." The revenue from this tax is deposited in the state general fund.[5]
  • The Oil and Gas Ad Valorem Production Tax is based on the "assessed value of property" and goes to the oil and gas production fund.[5]
  • The Natural Gas Processor's Tax is $0.0065 "per mmbtu of natural gas multiplied by adjustment factor." The adjustment factor is the "annual taxable value per MCF of natural gas divided by $1.33." The revenue from this tax goes to the state general fund.[5]

Royalties and land sales

The United States is one of the few countries where property owners can own the right to use and build on their land, known as surface rights, but they may not own the rights to the minerals located under their property. Depending on the state the mineral rights may have been sold in the past and may now belong to someone other than the surface owner. In fact, those mineral rights may belong to more than one individual, a company, or many individuals, who now have the right to extract those minerals, and in some states this can happen without the permission of the property owner. This can cause tension between the mineral owner, or whoever is leasing the mineral rights, and property owner.[6]

The federal government doesn't collect data on oil and natural gas royalty and land sales on private land. A 2014 study attempted to estimate these figures and determined that New Mexico (among the lower 48 states) was 10th in private royalty income in the nation. The study also found that for 2010:

  • Private oil revenue was $1,355 million
  • Private natural gas revenue was $1,863 million
  • Estimated royalty income was $402 million
  • Royalty income was 0.59 percent of state average income.[7][8]

Economic impact studies

Below is a study about the economic impact of the oil and natural gas industry (also categorized as the mining industry in some studies) in New Mexico. Both the author and sponsor of the study have been listed.

Study for the American Petroleum Institute

Economic modeling
IMPLAN and REMI are two econometric modeling systems used in both the private and public sectors to predict economic outcomes of policy changes. While these systems are widely used and highly respected, their results are theoretical and may not be universally accepted.

Because the oil and gas industry has grown so rapidly, there is not a wealth of data regarding its economic impacts. Instead, economists use forecasting models, such as IMPLAN and REMI, to predict the impact increased fossil fuel extraction is having on the economy. These studies usually measure both direct impacts, i.e., the jobs and income being added within the oil and gas industry and indirect impacts, i.e., jobs created throughout the supply chain. These studies also include induced impact, i.e., jobs created through increased spending due to growth in the industry.[12]

The following data are taken from a study done by PricewaterhouseCoopers LLP (PwC), a research consulting firm, for the American Petroleum Institute about the economic impact of the oil and natural gas industry in 2011 in New Mexico. According to the PwC study, the oil and gas industry added $11.27 billion in total value in 2011, including direct, indirect and induced value. Of this $6.55 billion, or 8.2 percent of the state's total value added was direct, $2.55 billion was indirect and $2.17 billion was induced, totaling 14.2 percent of the state's total value in 2011.[12]

Employment

The PwC study attributes 105,579 jobs, or 9.9 percent of employment in New Mexico in 2011, to jobs created directly by, indirectly by, or induced from, the oil and natural gas industry. The industry directly employed 39,208 people, or 3.7 percent of state total employment. Indirectly the industry employed 33,970 people and induced 32,400 jobs.

Direct, indirect and induced labor income, according to this study, was $5.35 billion, totaling 10.3 percent of New Mexico's labor income in 2011. Direct labor income from the mining sector was $2.32 billion, or 4.5 percent of the state's total. Indirect labor income totaled $1.78 billion and induced labor income was $1.25 billion.[12]

Environmental impact

Because of the sudden and unprecedented growth in fracking across the United States, getting high-quality, unbiased, state-specific information on the environmental impacts of fracking can be difficult. Most studies that would fit those first two qualifications are government studies that focus on the nation as a whole. As such, much of the information that follows in this section may only apply generally to the state. State-specific information has been added where possible.

Air

As with any type of energy extraction, there are several areas of risk when it comes to air quality. In the case of fracking, these risks include air pollutants such as volatile organic compounds (VOCs) and methane. Some environmental groups have raised concerns that methane could be leaked during the extraction process, resulting in unnecessary pollution.[13][14] Most of this pollution occurs during the well completion phase. Fracking operations can also emit known carcinogens, which have been linked with increased rates of cancer.[15]

Emissions

With regard to carbon dioxide, when natural gas is used to generate electricity in power plants, it produces fewer carbon emissions than coal-fired power plants. According to a 2014 study by the National Oceanic and Atmospheric Administration, "as a result of the increased use of natural gas, CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increase in natural gas use.[16] During the extraction process, however, methane is emitted, and methane actually traps 20 times more carbon dioxide than other greenhouse gases. Nevertheless, according to the International Energy Agency (IEA), CO2 emissions in the United States dropped by 3.8 percent in 2012, due in large part to the "increased availability of natural gas, linked to the shale gas revolution."[17][16]

A 2014 report from the U.S. Environmental Protection Agency found a decrease of 3.3 percent in overall greenhouse gas emissions and a 12 percent decrease in methane emissions from 2011 to 2012. Natural gas extraction is the second largest producer of methane, after cattle.[14][18]

Earthquakes

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State energy policy

State fracking policy

Energy policy terms

Fracking in the U.S.

Energy use in the U.S.

Energy policy in the U.S.

State environmental policy


See also
Local fracking on the ballot

Statewide fracking on the ballot

The central and eastern United States have been experiencing an increased number of earthquakes over the last few years, according to the U.S. Geological Survey (USGS), the government agency responsible for such data. Studies from the USGS have not found fracking directly responsible for this increase in felt earthquakes; however, the USGS is looking into regulations that would use seismic data to determine thresholds dictating when and where fracking can occur.[19] There is a growing body of evidence suggesting that this growth in the number of earthquakes has been caused by the increased use of injection wells to dispose of fracking wastewater. While fracking has been rarely known to cause earthquakes, there is an established scientific link between earthquakes and the disposal of fluids in deep, underground injection wells. Once a well has been fracked, the water returned to the surface is called wastewater, and contains large amounts of salt and other contaminants.[20] Some of this water can be recycled, but that water which can't be recycled is often stored in injection wells. These injection wells are generally considered the safest and most cost-effective place for wastewater to be stored. Injection wells are located thousands of feet underground and are encased in cement. Multiple drilling wells often rely on one disposal well for wastewater storage. The U.S. Environmental Protection Agency estimates there are 144,000 of these wells across the United States receiving 2 billion gallons of frack fluid per day.[19][21]

Induced seismology, or man-made earthquakes, have been around for decades and can be caused by mining, damming rivers and injecting fluids into underground wells. Earthquakes are caused by injection wells when water pumped into underground wells causes the faults under the earth to slip. Even though scientists at the USGS have been able to cause earthquakes intentionally by carefully injecting liquid into the earth, the link between injection wells and earthquakes is not fully understood. One of the largest concerns for scientists and regulators is that they do not have the tools to predict whether wastewater will cause seismic activity. These concerns are compounded by the lack of knowledge about where faults are located across the central and eastern United States. The USGS is just beginning to map these areas in more detail in order to understand the seismic risks. As of June 2014, these earthquakes have typically been small, two or three in magnitude on the Richter scale, but at least one scientist has raised concerns that earthquakes could grow in intensity if old injection wells continue to be used for storage.[19][20]

Water

When it comes to water protection and fracking there are four main areas of risk: the depletion of fresh water sources, spills and leaks of fracking fluid into water, mismanaged produced water and flowback, and stormwater pollution. Stormwater, flowback, produced water and wastewater can be harmful because they contain total dissolved solids and naturally occurring radioactive materials. Because of the recent rapid growth in fracking, there are still many uncertainties about the effects of fracking on water. There are studies that link fracking to groundwater contamination, but they remain controversial. The U.S. Environmental Protection Agency is releasing a report in spring 2015 on the potential impacts of fracking on drinking water, and is working on effective programs for managing these potential risks.[15][22]

One of the main criticisms of fracking is that the process uses a disproportionately large amount of water. Up to 10 million gallons of fresh water may be required to frack one well. A 2014 study from the Bureau of Economic Geology at the University of Texas found, however, that the amount of water used in a traditional well, versus a hydraulically fractured well, is not appreciably different. According to one of the researchers, Dr. Bridget Scanlon, "The water used to produce oil using hydraulic fracturing is similar to the water used in the U.S. to produce oil using conventional techniques." The only difference between the amount of water used during the two oil or gas production techniques, is when in the process water is used. The study was funded by the Alfred P. Sloan Foundation.[23][24]

Health

Because of the recent, rapid growth of fracking, little is known about the potential impacts to human health. Government agencies dealing with human health issues have raised concerns about some chemicals that can be released during the fracking process, including VOCs. The Centers for Disease Control are working with the EPA and federal, state and local agencies to better understand potential impacts.[25][26]

Socioeconomic impact

Fracking can also present challenges to communities. Increased oil and natural gas production happens in boom or bust cycles, and often these cycles disproportionately occur in rural communities. Large scale fracking booms can also lead to increases in crime, such as substance abuse, sex trade and domestic abuse. An influx of oil and gas workers also strains housing and traffic resources. This lack of housing can push oil and gas workers into so-called 'man camps,' which are "clusters of mobile homes, RVs, and trucks," or into hotels. A fracking boom also puts heavy traffic on roads, which can strain infrastructure, increase traffic accidents, and increase the likelihood of oil spills. Local governments respond by hiring more police, social workers, health care workers and emergency response personnel, thereby spending more of their budgets on roads and social programs. Currently, much of the tax revenue generated by the oil and gas industry goes to the federal and state government, not the local governments.[15]

Departments, agencies and organizations

  • The Oil Conservation Division (OCD) is charged with regulating the state's oil, gas and geothermal activity. Specific responsibilities include: permitting new wells, enforcing rules and regulations, ensuring that abandoned wells are properly plugged, and ensuring that land used for extraction purposes is properly restored. The division is an agency of the New Mexico Energy, Minerals and Natural Resources Department.[27]
  • Established in 1991, the New Mexico Environment Department (NMED) is the state's environmental agency. The stated mission of NMED is "to protect and restore the environment, and to foster a healthy and prosperous New Mexico for present and future generations." Specific responsibilities include:[28]
    • Providing information about environmental protection and health and safety requirements
    • Monitoring air, water and land quality
    • Inspecting work and industrial sites for compliance with applicable environmental laws
    • Assisting facilities with compliance requirements
    • Resolving environmental issues

Major organizations

  • The New Mexico Oil and Gas Association (NMOGA) is a non-profit organization and trade group that represents the interests of the state's oil and gas industry. NMOGA's stated mission is "promoting the safe and responsible development of oil and gas resources in New Mexico through advocacy, collaboration and education." NMOGA is listed as a "cooperating association" by the Independent Petroleum Association of America, which is a national trade group that "advocates its members' views before the U.S. Congress, the Administration and federal agencies."[29][30][31]
  • The Southwest Environmental Center (SEC) is a non-profit conservation group headquartered in Las Cruces, New Mexico. The stated mission of the SEC is "to protect and restore native wildlife and their habitats in the Southwestern borderlands, through advocacy, education and on-the-ground projects." SEC is listed as a "coalition member" by Americans Against Fracking, which is a nationwide anti-fracking group.[32][33]

Natural gas use in New Mexico

For more information on energy consumption in New Mexico, see "Energy policy in New Mexico"

In 2011, more than one-third of New Mexico's energy use was for industrial purposes, and slightly less than one-third was used for transportation. The rest was used mostly in residential and commercial buildings for heating, cooling, lighting and other functions. Most of the energy used in the state is in the form of petroleum (used primarily for transportation), followed by electricity and natural gas.[2]

Natural gas is the main source for home heating in New Mexico, accounting for 67.7 percent of all homes.

Consumption of energy for heating homes in New Mexico
Source New Mexico 2011 U.S. average 2011
Natural gas 67.7% 49.5%
Fuel oil 0.1% 6.5%
Electricity 15.5% 35.4%
Liquid Petroleum Gases (LPG) 8.9% 5%
Other/none 8.0% 3.6%

Natural gas production ranks New Mexico among the top 10 in the states, producing about 5 percent of national output. Interstate pipelines send natural gas to Arizona, Texas and on to markets from the West Coast to the Midwest. The San Juan Basin is home to a natural gas production center named Blanco Hub. It connects the major trading states carrying Rocky Mountain natural gas.[2]

Where electricity comes from in New Mexico[34]
Type Amount generated (MWh) % of state** % of U.S.**
Petroleum-fired 413,400 18.28% 1.37%
Natural gas-fired 1,405,200 62.14% 0.14%
Coal-fired 406,000 17.96% 0.02%
Hydroelectric 4,200 0.19% 0%
Other renewables 32,400 1.43% 0.02%
Total net electricity generation 2,261,200 100% 0.06%
**Note: Because the U.S. Energy Information Administration (EIA) does not include all of a state's energy production in these figures, the EIA totals do not equal 100 percent. Instead, we have generated our own percentages.

News items

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All stories may not be relevant to this page due to the nature of the search engine.

New Mexico Fracking News Feed

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See also

External links

References

  1. FrackWire, "Mineral rights and fracking," June 17, 2013
  2. 2.0 2.1 2.2 U.S. Energy Information Administration, "New Mexico Profile Analysis," updated December 18, 2013
  3. 3.0 3.1 American Oil and Gas Historical Society, "New Mexico Oil Discovery," accessed July 24, 2014
  4. IHS, "US unconventional oil and gas revolution to increase disposable income by more than $2,700 per household and boost US trade position by more than $164 billion in 2020," accessed September 17, 2014
  5. 5.0 5.1 5.2 5.3 5.4 National Conference of State Legislatures, "State Revenues and the Natural Gas Boom: An Assessment of State Oil and Gas Production Taxes," June 2013
  6. Geology.com, “Mineral Rights,” accessed January 29, 2014
  7. All the data presented below are in millions of nominal dollars. The royalty income figures assume a 1/8th royalty rate.
  8. Social Science Research Network, "U.S. Private Oil and Natural Gas Royalties: Estimates and Policy Considerations," March 12, 2014
  9. IMPLAN, "IMPLAN€'s History of Expert Economic Data," accessed September 17, 2014
  10. REMI, "About Us," accessed September 17, 2014
  11. REMI, "Clients," accessed September 17, 2014
  12. 12.0 12.1 12.2 PricewaterhouseCooper LLP, "Economic Impacts of the Oil and Natural Gas Industry on the US Economy 2011," July 2013
  13. University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 15, 2014
  14. 14.0 14.1 Senate Committee on Energy and Natural Resources, "Written Testimony of Frances Beinecke," accessed March 2, 2014
  15. 15.0 15.1 15.2 Stanford Law School Student Journals, "Local Government Fracking Regulations: A Colorado Case Study," January 2014
  16. 16.0 16.1 Cooperative Institute for Research Environmental Sciences,, "New study: U.S. power plant emissions down," January 9, 2014
  17. International Energy Agency, "Redrawing the Energy-Climate Map," June 10, 2013
  18. The Wall Street Journal, "Talk About Natural Gas: Cow Belches Top Methane List," February 26, 2014
  19. 19.0 19.1 19.2 U.S. Geological Survey, "Man-Made Earthquakes Update," January 17, 2014, accessed March 10, 2014
  20. 20.0 20.1 National Geographic, "Scientists Warn of Quake Risk From Fracking Operations," May 2, 2014
  21. National Public Radio, "How Oil and Gas Disposal Wells Can Cause Earthquakes," accessed June 2, 2014
  22. U.S. Environmental Protection Agency, "Natural Gas Extraction - Hydraulic Fracturing," accessed March 10, 2014
  23. WOAI, "Research: Fracking Uses No More Water Than Traditional Oil Production," October 6, 2014
  24. Bureau of Economic Geology, "US Shale Reserves and Production Bureau Shale Gas Study," October 6, 2014
  25. U.S. Department of Health and Human Services, "Garfield County," March 13, 2008, accessed March 10, 2014
  26. Centers for Disease Control, "Review of Federal Hydraulic Fracturing Research," April 26, 2013, accessed March 10, 2014
  27. New Mexico Oil Conservation Division, "Home page," accessed July 24, 2014
  28. New Mexico Environment Department, "About NMED," accessed July 24, 2014
  29. New Mexico Oil and Gas Association, "Mission and Values," accessed July 24, 2014
  30. Independent Petroleum Association of America, "About IPAA," accessed July 16, 2014
  31. Independent Petroleum Association of America, "Cooperating Associations," accessed July 16, 2014
  32. The Southwest Environmental Center, "About the Southwest Environmental Center," accessed July 24, 2014
  33. Americans Against Fracking, "Coalition Members," accessed July 16, 2014
  34. U.S. Energy Information Administration, "New Mexico Profile Overview," accessed February 22, 2014