Oil Patch cuts may sting state budget

ALBUQUERQUE (KRQE) - State government may be even deeper in the hole than $650 million as oil and gas companies expect to cut back production more than usual this winter.

Less oil and gas pumped from the ground means less money for the state.

New Mexico Oil and Gas Association President Bob Gallagher put the potential added loss for the state at hundreds of millions of dollars.

Companies always cut back in the winter, but are only using about half of their equipment now, he said. And that could drop to one-third, Gallagher added.

Lawmakers from both sides of the aisle say they don't yet know how they'll deal with the huge budget hole and now it may be even bigger

"It's been a major concern," state Rep. John Heaton, D-Carlsbad, told KRQE News 13.

"It's of deep concern to know that we have one more thing affecting us in a negative way," added Rep. Keith Gardner, R-Roswell.

When oil and natural gas is extracted from New Mexico, the companies pay the state taxes and royalties on what they produce. The production though is expected to shrink this winter and with it will go state revenue. New Mexico Oil and Gas Association President Bob

According to producers it's just not worth the investment to do more.

"The fact that New Mexico for the last five years is drilling fewer and fewer wells is an indication that the state rules and regulations are more difficult," H.G. "Buddy" Kleemeier, chairman of the Independent Petroleum Association of America, said. "Otherwise the rig counts would go up."

Environmental groups say the regulations are necessary to protect the land and groundwater.

Ralph Hill, president of exploration and development for Williams Companies, said low natural gas prices make the patchwork of regulations even worse. He said the industry is hampered by the "piling on" of state, local and federal regulations.

"Give us some agreement," Hill said.

Heaton and Gardner both want to reduce regulation as well.

"We have to stop some of these egregious rules that have been put in place and hopefully stop the bleeding and reverse the trend and allow this industry to recover," Gardner said.

The New Mexico Oil and Gas Association expects the drop in natural gas production over the winter to allow the use excess supplies in storage. That may help natural gas prices recover and lead to more production.