Energy, Utilities and Environment

Rio Grande Foundation Gives Obama Administration Lump of Coal for Christmas

For Immediate Release: Tuesday, December 22, 2015

For further Information, Contact: Paul Gessing 505-264-6090

(Albuquerque) – Today, the Rio Grande Foundation announced it is suing the Obama Administration over the Clean Power Plan (CPP), which is an illegal rule to regulate carbon dioxide emissions from power plants.  The Foundation is joining the Competitive Enterprise Institute (CEI) in asking the Courts to review the CPP rule.

Rio Grande Foundation President Paul Gessing said, “This is yet another unlawful Washington power grab by the Obama Administration that will cost New Mexico rate payers dearly. The Rio Grande Foundation believes the appropriate Christmas gift for economically-strapped New Mexicans is a lawsuit to stand up for those would pay the price for this ill-conceived and illegal regulation.”

In 2014, the Foundation, along with New Mexico Representatives Candy Ezzell and Tim Lewis filed comments against the CPP. In part, the Rio Grande Foundation cited, the traditionally-state nature of electricity regulation and the fact that under the plan, residential rates are projected to increase by 13 percent to 14 percent, while industrial rates are projected to increase by 23 percent.

Gessing concluded his remarks saying, “This regulation is a continuation of President Obama's promise to make electricity prices 'necessarily skyrocket' while his Administration lavishes subsidies on so-called 'renewables.' The CPP is an effort to use government regulations to hinder the use of traditional energy sources.” The Rio Grande Foundation is taking legal action in an effort to stop these disastrous effects from happening.”

The Foundation's 2014 comments as well as more information about the organization's work on energy and a wide variety of issues relating to New Mexico's economy can be found at The Rio Grande Foundation’s website, www.riograndefoundation.org.

Information on the Competitive Enterprise Institute can be found at: www.cei.org.

Obama’s proposed BLM regulations to increase costs/harm economy

Photo by: Shutterstock

Photo by: Shutterstock

The Bureau of Land Management (BLM) looms large as a land manager in the American West. Total surface acreage maintained by the BLM in my home state of New Mexico comes to 13.5 million acres. That’s more than twice the size of the state of Maryland or nearly as much land as the entire state of West Virginia.

Under the Obama Administration the BLM has become far more difficult for the oil and gas industries to deal with. An indicator is that since 2009, oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal lands is up by 61 percent and gas production on non-federal lands is up by 31 percent.

Unfortunately, a slew of new and proposed regulations will only make things more challenging. Combined with lower prices, these regulations could bring oil and gas drilling on BLM lands to a halt. This may be the goal of many in the Obama Administration. It is certainly the desired outcome of many of the President’s activist environmentalist supporters.

Proposed changes to Onshore Order No. 3 would dramatically alter the metering of production on federal leases, most likely forcing industry to install new meters on thousands of wells. 

These changes may slightly improve the accuracy of royalty payments, but the increased cost of compliance will lead to the premature abandonment of wells that cannot be economically updated. Significant revenue losses will be traded for minuscule changes to the accuracy of royalty accounting. A few years ago (when this same change was debated and then abandoned by BLM), New Mexico’s State Land Office conservatively estimated that the state could lose $1 trillion in revenue over a decade under this regulation.  

Another costly new BLM regulation expected to be formally proposed in the near future will address venting and flaring. The rule, submitted to the Office of Management and Budget for review in September, aims to reduce the amount of methane released into the environment.

A recent report from the Environmental Defense Fund (EDF) claims that $330 million worth of natural gas is “lost” on federal lands due to “excessive” venting and flaring. But like much of what passes for “energy analysis,” this figure is calculated by comparing estimates in two different time periods.  In the meantime, the EDF conveniently ignores the increasing amount of actual data that gradually shows reductions in methane emissions by industry action.

Photo by: Shutterstock

Photo by: Shutterstock

This new venting and flaring rule is expected to require the twice yearly inspection of all gas-producing wells with special, costly cameras. In northwest New Mexico alone, where there are over 20,000 active wells, the annual cost would be over $24 million a year not including administrative costs.

Ironically, the BLM’s own slow permitting process is a leading cause of flaring. When permits for rights of way for gathering systems are delayed, natural gas flaring times are often extended. This is a case of a bureaucracy-induced problem that has greatly impacted the industry in recent years.  

Another proposed BLM rule involves “fracking” on federal and Native lands. The BLM rules would require oil and gas companies to reveal the chemicals they inject, to meet construction standards in drilling wells and to safely dispose of produced water. This all sounds great, but “fracking” regulation has traditionally been done at the state level.  

According to Obama’s own EPA, states have been doing a good job. The EPA has never definitively identified a case where the fracking process itself resulted in water contamination.

Colorado Attorney General Cynthia Coffman in April joined North Dakota, Utah and Wyoming in arguing that the feds overreached and intruded into an area where state rules control.

Said Coffman, “It makes no sense that there would be two sets of regulations — one from the state and another conflicting one from the federal government that would apply to the same activity — especially when the state of Colorado has been responsibly regulating oil and gas in our state for decades.”

U.S. District Court of Wyoming Judge Scott Skavdahl agreed with Coffman. In late September he issued a preliminary injunction blocking federal land managers from regulating fracking on public lands until the legal case is resolved.

These are just three of the Obama Administration’s major new regulations being imposed on the oil and gas industries. Other regulations impacting Indian lands as well as mining rules relating to streams on BLM lands are in the works.

These costly regulations will reduce tax revenues and jobs on lands managed by the federal government with negligible positive impact on the environment.

Gessing and Rep. Bill McCamley discuss 2015 Legislative activities on KRWG TV

I was recently in Las Cruces and had a chance to sit down with Fred Martino of KRWG (the public television station in Las Cruces) to discuss what happened in the 2015 legislative session and special session. Las Cruces area state Representative Bill McCamley, a Democrat, was also on the air and, believe it or not, we found a few areas of agreement.

Freer trade could help New Mexico oil and gas industry

No matter what one thinks about recent battles over Trade Promotion Authority and the Trans Pacific Partnership, freer trade would be good for New Mexico's main private sector industry (oil and gas). In this case, as I argue below, freer trade would impact the industries from different angles.

Photo by Rob Nikolewski

When it comes to New Mexico’s economy, there are no bigger players than the oil and gas industries which, combined, contribute 31 percent of the general fund. Natural gas prices remain at historically-depressed levels. Since spiking during the winter of 2014 when the East Coast of the United States saw a series of cold snaps, the Henry Hub price has been on a steady decline. Throughout 2015, prices have been below the historically-low $3/mmbtu line.

Oil prices on the other hand, were elevated until July of 2014 when prices began a steep slide from $100/barrel to less than half that price by January of 2015.

Unfortunately for the industry and contrary to the beliefs of many Americans (at least when prices are elevated), oil and gas producers have little control over the price point at which they sell their product. Collectively, the oil and gas industries can (and have) cut production, but this is a painful and unappetizing process.

Recent Paul Gessing interview: the impact of low oil and gas prices on New Mexico

Natural gas prices have been down for some time but oil has rebounded somewhat in recent weeks. Here's a recent interview I did on the issue and how the prices of these important commodities impact New Mexico.

James Taylor presentation: Affordable Energy Threatened in New Mexico

On April 8, 2015, James Taylor of the Heartland Institute visited Albuquerque to discuss policies that are negatively impacting New Mexicans' access to affordable, reliable energy (especially electricity). You can watch his full presentation below and access his powerpoint slides here:

New RGF report: Obama Administration Clean Air Regulations to Raise Electricity Costs by 18 percent, cost 5,000+ New Mexico Jobs

(Albuquerque, NM) – The Rio Grande Foundation, using data produced by the Beacon Hill Institute at Suffolk University (BHI) has analyzed the Obama Administration Environmental Protection Agency’s proposed “Clean Air Regulations” and found that if consumers are concerned with the electricity rate hikes being proposed by Public Service Company of New Mexico (PNM), they will face an even greater impact under the new federal regulations.

The new report is available here. Among the report’s findings:

• Before factoring in PNM’s proposed 12 percent rate hike, New Mexico’s electricity prices are relatively high compared to other states. In part this is due to aggressive renewable portfolio standards;

• The EPA has introduced three new emission rules that will either force coal-fired generation plants to close or adopt expensive and unproven technologies such as carbon capture and storage;

• These rules will cost the New Mexico economy $185 million between implementation and 2030, according to data provided by the Beacon Hill Institute at Suffolk University;

• The rules’ effects on reducing the supply of inexpensive electricity production will increase electricity prices by 18%, cost 5,170 jobs, and reduce real disposable income by $578 million, according to the report.

According to Rio Grande Foundation president Paul Gessing, all of this economic harm amounts to “all pain and no gain” since EPA administrator Gina McCarthy, in September 2013 testimony before a House committee, conceded that the agency’s climate-change regulatory regime would not affect the climate because the preponderance of current and future greenhouse-gas emissions originate in Asia.

“Of course,” argued Gessing, “The pain of dramatically-increased electricity costs will further hinder New Mexico’s already anemic economy while having real-world impacts on the thousands of hard-working taxpayers who are destined to lose their jobs under this misguided proposal.”

With PNM already looking for a 12 percent rate hike and many of New Mexico’s utilities looking to increase their “renewable” portfolios from 15 to 20 percent by 2020 to comply with New Mexico’s “renewable portfolio standard,” the price of electricity in the Land of Enchantment has already risen dramatically in recent years (as seen in the chart below) and is likely to rise dramatically in the years ahead.

Check out this new video outlining the serious issues facing the Obama Administration's plan:

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