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New Mexico oil producers concerned about permit backlog

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ALBUQUERQUE, N.M. (AP) — The cost of drilling for oil and natural gas on public and tribal land went up slightly nationwide, thanks to a fee hike that took effect over the weekend. But New Mexico producers said Monday they are more worried about a continued backlog in the U.S. Bureau of Land Management’s processing of permits.

The delays are costing New Mexico and the federal government taxes and royalties, according to the New Mexico Oil and Gas Association.

The industry group estimates nearly $1.5 million in federal royalties and another $831,000 in state severance taxes are deferred daily due to administrative issues. The funding is critical as state lawmakers discuss budget priorities for the coming fiscal year, the association said.

The Bureau of Land Management earlier this year began shifting resources to tackle the backlog in areas where drilling activity has picked up, including in New Mexico’s share of the Permian Basin, which also spans parts of West Texas and is one of the nation’s top oil producing regions.

Robert McEntyre, a spokesman for the association, said the processing of applications hasn’t changed pace significantly since the summer when Interior Secretary Ryan Zinke issued an order targeting the backlog.

While the U.S. Interior Department has prioritized the problem, the delays still concern producers, McEntyre said.

“Really, it’s troubling when basically bureaucracy is holding up people from just doing business,” he said. “We think it can be a win-win. If we speed up the process, we can see more revenue for New Mexico.”

Regional officials with the Bureau of Land Management did not immediately respond to questions regarding the status of New Mexico’s backlog.

While federal statute requires the agency to review an application within 30 days, the average processing time nationwide was closer to 257 days during the 2016 fiscal year. Federal statistics showed nearly 20 percent of the 2,802 applications pending at the start of 2017 were in New Mexico.

In northwestern New Mexico’s San Juan Basin, industry officials reported that some producers were waiting up to 500 days.

“These kinds of delays push investment away from federal land,” McEntyre said.

The Bureau of Land Management is revamping the resource management plan for the basin as environmental groups and Native American tribal leaders push for more protections for culturally significant sites beyond the boundaries of Chaco Culture National Historical Park.

As for the fee, the agency announced a congressionally mandated hike in the amount paid by producers to process drilling applications. Starting Oct. 1, the non-refundable fee increased by $180 to $9,790 due to inflation.

Some industry experts described the increase as modest, suggesting it won’t slow the upward trajectory projected for oil production in 2018.

According to the U.S. Energy Information Administration, total crude oil production is forecast to average 9.9 million barrels per day next year. The record of 9.6 million barrels per day was set in 1970. Experts say most of that growth is expected to come from the Permian Basin in Texas and the Gulf of Mexico.

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