Energy production is big business in New Mexico.
That was the word from Greg Bloom, assistant commissioner for mineral resources from the New Mexico State Land Office, speaking Wednesday before the state legislature’s Economic Development and Policy Interim Committee on the CTECH campus in Hobbs.
“I don’t want to bury the big news,” Bloom said right at the start. “We have earned more than $2 billion over the past 12 months in just oil and gas royalties.”
And that revenue has been increasing steadily over the past decade, he said, almost doubling for fiscal year 2022 over the previous year, from just more than $1.2 billion to almost $2.6 billion, Bloom said.
June of this year saw the greatest single-month royalties from the oil and gas industry over the past 12 months at almost $261 million. It would take all of the fiscal year to bring in that much revenue just a few years ago, he said.
“We’re now doing in three weeks what we used to bring in in one year,” Bloom said. “It’s due to increased production, but also due to a favorable price environment (in part triggered by) the unfortunate was in Ukraine.”
All that money goes directly into the state’s maintenance fund, benefitting public schools, colleges and other entities across the state. And production has been keeping pace, increasing over the last 10 years as well, with natural gas production outpacing oil by about five to one, Bloom said.
“Last fiscal year, natural gas accounted for about 25 percent of revenue,” Bloom told the committee. “It’s a lot more of what we’re doing and, from talking to producers in the San Juan Basin, I think we’ll see even more.”
There was a slight decrease in natural gas production in June, triggered by a dip in demand following an explosion at a liquified natural gas facility on the Gulf of Mexico in Freeport, Texas. The loss of capacity to prepare LNG for shipment overseas caused a reduction in demand, and a decrease in price, Bloom said. But prices have rebounded as the plant was repaired and went back online, he said.
“Gas prices are not at historical highs,” Bloom said. “But they’re still much higher than they were throughout the 2000s.”
The pipeline for that revenue ends in the state coffers, but it begins in his office, with oil and gas lease sales held on the third Tuesday of each month. The next sale, scheduled for Tuesday, features about 18 tracks representing about 3,000 acres. Sales used to take place in person in the Land Office, but have moved to an online auction service called EnergyNet, specializing in the energy production industry.
“The money we make at lease sales has increased over the years,” Bloom said. “Because we’re using EnergyNet, we get a lot more bidders, including more bidders from outside New Mexico.”
Bloom was joined before the committee by EOG Resources representatives Sarah Mitchell, regulatory manager for the company, and Water Resources Manager Olivia Desser. Mitchell and Desser outlined some of the processes and projects EOG has in place throughout the Permian Basin.
“Innovation is kind of our thing,” Desser told the committee during her portion of the presentation. “We like to use a lot of technology to drive results.”
One area the company is focused on is water recycling and conservation. Mitchell told the committee water is a significant component of oil and gas production, used in the fracking process which injects a mix of high-pressure water and sand into recently bored wells to breakup the surrounding rock and help the hydrocarbon compounds move more freely to the surface. And, with water being one of the components typically found in wells alongside oil and natural gas, EOG and energy production in general actually uses far less water than the average person may believe, she said.
“As water comes out of the well, we’re able to grab some water off the pipe and send it directly to other fracking sites,” Desser said. “Reusing our own water is an absolute necessity. We’re producing about 1.3 million barrels (of water) per day and sending about 500,000 barrels to new well sites for fracking.
The company also pioneered a new way to store natural gas — which typically goes directly from the wells to pipelines and into the marketplace — during times of lower demand, Mitchell told the committee. It’s an innovation first tried here in Lea County, she said, called closed loop capture.
When demand drops, the company found natural gas could be re-injected into older wells for temporary storage, typically 24 to 48 hours at most. Responding to questions from the committee, Mitchell said initial studies on the pilot project showed the gas “migrat ed” away from the injection site little, if at all, before being pumped back out and into pipelines for transmission to consumers or LNG plants.
“These are all projects that make good eco nomic sense for EOG,” Mitchell said. They’re good for our bottom line but they’re also good for the environment. We don’t think the two have to be mutually exclusive.”