After six months of rising oil and gas tax revenues, Eddy County, New Mexico Finance Director Roberta Smith predicted a dip in collections in the coming months.
STORY BY Mike Smith, Carlsbad Current-Argus
Smith said Eddy County collected $9.9 million in oil and gas tax revenue during September 2022, the third month of the 2023 fiscal year.
Smith said September’s tax collections were based on oil and gas business activity conducted in June, 2022 in Eddy County when the price of West Texas Intermediate (WTI) sweet crude oil fluctuated between $108 and $124 a barrel, according to the U.S. Energy Information Administration (EIA).
Eddy County projected $39.5 million in oil and gas tax revenue collections by the end of the 2023 fiscal year, according to Eddy County Finance Department data.
For the first quarter of the current fiscal year, the County collected $29.5 million in oil and gas taxes. Fiscal years begin July 1 and end June 30.
Eddy County officials predicted that in the next fiscal year, the county would collect $2.9 million in oil and tax revenue.
The county started the new fiscal year with $8.9 million in July tax collections and $10.3 million in August collections, according to Eddy County Finance Department data.
“I do anticipate our distribution to go down slightly only because our price has gone down for oil,” Smith said.
WTI prices dove from around $100 a barrel in July to around $90 a barrel at the end of October, according to the EIA.
Chris Erickson, economics and international business professor at New Mexico State University, said short-term prediction of oil prices are difficult.
He said fundamental disruptions in the world oil market like the war between Ukraine and Russia and the Organization of Petroleum Exporting Countries (OPEC) should not cause a drop in oil prices.
“For the long term I’m still predicting that oil prices will fall back to about $60 (a barrel) or so,” he said.
Erickson said oil was an unstable and volatile commodity and county and state governments should be cautious of spending uncollected revenue.
Price of oil affect New Mexico government
State Rep. Jim Townsend (R-54) said New Mexico’s economy and its budget is affected by any drop in price of crude oil.
“A dollar up or down, the market fluctuates. If you saw a $20 fluctuation in price then it is certainly something that will be reflected on the bottom line,” he said.
Townsend said New Mexico budgeted $8.4 billion for 2023, which was approved in January 2022 by the New Mexico Legislature. He said the State expected nearly $2.5 billion from the industry for the 2024 budget year.
“The State is going to have almost $11 billion in money to address their needs. More than we have done in the whole history of the State,” he said.
Oil and gas activities in New Mexico fund nearly 40 percent of state government functions and operations.
Townsend said he, other House Republicans and some Democrats would advocate for a frugal budget 2023 when the Legislature meets in Santa Fe on Jan. 17.
“The State has many infrastructure needs, and that type of spending – one-time infrastructure needs – is a lot different than building into your budget recurring amounts. A drop in crude oil prices would make being able to sustain those challenging,” he said.
A spokesperson for the New Mexico Oil and Gas Association (NMOGA), a coalition of oil and natural gas companies, said producers in New Mexico were working to meet rising energy demands as supplies lagged.
Joe Vigil said government policy is complicating market challenges.
“The solution to America’s energy crunch is right here in New Mexico, and through technology, innovation, and our ability to exceed standards, our producers provide a secure, reliable, and cleaner energy that improves the lives and communities of all Americans,” he said.
Vigil said the administration of President Joe Biden needs an energy policy reset.
“There is more this administration and policymakers can do to ensure access to affordable reliable energy, starting with prioritizing our U.S. production, workforce, and energy infrastructure, especially right here in New Mexico,” Vigil said.
This article originally appeared on Carlsbad Current-Argus: Eddy County braces for lower tax collections