New Mexico watching as Texas considers limits on oil production By Jens Gould Apr 25, 2020

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"As oil prices have plummeted to levels never before seen, a rift has opened among the companies that extract crude.

Some of them say state regulators should force producers to pump less in the hopes such regulation will raise prices.

Others say no, just let the market do its job.

While Texas, an oil-producing behemoth, is weighing the controversial idea of imposing limits, New Mexico, now an oil powerhouse in its own right, has largely stayed out of that debate.

Depending where oil prices go and what other states decide to do, there may come a point when the state needs to take a position. But key state officials disagree on where New Mexico should go.

The issue has come to the fore as the COVID-19 crisis — paired with an international price war between Saudi Arabia and Russia — triggered a precipitous decline. Stay-at-home orders that keep Americans from traveling have drained demand for products like gasoline and jet fuel.

Yet oil producers continued to pump through the spring, leading to a massive oversupply — and an unprecedented crash. Early last week, that glut of crude caused oil futures to fall into negative territory for the first time ever, and despite somewhat of a recovery since then, prices remain far below profitable levels for U.S. companies.

The decline also means New Mexico oil revenue has become peanuts compared to the hefty sums the state was taking in during the boom. One key legislator has projected oil and tax revenue will fall short of projections by as much as $2 billion for next fiscal year.

Though global oil producers agreed to a historic production cut earlier this month, the question emerged whether oil-producing states in the U.S. should also mandate cuts to drive prices higher.

So far, the State Land Office has issued an emergency rule allowing oil and gas companies to voluntarily shut in, or close, their wells without penalty, and regulators said many companies are doing so because they can’t ship their oil anywhere.

Yet Land Commissioner Stephanie Garcia Richard suggested the state should go even further."

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