New Mexico’s revenue collections through the first 10 months of fiscal year (FY) 2019 are $273.5 million above forecast, according to the Legislative Finance Committee, which attributed the windfall to booming oil and gas production and strong tax receipts.
FY2019 ended in June. However, through April, the latest month for data, showed revenue collections at $6.6 billion, or nearly 25% higher than they were over the prior year period. If projections were to hold hold, the state would collect a record $7.8 billion in revenue because of strong gross receipts taxes and oil and gas production royalties, the latest revenue tracking report shows.
The state has already increased spending for FY2020 because of the budget surplus, but additional collections would also help strengthen cash reserves if oil and gas production were to continue rising and further depress prices, prompting operators to reduce activity.
While a hodgepodge of conventional and unconventional formations in the San Juan Basin of northwestern New Mexico have long contributed to production, the gains in the Permian Basin’s Delaware sub-basin in the southeastern part of the state is driving most of the activity. Overall, there were 111 rigs operating in New Mexico at the end of last week, up from 104 rigs at the same time last year. Only Texas, where 450 rigs were operating last week, had more.
Oil production hit a record of 250 million bbl in 2018 from 172.6 million bbl the year before, according to the New Mexico Oil Conservation Division. Production is on pace to hit a similar level this year as operators have reported oil volumes of 152 million bbl through July. Natural gas production also increased to 1.5 Tcf in 2018 from 1.3 Tcf in 2017.
Democratic Gov. Michelle Lujan Grisham, who took office in January, has prioritized renewable energy to wean the state off its dependence on fossil fuels. She signed a bill earlier this year that would require the state to produce all of its electricity from renewable energy sources by 2045.