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New Mexico’s governor signs oil incentive bill Measure designed to help producers weather slump in crude prices; it expands existing tax incentives for restoring inactive wells to production The Associated Press
New Mexico Gov. Gary Johnson has signed a bill providing a tax break for the struggling oil and gas industry.
“American consumers can now buy gasoline at bargain-basement rates. But they will pay for it in the future if we allow cheap imported oil to destroy our domestic oil and gas production,” Johnson said March 5.
The measure, sponsored by Rep. Don Whitaker, D-Eunice, was designed to help oil producers weather a slump in crude prices. It expands an existing tax incentive for restoring inactive wells to production.
It amends the current production restoration incentive, which grants a severance tax exemption for wells returned to production after being inactive for two years. The incentive previously applied only to wells inactive from January 1993 to January 1994. Now, it’s expanded to any period of 24 consecutive months starting Jan. 1, 1993.
Johnson said it qualifies an additional 3,280 wells for the exemption and would help those wells return to production. Three other bills pending He also pledged support for three other House measures pending in the Legislature: a new-well tax incentive, a workover incentive amendment, and an incentive to preserve marginally productive wells, also called “stripper” wells — all sponsored by Whitaker.
“It’s a very grave situation in the extreme southeast corner of New Mexico,” Whitaker said in February.
More than 700 jobs were lost in the oil and gas industry last year, with 200 of those in December, according to the Department of Labor.
Whitaker sponsored industry-backed measures to provide tax incentives for new oil and natural wells that are drilled when prices are low, reduce taxes on “stripper” or small production wells and simplify an existing tax break for so-called workover projects done to increase production on wells.
Committee members were told the number of drilling rigs was down 50 percent in the state from last year and the state’s Oil Conservation Division estimated a 50 percent drop in the drilling of new wells this year.
Oil and gas production provided $944 million in taxes, royalties and interest earnings to state government in the last budget year. Need for help critical But without their help, lawmakers were told, the state faced the prospects of continued declines in the industry — spilling over into job losses, reduced tax collections and an overall economic squeeze on cities and counties in oil and gas dependent areas.
Oil prices have dropped dramatically because of a worldwide crude glut. In southeastern New Mexico, oil sold for $5 to $7 a barrel in February, compared with $15 to $20 a barrel in early 1997.
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