Southeast New Mexico and the smell of money

If you’ve never driven through the oil patch of southeastern New Mexico, I recommend you do so. It’s not what your average tourist would call a scenic drive, but it will leave you impressed nevertheless.

In Lea and Eddy counties in particular, you can see miles and miles of pumpjacks decorating the scrublands. Roll down the windows in your vehicle and you can smell the oil being pulled out of the ground.

That’s the smell of money. It’s made some people very rich, and lot of blue-collar working stiffs middle class. Roughly a third of New Mexico’s tax revenues come from the oil and natural gas extraction industry, and when it’s booming, there’s plenty of money to go around. But when it’s down, families are hurt, and so is state government.

Booms and busts are commonplace in this industry. Right now it ain’t pretty. The San Juan Basin in northwestern New Mexico is in a major downturn, while southeastern New Mexico’s economy, which sits atop the western edge of oil-rich Permian Basin, began taking a hit in earnest last year.

More than the environmental concerns that come with our dependence on fossil fuels, the culprit for this downturn in the oil biz is a worldwide oil glut that has brought prices down to their lowest levels in 10-plus years. Right now the price of a barrel of oil is about $40, but producers typically need to earn $50 to $60 per barrel to turn a profit. So a lot of them are slowing or shutting down their drilling operations.

The drop in oil prices feels good at the gas pump and it’s causing a serious slump in an industry that provides a lot of jobs. Roughnecks and welders, engineers and geologists and others depend on these jobs, and lately the layoffs have been many. Last September, the mayor of Hobbs estimated 1,000 jobs had fallen by the wayside in recent months. And it could get worse.

Last week, Kevin Robinson-Avila, staff writer for the Albuquerque Journal, reported that even though crude oil prices began their prolonged slide in mid-2014, southeastern New Mexico’s oil production is actually at record levels of late—last year’s output of 145.5 million barrels is the highest it’s ever been. Improved efficiencies in drilling and production have cut costs, which allow oil and gas companies to earn a profit despite the price drop.

Plus, the Permian Basin is a very extraction friendly, which also contributes to greater efficiency in extraction there.

Of course, the long-term future of this industry is also in question, given the rise of renewable energy sources like solar and wind and the slow but determined move toward electric cars. The future of our planet might well depend of how fast we can wean ourselves off fossil fuels.

Clearly, that won’t happen overnight. The world is just too dependent on oil and natural gas for such changes to happen overnight. I suppose the fastest transition would be to double back into nuclear power—which southeastern New Mexico also has a hand in, with the Waste Isolation Pilot Plant in Eddy County and the uranium-enrichment plant Urenco USA in Lea County—but that’s got its own detractors.

Nuclear energy is definitely cleaner, but there are also significant hazards. Japan’s Fukushima Daiichi nuclear power plant, which had a meltdown in 2011 after a tsunami hit, threw a wet blanket over nuclear energy development. But it only slowed things down, as there are currently more than 50 nuclear reactors being constructed in over a dozen different counties around the globe.

For Southeast New Mexico to have a hand in nuclear energy development says something for the leadership in Lea and Eddy counties. Hobbs, Lovington, Carlsbad and the other communities could be totally dependent on oil and gas extraction, but they’re not. Their diverse local economy is a product of good long-term planning.

Oil will make a comeback when prices go back up, but over the long haul, communities that depend on such an industry need to prepare for the inevitable disruptions in their local economy. If they don’t, even the smell of money might, eventually, just blow away.

Tom McDonald is founder and editor of the New Mexico Community News Exchange and editor of the Roswell Daily Record. He may be reached at tmcdonald@gazettemediaservices.com or tmcdonald@rdrnews.com.