American Oil and Gas Reporter - March 2016 - 28

State Legislative Reports

New Mexico's Fiscal Woes Impact Bills
SANTA FE, N.M.-New Mexico's
budget shortfalls continued to influence
legislative activities throughout the session
that ended Feb. 18, with several bills tabled
because of their short-term financial impacts.
"The state's budget is highly dependent on oil and gas revenues, to the tune of
25-35 percent," says Michael D'Antonio,
director of government affairs for the
New Mexico Oil & Gas Association.
"New Mexico projected a $293 million
new-money surplus in the fall, but with the
decline in oil prices, that projection kept
dropping. In early February, it was negative $200 million in new money. That is
a swing of close to $500 million in a state
budget of $6.2 billion."
D'Antonio adds there has been speculation that a special session may be
called later this year because the New
Mexico Constitution demands a balanced
budget, and oil and natural gas prices remain very low.
NMOGA Communications Director
Wally Drangmeister says despite the
budget gap, legislators declined to seek additional revenues from the oil and gas sector, and in fact proposed several measures
favorable to the industry, including bills
that would have reduced severance taxes
on low-production wells when oil prices
fell below a trigger point.
That legislation included HB 107,
sponsored by Representative James Strickler, R-San Juan, would have reduced the
tax rate for certain oil and gas wells. D'Antonio says the state estimates New Mexico stripper wells produce 20 million
barrels of oil and 130 billion cubic feet of
gas annually. Legislators sought a way to
keep those wells producing so they would
be producing revenue for the state when
energy prices recovered.
He says the bill passed the House Energy Committee, but was tabled in the
House Ways and Means Committee because of the financial impact. That study
showed HB 107 would have a negative impact on severance and school taxes, although D'Antonio points out the analysis
ignored any long-term financial benefits.
Drangmeister says the same fiscal dynamics killed HB 285, introduced by
Representative Nate Gentry, R-Bernalillo. That bill would have cut the severance
tax rate on wells using anthropogenicsourced carbon dioxide for enhanced oil
recovery when oil prices were below $60
a barrel. The measure passed the House as
28 THE AMERICAN OIL & GAS REPORTER

well as the Senate Corporation and Transportation Committee, but failed to advance
out of the Senate Finance Committee.
"There was a similar logic between HB
107 and HB 285, in that both sought to encourage a little bit of a tax break for marginal oil and gas operations, to help keep
them going through low energy prices,"
Drangmeister says.
Utility Bills
NMOGA monitors utility-related bills
because its member companies pay significant electric bills as part of their operational budgets, D'Antonio says. State
lawmakers approved SB 47, sponsored by
Senator Clemente Sanchez, D-Cibola.
D'Antonio says the bill clears up confusion regarding how counties treat investments in specific utility construction projects undertaken by third parties.
Tax assessors in Harding County,
N.M., filed a lawsuit against the New Mexico Tax and Revenue Department, seeking
permission to increase taxes on a utility after a private company paid to upgrade a
long electric transmission line serving one
of its remote CO2 plant locations, he
says. In the past, such investments-termed
contributions in aid of construction-did not
impact a utility's ad valorem tax base.
"This legislation allows utilities to
keep doing what they normally do in assessing third-party contributions in aid of
construction," D'Antonio relates. "Without this legislation, it would have allowed some interpretation that counties
could add third-party contribution value in
taxing utilities. Of course, those utilities
pass those costs on to their end-use customers, which raises rates for all customers-not just oil and gas. There was
quite a bit of support for that bill, except
for the lone Harding County assessor
who was against the legislation."
NMOGA was asked to support SJM
18, sponsored by Senator Steven Neville,
R-San Juan, which authorizes the state
Legislative Council to contract an independent study of the Public Regulatory
Commission's staffing levels, D'Antonio
says. In addition to the manpower issue,
the analysis will "help determine if
changes in state law would make the
agency more effective," he adds.
"The PRC has a lot of say-so on natural gas and electric rate making," D'Antonio says. "It only has one or two analysts
that work for the commission, versus
some surrounding states that have 12 or 15
analysts working for their regulatory

agencies. This is just a request for an operational study. There is $50,000 allocated in the general funding for the study."
Recovering From Disasters
The National Conference of State Legislators (NCSL) developed model legislation that has been adopted in 22 states to
encourage out-of-state workers to cross
state lines and work temporarily to restore
critical energy, utility and telecommunications systems damaged by a national- or
state-declared emergency. D'Antonio says
it eases permitting requirements and
waives the requirement for paying state income taxes for utility crews responding to
disasters. He says this allows critical
services to be restored more quickly in adversely affected states.
SB 19, sponsored by Senator William
Payne, R-Bernalillo, revises NCSL's model legislation to add crude oil and refined
product pipelines, and natural gas liquids
gathering, processing, storage and transmissions systems to the list of critical infrastructure for the state of New Mexico.
"Earlier legislation was not very comprehensive on natural gas or oil infrastructure," D'Antonio says. "New Mexico's argument was that even though those provisions were not in other states' legislation,
workers would not be able to restore
services if gasoline stations did not have
gasoline."
The House and Senate approved the bill
and sent it to the governor's desk. D'Antonio says NMOGA is recommending the
governor sign it.
D'Antonio says the association also is
asking the governor to approve HB 283,
unemployment compensation legislation
sponsored by Representative Larry Larrañaga, R-Bernalillo. The bill limits increases in a company's contributions to the
state unemployment fund to 2 percent a
year, and reduces the contribution rate
based on the employer's history, he says.
"A cap of 2 percent a year will help the
oil and gas industry deal with layoffs while
producers are getting hit on all sides. Not
only are revenues decreasing, but many
companies have to pay additional fees for
unemployment compensation. Hopefully,
the governor will support HB 283," D'Antonio says.
Transportation Issues
NMOGA continues to push the use of
natural gas as a transportation fuel, D'Antonio says, applauding two bills that survived the legislative process.

American Oil and Gas Reporter - March 2016

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