Report: Oil and gas development on southern New Mexico’s Otero Mesa isn’t worth the effort

By Tim Korte

ALBUQUERQUE, N.M. (AP) – A Montana-based research group that studies Western land issues has concluded oil and natural gas development on southern New Mexico’s Otero Mesa would offer limited jobs and revenue, even at peak production.

Not surprisingly, the report from Headwaters Economics was hailed by New Mexico environmentalists after its release last week.

“It’s interesting that an outside group would agree with what conservationists have been saying for the last eight years. Otero Mesa is worth more protected than drilled,” New Mexico Wilderness Alliance associate director Nathan Newcomer said.

However, federal land managers and a representative of New Mexico’s oil and gas industry questioned most of the report’s findings.

Tony Herrell, the Bureau of Land Management’s deputy state director for minerals, said the report was written by economists and makes no valid scientific inquiries into the viability of production on Otero Mesa.

Because only a few wells have been drilled on the vast southern New Mexico grasslands, nobody can say what might be extracted.

“It’s difficult to do any predictive economic analysis without more information,” Herrell said. “Once you figure out your resources, then you can do an economic impact analysis.”

Headwaters Economics spokesman Chris Mehl said the group chose Otero Mesa as part of a wider study on energy and Western lands. The group bills itself as an independent nonprofit research group.

“They ought to stick to that because it’s obvious they don’t know much about oil and gas,” said Bob Gallagher, president of the New Mexico Oil and Gas Association.

The report said Otero Mesa drilling would provide little employment and revenue to either the state or Otero County and that energy development proceeds to the county may not cover infrastructure and service costs.

Gallagher said the conclusions were flawed.

For example, he said the industry employs 23,000 in New Mexico and has an important economic impact. He disputed the infrastructure argument, noting producers maintain oilfield roads, not county crews.

“There are no costs to the counties for that,” he said.

Otero Mesa is one of the last undisturbed areas of Chihuahuan desert, home to hundreds of species of plants, mammals, reptiles, birds and insects.

Mehl called it “a de facto wilderness” — a phrase often used by environmental groups. BLM officials say Otero Mesa fails the legal definition of wilderness because of a widespread network of unpaved roads.

Drilling opponents, including Gov. Bill Richardson, have warned that oil and gas production on the mesa could harm wildlife and contaminate groundwater.

The study predicted Otero Mesa drilling would net the state $3.4 million in annual revenue or 0.20 percent of all New Mexico revenue from oil and gas production taxes and royalties using 2007 figures.

Researchers said Otero County is projected to receive about $285,000 in annual revenue from oil and gas property and equipment taxes — 4.4 percent of all property tax revenue using 2007 figures.

“It is difficult to see how the limited revenue and economic activity from proposed energy development in Otero County would benefit the state or region in net terms,” the report concluded.

Mehl said Headwaters Economics receives funding from several sources, including the Montana Legislature. He was unable to specifically identify the source of funding for the Otero Mesa study.

Herrell challenged the study’s credibility.

“The objectivity and bias of the report is in question for their conclusions,” Herrell said. “It reiterates what we’ve heard from drilling opponents for the last eight years, kind of like hiring an expert witness.”

The BLM issued an environmental assessment and decision record last year for the 1.2-million acre Otero Mesa site that determined there would be no significant impact from oil and gas exploration.

Herrell noted the BLM’s drilling plan limits production to 1,589 acres, roughly one-tenth of 1 percent of the total area.

He also said BLM officials forged a plan that allows development while protecting the mesa and keeping it open for recreation.

The report said New Mexico is a top regional producer of oil and natural gas but jobs and personal income associated with the industry represent only 2 percent of all employment and 3 percent of total personal income in the state.

Mehl said because most energy jobs in New Mexico are located in other parts of the state — Eddy, Lea and San Juan counties — researchers tried to determine the impact Otero County could expect from drilling.

They expressed concern about potential long-term effects on tourism in the Alamogordo area — some 70 miles away — and said oil and gas jobs in Otero County might not pay as well as elsewhere in New Mexico.

“There are additional costs associated with getting the product to market and not a lot of revenue,” Mehl said. “Our advice was that you might have other avenues of income that are more reliable.”



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