We often hear grumbling about the subsidies the state provides to the Oil & Gas Industry. There are a few tax credits which are designed to offset some dual taxation created in the many overlapping taxes the industry pays, and there are some credits associated with the payment of royalties to Native American Tribes and the Federal Government. There are also some incentives that kick in when oil goes below 24 bucks a barrel and gas goes below $1.15 per mcf. Added up, all these can be stretched to about $160 million. Since the Oil & Gas Industry provides 2.2 billion tax dollars to our 5.4 billion dollar state budget, we get a big bang for those credits. No other subsidy can even approach that efficiency. Here is a partial list of taxes the Industry pays: The Oil & Gas Severance Tax, The Oil & Gas Conservation Tax, The Oil & Gas Emergency School Tax, The Oil & Gas Ad Valorem Production Tax, Natural Gas Processors Tax, The Oil & Gas Production Equipment Ad Valorem Tax. In addition there are royalty payments, bonuses, income taxes, corporate taxes and taxes on direct and indirect activities.
If you work for state government or if you have a government contract or if you receive a service from the state, around 40 cents of every dollar in your pocket comes out of the Industry. For the San Juan Basin the concern is that our production has gone down about 25% in the last decade. Unless we are successful in finding some additional oil and gas reserves, diversifying the economy and increasing the price of natural gas, the Four Corners and the State of New Mexico are going to have to find a source or sources for replacing a big pile of tax dollars.