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Oil Wealth Could Fund Free Education In This State

Irina Slav

Money from New Mexico’s general fund would be used in a plan for providing local students with free college education regardless of their income level. The fund has recently enjoyed substantial inflows thanks to the booming development of the Permian shale play that spans Texas and New Mexico.

NPR reports that the plan, proposed by Governor Michelle Lujan Grisham, has to first be approved by the legislature of the state and quotes the Governor as saying, "It means better enrolment. It means better student success. In the long run, it means economic growth, improved outcomes for New Mexico workers and thinkers and parents. It means a better trained and better compensated workforce."

Ironically, another initiative by the New Mexico Governor could undermine her education plans. Michelle Lujan Grisham took office with two climate-friendly pledges: to make New Mexico’s electricity emission-free by 2045, and to curb methane emissions from the oil and gas industry more substantially than they are being limited now.

The industry is already beginning to worry about what these pledges would mean for its future. “The production is better here than in Texas,” one industry insider told Bloomberg in August. “But the oversight that they have here is such a pain in the ass. Every minute they make it a little harder.”

We’ve already seen something similar in Canada: drillers in Alberta started moving their rigs south, to the United States, seeking better returns and less regulatory pressure. Now, an outflow of drillers from New Mexico to Texas has not begun, but if the authorities prioritize emission cuts, some may choose to relocate and this would affect the amount of oil money flowing into the general fund.\

The free education plan would cost somewhere between $25 and $35 million annually and will enable 55,000 students to attend any of New Mexico’s public colleges and universities. Now that’s not a whole lot given that the state’s general fund is expected this year to exceed spending obligations by as much as $900 million. Yet the program will not just run for a few years if approved. It will run for longer.

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Meanwhile, the contribution of the oil and gas industry to New Mexico’s general fund is expected to increase and not by a few million dollars. By 2030, the portion of revenues coming into the fund from the oil patch is estimated to increase threefold. In 2017, this contribution stood at $17 billion. By 2030, it is seen to reach $72.6 billion, if all goes well and the current rate of production increases continues.

New Mexico is not the only state intent on curbing harmful emissions. Yet so far, no state has managed to balance between continuing to support the oil industry and cutting emissions. In fact, those with the most ambitious climate change agendas—California, Washington, and New York, among others—have openly condemned the oil industry. The difference is, oil and gas production is not as vital for these states as it is for New Mexico. If the Governor’s initiative to provide free education to the future workforce of the state, chances are she will need the oil money coming in from the Permian, emissions and all.

By Irina Slav for Oilprice.com

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