Research & Commentary: Fracking Revolution Helped New Mexico Residents and Businesses Save $3.4 Billion

Published November 13, 2018

The massive increase in domestic shale development, led by hydraulic fracturing (“fracking”), has caused natural gas prices to plummet in New Mexico, according to a report from the Consumer Energy Alliance (CEA). Consequently, residents and businesses in the Land of Enchantment saved more than $3.4 billion from 2006 to 2016.

In 2016, natural gas prices were roughly a third lower in New Mexico than 10 years prior, leading to $1.6 billion in savings over that period for residential consumers. This is significant because roughly 400,000 New Mexicans live in poverty, and the average New Mexico resident at or below the poverty line spends around a quarter of their take home pay on energy costs. Additionally, commercial and industrial consumers saved $1.86 billion during the same period.

“According to the Legislative Finance Committee,” the report states, “New Mexico receives about $2 billion annually [from the oil and gas industry] via severance and property taxes. This figure includes royalties from production on state and federal lands as well as rental income. Sales and income taxes on oil and gas drilling and service activity generate an additional $300 million for the state. Based on the production in any given year, revenue generated from oil and gas production makes up between 15 to 25 percent of New Mexico’s total general fund revenue and is used to support permanent funds benefiting things like state environmental improvements, public schools, and hospitals.”

“With the savings that have occurred in recent years, New Mexico policymakers, regulators and leaders must continue to come together in support of local energy production and infrastructure that will help the state thrive and ensure hardworking families, seniors, households, and small businesses have the low-cost energy they need to reduce expenses, find work and improve their communities,” said CEA President David Hold in an accompanying press release.

Moreover, the oil and natural gas industries supported more than 90,000 jobs in New Mexico—8.3 percent of the state total—in 2015. These vital industries produced more than $5.2 billion in labor income and accounted for $12.8 billion in economic impact, according to a 2017 American Petroleum Institute study prepared by PricewaterhouseCoopers.

It should come as no surprise that shale development is spurring economic growth across New Mexico. Fracking delivers $1,300 to $1,900 in annual benefits to local households, including “a 7 percent increase in average income, driven by rises in wages and royalty payments, a 10 percent increase in employment, and a 6 percent increase in housing prices,” according to a December 2016 study conducted by researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology. 

Fracking enables the cost-effective extraction of once-inaccessible oil and natural gas deposits. These energy sources are abundant, inexpensive, environmentally safe, and can ensure the United States remains a leading energy producer well beyond the twenty-first century.

Therefore, New Mexico policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Land of Enchantment’s robust economy.

The following documents provide more information about hydraulic fracturing and fossil fuels.

Energy for New Mexico
This report from the Consumer Energy Alliance examined how the shale revolution across New Mexico has provided benefits to residents of the Land of Enchantment by boosting disposable income, revitalizing communities, and saving residential users $1.6 billion and commercial and industrial users $1.86 billion from 2006 to 2016.

Debunking Four Persistent Myths about Hydraulic Fracturing
This Heartland Institute Policy Brief by Policy Analyst Timothy Benson and former Heartland communications intern Linnea Lueken outlines the basic elements of the fracking process and then refutes the four most widespread fracking myths, providing lawmakers and the public with the research and data they need to make informed decisions about hydraulic fracturing.

The Social Benefits of Fossil Fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

The Local Economic and Welfare Consequences of Hydraulic Fracturing
This comprehensive study published by the National Bureau of Economic Research says fracking brings, on average, $1,300 to $1,900 in annual benefits to local households, including a 7 percent increase in average income, a 10 percent increase in employment, and a 6 percent increase in housing prices.

Local Fiscal Effects of a Drilling Downturn: Local Government Impacts of Decreased Oil and Gas Activity in Five U.S. Shale Regions
This study from Resources for the Future finds 82 percent of communities in the five largest shale regions in the United States experienced a net fiscal benefit from hydraulic fracturing despite a large drop in oil and natural gas commodity prices starting in 2014.

Impacts of the Natural Gas and Oil Industry on the U.S. Economy in 2015
This study, conducted by PricewaterhouseCoopers and commissioned by the American Petroleum Institute, shows that the natural gas and oil industry supported 10.3 million U.S. jobs in 2015. According to the Bureau of Labor Statistics, the average wage paid by the natural gas and oil industry, excluding retail station jobs, was $101,181 in 2016, which is nearly 90 percent more than the national average. The study also shows the natural gas and oil industry has had widespread impacts in each of the 50 states.

What If … Hydraulic Fracturing Was Banned?
This is the fourth in a series of studies produced by the U.S. Chamber of Commerce’s Institute for 21st Century Energy. It examines what a nationwide ban on hydraulic fracturing would entail. The report’s authors found by 2022, a ban would cause 14.8 million jobs to “evaporate,” almost double gasoline and electricity prices, and increase natural gas prices by 400 percent. Moreover, cost of living expenses would increase by nearly $4,000 per family, household incomes would be reduced by $873 billion, and GDP would be reduced by $1.6 trillion.

What If … America’s Energy Renaissance Never Happened?
This report by the U.S. Chamber of Commerce’s Institute for 21st Century Energy examines the impact the development of shale oil and gas has had on the United States. The report’s authors found that without the fracking-related “energy renaissance,” 4.3 million jobs in the United States may not have ever been created and $548 billion in annual GDP would have been lost since 2009. The report also found electricity prices would be 31 percent higher and gasoline prices 43 percent higher.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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