Gov. Lujan Grisham Vetoes Tax Exemption for Small Oil and Gas Wells in New Mexico
Senate Bill 64, sponsored by Sen. Ron Griggs (R-34) of Alamogordo would have exempted low-performing or “stripper” wells from severance taxes operators pay to produce oil and gas in New Mexico.
New Mexico Governor Michelle Lujan Grisham vetoed a measure to exempt New Mexico’s smaller oil and gas wells from taxes paid on fossil fuels extracted, drawing the ire of Republicans and industry supporters.
Senate Bill 64, sponsored by Sen. Ron Griggs (R-34) of Alamogordo would have exempted low-performing or “stripper” wells from severance taxes operators pay to produce oil and gas in New Mexico.
It was intended to reduce expenses for small oil and gas companies in New Mexico, and specified the money saved would go to bringing these wells into compliance with state environmental rules.
According to the Carlsbad Current Argus, SB 64 was added to House 252, a package of tax bills that passed both the House and Senate and sent to Lujan Grisham’s desk for signature into law. Before she did that, Lujan Grisham removed SB 64’s language via a line-item veto that allows governors to reject specific portions of bills before they become law.
The Independent Petroleum Association of New Mexico, which represents smaller producers, slammed the veto immediately as it was announced. President Jim Winchester said Lujan Grisham unfairly penalized oil companies that were already struggling to stay afloat.
“Governor Michelle Lujan Grisham continues her assault on small-business independent producers with her veto of the stripper well tax provision, which had bipartisan backing,” Winchester said. “This carefully crafted tax treatment would have provided measurable benefits to the environment by substantially reducing emissions from small producers’ low-production wells.”
In a message to lawmakers, Lujan Grisham argued the language only exempted certain wells based on their oil and gas production levels, wells that could be owned by large companies. Large oil companies often drill wells and then sell them to smaller companies when the wells reach the end of their lifetime.
But many large companies still own wells that would qualify as stripper wells, typically producing up to 15 barrels of oil per day, Lujan Grisham argued, meaning the tax exemption might not meet its purported purpose of supporting small businesses.
“Although I appreciate the intent behind this measure (i.e. to encourage stripper well operators to come into compliance with current regulations), the exemption should be limited to small and independent operators,” Lujan Grisham wrote.
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