By Nick Bowlin
Satellite images of the land outside Artesia, New Mexico, show an arid brown landscape pockmarked with dots. Zoom in a bit, and a semiregular grid pattern appears, which could be mistaken for a suburban development. Zoom once more and the truth becomes clear: oil drilling sites, thousands of them. Each of these wells will one day need to be cleaned up: the borehole plugged and the land restored. When abandoned, wells like these will leak methane and other pollutants into the atmosphere for years.
More than 1,500 miles east and north of Artesia, among rolling hills of Appalachia, there are streams tinged orange by acid mine drainage and mountaintops flattened by companies seeking the hard, black coal seams underneath. Many of these companies are now bankrupt, or shadows of their former selves, while the industry’s legacy persists in billions of dollars in cleanup costs.
After the pandemic tanked global oil demand, drillers and oilfield service companies went bankrupt, thousands of workers lost their jobs, and the industry’s aggregate debt approached record levels.
Petroleum replaced coal as America’s fuel of choice and, in coal’s decline, oil and gas may catch a glimpse of its own future.
Beginning last year, the pandemic buffeted New Mexico’s oil and gas drillers. After the pandemic tanked global oil demand, drillers and oilfield service companies went bankrupt, thousands of workers lost their jobs, and the industry’s aggregate debt approached record levels. A significant chunk of New Mexico’s annual revenue – often ranging from 15% to 25%, according to the state, and reaching 34% in 2020 – depends on drilling dollars, while the prospective cleanup costs are monumental. This bind is not new or unique. In fact, New Mexico only has to look at the coal industry’s decline – and what that decline meant for mining dependent states – to see what happens when a fossil fuel industry goes under.
States like West Virginia in the East and Wyoming in the West were as reliant on coal dollars as New Mexico is on oil and gas revenue.
In 2013, Wyoming took in $239 million in revenue from federal coal leases, money that went to public schools, according to a High Country News analysis. By 2019, that number was zero. Last year, Wyoming – which, like New Mexico, is also suffering from oil and gas’s decline – enacted enormous budget cuts, with more on the way.
And the outlook shows a clear trend: A recent report from Morgan Stanley suggests coal could be fully eliminated as a source of electricity in the U.S. by 2033.
This future was avoidable, says Shannon Anderson, an attorney with Wyoming’s Powder River Basin Resource Council. Anderson argues that state leaders denied coal’s decline for more than a decade, missing multiple chances to diverge from its mineral extraction dependence and diversify the economy. But when the money is good, she explained, state lawmakers have little incentive to change, even when the warning signs are clear.
Energy Finance Analyst: New Mexico stands today, in its relation to oil and gas, approximately where coal states like Wyoming were a little more than a decade ago.
“Lots of fossil fuel economies are like this,” Anderson says. “Once you get a lot of revenue, you spend it in an earmarked way, you want to pump it into programs, and you come to expect that it will be there.”
Beyond the budgetary dependence, coal’s cautionary tale for New Mexico extends to corporate behavior as market share declines and environmental obligations and reclamation costs kick in. New Mexico stands today, in its relation to oil and gas, approximately where coal states like Wyoming were a little more than a decade ago, says Clark Williams-Derry, an energy finance analyst with the Institute for Energy Economics and Financial Analysis.
He cautions that the oil and gas industry’s decline will not be the same as coal’s – which he compares to “Wile E. Coyote running off a cliff.” But, he says, “when it comes to corporate inability and unwillingness to meet their cleanup costs, there are worrying similarities between the two extraction industries.
“If there’s a financial collapse,” Williams-Derry says, “there’s a chance that large segments of the oil and gas market are already insolvent and wouldn’t be able to pay their corporate debt, let along their environmental obligations.”