Permian Basin gas, oil subsidies boost air pollution, cost billions: NRDC report

WASHINGTON — Amid record industry profits and rising climate damages, a new NRDC (Natural Resources Defense Council) report documents 57 federal and state subsidies that the fossil fuel industry receives in the Permian Basin in Texas and New Mexico that incentivize extraction, cost taxpayers billions, worsen climate change and increase harmful air pollution.

The authors of the report, “Fossilized Finances: State and Federal Oil and Gas Subsidies in The Permian Basin,” made a series of recommendations to better protect the public in New Mexico and Texas and—to help meet the goal of limiting global warming to 1.5 degrees Celsius—called for the immediate end of all public giveaways to an industry that earned $200 billion in profits in 2022.

“Our report reveals the extensive subsidies totaling billions of dollars that New Mexico, Texas and the federal government give away each year to the fossil fuel industry, perversely driving up further production that fuels dangerous climate impacts and unhealthy air pollution,” said Susan Casey-Lefkowitz, senior strategic adviser at NRDC. “These subsidies to the profit-rich fossil fuel industry should end now. The money should be redirected to true public priorities such as establishing ‘just transition’ programs for industry workers, or supporting clean energy, education, health care or other goals benefitting people and communities.”

“These public subsidies artificially distort the market and attract private investment that would otherwise flow to industries that are less of a threat to the planet and its people,” said the report’s co-author Doug Koplow, director of Earth Track. “The subsidies unfairly burden taxpayers while increasing residents’ exposure to environmental damages.”

The report released today [Jan. 24, 2024] was written by NRDC and Earth Track and is an inventory of subsidies to oil and gas development, extraction, transport, and refining/conversion that benefit the Permian Basin. The analysis includes federal and state subsidies in Texas and New Mexico that reduce the cost of business or reduce investment risk for oil and gas companies. Information on subsidies was gathered from state and federal budget and tax expenditure documents, published research, special studies, the trade press, and legislative reviews.

The report’s key findings include:

In Texas, just three Permian Basin state oil and gas subsidies cost taxpayers $1.4 billion in 2023. Over the next five years, these subsidies will total $6.6 billion.

In New Mexico, similar subsidies cost taxpayers $86.2 million in 2022. That could cover more than half the funding for tuition-free college through the New Mexico Opportunity Scholarship.

Taxpayer subsidies distort the market for oil and gas produced in the Permian Basin. The report details 57 individual federal and state giveaways of public resources and special exemptions. The inventory documents the extent that taxpayers are propping up this polluting industry.

The number of state oil and gas subsidies exceeds federal subsidies. Federal fossil fuel subsidies have received significant attention. However, widespread, and often longstanding oil and gas subsidies at the state level have received less focus despite also being pervasive and costly. Both federal and state subsidies should be eliminated.

Subsidies to exploration and production dominate. Approximately 70 percent of the subsidies identified in the report support finding new wells and pumping oil and gas from them. These subsidies circumvent efforts to combat fossil fuel-driven climate change and curb local pollution, instead locking in decades of pumping fossil fuels from the wells they help create.

“The oil and gas industry is hardly withering on the vine,” said James Povijua, regional director for NRDC. “Nothing stands in the way of state and federal leaders eliminating oil and gas subsidies and shifting resources toward a just transition for people in the Permian Basin now, so they can move to more sustainable, healthier jobs that better support their families.”

“Ending unnecessary oil and gas subsidies could free up funds to help workers transition to the better, more economically stable, and healthier lives they dream of, enabling them to remain rooted in the New Mexico communities they grew up in,” said Paige Knight, Deputy Policy Director, New Mexico Voices for Children.

The “Fossilized Finances: State and Federal Oil and Gas Subsidies in The Permian Basin,” report’s release also coincides with the New Mexico Legislature’s 2024 session that runs through Feb. 15. Among bills under consideration are several that aim to update the 1935 Oil and Gas Act.

Updates under consideration by Gov. Michelle Lujan Grisham and state lawmakers are among the recommendations in the NRDC report, including increasing bonding fees to reduce state liability for orphan wells and increase fees and penalties.

Altogether, the report has nearly two dozen recommendations for federal and state policymakers, which if made, would help align public spending with national goals to reduce greenhouse gas emissions, protect taxpayers from abuse, and end market distortions that favor fossil fuel investments.

Source: “NRDC Report: Extensive Oil & Gas Subsidies in Permian Basin Cost Billions, Drive Climate Damage and Boost Air Pollution,” Jan. 24, 2024 Natural Resources Defense Council press release.

Corresponding, connected home-page-featured image: U.S. Energy Information Administration via Wikimedia Commons