New Mexico has rapidly emerged as a key player in the Permian Basin’s oil and gas production, driven by significant developments in Lea and Eddy counties. As companies tap into the Delaware Basin, New Mexico’s output has surged, solidifying its position as the second-largest oil-producing state in the U.S. However, while this growth has bolstered both the state’s economy and national energy security, challenges remain, particularly regarding the state’s stringent regulatory environment. Despite these hurdles, the region continues to attract investment, with Texas-based operators playing a significant role in supporting New Mexico’s energy production.
Summary
New Mexico’s Role in the Permian Basin:
- New Mexico has become a major oil and gas producer, particularly in Lea and Eddy counties.
- The state’s oil output has increased with the development of the Delaware Basin, a part of the larger Permian Basin.
Production Growth:
- New Mexico’s oil production helped push the Permian Basin to a record 5.77 million barrels per day (b/d) in 2024.
- Oil production in New Mexico rose from 5.3 million b/d in 2022 and 4.7 million b/d in 2021.
Economic Impact:
- Oil and gas revenue now provides approximately 50% of New Mexico’s state budget, supporting services like education and infrastructure.
- New Mexico is now the second-largest oil-producing state in the U.S., behind Texas.
Challenges in Regulatory Environment:
- Industry leaders note New Mexico’s stringent regulatory environment, which poses challenges to maintaining high levels of oil and gas production.
- Concerns are raised about increasing legislative and regulatory barriers that could deter future development.
Investment from Texas Operators:
- Nine of the top 10 operators by wells drilled in New Mexico in 2024 are headquartered in Texas.
- Texas-based companies are expanding investments into New Mexico despite the tougher regulatory environment.
Employment and Economic Growth in Lea and Eddy Counties:
- Upstream employment in Lea and Eddy counties grew by 3,300 jobs from 2021 to 2023, totaling 13,619 jobs.
- The Gross Regional Product of these counties’ upstream sector increased by 85% to over $7.1 billion.
Infrastructure Support from Texas:
- Texas has provided vital support through its pipeline network, processing facilities, and refining capacity.
- New Mexico’s oil production regularly flows into Texas, with Texas receiving over 2 million barrels per day of New Mexico’s oil for seven consecutive months in 2024.
Broader Energy Impact:
- The Permian Basin’s overall output, supported by both New Mexico and Texas, has reinforced the U.S. as a global leader in energy supply.
New Mexico’s rise as a major oil and gas producer in the Permian Basin showcases the state’s immense potential and its vital role in supporting the nation’s energy security. However, sustaining this growth will require balancing economic development with regulatory challenges. Continued investment from Texas-based operators and the essential infrastructure provided by Texas highlight the collaborative nature of the region’s success. With proper regulatory and industry support, New Mexico can maintain its strong production levels and continue contributing to both state revenue and the broader U.S. energy landscape.
