A Cauldron Of Energy Uncertainty

Oil and gas production is one ingredient in New Mexico’s cauldron of energy uncertainty, and it’s a big one. This analysis points to several dilemmas, in recent news, that are simmering, and explains what may happen in the near future.

Oil And Gas Production.

35% of New Mexico’s revenue comes from oil and gas fields in the Delaware basin, part of the Permian basin that stretches into West Texas. Crude production exceeded 2 MMbopd (million barrels per day) in 2024, which was double that in 2019 before the Covid dropout in 2020. The entire Permian basin reached 6 MMbopd in 2024, about half of total U.S. crude production.

But what will happen if the price of oil stays low? If the WTI price of oil stays at $63/barrel, Permian drilling of well inventory will last seven – ten years. This is better than three – four years for the Eagle Ford in East Texas, and the Bakken in North Dakota. But it illustrates one potential downside if the price of oil stays low.

Another downside is a projection by Vicki Hollub, CEO of Occidental, who said crude production in the Permian could peak by next year, due to cutbacks in capital spending.

Oil and gas production is one ingredient in the cauldron of uncertainties because 35% of New Mexico’s revenue comes from the Delaware basin. Another ingredient is that oil and gas globally produces about 50% of greenhouse gases (GHG) that cause global warming. The oil and gas industry is responsible for the largest fraction of emissions in New Mexico at 41%.

Although there is a growing industry of renewable energies in New Mexico, and lots of government support, the revenue from this will never replace the revenue from oil and gas.

Produced Water From Oil Wells Banned For Reuse.

Another dilemma faced by New Mexico is the enormous volume of water that flows to the surface along with oil and gas—so called produced water. 2 billion barrels or 84 billion gallons are produced each year. Right now, this water is left in evaporation ponds, or disposed of in injected wells, or recycled and cleaned to be used in the next frac job. Disposal by deep injection is problematic because it has created earthquakes of magnitude 5, although this has been more of an issue in West Texas.

The dilemma is exacerbated because the Permian basin is largely a desert, and New Mexico is in a drought—some say a 20-year drought. A solution that cries out loud is to purify the produced water enough that it can be used in agriculture, or perhaps even drinking water. There are a range of systems from multi-stage filtration up to commercial desalination that can be used, but to achieve the required purification would be costly.

Twelve pilot projects are underway to test the effects of treated water on agriculture and manufacturing. But the New Mexico Water Quality Control Commission stepped in last month to prohibit the next step—discharge of treated water to ground or streams. The Commission fears that chemicals still in treated produced water will be toxic, but there are no regulations governing their use.

As well as water treatment, the state would need to oversee storage, transport, and disposal of the water. Although there are no regulations for this, NMED (New Mexico Environmental Department) plans to use results from the pilot projects to design new standards, technical and operational, that would allow re-use of produced water to help resolve the fresh water problem in New Mexico.

Drilling Around Chaco Canyon.

Chaco Canyon was a central gathering place of Indian tribes around 1100 A.D. Eight man-made roads extended radially outwards, some for 50 miles or so. The large collection of ruins at Chaco include separate multi-story buildings and many circular kivas, underground religious centers. Carvings in sheltered sandstone clefts and alignment of structural walls reveal native knowledge of yearly seasons of the sun and moon.

Chaco Canyon lies in the San Juan basin, once the largest gas basin in the U.S. Chaco has been simmering in the New Mexico cauldron for a number of years. In 2023, Secretary of the Interior, Deb Haaland issued an order to restrict drilling or development of oil and gas operations to outside a 10-mile radius around Chaco. This was to enlarge the area of protection around Chaco Canyon, which is sacred to many Indian tribes. But not all tribes, as the Navajo Tribe did not live in the region until hundreds of years after 1100 A.D.

The details of this issue have been spelled out separately. Chaco sits close to the southern edge of the oily window of the San Juan basin. In 2023, the Navajo Nation had wanted to specify a smaller radius of 5 miles, because some members owned mineral rights to some of the land around Chaco. They filed a lawsuit against the Interior Department and BLM (Bureau of Land Management) in January of 2025, arguing to revoke the 10-mile limit because it harmed the profits of lessees who were economically small operators.

Into the breach has stepped the Trump administration. New Interior Secretary, Doug Burgum, has told the BLM to reconsider the 10-mile limit. The All Pueblo Council of Governors has resisted this, but not the Navajo Nation. Given the Trump government’s directive to revise or rescind actions that are an “undue burden on the development of domestic energy resources”, it’s hard to see the BLM keeping the 10-mile protective limit at Chaco.

Uranium Mining.

New Mexico was a hotspot of uranium mining back in the 1950s and 1960s when the cold war was at its height. Over 1,000 uranium mines came into existence, many that employed miners from the Navajo Nation. The uranium was bought by the U.S. government to be used for nuclear defense purposes. Church Rock just outside Gallup was an active mining site, and the scene of a bad flood that polluted the Rio Puerco in 1979—the largest-ever radiation accident in the U.S.

The health effects of mining, notably lung disease due to radon gas attached to mining dust, is a dark chapter in the history of mining. Lack of epidemiological studies and government bureaucracy delayed cleanup efforts for surface tailings radiation, and underground contamination of aquifers.

The U.S. Congress eventually passed RECA, an act that provided reparations to people affected by uranium mining and by nuclear tests in Nevada. The law was due to expire in June 2024, but the Senate passed a bill to extend it by six years. However, the House never brought it to a vote, so the law has expired. Under RECA, the government has paid claims of 41,000 people, and paid $2.6 billion in reparations, the majority to recipients from the Nevada nuclear testing site.

The Inflation Reduction Act of 2022 opened a door to nuclear power as an alternative energy source, to the tune of $30 billion. This would include reopening of old mines, many of which lie on Native land, as well as new mines.

The Trump government appears to have taken another giant step toward uranium mining by another new executive order on May 23 that prioritized nuclear fission reactors, traditional and SMRs (small modular reactors). This was ostensibly to provide burgeoning new electricity needed for U.S. data centers. According to the Secretary of Energy, “Nuclear has the potential to be America’s greatest source of energy addition. It works whether the wind is blowing, or the sun is shining, is possible anywhere and at different scales.”

Given the state’s history, a lot of tension will arise if uranium mining is allowed to resume in New Mexico. Untrammeled growth of uranium mining and nuclear generation of electricity may ignite a spark to the ever-present fear of radioactivity in mining and disposal of nuclear waste, which are always simmering in the New Mexico cauldron of uncertainty.