New Mexico oil boom towns hope worst is over - COVID chronicles
CBS News is chronicling what has changed for the lives of Americans in 2020 amid the coronavirus pandemic.
Before oil prices collapsed earlier this year to record lows, crushed by an unprecedented and unexpected evaporation in demand, workers were flooding into southeastern New Mexico to man the state's booming oilfields. Over three months later, residents are hoping life will return soon to the oil-rich region's ghost towns.
In Artesia, where one in 5 workers were directly employed by oil and gas companies, Mayor Raye Miller sounds optimistic hoping that the industry had turned a corner from its most dire moments in the spring.
"We feel fairly good, given the circumstances of the COVID issues, what our governor has actually done in the way of shutdowns, then the huge loss of demand for products of oil and gas, to be at least where we are," says Miller, who has worked in the oil and gas industry since the 1980s.
"Most of our folks, a lot of small independent entrepreneurs who are in the businesses supplying to the oil companies services, they've been through these times before. And so, as a result, they try to get out of debt as much as they can in the good times and survive through the bad times," added Miller.
However, it is difficult to predict how long the bad times will last. The beginning of the year seemed promising: New Mexico reported producing nearly 33 million barrels of crude oil in January. Nationwide, only North Dakota and neighboring Texas, with which New Mexico straddles the vast shale oil reserves of the Permian Basin, reported more production. The industry fueled a boom across a wide spectrum of jobs, from geological engineers to truck drivers.
But by May, production in New Mexico had tumbled to less than 28 million barrels. Data collected in July by oilfield services firm Baker Hughes reported 49 rigs active in the state, under half as many as a year ago.
Just 3% of executives surveyed recently by the Federal Reserve Bank of Dallas said they expected American drilling and completion activity to return to pre-COVID-19 levels by the end of the year. Eighty-two percent of respondents said their firms had shut in or curtailed production in the second quarter.
As oil rigs shut of their spigots, it didn't take long for companies that support the industry to feel the effects.
"It was like we went from being completely full, and everybody just started leaving overnight," said Christina Snodgrass, owner of Bonnie and Clyde's Getaway RV Park in nearby Carlsbad.
Snodgrass runs one of dozens of trailer parks across the state that opened to meet a surge in long-term renters crowding into the area's homes, camps, and hotels: oil and gas workers in search of a new place to call home.
The park, which had a waitlist before the pandemic, now has just five reservations on the books for its 40 spots. Snodgrass, whose fiancé works in oilfield construction, said nearly everyone they know in the industry has seen equipment idled and mass job cuts.
"Up until this point, we have only done long term reservations. Our clients, they were all here long term and it was almost all oil and gas," said Snodgrass, who noted her site wasn't set up to host short-term renters or tourists.
"Our rates were already probably one of the most affordable in Carlsbad. And we market on Google, on Facebook. We post ads in town," Snodgrass said. "We're not getting calls for long-term rentals. So nobody's even shopping for rates or looking for availability."
"A lot of times what you'll see is companies that will continue to produce a well, even if they're losing money for a short period of time, because the cost of turning the well off, then potentially bringing it back online would be more than that loss would be," said Janie Chermak, an economics professor at the University of New Mexico who focuses on the industry.
While some workers are needed to maintain wells and process their oil, Chermak described the manpower needed to drill and complete new wells as the driving force behind "the boomtown economy."
"I think a number of companies probably can't drill new wells. It wouldn't be in their best economic interests, which means the production that you're going to see for the most part are drills already drilled and completed," added Chermak.
"In 2016, we had a downturn. We had the park empty out for about three months. We were down to about eight or 10 spots and then when they turned it back on we filled back up. But this one, this one's a little different. It wasn't an economically driven downturn. It was the pandemic that shut the floodgates," says Boe Norton, owner of North Star RV Park.
Norton blamed restrictions by New Mexico Governor Michelle Lujan Grisham, like quarantine requirements and limits on businesses, for squeezing the local economy and driving away out-of-state workers and visitors.
"I don't think anybody should have to die, but on the other side of that, we lost more people to the flu here than we did to COVID-19," remarked Norton.
In a statement, the governor's press secretary Nora Meyers Sackett called restrictions "a critical step in slowing the spread," citing climbing cases over the state's border with Texas.
"I would expect industry members in southeast New Mexico to have concern and compassion for their communities and want to encourage every possible action to slow the spread of COVID-19 and prevent further illness among their neighbors," said Meyers Sackett.
Though the governor's public health orders have angered many across the oil-bearing counties of New Mexico, the industry's trade group in New Mexico praised Lujan Grisham and said they had "no issues working with the governor during the pandemic."
"She's been really working hard to follow a very ambitious environmental policy proposal. But she's had to also recognize the importance of the industry, and that it is so critical to our state's future," Ryan Flynn, executive director of the New Mexico Oil and Gas Association, tells CBS News.
"I think the long-term prognosis is still positive. Leading companies in our industry have a huge investment in this area, so they're not walking away from those investments anytime soon," remarked Flynn.