Overview

Resources and Consumption

New Mexico is rich in fossil fuel and renewable energy resources. Major oil and gas deposits are located in the Permian Basin in southeast New Mexico and in the San Juan Basin in the northwest. The San Juan Basin Gas Area is the largest field of proved natural gas reserves in the United States. New Mexico’s Permian Basin contains three of the 100 largest oil fields in the United States. The northwest corner of the State contains major coal deposits. Much of New Mexico’s geologically active Rocky Mountain region holds geothermal power potential, and pockets of the State are suitable for wind power development. New Mexico’s southern deserts offer the State's most concentrated solar power potential. Although rich in energy resources, New Mexico has low energy demand due in large part to its small population. The transportation and industrial sectors lead State energy consumption.

Petroleum

New Mexico’s crude oil production is substantial, and State crude oil output is typically just over 3 percent of the annual U.S. total. Production, which has been relatively steady since a steep decline through most of the 1970s, occurs in the Permian and San Juan basins. The Permian Basin, most of which lies in west Texas, is one of the most productive areas in the United States. New Mexico has three oil refineries, and several petroleum product pipelines connect the refineries to State and area markets. New Mexico requires the wintertime use of oxygenated motor gasoline to reduce carbon monoxide emissions in the Albuquerque metropolitan area. Ethanol, which is blended with gasoline to increase its oxygen content, is produced from corn and grain milo at New Mexico’s only ethanol plant in Portales.

Natural Gas

New Mexico is one of the top natural gas-producing States in the Nation, and its output accounts for close to one-tenth of U.S. production. New Mexico produces natural gas in its Permian and San Juan basins. Although natural gas production declined through much of the 1980s, output has increased sharply since the early 1990s due in large part to the rapid development of coalbed methane production (the production of unconventional natural gas from coal seams). Today, coalbed methane accounts for about one-third of New Mexico’s natural gas production. The San Juan Basin, which straddles the Colorado-New Mexico border, is the leading coalbed methane-producing region in the United States. New Mexico rivals Colorado as the Nation’s leading coalbed methane producer and is responsible for around three-tenths of all coalbed methane produced in the United States. Although coalbed methane production from the San Juan Basin has declined since the late 1990s, new production is under development in the Raton Basin in the northeastern part of the State.

Although more than two-thirds of New Mexico’s households use natural gas as their primary energy source for home heating, State natural gas consumption is low. Less than one-tenth of New Mexico’s natural gas is used in the State. The majority of New Mexico’s supply is delivered via pipeline to consumption markets on the West Coast and to market centers in West Texas that supply the Midwest. New Mexico’s Blanco Hub, located in the San Juan basin, is a major gathering point for Rocky Mountain natural gas supplies heading to West Coast markets.

Coal, Electricity, and Renewables

A substantial amount of coal is produced in New Mexico. Most of New Mexico’s coal mines are clustered in the San Juan Basin. About three-fifths of New Mexican coal is used within the State; the remainder is delivered by rail primarily to electricity generators in Arizona. Coal-fired power plants dominate the New Mexico electricity market and supply roughly nine-tenths of the State’s electricity generation. Natural gas-fired plants supply most of the remainder. Just over one-tenth of New Mexico households use electricity as their main energy source for home heating.