Democratic Senator Martin Heinrich on May 13 introduced a bill that would help states that rely on oil and gas revenue weather the U.S. transition away from fossil fuels by offering federal support to help fill gaps in state and school budgets hit by a decline in oil and gas production.

The Schools and State Budgets Certainty Act would provide “energy transition payments” to states that rely on revenue from federal mineral leasing as a result of changes in U.S. policy to give them time to invest in new industries, the New Mexico senator said.

President Joe Biden signed an executive order in January pausing new oil and gas leasing on federal lands and waters that account for around 25% of the nation's petroleum production pending a review of its impacts, a move that has been seen as a first step to the permanent ban he promised during his campaign.

“The global energy landscape is undergoing a massive transformation, and states like New Mexico need to be ready,” said Heinrich, adding that the bill offers these states a “glidepath” to move away from their reliance on extractive industries.

New Mexico has been the biggest beneficiary of the federal drilling program because it hosts vast federal acreage overlying a share of the Permian Basin, the world’s most productive oil field. Revenues from drilling on federal lands there soared 85% over the last decade to $707 million in 2020—making up about a tenth of the state's total budget. Much of that money goes to its schools.

Heinrich told Reuters in February that he and fellow New Mexico Senator Ben Ray Lujan had a phone meeting with White House climate adviser Gina McCarthy in which they expressed a need for financial assistance to offset the impact of the moratorium.

His bill would set a baseline mineral revenue amount for each fiscal year based on a historical average of federal mineral revenue that would decline by 5% each year. The federal government would then pay a state or county the difference between the actual mineral payment and the baseline.

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