Archives for April 2018

The boom in New Mexico’s oil patch is pumping up state revenue and economic development in Lea and Eddy counties, but it’s also raising many red flags for environmental organizations.
Activists say the unprecedented level of investment and activity flooding into southeastern New Mexico, which elevated the state last year to third-largest oil producer in the nation, foreshadows long-term environmental problems unless balanced development plans and firm regulations are in place to protect natural resources. That includes better control of methane emissions, plus efforts to protect water, vegetation and wildlife against overzealous development and industrial accidents such as oil spills.
Government and industry say they’re working diligently to protect the environment through careful monitoring and new technologies that help limit impacts on everything from wildlife and water to methane emissions.
All sides will weigh in on those things as the Bureau of Land Management’s Carlsbad office develops a new resource management plan that it expects to conclude this year.
Until recently, activists focused more on other parts of the state, particularly methane emissions in the northwest San Juan Basin and industry development around Chaco Culture Historical National Park. But with the southeast boom gaining momentum, environmentalists are concentrating more on the oil patch, which many see as key in the battle over climate change.

“It’s the elephant in the room right now,” said Thomas Singer, a western Environmental Law Center senior policy adviser. “The Permian Basin is poised to be a major global player in the industry and also a major source of greenhouse gas emissions. New Mexicans need to take responsibility, because the short-term economic gains from the boom come with huge environmental risks.”
Methane emissions are a top priority for most groups, especially with the federal government rewriting Obama-era regulations to control venting, flaring and leaks from oil and gas operations. New Mexico’s San Juan and Permian basins are front and center in the debate, given the state’s high emission levels.
A new report this month from the Washington, D.C.-based Taxpayers for Common Sense says New Mexico accounted for one-half of all the natural gas lost in the five-year period from 2012-2016.
The Environmental Defense Fund estimates 570,000 tons of methane escape here every year.
“San Juan County is the No. 1 producer of methane emissions now,” said Jon Goldstein, defense fund senior policy manager. “But projections show that over the next 10 years it will flip, with Lea County becoming the No. 1 source followed by Eddy County and then San Juan.”
New Mexico Oil and Gas Association Executive Director Ryan Flynn said that turns reality on its head, because natural gas production is the No. 1 factor that’s cut U.S. greenhouse gas emissions by replacing coal as the nation’s primary source for electric generation. In addition, industry is aggressively attacking the problem, cutting methane emissions at wellheads by 40 percent since 2006.
“Every objective measure points to major advancements and improvements from the industry side,” Flynn said.
Nevertheless, the Permian oil boom could become a key source of greenhouse gasses as all the new crude pumped there is burned as fuel, Singer said. Industry projects local production will more than triple over the next decade, to between 500 million and 600 million barrels.
“Combusting one barrel of oil creates about .43 metric tons of carbon dioxide,” Singer said. “Burning nearly 600 million barrels would equal emissions from about 64 average coal plants. To our mind, the New Mexican Permian is a story about the tragedy of a short-term fossil fuel boom fueling major contributions to climate change.”
Water is another big issue, given the voluminous amounts used in operations and the dirty, “produced” water left behind. Roughly 12.6 million gallons are used daily for hydraulic fracturing, or “fracking,” in southeast New Mexico, according to a report in March from Circle of Blue, a Michigan-based nonprofit focused on global reporting and education about water issues. Millions more are used in other types of drilling.
All that activity generates about 115 million gallons of produced water daily, about half of which is recycled for re-use and the rest injected into permanent wastewater wells.
Environmentalists worry about groundwater contamination. But the state Energy Minerals and Natural Resources Department says there’s no local evidence of that to date, and operators are required to use three layers of steel and cement casing around wells to prevent ruptures.
Industry is also making strides on new technology to recycle more produced water for re-use and reduce the need for fresh water in all operations.
“In reality, oil and gas only account for about 1.4 percent of total fresh water use in New Mexico, and we’re encouraging operators wherever possible to switch from fresh water to produced water,” said department Secretary Ken McQueen.
Frequent liquid spills are also a concern. The state Oil Conservation Division documented almost 800 surface spills or leaks last year just in Eddy and Lea counties. That’s up from 500 spills statewide in fiscal year 2015. None reached groundwater, and the state is working to tighten regulations and monitoring, McQueen said. The division will hold hearings in June to improve timelines for assessment and remediation of spill sites.
Wilderness groups expect to weigh in during the 90-day comment period that opens after the BLM releases its new resource management plan, likely next month. The BLM manages more than 50 percent of the potential oil and gas lands in southeast New Mexico, and 80 percent of that is already leased for industry operations.
“The remaining acreage contains many spectacular places, including riparian areas and national parks with outdoor recreation and hiking trails,” said Nada Culver of the Wilderness Society. “We want the BLM to protect many of those natural areas.”
By: Kevin Robinson-Avila (ABQ Journal)
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For neighborhood and community shopping centers, the vacancy rate averaged 10.0 percent, the same as the quarter before.
Retail vacancy levels stayed relatively flat for the first quarter of the year, according to preliminary data from real estate research firm Reis. Industry experts say that despite accounts of retail bankruptcies and store closures, the sector is poised to stay the course.
For neighborhood and community shopping centers, the vacancy rate averaged 10.0 percent, the same as the quarter before. Meanwhile, the vacancy rate for regional malls rose 10 basis points from the fourth quarter to 8.4 percent.
This rate has remained relatively unchanged for several quarters, signaling that 2018 is not likely to see a major disruption to retail occupancies, says Barbara Byrne Denham, a senior economist at Reis. Denham points out the particularly rough start the retail sector saw in 2017. “It can’t get that much worse,” she says.
Denham notes she has been starting to see the demolition of shopping centers for other development, which is slightly boosting occupancy statistics. But more importantly, otherlarge users—particularly fitness centers—have stepped up to absorb some of the excess retail space, she says. “That’s why things aren’t suffering too greatly, but we do see some pretty dark clouds on the horizon for the third and fourth quarter of this year,” Denham adds.
Asking and effecting rates for neighborhood and community shopping centers increased, but barely, by just 0.4 percent from the fourth to the first quarter, Reis data shows. Net absorption remained positive as well, but also represented the lowest quarterly total in more than five years. For malls, rents rose by 0.5 percent. “It’s kind of like two steps forward, three steps back,” Denham says.
Some of the warning signs for retail’s future include toy retailer Toys “R” Us’ plans to liquidate 740 big-box locations across the United States. The first few months of 2018 also saw several big-name retail bankruptcy filings, including shoe retailer Nine West, department store chain Bon-Ton and Claire’s, a teen accessories retailer.
There are other red flags in the market. In a recent report, Moody’s Investors Services found that there were nine retail corporate defaults in the first quarter, marking a record high. Among the defaulters was Sears Holdings Corp.
Still, some in the industry say retail, as a whole, is far from dead.
The U.S. Census Bureau reports that retail sales for February rose 4.0 percent year-over-year. For the period of December to February, sales were up 4.3 percent from the same period the year before. E-commerce sales increased at a greater clip, jumping 16.9 percent in the fourth quarter year-over-year.
However, ICSC data shows sales productivity in December, the most recent month for which figures are available, varied across the board. Women’s apparel retailers, for example, experienced a year-over-year sales productivity decline of 9.4 percent, food courts experienced a 0.1 percent increase in sales productivity and electronics retailers a 25.6 percent increase. The overall mall sales productivity nationally declined by 0.4 percent, to $470 per sq. ft.
Some retailers failed to innovate in an industry that demands staying ahead of the curve to meet consumers’ changing needs. “In any industry, you’re going to have companies that grow well and others that don’t,” says Lee Holman, lead retail analyst at Franklin, Tenn.-based IHL Group, a retail and hospitality consultancy firm.
John Mercer, a senior analyst at Coresight Research, a retail think tank, says he expects slightly fewer store closures in 2018 than last year, which “seemed to be an exceptional year,” he says. There was an accelerated move to online, which hit brick-and-mortar apparel retailers, a segment that ended up seeing numerous bankruptcy filings. Many retailers also grappled with heavy debt loads last year. “We may see a slight fallback after that spike.”
Many major shopping center owners are now proactively repurposing their spaces and shifting their tenant base to rely less on apparel chains, Mercer says.
Coresight has found that there have been 3,264 major U.S. store closure announcements year-to-date and 1,699 store openings, with Dollar General leading the way. Last year, there were 7,066 announced store closures—RadioShack shuttered the most locations. There were 3,157 openings, with Dollar General again opening the most stores.
According to a 2018 report from IHL Group, which looked at a broader array of retailers that included drug stores, restaurants and furniture stores, there were more store openings than closings. IHL found that retailers opened 14,248 stores in 2018 and closed 10,168.
The National Retail Federation (NRF), and industry trade group, projects 3.8 to 4.4 percent growth for retail sales this year. Strong consumer confidence, low unemployment and a well-performing stock market contribute to this forecasted growth, says Mark Mathews, vice president of research at the NRF. “You can’t be struggling when you’re growing faster than the economy at large,” he notes.
By: Mary Diduch (National RE Investor)
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