Land Commissioner Stephanie Garcia Richard pushed for legislation to increase the top royalty rate offered for new oil and gas development on the best state lands will be signed into law today by the governor. Photo by Carol A. Clark/ladailypost.com
STATE News:
- Offering market rate for premium tracts would generate over a billion dollars in additional value for public schools, universities and hospitals
SANTA FE – Legislation pushed by New Mexico Commissioner of Public Lands Stephanie Garcia Richard to increase the top royalty rate offered for new oil and gas development on the best state lands was signed into law today by Gov. Michelle Lujan Grisham.
The last time the royalty rate was updated – which is how much companies pay for the right to extract publicly-owned oil and gas resources – was in the 1970s and well before the full economic potential of New Mexico’s oil and gas potential was fully understood.
Commissioner Garcia Richard has fought for the public to receive a fair share of oil and gas earnings since assuming office in 2019.
Senate Bill 23, sponsored by Sen. George Muñoz and co-sponsored by Speaker of the House Javier Martinez, Sen. Liz Stefanics and Rep. Matthew McQueen, increases the top oil and gas royalty rate for new state land leases from 20% to 25%, bringing it in line with what is offered in Texas and on private lands in New Mexico.
As New Mexico’s part of the Permian Basin is one of the best oil fields in the world, the change will generate millions more each year and $1 billion to $2 billion overall in additional value for New Mexico’s public schools and other institutions.
“History has been made today and we will now generate a billion dollars in additional revenue for our public schools and other institutions,” Commissioner Garcia Richard said. “By bringing the state’s royalty rate for premium oil and gas lands in line with what is charged in Texas and on private lands in New Mexico, we are making a smart business decision. You always want to get maximum returns for the best resources, and the oil in New Mexican’s Permian Basin is some of the best in the whole world. Raising the rate was always the right thing to do, but like with many great things it took some time and a lot of work to make it happen. I am truly grateful to all of the sponsors of this legislation during this year’s session and previous sessions for their leadership, and thank the Governor for signing it.”
Sen. Muñoz: “Raising the top rate makes good business sense because it allows the state to get premium value for a premium resource. The money earned from oil that is extracted from state trust lands benefits institutions in New Mexico including our public education system. Those institutions will now receive millions of dollars in new money every year. I always value legislation that can actually improve the lives of New Mexicans. Senate Bill 23 does just that, setting up our public schools and other institutions for greater long-term success.”
Rep. McQueen: “The royalty rate isn’t a tax, a fee, or a regulation. It is (or should be) the fair market price we receive for selling something we own. What’s more, we hold these minerals in trust for the beneficiaries of the Land Grant Permanent Fund. We have a legal duty to ensure that our schools, universities, and hospitals receive a fair return and aren’t subsidizing the oil and gas industry. By passing this update to the state’s top royalty rate, we will now bring in much more revenue for these important institutions in the coming years.”
The new law – which will go into effect June 20 – only applies to new leases on state lands located within the most productive oil producing areas in southeast New Mexico.
According to the Legislative Finance Committee, offering the market rate of 25% for premium oil and gas leases is estimated to result in additional annual contributions of between $50-$75 million to the Land Grant Permanent Fund (LGPF). State Land Office oil and gas royalties are transferred to the LGPF and invested by the State Investment Council (SIC) prior to distribution. The SIC estimated that the additional inflow of royalties from the State Land Office that would occur under the proposal would result in between $1.5-$2 billion in increased value of the LGPF by 2050, and between $750 million and $1.3 billion more in cumulative distributions from the LGPF by 2050.
About New Mexico Land Commission:
Commissioner of Public Lands Stephanie Garcia Richard has overseen the New Mexico State Land Office since 2019. In that time the agency has raised more than $11 billion for New Mexico public schools, hospitals, and universities. Over 13 million acres of state trust land are leased for a variety of uses, including ranching and farming, renewable energy, business development, mineral development, and outdoor recreation. The State Land Office has a dual mandate to use state trust land to financially support vital public institutions, while simultaneously working to protect the land for future generations.