NMSLO News:
SANTA FE — For the first time, 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 from 20% to the market rate of 25% passed the passed the full New Mexico Senate today.
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, would bring New Mexico’s royalty rate in line with what is offered in Texas and on private lands in New Mexico and would generate millions more each year and $1 billion to $2 billion overall in additional value for New Mexico’s public schools and other institutions. The bill passed the Senate floor by a vote of 21-15.
The bill passed the Senate Conservation and Finance committees earlier this month. Similar legislation introduced by Rep. McQueen to raise the state’s top royalty rate advanced further than ever before in the 2024 legislative session, passing the full House of Representatives before the session ended.
“Passing out of the Senate is a major breakthrough for this legislation. We are now one step closer to ensuring millions more for our education system and other institutions every year,” Commissioner Garcia Richard said. “Large, out-of-state companies have benefited from below-market royalty rates on New Mexico’s premium lands for far too long. We should be doing everything we can to get maximum returns for our public resources on behalf of New Mexico’s school kids. It’s difficult to fathom why there would be any opposition to this legislation since we could see billions of dollars in additional revenue by applying the market royalty rate to just a handful of appropriate leases. I’m thankful to our sponsors and all of the legislators who have done their part so far to help this legislation along. We’ll keep pushing until we get a fair rate for New Mexicans.”
“When you have the best of the best, you want the best rate that you can get,” said Sen. Muñoz during a floor debate on the legislation. “When we’re charging 25 percent, and they [oil companies] may have some overhead costs, their net on the 25 baseline is 75 percent. That’s a pretty damn good deal. There’s nothing wrong with raising the rate. It’s not going to stop oil and gas. What it’s going to do is generate about $1.3 billion more for the State of New Mexico. As the Chair of Senate Finance, that is my job.”
The last time the royalty rate was updated by the Legislature was in the 1970s, well before the full economic potential of New Mexico’s oil and gas regions were fully understood. The legislation would only apply to new leases on the most productive oil and gas parcels on state lands. Royalties are not taxes – they are what companies pay for the right to extract publicly-owned resources, such as oil and gas, from state lands.
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.
Senate Bill 23 now heads to the House of Representatives to await a committee assignment.