NMSLO News:
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 from 20% to the market rate of 25% passed the Senate Finance Committee on a 6-3 vote 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 Conservation Committee 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.
“New Mexico’s public schools depend on money earned from development on our state lands. That’s why lawmakers have a duty to make sure we can get as much money as possible for resources like oil and gas that belong to all New Mexicans,” Commissioner Garcia Richard said. “For too long, New Mexico’s school kids have been subsidizing the major players in the oil and gas industry. Enough is enough. It’s time to take the commonsense step of offering the same royalty rate that Texas offers for the best of the best lands in the Permian Basin. Let’s update the top royalty rate and get maximum returns on our most valuable resources. I’m grateful to Senator Muñoz and our other sponsors for leading the way on this bill and to every legislator who has voted in favor of more money for our school kids.”
“As always, I’m committed to improving the lives of everyday New Mexicans, and passing this legislation would do exactly that,” Sen. Muñoz said. “Remember that the money from oil and gas royalty rates goes directly to benefit our public schools. Raising the state’s top oil and gas royalty rate puts millions more into the state’s savings for some of our most important institutions every year to ensure we continue funding them well into the future. I urge my colleagues in both chambers to join me in passing this long overdue update to our royalty rates for the long-term benefit of New Mexico’s families.”
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 Senate floor to be considered by the full chamber.