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 passed a floor vote in the House of Representatives today and now heads to the governor’s desk.
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 increase the top oil and gas royalty rate on New Mexico state lands from 20% to 25%, bringing it in line with what is offered in Texas and on private lands in New Mexico. Increasing the top rate 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.
“This is a historic day. Now that this bill has cleared both chambers of the legislature, we are just one step removed from a billion dollars in new money for our public schools, universities and hospitals,” Commissioner Garcia Richard said. “This is exactly why I ran for this office – to make as much money as possible for school kids and our public institutions. Raising the oil and gas royalty rate on premium state lands was always the right thing to do. It was also the logical thing to do. Now, our rate aligns with what is offered for premium state lands in Texas and private lands in New Mexico. We are finally getting a fair, market value for the public resources that belong to all New Mexicans. I am forever grateful to our sponsors for all of their work on this bill, and for every legislator who voted for it.”
“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.”
“Raising the royalty rate is the logical thing to do. We are simply asking companies to pay the same rate they pay to lease land from private landowners and neighboring states like Texas. It’s only fair,” Rep. McQueen said. “New Mexico is fortunate to have some of the best natural resources in the country, and we shouldn’t be content to give them away on the cheap, especially when the future of New Mexico’s kids is at stake. I urge all of my fellow legislators to do the right thing for our young people by voting to pass this bill.”
The bill passed the House Appropriations & Finance and the Energy, Environment & Natural Resources committees before clearing the full House. Before that, it passed the full Senate for the first time ever on Feb. 22, after clearing the Senate Conservation and Finance committees earlier that 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.
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.
