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New Mexico Commissioner of Public Lands Stephanie Garcia Richard is again urging the legislature to increase the top royalty rate charged for new oil and gas development on state lands from 20% to the market rate of 25%. The legislation, which has been pre-filed by its sponsor, Sen. George Muñoz, would bring New Mexico’s royalty rate in line with what is charged 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.

Similar legislation introduced by Rep. McQueen to raise the state 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 school kids should not be subsidizing the multi-billion-dollar oil and gas industry, period,” said Commissioner Garcia Richard. “It should be a no-brainer to pass this legislation. Our friends next door in Texas have recognized that the Permian Basin is the top play for oil and gas in the world and the state’s top royalty rate should reflect that. We can’t miss this opportunity to bring in billions more for our public schools and set up future generations of New Mexicans for success.”

“As always, I’m committed to improving the lives of everyday New Mexicans, and passing this legislation would do exactly that,” said Sen. Muñoz. “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, charging 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.