SANTA FE, N.M. – Legislation pushed by New Mexico Commissioner of Public Lands Stephanie Garcia Richard to increase the top royalty rate charged for new oil and gas development on the best state lands from 20% to the market rate of 25% cleared its first hurdle today. Senate Bill 23, sponsored by Sen. George Muñoz and co-sponsored by Sen. Liz Stefanics and Rep. Matthew McQueen, 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. The bill passed the Senate Conservation Committee on a 5-3 vote.
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.
“Raising the top royalty rate means more money for our school kids. It’s pretty simple. Legislators have a rare opportunity in front of them to make a significant impact for public education in New Mexico, and they should take it. I’m grateful to every member of Senate Conservation who did their part to get the bill through committee today,” said Commissioner Garcia Richard. “Our neighbors in Texas have recognized that the Permian Basin is one of the top plays for oil and gas in the world and that the state’s top royalty rate should reflect that. This bill has the support of legislative leadership and it advanced further than it ever had before during last year’s 30-day legislative session. Many legislators have a solid understanding of what the bill does and have already put their votes behind it. With such strong support already in place, I’m confident that we can push this increase to the top royalty rate across the finish line this year. I thank Chairman Muñoz for his leadership in taking this legislation on for the betterment our public institutions.”
“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.
Senate Bill 23 now heads to the Senate Finance Committee.
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.