By Alaina Mencinger and Margaret O’Hara | Santa Fe New Mexican
February 7, 2025
State Land Commissioner Stephanie Garcia Richard is optimistic her yearslong effort to raise New Mexico’s oil and gas royalty rate on the top tracts of land is finally poised for success.
The current legislative session marks the fourth time in recent years her agency has advocated for royalty rate increases, which she says are falling behind private land leases and neighboring states like Texas — costing the state tens of millions of dollars each year.
Garcia Richard stopped leasing the state’s prime oil and gas tracts in March after the Legislature failed to pass an increase in royalty rates. The vast majority of the best tracts already have been leased.
Senate Bill 23 would raise the royalty rate on some of the state’s most valuable parcels — the amount oil producers pay on the value of oil or gas removed from the land — to 25% from its current ceiling of 20%. It cleared its first hurdle Thursday with a 5-3 vote of approval by the Senate Conservation Committee.
Notably, SB 23 is sponsored by Sen. George Muñoz, D-Gallup, chair of the powerful Senate Finance Committee, which holds the state’s purse strings. That committee is the measure’s next stop before it reaches the Senate floor.
Muñoz said the “only reason” he chose to carry the bill this time is because of a key distinction from last year’s proposal: It limits the increase to the state’s choicest tracts.
Essentially, the senator argued, fair is fair: The state should charge higher royalties for the best extraction spots.
“The reason I did this was because these are the most valuable assets to the state of New Mexico,” Muñoz said. “And when you have something of value — and somebody wants something of value — we’re going to get the best that we can.”
Industry officials and the Senate Conservation Committee’s three Republican members voiced strong opposition to the proposal, saying it would be bad for the little guy — small, independent oil and gas producers — while major operators could afford to pay the higher cost.
“The bottom line here for my membership and really for the state is that we’re losing independence to the consolidation of the industry. The bigs are certainly getting bigger, and small operators are getting squeezed out,” said Jim Winchester, executive director of the Independent Petroleum Association of New Mexico.
Sen. Candy Spence Ezzell, R-Roswell, also worried the increase would result in more leases going to the “majors” in oil and gas production.
“I don’t want to see any more jobs and businesses leaving the state of New Mexico,” she said.
The royalty rate increase could result in considerable revenue for the state, with a fiscal impact report estimating it would bring in up to $50 million in fiscal year 2028 and up to $75 million in fiscal year 2029. The State Land Office operates like a landlord, putting profits from land leases toward public education and other public institutions.
Proponents argue the extra revenue would be put to good use in New Mexico’s struggling public education system, while opponents asserted it would chip away at smaller, independent oil and gas operators.
If adopted, the new rates would go into effect July 1 on all new leases. Existing leases would not be affected.
“This is about our royalty rate. It’s about what the land office, what our school kids, what the taxpayers get off of the lands that belong to them,” Greg Bloom, the State Land Office’s assistant commissioner of mineral resources, told members of the Senate Conservation Committee on Thursday morning.
Garcia Richard is encouraged about the outlook for this year’s proposal.
“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,” she said in a statement following the committee approval.
“With such strong support already in place,” she added, “I’m confident that we can push this increase to the top royalty rate across the finish line this year.”
This article originally appeared in the Santa Fe New Mexican.