SANTA FE, N.M. – 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 the House Energy, Environment & Natural Resources Committee 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 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.
The bill passed the full Senate for the first time ever on February 22. It also passed the Senate Conservation and Finance committees earlier in February. 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.
“After clearing today’s committee hearing, we are now on the doorstep of historic new levels of funding for our public schools and other institutions,” said Commissioner Garcia Richard. “Bringing the royalty rate for our best lands in line with the market rate should be a no-brainer. We should always get top returns for our best public resources, especially because this money funds some of our most important institutions and saves taxpayers about $3,000 per year. We need to capitalize on this opportunity to get the most value we can for New Mexicans. I’m grateful to our sponsors for their leadership and for every legislator who has voted so far for this commonsense bill.”
“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.”
“Raising the top royalty rate is the right thing to do. We are simply asking oil companies to pay a fair market rate, the same rate they pay in Texas. It’s only fair,” said Rep. McQueen. “New Mexico is fortunate to have some of the best oil and gas 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 my fellow legislators to do the right thing for our young people by voting to pass this bill.”
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 House Appropriations & 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.