SANTA FE, N.M. – For the second month in a row, the State Land Office has smashed the record for revenue earned from an oil and gas lease sale, bringing in $256 million in bonus payments at a public auction, New Mexico Commissioner of Public Lands Stephanie Garcia Richard announced today. It is the second auction the State Land Office has held since a new, 25% royalty rate for premium oil and gas leases kicked in. The law that raised the top royalty rate, which became effective June 20th, allows the State Land Office to offer its best parcels in the Permian Basin at the market rate. Commissioner Garcia Richard championed the legislation for years.
The State Land Office offered a total of 10 leases at today’s auction, which are located in Lea and Eddy counties, of which nine included the new 25% rate. All of the leases received bids, with a combined total of over $256 million in bonus payments being received. One parcel in Eddy County setting a new State Land Office record of over $84 million, and another parcel set a New Mexico record of $132,552 per acre, exceeding previous Land Office and BLM records. Today’s record sales surpass last month’s record of over $56 million.
“We are now two-for-two in shattering revenue records on behalf of our school kids since the 25% royalty rate took effect,” said Commissioner Garcia Richard. “As I’ve argued all along, oil companies are going to go where the resource is, and the oil resource in the Permian Basin is among the best in the world. Opponents who said oil companies would flee the state if we raised the rate clearly missed the mark. It was wrong to ask New Mexico’s public schools to subsidize the oil and gas industry for so many years. I’m glad the legislature finally took the critical step of raising the top oil and gas royalty rate in this year’s session. Bringing in billions more for our school kids was always my goal, and we are now well on our way to achieving that. The money the State Land Office brings in saves the average New Mexico taxpayer around $3,000 a year. I’m excited that this change will deliver millions more each year for our public institutions and save New Mexicans even more money.”
Each month, the State Land Office holds a public auction for the right to develop certain oil and gas areas. Companies submit bids for leases with the award going to the highest bidder. Once a lease begins to produce, an operator also pays royalty—a payment back to New Mexicans for development of a public resource.
The first oil and gas lease sale with the new, top royalty rate in July earned a then-record $56 million from 14 offered parcels, nine of which were auctioned at the 25% rate.
Senate Bill 23, which was sponsored by Sen. George Muñoz and co-sponsored by Speaker of the House Javier Martinez, Sen. Liz Stefanics and Rep. Matthew McQueen, increased the top oil and gas royalty rate for new state land leases from 20% to 25%, bringing it in line with what is offered in Texas and on private lands in the best parts of the Permian Basin.
The new, top rate only applies to new leases on state lands within the most productive oil-producing areas in southeast New Mexico. The last time the royalty rate was updated was in the 1970s and well before the full economic potential of New Mexico’s oil and gas play was fully understood. Commissioner Garcia Richard has fought for the public to receive a fair share of oil and gas earnings since assuming office in 2019.
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.
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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 $12 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.