Bill to Increase Oil And Gas Royalty Rate on New Mexico State Lands Passes First Committee
State says raising rate would generate millions more for New Mexico’s schools every year, energy experts say the price hike will be passed on to the consumers.
Legislation to increase the top royalty rate charged for oil and gas development on state lands from 20% to the market rate of 25% passed the House Energy, Environment & Natural Resources Committee, New Mexico Commissioner of Public Lands Stephanie Garcia Richard announced.
House Bill 48 (also filed as Senate Bill 24), which is sponsored by Rep. Matthew McQueen and Sen. Bill Tallman, would bring New Mexico’s royalty rate in line with what is charged in Texas and would generate millions more in revenue each year for New Mexico’s public schools and other institutions.
“House Bill 48 passing its first committee is a huge first step. We should capitalize on the current oil and gas boom by raising what we charge to oil and gas companies to use land that belongs to New Mexicans. The result would be huge amounts of new money for our school kids,” Commissioner Garcia Richard said. “Our job is to earn as much revenue as we can for New Mexico’s public institutions. It makes no sense to charge a below market rate for developing our most valuable natural resources. As a former public school teacher myself, I understand how tight the budgets can get for our school districts. We need to pass an increased royalty rate now and set up our schools for long-term success. I’m grateful to the leadership of Rep. McQueen and Sen. Tallman, and look forward to this bill making it across the finish line this session.”
“Raising the royalty rate should be a no-brainer. We are simply asking companies to pay the same rate they pay to lease land from private landowners and neighboring states like Texas,” Rep. McQueen said. “New Mexico is fortunate to have some of the best natural 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 all of my fellow legislators to do the right thing by our young people and pass this bill.”
“Raising New Mexico’s royalty rate is long overdue,” Sen. Tallman said. “New Mexico has been getting far too little in return for the activities of oil and gas companies on our lands. Passing this legislation is a commonsense way for us to maximize the state’s earning potential and benefit countless New Mexicans in the long run. It’s legislation we should all be getting behind.”
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.
“With all due respect, I disagree that raising the royalty rate should be a ‘no-brainer’ like Rep. Queen suggests,” The Crude Life founder Jason Spiess said. “In addition to using extreme and polarizing language, Rep. Queen fails to incorporate the Pass Along To The Consumer Cost involved with this rise of rates.”
Spiess added that “just because a regulation is old or antiquated doesn’t mean it needs to be changed. Furthermore, using antiquated leadership and polarizing rhetoric is not working for any political party. This needs to stop immediately so the country and industry can have a civil conversation about the realm of reality. Right now leadership is arguing about how to live on the planet of platitudes.”
The legislation would only apply to new leases on the most productive oil and gas parcels on state lands.
HB48 now heads to the House Appropriations and Finance Committee.
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Like most improvise judication, instead of working on regulation, laws, & state investment needed to make the state a place to attract business and talent. However like most improvise judication, Dutch disease will take hold & make New Mexico worse. As has been shown many times, when government officials get there hands on the resources, it's mostly goes to waste.