New Mexico Land Commissioner Stephanie Garcia Richard is working on a bill with state lawmakers to allow higher royalty rates for oil and natural gas production on state trust land, the Associated Press reported.
Garcia Richard said Tuesday that she wants New Mexico to raise its royalty cap to 25 percent on future leases to match Texas. The commissioner said she currently can charge up to 20 percent on oil and gas production in some areas.
The State Land Office oversees energy leases across some 14,000 square miles (36,000 square kilometers) of state trust land and additional underground resources to help fund schools, universities and hospitals.
Garcia Richard, a Democrat, said she wants the state to take full financial advantage of future oil and gas production in the Permian Basin that straddles the Texas-New Mexico line. She cited recent revelations by the U.S. Geological Survey that the Permian Basin holds the most potential oil and gas resources ever assessed in the U.S.
“The Permian Basin has an arbitrary state line through the middle of it,” she said. “On the Texas side they’re capped at 25 percent royalties, on the New Mexico side we’re capped at 20. So that’s not competitive in my mind.”
New Mexico Oil and Gas Association spokesman Robert McEntyre said Wednesday that royalties are just one piece of the larger cost burden on the oil and gas extraction industry from taxes and rents, and urged a cautious approach to changes.
He noted that Texas oil comes primarily from private holdings that don’t involve royalties.
“We have a $1 billion surplus with the current taxes and royalties,” he said, referring to overall state government income forecasts for the fiscal year starting June 30. “It doesn’t appear that there is a significant need” to increase royalties.
During periods of high energy prices, the industry’s direct annual revenue contributions to New Mexico have reached as high as $2.6 billion through severance taxes, rents, bonuses and royalty payments on state and federal land.
A 2017 bill to raise the royalty cap and levy charges on vented or flared gas never made it to a full state House or Senate vote. The Democrat-led Legislature convenes Jan. 15 for a 60-day session.
Newly inaugurated New Mexico Gov. Michelle Lujan Grisham campaigned on efforts to diversify the economy to trim the state’s dependence on the boom-and-bust oil industry.
