New Mexico legislators OK increase on future oil royalty rates for prime
land
[March 22, 2025] By
MORGAN LEE
SANTA FE, N.M. (AP) — The state Legislature has endorsed a bill that
would raise royalty rates for new petroleum development on prime pieces
of land in New Mexico, on one of the world's most prolific oil
production areas.
A 37-31 vote on Thursday sent the bill from the Statehouse to Democratic
Gov. Michelle Lujan Grisham for consideration.
The proposal would increase the top royalty rate for oil and gas
development from 20% to 25% on New Mexico's state trust lands with
implications for the energy industry in the Permian Basin, which
overlaps southeastern New Mexico and western Texas. The area accounted
for 46% of U.S. oil production in 2023, according to the Federal Reserve
Bank of Dallas.
New Mexico deposits royalty payments from oil and gas development in a
multibillion-dollar investment trust that benefits public schools,
universities and hospitals.
“We have a legal duty to maximize the return on these assets,” said
Democratic state Rep. Matthew McQueen of Galisteo, a co-sponsor of the
bill.
Legislative approval was the culmination of a yearslong effort backed by
Public Lands Commissioner Stephanie Garcia Richard to increase top-tier
royalty rates. A year ago, Garcia Richard put a hold on lease sales
indefinitely for coveted tracts while advocating for the rate increase.
Proponents say neighboring Texas already charges up to 25% on state
trust land amid intense competition to drill in the Permian Basin. The
royalty changes in neighboring New Mexico would not go into effect in
Texas.
Opponents say the rate change threatens to penalize petroleum producers
and public beneficiaries, noting that oil production is significantly
taxed in other ways and hinges on volatile commodity prices.
In a news release, Garcia Richard said the goal is “to make as much
money as possible for school kids and our public institutions.”
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Pumpjacks work in a field near Lovington, N.M., on April 24, 2015.
(AP Photo/Charlie Riedel, File)
 “Raising the oil and gas royalty
rate on premium state lands was always the right thing to do," she
said.
Garcia Richard, a Democrat, terms out of office as land commissioner
in 2026 and this week announced her candidacy for lieutenant
governor.
New Mexico is the No. 2 state for oil production behind Texas.
Efforts by New Mexico to save and invest portions of a financial
windfall from local oil production are paying dividends as state
government income on investments is forecast to surpass personal
income tax collections.
The state’s land grant permanent fund currently distributes about
$1.2 billion a year to beneficiary schools, universities and
hospitals as well as the state general fund.
New Mexico state government relies heavily on a financial windfall
linked to oil production amid increasing concerns about the
connection between climate change and natural disasters including
wildfires.
A coalition of environmental groups praised the passage of bills
this week that would underwrite local clean energy and environmental
sustainability projects and related job training.
But Albuquerque-based attorney Gail Evans of the Center for
Biological Diversity vowed to press forward with a lawsuit against
the state seeking compliance with the “pollution control clause” in
the New Mexico Constitution on behalf of Native Americans who live
near oil wells.
“Our legislators didn’t even take the tiny step of ensuring our kids
are protected from dangerous oil and gas pollution when they’re at
school,” said Evans, alluding to a stalled bill to restrict oil and
gas operations within a mile (1.6 kilometers) of school property.
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