Officials Urge Laid-Off Federal Workers to Seek Unemployment, Consider Working for New Mexico

Published February 25th, 2025 at 12:38 pm

By Alice Fordham, KUNM

The royalty rates that New Mexico charges for oil and gas production on the best parcels of state trust land are one step closer to increasing.

The Senate passed SB 23 on a 21-15 vote over the weekend. 

Bill sponsor Sen. George Muñoz, D-Gallup, said royalty rates in New Mexico have not increased since 1970. Royalties are the price that companies pay for the right to extract oil and gas resources from publicly-owned state lands.

The majority of money earned from activities such as oil and gas development on state trust lands goes to support public education.

Should SB 23 become law, producers who extract oil and gas from the premium parcels could pay up to 25% in royalties. This would only impact future leases.

Muñoz said legislators in the past have attempted to raise royalty rates statewide to 25%. SB 23 would not do that.

“This takes the best of the best, the best rock in New Mexico. It allows them to increase it to 25% if the auction sells at that rate,” he said.

The higher royalty rates would primarily impact leases in Lea and Eddy counties, Muñoz said. He said some parcels in Roosevelt and Chaves counties could also be impacted.

He said it would also allow the State Land Office to offer new leases in the most productive parts of the Permian Basin and provide increased transparency regarding how lease rates are set. 

Opponents say raising the royalty rates could increase the costs of doing business in New Mexico and cause oil and gas companies to favor parcels in other states such as Texas.

Muñoz said the State Land Office does not have to bid the premium leases at the maximum rate, which would be 25% if SB 23 passes. He said if the State Land Office offers a parcel for lease with a 25% royalty rate and companies do not bid, the State Land Office can lower the rate on that parcel.

“They’re going to have to make those adjustments to see what the market is bringing on leases,” he said. “If the market’s not going to bring the 25%, then the leases won’t sell for that, but they’ve never had the capability to go to 25%.”

Currently, the State Land Office cannot charge more than 20% in royalties on those leases.

State Land Commissioner Stephanie Garcia Richard is among the people pushing for the increase in royalty rates. In a press release, she described the Senate passage of SB 23 as a “major breakthrough for this legislation.”

“We are now one step closer to ensuring millions more for our education system and other institutions every year,” she said. “Large, out-of-state companies have benefited from below-market royalty rates on New Mexico’s premium lands for far too long. We should be doing everything we can to get maximum returns for our public resources on behalf of New Mexico’s school kids.”