Dem NM land commissioner shakes down oil producers for more cash
The New Mexico State Land Office has announced a pause on leasing its most lucrative oil and natural gas sites in the Permian Basin after legislation during the 2024 Legislative Session to shake down oil and gas producers for more money via higher royalty rates failed.
Land Commissioner Stephanie Garcia Richard highlighted the effort to increase the current top royalty rate of 20 percent to 25 percent, a move that has seen repeated setbacks despite the Democrats dominating both chambers of the Legislature.
The proposal aims to align New Mexico’s royalty rates with those of Texas, which can go as high as 25 percent for oil and gas extraction on state trust lands. The Permian Basin, a hotspot for drilling, spans southeastern New Mexico and parts of western Texas. Texas’ royalty rates haven’t risen since the late 1990s, so the sudden attempt to hike rates appears solely politically motivated.
Revenue from oil and gas royalties in New Mexico contributes to a substantial investment trust that supports public education, universities, and healthcare institutions.
Garcia Richard emphasized her duty to optimize returns for the beneficiaries, stating, “I am a fiduciary on behalf of the school kids. It’s my job to make them the most money possible, and leasing these tracts below market rate means that school kids are subsidizing the oil and gas activity.” But with pauses on these leases, there will be no revenue coming in on the tracts in question.
The New Mexico Oil and Gas Association, through its CEO Missi Currier, expressed concern that halting new leases could disadvantage both the industry and the public who benefit from the revenues. Currier noted that New Mexico’s existing tax and royalty framework is competitive with neighboring states.
The Independent Petroleum Association of New Mexico’s Executive Director Jim Winchester wrote following the news, “The State Land Office has unilaterally decided to cut off future revenues to state beneficiaries and the general fund by suspending new leasing of premium tracts. IPANM strongly opposes this action especially considering the decision was abruptly announced without any consideration of the economic impact to all New Mexicans.”
The suspension of lease sales, starting with up to six leases in March’s auction, represents a small fraction of total transactions but signals a significant shift in policy. Garcia Richard re-elected for a second term in 2022, acknowledged the short-term loss of revenue from bonus payments due to the suspension but likened the strategy to a homeowner waiting for a more favorable market to sell property, emphasizing the long-term financial benefits. Time will tell if Richard’s shakedown will work.
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