NEW MEXICO (KRQE) – The New Mexico State Land Office (NMLO) is looking to earn every possible penny on prime oil land in southeast New Mexico meaning the state will not accept any leases for some of the best drilling places until the royalty rate goes up. “They are really clamoring to have these leases be put back on the lease sale, and the reason is because they’re so lucrative,” said New Mexico Land Commissioner Stephanie Garcia Richard.
But for now, the state says they will withhold any leases on several hundred acres of premium oil land in southeastern New Mexico. “New Mexico wasn’t charging top dollar for a resource that is valued higher,” Commissioner Garcia Richard said.
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State officials argue the amount of money New Mexico has earned in royalties from oil leases on prime land is far below what other states in the area are making. As it stands, the state receives 18% to 20% in royalties from oil pumps in the Permian Basin for a typical parcel of land.
However, for the prime real estate, officials say they would like to increase that rate to 25%, matching the market value in neighboring states. “These prime parcels, these best of the best acres, that would draw an additional, between 50 and 80 million dollars,” Commissioner Garcia Richard explained.
In a statement from the New Mexico Oil & Gas Association (NMOGA), the organization disagreed with the decision to not lease this land and said that the state has received record revenues from oil royalties in recent years:
“The New Mexico Oil and Gas Association is incredibly disappointed that our members and those who benefit from State Land Office revenue, like public schools, hospitals, and higher education institutions, are being penalized because of a disagreement between the State Land Office and the Legislature over statutory leases.
The State Land Office, and its beneficiaries, have received record revenues in recent years, including $2.75 billion in fiscal year 2023. Since 2019, NMOGA has not taken a position on proposed royalty rate increase legislation. When trying to determine market value, we believe New Mexico total taxes, including royalties, are comparable with surrounding states.”Missi Currier, President/CEO, New Mexico Oil and Gas Association
The only way the New Mexico Land Office will re-open them is if lawmakers pass a bill increasing the royalty amount to 25%, which was attempted, unsuccessfully, in this year’s session. “Whatever next opportunity we have to work on this effort we will take,” said Commissioner Garcia Richard.
Commissioner Garcia Richard says the reason for the office’s decision is to make sure the state is making every dime it can from the oil industry, with the expected increased revenue going toward public education, hospitals, and state universities.
“I don’t think New Mexico’s children should be subsidizing the industry,” Commissioner Garcia Richard added. “I don’t think we should satisfy ourselves with crumbs.”
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