Mar. 20—State Land Commissioner Stephanie Garcia Richard is receiving both criticism and praise over her decision not to lease some of the state’s most valuable tracts of land for oil and natural gas development in the Permian Basin until the Legislature increases royalty rates.

Her decision earlier this month to withhold lease sales came just weeks after a bill to raise the top royalty rate from 20% to 25% died in the Legislature during the 30-day session, the latest in a series of failed attempts in recent years.

Rep. Jim Townsend, R-Artesia, called the move “pettiness at its height.”

“She should bring [the proposal] back to the Legislature, maybe in a revised manner so it would pass, but to demand that you either do it or I’m going to quit leasing land is completely irresponsible to the people and to the constitution of New Mexico,” he said Wednesday.

Rep. Matthew McQueen, D-Galisteo, who sponsored House Bill 48 during the session, lauded Garcia Richard for taking decisive action.

“I think the rates on the premium tracts are below market, and the land commissioner recognizes she has a fiduciary duty to maximize the return on those assets,” he said.

“This isn’t a tax. It’s not a fee. It’s not a regulation,” McQueen added. “It’s the state of New Mexico selling minerals that it holds in trust for a fair market price, and the idea that we need to subsidize the oil and gas companies is just crazy. This is something we own and that we have a legal obligation to maximize the return on.”

Until the issue is resolved, the State Land Office is seeing a financial impact.

The lease sales of five tracts in March, the first since the agency started withholding some of its most promising tracts, generated $95,000.

The previous month, the lease sales of 19 tracts generated $13.3 million.

Joey Keefe, a spokesman for the State Land Office, said Garcia Richard has no plans of reversing course.

“That will be in effect until the law changes, until the Legislature changes the law,” he said, adding the office isn’t losing any money because the resources remain in the ground.

Garcia Richard was unavailable for an interview Wednesday. But she said in a statement it’s her duty to earn as much money as possible for New Mexico’s public institutions.

“So I think it makes perfect sense to forego millions now in exchange for billions down the road,” she said.

The State Land Office estimated the higher royalty rates would’ve resulted in an additional $50 million to $84 million for the Land Grant Permanent Fund. A fiscal impact report stated the market value of the fund would’ve have grown by $1.5 billion to $2.5 billion by 2050 with the potential revenue increase.

Gov. Michelle Lujan Grisham said in a statement it’s the land commissioner’s job to make decisions over state trust land, and Garcia Richard is making them.

“Whether I agree or disagree, I respect her decision,” she said.

Still, Lujan Grisham offered her a bit of advice.

“An approach that has worked well for my administration is to try to create partnerships and get everybody with a vested interest to the table to make decisions,” the governor said. “We want to make sure the state holds the industry accountable, but this is an energy state, and we need to listen to all stakeholders.”

Garcia Richard said the “impassioned response” from the oil and gas industry just shows companies would be willing to pay a little more to develop the most valuable tracts of land, which they already do elsewhere in the Permian Basin.

“Opponents of raising the royalty rate seem to be more concerned about the profits of private oil and gas companies,” she said. “I’m going to keep doing what I was elected to do, and that is to maximize returns for our public schools, universities, and hospitals — not for private corporations.”

Missi Currier, president and CEO of the New Mexico Oil and Gas Association, said in a statement the impact on the industry will take months to fully realize as it gains a better understanding of the tracts that will be held back in the monthly sales.

“NMOGA understands that the Commissioner has the ability to choose which tracts are made available and that the State Land Office feels that this pause will make more money in the long term with an increased rate,” she said. “The New Mexico Legislature is the only body that can vote to increase the royalty rate. Since 2019, multiple bills have been filed that would have allowed for the increase, and after much debate and deliberation, legislators have consistently chosen to not raise royalty rates.”

Sen. Ron Griggs, R-Alamogordo, suggested Garcia Richard is acting outside her “constitutional authority or statutory authority.”

“She needs to step back and look at that because I believe she’s really doing something she shouldn’t do,” he said.

Garcia Richard “has made her point” but needs to get back to the State Land Office’s purpose of funding public education and other public institutions, Griggs said. “She needs to do the job she was elected to do.”

Former Sen. Gay Kernan, R-Hobbs, called Garcia Richard’s decision “very short-sighted.”

“What I think about is the capital investment that oil and gas companies make, and many times the plans to invest and to purchase a lease, all of that, is done with a lot of thought,” she said. “They have so many dollars that they’re willing to allocate, and when they have that money ready to spend and then the opportunity passes by, they’re gonna spend that money someplace else.”

During this year’s legislative session, advocates of HB 48 argued the royalty rates had not increased since the 1970s and that Texas charges rates of up to 25%.

“You cannot compare Texas and New Mexico because so much land in Texas is private,” Kernan said. “In New Mexico, we’re mostly federal and state land with very little private land. It’s just different.”

The bill to raise royalty rates, the amount oil and gas companies pay on the value of oil or gas they remove, stalled in the Senate Finance Committee this year.

Committee Chairman George Muñoz, D-Gallup, said the bill got held up when he asked about the total tax burden on petroleum producers and didn’t get an answer.

“I agree with her withholding the leases because I’d love to have the best wells in New Mexico saved for our future, not spent today,” he said. “It’s just like the Severance Tax Permanent Fund, right? The more we save for the future, the better off we are.”

After Garcia Richard announced her decision to withhold lease sales, Sen. Steven McCutcheon II, R-Carlsbad, issued a statement accusing her of “using the children of New Mexico as pawns to try and force the Legislature to raise lease rates” after years of record revenues from oil and gas.

“New Mexico schools are the greatest beneficiaries of these royalties,” he said in a statement at the time. “To hold them hostage, for an unknown amount of time, is nothing short of unconscionable. … I urge the Commissioner to abandon this irresponsible decision and get back to doing what is best for New Mexico.”

Follow Daniel J. Chacón on Twitter @danieljchacon.