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25% royalty rate cap on prime oil and gas land heads to the House
Sen. George Mu帽oz, D-Gallup, is shown during a Senate committee hearing during this year鈥檚 60-day legislative session. Mu帽oz was a sponsor of a 2020 pension solvency bill and said in a recent interview he does not believe additional legislative action is needed to shore up New Mexico鈥檚 Public Employees Retirement Association.
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Legislation increasing the maximum royalty rates charged for prime New Mexico oil and gas land is heading to the House after passing the Senate chamber Saturday on a 21-15 vote.
A similar effort passed the House last year but couldn鈥檛 make it through the Senate. This year鈥檚 bill, Senate Bill 23, takes a slightly different approach by limiting a proposed 25% royalty rate cap geographically to premium land for oil and gas exploration 鈥� the Permian Basin.
鈥淲hen you have the best of the best, you want the best rate that you can get,鈥� said bill sponsor Sen. George Mu帽oz, D-Gallup. 鈥淚t鈥檚 a business model.鈥�
Currently, the State Land Office can only charge up to 20% in royalty rates. The money goes to the state鈥檚 Land Grant Permanent Fund, which funds public education.
Mu帽oz said 99% of activity in the Permian Basin is driven by major oil companies.
鈥淓very major oil company 鈥� ExxonMobil, Chevron 鈥� has hit oil in this area, and hit it at a high volume,鈥� he said.
However, that argument did not sway Senate Republicans, who uniformly opposed the legislation.
Sen. Larry Scott, R-Hobbs, tried but failed to amend the bill to make the State Land Office subject to the same prime oil and gas development directive that lessees and private landowners must follow, which is to prevent waste and protect correlative rights.
Republicans sang a similar tune against the bill as they have so far in the session and in past years, saying it would hurt the industry majorly funding New Mexico.
鈥淚f you want less of something, you tax it. If you want more or something, you incentivize it,鈥� said Sen. Ant Thornton, R-Sandia Park. 鈥淎nd it seems to me we are doing our best to kill the industry that keeps the state running.鈥�
The State Land Office last year stopped leasing out the best tracts of oil and gas land until the Legislature raises the royalty rate cap.
The bill passed the floor after about an hour and a half of debate.
