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State Land Office nets record $56M in July oil and gas leases after new royalty rate takes effect
Pump jacks extract oil at a site north of Eunice in 2024. The State Land Office on Tuesday announced oil and gas leases in July generated $56.4 million.
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New Mexico鈥檚 largest permanent fund and educational endowment got tens of millions of dollars more in revenue than usual this month.
The State Land Office on Tuesday announced $56.4 million in revenue generated from its July oil and gas leases. July was the first month the agency could implement a 25% royalty rate on certain oil and gas extraction activities in the Permian Basin. Previously, the highest rate the agency could charge was 20%.
The $56 million in lease revenues sets a new record for New Mexico. The previous record of $43 million was set in November 2018, according to the State Land Office.
The royalty rate is the amount companies ultimately pay to extract publicly owned oil and gas resources. The money from the July auction will be transferred to the state鈥檚 Land Grant Permanent Fund, which ultimately funnels revenue into public institutions, mostly public schools.
The State Land Office for years unsuccessfully called on the Legislature to raise the maximum oil and gas royalty rate, but opposers often voiced concerns that the price hike could push oil and gas operators out of New Mexico. The bill authorizing the rate鈥檚 cap increase finally passed this year, after it specified the state could only charge up to 25% for the most fruitful oil and gas tracts in the Permian Basin.
The passage also followed Public Lands Commissioner Stephanie Garcia Richard鈥檚 refusal, starting last year, to lease out the state鈥檚 best oil and gas tracts for less than 25%.
鈥淐ritics of raising the rate said oil companies would run to Texas, but instead they ran for their checkbooks,鈥� Garcia Richard said in a statement Tuesday. 鈥淭he $56 million we brought in for our schools today confirms that oil companies will go to where the resource is and are willing to pay top dollar for some of the best tracts of oil and gas land in the world.鈥�
The July lease sale included 14 tracts, which cumulatively account for 2,834 acres of land. The state leased nine of the tracts at a 25% royalty rate, and the rest at 20%.
Oil and gas operators on average spent $19,903 per acre. The highest dollar per acre spent was $80,069 by Dudley Land Co. in three separate leases for parcels in Eddy County.
For comparison, the state鈥檚 June mineral lease sale results generated $8.37 million in revenue, despite leasing nearly the same amount of acreage in the Permian Basin. However, the state has withheld any tracts that officials estimated would lease for 25% in an open market since March 2024, a spokesperson for the State Land Office said.
鈥淏ecause of this new law, New Mexicans will reap these rewards and companies will pay their fair share,鈥� Garcia Richard said. 鈥淭his is long overdue.鈥�
