Legislation to increase the maximum royalty rates for prime oil and gas land in New Mexico is advancing to the House following approval by the Senate with a 21-15 vote. This bill, known as Senate Bill 23, seeks to implement a 25% royalty rate cap specifically on premium land within the Permian Basin, an area crucial for oil and gas exploration.
Senator George Muñoz of Gallup, who sponsors the bill, explained that "when you have the best of the best, you want the best rate that you can get." The current regulation allows the State Land Office to charge up to 20% in royalty rates, which contributes to New Mexico’s Land Grant Permanent Fund supporting public education.
Muñoz emphasized that major oil companies drive nearly all activity in the Permian Basin. "Every major oil company — ExxonMobil, Chevron — has hit oil in this area, and hit it at a high volume," he stated.
Despite this rationale, Senate Republicans unanimously opposed the legislation. Senator Larry Scott of Hobbs attempted unsuccessfully to amend the bill so that the State Land Office would follow similar directives as lessees and private landowners regarding waste prevention and correlative rights protection.
Republicans argued against Senate Bill 23 by maintaining their position from previous sessions: such measures could negatively impact an industry vital for funding New Mexico. Senator Ant Thornton of Sandia Park remarked, "If you want less of something, you tax it. If you want more or something, you incentivize it. And it seems to me we are doing our best to kill the industry that keeps the state running."
The State Land Office halted leasing out top tracts of oil and gas land last year until legislative action is taken on raising royalty rate caps. The bill moved forward after approximately ninety minutes of debate.
