For the first time, the New Mexico State Land Office has auctioned oil and gas leases at a 25% royalty rate following a new state law supported by Commissioner of Public Lands Stephanie Garcia Richard. The law, effective since June 20th, allows the office to offer its prime parcels in the Permian Basin at market rates.
The State Land Office conducts monthly public auctions for rights to develop specific oil and gas areas. Companies place bids for leases, with the highest bidder securing the lease. Once production begins on a lease, developers pay royalties as compensation to New Mexicans for utilizing public resources.
In this auction, 14 leases were offered in Eddy and Lea counties, with nine featuring the new 25% rate. All leases received bids totaling over $56 million in bonus payments. The three highest-earning parcels each attracted bids exceeding $12 million. This sale set a record high bid per acre at over $80,000 and surpassed the previous record of over $43 million from 2018 when 34 parcels were sold.
“Critics of raising the rate said oil companies would run to Texas, but instead they ran for their checkbooks,” stated Commissioner Garcia Richard. “The $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."
Senate Bill 23 increased the top oil and gas royalty rate from 20% to 25%, aligning it with rates in Texas and on private lands within prime parts of the Permian Basin. Sponsored by Sen. George Muñoz and co-sponsored by Speaker Javier Martinez, Sen. Liz Stefanics, and Rep. Matthew McQueen, this new rate applies only to new leases on state lands within southeast New Mexico's most productive areas.
According to the Legislative Finance Committee, offering a market rate of 25% could add between $50 – $75 million annually to the Land Grant Permanent Fund (LGPF). These royalties are invested by the State Investment Council (SIC) before distribution. The SIC estimates that additional inflows could increase LGPF value by up to $2 billion by 2050.
Since taking office in 2019, Commissioner Garcia Richard has overseen more than $12 billion raised for New Mexico's public institutions through various uses of over 13 million acres of state trust land.
