Adrian Hedden
Carlsbad Current-Argus
achedden@currentargus.com
Democrat lawmakers in Santa Fe have less than two weeks left to pass a bill that would hike fees paid to the state by oil and gas companies to drill on state-managed public land.
Senate Bill 23, which would raise the cap on royalty rates for oil and gas leases on State Trust land from 20% to 25%, passed the House Energy, Environment and Natural Resources Committee on a 5-4 vote March 4 and was sent to the House Finance Committee for further consideration.
Royalty rates are charged by the State Land Office to energy companies as a percentage of the revenue derived from oil and gas production on land leased from the state.
The bill already passed two Senate committee, in the chamber where it originated, and survived a vote on the Senate floor in February.
If granted a “do pass” recommendation by the finance committee in the House, SB 23 would then go to a vote of the full chamber. It could be amended on the floor and would then need approval by the Senate before going to the desk of Gov. Michelle Lujan Grisham to be signed into law.
The final approvals will need to occur in less than two weeks if the bill sponsored by Sen. George Munoz (D-4) is to become law, as the legislative session ends March 22. The bill was not scheduled for its next hearing as of press time.
“Raising the state’s top oil and gas royalty rate puts millions more into the state’s savings for some of our most important institutions every year to ensure we continue funding them well into the future,” Munoz said.
The State Land Office leases State Trust land to the industry through monthly auctions, which recently focused on the southeast corner of the state in the booming Permian Basin.
The 25% rate would only be charged for the most valuable tracts of land, as appraised by the Land Office, in the Delaware sub-basin – an area of the Permian encompassing Eddy and Lea counties and believed to be the most productive in New Mexico.
Land Commissioner Stephanie Garcia Richard, who leads the office and has long supported the higher royalty rate, said following the bill’s most recent passage by the House Energy Committee the measure would allow New Mexicans to get a fair share of fossil fuel revenue produced in the state. New Mexico is ranked second in the U.S. in oil production.
The nation’s top oil-producing state is Texas, which shares the Permian Basin with New Mexico.
Financial benefit or anti-business?
Revenue gained by the Land Office supports its statutory beneficiaries such as public schools, universities and hospitals. Garica Richard argued such support saves taxpayers in the state thousands of dollars each year.
“We should always get top returns for our best public resources, especially because this money funds some of our most important institutions and saves taxpayers about $3,000 per year,” Garcia Richard said. “We need to capitalize on this opportunity to get the most value we can for New Mexicans.”
An analysis by the Legislative Finance Committee said the bill would raise up to $75 million a year for the Land Grant Permanent Fund, which the Land Office uses to distribute money to its beneficiaries.
Despite the purported financial benefits to the land office, Republicans and oil and gas industry groups oppose the higher rate because, they say, it would further burden oil companies – especially smaller producers – and could cause oil and gas operations to be moved over the border to Texas.
Paul Gessing with the nonprofit Rio Grande Foundation, a conservative business advocacy group, said the bill was the latest attempt by Democrats in control of the Legislature to attack the oil and gas industry.
Such an agenda, Gessing added, would come at the expense of New Mexico’s fiscal prosperity as the state already heavily regulates and taxes the industry.
“New Mexico is actually taking more than any other state from the oil and gas industry in terms of revenue,” Gessing said during the House Energy committee’s March 4 hearing. “If you want this money, I encourage you to share the wealth with New Mexicans, not just hoard it in government.”
Larry Sonntag with the New Mexico Business Coalition said fees and other expenses imposed by the state, other than the land office’s royalty rate, already made it more expensive to drill for oil and gas in New Mexico
“This would have a detrimental effect to our oil and gas industry,” Sonntag said of the bill. “They already provide a significant benefit to the state, and we don’t want to do anything to disincentivize that.”
Renewable energy, pollution control bills pass house
Lawmakers in the House voted March 6 to pass House Bill 289. The bill, approved by a vote of 35-23, would expand grant eligibility up to $250,000 for geothermal energy projects.
Geothermal energy, considered a renewable form of energy, creates electricity using underground heat. Projects usually draw heated water and steam to the surface from deep underground, using the heat’s energy to produce power.
The House also voted to pass House Bill 140, which would update the state’s Hazardous Waste Act to allow New Mexico officials to sue entities such as the Department of Defense for causing water contamination from per- and polyfluoroalkyl substances, or PFAS. PFAS are industrial byproducts often labeled “forever chemicals” because they do not break down in the environment.
PFAS contamination in local groundwater was linked to the use of firefighting foam at several Air Force bases in New Mexico.
