New Mexico Approves Oil Royalty Hike on State Lands
New Mexico lawmakers have approved a bill to raise royalty rates on oil development, targeting some of the richest petroleum areas in the U.S. The measure, passed with a 37-31 vote, now heads to Governor Michelle Lujan Grisham’s desk for approval.
The new legislation boosts the top oil royalty rate from 20% to 25% for leases on premium state trust lands. These changes could significantly affect oil operations in the Permian Basin, one of the world’s most prolific oil-producing regions.
Increased Royalties Could Reshape Permian Basin Drilling
The Permian Basin, overlapping southeastern New Mexico and western Texas, contributed to 46% of all U.S. oil production in 2023. The proposed oil royalty increase brings New Mexico’s rate in line with Texas, which already charges up to 25% on similar lands.
Public Lands Commissioner Stephanie Garcia Richard, a Democrat, advocated for the change. She previously suspended lease sales on high-value land until a new rate was adopted. Her office manages land that generates billions in revenue through oil-related royalty payments.
Schools and Hospitals to Benefit from Higher Oil Revenues
New Mexico’s oil royalty revenues are invested in a multibillion-dollar trust that supports public institutions. These include public schools, universities, and hospitals. According to state data, the permanent land fund now disburses approximately $1.2 billion each year.
“We have a legal duty to maximize the return on these assets,” said Democratic Representative Matthew McQueen, co-sponsor of the bill. Garcia Richard added, “Raising the oil and gas royalty rate on premium state lands was always the right thing to do.”
Industry Pushback Over Economic Concerns
Critics argue that raising the oil royalty rate could discourage production and negatively impact economic output. They also highlight the already heavy tax burden faced by oil producers in the state and the volatility of global oil markets.
Opponents believe the move may backfire, reducing overall production and harming the same beneficiaries it aims to support. Still, supporters say the royalty hike ensures fair value for public land use, especially in a highly competitive drilling zone.
Environmental Groups Demand More Protective Measures
While environmental advocates welcomed efforts to invest oil revenues into clean energy and sustainability, others say the legislature missed opportunities to safeguard communities. A bill to prevent oil drilling within one mile of schools stalled during the session.
Gail Evans, an attorney for the Center for Biological Diversity, vowed to continue legal efforts to hold the state accountable. “Our legislators didn’t even take the tiny step of ensuring our kids are protected from dangerous oil and gas pollution,” Evans stated.
Oil Revenues Power New Mexico’s Fiscal Future
New Mexico ranks as the second-largest oil-producing state in the country, trailing only Texas. The state’s growing oil revenues are becoming increasingly important to its economy. Forecasts show investment returns from oil-linked funds could soon surpass personal income tax revenues.
Despite growing climate concerns, state leaders continue to rely on oil-related income for long-term planning. Environmental advocates and lawmakers alike remain locked in debate over how to balance fossil fuel production with sustainability.