KRWG

New Mexico shuns proposal to raise royalty rates on oil

Feb 16, 2019

  SANTA FE, N.M. (AP) — New Mexico state legislators shunned a proposal to increase the maximum royalty rate for oil and natural gas production on state trust lands that generate money for public schools, after hours of contentious public debate Friday.

The bill would have raised the top potential royalty rate on future oil leases for highly valued tracks in the Permian Basin of southwestern New Mexico from 20 percent of production to 25 percent.

A Democrat-led panel of House lawmakers declined to advance the bill at a hearing where representatives of the oil and natural gas sector warned that a higher rate cap would drive away business and undermine state government finances.

At the hearing, newly elected State Land Commissioner Stephanie Garcia Richard urged lawmakers to back the bill and give her a stronger hand in negotiating leases with oil producers to raise more money for public education.

The State Land Office oversees energy leases across about 14,000 square miles (36,000 square kilometers) of state trust land and additional underground resources to help fund schools, universities and hospitals.

The New Mexico Oil and Gas Association and individual companies said the bill would discourage private investment in the state. "We should be looking to attract capital not push it away," said Aimee Barabe, a lobbyist for the association.

Republicans joined three Democratic House legislators, including committee chairman Antonio Maestas of Albuquerque, in voting to halt consideration of the bill.

Maestas said he could not be sure whether the bill might hurt an oil industry that provides much of the state's annual budget.

Responding to the panel's decision, Garcia Richard said in a statement that "it is a sad day when wealthy special interests win out to the detriment of our kid's futures."

The bill also would have allowed the state to charge natural gas producers for methane that is released into the atmosphere to discourage waste and pollution.

Dozens of comments in support of the bill came from environmentalists and advocates for greater spending on public education.

A 25 percent royalty cap would bring New Mexico rates in line with Texas, though most production in Texas takes place on private land where the terms of contracts are not made public.