New Mexico legislators push for increased oil royalty rates

In March 2025, New Mexico's Legislature voted to endorse a significant increase in royalty rates for new oil and gas development on state trust lands. With a vote of 37-31, the bill was forwarded to Democratic Governor Michelle Lujan Grisham for her consideration. This legislative move aims to boost the top royalty rate from 20% to 25% on prime parcels in the Permian Basin, an area that is critical to the energy sector, producing 46% of U.S. oil as of 2023. New Mexico is ranked as the second-largest oil-producing state in the U.S., following Texas. The motivation behind this initiative was fueled by a desire to maximize the returns on state assets utilized for public benefit, aligning the state's royalty rates more closely with the competitive rates in neighboring Texas. Public Lands Commissioner Stephanie Garcia Richard has been a leading proponent of this change, highlighting the state's legal obligation to enhance revenue from petroleum development for the benefit of public institutions, including schools and hospitals. Last year, Garcia Richard placed a hold on lease sales to advocate for this critical rate change. Supporters of the bill argue it is a necessary response to the competitive pressures facing the state in the oil market, particularly as Texas has historically maintained a higher royalty rate on its state trust land. They expect that raising the rate would not only generate increased revenue but also ensure that public institutions benefit directly from the lucrative oil and gas industry. However, opponents of the proposed increase express concerns that such changes could penalize petroleum producers and the beneficiaries reliant on the currently established rates, particularly amid fluctuating oil prices. The bill's passing marks a significant step in a years-long journey towards reforming the royalty structure in New Mexico, reflecting ongoing discussions about economic balance, public funding, and energy production. It also represents a broader debate on how to effectively manage state resources while catering to the needs of both the energy industry and public welfare. With the decision now in the hands of Governor Lujan Grisham, the outcome will have long-lasting implications for the state's oil production landscape, education funding, and public health services.