Increasing rates for the best tracts is anticipated to increase state revenues by a billion dollars in a 25-year period, including providing additional millions for the State Land Office and the Legislative Finance Committee and adding between $1.5 billion and $2 billion to the Land Grant Permanent Fund — which helps fund education needs — by 2050. The office is proposing increasing the maximum rates from 20% to 25%, with the higher rates only applicable to new leases (Editor’s Note: Higher Royalty Rates would also apply to leases that SLO cancels and then relists for bid, which is a tactic the SLO is aggressively using.)

Currently, about 99% of the land likely to include high-value tracts has already been leased. “It’s difficult to put an exact number on the amount of land we are talking about, as new parcels become available as leases expire and other leases go into effect,” State Land Office spokesperson Joey Keefe wrote in an email to The New Mexican. “However … there are not many premium lands to be had.”The majority of state land lessees are out-of-state companies. Just 1% of the leaseholders are based in New Mexico, with Colorado, Texas and Oklahoma companies making up the rest.

The office could be missing out on one-time bonus payments as a result of the delay in leasing the best tracts, Keefe wrote. Tracts are “nominated” for oil and gas leasing by private companies. If the office decides those tracts are viable, they go out to bid.

The winning bidder pays a bonus payment that “typically can range from tens of thousands of dollars up to a few million dollars.” “Currently, we are withholding the tracts that are nominated by industry that we determine would attract a 25% royalty rate on the open market,” Keefe wrote.

He added, “By withholding premium tracts temporarily, we are missing out on some of those initial payments. But the Commissioner is willing to forgo a few million dollars now if it potentially means billions more for school kids in the long run.”

Sen. Joe Cervantes, D-Las Cruces, said more analysis is needed to determine whether that strategy will pay off.

“Holding back on these leases, waiting for the Legislature, increasing royalty rates … that makes some sense,” Cervantes said. He added, “On the other hand, while you’re setting those leases, you’re depriving yourself of revenue and business in, perhaps, a market condition that exists today. It may not exist next year … as prices fall.”