ABQ Journal Editorial Board (March 19, 2024) – It’s one of the most petty acts we’ve seen from a statewide elected official.
Upset, again, that her personal crusade to stick it to the oil and gas industry was rebuffed by state lawmakers, New Mexico Land Commissioner Stephanie Garcia Richard has decided to take her ball and go home, even it it punishes schools and hospitals.
The New Mexico State Land Office, which Garcia Richard oversees, has announced it will withhold the state’s five or six best tracts from the March bidding sale because Garcia Richard didn’t get her way with a royalty cap increase during the recent legislative session. Royalty rates determine the amount energy producers pay on the value of oil or gas harvested.
“At this time, we’ve determined that the market rate is 25%,” she said. “We’re not getting that market rate, and so we’re not going to lease them.”
Garcia Richard has for years yearned to hike New Mexico’s oil and gas royalty rate cap from 20% to 25%. Royalty rates on state trust lands, which range from 12.5% to 20% in New Mexico, are established by the Legislature, not by the land commissioner.
Only Texas has higher royalty caps than New Mexico. North Dakota, the third-largest oil producer behind Texas and New Mexico, sets royalty rates between 12.5% and 18.75%.
Since being elected land commissioner in 2018, Garcia Richard has pressured lawmakers to hike royalty caps on new wells, suggesting the state is not fully milking the oil and gas industry.
This year’s incarnation, House Bill 48, was passed by the New Mexico House of Representatives on a largely party-line 39-28 vote, but died in the Senate Finance Committee.
According to a fiscal impact report of the bill, increasing the rate cap to 25% would result in an additional $50 million to $75 million of revenue for the land grant permanent fund, the depository for royalties paid on mineral production on state trust land. That’s assuming there’s no market reaction to a cap hike. Currently, oil and natural gas make up more than 80% of all State Land Office revenue, primarily because of robust oil production in the Permian Basin in southeast New Mexico.
HB 48 rightfully died because Democrats and Republicans recognize oil and gas is the main driver of the state’s economy, and what makes all the social spending in Santa Fe possible. Raising royalties would be akin to shooting oneself in the foot for the sake of virtue signaling.
Lawmakers know the state’s O&G industry generated a record $13.9 billion in revenue for New Mexico in fiscal year 2023, an increase of $3.36 billion – or 32% – compared with the same period in 2022. They know total general fund revenue from oil and gas production reached $7.5 billion in 2023, or about 50% of all state general fund revenue. They know 92,000 New Mexicans are employed as energy workers. And they know about $6.4 billion from oil and gas production went to non-general funds.
Garcia Richard argues royalty rates should be increased to the 25% cap in Texas. But that flawed reasoning doesn’t take into account that much of Texas’ oil production occurs on private lands, especially in West Texas, lands that people have paid for, not trust lands inherited at no cost upon statehood, as is the case with New Mexico.
Garcia Richard speciously contends New Mexico is losing money, and therefore she’s withholding the six or so best tracts until they reach the royalty rate she feels is appropriate.
“I feel comfortable making this decision,” she said. “I feel comfortable not asking the beneficiaries any longer to subsidize a multibillion-dollar industry.”
Such a statement is utterly ridiculous. New Mexico is not subsidizing the oil and gas industry, as it actually is subsidizing the electric vehicle industry and renewable energy sector. The state reaps revenues when oil and gas production occurs on state trust lands.
Garcia Richard’s defective and short-sighted outlook is like renting your yard to parking, and then complaining you’re getting ripped off because your neighbor is charging slightly more.
In withholding the six best tracts from the March sale, Garcia Richard is shirking her fiduciary responsibility to the 21 beneficiaries of the 12.7 million subsurface acres and 9 million surface acres administered by the Land Office, including hospitals, public schools and higher education institutions. Her unilateral decision, derided by some House Republicans as “a dereliction” of her fiduciary responsibilities, could cost the state $10 million by fiscal year 2026, and more than $30 million by fiscal year 2028.
That’s a lot of lost revenues for the sake of virtue signaling.
Unfortunately, we’ve seen Garcia Richard play politics before.
In June 2020, as the presidential race was heating up, Garcia Richard refused to renew an agreement that required U.S. Customs and Border Protection to coordinate with tribes, state agencies, other federal agencies and nongovernmental groups in the project development process. It was a common-sense agreement left over from the Obama administration that required CBP to consider alternative methods, routes and locations offered by stakeholders here and in Arizona, California and Texas to avoid/minimize impact on historic properties.
Garcia Richard said then she was siding with those who urged her not to work with CBP because of perceived discrimination along the border. She stomped her foot then and walked away from the table, giving CBP carte blanche on our state lands.
On June 1, 2023, Garcia Richard played politics again, issuing an executive order banning new oil and gas leases on state trust land within a mile of schools, with no input from local residents. There was no explanation for the arbitrary 1-mile buffer, because there was no scientific basis for it.
The Land Office said there were up to 119 N.M. schools within a mile of oil and gas activity, but those figures included federal, tribal and private land leases, over which the Land Office has absolutely no authority. The Land Office itself didn’t know how many schools would be impacted by the politically motivated executive order.
If Garcia Richard wants to legislate, she should return to the Legislature, in which she served as a state representative from northern New Mexico from 2013 to 2018. That’s where laws are supposed to be made, in the Roundhouse, not in a back room of the Land Office.
If Garcia Richard can’t perform the duties of her office under the current royalty rates, she should resign in protest and let someone else represent the Land Office’s beneficiaries.
The good news is that Garcia Richard will be term-limited out of office at the end of 2026.
The Journal endorsed Garcia Richard in 2022, and we now acknowledge that mistake. Thankfully, voters can right the ship in 2026 by electing a new land commissioner more dedicated to the people than playing party politics.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.
