SANTA FE — A bill to raise the top oil and gas royalty rate on New Mexico state lands has passed both chambers of the state Legislature and is now on its way to Governor Michelle Lujan Grisham’s desk for final approval.
Senate Bill 23, sponsored by Cibola Sen. George Muñoz (D–Gallup) and cosponsored by Speaker of the House Javier Martinez, Sen. Liz Stefanics, and Rep. Matthew McQueen, increases the top royalty rate from 20 percent to 25 percent for new leases on premium state trust lands. The bill passed the Senate by a vote of 21–15 on February 22 and passed the House on March 20 by a vote of 37–31.
All four of Cibola County’s legislators—Senators Muñoz and Angel Charley (D–To’hajiilee), and Representatives Martha Garcia (D–Pinehill) and Michelle P. Abeyta (D– Acoma)—voted in favor of the bill.
Projected Impact
The change would apply only to future oil and gas leases on the most productive parcels of state trust land. According to the Legislative Finance Committee (LFC), implementing a 25 percent royalty rate is expected to result in an additional $50 to $75 million per year being contributed to the Land Grant Permanent Fund (LGPF), which supports public schools, universities, and hospitals.
The State Investment Council (SIC) estimates the new revenue could grow the LGPF’s value by $1.5 to $2 billion by 2050, and result in $750 million to $1.3 billion more in cumulative distributions to beneficiaries by that time.
New Mexico last updated its top royalty rate on state lands in the 1970s. Supporters of SB 23 argue that the current rate is outdated and below what companies already pay on private lands in New Mexico and on state lands in Texas.
“This bill brings New Mexico’s royalty rates in line with the market,” said Commissioner of Public Lands Stephanie Garcia Richard, who advocated for the legislation. “It ensures fair value is received for the public resources managed by the State Land Office.”
Sen. Muñoz emphasized that the royalty revenues directly benefit the state’s public education and health systems. “This bill strengthens long-term funding for essential services without raising taxes,” he said.
Rep. McQueen added that the adjustment reflects market fairness. “We’re simply aligning with what private landowners and neighboring states charge.”
Legislative Process Senate Bill 23 advanced through several committees before clearing both chambers: • Referred to Senate Conservation and Senate Finance Committees
• Reported with recommendations on February 7 and February 19, respectively • Passed the Senate on February 22
• Referred to House Energy, Environment & Natural Resources and House Appropriations & Finance Committees
• Cleared both House committees by mid-March
• Passed the House floor on March 20 The legislation includes updates to the lease forms and royalty calculations for oil and gas development on restricted district lands and provides the State Land Office with clearer authority to enforce lease terms.
If signed by Governor Lujan Grisham, the new royalty rate and lease terms will take effect on July 1, 2025, and will only apply to new leases moving forward.
Oil and gas royalties are not taxes; they are payments made by companies for the right to extract publicly owned resources from state trust lands. The revenues are managed by the State Land Office and transferred to the State Investment Council for long-term investment.