New Mexico could make billions more from oil and gas with higher royalty rate, study says
About $6.1 billion in revenue from oil and gas operations on federal land was lost by New Mexico in the last decade under a royalty rate unchanged since 1920, per a recent study.
Taxpayers for Common Sense found through its research that if the 12.5 percent rate fossil fuel companies paid to operate on federal public land between 2012 and 2021 was raised to the 18.75 percent recently enacted by the administration of President Joe Biden about $3 billion of the added revenue would go “directly” back to New Mexican taxpayers.
Nationwide, the report estimated $13.1 billion was lost under the lower rate which was amended in an April announcement by the U.S. Department of Interior.
The DOI’s move came after the agency blocked new federal oil and gas leases as Biden took office in January 2021 and began a review of its fossil fuel programs.
That was maligned by oil and gas industry groups and oil-producing states as an action that could cause economic harm and increase U.S. reliance on foreign energy sources.
An injunction was subsequently filed in federal court from the Western District of Louisiana, compelling the federal government to resume the sale of leases to oil and gas companies for development.
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That came after a November 2021 report was released by the DOI calling for the higher royalty rate and in-depth review of oil and gas’ implications for pollution and human-caused climate change.
The most active oilfield in the U.S., the Permian Basin of southeast New Mexico, was to see its first federal lease sale to the industry of the Biden administration scheduled for June 16.
Those leases were to be sold under the higher royalty rate, and Taxpayers for Commons Sense Vice President Autumn Hanna said Congress and the Executive Branch should take action to ensure it became permanent.
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Offshore leases already incur the 18.75 percent royalty rate, records show, and Hanna said it was needed to ensure a fair return for New Mexico’s and the U.S.’ taxpayers.
“For 102 years, oil and gas companies have been able to ’buy low and sell high’ on leases to drill on America’s public lands,” she said. “These public lands, owned by all Americans and held in trust by the federal government, contain vast deposits of valuable oil and gas resources on millions of acres throughout the western United States.”
The report showed in 2021 alone, $2.1 billion in national revenue from oil and gas was lost under the low royalty rate in a year of record industry profits as oil prices rose amid the nation’s recovery from COVID-19.
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The top 20 oil companies in the U.S., per the report, reported $73.6 billion in profits last year.
“Reforming the federal oil and gas system will benefit all taxpayers, grow our economy, and help us move towards more balanced energy development on public lands that belong to every American,” Hannah said.
“In effect, taxpayers have been subsidizing oil and gas companies operating on America’s public lands and their profits that they funnel back into shareholder portfolios.”
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In its April 15 announcement the DOI said it completed reformed environmental assessments for New Mexico’s and other states’ lease sales, considering potential greenhouse gas emissions should the leased land be developed, along with expanded local and Indigenous input.
The reforms also led to an 80 percent reduction in the acreage offered in the sales, from 646 parcels on about 733,000 acres to 173 parcels on 144,000 acres.
Land offered in the New Mexico sale, five parcels on about 500 acres in Lea and Chaves counties, was unaltered by the decision, records show.
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In a statement, U.S. Interior Secretary Deb Haaland, herself a native New Mexican who previously served as the state’s U.S. representative for its Second Congressional District said the agency will put the needs of Americans ahead of industry profits in the future.
“For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries above local communities, the natural environment, the impact on our air and water, the needs of Tribal Nations, and, moreover, other uses of our shared public lands,” Haaland said.
“Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations.”
Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.
This article originally appeared on Carlsbad Current-Argus: New Mexico could make billions with higher oil and gas royalty rate
