New Mexico’s kids are getting short changed when it comes to funding for education and other important services.

 

While the oil and gas industry has contributed significantly to public schools, New Mexicans are not getting a fair deal for the natural resources that belong to all of us. This is mostly due to old, outdated royalty rates for oil and gas development on federal lands. 

First, some historical context. 

In 1920:
Prohibition was just going into effect.

People were enjoying the latest in entertainment technology – silent movies.

And the Bureau of Land Management (BLM) was setting the royalty rate on crude oil for a young industry.

Some things have changed.

Prohibition was repealed in 1933.

And technology has revolutionized our entertainment industry.

But some things haven’t changed.

Despite making enormous profits, oil and gas producers are still paying the same royalty rate they paid to the federal government back in 1920: 12.5%.

These royalties – which are based on how much the oil and gas are worth when they are sold – are paid to us because Americans are entitled to “fair market value for the use of the public lands and their resources…” under federal law. 

Because the federal royalty rates – and other policies, like rental rates and minimum leasing bids – haven’t been updated in decades, our state has lost out on billions of dollars that could have been used for teacher raises and supporting our students in the classroom. 

Many western states have strengthened their own fiscal policies to give a fair deal to their people, and all have a higher state royalty rate than BLM’s onshore royalty rate. In New Mexico, for example, the royalty rate for production on state lands is as high as 20%. 

Our country has changed a lot since 1920, and our policies for oil and gas leasing should change with the times, too. As oil and gas companies become more and more profitable (making on average, nearly $900 per second), it’s time to update our federal rates so New Mexico’s families are getting a fair return on the natural resources that belong to ALL of us. 

By updating royalty rates, states like New Mexico would benefit from millions of dollars in increased funding for our schools, hospitals, and other important services we rely on. It’s time to fix these outdated policies.

To learn more about this issue, and find out what you can do to help, check out our policy brief here.