For the first time, New Mexico State Land Office auctioned oil and gas leases at the new 25 percent royalty rate. The new state law, which took effect June 20, allowed the State Land Office to offer its prime parcels in core of Delaware Basin at market rates. That resulted in a record-breaking auction that closed July 15 and generated more than $56 million for public schools.
The State Land Office conducts monthly public auctions for oil and gas development rights with leases awarded to the highest bidder. Once production begins, developers pay a royalty, which is a payment to benefit New Mexico residents for the use of a public resource. Hart Energy said Coterra, Civitas and a resurgent Avant Natural Resources were among the winning bidders.
In the auction this week for premium, undrilled inventory, 14 leases located in Eddy and Lea counties were offered with nine incorporating the new 25 percent royalty rate. All leases received bids, collectively totaling more than $56 million in payments. This significantly surpassed the previous sale record of more than $43 million set in 2018 when 35 parcels were offered. The sale also established a new record for the highest bid per acre, reaching more than $80,000 per acre.
“Critics of raising the rate said oil companies would run to Texas, but instead they ran for their checkbooks,” commissioner Stephanie Garcia Richard told New Mexico Political Report. “The $56 million we brought in for our schools confirms that oil companies will go where the resource is and are willing to pay top dollar for some of the best tracts of oil and gas land in the world.”
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