The bill amends Section 19-10-4.3 of the New Mexico Statutes to establish a new royalty rate structure for future oil and gas development leases on certain state trust lands classified as restricted lands and categorized as Premium, effective for leases issued on or after July 1, 2025. It introduces a tiered royalty rate system with a minimum of three-sixteenths and a maximum of one-fifth, or alternatively, a minimum of one-fifth and a maximum of one-fourth for specific restricted districts. The bill also includes provisions for annual royalties, lease continuance under certain conditions, and the lessee's obligations regarding payments and reporting. Notably, it allows leases to remain active if a well capable of producing gas is shut-in due to market access issues, provided the lessee pays an annual royalty.

Additionally, the bill outlines amendments to existing lease agreements, including the authority for lessors to cancel leases for non-compliance, contingent upon a notice of default and a thirty-day remedy period. It stipulates that if oil or gas production ceases after five years, the lease will not terminate if the lessee initiates additional drilling or reworking operations within sixty days. Lessees are required to report the status of operations every thirty days, with any cessation of operations for more than twenty consecutive days considered abandonment. The bill also clarifies lessee responsibilities to comply with laws and regulations, grants lessors the right to take their royalty share in-kind, and reserves rights for geothermal resource development.

Statutes affected:
introduced version: 19-10-4.3