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New Mexico marks record for monthly oil and gas lease sale

November 23, 2018

SANTA FE, N.M. (AP) — The State Land Office has set a record for its monthly oil and gas lease sale, generating more than $43 million for public schools and other trust land beneficiaries as the oil boom continues in New Mexico.

The November sale represents the highest single-month yield in the agency’s history. The previous record of just over $30 million was set in July 2017.

Land Commissioner Aubrey Dunn said in a statement issued Tuesday that he was expecting a good month but was surprised by the outcome. He said it will help with the goal of generating $1 billion in revenues for the current fiscal year.

The State Land Office, one of the most powerful agencies in New Mexico, oversees oil and gas drilling, renewable energy projects and other development on millions of acres of state trust land. Revenues from the monthly oil and gas lease sales and other activities help to fund public schools, higher education, hospitals, the state penitentiary and infrastructure projects.

In all, 35 tracts covering more than 12 square miles (32 square kilometers) were up for bid this month in Lea, Chaves and McKinley counties. All but one tract was leased and another ended up being withdrawn.

The oil and gas sector is mostly behind a significant budget surplus that New Mexico Gov.-elect Michelle Lujan Grisham and the state Legislature will be able to tap as they set spending priorities for the next fiscal year.

Dunn, who will be wrapping up his term at the end of the year, said productivity in the Permian Basin — which straddles parts of southeastern New Mexico and West Texas — has been a mixed blessing.

“On one hand, money is being generated at an unprecedented rate but the flipside is that with the increased productivity comes problems,” he said, alleging unscrupulous business practices by some and the lack of regulatory enforcement.

Dunn’s office recently sent a letter to state Energy, Minerals and Natural Resources Secretary Ken McQueen alleging violations by oil and gas operators on state lands.

Among the concerns were hundreds of non-operating wells that companies have plugged without cleaning the surrounding areas. Dunn has said those sites are littered with tank batteries and other equipment that pose a risk.

The state energy department and industry representatives have disputed the claims.

Dunn has said underfunding for his office and the state Oil Conservation Division is a problem, as neither agency has enough personnel to oversee all the activity in southeast New Mexico.

The division’s personnel budget dropped by 10 percent since fiscal year 2015 to help balance government finances after oil prices crashed in 2014, the Albuquerque Journal reported .

The division is requesting a budget increase to $5.4 million for personnel for the next fiscal year. The State Land Office is requesting $200,000 more to hire three more people.

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