SFC/SB 23
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AN ACT
RELATING TO PUBLIC LANDS; SETTING THE ROYALTY RATE ON FUTURE
OIL AND GAS DEVELOPMENT LEASES ON CERTAIN STATE TRUST LANDS
TO ENHANCE REVENUE FOR BENEFICIARIES; REQUIRING THE MANNER OF
POSTING OF CERTAIN INFORMATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 19-10-4.3 NMSA 1978 (being Laws
1985, Chapter 195, Section 5) is amended to read:
"19-10-4.3. DEVELOPMENT FORM OF LEASE--PREMIUM
RESTRICTED LAND.--
A. The commissioner shall not cancel leases except
upon failure or default of the lessee to comply with any of
the provisions or covenants within the lease described in
Subsection B of this section.
B. The following form is designed as the
"Development Form". It may be used by the commissioner for
oil and gas leases on lands classified as restricted lands
and categorized as Premium and issued on or after July 1,
2025:
"LEASE NO. ___________________ APPLICATION NO. ______________
OIL AND GAS LEASE
(Development Form)
This agreement, dated ____________________, 20___,
between the state of New Mexico, acting by and through its SFC/SB 23
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commissioner of public lands, hereinafter called the
"lessor", and_______________________________________________,
whose address is ___________________________________________
____________________________________________________________,
hereinafter called the "lessee",
WITNESSETH:
WHEREAS, the lessee has filed in the office of the
commissioner of public lands an application for an oil and
gas lease covering the lands hereinafter described and has
tendered therewith the required first payment; and
WHEREAS, all of the requirements of law relative to the
application and tender have been duly complied with;
THEREFORE, in consideration of the premises as well as
the sum of___________________________________________________
dollars ($________________), the same being the amount of the
tender above mentioned, and the further sum of $___________
filing fee, and of the covenants and agreements hereinafter
contained, the lessor does hereby grant, demise, lease and
let unto the lessee, exclusively, for the sole and only
purpose of exploration, development and production of oil or
gas (including carbon dioxide and helium), or both thereon
and therefrom with the right to own all oil and gas so
produced and saved therefrom and not reserved as royalty by
the lessor under the terms of this lease, together with
rights of way, easements and servitudes for pipelines, SFC/SB 23
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telephone lines, tanks, power houses, stations, gasoline
plants and fixtures for producing, treating and caring for
such products and housing and boarding employees and any and
all rights and privileges necessary, incident to or
convenient for the economical operation of the land, for oil
and gas, with right for such purposes to the free use of oil,
gas, casing-head gas or water from the lands, but not from
the lessor's water wells, and with the rights of removing
either during or after the term hereof, all and any
improvements placed or erected on the premises by the lessee,
including the right to pull all casing, subject, however, to
the covenants and conditions hereinafter set out, the
following described land situated in the county of _________,
state of New Mexico, and more particularly described as
follows:
Line SUBDIVISION Sec. Twp. Rge. Acres Institution
1 ___________________________________________________________
2 ___________________________________________________________
3 ___________________________________________________________
4 ___________________________________________________________
5 ___________________________________________________________
6 ___________________________________________________________
7 ___________________________________________________________
The lands having been awarded to the lessee and
designated as Tract No. ____________ at a public sale held by SFC/SB 23
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the commissioner of public lands on ____________________,
20___.
To have and to hold the land, and all the rights and
privileges granted hereunder, to and unto the lessee for a
primary term of five years from the date hereof, and as long
thereafter as oil and gas, or either of them, is produced in
paying quantities from the land by the lessee, subject to all
of the terms and conditions as hereinafter set forth.
In consideration of the premises, the parties covenant
and agree as follows:
1. Subject to the free use without royalty, as
hereinbefore provided, the lessee shall pay the lessor as
royalty ________ (not less than three-sixteenths nor more
than one-fifth, or alternatively, not less than one-fifth nor
more than one-fourth if the leased premises is located in
whole or in part within the following portions of the
restricted districts established pursuant to Section 19-10-16
NMSA 1978: townships 8 to 10 south inclusive, ranges 31 to 38
east inclusive; townships 11 to 15 south inclusive, ranges
31 to 38 east inclusive; townships 16 to 20 south inclusive,
ranges 21 to 39 east inclusive; township 20.5 south, ranges
21 to 23 east inclusive; or townships 21 to 26 south
inclusive, ranges 21 to 38 east inclusive, N.M.P.M.) part of
the oil produced and saved from the leased premises or the
cash value thereof, at the option of the lessor, such value SFC/SB 23
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to be the price prevailing the day oil is run into a
pipeline, if the oil be run into a pipeline, or into storage
tanks, if the oil is stored.
2. Subject to the free use without royalty, as
hereinbefore provided, at the option of the lessor at any
time and from time to time, the lessee shall pay the lessor
as royalty ________ (not less than three-sixteenths nor more
than one-fifth, or alternatively, not less than one-fifth nor
more than one-fourth if the leased premises is located in
whole or in part within the following portions of the
restricted districts established pursuant to Section 19-10-16
NMSA 1978: townships 8 to 10 south inclusive, ranges 31 to 38
east inclusive; townships 11 to 15 south inclusive, ranges
31 to 38 east inclusive; townships 16 to 20 south inclusive,
ranges 21 to 39 east inclusive; township 20.5 south, ranges
21 to 23 east inclusive; or townships 21 to 26 south
inclusive, ranges 21 to 38 east inclusive, N.M.P.M.) part of
the gas produced and saved from the leased premises,
including casing-head gas. Unless the option is exercised by
the lessor, the lessee shall pay the lessor as royalty
________ (not less than three-sixteenths nor more than
one-fifth, or alternatively, not less than one-fifth nor more
than one-fourth if the leased premises is located in whole or
in part within the following portions of the restricted
districts established pursuant to Section 19-10-16 NMSA 1978: SFC/SB 23
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townships 8 to 10 south inclusive, ranges 31 to 38 east
inclusive; townships 11 to 15 south inclusive, ranges
31 to 38 east inclusive; townships 16 to 20 south inclusive,
ranges 21 to 39 east inclusive; township 20.5 south, ranges
21 to 23 east inclusive; or townships 21 to 26 south
inclusive, ranges 21 to 38 east inclusive, N.M.P.M.) of the
cash value of the gas, including casing-head gas, produced
and saved from the leased premises and marketed or utilized,
such value to be equal to the net proceeds derived from the
sale of such gas in the field; provided, however, the cash
value for royalty purposes of carbon dioxide gas and of
hydrocarbon gas delivered to a gasoline plant for extraction
of liquid hydrocarbons shall be equal to the net proceeds
derived from the sale of such gas, including any liquid
hydrocarbons recovered therefrom.
Notwithstanding the foregoing provisions, the lessor may
require the payment of royalty for all or any part of the gas
produced and saved under this lease and marketed or used at a
price per m.c.f. equal to the maximum price being paid for
gas of like kind and quality and under like conditions in the
same field or area or may reduce the royalty value of any
such gas (to any amount not less than the net proceeds of
sale thereof, in the field) if the commissioner of public
lands shall determine such action to be necessary to the
successful operation of the lands for oil or gas purposes or SFC/SB 23
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to encouragement of the greatest ultimate recovery of oil or
gas or to the promotion or conservation of oil or gas or in
the public interest.
3. This lease shall not expire at the end of the
primary term hereof if there is a well capable of producing
gas in paying quantities located upon some part of the lands
embraced herein, or upon lands pooled or communitized
herewith, where such well is shut-in due to the inability of
the lessee to obtain a pipeline connection or to market the
gas therefrom, and if the lessee timely pays an annual
royalty on or before the annual rental paying date next
ensuing after the expiration of ninety days from the date the
well was shut-in and on or before the rental date thereafter.
The payment of the annual royalty shall be considered for all
purposes the same as if gas were being produced in paying
quantities and upon the commencement of marketing of gas from
the well or wells the royalty paid for the lease year in
which the gas is first marketed shall be credited upon the
royalty payable hereunder to the lessor for such year. The
provisions of this section shall also apply where gas is
being marketed from the leasehold premises and through no
fault of the lessee, the pipeline connection or market is
lost or ceases, in which case this lease shall not expire so
long as the annual royalty is paid as herein provided. The
amount of any annual royalty payable under this section shall SFC/SB 23
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equal twice the annual rental due by the lessee under the
terms of this lease but not less than three hundred twenty
dollars ($320) per well per year; provided, however, that any
such annual royalty for any month beginning on or after ten
years from the date hereof shall equal four times the annual
rental due by the lessee under the terms of this lease but
not less than two thousand dollars ($2,000) per well per
year; provided further, that no annual royalty shall be
payable under this section if equivalent amounts are timely
paid pursuant to another lease issued by the lessor and if
such other lease includes lands communitized with lands
granted hereunder for the purpose of prorationally sharing in
the shut-in well. Notwithstanding the provisions of this
section to the contrary, this lease shall not be continued
after five years from the date hereof for any period of more
than ten years by the payment of the annual royalty unless,
for good cause shown, the commissioner of public lands, in
the commissioner's discretion, grants such a continuance.
4. The lessee agrees to make full settlement on the
twentieth day of each month for all royalties due the lessor
for the preceding month, under this lease, and to permit the
lessor or its agents, at all reasonable hours, to examine the
lessee's books relating to the production and disposition of
oil and gas produced. The lessee further agrees to submit to
the lessor annually upon forms furnished by the lessor, SFC/SB 23
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verified reports showing the lessee's operations for the
preceding year.
5. An annual rental at the rate of $_____________ per
acre shall become due and payable to the lessor by the
lessee, upon each acre of the land above described and then
claimed by such lessee and the same shall be due and payable
in advance to the lessor on the successive anniversary dates
of this lease, but the annual rental on any assignment shall
in no event be less than forty dollars ($40.00).
In the event the lessee shall elect to surrender any or
all of the acreage, the lessee shall deliver to the lessor a
duly executed release thereof and in event the lease has been
recorded then the lessee shall upon request furnish and
deliver to the lessor a certified copy of a duly recorded
release.
6. The lessee may at any time by paying to the lessor
all amounts then due as provided herein and the further sum
of forty dollars ($40.00), surrender and cancel this lease
insofar as the same covers all or any portion of the lands
herein leased and be relieved from further obligations or
liability hereunder, in the manner as hereinbefore provided.
Provided, this surrender clause and the option herein
reserved to the lessee shall cease and become absolutely
inoperative immediately and concurrently with the institution
of any suit in any court of law or equity by the lessee, SFC/SB 23
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lessor or any assignee, to enforce this lease, or any of its
terms expressed or implied.
7. All payments due hereunder shall be made on or
before the day such payment is due, at the office of the
commissioner of public lands in Santa Fe, New Mexico.
8. The lessee with the consent of the lessor shall have
the rights to assign this lease in whole or in part.
Provided, however, that no assignment of an undivided
interest in the lease or in any part thereof nor any
assignment of less than a legal subdivision shall be
recognized or approved by the lessor. Upon approval in
writing by the lessor of an assignment, the assignor shall
stand relieved from all obligations to the lessor with
respect to the lands embraced in the assignment and the
lessor shall likewise be relieved from all obligations to the
assignor as to such tracts, and the assignee shall succeed to
all of the rights and privileges of the assignor with respect
to such tracts and shall be held to have assumed all of the
duties and obligations of the assignor to the lessor as to
such tracts.
9. In the event a well or wells producing oil or gas in
paying quantities should be brought in on adjacent land that
is draining the leased premises, the lessee shall drill such
offset well or wells as a reasonably prudent operator would
drill under the same or similar circumstances, provided that SFC/SB 23
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no such offset well shall be required if compensatory
royalties are paid pursuant to an agreement between the
lessor and the lessee.
10. The lessee agrees to notify the lessor of the
location of each well before commencing drilling thereon, to
keep a complete and accurate log of each well drilled and to
furnish a copy thereof, verified by some person having actual
knowledge of the facts, to the lessor upon the completion of
any well, and to furnish the log of any unfinished well at
any time when requested to do so by the lessor.
If any lands embraced in this lease shall be included in
any deed or contract of purchase outstanding and subsisting
issued pursuant to any sale made of the surface of such lands
prior to the date of this lease, it is agreed and understood
that no drilling operation shall be commenced on any such
lands so sold unless and until the lessee shall have filed a
good and sufficient bond with the lessor as required by law,
to secure the payment for such damage to the livestock,
range, water, crops or tangible improvements on such lands as
may be suffered by the purchaser holding such deed or
contract of purchase, or the purchaser's successors, by
reason of the developments, use and occupation of such lands
by such lessee. Provided, however, that no such bond shall
be required if such purchaser shall waive the right to
require such bond to be given in the manner provided by law. SFC/SB 23
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11. In drilling wells, all water-bearing strata shall
be noted in the log, and the lessor reserves the right to
require that all or any part of the casing shall be left in
any nonproductive well when the lessor deems it to the
interest of the beneficiaries of the lands granted hereunder
to maintain the well or wells for water. For such casing so
left in wells the lessor shall pay to the lessee the
reasonable value thereof.
12. The lessee shall be liable and agree to pay for all
damages to the range, livestock, growing crops or
improvements caused by the lessee's operations on the lands.
When requested by the lessor, the lessee shall bury pipelines
below plow depth.
13. The lessee shall not remove any machinery or
fixtures placed on the premises, nor draw the casing from any
well unless and until all payments and obligations due the
lessor under the terms of this agreement shall have been paid
or satisfied. The lessee's right to remove the casing is
subject to the provision of Paragraph 11 above.
14. Upon failure or default of the lessee to comply
with any of the provisions or covenants hereof, the lessor is
hereby authorized to cancel this lease and such cancellation
shall extend to and include all rights hereunder as to the
whole of the tract so claimed, or possessed by the lessee,
but shall not extend to, nor affect the rights of any other SFC/SB 23
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lessee or assignee claiming any portion of the lands upon
which no default has been made; provided, however, that
before any such cancellation shall be made, the lessor shall
mail to the lessee so defaulting, by registered or certified
mail, addressed to the post office address of such lessee as
shown by the records of the state land office, a notice of
intention of cancellation specifying the default for which
cancellation is to be made, and if within thirty days from
the date of mailing the notice the lessee shall remedy the
default specified in the notice, cancellation shall not be
made.
15. If this lease shall have been maintained in
accordance with the provisions hereof and if at the
expiration of the primary term provided for herein oil or gas
is not being produced on the land but the lessee is then
engaged in bona fide drilling or reworking operations
thereon, this lease shall remain in full force and effect so
long as such operations are diligently prosecuted and, if
they result in the production of oil or gas, so long
thereafter as oil and gas in paying quantities, or either of
them, is produced from the land; provided, however, such
operations extending beyond the primary term shall be
approved by the lessor upon written application filed with
the lessor on or before the expiration of the term, and a
report of the status of all of such operations shall be made SFC/SB 23
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by the lessee to the lessor every thirty days and a cessation
of such operations for more than twenty consecutive days
shall be considered as an abandonment of such operations and
this lease shall thereupon terminate.
If during the drilling or reworking of any well under
this section, the lessee loses or junks the hole or well and
after diligent efforts in good faith is unable to complete
the operations, then within twenty days after the abandonment
of the operations, the lessee may commence another well
within three hundred thirty feet of the lost or junked hole
or well and drill the same with due diligence.
Operations commenced and continued as herein provided
shall extend this lease as to all lands as to which the same
is in full force and effect as of the time the drilling
operations are commenced; provided, however, this lease shall
be subject to cancellation in accordance with Paragraph 14
hereof for failure to pay rentals or file reports that may
become due while operations are being conducted hereunder.
16. Should production of oil and gas or either of them
in paying quantities be obtained while this lease is in force
and effect and should thereafter cease from any cause after
the expiration of five years from the date hereof, this lease
shall not terminate if the lessee commences additional
drilling or reworking operations within sixty days after the
cessation of such production and shall remain in full force SFC/SB 23
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and effect so long as such operations are prosecuted in good
faith with no cessation of more than twenty consecutive days,
and if such operations result in the production of oil or gas
in paying quantities, so long thereafter as oil or gas in
paying quantities is produced from the land; provided,
however, written notice of intention to commence such
operations shall be filed with the lessor within thirty days
after the cessation of such production, and a report of the
status of such operations shall be made by the lessee to the
lessor every thirty days, and the cessation of such
operations for more than twenty consecutive days shall be
considered as an abandonment of such operations and this
lease shall thereupon terminate.
17. Lessees, including their heirs, assigns, agents and
contractors, shall at their own expense fully comply with all
laws, regulations, rules, ordinances and requirements of the
city, county, state and federal authorities and agencies, in
all matters and things affecting the premises and operations
thereon that may be enacted or promulgated under the
governmental police powers pertaining to public health and
welfare, including but not limited to conservation,
sanitation, aesthetics, pollution, cultural properties, fire
and ecology. Such agencies are not to be deemed third party
beneficiaries hereunder, however this clause is enforceable
by the lessor in any manner provided in this lease or by law. SFC/SB 23
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18. Should the lessor desire to exercise its rights to
take in-kind its royalty share of oil, gas or associated
substances or purchase all or any part of the oil, gas or
associated substances produced from the lands covered by this
lease, the lessee hereby irrevocably consents to the lessor
exercising its right. Such consent is a consent to the
termination of any supplier/purchaser relationship between
the lessor and the lessee deemed to exist under federal
regulations. The lessee further agrees that it will require
any purchaser of oil, gas or associated substances to
likewise waive any such rights.
19. The lessor reserves a continuing option to purchase
at any time and from time to time, at the market price
prevailing in the area on the date of purchase, all or any
part of the minerals (oil and gas) that will be produced from
the lands covered by this lease.
20. The lessor reserves the right to execute leases for
geothermal resource development and operation thereon; the
right to sell or dispose of the geothermal resources of such
lands; and the right to grant rights of way and easements for
these purposes.
21. All terms of this agreement shall extend to and
bind the heirs, executors, administrators, successors and
assigns of the parties hereto.
In witness whereof, the party of the first part has SFC/SB 23
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signed and caused its name to be signed by its commissioner
of public lands duly authorized, with the seal of office
affixed, and the lessee has signed this agreement the day and
year first above written.
STATE OF NEW MEXICO
By__________________________________
Commissioner of Public Lands, Lessor
____________________________________
_____________________________(Seal)
Lessee"."
SECTION 2. Section 19-10-17 NMSA 1978 (being Laws 1929,
Chapter 125, Section 8, as amended) is amended to read:
"19-10-17. PUBLIC SALE OF RESTRICTED DISTRICT LEASES--
TIME--REGULATIONS--NOTICE--MINIMUM BONUS--SEALED BIDS OR
PUBLIC AUCTION AUTHORIZED--SITE OF SALE--PUBLICATION OF
NOTICE--REJECTION OF BIDS--COMPLETION OF TRANSACTION.--
A. The commissioner shall hold a public sale of
oil and gas leases upon lands that may be open to lease and
embraced within the restricted district or districts created
and that may be created under Section 19-10-16 NMSA 1978 on
the third Tuesday of each month or on the next business day
following, where the third Tuesday falls on a legal holiday,
and shall offer for lease such lands in designated tracts to
the highest and best bidder. All sales of leases upon
competitive bidding or a public auction shall be governed by SFC/SB 23
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regulations issued by the commissioner not in conflict with
the provisions of Chapter 19, Article 10 NMSA 1978. Notice
of such sales shall be given by posting in a conspicuous
place in the state land office, not less than ten days before
the date of sale, a notice of the sale specifying the day and
hour when and the place where the sale will be held and
specifying the following for each tract to be offered for
lease:
(1) a description of the lands;
(2) the form of lease to be used;
(3) the royalty rate; and
(4) the annual rental per acre to be paid.
B. The commissioner may, when it is deemed to be
for the best interests of the beneficiaries of such lands,
also specify a minimum bonus to be paid for the leases upon
the respective tracts, and, when so specified, the bonus
shall be paid in addition to the first year's rental. The
notice shall also contain such other information as the
commissioner may deem advisable or necessary. Sales may be
conducted through sealed bids or at public auction or by both
methods combined, but the method of conducting each sale
shall be stated in the notice of sale required pursuant to
this section. Sales may be held at the option of the
commissioner either in the office of the commissioner or at
the county seat of the county in which the lands, or the SFC/SB 23
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greater part thereof, are situated or such other place within
the state as the commissioner may designate in the notice of
public auction provided for in this section. The
commissioner is authorized to give such additional notice of
the sales, either by publication in newspapers or by mailing
copies of the notice of sale to interested persons, firms or
corporations, as the commissioner may deem necessary to give
proper publicity thereto. The commissioner shall have the
right to reject all bids received at any sale for the lease
upon any tract but shall not reject any bids made in
conformity with the regulations and provisions of Chapter 19,
Article 10 NMSA 1978 without rejecting all bids applicable to
the same tract of land. Leases sold at sales as provided in
this section shall be awarded to the respective bidders
offering the largest bonus, which shall be paid in addition
to the first year's rental, or, where a minimum bonus is not
specified and no offer of a bonus is received, to the bidder
offering the rental specified in the notice of sale that, for
the first year, shall not be less than one hundred dollars
($100) for each lease as provided in Section 19-10-15 NMSA
1978. Where two or more sealed bids making the same offer
for the same tract are received, the commissioner shall award
the lease in accordance with such regulations as the
commissioner may prescribe. The successful bidders shall
file proper applications for the leases purchased and shall SFC/SB 23
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complete the payment of any balance due on their bids before
the closing of the office of the commissioner on the day of
the sale.
C. The individual percentages and total percentage
for each factor, pursuant to Section 19-10-3 NMSA 1978, shall
be posted in conjunction with the lease notice for each
individual tract nomination in a manner that keeps
confidential the identity of the nominating company."
SECTION 3. EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2025.