Committee temporarily tables bill to equalize oil and gas severance tax after lengthy debate

SANTA FE — The House Taxation & Revenue Committee on Tuesday temporarily tabled House Bill 548, a measure that would raise the effective severance tax on oil to 4% — equalizing it with the current natural gas emergency school tax rate — after more than two hours of testimony and member debate.

The bill’s sponsor, Representative Small, presented the measure with technical input from Mark Chaikin of the Taxation & Revenue Department and Jennifer Fabian, deputy chief economist at the Legislative Finance Committee (LFC). Small said the measure seeks “horizontal equity” in how hydrocarbons are taxed and argued that, with record production and rising prices, the state should capture additional revenue. “This bill and its horizontal equity yields the best benefits for the state of New Mexico, while at the same time continuing to keep us as a very strong partner for production,” Small said.

Supporters and opponents framed the bill as a trade-off between state revenue and local economic risk. Carla Sonntag, president and CEO of the New Mexico Business Coalition, testified in opposition: “We strongly oppose House Bill 5 48. We think it poses a significant issue for New Mexico businesses, consumers, and our overall economic health.” Jim Winchester, executive director of the Independent Petroleum Association of New Mexico, warned the increase would hit small independent operators hardest: “This is a major tax increase of 25% on oil production in New Mexico… the independents, the smaller companies that I represent, calculate that this will have a direct revenue loss overnight of 40%.”

Lawmakers debated the numbers and the policy rationale. Representative Martinez said she supported the bill and the principle of equalization, noting the actual percent change is small on some measures: “You’re looking at an increase of less than 1%. Less than 1%.” Representative Henry and others pressed for more stakeholder consultation and interim study, arguing the change could raise producers’ breakeven costs and harm local economies that rely on oil- and gas-related jobs and taxes. Representative Montoya and Representative Duncan described the possible downstream effects on small communities and service businesses if smaller producers reduce activity.

Fiscal and production context were cited repeatedly. Witnesses and staff referenced a December Energy Information Administration monthly figure of roughly 65.5 million barrels produced in December; a rig count in the low hundreds (about 105); and LFC and department estimates that full equalization could generate several hundred million dollars in additional revenue annually (witnesses and staff cited figures in the roughly $400 million range). Committee discussion noted that some of any new recurring oil-and-gas revenue is directed to the Severance Tax Permanent Fund under recent statute (Senate Bill 26) and that some federal receipts — described in committee as roughly $2.847 billion in FY24 from federal mineral leasing payments — also flow into state coffers.

Proponents argued the state’s share of the value from extraction is appropriate given that most of the production is exported to out‑of‑state companies and that the state’s current tax treatment dates back to a state policy response in the 1990s tied to a long-expired federal tax credit for natural gas. Opponents and industry groups said the change is effectively a targeted tax increase on a single sector, could drive small operators to sell or leave, and would raise compliance costs where the bill also proposes reporting changes.

After public comment and member discussion, Madam Vice Chair Cadena moved to temporarily table HB 548 and a second was recorded. The motion carried with no recorded opposition and the bill was temporarily tabled.

Votes at a glance

- Motion to temporarily table House Bill 548 — mover: Madam Vice Chair Cadena; second: not specified in the record; outcome: temporarily tabled (no recorded opposition).