OIL & GAS CONSERVATION TAX ACT CHANGES, the official text

HOUSE BILL 80

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Mark B. Murphy and Debra M. Sariñana and Elaine Sena Cortez

and Meredith A. Dixon and Jonathan A. Henry

AN ACT

RELATING TO THE OIL AND GAS RECLAMATION FUND; INCREASING THE
AMOUNT OF THE TAX IMPOSED PURSUANT TO THE OIL AND GAS
CONSERVATION TAX ACT DISTRIBUTED TO THE FUND; AMENDING HOW
MONEY IN THE FUND CAN BE USED; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 7-1-6.21 NMSA 1978 (being Laws 1985,
Chapter 65, Section 7, as amended) is amended to read:

"7-1-6.21. DISTRIBUTION TO OIL AND GAS RECLAMATION
FUND.--[A. With respect to any period for which the rate of
the tax imposed by Section 7-30-4 NMSA 1978 is nineteen-hundredths percent, a distribution pursuant to Section 7-1-6.20
NMSA 1978 shall be made to the oil and gas reclamation fund in
an amount equal to two-nineteenths of the net receipts
attributable to the tax imposed under the Oil and Gas
Conservation Tax Act.

B. With respect to any period for which the total
rate of the tax imposed on oil by Section 7-30-4 NMSA 1978 is
twenty-four hundredths percent] A distribution pursuant to
Section 7-1-6.20 NMSA 1978 shall be made to the oil and gas
reclamation fund in an amount equal to [nineteen and seven-tenths percent] the following percentages of the net receipts
attributable to the tax imposed under the Oil and Gas
Conservation Tax Act:

(1) beginning July 1, 2027 and prior to July
1, 2028, fifty percent;

(2) beginning July 1, 2028 and prior to July
1, 2029, seventy-five percent;

(3) beginning July 1, 2029 and prior to July
1, 2037, one hundred percent; and

(4) beginning July 1, 2037, fifty percent."

SECTION 2. Section 70-2-37 NMSA 1978 (being Laws 1977,
Chapter 237, Section 4, as amended) is amended to read:

"70-2-37. OIL AND GAS RECLAMATION FUND CREATED--DISPOSITION OF FUND.--[There is created] The "oil and gas
reclamation fund" is created as a nonreverting fund in the
state treasury. In addition to other sources, money in the
fund may consist of distributions, appropriations, gifts,
grants and donations. [All funds in the oil and gas
reclamation fund are appropriated to] The energy, minerals and
natural resources department shall administer the fund, and
money in the fund is appropriated to that department for use by
the [oil conservation] division in carrying out the provisions
of [the Oil and Gas Act] Section 70-2-38 NMSA 1978; provided
that money in the fund may be appropriated upon a two-thirds'
majority vote of both houses of the legislature to avoid an
unconstitutional deficit in the event that general fund
balances, including all authorized revenues and transfers to
the general fund and balances in the general fund operating
reserve, the appropriation contingency fund, the state-support
reserve fund and the tax stabilization reserve, will not meet
the level of appropriations authorized for a fiscal year.
Expenditures from the fund shall be by warrant of the secretary
of finance and administration pursuant to vouchers signed by
the secretary of energy, minerals and natural resources or the
secretary's authorized representative."

SECTION 3. Section 70-2-38 NMSA 1978 (being Laws 1977,
Chapter 237, Section 5, as amended) is amended to read:

"70-2-38. OIL AND GAS RECLAMATION FUND ADMINISTERED--PLUGGING WELLS ON FEDERAL LAND--RIGHT OF INDEMNIFICATION--ANNUAL REPORT--CONTRACTORS SELLING EQUIPMENT FOR SALVAGE.--

A. [The oil and gas reclamation fund shall be
administered by the oil conservation division of the energy,
minerals and natural resources department.] Expenditures from
the oil and gas reclamation fund may be used by the director of
the division for the purposes of:

(1) employing the necessary personnel to
survey abandoned wells, well sites and associated production
facilities; and

(2) preparing plans for administering and
performing the plugging of abandoned wells that have not been
plugged or that have been improperly plugged and for the
restoration and remediation of abandoned well sites and
associated production facilities that have not been properly
restored and remediated [and

(2) supporting energy education throughout the
state in an amount not to exceed one hundred fifty thousand
dollars ($150,000) annually].

B. The director of the [oil conservation] division
[of the energy, minerals and natural resources department], as
funds become available in the oil and gas reclamation fund,
shall reclaim and properly plug all abandoned wells and shall
restore and remediate abandoned well sites and associated
production facilities in accordance with the provisions of the
Oil and Gas Act and the rules and regulations promulgated
pursuant to that act. The division may order wells plugged and
well sites and associated production facilities restored and
remediated on federal lands on which there are no bonds running
to the benefit of the state in the same manner and in
accordance with the same procedure as with wells drilled on
state and fee land, including using funds from the oil and gas
reclamation fund to pay the cost of plugging. When the costs
of plugging a well or restoring and remediating well sites and
associated production facilities are paid from the oil and gas
reclamation fund, the division is authorized to bring a suit
against the operator or district court of the county in which
the well is located for indemnification for all costs incurred
by the division in plugging the well or restoring and
remediating the well site and associated production facilities.
Any funds collected pursuant to a judgment in a suit for
indemnification brought under the Oil and Gas Act shall be
deposited in the oil and gas reclamation fund.

C. The director of the [oil conservation] division
[of the energy, minerals and natural resources department]
shall make an annual report to the secretary of energy,
minerals and natural resources, the governor and the
legislature on the use of the oil and gas reclamation fund.

D. Contracts for plugging and reclamation [and
energy education] pursuant to this section shall be entered
into in accordance with the provisions of the Procurement Code.
A contractor employed by the [oil conservation] division [of
the energy, minerals and natural resources department] to plug
a well or restore or remediate a well site or associated
production facility is authorized to sell the equipment and
material or product that is removed from the well, site or
facility and to deduct the proceeds of the sales from the costs
of plugging, restoring or remediating.

E. As used in this section, "associated production
facilities" means those facilities used for, intended to be
used for or that have been used for the production, treatment,
transportation, storage or disposal of oil, gas, brine, product
or waste generated during oil and gas operations or used in the
production of oil and gas if that facility is, has been or
would have been subject to regulation by the [oil conservation]
division [of the energy, minerals and natural resources
department] or the [oil conservation] commission pursuant to
the Oil and Gas Act or the Water Quality Act."

SECTION 4. EFFECTIVE DATE.--The effective date of the
provisions of this act is July 1, 2027.

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