HOUSE MEMORIAL 81

52nd legislature - STATE OF NEW MEXICO - second session, 2016

INTRODUCED BY

James R.J. Strickler

A MEMORIAL

REQUESTING THE NEW MEXICO CONGRESSIONAL DELEGATION TO REPRESENT THE STATE'S INTERESTS AND REQUEST THAT THE FEDERAL GOVERNMENT REEVALUATE THE OVERALL ECONOMIC IMPACT OF THE OFFICE OF NATURAL RESOURCES REVENUE'S PROPOSED OIL AND GAS VALUATION REGULATIONS AND THEIR UNBUNDLING EFFORTS.

     WHEREAS, companies operating in New Mexico want to be in compliance with and to report and pay their federal royalties correctly as required by federal regulations; and

     WHEREAS, the revenue from oil and gas has historically paid between thirty percent and thirty-five percent of the annual revenue to the state over the past decade; and

     WHEREAS, the federal government, via its office of natural resources revenue, has unilaterally reinterpreted existing federal oil and gas valuation rules and is proposing changes to the rules in a way that will make oil and gas development on federal lands more costly and burdensome to comply with; and

     WHEREAS, the reinterpreted rules will not allow companies to deduct all of their actual reasonable transportation or processing costs that are currently allowed; and

     WHEREAS, those rules will result in the office of natural resources revenue continuing to require companies to unbundle third-party transportation and processing contracts, which is literally impossible to do; and

     WHEREAS, the office of natural resources revenue is requiring companies to retroactively recalculate their royalties back seven years and then pay this additional amount plus interest, amounts that are a significant portion of the remaining value of the wells; and

     WHEREAS, the office of natural resources revenue is providing guidance to companies on how to unbundle and is posting unbundled cost allocations for New Mexico plants that are mathematically incorrect and are contrary to engineering reality, resulting in the office of natural resources revenue knowingly understating the allowable transportation and processing costs, which causes companies operating in New Mexico to pay tens of millions of dollars more in federal royalties each year than what is required by the federal oil and gas regulations; and

     WHEREAS, it is not in the best interest of the welfare of the state, its citizens and the numerous education programs in place to decrease revenue by making oil and gas development on federal lands more costly and burdensome and less preferable than on state or private lands;

     NOW, THEREFORE, BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES OF THE STATE OF NEW MEXICO that New Mexico's congressional delegation be requested to represent the state's interests and request that the federal government reevaluate the overall economic impact of the office of natural resources revenue's proposed oil and gas valuation regulations and its unbundling efforts to ensure that the regulations are not a deterrent for oil and gas development on federal lands; that the regulations are clear, fair and provide certainty that they continue to allow all actual reasonable transportation and processing costs; and that the regulations provide a cost-effective, revenue-neutral alternative for all lessees to comply with the office of natural resources revenue's unbundling requirement; and

     BE IT FURTHER RESOLVED that copies of this memorial be transmitted to the New Mexico congressional delegation, the president of the United States, the United States secretary of the interior, the United States secretary of energy, the majority leader of the United States senate and the speaker of the United States house of representatives.

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