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F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Robinson

 

DATE TYPED:

01/25/02

 

HB

 

 

SHORT TITLE:

Pay Oil & Gas Royalties

 

SB

168

 

 

ANALYST:

Dunbar

 

APPROPRIATION

 

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

FY02

FY03

 

 

$100,000.0

 

 

 

Non-Recurring

General Fund Operating Reserve

 

(Parenthesis ( ) Indicate Expenditure Decreases)

 

SOURCES OF INFORMATION

 

Responses Received

Energy, Minerals & Natural Resources Department  (EMNRD)

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 168 appropriates $100 million from the general fund operating reserve to the NM Office of Indian Affairs.  The funds are to provide a loan to the Department of the Interior to make oil and natural gas royalty payments to "residents" of the Navajo Nation and the Jicarilla Apache Nation.  The bill observes that the failure of the security system of the computer at the Department of the Interior has resulted in the cessation of payments and created the need for such a loan.  The loan is to be made at the current market rate of interest as stated in the Wall Street Journal on the date (or in the week) the loan was made, and the entire loan is to be repaid within six months from the date it is made.  The bill contains an emergency clause.

 

     Significant Issues

 

The continuing litigation concerning the accounting of oil and natural gas revenue pursuant to the trust responsibility of the Department of the Interior for Native Americans has resulted in an order from a federal judge sequestering relevant data on computer systems.  Apparently, as a result, royalty payments are not being made to tribal members of the Navajo Nation and Jicarilla Apache Nation, with accompanying hardship to those on fixed incomes relying on this income. EMNRD points out that in attempting to rectify this difficult situation, the bill raises a practical issue: whether the

 

Department of the Interior, with funds provided by the State of New Mexico but without the use of its computer system, would be able to determine who is eligible for payments.  If this difficulty exists, the making of a loan might be futile.  The department expresses concern that even if payments could be made, a risk exists that the $100 million could get tied up in the ongoing litigation and not be returned to the State. 

 

FISCAL IMPLICATIONS

 

The bill appropriates $100 million from the general fund operating reserve to the NM Office of Indian Affairs for expenditure in fiscal years 2002 and 2003 as a loan to the Department of Interior.   The bill contains an emergency clause.

 

Any unexpended or unencumbered balance remaining at the end of FY 03 shall revert to the general fund.

 

The $100 million represents almost 25% of the total general fund operating reserve and would lower the surplus to $72 million above the 5% reserve level.  The acceptance of the loan by the federal government would be contingent on the Office of Indian Affairs successfully negotiating agreement with the federal government. The particular market interest rate used would need to be defined.

 

TECHNICAL ISSUES

 

EMNRD raises the following technical issue:

Use of the word "residents" might be considered ambiguous in this context, as persons might reside on the Navajo Nation and the Jicarilla Apache Nation who are not beneficiaries of the oil and natural gas royalties, or indeed who are not even tribal members.  More importantly, the use of the word implies that tribal members not "resident" on the reservation would be ineligible to receive loan proceeds despite being beneficiaries of oil and natural gas royalties.  The phrase "tribal members" could be substituted for the word "residents."  This change would permit loan proceeds to benefit tribal members living in Albuquerque, Santa Fe or elsewhere.  However, there may be non-tribal members who receive because the heirs of individual trust allottees do not have to be members of the Navajo or Jicarilla Apache tribes.

 

BD/ar

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