Section 19-13-7 - Leases; terms; rentals and royalties. - New Mexico Statutes

19-13-7. Leases; terms; rentals and royalties.

A.     Each lease issued pursuant to the Geothermal Resources Act [19-13-1 to 19-13-11, 19-13-12 to 19-13-28 NMSA 1978] shall provide for the following rentals and royalties with respect to geothermal resources produced, saved and sold from the lands included within the lease:   

(1)     a royalty of ten percent, except as provided in Paragraph (4) of this subsection, of the gross revenue, exclusive of charges approved by the commissioner made or incurred with respect to transmission or other services or processes, received from the sale or use of steam, brines or hot water from which no minerals have been extracted, and associated gases or any other form of heat or energy derived from production under the lease at the point of delivery to the purchaser thereof; provided, however, as to new leases issued and old leases stipulated pursuant to Section 19-13-11.1 NMSA 1978 after the effective date of this act which leases embraced land then classified as being in a "known geothermal resource field," the royalty shall be at a rate of not less than ten percent nor more than fifteen percent, the exact amount thereof to be set by the commissioner either by rule or regulation or in the posted notice of sale required for the sale of leases at public auction;   

(2)     a royalty of not less than two percent nor more than five percent of the gross revenue received from the sale of mineral products or chemical compounds recovered from geothermal fluids in the first marketable form as to each such mineral product or chemical compound for the primary term of the lease, except that as to any by-product or minerals covered by other mineral leasing statutes administered by the commissioner or rules or regulations of the commissioner, the rate of royalty for such mineral or by-product shall be the same as the then existing rate of royalty under leases currently being issued by the commissioner;   

(3)     a royalty of eight percent of the net revenue received from the operation of an energy producing plant on the leased land;   

(4)     a royalty of not less than two percent nor more than ten percent of the gross revenue received from the operation of the geothermal resources for recreational, space heating or health purposes;   

(5)     an annual rental, payable in advance, of one dollar ($1.00) an acre or fraction thereof for each year of the lease;   

(6)     if, after the discovery of geothermal resources in commercial quantities, the total royalties paid during any calendar year do not equal or exceed a sum equal to two dollars ($2.00) an acre for each acre or fraction thereof then included in the lease, the person holding the lease shall, within sixty days after the end of the year, pay such sum as is necessary to equal the minimum royalty of two dollars ($2.00) an acre;   

(7)     the royalties specified pursuant to this section shall be subject to renegotiation after twenty years from the effective date of a lease and at ten-year intervals thereafter; however, the new royalty rate shall not vary more than fifty percent from the previous royalty rate and in no event shall the total royalty be less than five percent nor more than twenty-two and one-half percent. At any time, upon good cause shown, the commissioner may reduce the royalty on any lease; and   

(8)     except for royalties on minerals, royalties and rentals may be negotiated at other rates than that provided in this section where the surface has heretofore been sold with minerals reserved; provided, however, a public hearing shall be held thereon before any such rates are approved by the commissioner.   

B.     Royalty payments shall be made pursuant to Paragraphs (1) and (2) of Subsection A of this section for all geothermal resources used and not sold by a person holding a lease, with the gross revenue therefrom to be determined as though the geothermal resources had been sold to a third person at the then prevailing market price in the same market area and under the same marketing conditions; provided, however, that no royalties shall be payable for steam used by a person holding a lease in the production of any geothermal resources subject to the payment of royalties pursuant to Paragraphs (1) and (2) of Subsection A of this section.   

C.     The commissioner shall have the authority in leasing lands pursuant to the Geothermal Resources Act to prescribe a development program. In prescribing the program, the commissioner shall consider all applicable economic factors, including market conditions and the cost of drilling for, producing, processing and utilizing of geothermal resources.