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Gov. Looks at Oil Tax Increase

By Deborah Baker
The Associated Press
    SANTA FE— Gov. Bill Richardson says he is considering asking lawmakers to raise a state tax on oil production, a proposal that producers say they would fight tooth and nail.
    Richardson said the increase, proposed in 2003 by a tax advisory panel, is among the revenue measures he may recommend to the Legislature when it meets for a 60-day session beginning Jan. 18.
    "It's on the table," said the governor, who is in the process of finalizing his budget proposals for next year.
    The tax panel recommended raising the so-called Oil and Gas Emergency School Tax rate on oil from 3.15 percent to 4 percent. Natural gas already is taxed at the 4 percent rate.
    It's estimated the tax change would provide another $17.5 million to the state in the 2005-06 budget year, and $16.1 million the following year, said Taxation and Revenue Secretary Jan Goodwin. The drop in the second year is because of the agency's projections of a decline in price and production, she said.
    When the Blue Ribbon Tax Reform Commission recommended the tax increase in October 2003, it was projected to yield $11 million.
    The administration has not pushed for the tax change since the panel proposed it.
    "I think the oil and gas industry, because they're doing so well ... need to do a little more than they're doing," the governor said in a recent interview. "Their revenues to the state, I think, need to increase modestly."
    Richardson said he viewed it as "just equalizing" the rate between natural gas and crude oil— "so it's not a tax increase."
    But Bob Gallagher, president of the New Mexico Oil and Gas Association, said the industry is "adamantly opposed to any increase."
    "You don't kick the cash cow in the stomach," he said.
    The Depression-era tax, imposed on the net taxable value of the product, is one of the major ways New Mexico taxes oil and gas production.
    It generated $297 million last year, $238 million of that from gas and $59 million from crude oil, Gallagher said.
    If New Mexico doesn't provide a "business-friendly" environment, producers will look elsewhere— to Texas, Oklahoma, Colorado and Wyoming, Gallagher said.