The U.S. Department of the Interior will pay New Mexico more than $5 billion in federal energy revenue for the 2026 fiscal year. It is the largest such annual amount ever paid to a state in U.S. history, according to the federal agency, and was part of a boom seen in seven of the eight Mountain West states amid record consumer petroleum prices.
The money comes to the states primarily from royalties, rents and payments companies pay for developing energy and mineral resources on public lands. Each state uses the funds differently, but they generally go to government services, conservation projects and other programs.
New Mexico’s tally represented nearly a quarter of the $21.8 billion distributed nationwide from activities on federal and tribal lands as well as federal offshore waters, according to theU.S. Department of the Interior. In all, it was the second-highest annual disbursement on record.
A major driver was afederal oil and gas lease sale in New Mexico and Texas in May that generated more than $4 billion.
Elsewhere in the Mountain West, Wyoming reaped nearly $485 million, the second-largest state total. Utah and Colorado ranked among the top 10 with $124 million and $87.6 million, respectively.
Daniel Raimi, an energy researcher at the nonpartisan Resources for the Future, said the U.S. conflict with Iran has pushed oil prices higher, benefiting oil-producing U.S. states, even as consumers face higher gasoline and transportation costs.
“If you're an oil producer, then high oil prices are good news for your bottom line,” Raimi said.
The federal government also took a share. Some $7.53 billion went to the U.S. Treasury and $5.1 billion went to the Reclamation Fund, which supports water projects in the West. And, tribal governments received about $918 million.
States use the revenue in different ways, from funding annual budgets to investing in long-term savings. In New Mexico, the oil and gas boom in the Permian Basin — which includes West Texas and southeastern New Mexico — has helped expand free pre-K programs.
But Raimi said that such large payouts should not be viewed as a reliable source of income for state governments.
“Revenues from fossil fuel production are volatile, and planning on them being stable over time is not a wise strategy,” he said.
Some Western states, including New Mexico and Wyoming, invest portions of their energy revenues in permanent funds. Those investments can generate income to help pay for public services like libraries, healthcare facilities and water projects during periods of lower oil and gas revenue.
Preparing for a changing energy future
The financial benefits of fossil fuel production also come with longer-term challenges as the energy system changes.
Burning oil, natural gas and coal contributes to climate change. Raimi said that states that rely heavily on those industries will need to consider how to support public services if demand for fossil fuels declines.
“For the world to become more sustainable, we are going to need to move away from fossil fuels in the long term,” he said. “And that means that states that rely on fossil fuel production are going to need to look to diversify their revenue sources.”
This story was produced by the Mountain West News Bureau, a collaboration between Boise State Public Radio, Wyoming Public Media, Nevada Public Radio, KUNR in Nevada, KUNC in Northern Colorado, KANW in New Mexico, Colorado Public Radio and KJZZ in Arizona as well as NPR, with support from affiliate newsrooms across the region. Funding for the Mountain West News Bureau is provided in part by the Corporation for Public Broadcasting and Eric and Wendy Schmidt.
