New Mexico Statutes Chapter 19. Public Lands § 19-10-52. Drainage of state lands by oil or gas wells required to be offset; agreement to compensate state

In any case where it appears to the commissioner of public lands of the state of New Mexico that lands owned by the state of New Mexico are being drained by an oil or gas well required to be offset under the terms of any oil or gas lease issued by the commissioner of public lands, he is hereby authorized and empowered to enter into agreements whereby the state of New Mexico will be reasonably compensated for such drainage, such agreements to be made with the consent of the owners of the leases affected thereby. The fixed term (primary and secondary terms) of any lease on account of which the compensatory royalty is being paid shall be extended so long as such compensatory royalty agreement is in effect and if drilling operations upon such lease during the effective period of any such agreement result in the production of oil or gas, such lease shall be extended as long thereafter as oil or gas or either of them is being produced from the leased premises.

The nature of the agreement and the method of computing the amount of the compensatory royalty to be paid thereunder shall depend upon the conditions and circumstances involved in the particular case and shall be calculated to give to the state its fair share of the oil or gas being produced from the well or wells on account of which compensatory royalty is to be paid. The owners of any lease on account of which compensatory royalty is being paid shall be relieved of the offset obligation as to the well or wells for which compensatory royalty is being paid during the life of any such agreement.