A proposed rule, announced June 22 and formally published June 24, would make major changes to the federal onshore oil and gas leasing program that could leave taxpayers and communities to shoulder more of the costs of cleaning up oil and gas wells. The proposed rule would reduce minimum federal bond requirements for oil and gas operators, returning them to decades-old levels that previously left taxpayers exposed to billions in potential cleanup liabilities.

The rule would also reduce companies’ filing fees while creating a new fee for members of the public filing protests, shorten public comment period, remove leasing preference criteria that guide which lands are offered for leasing, give BLM greater discretion in granting lease suspensions, and codify the noncompetitive leasing and replacement sale processes.

Lowering Bond Amounts and Potentially Restoring Nationwide Bonds Would Increase Taxpayer Risk

Federal taxpayers own mineral resources across the United States, including a 700-million-acre onshore subsurface mineral estate. The federal government manages the development of publicly owned oil and gas by leasing land to private companies to extract resources and sell them for profit.

After production ends, operators on federal land are required to plug their wells and clean up the surrounding sites. BLM seeks to ensure these obligations are met by requiring operators to post bonds before drilling begins. However, in practice, federal bonding requirements have often been insufficient to cover the full costs of reclamation, leaving taxpayers exposed when operators fail to complete cleanup.

BLM increased minimum bond requirements in 2024 and adopted a new risk-based bond adequacy review process intended to better ensure operators, rather than taxpayers, pay for well cleanup. BLM currently accepts two types of bond coverage: bonds covering an operator’s wells on an individual lease, with a minimum of $150,000, and bonds covering all of an operator’s wells within a state, with a minimum of $500,000. Higher bond amounts may also be required based on an operator’s financial condition, history of violations, anticipated reclamation costs, or other risk factors.

The proposed rule would return minimum bond amounts to their previous levels, reducing the minimum individual lease bond to $10,000 and the statewide bond to $25,000, which were set in the 1950s and 60s. Reclaiming wells is expensive, and these proposed minimums are inadequate. The Government Accountability Office estimates reclamation costs can range from $20,000 to $145,000 per well. BLM has reported an average cost of $71,000 per well and, in some cases, as high as $200,000. When operators walk away and posted bonds are insufficient to cover the costs, taxpayers end up with the bill.

Unreclaimed wells can also leak methane, contaminate drinking water, and put communities at risk. BLM estimates the proposed rule could delay reclamation of orphaned wells by an estimated 1,440 to 2,400 days annually, leaving communities to face these public health and safety risks for months longer.

BLM is also seeking comments on whether to restore nationwide bonds, which previously allowed operators to cover an unlimited number of wells across the country with a minimum bond of just $150,000. In 2024, BLM reported that the average nationwide bond covered 295 wells, with an average bond amount of just $671 per well. Although the proposed rule did not formally include nationwide bonding, BLM is soliciting comments on whether nationwide bonds should be restored. In fact, BLM even highlights the benefits of eliminating the use of nationwide bonds, stating that doing so “created efficiencies for the BLM’s oil and gas program by allowing the agency to better tailor bond amounts to local conditions and State-specific requirements when reviewing bonds for adequacy.”

Noncompetitive Leasing Locks Public Land into Nonproducing Leases and Costs Taxpayers

Not all leasing follows the competitive model. The noncompetitive leasing process, a loophole in federal policy, allows oil and gas companies to acquire leases that go unsold at competitive auctions for pennies per acre.

Under this process, parcels that receive no bids at auction become available the following day to the first qualified applicant willing to pay an administrative fee, currently a minimum of $75 regardless of acreage, plus the first year’s rent. Unlike a competitive lease sale, companies are not required to submit a bonus bid—the upfront payment bidders offer at auction to compete for the right to lease public land.

According to BLM, only 1 percent of noncompetitive leases issued between 2003 and 2019 began producing within their primary lease term. These nonproducing leases can prevent other productive uses of public land that could yield far greater value for taxpayers, including recreation, conservation, or the development of other mineral and energy resources. Noncompetitive leasing also costs taxpayers through foregone bonus bids and because these leases rarely produce oil or gas, generate little royalty revenue. Between FY2003 and FY2009, noncompetitively leased lands generated five times less revenue than competitively leased lands. Noncompetitive leasing leads to little production and meaningful revenue, particularly in states with little presence of oil and gas production or development potential. In Nevada, for example, no lease issued noncompetitively since 2000 has ever entered production.

Congress repealed noncompetitive leasing in 2022, but restored it through the One Big Beautiful Bill Act in 2025. This proposed rule implements those statutory changes.

Replacement Sales Waste Agency Time and Resources

The One Big Beautiful Bill Act also requires quarterly lease sales in Alaska, Colorado, Montana, Nevada, New Mexico, North Dakota, Oklahoma, Utah, and Wyoming, and requires BLM to hold a replacement sale if the quarterly auction is canceled, delayed, deferred, or if the sale fails to receive bids on 25% or more of the offered acreage. Between 2015 and 2024, more than one-third of all lease sales would have triggered a replacement sale, suggesting this provision could significantly increase the number of auctions BLM is required to conduct.

So far, BLM has held two replacement sales, both attracted little interest. A December 30 sale, “replacing” the fourth quarter oil and gas lease sale in Wyoming, attracted interest from only two companies, each purchasing a single 80-acre parcel for the legal minimum bid of $10 per acre. Less than 1% of the available acreage was leased. A January 8 replacement sale  in Colorado offered approximately 20,000 acres and received no bids.

Congress did not specify which parcels must be included in replacement sales. To date, BLM has generally reoffered parcels that previously failed to attract bids. The proposed rule also clarifies that parcels may only become available for noncompetitive leasing after the required competitive lease sale, and, if necessary, any required replacement sale, has occurred. BLM would reject noncompetitive lease applications submitted before those sales or covering land that has already been leased.

Other Changes Could Reduce Public Participation, Lower Revenue, and Extend Nonproductive Leases

BLM proposes several additional changes that could have long-term implications for taxpayers and public land management, including:

• Reducing the filing fee for competitive oil and gas lease applications from $3,100 to $155, reducing the filing fee for lease consolidations from $575 to $320, and removing the $30 filing fee for renewal exploration permits in Alaska.
• Creating a new $1 per page filing fee for protests exceeding 50 pages.
• Reducing public participation by removing the 30-day NEPA scoping period, eliminating the separate 30-day NEPA comment period, shortening the Notice of Competitive Lease Sale from 60 days to 45 days, and decreasing the protest period from 30 days to 10 days.
• Removing leasing preference criteria that directed BLM to consider factors such as proximity to oil and gas development, fish and wildlife habitat, historic properties and cultural resources, recreation, potential for oil and gas development.
• Giving BLM greater discretion to grant lease suspensions by eliminating the current policy discouraging suspension requests filed less than 90 days before lease expiration, among other changes. Operators that do not begin production within 10 years generally must relinquish their leases unless BLM grants an extension or suspension, allowing them to continue holding public land without paying rent.