The Highlights

• 20,334 acres of public land in New Mexico, Oklahoma, and Texas were offered and leased for oil and gas development at below-market royalty rates.
• Industry interest varied widely, with bids ranging from roughly $110,000 to $126 per acre
  • New Mexico: 19,095 acres leased at an average bid of $7,162 per acre, lower than the last four sales in the state.
  • Oklahoma: 1,120 acres leased at an average bid of $1,873, lower than the last 2 sales in the state.
  • Texas: 119 acres leased at an average bid of $153 per acre, the state’s lowest since 2014.
• Taxpayers are estimated to lose $19.6 million in royalty revenue from future production on these leases

On August 19, the federal government leased 20,334 acres of public land in New Mexico, Oklahoma, and Texas for oil and gas development at the recently reduced federal royalty rate of 12.5%. The result is an estimated $19.6 million in lost royalty revenue over the life of the leases.

The Permian Basin is the most prolific oil-and-gas-producing region in the country, accounting for nearly 40% of all oil production and 15% of natural gas production in the United States. Industry interest in leasing in the region—on federal, state, or private land—has always been strong. However, today’s auction results fall notably below the last federal oil and gas lease sale in the Permian Basin, held in May 2026, which generated $4 billion in bid revenue and an average bid of roughly $120,000 per acre leased.

The large difference between these two sales is further evidence that auction results are highly dependent on market conditions and the specific parcels offered, not royalty rates. Lowering the royalty rate only costs taxpayers future royalty revenue. The 20,000 acres leased today were issued under the outdated 12.5% royalty rate, meaning taxpayers receive just 12.5 cents for every dollar of taxpayer-owned oil and gas produced and sold over the multi-decade lifetime of these leases, ¬¬far below what is charged on nearby state land in the Permian Basin.

TCS estimates that taxpayers have already lost more than $1.4 billion in projected royalty revenue from leases sold since July 4, 2025, when the onshore royalty rate was reduced to 12.5%.

By contrast there is relatively little federal leasing in Oklahoma and Texas, where most oil and gas production occurs on state and private lands. As of the end of FY2025, there were 997 active federal leases in Oklahoma and 457 in Texas, compared with roughly 7,600 in New Mexico. Over the last decade, Oklahoma and Texas each accounted for less than 1% of oil and natural gas produced on federal lands.

Results from Today’s Lease Sale:

New Mexico sits at the center of federal oil and gas production. Over the last decade, it has consistently ranked as the largest producer of federal oil and natural gas. Oil production on federal lands in the state has increased nearly fivefold over the last decade, while gas production has nearly doubled. Lease sales in New Mexico have also remained among the most competitive in the country. In 2025, nearly all acreage offered in the state received bids and the average bid per acre exceeded the average in every other state.

By contrast there is relatively little federal leasing in Oklahoma and Texas, where most oil and gas production occurs on state and private lands. As of the end of FY2025, there were 997 active federal leases in Oklahoma and 457 in Texas, compared with roughly 7,600 in New Mexico. Over the last decade, Oklahoma and Texas each accounted for less than 1% of oil and natural gas produced on federal lands.

Today’s sale offered a total of 26 parcels of federal land for private companies to lease and develop oil and gas: 21 parcels in New Mexico totaling 19,095 acres, four parcels in Oklahoma totaling 1,120 acres, and one parcel in Texas totaling 119 acres. Only one parcel in Oklahoma, containing just 0.3 acres, was not leased.

Competitiveness in today’s sale varied widely. Parcels sold for between roughly $110,000 per acre and $126 per acre. Land in Lea and Eddy Counties (NM), the largest producers of federal oil and gas in the country, received the highest bids, with roughly 2,200 available acres leased for an average of about $60,000 per acre. Land in Sandoval County (NM), which produces little federal oil and gas, received the lowest bids, with roughly 17,000 available acres leased to a single bidder for an average of just $132 per acre.

This variation is common. How much private companies are willing to pay to lease federal land for oil and gas development depends heavily on the development potential of the specific parcels offered. Today’s sale provides a particularly clear example. The same royalty rate applied to every parcel, yet the average bids differed dramatically depending on where the land was located.

Millions in Potential Taxpayer Revenue Lost

Competitive market-based royalty rates do not deter industry interest or production decisions. The five lease sales held in New Mexico under the previous 16.67% royalty rate generated a higher average bid per acre than sales held during the previous decade under the 12.5% rate. The same pattern held for the single lease sales conducted in Oklahoma and Texas under the higher rate.

Rather, lower royalty rates only shortchange taxpayers by reducing future royalty revenue. As the largest producer of federal oil and gas, state taxpayers in New Mexico stand to gain the most state revenue from a modernized royalty rate. Between 2015-2024, taxpayers lost $13.9 billion from oil and gas development on federal lands in New Mexico under the 12.5% rate compared to an 18.75% rate. Since roughly half of federal royalties are returned to producing states, the New Mexico state coffer lost out on nearly $7 billion. And with oil and gas production reaching record highs across the country, those losses are likely to continue growing.

The Bureau of Land Management estimates that the parcels leased today could ultimately produce 6 million barrels of oil and 18 billion cubic feet of natural gas over their productive lifetimes. Based on the White House Office of Management and Budget FY2026 price projections, which are used to estimate federal royalty revenue from onshore leases, that production could be worth roughly $470 million. At the 12.5% royalty rate, taxpayers would receive about $58.7 million in royalty revenue, roughly $19.6 million less than we would receive under a 16.67% rate. And even this is a conservative estimate. With oil and gas production reaching record highs across the country, those losses are likely to continue growing.

State and Private Landowners in the Permian Basin Charge a Higher Royalty Than the Federal Government

The stagnant 12.5% minimum royalty rate charged on federal lands stands in stark contrast to the higher royalty rates states with significant oil and gas deposits charge on state land. Although BLM has the authority to charge higher than the minimum royalty rate, the agency has rarely done so. In contrast, New Mexico, Oklahoma, and Texas charge royalty rates of 18.75% to 25% for leases on state land, with higher rates often applied in high producing regions like the Permian Basin.

Congress has long considered increasing the minimum royalty rate, including during a major overhaul of the onshore oil and gas leasing system in 1987. At the time, Interior Department officials cited the use of the 12.5% rate on state and private lands as a reason for maintaining it for federal leases. The subsequent adoption of higher rates for leases on state lands undermines that rationale for continuing the 12.5% rate in federal leases.

Oil and gas resources developed on federal lands belong to the American people, and leasing terms should ensure those resources are not sold for less than they are worth.