WASHINGTON, D.C. | September 23, 2026 — Taxpayers for Common Sense today released, Royalty Rip-Off, a report finding that federal and state taxpayers could have collected roughly $25 billion more from oil and gas production on federal lands between 2016 and 2025 under an 18.75% royalty rate. The report examines the cost of federal leasing terms that lag behind those used by major oil- and gas-producing states.

“Woodrow Wilson was president when Congress established this royalty rate. More than a century later, the oil and gas industry has transformed, and major producing states charge more for access to their resources. Federal taxpayers deserve terms that reflect what those resources are worth today,” said Autumn Hanna, vice president of Taxpayers for Common Sense.

Congress established the 12.5% minimum royalty rate in the Mineral Leasing Act of 1920. Since then, many states have updated what they charge for development of publicly owned resources. Texas typically charges royalties of 20% to 25% on state lands, while New Mexico charges 18.75% to 25%. Companies developing federal resources pay less under the 12.5% minimum, even when operating in those same states sometimes in adjacent parcels.

Billions in potential federal and state revenue

Royalties are payments based on the value of oil and gas extracted from publicly owned resources. Applying an 18.75% rate to historical oil and gas sales from federal lands would have generated roughly $25 billion in additional revenue between 2016 and 2025, according to the report. Nearly half would have gone to the states where production occurred. The largest estimated annual difference was $4.6 billion in 2022, when oil and gas prices rose sharply.

The report reviews Congressional Budget Office and Government Accountability Office analyses finding that higher federal royalty rates could increase revenue with little or no effect on production. Resource potential, commodity prices and extraction costs are major factors in companies’ investment decisions. Major producing states have continued attracting development while charging higher royalty rates.

“Getting a fair return for publicly owned oil and gas is something lawmakers in both parties can agree on,” Hanna said. “States have shown that energy development and market-based royalty rates can go hand in hand. Congress and the Administration have an opportunity to put that experience to work for federal taxpayers.”

Read the full report, Royalty Rip-Off, at https://www.taxpayer.net/energy-natural-resources/oil-and-gas/royalty-rip-off/

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