On January 6, the federal government leased 20,400 acres of public land in New Mexico for oil and gas development at the recently reduced federal royalty rate of 12.5%. The result is an estimated $110 million in lost royalty revenue over the life of these leases.

This sale adds to mounting losses—TCS estimates that taxpayers have already lost roughly $600 million in projected royalty revenue from leases sold since July 4, when the One Big Beautiful Bill Act (OBBBA) reduced the onshore royalty rate to 12.5%—below what states and private landowners typically charge.

Lease sales in New Mexico are often competitive. The state is the nation’s largest producer of federal oil and gas, accounting for 79% of federal oil production and 55% of federal gas production last year. In 2025, four lease sales in New Mexico received an average bid of $8,581 per acre, the highest in the country.

Today’s sale offered and leased 30 parcels in New Mexico and 1 in Oklahoma. Most parcels were located in Eddy and Lea Counties, which accounted for 83% of federal oil production and 98% of federal gas production in the state last year. Competitiveness varied widely, with bids ranging from $329 to $218,751per acre and averaging about $16,000. This was the largest lease sale in New Mexico since 2020. Unfortunately for taxpayers, every lease was issued at the outdated 12.5% royalty rate, locking in a century-old rate for decades. 

Competitive, market-based royalty terms do not deter industry interest or production decisions. While today’s bids exceeded the state’s average over the past decade, they were still lower than bids received  in 2023 and 2024, when leases were offered under the 16.67% royalty rate. The lower royalty rate did not make these leases more competitive. It simply reduced future royalty revenue. In New Mexico alone, taxpayers lost an estimated $8 billion in revenue from FY2013 through FY2022 under the  12.5% rate. With record-high production across the U.S., those losses will continue to mount. Because revenues are shared with states, New Mexico communities will also lose funding for schools, infrastructure, and other priorities.

The Bureau of Land Management estimates that the parcels sold today could yield 32.8 million barrels of oil and 113 billion cubic feet of natural gas over their lifespan. Based on the White House budget office’s 2026 price projections—used to estimate federal royalty revenue from onshore leases—that production could be worth roughly $2.65 billion. At the 12.5% rate, taxpayers would receive about $332 million each year, roughly $111 million less than they would under a 16.67% rate.

New Mexico plays an important role in American energy production, but taxpayers should not be shortchanged. Oil and gas developed on federal lands belong to the American people, and leasing terms should ensure these resources aren’t given away for less than they’re worth.