The Highlights

• Second oil and gas lease sale in Montana this year. 

• The auction offered four parcels totaling 1,796 acres of public land for oil and gas development. One 40-acre parcel was leased. 

• The remaining 1,756 acres not leased at auction will be available for noncompetitive leasing, a process that sidesteps normal competition and allows oil and gas operators to acquire leases for cheap, often for less than $1/acre. 

• TCS estimates taxpayers will lose $36,642 in royalty revenue from future production on this lease, adding to $1.4 billion lost nationwide since royalty rates were reduced in July 2025 

On July 14, the federal government offered 1,796 acres and leased 40 acres of public land in Montana for oil and gas development at the recently reduced federal royalty rate of 12.5%. Based on projected production, taxpayers stand to lose an estimated $36,642 in royalty revenue from production on the lease.

This sale adds to mounting losses. 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%—below what states and private landowners typically charge.

Results from Today's Lease Sale

Today's auction offered just four parcels totaling 1,796 acres for oil and gas development. One 40-acre parcel in Richland County, the state's second largest producer of federal oil, was leased for $7,751 per acre, a higher-than-average bid. Unfortunately for taxpayers, it was leased under a below-market royalty rate, meaning taxpayers could be shortchanged millions of dollars in potential revenue over the life of production.

Millions in Potential Taxpayer Revenue Lost

Lowering royalty rates shortchanges taxpayers by reducing future royalty revenue. In Montana alone, taxpayers lost an estimated $117 million from 2016–2025 under the 12.5% rate. Because federal mineral revenues are shared between the federal treasury and states, Montana taxpayers also lose funding for schools, infrastructure, and other local priorities.

Competitive, market-based royalty terms do not deter industry interest or production decisions. In fact, lease sales in Montana received strong bids under the 16.67% royalty rate, including several parcels that sold for over $10,000 per acre, higher than the winning bid received today. Average bids in Montana under the 16.67% rate were approximately $2,300 per acre, much higher than the average of $33 per acre over the previous decade. The same pattern holds nationwide. Average bids in 2023 and 2024 ($978 and $2,149 per acre, respectively) exceeded the average from 2013 through 2022 ($379 per acre).

The Bureau of Land Management estimates that the parcel leased today could ultimately produce 10,778 barrels of oil and 39,244 thousand cubic feet of natural gas over its productive life. 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 $878,705. At the 12.5% royalty rate, taxpayers would receive about $109,838 in royalty revenue, roughly $36,642 less than we would receive under a 16.67% rate.

Noncompetitive Leasing Generates Little Return While Blocking Other Land Uses 

The 1,756 acres not leased today will become eligible for noncompetitive leasing as early as tomorrow. Under this process, parcels are awarded to the first applicant willing to pay an administrative fee, set by BLM at a minimum of $75 regardless of acreage, plus the first year's rent. No competitive bid is required. This process, repealed by Congress in 2022, was reinstated in 2025 and enables companies to bypass market competition entirely.

Noncompetitive leasing generates little return for taxpayers. Leases issued noncompetitively generate less revenue and are significantly less likely to ever enter production. According to BLM, only 1 percent of noncompetitive leases issued nationwide begin producing during their primary lease term. The Government Accountability Office found that noncompetitive leases generate five times less revenue than competitively leased land.

This issue is particularly notable in Montana. More federal land in Montana was leased noncompetitively than competitively. Yet nearly 3 out 4 noncompetitive leases are currently nonproducing. Nonproducing leases block other uses of federal land that could generate greater value for taxpayers, including recreation, conservation, and the development of other mineral and energy resources.

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.