The Highlights

• Fourth federal oil & gas lease sale in Colorado this year.
• 14,212 acres of public land were offered and leased for oil and gas development, all at below market rates.
• The sale had an average bid of $334 per acre, with individual leases selling for between $10 and $2,121 per acre.
• Taxpayers will lose an estimated $20 million in royalty revenue from future production on these leases.

On September 10, the federal government offered 14,212 acres of public land in Colorado for lease for oil and gas development at the recently reduced federal royalty rate of 12.5%. The result is an estimated $20 million in lost royalty revenue over the life of these leases.

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 Sale:

Today’s sale leased 14,212 acres of federal land in Colorado for oil and gas development at an average bid of $334 per acre. This is the fourth federal oil and gas lease sale in the state this year. The previous sale, held June 16, was the state’s largest in more than a decade, leasing 134,000 acres at an average bid of $256 per acre.

Leasing decisions are driven by development potential and market conditions. Operators lease where there is strong development potential, a factor driven largely by the specific parcels included in a sale. Competitiveness in today’s sale varied widely, from one 440-acres parcel selling for $2,121 per acre, to a 318-acre parcel selling for $10 per acre, the legal minimum. Land in Weld County, the largest producer of federal oil in Colorado, generally received high bids in today’s lease sale, averaging roughly $1,311 per acre. Land in Routt County, a minor producer of federal oil and gas, generally received low bids, averaging roughly $55 per acre.

Lower Federal Royalty Rates Cost Taxpayer Millions

Lower royalty rates do not make leases more competitive; they simply reduce the future revenue generated by taxpayers. This is true in Colorado and across the country. Colorado’s only sale under the 16.67% rate had a higher average bid ($2,500 per acre) than sales under the 12.5% rate over the preceding decade ($95 per acre from 2013-2022). Nationwide average bids were also higher in 2023 and 2024 ($978 and $2,149 per acre, respectively) than they had been in the previous decade ($379 per acre 2013-2022).

The 12.5% royalty rate charged by the government for federal leases is far below the 20% Colorado often charges on state lands. In Colorado alone, taxpayers lost an estimated $937 million in revenue from 2015-2024 compared to an 18.75% rate. Because royalty revenue is shared between the federal government and states, Coloradans lost funding that could otherwise support schools, infrastructure, and other public priorities.

The Bureau of Land Management estimates that the parcels sold today could yield 1.2 million barrels of oil and 99 billion cubic feet of natural gas over a conservative 10-year 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 $480 million. At the 12.5% rate, taxpayers would receive about $60 million in royalty revenue, roughly $20 million less than we would under a 16.67% rate.

Lowering Financial Assurance Requirements Increases Taxpayer Risk

After production ends, oil and gas producers operating on federal land are required to plug their wells and reclaim surrounding sites. To guarantee that cleanup of these potentially hazardous and environmentally harmful sites is paid for, producers must post a bond before drilling begins. If a company abandons its wells or goes bankrupt, the bond is forfeited and used to help cover reclamation costs. BLM currently accepts two types of bond coverage: bonds for an operator’s wells on an individual lease, with a minimum of $150,000, and bonds covering all wells owned by an operator within a state, with a minimum of $500,000.

This June, DOI proposed to lower bond requirements to their decades-old minimums. In 2023, DOI reported holding an average bond coverage of $3,873 per well, covering just 5 percent of estimated reclamation costs. If outdated bonding requirements return, the federal government would hold only about $29 million in financial assurances for the 7,722 oil and gas wells producing on federal lands in Colorado, leaving taxpayers exposed to approximately $518 million in potential future liabilities. Without adequate safeguards, the leases issued today could add to growing liabilities.

Modernized Leasing Terms Support Responsible Development, Generate Revenue, and Protect Taxpayers

Oil and gas developed on federal lands belongs to the American people, and leasing terms should ensure taxpayers receive a fair return from the development of these valuable resources.