On December 30, the Department of the Interior (DOI) held a replacement sale in Wyoming, re-offering 26,050 acres of federal land for oil and gas development. Just 160 acres were leased, less than 1 percent of what was offered. While disappointing for taxpayers, the result was unsurprising. The parcels were the same ones industry had ignored at auction just four weeks earlier.

The “replacement sale” is a new requirement created this summer in the One Big Beautiful Bill Act (OBBBA). When a quarterly lease sale in certain states—Alaska, Colorado, Montana, Nevada, New Mexico, North Dakota, Oklahoma, Utah, and Wyoming—fails to receive bids on 25% or more of the acreage offered, DOI must hold a replacement sale. The same requirement applies if an auction is canceled, delayed, or deferred. Between 2015 and 2024, more than one-third of all lease sales would have triggered a replacement sale, suggesting this provision could significantly increase the number of auctions DOI is required to hold.

This was the first time a replacement sale has been triggered. The December 30 sale “replaces” the fourth quarter oil and gas lease sale held in Wyoming on December 3, which received bids on 67% of the acreage offered, falling short of the 75% threshold.

The replacement sale faired far worse. Only two companies participated, each acquiring a single 80-acre parcel for the legal minimum bid of $10 per acre. Total auction revenue—including bids, fees, and the first year’s rent—came to just $23,000. Taxpayers can only hope this covers the administrative costs of holding the sale in the first place.

Foregone revenue from future development on these parcels will also cost taxpayers. Using average production on federal lands in Wyoming over the past decade, the two parcels, if developed, could produce roughly 875 barrels of oil and 23 million cubic feet of natural gas per year during active production. Based on the White House budget office’s 2025 price projections—used to estimate federal royalty revenue from onshore leases—royalties from that production could generate about $270,000 over a conservative 10-year lifespan. Under the previous 16.7% royalty rate, taxpayers would have received closer to $360,000—leaving roughly $90,000 on the table due to an outdated, below-market rate.

Questions remain about how replacement sales will be implemented in the future. Mandating additional sales after an auction attracts little industry interest makes no fiscal sense. The next replacement sale, scheduled for January 8 to replace the Quarter 4 lease sale in Colorado, appears to repeat the same nonsensical pattern, re-offering the same 20,451 acres that drew no bids in the previous sale. The OBBBA does not specify which parcels must be included in a replacement sale, however, and DOI may have the authority to change this approach moving forward.