FOR IMMEDIATE RELEASE

Contact:
Ike Obi, ike@taxpayer.net
Taxpayers for Common Sense

Santa Fe, N.M. — As gasoline prices rise amid escalating conflict with Iran and renewed calls for expanded federal oil and gas leasing, a new analysis from Taxpayers for Common Sense (TCS) finds that outdated federal leasing policies have already cost New Mexico taxpayers billions of dollars over the past decade, even as drilling on federal lands in the state has reached record highs.

The findings come as policymakers increasingly push for more leasing and lower costs for oil and gas development in response to rising energy prices. But oil prices are set on global markets, and evidence shows that below-market federal leasing terms do little to affect prices at the pump while reducing the return taxpayers receive from publicly owned resources.

From 2015 through 2024, oil and gas production on federal lands in New Mexico generated great economic value, but taxpayers did not receive a fair return. The report finds that:

• About 4.1 million acres of federal public land in New Mexico are leased for oil and gas development.
• New Mexico and federal taxpayers missed out on an estimated $13.9 billion in royalty revenue because federal royalty rates were kept below market rates, including what is charged on neighboring state land.
• If federal bonding requirements for oil and gas wells are allowed to slip back to outdated minimums, taxpayers could face between $2.2 billion and $7.2 billion in future well cleanup liabilities.

If leases in New Mexico had carried an 18.75 percent royalty rate, consistent with rates commonly charged on state lands, instead of the 12.5 and 16.67 percent rates used for most of the last decade, total royalty collections would have been $13.9 billion higher. Nearly half of that—about $7 billion—would have gone directly into New Mexico’s budget to support public schools, roads, and other services.

“For years, outdated federal policies have allowed companies to extract publicly owned resources at bargain rates, shortchanging both federal taxpayers and New Mexicans,” said Autumn Hanna, Vice President of Taxpayers for Common Sense. “And every time gas prices rise, there are renewed calls to lease more public land at discounted rates, even though those policies do little to lower prices at the pump.”

The report finds that production in New Mexico remained strong under both higher and lower royalty rates. Recent lease sales in New Mexico remained among the most competitive in the country even when the federal royalty rate was temporarily increased to 16.67 percent. In 2023 and 2024, nearly all offered acreage in New Mexico received bids, and average bids per acre far exceeded the national average.

“New Mexico’s oil boom did not depend on discounted royalty rates,” Hanna said. “Companies lease and drill in New Mexico because the resource is profitable. Lowering royalty rates does not create demand or meaningfully change gasoline prices. It only reduces what taxpayers receive in return.”

The report also warns that weak federal bonding rules leave New Mexico communities exposed to large cleanup bills when wells are abandoned. Federal bonding levels historically covered only a small fraction of actual reclamation costs. Recent updates have lowered this shortfall, but efforts that could potentially repeal these common-sense requirements are underway. There are now more than 33,000 producing federal wells in the state. If bonding standards return to earlier inadequate levels, taxpayers could be left holding the bag for billions of dollars in plugging and cleanup work.

Charging below-market royalty rates has little, if any, impact on gasoline prices, which are set on global markets. Instead, it shortchanges taxpayers, especially when oil prices—and industry profits—are high.

“Right now, families are seeing higher prices at the pump because of global events,” said Hanna. “The answer is not to continue giving away publicly owned resources at below-market rates. Taxpayers deserve a fair return from oil and gas development on public lands..”

Hanna urged Congress and the administration to impose federal royalty rates that ensure taxpayers receive a fair return and bonding requirements that ensure taxpayers are not left with the cleanup bill. “For a state that produces more federal oil and gas than any other, the stakes could not be clearer,” she said. “Fair, modern leasing terms are about protecting New Mexico’s taxpayer dollars today and in the future.”

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