The Highlights

• Fourth oil and gas lease sale in North Dakota this year.
• In total, 3,227 acres of public land were offered and leased for oil and gas development, all at the reduced 12.5 % royalty rate.
• Individual parcels sold for between the minimum bid of $10 and as much as $11,000 per acre.
• Taxpayers could receive $15.7 million less in royalty revenue from future oil and gas production on these leases than under the previous 16.67% rate. Roughly half of that shortfall would fall on North Dakota.

On October 27, the federal government offered and leased 3,227 acres of public land in North Dakota 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 $15.7 million in royalty revenue over the life of these leases compared with the previous 16.67% rate. Roughly half of that lost revenue would otherwise go to North Dakota.

This sale adds to mounting projected losses. TCS estimates that taxpayers could receive more than $1.7 billion less in royalty revenue from future production on leases sold since July 4, 2025, when the FY2025 reconciliation law reduced the federal onshore royalty rate to 12.5%, below what states and private landowners typically charge.

Lease Sale Results:

North Dakota is the third-largest producer of oil and fifth-largest producer of natural gas from federal lands. Over the last decade, companies have produced $27.6 billion worth of oil and gas from federal lands in North Dakota. Despite this, taxpayers failed to receive the full value of those publicly owned resources because federal leasing terms were set at below-market rates.

Today’s sale offered and leased 19 parcels totaling 3,227 acres. Competitiveness varied widely, with parcels selling for between $10 and $11,000 per acre. Eighty precent of the land offered and leased was located in McKenzie County, the state’s largest producer of federal oil and gas. Parcels there leased for an average bid of $6,298 per acre.

Below-Market Royalty Rates Waste Millions in Taxpayer Revenue

Unfortunately for taxpayers, all parcels leased today carry a 12.5% royalty rate, reducing the public’s share of revenue from any oil and gas produced from these leases.

Leasing decisions are driven by development potential and market conditions. Operators lease where there is strong development potential. Historic leasing data supports this point. Across the country, average bids at competitive auctions were actually higher under the 16.67% royalty rate that was in place in 2023 and 2024 ($978 and $2,149 per acre, respectively) than they had been during the preceding decade under the lower 12.5% rate ($379 per acre from 2013-2022). The same pattern holds true for federal leases in North Dakota, where average bids were slightly higher under the raised 16.67% rate (roughly $2,200 per acre) than under the previous 12.5% rate (roughly $2,000 per acre).

The current 12.5% royalty rate is below the rates charged by states including North Dakota, which imposes a minimum rate of 16.67%. Other states with significant oil and gas deposits, including Texas and New Mexico, charge rates of 18.75% to 25%.

According to a new report from TCS, taxpayers could have received an additional $1.8 billion over the last decade from federal oil and gas production in North Dakota under an 18.75% royalty rate. Since roughly half of federal royalty revenues are shared with states, North Dakota taxpayers lost out on nearly $1 billion over the last decade. This funding could have supported public schools, infrastructure, and other local priorities.

The Bureau of Land Management (BLM) estimates that the parcels leased today could ultimately lead to 16 oil wells producing 5.6 million barrels of oil over a productive lifetime of 10 years. Based on the White House Office of Management and Budget FY2026 price projections, which are used to estimate federal royalty revenue from onshore leases, the production could be worth roughly $377 million. At the 12.5% royalty rate, federal and state taxpayers would receive a combined $47.2 million in royalty revenue, roughly $15.7 million less than what would have been received under a 16.67% rate. This total production value estimate does not include any associated gas produced from these oil wells, as BLM did not provide such estimates, meaning that taxpayer losses could even be greater.

New Federal Proposal to Lower Oil and Gas Bonding Rates 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 help ensure that producers pay to clean up these potentially hazardous and environmentally harmful sites, they must post a bond before drilling begins. If a company completes the required cleanup, the bond is returned. 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, BLM proposed to lower minimum bond requirements to their decades-old minimums of $10,000 for an individual lease and $25,000 for all wells in a state. In 2023, these inadequate minimums led to average bond coverage of just $3,873 per well, just 5% of the average cost of reclamation. If outdated bonding requirements return, TCS estimates that the federal government would hold only $13.2 million in financial assurances for the 3,408 oil and gas wells producing on federal lands in North Dakota, leaving taxpayers exposed to approximately $229 million in potential future cleanup liabilities.

That estimate covers existing producing wells statewide, not the parcels sold today. Without adequate safeguards, development on the leases issued today could add to those liabilities.

Updating Leasing Terms Can Support Responsible Development, Generate Revenue, and Protect Taxpayers

Oil and gas developed on federal land belongs to the American people, and leasing terms should ensure taxpayers receive a fair return from the development of these valuable resources. For North Dakota, that means protecting the state’s share of royalty revenue and ensuring companies cover the cost of cleaning up after production ends.