The Trump Administration’s public lands fire sale continues. Between now and the end of the year, the Administration is planning to offer more than half a million acres of public land to private companies to drill for oil and natural gas. This is on top of the nearly 800,000 acres already leased this year. If the sheer acreage isn’t enough to boggle your mind, here’s the kicker — all of it is being offered to oil and gas companies at discounted rates. That’s right, leased under outdated, below-market terms that will shortchange taxpayers by billions, not just next year or the year after, but for decades to come.
America’s public lands and natural resources belong to taxpayers. The federal government manages the development of our publicly owned oil and natural gas by leasing land to private companies to extract these resources and sell them for profit. In exchange, companies pay for that right through bids at auction, rental fees, and royalties on the value of any resources extracted and sold.
Taxpayers should be compensated fairly throughout the leasing process, but royalties are the real money-maker. In 2025, the Department of the Interior collected $6.9 billion in oil and gas royalties, accounting for 90% of revenue from all mineral and energy resources from public lands, including coal and geothermal. The current royalty rate is 12.5%, meaning taxpayers get 12.5 cents for every dollar of oil and natural gas extracted and sold from federal lands. And as the price of oil and natural gas rises, so does royalty revenue.
Unfortunately for taxpayers, the federal royalty rate is well below the normal market rate. Think of a state known for oil and natural gas. Texas? Charges 20% to 25%. New Mexico? Charges 18.75% to 25%. Colorado, North Dakota, Oklahoma, Pennsylvania, Utah, and Wyoming? Charge 16.67% to 20%. All while American taxpayers are stuck at 12.5%.
Why 12.5%? You’ll have to travel back to 1920 and ask Congress. The rate was first set more than a century ago, and while the oil and gas industry and the technologies they use have changed a lot since then, the rate barely has. Congress finally raised it in 2022, only to lower it again in 2025. So, congratulations to the oil and gas industry. It took more than a century to raise your royalty rate, and just three years to haggle your discount back.
And low royalty rates aren’t needed to encourage production. The evidence shows that low rates don’t change where oil and gas companies want to develop. No, oil and gas companies drill where there is oil and gas. And they overwhelmingly decide when and how much to produce based on the global economy. Texas has consistently been the top producer of both oil and gas even with a 25% rate. And during the short period when the federal government charged a higher rate, taxpayers saw more competitive bids at auction.
What we do know is that the difference between a low rate and a competitive one means real money for federal taxpayers and state budgets. Funding for schools, roads, and hospitals that is instead lining the pockets of Big Oil.
Our new report, Royalty Rip-Off, found that taxpayers would have received $25 billion more in revenue over the last decade if an 18.75% royalty rate had applied instead of the grossly outdated 12.5% rate. Of that, $12.4 billion would have gone to the federal Treasury and $12.4 billion to the states where development takes place.
These losses are mounting with every new lease sold. Once a parcel of federal land is leased, the terms and conditions are locked in for the lifetime of the lease, potentially decades if the oil keeps flowing. And we’re keeping track. So far, we’ve identified $1.6 billion in projected royalty losses from oil and natural gas produced under leases issued since Congress lowered the royalty rate back to 12.5%.
So the Administration’s upcoming calendar of lease sales is no joke. A combined 574,000 acres of public land across the western and central U.S. are on the auction block.
Some auctions are in states with substantial oil and natural gas production on federal lands, like Wyoming (250,000 acres), Colorado (126,000 acres), Utah (75,000 acres), and New Mexico (5,140 acres). All offered at a 12.5% royalty rate. Companies now have another opportunity to lock in discounts that could cost American taxpayers for decades.
Other auctions are in states with little prospect of oil or natural gas production, like Arizona (78,000 acres), which has never produced oil or natural gas on federal lands, and Nevada (3,000 acres), where 94% of previously leased land sits idle. Offering land that is unlikely to attract bids wastes agency time and resources. And leasing land that is unlikely to ever be developed can block better uses, like recreation or other resource development.
No matter the state, public lands and the resources they contain belong to American taxpayers. The Department of the Interior is charged with managing those lands for taxpayers. But that is not happening right now. Bargain-basement level royalty rates are not in taxpayers’ best interests. We can’t afford to keep handing the oil and gas industry discounts at taxpayers’ expense. It’s time for a change.
- BLM Photo
