Oil and gas on federal lands belong to American taxpayers. In exchange for the right to develop public resources for private profit, companies pay royalties on the value of resources extracted and sold. Unfortunately for taxpayers, the federal royalty rate is outdated and below-market, well below what major producing states charge on their own lands. That difference costs federal and state taxpayers billions in potential revenue.
On September 23, 2026, Taxpayers for Common Sense released Royalty Rip-Off, examining what taxpayers received from federal oil and gas production between 2016 and 2025, how federal royalty rates compare with state rates, and what updating those terms could mean for public revenue and energy development.
Key Findings:
- Federal and state taxpayers could have collected roughly $25 billion more between 2016 and 2025 under a 18.75% royalty rate.
- Nearly half of that additional revenue would have gone to the states where production occurred.
- Congress returned the minimum royalty rate for new federal onshore leases to 12.5% in 2025, the same minimum established in 1920.
- Almost all oil- and gas-producing states charge a higher royalty rate. Texas typically charges 20% to 25% on state lands, while New Mexico charges 18.75% to 25%.
- Analyses by the Congressional Budget Office and Government Accountability Office found that higher federal royalty rates could increase revenue with little or no effect on production.
Read the full report below or download it here.
