The Highlights

• Second federal oil & gas lease sale in New Mexico this year and the state’s largest since 2020. First federal oil & gas lease sale in Texas.
• In total, 33,530 acres of public land were offered and leased at below market rates.
• The sale was highly competitive, with an average bid of more than $120,00 per acre in New Mexico, suggesting industry interest would have remained strong under higher royalty rates.
• TCS estimates taxpayers will lose $189 million in royalty revenue from future production on these leases.

On May 20, the federal government leased 33,530 acres of public land in New Mexico and Texas for oil and gas development at the recently reduced federal royalty rate of 12.5%. The result is an estimated $189 million in lost royalty revenue over the life of these leases.

This sale adds to mounting losses. TCS estimates that taxpayers have already lost more than $1 billion in projected royalty revenue from leases sold since July 4, when the One Big Beautiful Bill Act (OBBBA) reduced the federal onshore royalty rate to 12.5%, below what states and private landowners typically charge.

Today’s sale offered 73 parcels of public land in New Mexico totaling 33,374 acres and one parcel in Texas totaling 156 acres. All available acreage was leased.

New Mexico sits at the center of federal oil and gas production. Over the last decade, it has consistently ranked as the largest producer of federal oil and, in recent years, the largest or second-largest producer of federal natural gas. Oil production on federal lands in the state has increased nearly fivefold over the last decade, while gas production has nearly doubled. Lease sales in New Mexico have also remained among the most competitive in the country. In 2025 alone, nearly all acreage offered in the state received bids and the average bid per acre exceeded the average in every other state.

By contrast, there is relatively little federal leasing in Texas. As of the end of FY2025, there were only 457 active federal leases in the state, compared to roughly 7,600 in New Mexico. Over the last decade, Texas accounted for less than 0.1% of oil and roughly 1% of natural gas produced on federal lands.

Leasing decisions are driven by development potential and market conditions. Competitiveness in today’s sale varied widely. Parcels sold for between $11 per acre and $357,129 per acre. Land in Lea and Eddy Counties, the largest producers of federal oil and gas in New Mexico, received the highest bids, averaging roughly $140,000 per acre and $119,000 per acre respectively. Land in Quay County, which produces no federal oil and little federal gas, received the lowest bids, with the three available parcels selling for between $11 and $12 per acre. Operators lease where there is strong development potential, a factor driven largely by the specific parcels included in a sale.

Competitive, market-based royalty terms do not deter industry interest or production decisions. The five lease sales held in New Mexico under the previous 16.7% royalty rate generated a higher average bid per acre than sales held during the previous decade under the 12.5 percent rate. The same pattern held for the lease sale conducted in Texas under the higher rate.

The lower royalty rate used in today’s sale did not make these leases more competitive. It simply reduced future royalty revenue. Our new report found that in New Mexico alone, taxpayers lost an estimated $13.9 billion in revenue from FY2015-2024 under the 12.5% rate compared to an 18.75% rate. With oil and gas production reaching record highs across the country, those losses are likely to continue growing. Because royalty revenue is shared between the federal government and states, New Mexicans also lose funding that could otherwise support schools, infrastructure, and other public priorities.

The Bureau of Land Management estimates the parcels sold today could ultimately produce 56 million barrels of oil and 190 billion cubic feet of natural gas. Based on the White House Office of Management and Budget’s FY2026 price projections, used for estimating federal royalty revenue from onshore leases, that production could be worth roughly $4.5 billion over the life of the leases. At a 12.5% rate, taxpayers would receive about $566 million, roughly $189 million less than they would under a 16.67% rate.

Oil and gas resources developed on federal lands belong to the American people, and leasing terms should ensure those resources are not sold for less than they are worth.