On November 30th the Bureau of Land Management (BLM), under the Department of the Interior (DOI), held an auction for oil and gas leases in New Mexico and Oklahoma. The sale offered 6 parcels for sale in New Mexico, totaling more than 430 acres, and 3 parcels for sale in Oklahoma, totaling 120 acres. Between the two states, 554 acres were offered for sale.

This was the second federal oil and gas lease sale of the year in New Mexico and the first in Oklahoma. In the first New Mexico sale, 5,317 acres of land were leased.

All acres offered were bid on, generating more than $22.5 million in revenue for state and federal taxpayers. The average winning bid in New Mexico, at $51,623 per acre, is the highest average bid since 2009 and significantly higher than the state’s 2016-2020 average of $19,143 per acre. This result is in line with how competitive New Mexico has been, especially compared with other states, and indicates that although the DOI offered fewer acres in New Mexico in this sale, the acres offered had high potential for development and were therefore highly competitive. The average winning bid per acre in Oklahoma, $1,200 per acre, was also higher than the 2016 to 2020 average of $805 per acre.

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Federal oil and gas lease sales held in 2023 included important reforms made in the Inflation Reduction Act (IRA), including:

• A federal onshore royalty rate of 16.67% (raised from 12.5%)
• Rental rates of $3/acre for the first 2 years, $5/acre for years 3-8, and no less than $15/acre for years 9-10 (raised from $1.50/acre for years 1-5 and $2/acre for years 5-9)
• Minimum bid of $10/acre (raised from $2/acre)

In a May report, Taxpayers for Common Sense highlighted taxpayer losses from outdated oil and gas leasing terms in New Mexico. Over the last decade, federal and New Mexico taxpayers failed to secure $8 billion in potential revenue due to below-market leasing rates. Additionally, taxpayers have been left with over $1 billion in potential cleanup liability from orphaned wells in New Mexico.

The BLM recently proposed a new leasing rule that would codify the fiscal reforms made in the IRA and implement other needed changes, such as improving oil and gas bonding requirements. Additionally, the rule would help direct leasing to appropriate locations and increase processing fees, allowing the BLM to cover the cost of administering the federal oil and gas program.

So far this year, nearly 286,000 acres of federal land have been offered for oil and gas development of which 156,168 acres have been leased. Additional lease sales in Nevada and North Dakota will be held in December.