On June 20, 2024, the Bureau of Land Management (BLM), under the Department of the Interior (DOI), held an auction for oil and gas leases on federal land in Kansas and New Mexico. The sale in Kansas offered 8 parcels, totaling 1,528 acres. The sale in New Mexico offered 11 parcels, totaling 1,600 acres. This was the fourth lease sale held by BLM in 2024, with sales previously held in Wyoming, North Dakota, Mississippi, and Montana and North Dakota.

In total, the BLM leased 3,128 acres of federal land for oil and gas development. The results of the lease sale varied greatly between the two states. In Kansas, only 3 parcels containing 76% of the offered acreage were leased – all of which were sold at the statutory minimum bid of $10/acre. Low bids are common in Kansas; the last lease sale held in Kansas, in May 2023, had an average bid of $13.32/acre.

In New Mexico, all the acres offered at auction were sold, with an average bid of $21,490/acre. New Mexico was the largest producer of federal oil and second largest producer of federal gas over the last decade. Last year’s oil and gas lease sales were similarly competitive; the state saw its highest annual average bid average bid per acre across all sales ($27,232/acre) in more than 15 years.

The leases sold in this most recent sale would come with leasing terms that reflect critical reforms enacted by Congress in 2022 and codified by the DOI in April, 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)

The leases would also include updated bonding rates included in the new leasing rule by DOI that would protect taxpayers from future cleanup liabilities.

Previously outdated leasing processes and below-market fees cost taxpayers big – especially in major oil and gas producing states like New Mexico. Between FY2012 and FY2021, taxpayers missed out on a staggering $8 billion in revenue lost under the 12.5% federal royalty rate (as opposed to a rate of 18.75%) and an additional $61.4 million in lost rental revenue and lost royalty revenue from gas waste. This lost revenue was compounded by the potential $1.05 billion in reclamation liabilities from currently producing wells in the state due to outdated bonding requirements.

Recent reforms have modernized the federal leasing system, helping secure a fair return for taxpayers and ensure we are not left with long term liabilities.