How will the Big Beautiful Bill’s reduced oil-and-gas royalty rates impact Wyoming?
A federal oil and natural gas lease sale in Wyoming this month netted $8.5 million for 32 parcels spanning 39,225 acres, according to the U.S. Bureau of Land Management.
The “bonus bid” proceeds are paid up front and split between the U.S. Treasury and the state. Companies also pay federal mineral royalties as they produce the petrol.
But the sale — the BLM’s third competitive oil and gas lease auction in Wyoming so far this year — and any resulting royalty payments will ultimately generate less revenue for American taxpayers than sales in the past, conservation groups and one taxpayer advocacy organization say.
The One Big Beautiful Bill, passed in July, reduced the royalty rate for federal oil and gas from 16.67% to 12.5%. If all 32 parcels in this month’s sale are fully developed, then the lesser royalty rate will reap an estimated $22 million less than under the previous royalty rate, according to calculations by Taxpayers for Common Sense. That would put Wyoming’s loss at $11 million.
Advocacy groups have also noted that a similar royalty rate reduction for federal coal will cost Wyoming about $50 million annually — a revenue loss that many state lawmakers want to rectify.
“Competitive, market-rate royalty rates do not affect industry interest or production decisions — lowering rates only shortchanges taxpayers by reducing future royalty revenue,” Taxpayers for Common Sense wrote.
An oil pumpjack in Wyoming. (Bureau of Land Management)
The BLM, under the Trump administration, doesn’t see it that way.
Instead, the reduced royalty rate “is expected to spur additional leasing and drilling activity, which in turn supports increased domestic energy production and strengthens U.S. energy security,” according to a BLM statement regarding the Wyoming lease sale.
Oil and gas industry officials in Wyoming agree.
“It simply isn’t true to claim that higher royalty rates always result in more revenue for the federal government,” Petroleum Association of Wyoming President Pete Obermueller told WyoFile.
The Inflation Reduction Act increased the federal oil and gas royalty rate from 12.5% to 16.67% in 2022, Obermueller noted. “Total royalties paid by Wyoming’s industry decreased by 17% from 2022 to 2023,” he said. “In 2024, while still under the IRA-mandated higher royalty rate, federal royalties decreased again, this time falling by a whopping 30%.”
Compounding the issue, conservation groups contend the industry is nominating and acquiring federal oil and gas lease parcels beyond the typical “speculation” required to suss out the potential productivity of new areas. The type of speculation alleged by some conservation groups is to simply hold some areas open to future development, where they fear environmental restrictions in the future might keep them out.
The industry holds a vast amount of federal oil and gas leases that it has not acted on, they note.
One piece of evidence the taxpayer advocacy group points to is what they say is an uncommonly low average dollar-per-acre among successful bids in this month’s lease sale in Wyoming.
“More than 90% of acres [in Fremont and Natrona counties] were leased for less than $40 per acre,” Taxpayers for Common Sense said. In contrast, some of the highest winning bids were for parcels in Converse and Campbell counties — a highly active oil play — fetching more than $1,000 per acre, including one in Campbell County for $4,612 per acre, based on BLM reports.
The accusation of speculation, or buying federal oil and gas leases to fend off future environmental limitations to development, “is an odd concept,” and doesn’t hold water, according to Obermueller.
“Every single lease ever offered is, at one point, speculative,” he said. “People forget that oil and natural gas must first be found before it can be produced.”
Oil and gas companies that bought federal leases in the Jonah Field in the late 1990s or early 2000s, for example, were considered by some within the industry to be risky, at best, Obermueller suggested. “They paid off quite handsomely for Wyoming.
“Wyoming,” Obermueller continued, “is exciting to oil and gas operators precisely because we are still exploring for resources and testing the horizontal and vertical bounds of oil and natural gas basins. If so-called ‘speculative’ leasing were not allowed, then there would no longer be a mechanism for exploring in Wyoming.”
The BLM’s lease sale this month is the first to “fully” implement myriad new policies under the Trump administration, Lander-based Wyoming Outdoor Council Conservation Director Alec Underwood told WyoFile. The concern laid out by Taxpayers for Common Sense — that the average per-acre bid price suggests overt speculation — he said, holds some merit.
“Only a very small percentage of acres purchased in the sale, 7%, accounted for more than 80% of auction revenue. This points to many of the parcels being leased through speculation,” Underwood said. “Rather than offering a fire sale of leases in important habitat such as crucial winter range for ungulates, we should be prioritizing leasing in areas that are likely for production and adjacent to existing development.”
The BLM’s next quarterly oil and gas lease sale in Wyoming will take place in December. Go to this BLM webpage for more information.
