Oil Giants Face New Royalty Rules on Federal Lands
Published Date: 4/29/2026
Rule
Summary
Starting June 29, 2026, new rules will update how fees, rents, and royalties work for oil and gas companies leasing federal land. These changes come from a big new law passed in 2025 and could affect how much companies pay and when. If people have big concerns, they can speak up by May 29, 2026, before the rules kick in.
Analyzed Economic Effects
5 provisions identified: 2 benefits, 2 costs, 1 mixed.
New Federal Lease Rate Set at 12.5%
Starting June 29, 2026, the rule sets the royalty rate for production from newly issued Federal onshore oil and gas leases to be "not less than 12.5 percent." This reverses the 16.67 percent rate that was required under prior law and applies to leases issued after the One Big Beautiful Bill (OBBB).
Non-Competitive Leases Have 12.5% Rate
The rule explicitly sets the royalty rate for all non-competitive Federal oil and gas leases at 12.5 percent. This change is included in the revised text of 43 CFR 3103.31(a)(3).
Reinstated Leases Face Higher Formula
For reinstated Federal oil and gas leases, the rule sets the royalty rate equal to the rate used for new leases at the time of reinstatement plus 4 percentage points, plus an additional 2 percentage points for each succeeding reinstatement, and states the royalty on reinstated leases will be at least 16.67 percent.
Government Revenues and Production May Shift
The rule explains that incremental or decremental changes in royalties change revenue to the U.S. Government, State governments, and funds, and that economic theory suggests Federal oil or gas production may increase under the OBBB provisions compared to the prior IRA provisions.
Existing Higher-Rate Leases Remain Unchanged
The rule states it does not amend existing oil and gas leases that already have royalty rates higher than 12.5 percent; those leases will remain at their current rates. The BLM says it will take separate action to implement the royalty change for future leases.
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Key Dates
Department and Agencies
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