On July 4, 2025, President Trump signed a reconciliation bill that contains numerous provisions affecting oil and gas leasing and development on onshore federal lands. Some provisions repeal elements of the 2022 Inflation Reduction Act (IRA), while other provisions react to administrative and regulatory efforts that constrain federal oil and gas leasing.
Rollback of the IRA’s increased royalty rate on new federal onshore oil and gas leases.
The IRA had amended section 17(b)(1)(A) of the Mineral Leasing Act (MLA), 30 U.S.C. § 226(b)(1)(A), to increase the royalty rate on new onshore federal oil and gas leases from a minimum of 12.5% to 16 2/3%. Section 50101(a)(1) of the Reconciliation Act repealed this IRA provision and restored section 17(b)(1)(A) of the MLA “as if [the IRA] had not been enacted into law.”
The IRA also had established a baseline 16 2/3% royalty for reinstated leases. The Reconciliation Act similarly repealed this royalty rate applicable to reinstated leases.
Importantly, the Reconciliation Act did not undo all of the IRA’s changes to the terms of new onshore oil and gas leases. Section 50262(b) and (c) of the IRA amended the MLA at 30 U.S.C. § 226(b)(1)(B) and (d) to increase the minimum bid and annual rental rates for onshore oil and gas leases. The Reconciliation Act left these amendments intact.
Circumscription of the Secretary’s discretion to lease lands for oil and gas development.
Prior to the Reconciliation Act, the MLA afforded the Secretary of the Interior discretion to lease a given parcel of land for oil and gas development. Specifically, 30 U.S.C. § 226(a) provided that the Secretary “may” lease lands known or believed to contain oil and gas deposits. Courts had interpreted this statutory mandate as affording the Secretary broad discretion to determine whether to lease lands.
Section 50101(d) of the Reconciliation Act eliminated this discretion. The Reconciliation Act replaced 30 U.S.C. § 226(a) with a requirement that the Secretary must lease those lands for which the Secretary receives an expression of interest for leasing. The Secretary must make such lands available for leasing within 18 months of receiving the expression of interest, so long as those lands are designated as open to leasing under the applicable resource management plan (RMP) when the expression of interest is submitted.
The Reconciliation Act also amended 30 U.S.C. § 226(a) to provide that an ongoing RMP amendment “shall not” prevent or delay the Bureau of Land Management (BLM) from offering lands for lease.
Limitation on oil and gas lease stipulations.
Section 50101(d) of the Reconciliation Act amended 30 U.S.C. § 226(a) to prohibit BLM from attaching stipulations or mitigation requirements to oil and gas leases that are not included in the applicable RMP.
Promotion of quarterly onshore oil and gas lease sales.
The Reconciliation Act promotes quarterly onshore oil and gas lease sales, presumably in response to the Biden administration’s pause on onshore lease sales in 2021 and 2022.
The MLA requires that the Secretary, through BLM, hold lease sales “at least quarterly” in each State “where eligible lands are available.” 30 U.S.C. § 226(b)(1)(A). While the Reconciliation Act did not amend the MLA’s direction that BLM hold quarterly lease sales, section 50101(c) of the Reconciliation Act separately directs that the Secretary “shall conduct a minimum of 4 oil and gas lease sales of available land” each fiscal year, i.e., October 1 through September 30, in Wyoming, New Mexico, Colorado, Utah, Montana, North Dakota, Oklahoma, and Nevada.
Additionally, section 50101(b)(3) of the Reconciliation Act amended the MLA to define “eligible lands” as “all lands that are subject to leasing under [the MLA] and are not excluded from leasing by a statutory prohibition.” This change modifies BLM’s longstanding definition of “eligible” set forth in an agency handbook, which defined “eligible” as “available for leasing when all statutory requirements and reviews, including compliance with the National Environmental Policy Act (NEPA) of 1970, have been met.” With this change, Congress indirectly rebuked the Biden administration’s position that BLM could decline to hold quarterly lease sales when BLM had not completed NEPA reviews prior to leasing.
Furthermore, section 50101(b)(3) of the Reconciliation Act amended the MLA to define “available” lands as “designated as open for leasing under a land use plan developed under section 220 of the Federal Land Policy and Management Act of 1976 (43 U.S.C. 1712) and that have been nominated for leasing through the submission of an expression of interest, are subject to drainage in the absence of leasing, or are otherwise designated as available pursuant to regulations adopted by the Secretary.”
To further promote quarterly sales, the Reconciliation Act directed that BLM:
- Conduct any lease sale required by the MLA “immediately on completion of all applicable scoping, public comment, and environmental analysis requirements” under the MLA and NEPA (§ 50101(b)(2)(A));
- Conduct the scoping, public comment, and environmental analysis requirements under the MLA and NEPA “in a timely manner” (§ 50101(b)(2)(B));
- Shall not offer less than 50 percent of available parcels nominated for lease under a given RMP (§ 50101(c)(2)(A));
- Shall not restrict parcels offered at a quarterly sale to those located in one BLM field office, unless all nominated parcels are in that one field office (§ 50101(c)(2)(B)). This prohibition prevents BLM from reinstituting a directive in a 2010 BLM instruction memorandum, No. 2010-117, that quarterly lease sales should rotate among field offices in a given state. The effect of this directive had been that BLM offered parcels for lease in given field office only once or twice a year.
Finally, section 50101(d) of the Reconciliation Act directed BLM to conduct replacement lease sales when a lease sale is cancelled, delayed, or deferred or when less than 25% of acreage offered a lease sale does not receive a bid.
Elimination of expression of interest fees.
The IRA had amended the MLA, 30 U.S.C. § 226(q), to impose a $5 per acre fee on expressions of interest. Section 50101(d) of the Reconciliation Act eliminated this fee.
Restoration of noncompetitive leasing.
Section 50262(e) of the IRA had eliminated noncompetitive onshore oil and gas leasing. Section 50101(a)(2) of the Reconciliation Act restored noncompetitive leasing.
Elimination of the royalty on extracted methane.
Section 50103 of the Reconciliation Act repealed the royalty on methane that the IRA imposed on federal onshore and offshore leases issued after August 16, 2022.
Authorization of commingling approvals.
Section 50101(d) of the Reconciliation Act amended the MLA, 30 U.S.C. § 226(p), to authorize the commingling of production from two or more federal leases or other sources. The amendment provides some relief from the stringent commingling regulations at 43 C.F.R. Part 3170, Subpart 3173, that BLM adopted in 2016.
The amendment requires BLM to approve commingling applications if the applicant agrees to:
- Install measurement devices for each source;
- Utilize a method to allocate production between sources that “achieves volume measurement uncertainty levels within plus or minus 2 percent during the production phase reported on a monthly basis,” or
- Utilize an approved periodic well testing methodology.
In a press release, the Department of the Interior announced it would initiate a rulemaking to implement this provision.
Adjustment of the duration of applications for permits to drill (APDs).
Section 50101(d) of the Reconciliation Act amended the MLA, 30 U.S.C. § 226(p), to establish a single, non-renewable four-year term for APDs approved on or after July 4, 2025. The amendment effectively supersedes BLM’s 2024 regulation at 43 C.F.R. § 3171.14(a) establishing a three-year term for AP.