Background on oil and gas leases

Who Owns the West?

How much do leases cost?

On auction day or at a time specified by an authorized officer, winning bidders pay an administrative fee of $75 per lease, the first year's rent of $1.50 per acre, and at least $2 per acre of their "bonus bid." (The minimum bid is $2 per acre; the bonus bid is what bidders offer above the minimum.) Winning bidders pay the balance of the bonus bid to BLM within 10 working days of the auction.

In addition to the initial payment, lessees pay rental rates of $1.50 per acre for the first five years for all leases beginning after December 22, 1987. Rates are $2 per acre for any additional year. Other rates may apply for leases that began prior to December 22, 1987. Rates can reach $10 per acre or higher for leases that are terminated and subsequently reinstated.

Lessees generally do not pay rent on land for which they are paying royalties (CFR Leasing Fees 2004).

What production royalties are paid to the government by oil and gas lessees?

Lessees pay a royalty of 12.5 percent to the Department of the Interior's Minerals Management Service on the amount or value of the oil or gas removed or sold from each lease. Lessees must pay a minimum royalty at the end of each year beginning on or after a discovery of oil or gas in paying quantities (CFR Oil and Gas Royalty 2004).