If you're feeling that, you know, "big gub'mint," might not be the problem behind recent price surges, you're not alone.

The average royalty and lease costs for oil producers extracting petroleum from government lands have recently increased. As of 2025, the minimum royalty rate for oil and gas production on federal lands is 16.67%, up from the previous rate of 12.5%25. This change was implemented as part of the Biden administration's efforts to generate more revenue for taxpayers and better reflect the value of public resources.

In addition to royalties, oil companies must now pay higher fees for leasing federal lands:
Minimum bid price: Increased from $2 per acre to $10 per acre. Annual rental rates: Now start at $3 per acre for the first two years, increase to $5 per acre for the next six years, and then rise to $15 per acre afterwards. Bonding requirement: Increased from $10,000 to $150,000 per lease.

It's worth noting that royalty rates on state and private lands are often higher than federal rates, typically ranging from 12% to 25%1. For example:
• Texas has the highest royalty rates at 20-25%.
• Royalties in the Permian Basin (Texas-New Mexico) and North Dakota Bakken Basin range from 18-20%.
• Many western states charge royalties of 16.67%.

These changes aim to ensure a fair return to taxpayers for the extraction of public resources and to cover potential cleanup costs. The government projects that these new rules will result in approximately $1.5 billion in increased costs for fossil fuel companies between now and 2031.

Supporters of Big Oil will blame these fees for the high price of retail gasoline, etc. However, the profit motive remains the main driver behind short term pricing.

Bottom line, for every dollar received by the actual property owners of public land (just to be clear, that's the public), The producers take 83.3%. The 15% increase in royalties & leases under the Biden administration will amount to about $1.5 billion.

At the same time, based on recent data, oil companies have been earning substantial revenues from oil extracted from public lands, with significant profit margins.

Here are the key details:

Industry revenue for oil drilling and gas extraction in the US reached an estimated $488.5 billion in 2025, growing at a compound annual growth rate (CAGR) of 10.6% over the past five years.

Profit margins for the largest companies in the industry are considerable:
The top company had a profit margin of 25.2% in 2025, with revenues of $31.26 billion and profits of $7.86 billion.
The second-largest company had a profit margin of 22.8%, with revenues of $26.26 billion and profits of $5.98 billion.
The third-largest company had a profit margin of 14.0%, with revenues of $23.02 billion and profits of $3.23 billion.

Specifically for public lands, revenues from oil and natural gas leases on onshore federal lands totaled $4.202 billion in fiscal year 2019, representing 86% of total federal revenues from these resources.

The oil and gas industry has maintained strong profitability despite fluctuations in oil prices. From 2014 to 2023, the industry saw a 7% rise in net income, even with an 18% drop in oil prices. Cue recording, "nice work if you can get it."

It's important to note that these figures represent the overall industry, including both public and private lands. The profitability of operations specifically on public lands may vary depending on factors such as royalty rates, lease costs, and production levels.

And there you have the facts behind "drill, baby, drill."

Yesterday in W. Washington, regular gas was $4.29.


(Footnotes omitted. ––RC)