Interior proposes new royalty rules for oil, gas and coal

The Interior Department has proposed new federal royalty rules for oil, gas and coal produced on public lands. The draft comes from the Office of Natural Resources Revenue, or ONRR, and it would change how production is valued for royalty purposes. It is still only a proposed rule.

One major change would expand the index-based valuation option to arm’s-length Federal gas and NGL sales. The proposal would also switch the gas benchmark from the highest bidweek price to the average bidweek price, which ONRR says would better reflect market value and simplify reporting.

ONRR also wants to remove the default provision and the associated misconduct definition from the regulations. The agency says the old language has created ambiguity and inconsistent application. The proposal also sets out the standard of review and timeliness for Director-level appeals.

The preliminary analysis attached to the draft estimates a net annual decrease of about $331 million in royalty collections if the rule is finalized, along with about $2 million in reduced administrative costs for lessees. The public-inspection copy shows the rule was scheduled for Federal Register publication on June 30, 2026, and comments are due 60 days after publication.

What happens next

The immediate question is whether the final rule should keep these valuation changes, scale them back, or drop them. For energy companies, state revenue watchers, and taxpayers, the practical issue is how much federal royalty revenue Interior is willing to trade for simpler reporting rules.

Sources

• U.S. Department of the Interior press release on proposed royalty rule
• Federal Register public inspection draft: proposed ONRR royalty valuation rule
• Federal Register issue for June 30, 2026