H.R. 7882, a bill to provide for the leasing of certain deposits of minerals located within the City of Carlsbad, New Mexico

Bill Summary

H.R. 7882 would authorize the Bureau of Land Management (BLM) to lease federal land within the city of Carlsbad, New Mexico, for subsurface mineral extraction, with the city’s consent. Under current law, mineral leasing generally is prohibited within most incorporated cities, towns, or villages.

Estimated Federal Cost

The estimated budgetary effects of H.R. 7882 are shown in Table 1. The costs of the legislation fall within budget function 300 (natural resources and environment).

Basis of Estimate

For this estimate, CBO assumes that the legislation will be enacted by the end of calendar year 2026. Based on the city’s support for existing federal subsurface leasing within its boundaries, CBO assumes that the city also would consent to any new leases.

Background

The Bureau of Land Management (BLM) administers onshore mineral leasing on federal lands. For all leasing agreements that are executed, lessees pay the federal government a bonus bid (the amount that a company is willing to pay for the right to extract mineral resources), annual rent to retain the agreement before production begins, and royalties based on the value of any oil or gas produced. Those payments are recorded in the budget as offsetting receipts; that is, as reductions in direct spending. Under the Mineral Leasing Act (MLA), states receive 49 percent of all royalties, rents, and bonus bids collected. The federal government generally does not collect any bonus bids, royalties, or rents from hardrock mining activities on federal lands.

Direct Spending

Based on information from BLM about existing activity within the region, CBO expects that the federal subsurface beneath the city has little potential for geothermal and coal resources but high potential for oil and gas resources.

Using information on the number of parcels of land available to be leased, CBO estimates that roughly 1,500 acres within the city would be leased for oil and gas production. Lessees have paid about $60,000 per acre in bonus bids to lease nearby federal lands outside the city’s boundaries. On that basis, CBO estimates that the federal government would collect roughly $90 million in gross bonus bids over the 2026-2036 period to lease the affected land. Given the current oil and gas activity in the region, CBO expects the parcels would be nominated and leased soon after enactment.

Annual rental payments range from $3 to $15 per acre, depending on the number of years since a lease was issued. At those rates, CBO expects that rental payments for leases within the city would total less than $500,000 over the 2026-2036 period.

Once production commences, lessees transition to paying royalties based on the value of any oil or gas produced. Based on nearby production, CBO estimates that leases within the city would produce 1.4 million barrels of oil and 11 million cubic feet of gas annually beginning partway through 2029 and continuing through at least 2036. Using the projections for oil and gas prices that underlie CBO’s February 2026 baseline, and applying the 12.5 percent royalty rate under current law, CBO estimates that gross royalties from oil and gas production would total $130 million over the 2026-2036 period.

After accounting for payments to states of 49 percent, CBO estimates that enacting H.R. 7882 would increase net federal receipts from mineral leasing on land beneath the city by $110 million and would thus reduce net direct spending by the same amount over the 2026-2036 period.

Spending Subject to Appropriation

Based on the costs of similar tasks, CBO estimates that any administrative costs incurred by BLM to implement the change in leasing eligibility would total less than $500,000 over the 2026-2031 period. Any related spending would be subject to the availability of appropriated funds.

Pay-As-You-Go Considerations

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays that are subject to those pay-as-you-go procedures are shown in Table 2.

Increase in Long-Term Net Direct Spending and Deficits

CBO estimates that enacting H.R. 7882 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2037.

Mandates

The bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

Estimate Prepared By

Federal Costs: Emma Uebelhor

Mandates: Erich Dvorak

Estimate Reviewed By

Ann E. Futrell
Chief, Natural and Physical Resources Cost Estimates Unit

Kathleen FitzGerald 
Chief, Public and Private Mandates Unit

H. Samuel Papenfuss 
Deputy Director of Budget Analysis

Estimate Approved By