Mineral Leasing Act of 1920

• DATE: Took effect February 25, 1920; subsequently amended many times

The purposes of the US Mineral Leasing Act were to expand the government’s control over public mineral lands, to promote the development of oil and gas deposits on public lands by private enterprise, and to promote the wise use of selected minerals with a reasonable financial return.

Background

Nearly 28 percent of the land in the United States is owned by the federal government. These public lands are concentrated in the West and Alaska and are important sites for mineral resources. The Mineral Leasing Act of 1920 was enacted to establish a system for developing energy minerals (coal, oil shale, oil, and gas) and certain soft-rock minerals (phosphate, potassium, sodium, sulfur, and native asphalt) on onshore public lands. The goals of the act were to expand the secretary of the interior’s control over specific minerals on public lands, to promote the development of oil and gas deposits on public lands by private companies, and to promote the wise use of natural resources while receiving a reasonable financial return for the public.

Provisions

The primary system for mineral development on public lands is based on the Mining Act of 1872. This location system cedes government ownership of commercial mineral deposits to private parties who discover them; no royalty (a share of revenue) is paid to the government. This system did not work for oil and gas deposits or for a mineral of strategic concern, such as coal (essential for the steam-powered Navy of the early 1900s). Problems with developing these types of minerals forced several presidents to withdraw sections of public lands from potential mineral development, seeing this as the only alternative to the existing system. The Mineral Leasing Act created a leasing system as the method for developing these types of minerals.

Impact on Resource Use

The core of any leasing system is the allocation of leases. With a lease, the government maintains ownership of the mineral deposit but grants the right to exploit the mineral values to a private party for a set period of time. The government receives a royalty on any production that occurs. The government can control which properties are developed, who develops them, and the financial returns. The method for allocating leases and the amount of royalty to be paid vary. Coal and oil and gas leases for known deposits are granted under a competitive bidding scheme. The producers must pay at least a 12.5 percent royalty. In addition, sealed bonus bids are made. A bonus bid is an upfront cash payment. The highest bidder receives the lease if the bid is considered adequate. For other properties, a noncompetitive bidding system is used; this may be a lottery or a first-come, first-served system. A royalty still must be paid on production. Typically, this royalty is 12.5 to 16 percent. Sometimes the royalty is much less if the government wishes to encourage production. The 2022 Inflation Reduction Act increased minimum royalties for new onshore oil and gas leases to 16.67 percent. Minimum bids and annual rental rates also increased significantly. However, the 2024 Reconciliation Act repealed the royalty rate to the former 12.5 percent. Also in 2024, the Bureau of Land Management finalized the Onshore Oil and Gas Leasing Rule, which eliminated noncompetitive leasing, amended lease development standards, and increased royalty rates to 16.7 percent, among other changes.

Bibliography

"Mineral Leasing Act." International Energy Agency (IEA), 22 Jan. 2025, www.iea.org/policies/15000-mineral-leasing-act. Accessed 22 Nov. 2025.

"Mineral Leasing Act of 1920 as Amended." Bureau of Land Management, www.ntc.blm.gov/krc/system/files?file=legacy/uploads/9618/Mineral%20Leasing%20Act.pdf. Accessed 22 Nov. 2025.

"Mineral Leasing Act of 1920 (30 USC Chapter 3A)." Food & Drug Agriculture Organization of the United Nations, 6 Sept. 2024, www.fao.org/faolex/results/details/en/c/LEX-FAOC198940. Accessed 22 Nov. 2025.

Vann, Adam. "Energy Production on Federal Lands: Leasing and Authorization." The Congressional Research Service, 19 July 2024, www.congress.gov/crs-product/R48130. Accessed 22 Nov. 2025.

Western, Samuel. "The Mineral Leasing Act of 1920: The Law That Changed Wyoming’s Economic Destiny." Wyoming Historical Society, 8 Nov. 2014, www.wyohistory.org/encyclopedia/mineral-leasing-act-1920-law-changed-wyomings-economic-destiny. Accessed 22 Nov. 2025.