The U.S. Interior Department has proposed a major rule change that could reshape onshore oil and gas development in the West. Under the plan, energy companies would be allowed to commingle production from multiple leases on a single well pad, a move that the department estimates could save the industry nearly two billion dollars a year and significantly boost domestic output.
In this article, I break down what commingling means, why it matters for profitability, how it could spur new development, and what it means for taxpayers, tribal communities and regulators.
What is commingling and why does it matter?
In its simplest form, commingling allows operators to combine oil or gas from different lease parcels—often federal, state or private—into a single well or equipment system. That is possible thanks to advanced metering and measurement technology. Commingling is already allowed in certain cases, but only if the leases involved have identical terms for mineral ownership, royalty payments and revenue distribution. That restriction often prevents projects in places like the Intermountain West or Rockies from moving ahead.
Right now, production equipment can only serve leases that are identical in their contractual terms. That technical limitation forces drillers to install separate pipelines, pumps and measurement systems for leases where the terms do not match—even where the wells feed into the same reservoir. It drives up costs, creates unnecessary surface disturbance and discourages development in complex land ownership areas.
Commingling enables operators to dedicate one well pad to multiple leases and still know exactly how much each lease yields through accurate metering at the site level. Royalty payments—whether to federal government, states or tribes—are calculated with precision. This flexibility can transform marginal leases into financially viable investments.
How the proposed rule could drive savings and new development
Interior estimates this rule change could save the industry as much as 1.8 billion dollars each year. That figure comes from avoiding duplicated equipment, bringing fewer pipelines to surface, cutting operational costs and reducing environmental impact. Energy analysts and the Western Energy Alliance argue that many projects in the Upper Green River Basin, Wyoming and elsewhere have been held up or abandoned because BLM has not approved commingling setups spanning mixed-ownership leases.
Because mineral ownership in Western states is often a checkerboard of federal, private and tribal parcels, strict commingling rules have restricted development even in areas rich with oil and gas. Modern measurement tools can now track production to the pad and even to the lease line, offering regulators and royalty recipients confidence in revenue allocation.
By allowing better use of existing infrastructure, regulators expect more efficient footprint management. Reducing the number of drilling pads, pipelines and access roads will benefit local ecosystems and reduce costs for operators and communities.
From a small producer perspective, especially independents in the Rockies, this rule could unlock fresh investment. Marginal wells that were previously uneconomical now make financial sense when the cost of drilling and operation is shared across several leases.
Onshore energy development and broader implications
Ease of commingling would fit neatly into a broader campaign to expand domestic energy production. This administration has made deregulation a key component of its policy agenda. Interior’s proposal follows earlier moves like accelerating lease reviews and opening more public land to oil and gas development.
But the benefits extend beyond production. District offices like BLM in Wyoming and Utah could issue fewer permits, freeing up staff for inspections, compliance and other duties. Reduced regulatory friction can also shorten project timelines, meaning wells come online faster and royalties begin flowing sooner.
Minimizing administrative costs and surface footprint aligns with a low intensity development philosophy. Regulators now acknowledge that modern rigs leave much smaller scars on the land compared to the 1970s era, further reducing resistance from local communities.
Furthermore, accurate royalty measurement through firm metering assures tribal governments and public treasury officials that they will receive fair compensation. Interior Secretary Doug Burgum emphasized that the old rules were outdated and that the updates will help taxpayers and tribes claim every dollar.
Risks and oversight concerns
The proposal is not without critics. Environmental groups worry that easier commingling may encourage drilling in fragile ecosystems with less scrutiny. They argue that grouping leases could reduce site-specific reviews if regulators are not careful.
Critics also point out that the Interior Department will need strong oversight systems to ensure metering stations remain tamper proof and accurate over time. There is concern that if measurement sites fail or are tampered with, royalty distribution could fall out of sync.
Royalty fraud and underreporting are historic risks in the industry. Tracking issues may arise, especially for small operators lacking robust integrity systems. Regulators would need to set strict testing and auditing requirements to ensure accuracy over the life of the well.
Another concern: if leases are commingled across state, private and federal parcels, disagreements over access and surface impact could emerge. Landowners and local governments have already raised questions about infrastructure projects that benefit from commingling but impact nearby roads, water or ecosystems.
What lies ahead
The proposal will now go through a public comment period. Industry groups like Western Energy Alliance are expected to lend vocal support. They argue that this is a common sense modernization that addresses outdated policy rather than substance.
Opponents may call for stricter environmental oversight or demand more stringent measurement standards. Be aware that the final rule may include conditions on surface disturbance, transport and spill prevention to offset development pressure.
If adopted, the change could open new plays in Wyoming gas fields, Utah oil fields and tribal lands in Montana and New Mexico. Shale or tight oil areas may not see as much change since surface rights are already consolidated.
If you work in exploration, production or energy investment, this could mark a turning point. Commingling offers a chance to unlock overlooked reserves in complex mineral regimes without sacrificing environmental responsibility.
The financial impact could be substantial. A study cited savings of nearly two billion dollars a year. That sum could support investment in enhanced recovery, new drilling technology or environmental protection programs.
For consumers, smaller operational cost may translate to modestly softer oil and gas prices down the road. National energy production is already strong, but this rule could amplify growth.
For local communities, it could mean more jobs, stronger royalties and a chance to see well managed development in places that were previously off the table due to complexity.
