Bumpy, if an oil well drilling pad (the surface location of the drilling rig) is on someone's land, that landowner is compensated (amount varies with where it is located). The neighbors are generally not compensated. ("Fairness" of that can be discussed elsewhere.)
If the drilling targets minerals (oil, in this discussion) under the public land (through directional/horizontal drilling), and the public entity owns the minerals, then the public entity does get a royalty, if minerals (oil) are produced.
This is a bit out of the realm of the current discussion, so I will leave it with the above clarification.
