Federal officials reversed course in a dispute over mineral payments Monday as they agreed to pay states an estimated $110 million that was being withheld under 2013 budget cuts.

The decision by the Interior Department comes after Western lawmakers and governors pressed the Obama administration to restore the money, derived primarily from payments by companies for oil and gas leasing and production royalties.

More than two dozen states were denied a portion of their payments for 2013, under automatic spending cuts put in place after Congress failed to agree on a deficit reduction plan.

The cuts trimmed about 5 percent from all those states' shares. Wyoming led the list of potential losers, with at least $53 million at stake for 2013. New Mexico would have lost $26 million.

Critics had said the government had no right to withhold the states' share of the money.

Interior officials previously defended the cuts by saying they had no choice in the matter under budget rules now in place. But they said Monday they had changed course following a legal review of the underlying Mineral Leasing Act.

U.S. Sen. Tom Udall, a New Mexico Democrat, said the administration's reversal showed it had "seen reason."

"These funds are the result of an existing agreement for mineral development," he said. "The government shouldn't be using them to balance its books."

Mineral leasing revenues are typically split roughly evenly between the states and the Interior Department. The government last year paid $2.1 billion to the states under the mineral leasing program.

The Interior Department says the money will be given to the states sometime after the end of the fiscal year on Sept. 30, assuming the current law stays in place.

A spokesman for Wyoming Gov. Matt Mead said he was pleased to get the news that the money would be returned to the state, but was awaiting further details on what might happen in future years.

Payments from revenues received in 2014 also will be withheld until the end of that fiscal year if the automatic budget cuts remain in place and unchanged, said Patrick Etchart, spokesman for the Interior Department's Office of Natural Resources Revenue.

He said the process of withholding the money requires additional work by the agency, but it has no choice under the current budget rules.

"We are obliged to follow the law, and that is what the law stipulates," Etchart said.