No More Free Rides? Bill Ties New Gulf Oil Leases to Royalties on Certain Older Deals

The "Stop Giving Big Oil Free Money Act" is a pretty straightforward piece of legislation aiming to make sure oil and gas companies pay their fair share. In a nutshell, if companies hold certain older oil and gas leases in the Gulf of Mexico—the kind that didn't require them to pay royalties when prices shot up—they'll now need to renegotiate those terms. If they don't agree to pay royalties when oil and gas prices hit specific high marks, as defined in existing law, they won't be able to get new federal leases or transfer their existing ones. The goal, as stated in the bill's title, is to close a perceived loophole and ensure taxpayers get a better cut when these public resources become highly profitable.

The Old Deal vs. The New Rules

So, the bill talks a lot about "covered leases." Think of these as specific existing oil and gas leases in the Gulf of Mexico, originally issued under the Outer Continental Shelf Deep Water Royalty Relief Act, that don't have terms requiring companies to pay royalties based on market prices hitting certain thresholds. Essentially, some companies got deals years ago that let them off the hook for paying extra when oil and gas prices went through the roof. Section 2 of this bill says that free ride is over if those companies want to keep doing new business with the federal government in the Gulf. No new leases under the Outer Continental Shelf Lands Act will be issued to companies holding these "covered leases" unless they agree to add those price-triggered royalty payments. This applies even if they transferred a covered lease after this bill passes, or if they're just benefiting from one.

How This Actually Plays Out

Here’s how it’s supposed to work. If a company has one of these "covered leases," they face a choice: either agree to modify that lease to include royalty payments when oil and gas prices reach the levels defined in clauses (v) through (vii) of section 8(a)(3)(C) of the Outer Continental Shelf Lands Act, or they can likely say goodbye to getting new leases or easily selling their current ones. It’s a bit like telling a tenant with an old, super-cheap lease, "If you want to rent another apartment from us or sublet your current one, you need to agree to pay market rates on your old place when the neighborhood gets hot." Section 3 also provides a path for companies with slightly different older leases – those issued for Central and Western Gulf of Mexico tracts between January 1, 1996, and November 28, 2000. These companies can request to have their leases modified to incorporate similar price thresholds for royalty suspension, with these new or revised thresholds becoming effective from October 1, 2026. This seems like a way for other companies to align with the new standard.

Keeping It Tight: Transfers and Shared Leases

The bill also tries to prevent companies from sidestepping these new rules. According to Section 2, you can't just sell or transfer a "covered lease"—or any Gulf of Mexico oil or gas lease under the Outer Continental Shelf Lands Act, for that matter—to someone unless the buyer has also agreed to these new royalty terms on all "covered leases" they hold, or has a specific agreement with the Secretary of the Interior to do so. What if a lease is co-owned? The bill allows the Secretary of the Interior to make separate agreements with individual companies that only own a share of a "covered lease." If a part-owner agrees to the new royalty terms for their slice of the pie (at price thresholds equal to or less than the standard ones), their share is no longer considered "covered" for them, potentially freeing them up for new leases. This offers some flexibility but keeps the pressure on to update those old terms, ensuring that when oil and gas prices are high, the public gets a more consistent return on its resources.