Proposed Act Blocks New Gulf Oil Leases Until Companies Renegotiate Old Royalty Deals

The “Stop Giving Big Oil Free Money Act” is aiming to close what it sees as a loophole in how some major energy companies pay the government for drilling in the Gulf of Mexico. Essentially, this bill targets companies holding older, advantageous oil and gas leases—known here as “covered leases”—that lack strict price triggers for paying royalties. The core of the bill, found in Section 2, says that if you hold one of these covered leases, the Secretary of the Interior cannot issue you any new oil or gas leases in the Gulf until you agree to renegotiate every single one of your old covered leases. The renegotiation must add a clause requiring royalty payments to kick in when oil or gas prices hit certain levels, mirroring the terms outlined in the Outer Continental Shelf Lands Act.

The Royalties Roadblock: No New Leases Without Fixing the Old Ones

Think of this as the federal government telling certain energy giants: you can’t get a new loan until you pay off or restructure that old, super-sweet deal you got years ago. This isn't just about current holders; the restriction also applies to any company that held one of these covered leases when the law was enacted but later sold or transferred it. If you benefited from the old terms, you’re on the hook to fix them if you want to bid on future leases. This means companies that thought they were done with these leases might find that history is still impacting their future business plans. Furthermore, the bill restricts the transfer or acquisition of any existing Gulf lease unless the buyer or seller agrees to modify all their covered leases to include these market-price royalty triggers. This could seriously complicate mergers, acquisitions, and restructuring within the offshore energy sector, potentially slowing down investment or forcing fire sales.

The Real-World Impact: Cost vs. Consistency

The immediate goal is clear: bring old leases in line with current policy standards and ensure the federal government collects more revenue when energy prices are high. For taxpayers, this could mean more money flowing into the federal treasury from public resources, rather than the money staying with the energy companies when oil is expensive. However, for the companies currently holding these leases, it’s a significant regulatory hurdle. They face a choice: either renegotiate lucrative, long-term contracts (which means higher costs when prices spike) or be completely locked out of acquiring any new leases in the Gulf. This could disproportionately affect the specific companies that benefited from those older deals, potentially limiting competition for new drilling tracts in the future. The vagueness around how “control” or “financial stake” is defined could also create compliance headaches for joint ventures that involve one of these restricted entities.

A Grace Period for Some, But Not Until 2026

Section 3 addresses a different set of leases—those issued in the Central and Western Gulf between 1996 and 2000. For these specific leases, the bill offers a voluntary option: lessees can ask the Secretary to amend their contracts to adopt newer, lower royalty suspension price thresholds. This is a voluntary move toward modernizing the terms, but there’s a catch: even if a company agrees to the change today, the new terms won’t actually take effect until October 1, 2026. This delayed implementation suggests a long runway for the industry to adjust, but it also means the government won't see the benefit of these updated terms for several years, even if companies opt into the change now.