Buried in US President Joe Biden's $1.75 trillion Build Back Better Act are two pieces of legislation could have a significant impact on the US oil and gas industry.

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The bill, which has passed the US House of Representatives but faces an uphill battle for survival in the Senate, includes a permanent ban on oil and gas drilling off the west coast of Florida and increased royalty rates for oil and gas leases on federal land and waters.

Offshore drilling ban

Drilling off the Florida coast has been a hot-button topic for decades, but has been subject to a series of moratoriums dating back to 2006 and the administration of President George W. Bush.

The moratorium was extended in 2017 by the Trump administration, but is scheduled to expire in 2022 with the conclusion of the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Proposed Final Programme.

The measure is part of the bill’s climate-related issues and would permanently ban leasing of areas set off limits by the Gulf of Mexico Security Act of 2006, which includes the eastern Gulf of Mexico.

It would also ban drilling in areas off the Atlantic and Pacific coasts currently off limits in the 2017-2022 leasing programme.

Proposed royalty rate increases

The bill also includes legislation that does what the US Department of the Interior failed to do in its recent report on federal oil and gas leases: proposes increases in royalty rates and minimum bids for acreage.

The DOI report, released on 26 November as much of the country was on an extended Thanksgiving holiday, called the current leasing system “antiquated” but gave no specifics on how to modernize it.

In the Build Back Better bill, minimum onshore royalty rates would be increased from 12.5% to 20%, while higher royalty rates of 16.67% would be increased to 25%. Offshore production royalties would be increased across the board from 12.5% to 20%.

The minimum bid for oil and gas leases both onshore and off would be increased from $2 per acre to $10 per acre. In addition, the Department of the Interior would have the ability to increase minimum bid rates every four years to adjust for inflation.