Update Ensures U.S. Taxpayers Never Pay for Decommissioning
The U.S. Bureau of Ocean Energy Management (BOEM) has enacted a revised scheme designed to ensure that U.S. taxpayers never have to pay for offshore oil and gas platform decommissioning.
All OCS leases require that decommissioning companies must remove all facilities and restore the site to its pre-lease state. However, due in part to the industry’s move into deepwater areas in the Gulf of Mexico, decommissioning costs have risen significantly. Moreover, as existing infrastructure ages, larger companies are transferring older facilities to smaller or less experienced companies. Current estimated routine decommissioning liabilities in the Outer Continental Shelf (OCS) are approximately $40 billion.
BOEM’s updated Notice to Lessees and Operators details procedures to determine a company’s ability to carry out the decommissioning of OCS facilities and whether additional financial assurance is required.
“BOEM’s financial assurance regulations need to take into account current industry practices,” said BOEM Director Abigail Ross Hopper. “We must ensure the U.S. taxpayer never pays to decommission an OCS facility and that the environment is protected. Managing risk in the early stages of a lease will provide lessees negotiated solutions that improve business certainty and leverage existing company strengths.”
BOEM will examine each company individually, assess its total financial assurance needs and then work with the company to determine the best financial assurance. BOEM is providing a 60-day grace period before the updated notice is implemented, and will focus first on the platforms that pose the highest risk to the government, namely, properties for which there is only one leaseholder responsible for decommissioning.
BOEM first proposed the revisions to the notice in September 2015.