Reporting pipeline decommissioning costs

The federal Bureau of Safety and Environmental Enforcement has issued a new rule requiring the operators of offshore oil and gas facilities to report decommissioning costs for subsea pipelines.

In December 2015 BSEE published amended regulations requiring reporting of actual expenditures for decommissioning activities involving plugging of wells, clearing of obstructions and removal of offshore platforms and other facilities. A report is required within 120 days of the completion of each activity. The regulations also authorize BSEE to require supporting information for specific costs on a case-by-case basis.

But the 2015 regulations did not require reporting of pipeline decommissioning costs - the new rule amends the regulations to add pipelines to the scope of the required reporting.

The idea behind the cost reporting is to enable BSEE to use data about actual decommissioning costs for the estimation of future cost liabilities. BSEE can then share its cost estimates with the Bureau of Ocean Energy Management, the agency that oversees plans for oil and gas development on the outer continental shelf. The estimates enable BOEM to more accurately set financial liability levels for new developments, to assure that an operator has the financial wherewithal to cover the eventual cost of facility removal, while also assuring that financial assurance requirements are not excessively high.

Inadequate financial assurance could end up causing the government to have to incur financial liabilities for the decommissioning.

- ALAN BAILEY