BOEM updates decommissioning specs

The Bureau of Ocean Energy Management has notified companies holding oil and gas leases on the federal outer continental shelf that the agency is updating its requirements for financial assurance and risk management associated with the decommissioning of oil and gas production facilities. The agency says that it wants to ensure that taxpayers do not become liable for the cost of removing facilities that have reached the end of their operational lives.

Under the conditions for issuing outer continental shelf leases, the company operating the lease at the time a production facility becomes defunct must remove the facility, fully restoring the facility site to its pre-lease state. BOEM says that it is updating its regulations in recognition of the trend for companies to move to deeper water areas in the Gulf of Mexico, and for the larger companies to transfer their older assets to smaller or less experienced businesses.

“BOEM’s goal is to modernize its approach to risk management in a way that better aligns with the realities of the industry and protects the U.S. government and taxpayers from risk in a manner that isn’t overly burdensome to the oil and gas industry,” said BOEM Director Abigail Ross Hopper. “By implementing these changes, we will create comprehensive procedures to decrease risks to taxpayers while providing industry flexibility to negotiate adaptive solutions and use tailored financial plans to meet their financial assurance requirements.”

Under the revised regulations, BOEM will require additional financial security for leases and will use updated criteria for determining a lessee’s ability to self insure its outer continental shelf liabilities. The agency says that the regulations will provide new methods and flexibility for meeting financial security on the basis of tailored plans.

BOEM says that, upon adoption of the new revised regulations, the agency will first address leases with just one leaseholder responsible for decommissioning, giving the leaseholder 60 days to comply with any ordered additional financial security. For other less risky lease holdings, with multiple leaseholders, the lessees will be given 120 days to comply with any new financial security order, with the option of providing a tailored financial plan to BOEM.

- ALAN BAILEY