Four oil and gas trade associations, which collectively represent the industry in the Gulf of Mexico, filed Freedom of Information Act requests with the US Department of the Interior and its Bureau of Ocean Energy Management on Nov. 7 concerning changes in financial assurance and bonding requirement changes for offshore oil, gas, and sulfur producers.
BOEM outlined the changes in a notice to lessees, No. 2016-NO1, that it issued on July 12. The new requirements were to become effective on Sept. 12. BOEM subsequently extended the time period for stakeholders to review the rules by 2 weeks to Nov. 23 (OGJ Online, Nov. 3, 2016).
The National Ocean Industries Association, Independent Petroleum Association of America, Louisiana Midcontinent Oil & Gas Association, and Gulf Economic Survival Team jointly urged DOI, BOEM, and the Bureau of Safety and Environmental Enforcement to respond to industry concerns about the changes that they consider drastic.
Their FOIA requests came on the heels of one by NOIA to BSEE for information related to the agency’s revised estimates for well plugging and abandonment and platform decommissioning costs in the gulf (OGJ Online, Oct. 4, 2016). The new estimates varied dramatically from actual and current decommissioning costs and BSEE’s own previous cost projections, the trade association said at the time.
The four FOIA filings augment continued industry efforts to gain greater clarity into how BOEM and DOI determined that new financial assurance requirements were necessary and the considerations underpinning and informing their decision-making process, the associations said in a joint statement.
“Combined, these efforts represent our industry’s commitment to understand how DOI and BOEM determined that changing the rules via the NTL guidance was appropriate rather than undertaking a formal rulemaking process, a much more transparent and equitable process,” it said.
“Remarkably, transparency typically afforded to companies under normal circumstances with NTLs has been at a premium with BOEM in this instance, as information central to the rationale of NTL No. 2016-N01 has not been released to the public or to companies attempting to meet the new financial assurance and bonding requirements,” the associations said.
They said they consider the new rules a solution in search of a problem since the existing framework has protected taxpayers for decades.
“Moreover, offshore operators made significant investments based on the existing regulatory framework, and BOEM has now changed the rules in a manner that threatens to trigger the very risk it is trying to protect against, as these new burdensome bonding requirements will tie up capital that would otherwise be available for exploration, development, jobs, revenues to states and the federal government—and most ironically—for actual plugging and abandonment work,” the associations maintained.
Contact Nick Snow at [email protected].
