The US Bureau of Safety and Environmental Enforcement extended the deadline for offshore oil and gas operators to coordinate their operations and retain their federal leases from 180 days a full year. The June 9 final rule extends the time allowed between production, drilling, or well-reworking operations on a lease, BSEE Director Scott A. Angelle stated.
"These additional months mean companies doing business on the Outer Continental Shelf will have more planning flexibility, which will help them be more cost efficient, create more jobs, and maximize the economic benefit for the entire nation," Angelle said.
BSEE made the move after US President Donald Trump signed into law on May 5 the 2017 Consolidated Appropriations Act, which required in its Section 121 that the rule be amended within 30 days. National Ocean Industries Association Pres. Randall B. Luthi called it "a logical and commonsense change that will make a big difference in efficiency and cost."
Luthi told OGJ in a June 9 e-mail, "It is important to realize that this is not just a carte-blanche, 1-year extension of offshore leases. If there has not been sufficient exploration or other preproduction activities on a lease during the lease term, the lease goes back into the government hopper."
He said, "This rule addresses the specific situation where a company has been conducting work or operations, but the lease is expiring and there is not sufficient production."
The provision originally stated that a lease would expire if a lessee or operator ceased operations during the lease's final 180 days or on a lease that has continued beyond its primary term unless the operator resumed operations or received a Suspension of Operations or Suspension of Production from BSEE's regional supervisor within the final 180 days.
'It just makes sense'
Basically, an offshore leaseholder is proving to BSEE that drilling took place during that period, Luthi said. "With low commodity prices, the need for more efficiency, and permitting of any new activity taking longer than it did a few years ago, it just makes sense for that time period to be a year," he said.
"Should the extension be granted, the leaseholder still pays the rental fee, and must also meet the continuous operations threshold, which means they are spending money on exploration activity, Luthi said. "The least expensive alternative is to let the lease lapse, but that does not produce jobs or energy for America."
The deadline extension also affects related BSEE guidance documents, such as NTL No. 2008-N09, and unitization agreements that follow a BSEE-approved model. BSEE plans to revise the relevant notices to reflect the extension to 1 year, the agency said.
