The US Interior Department Mar. 5 proposed rolling back a Biden-era financial assurance rule that boosted the amount of money oil and gas producers must set aside to cover the cost of decommissioning rigs.
The move could save the industry about $484 million each year in compliance costs, Interior said in a press release.
The Biden administration’s 2024 rule required that companies put up about $6.9 billion in bonds for the cost to clean up after oil and gas production ends, Interior said. Roughly $6 billion of the costs would have fallen on small businesses, which Interior noted make up most of the operators on the Outer Continental Shelf.
Response
“For too long, Washington red tape has strangled American energy producers and held back small businesses,” Interior Secretary Doug Burgum said in a statement. “These updates will free up billions of dollars for exploration and development, create good-paying jobs and unlock domestic energy production so we are never forced to rely on foreign adversaries for the resources that power our economy.”
Interior’s proposal would change how the Bureau of Ocean Energy Management (BOEM) evaluates financial risks and lower the bond requirement. “By using updated risk metrics and data from the Bureau of Safety and Environmental Enforcement, BOEM would ensure taxpayer protections remain in place while allowing companies to invest more capital in new projects,” Interior said.
The Independent Petroleum Association of America (IPAA) welcomed the news. “We applaud the Trump administration for taking steps to roll back the flawed financial assurance rule promulgated during the Biden administration. Had it been fully implemented, the Biden rule would have disproportionately affected independent offshore oil and gas producers and had them bear most of the associated costs,” IPAA executive vice-president and chief policy officer Dan Naatz said in a statement.
2024 financial assurance rule
Environmental groups blasted the rollback. The Biden administration’s financial assurance rule “ensured that taxpayers wouldn’t be left on the hook to clean up the messes oil and gas companies leave behind,” Athan Manuel, director of the Sierra Club’s land protection program, said in a statement. “The Trump administration has decided it’s more important to boost corporate bottom lines, even if it leaves the American people holding the bag.”
The Biden administration rule sought to limit the number of abandoned wells in the Gulf of Mexico’s Outer Continental Shelf. It was implemented following a Government Accountability Office (GAO) report that found that Interior was not doing enough to protect taxpayers from the costs of plugging wells and decommissioning platforms if a company abandons the lease.
Over 75% of end-of-lease and idle infrastructure in Gulf of Mexico federal waters—more than 2,700 oil and gas wells and 500 platforms—are overdue for decommissioning, GAO noted in its February 2024 report. The report explained decommissioning delays can indicate that companies are in financial trouble and may leave the government to pay for plugging the well.
The Trump administration expects to publish the proposed changes in the Federal Register shortly. That would open a 60-day public comment period.
