Oil & Gas News

Oil and Gas Groups Seek Additional Information and Transparency on New Financial Assurance Requirements for Offshore Producers


NOIA, IPAA, LMOGA & GEST Submit Joint FOIA Requests to BOEM and DOI

Washington, D.C.The National Ocean Industries Association (NOIA), the Independent Petroleum Association of America (IPAA), the Louisiana Mid-Continent Oil and Gas Association (LMOGA), and the Gulf Economic Survival Team (GEST) submitted Freedom of Information Act (FOIA) requests to both the Bureau of Ocean Energy Management (BOEM) and the Department of the Interior (DOI) seeking information related to the recent drastic changes to the financial assurances and bonding required of offshore oil and gas producers.

The four industry trade groups—which collectively represent the entirety of the offshore oil and gas industry in the Gulf of Mexico – have joined together to press for immediate consideration of these FOIA requests and continue to urge BOEM, the Bureau of Safety and Environmental Enforcement (BSEE), and DOI to be responsive to industry concerns regarding its Notice to Lessees (NTL) No. 2016-N01, which dramatically changed the existing framework for securing decommissioning liability for the offshore oil and gas industry.

This comes on the heels of NOIA’s recent FOIA request to BSEE seeking information related to the agency’s revised estimates for future well plugging and abandonment and platform decommissioning costs in the Gulf of Mexico, which varied wildly from actual and current decommissioning costs and BSEE’s own previous cost projections.

Today’s FOIA requests 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.

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.

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 new rules are a solution in search of a problem, as 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.

On behalf of our members, NOIA, IPAA, LMOGA and GEST stand ready and committed to work with BOEM, BSEE, and DOI to ensure a robust future of responsible development in the Gulf of Mexico for the benefit of taxpayers in the form of royalties, severance tax revenues to the state and federal government, jobs, and additional capital investment.

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