BOEM Finalizes Rule Requiring Billions in New Financial Assurance for Offshore Oil and Gas Operations
The Bureau of Ocean Energy Management (BOEM) has announced the finalization of a rule that will substantially revise the financial assurance requirements for offshore oil and gas operations. The final rule, which will take effect 60 days after its publication in the Federal Register, aims to ensure operators have adequate financial assurance to cover the decommissioning of oil and gas assets on the Outer Continental Shelf (OCS).
Under the new rule, BOEM will require a total of $6.9 billion in new supplemental financial assurance, down from the initial estimate of $9.2 billion. This marks a significant effort by the federal government to protect American taxpayers from exposure to financial loss associated with OCS development.
The final rule includes new criteria for supplemental bonding, a revised process for estimating decommissioning costs, and changes in bonding requirements for right-of-use and easement (RUE) and pipeline right-of-way (ROW) grant holders. Additionally, the rule allows for the use of third-party guarantees to fulfill financial assurance obligations.
One of the most significant changes is the requirement for companies seeking to stay a supplemental financial assurance demand pending appeal to post an appeal bond in the required amount. This could have major implications for companies in the oil and gas sector, especially as the surety bond market has become less accessible following recent bankruptcies.
Overall, BOEM’s final rule is expected to have wide-ranging impacts on the offshore oil and gas industry, with operators likely facing challenges in obtaining the additional financial assurance required by the new regulations. Compliance will be phased in over a three-year period, giving companies time to adjust to the new requirements.
