BOEM Withdraws Sole Liability Orders
Further Review of Complex Financial Assurance Issues Warranted
Contacts: Connie Gillette
The Bureau of Ocean Energy Management (BOEM) announced today that it will withdraw sole liability orders issued to Outer Continental Shelf (OCS) oil and gas lease and grant holders in December to allow time for the new Administration to review the complex financial assurance program. Additionally, any implementation issues associated with those orders will be discussed as part of the ongoing, six-month interactive process BOEM has initiated to gather input on other components of the Notice to Lessees (NTL) 2016-N01. However, BOEM may re-issue sole liability orders before the end of the six-month period if it determines there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities.
While this Administration reaffirms the program’s goal that the taxpayer should never have to shoulder any liability for decommissioning existing or future facilities on the OCS, and places a high priority on ensuring an effective financial assurance program is in place, it also acknowledges that financial assurance is a complex issue and welcomes continued industry engagement on this important issue.
In July 2016, after months of careful consideration and industry engagement, BOEM issued NTL 2016-N01 which detailed improved procedures to determine a lessee’s ability to carry out its lease obligations - primarily the decommissioning of OCS facilities – and to make informed decisions about whether lessees should furnish additional security.
In December 2016, BOEM issued Orders to Provide Additional Security for sole liability properties. Sole liability properties are leases, rights-of-way, or rights of use and easements for which the holder is the only liable party, i.e., there are no co-lessees, operating rights owners and/or other grant holders, and no prior interest holders liable to meet the lease and/or grant obligations. This action reflects BOEM’s continued assessment that sole liability properties represent the greatest programmatic risk to the American taxpayer.
On January 6, 2017, BOEM announced that it was extending the implementation timeline for NTL 2016-01 by an additional six months as to leases, rights-of-way and rights of use and easement for which there are co-lessees and/or predecessors in interest, except in circumstances in which BOEM determines there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities. The extension allows an opportunity for additional time and conversation regarding issues that arise in the context of non-sole liability properties.
More information about the NTL can be found at: http://www.boem.gov/Risk-Management/.