BOEM Makes Proposed Guidance for OCS Oil & Gas Companies Available for Review
The Bureau of Ocean Energy Management (BOEM) today issued proposed guidance to clarify procedures for oil and gas companies operating on the Outer Continental Shelf (OCS). The proposed guidance details procedures that BOEM will use to determine a lessee's financial ability to carry out its obligations, primarily the decommissioning of OCS facilities, and the potential need for additional security.
The proposed guidance will be available on BOEM’s website at: www.boem.gov/Risk-Management for a 45-day review. BOEM will hold a workshop in Houston to meet with industry representatives to answer questions and discuss the proposed change. The workshop will be held on October 9 from 8:30 a.m. to noon at the Houston Airport Marriott, 18700 John F. Kennedy Blvd, Houston, TX, 77032. To register for the workshop, visit:
www.boem.gov/Financial-Assurance-Forum-Registration/ BOEM held a similar financial assurance forum in February 2015.
The proposed guidance is intended to be used in a revised Notice to Lessees (NTL) that will replace NTL No. 2008-N07. The revised NTL will provide updated procedures for requiring additional security pursuant to 30 C.F.R 556.53 for oil and gas or sulphur leases. The revised NTL will provide updated criteria for determining a lessee's ability to self-insure its OCS liabilities based on the lessee's financial capacity and financial strength. It also provides new methods and additional flexibility for lessees to meet their additional security requirements through a tailored plan. The guidance and clarification will apply to all BOEM regions and planning areas.
BOEM’s goal is to modernize its financial assurance regulations to match current industry practices. BOEM also wants to ensure the U.S. taxpayer never pays to decommission an OCS facility and that the environment is protected. Managing risk in the early stages of a lease will provide lessees negotiated solutions that improve business certainty and leverage existing company strengths.
The potential costs and liabilities of financial uncertainty, credit risk, project failures, and legal liability are far easier to manage than to remediate. By modernizing its risk management program, BOEM intends to create comprehensive procedures designed to decrease cost risks to taxpayers while providing industry flexibility to negotiate adaptive solutions and utilize tailored financial plans to meet their decommissioning financial assurance requirements.
BOEM will work with all lessees, both large and smaller individual lessees, to develop an approach that works best for the government and for each company.