Financial Assurance Requirements for the Offshore Oil and Gas Industry Operating on the OCS

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Decomissioned

What's New?

On April 15, 2024, the Department of Interior announced a final rule from the Bureau of Ocean Energy Management (BOEM) to protect taxpayers from covering costs that should be borne by the oil and gas industry when offshore platforms require decommissioning. The action updated 20-year-old regulations. BOEM has substantially strengthened financial assurance requirements for the offshore oil and gas industry operating on the U.S. Outer Continental Shelf (OCS). 

The final rule,  titled “Risk Management and Financial Assurance for OCS Lease and Grant Obligations,” was published in the Federal Register on April 24, 2024, and updated existing regulations to better protect the American taxpayer from bearing the cost of oil and gas facility decommissioning. 

A technical correction to the final rule was published in the Federal Register on May 31, 2024, to change the rule effective date from June 24, 2024, to June 29, 2024. This change was made because the Congressional Review Act requires that the effective date of a major rule be 60 days after the date of publication in the Federal Register or receipt of the rule by Congress, whichever is later. The rule was published on April 24, 2024. The rule was received by both chambers of Congress on April 29, 2024, making the effective date June 29, 2024, instead of June 24, 2024.

Background

The Government Accountability Office (GAO) released two reports, one in December 2015 and another in February 2024, both affirming the need for strengthened financial assurance requirements for offshore oil and gas operations.  

GAO recommended that BOEM complete and fully implement strengthened requirements that reduce financial risks, including by requiring higher levels of supplemental bonding. BOEM addresses concerns expressed in the GAO reports with the 2024 publication of the Risk Management and Financial Assurance Rule. 

On June 29, 2023, BOEM published the Proposed Risk Management and Financial Assurance Rule for public comment that ended on August 28, 2023. Subsequently, BOEM published a comment period extension  notice to extend the public comment period to September 7, 2023. BOEM carefully considered all comments before publishing the final rule on April 15, 2024.  

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