Historically, offshore oil and gas companies with operations in the United States have been providing base financial assurance in the form of surety bonds, decommissioning accounts or other guarantees to the Bureau of Ocean Energy Management (BOEM)—the agency within the Department of the Interior (DOI) responsible for managing the development of the nation’s offshore resources—to ensure performance of decommissioning obligations. The regulatorily prescribed amount of such assurance is based on the level of activity occurring on a specific lease or in an area.
|
Level of Activity |
Lease-Specific Amount |
|
No approved operational activity |
$50,000 |
|
Exploration Plan |
$200,000 |
|
Development Production Plan |
$500,000 |
|
Level of Activity |
Area-Wide Amount |
|
No approved operational activity |
$300,000 |
|
Exploration Plan |
$1,000,000 |
|
Development Production Plan |
$3,000,000 |
|
Pipeline – Right-of-Way |
$300,000 |
|
[Effective June 24th] Right-of-Use and Easement |
$500,000 |
BOEM is amending its risk management and financial assurance regulations and recently released a final Risk Management and Financial Assurance for OCS Lease and Grant Obligations rule, which will go into effect on June 24, 2024 and affect current and future offshore lessees, right-of-use and easement (RUE) grant holders and pipeline right-of-way (ROW) grant holders. The rule finalizes these amendments that are intended, in part, to update existing regulations to address the increasing costs of facility decommissioning and other financial risks associated with the Outer Continental Shelf (OCS) development. The amendments are also expected to increase the total amount of financial assurance required from OCS lessees and grant holders. This alert provides a summary of the key provisions included in this final rule.
