BOEM extends offshore liability requirement implementation

The US Bureau of Ocean Energy Management extended the deadline by 6 months for offshore oil and gas operators to implement a risk management and financial assurance program for decommissioning facilities under a notice to lessees it issued in September because of liability questions that have emerged. BOEM issued Notice to Lessees (NTL) 2016-NO1 with a 60-day implementation period after proposing it a few months earlier (OGJ Online, July 14, 2016).

The US Department of the Interior agency said on Jan. 6 that it has continued engaging with offshore oil and gas operators since the September order, most recently by ordering additional security for sole liability properties in December.

“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,” it explained. “This most recent action reflects BOEM’s continued assessment that sole liability properties represent the greatest programmatic risk to the American taxpayer.”

Discussions with operators have made it apparent that navigating multiparty business relationships that exist between co-lessees and predecessors-in-interest can prove challenging and time-consuming, BOEM said. Further, because the nonsole liability properties may include several co-lessees and prior interest owners, their existing financial arrangement may require assessing the extent to which these existing financial arrangements can be considered in determining whether BOEM needs additional security, it added.

BOEM said that it decided to extend the order’s implementation deadline to give operators and the agency time to focus on providing additional security for sole liability properties, and to allow an opportunity for additional time and conversation, including with interested stakeholders, regarding issues that arise in the context of nonsole liability properties.

The extensions will apply 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, it indicated. “Interest holders of nonsole liability properties are encouraged, however, to propose and negotiate tailored plans during this period,” BOEM said.

“BOEM’s decision to delay implementation of stringent new decommissioning bonding requirements is the right one, and industry is appreciative,” National Ocean Industries Association Pres. Randall B. Luthi told OGJ. “This is a complex issue that rightfully deserves further review and continued and thorough dialogue with the companies impacted.”

Contact Nick Snow at nicks@pennwell.com.

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