US Senator Bill Cassidy is leading a group of US senators to ask the US Department of the Interior (DOI) to extend the public comment period for the proposed Outer Continental Shelf Financial Assurance (OCS) rule ) to enable a more detailed and robust audience. record on its impact on small businesses.
Senators Bill Cassidy, Joe Manchin, Ted Cruz and John Kennedy wrote a letter to DOI Secretary Debra Haaland to extend the comment period for the notice of proposed rulemaking, entitled Risk Management and Assurance financial for the OCS lease and subsidy obligations, at 120 days. starting in 60 days, according to a press release from Sen. Cassidy’s office Thursday. The comment period for the rule ends on August 28.
The letter said the proposed rule would make changes to the financial assurance regime to guarantee the decommissioning obligations of the offshore oil and gas industry and impose additional bonding requirements on small companies, which produce 35 percent of oil and gas of the Gulf of Mexico. .
The senators wrote that the DOI recognized that the proposed rule would “significantly affect smaller companies” and create “a disincentive for additional exploration, development and production.” For those reasons, the senators said it would take more than 60 days to assess the effects of the proposed rule.
“In addition, the proposed rule requires the offshore energy industry to determine whether the international collateral market can support the significant amount of new bonds that would be required to be issued to the Bureau of Ocean Energy Management (BOEM) under the proposed rule” , the senators continued. “This effort requires analysis and discussion with the bond market that currently issues bonds to secure offshore decommissioning obligations. Simply put, a 60-day extension of the comment period for the proposed rule is reasonable. Do- can help ensure that due diligence is taken to provide BOEM with meaningful feedback.”
“There is no imminent need for BOEM to finalize the proposed rule. Recent failures in the offshore industry have not caused American taxpayers to pay for the closure of offshore wells and infrastructure,” the senators concluded, adding that the rule recognizes that taxpayers’ responsibility for infrastructure closure offshore is “rare”.
On June 29, BOEM published proposed changes to the financial assurance rule in the Federal Register, “in order to better protect American taxpayers from incurring the costs associated with liability for the petroleum industry and the gas from decommissioning offshore wells and infrastructure, once they are no longer used,” according to a previous press release from the agency.
The proposed rule would establish two metrics by which BOEM would assess the risk any company poses to the American taxpayer, according to the statement.
“First, to accurately and consistently predict financial distress, BOEM would use credit ratings from a nationally recognized statistical rating organization or an intermediate credit rating generated using a statistical model. BOEM would require companies without a rating provide additional financial collateral. BOEM is seeking public input on whether to rely on credit ratings to make these determinations and what credit rating threshold would best protect taxpayer interests without imposing undue burdens to the industry,” the statement said.
“Second, BOEM would consider the current value of the proven oil and gas resources of the same lease when determining the overall financial risk of closure, given that any leases with significant reserves still available would be acquired by another operator who would later assume the liability in the event of bankruptcy”, the statement continued.
“The proposed regulatory changes would provide greater clarity and reinforce that current lessors and lessees bear the cost of ensuring compliance with lease obligations, rather than relying on previous owners to cover those costs,” BOEM added.
The BOEM said it would use decommissioning estimates based on industry-reported data collected by the Office of Environmental Safety and Compliance “at a level that would adequately cover the estimated costs of decommissioning without being unduly burdensome.” In addition, the proposed rule would allow current tenants and grantees to request phased payments over three years for new financial guarantee amounts, the agency said.
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