Among an estimated 30 detailed comments received from industry and stakeholders as of last month, operators said that the system is overkill and broken and acts as a strong disincentive to production, especially among independents.

In August the US Bureau of Ocean Energy Management (BOEM) announced it was planning to modernise its rules on ‘Risk Management, Financial Assurance, and Loss Prevention’, and launched a 60-day comment period.

But the response from industry was such that BOEM extended the comment period for another 30 days, which closed on 17 November.

Operators must put up bonds which can range from $50,000 to tens of millions of dollars to cover future eventualities, such as decommissioning.

BOEM said the need to update the rules arose because the current bonding requirements were set nearly a quarter of a century ago. Meanwhile, offshore operations have “changed significantly, such as increased scale and complexity of deepwater and subsea operations,” BOEM said, adding: “and the costs of decommissioning have dramatically increased”.

The issue has come into greater focus as Gulf of Mexico production has rebounded after the drilling moratorium in the wake of the Macondo disaster in 2010.

Particularly outspoken against the rules was the Independent Petroleum Association of America (IPAA), which claimed that the whole system is broken.

“The current system for assuring that companies have adequate capital to remove offshore production facilities is broken and redundant,” said IPAA President and CEO Barry Russell. “The effect of this action has fallen disproportionately on independent producers.”

In its submission to BOEM the IPAA said: “The current bonding requirements are not merely duplicative; they are multiplicative – requiring, for example, that companies provide $80 million in assurance to cover the same $20 million removal operation.”

In its recommendations the IPAA said BOEM should not treat a company “as if it owes 100% of the cost to clear a site when it owns only 20% of the lease”.

Apache Corp., a major Gulf of Mexico operator, said the rules have become a disincentive to offshore drilling as more and more US oil and gas operations are moving onshore.



In its letter, reported by Platts, Apache wrote that “there has never been an indication that private companies have failed to properly address abandonment in the face of catastrophic loss.”

These views were echoed by the National Ocean Industries Association. According to Platts, NOIA wrote: “To date, the federal government has not used taxpayer money to plug and abandon no longer used well and platforms. However, the current process, in many cases, results in bonding amounts far in excess of what is the reasonable liability.”

Environmental groups are expected to disagree.

BOEM, meanwhile, appears to be listening.

“BOEM recognizes the need to update its requirements,” said BOEM acting director, Walter Cruickshank, “and we look forward to continuing the dialogue with stakeholders on how to develop a program that works for a wide variety of operators and also gives us the tools to identify, prioritize, and manage the risks associated with industry activities on the Outer Continental Shelf.”

BOEM said that after the comment period closed it would “continue its outreach” and host a stakeholder workshop to have more discussions before changing the rules.