Offshore Decommissioning

The Department of the Interior (DOI) announced the final BOEM decommissioning rule on April 15, 2024, with new financial requirements for U.S. Outer Continental Shelf (OCS) offshore platform decommissioning. This overhaul of the offshore regulations finalizes the June 2023 proposed rule.

Decommissioning of OCS oil and gas facilities can be extremely costly. BOEM’s Risk Management and Financial Assurance for OCS Lease and Grant Obligations rule implements new methods for calculating levels of required corporate financial assurance to ensure compliance with deadlines and lease obligations.

BOEM uses two primary metrics:

• Company financial health, specifically credit ratings.
• Reserves value, compared to costs of meeting decommissioning obligations.

Companies lacking investment-grade credit ratings or adequate proven reserves must provide additional financial assurance. Current lease holders can not rely on previous owner assets, although BOEM may pursue previous owners for decommissioning costs.

BOEM estimates $6.9 billion in new financial assurances must be provided by the oil and gas industry under this new rule, and allows current lessees/grant holders to request staggered payments over three years.

Onshore Leasing

DOI issued a final rule for BLM oil and gas leasing programs on April 12, 2024, to limit development that impacts sensitive habitat, recreational areas, or cultural resources further increasing the costs of production on leased BLM lands.

The Fluid Mineral Leases and Leasing Process rule updates terms of the onshore federal oil and gas leasing program. The final rule revises frameworks for leasing, bonding, and royalty rates, and implements provisions from the Inflation Reduction Act (IRA) and DOI’s Report on the Federal Oil and Gas Leasing Program.

Key rule updates include:

• Bonding Requirements: 
  • Single well minimum - $150,000
  • Statewide blanket minimum - $500,000
  • Nationwide and unit bonds eliminated
  • Inflation adjustments at ten-year intervals
• Wildlife and Cultural Resources: 
  • Leases not permitted near cultural sites or wildlife habitats
  • Leases permitted near existing infrastructure or high production potential regions
• Fiscal Terms: 
  • Royalty rates - 16.67% until August 16, 2032
  • Minimum bids - $10/acre
  • Rental rates - $3/acre/year fee (first 2 years), $5/acre/year (next 6 years), and $15/acre/year thereafter
  • Expressions of Interest - $5/acre fee

Onshore Gas Capture

BLM’s Waste Prevention Rule was finalized in April. The rule requires oil and gas lease operators to avoid natural gas waste and to create leak detection, repair, and waste reduction plans. An additional $50 billion in royalties may be collected from captured gas that previously could be vented, flared, or leaked from production operations. “Avoidable” losses may be subject to royalties.

The rule allows for phase-in of requirements, ranging from 60 days to 18 months for flaring limits. Leak detection and repair plans must be submitted to state BLM offices within 18 months.

Managing Costs

As regulatory frameworks sharply raise costs for producers, planning is critical to company success. Investing in the right properties, complying with the maze of regulations, and following environmentally sound practices is essential for efficient operations. Choosing partners who can implement cost-effective solutions while reducing risk is more important than ever. .

BioSqueeze Inc. provides innovative turnkey well integrity solutions for our partners in the oil and gas industry, ensuring assets are in compliance and minimizing the risk of complications from ineffective remediation.