DOI on Offshore Decommissioning Costs

On September 17, 2020, the Department of the Interior (“DOI”) issued a proposed “Risk Management, Financial Assurance and Loss Prevention” Rule (“Proposed Rule”) intended to address concerns about Outer Continental Shelf (“OCS”) oil and gas decommissioning costs. The Proposed Rule provides revised evaluation criteria for determining when oil and gas lessees, right-of-use and easement (“RUE”) grant holders, and pipeline right-of-way (“ROW”) grant holders may be required to provide additional bonds or other security to ensure compliance with the terms and conditions of OCS leases. These terms include decommissioning responsibilities, i.e., the costs and obligations associated with the removal of infrastructure and equipment used in the exploration and production of offshore oil and gas. The recent economic downturn, plummeting oil prices, and a surge in bankruptcies has increased concern over companies’ ability to pay for these required decommissioning costs.

The Proposed Rule would amend regulations under

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