The National Ocean Industries Association (NOIA) has sent a Freedom of Information Act (FOIA) request to the Bureau of Safety and Environmental Enforcement (BSEE) seeking information related to the agency’s recently revised estimates for future well plugging and abandonment and platform decommissioning costs in the Gulf of Mexico.
The FOIA request reinforces industry efforts to obtain vital information being used by BSEE to determine estimates of decommissioning costs. To date, that information has not been released to the public or to companies attempting to meet new financial assurance/bonding requirements being issued by the Bureau of Ocean Energy Management (BOEM). The FOIA request seeks to assure transparency regarding the methodologies used to calculate BSEE’s revised estimates, the accuracy of which cannot be verified by industry without the supporting documentation.
The BSEE estimates, particularly for facilities in the shallow water Gulf, appear to vary wildly from current decommissioning costs. BSEE released the revised estimates with little explanation regarding the assumptions and data it relied upon, despite the fact the agency’s own projections for decommissioning liability in the shallow water Gulf are over 100% higher than previous estimates from as recently as four months ago. In stark contrast, actual costs to perform decommissioning projects have decreased dramatically due to depressed commodity prices, better equipment and execution by operators, and a reduction of overall service costs in the Gulf.
BOEM may be incorporating BSEE’s revised decommissioning estimates into its new financial assurance/bonding requirements for offshore operators. Thus, BSEE’s decommissioning assessments must provide realistic liability estimates for use by BOEM to establish bonding limits for each lease. It is vital that underpinning formulas and information being used by BSEE are thoroughly vetted and verified.
NOIA member companies impacted by the revised estimates have made exhaustive inquiries to BSEE regarding the assumptions and methodologies supporting the revised estimates, but these inquiries have yet to garner any meaningful response from BSEE. NOIA member companies remain willing to work in a collaborative manner to develop an accurate and reliable method for determining decommissioning liability for offshore operators. We remain hopeful that BSEE will continue to work with the industry to ensure a viable future for all operators in both shallow and deepwater areas of Gulf of Mexico as the new financial assurance/bonding requirements are implemented.