NOIA Seeks Information on GOM Decommissioning Cost Estimates

The National Ocean Industries Association (NOIA) submitted Tuesday a Freedom of Information Act request to the Bureau of Safety and Environmental Enforcement (BSEE), seeking information on BSEE’s recently revised estimates for future well plugging and abandonment (P&A) and platform decommissioning costs in the Gulf of Mexico.

The industry group said this 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). Given that BSEE’s revised estimates may be incorporated into the new BOEM requirements for offshore operators, BSEE’s decommissioning assessments must “provide realistic liability estimates for use by BOEM to establish bonding limits for each leases,” NOIA said in an Oct. 4 press release.

The BSEE estimates, particularly for shallow water Gulf of Mexico facilities, appear to vary wildly from current decommissioning costs, NOIA said in an Oct. 4 press statement. BSEE also 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 percent higher than previous estimates from as recently as four months ago.

“By stark contrast, actual costs to conduct 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,” NOIA stated in the release.

Matt McCarroll, CEO of NOIA member company Fieldwood Energy, told Rigzone that his company supports the NOIA’s efforts, and is concerned with the lack of transparency on BSEE’s behalf in respect to the new assessments.

“We and the industry remain willing to sit down with BSEE and come up with accurate decommissioning cost assessments,” McCarroll told Rigzone in an interview.

With the Bureau of Ocean Energy Management indicating it will no longer issue waivers to financially healthy operators to avoid posting bonds to cover future decommissioning costs in the Gulf of Mexico, some of these operators are facing significant financial strain, according to an April 2016 Wood Mackenzie research note.

BSEE is “actively working to respond to the FOIA request,” BSEE press secretary Greg Julian told Rigzone in an email statement. Julian said that NOIA representatives had participated in a couple of workshops on decommissioning costs. The most recent workshop on decommissioning liability assessment was held Aug. 25 in New Orleans. At that workshop, BSEE officials outlined their plans to conduct on Aug. 29 a global update of BSEE Gulf of Mexico decommissioning estimates. Julian added this was the first update BSEE has done for these estimates since its establishment.

Julian said that the old estimates were “way low” from where they need to be to protect the American taxpayer, adding that BSEE has “an open line of communication” with NOIA, and is open to input on where industry thinks the estimates should be adjusted.


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