Bud's Offshore Energy (BOE)

Observations and comments on the offshore findings and recommendations in the Dept. of the Interior’s report:

• From an offshore perspective, this report is more moderate than expected. No major complaints.
• The report was issued the Friday after Thanksgiving. Was there a desire to minimize attention?
• The report does not include a recommendation on raising royalty rates. DOI will continue to study such actions (prudent decision).
• BSEE estimates current liability for “orphaned infrastructure” at only $65 million. They must be using a very narrow definition of orphaned infrastructure.
• “Financial assurance coverage should be strengthened.” (Few would argue with that statement.)
• “BSEE and BOEM will carefully consider comments on the 2020 proposed financial assurance rule.” (Deja vu? Expect a long, slow process.)
• BOEM will establish a “fitness to operate standard.” Comments: (1) This is an old concept that has proven to be difficult to execute. Hold companies accountable, make them demonstrate financial assurance, and don’t pander to bad actors (see the case of Hogan and Houchin) (2) Why is BOEM establishing this standard and not BSEE, the safety bureau? (The division of responsibilities between BOEM and BSEE has created serious overlap, inefficiency, and confusion and needs to be addressed.)
• “BOEM should consider advancing alternatives to the practice of area-wide leasing.” Tract selection makes sense in frontier areas with little operational history. It would have been perfect for the Mid- or South Atlantic or the EGoM, all of which were cynically removed from future leasing consideration by the previous President just before the 2020 election. The Central and Western Gulf of Mexico is too mature for a return to tract selection; employing that approach after 40 years of area-wide leasing is likely to generate less revenue and production.