The first public comments on BOEM’s proposed revisions to the decommissioning financial assurance requirements have been posted. A good comment letter (attached) was submitted by natural resource management students at the University of Arizona. The students oppose the proposed revisions. Among their concerns (additional thoughts added in parentheses):
- Increased environmental risks. (Accidents, hurricanes, and other events may introduce decommissioning risks that require both immediate and longer term attention and financial resources. Such incidents typically increase decommissioning costs by orders of magnitude, and can even bankrupt financially sound companies. See “Sad End for Taylor Energy.”)
- Firms with lower credit ratings would no longer have to hold as much capital in reserve and would have a lower bar of entry into projects. (See comments by John Smith.)
- The possibility of cascading economic impacts in the event that bankruptcy does occur. (Which predecessors will be affected and how? What about contractors? How long will bankruptcy litigation delay resolution of claims? Will bankruptcy court asset sales increase public financial, safety, and environmental risks?)
- Taxpayers would be facing a portion of the risk. (Predecessors are only accountable for the facilities they installed, so holding predecessors liable doesn’t free the taxpayers from all financial risks.)
- The entire energy sector faces increased risks when operating companies fail. (Prominent failures damage the reputation of the industry and the OCS program, with implications for the economy and national security.)
Before relaxing financial assurance requirements, BOEM should consider the role that lax lease assignment and financial assurance policies had in the growth of Fieldwood, Cox, Signal Hill, Black Elk, and other failed companies.
Bud's Offshore Energy (BOE) 
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