Capt. David Bacon is a boating safety consultant and expert witness, with a background in high-tech industries and charter boat ownership and operation. He teaches classes for Santa Barbara City College and, with a lifelong interest in wildlife, writes outdoors columns for Noozhawk and other publications.
Excerpts from Capt. David Bacon’s Noozhawk column:
- I believe those oil rigs offshore create, attract and sustain more life than all of our radical enviro orgs crying, “The sky is falling and the world is being destroyed, so send us your money” can ever hope to accomplish.
- Our ocean and seagoing critters lost big-time when the four inshore rigs off Padero Lane and Carpinteria were removed some years back. They were taken down to the ground, and all that was left were mounds of mussel shells.
- Let’s not repeat that massive forced die-off by removing any more oil rigs.
- There was argument about whether our oil rigs attracted or produced life. That argument is long over. They do both.
- The structure above the waterline serves pinnipeds and birds, which feed on the life below. Our rigs support a wide-ranging variety of sea life.
- When I look at the rigs from a close-up and personal perspective while I fish near them, I see the obvious. They are massive life generators and supporters, leading me to call them our Rigs of Life.
- We also need to keep our oil rig structures even after we decommission them, because to have abundant sea life, we need to create and maintain more supporting habitat.
For those of us who agree with the Captain that these structures have great value to society, the main questions are:
- How do we maintain valuable offshore structures after the production of oil and gas ceases?
- Who bears responsibility for their ultimate decommissioning? Is there a liability regime in place for any structure that remains?
- Who manages the post-production uses of the platform which could include oceanographic, biological, and alternative energy research, national security and space applications, communications, weather observations, and much more?
- Is there a business plan that works for the companies responsible for decommissioning and platform users, while also protecting taxpayers from liabilities?
One approach would be for the lessees responsible for decommissioning to retain that obligation and continue to maintain the structures in accordance with Federal regulations. This assumes the financial benefits from deferring decommissioning are sufficient to justify such a commitment. This could be a flawed assumption in some (most?) cases.
Alternatively, for companies that would prefer to be relieved of decommissioning obligations, John Smith’s proposal would allow qualified 3rd parties to accept title and liability for the structures. A company, consortium, nonprofit, or entrepreneur could, for a fee, acquire the structures and obtain insurance or other financial protection in accordance with their business plan.
The best way to preserve the reef environment is to extend the life of the platform for post-production activities. Can we make this work?
Restart seems likely for decommissioning financial assurance rule
Posted in decommissioning, energy policy, Regulation, tagged API, BOEM, Chevron, comments, decommissioning, financial assurance, NEFSA, proposed regulation, Shell on May 18, 2026| Leave a Comment »
Thankfully, from the standpoint of those of us whose primary concerns are the integrity of the OCS program and protecting taxpayers from decommissioning liabilities, the API comments (attached), along with those submitted by Shell and Chevron, have exposed the folly of eliminating financial assurance whenever there is a financially strong company somewhere in the lease chain of custody.
Mindful of ongoing and anticipated decommissioning liability battles, API effectively challenges the BOEM proposal on legal grounds. API also demonstrates why revisions intended to improve regulatory efficiency and increase production would do exactly the opposite. Excerpts from the API comments (emphasis added):
Further, foisting financial assurance obligations on predecessors will not achieve BOEM’s stated aims of financial “savings” and increased OCS oil and gas production; it more likely will do the opposite. The Proposed Rule would just shift financial assurance burdens to financially stronger predecessors, many of which remain engaged in the majority of leasing and production across the OCS and are far more likely to be future investors in increased OCS development and production. By contrast, nothing ensures that entities standing to benefit from the Proposed Rule will reinvest saved financial assurance premium dollars into OCS production; in fact, such entities largely do not explore or increase reserves, but merely buy pre-discovered reserves and produce them to a lower economic limit.
Nor would the Proposed Rule promote or save costs for future OCS transactions since, in the absence of any option for BOEM-demanded financial assurance from current interest holders, assignors will demand financial assurance at sufficiently conservative levels to address the risk of residual liability if assignees default on their obligations.
Even more problematically, the Proposed Rule would retroactively impose this new regulatory burden on entities that divested their OCS property interests years (or decades) earlier—in reliance on BOEM’s regulations that required their assignees to provide any supplemental financial assurance. Such entities are no longer in privity with BOEM, and have no control over current operations on those OCS properties. The Proposed Rule would reach back even to impose these obligations on predecessors that divested their interests before the 1997 regulatory imposition of joint and several liability for assignors (a time period on which the Proposed Rule is silent).
This novel and misguided approach allows, and even encourages, current interest holders to eschew their lease and grant obligations, and instead freely operate on the backs of predecessors and taxpayers. Meanwhile, current interest holders could choose to allocate little or no funding for end-of-life obligations like decommissioning whenever they desire to conclude production, file for bankruptcy, and leave BOEM to eventually issue decommissioning orders to predecessors that have not operated the grants and leases for years or even decades. This would create higher administrative and financial burdens for the government and system as a whole, including where no viable predecessor had accrued liability for decommissioning all facilities present on the lease or grant, and potential operational impacts that a predecessor has no obligation to cure.
This new proposed obligation on predecessors is arbitrary and capricious and unlawful on multiple grounds. It violates the rule against retroactivity by creating new federal liability stemming from already-completed transactions. It violates the agency change in position doctrine, particularly given that BOEM on multiple occasions has rejected precisely the same approach as in the Proposed Rule. It is unsupported, as it overstates the burdens under the discretionary Existing Rule, disregards repeated U.S. Government Accountability Office (“GAO”) and BOEM findings calling for more robust financial assurance by current interest holders, cites only anecdotal prior comments while ignoring the bulk of countervailing comments detailing reality on the OCS, and identifies no means by which BOEM can compel collect, and assess adequate financial information for all predecessor entities. And it is self contradictory, including by tying up more capital among entities producing the vast majority of oil and natural gas on the OCS.
Chevron points to their potential liability balance of ~ $2 billion for satisfying the decommissioning obligations of default owners:
John Smith and I do not agree with the industry support for the use of reserves as financial assurance. The margin of error in reserve, oil price, and decommissioning cost estimates, not to mention the potential for facility damage, the ever-changing political environment, and the administration challenges, present an unacceptably high risk for taxpayers. If companies want to guarantee decommissioning based on reserves, let them do so. Shell makes a good point about why it is especially important to prohibit the use of reserve estimates on a company-wide basis:
Lastly, kudos to the New England Fisherman’s Stewardship Association for raising the concern about financial assurance for decommissioning offshore wind facilities
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