Interior Department Announces Rule on Financial Assurance for Offshore Oil and Gas

Energy attorneys Jim Noe and Elizabeth Craddock co-authored an article featured in The Journal of Federal Agency about the U.S. Department of the Interior Bureau of Ocean Energy Management's (BOEM) recently issued final rule establishing new standards for supplemental financial assurance or bonds required from offshore oil and gas companies operating in federal waters. The authors discuss the rule's requirements, which mandate that lessees post supplemental financial assurance in the amount of the estimated decommissioning liability unless certain credit rating or proven reserves criteria are met. They also highlight the divergent industry reactions to the rule: Large international oil and gas companies generally support it, while independent oil and gas companies oppose it, arguing that the additional financial burden could significantly affect offshore oil and gas production and further weaken the financial strength of independent producers.

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