GAO slams BSEE and BOEM delays on offshore decommissioning
Written by Nick Blenkey
Image: GAO
Worldwide, decommissioning of end-of-life offshore wells and platforms is an important market for a number of specialist offshore service providers. A recent report from the Government Accountability Office (GAO) indicates that the U.S. market could be a whole lot bigger but for inaction by two U.S. Department of the Interior Agencies: the Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM).
According to GAO, as of June 2023, more than 2,700 wells and 500 platforms were overdue for decommissioning in the Gulf of Mexico.
GAO says that delays can increase environmental, safety, and financial risks. For example, delays could indicate that companies are in financial trouble and may leave the government to pay for decommissioning. The Department of the Interior only holds about $3.5 billion in bonds from companies to cover a potential cost of $40-$70 billion.
According to the GAO report, BSEE does not effectively ensure that industry operators meet decommissioning deadlines for offshore wells and platforms at the end of their useful lives. BSEE’s administrative enforcement tools and its use of them are ineffective at incentivizing noncompliant operators—for example, citations for regulatory violations and orders to comply are essentially warnings. BSEE rarely takes more punitive actions such as issuing civil penalty fines, which can take years, or disqualifying operators, which has unclear trigger criteria.
Long-standing uncertainties in the enforceability of some deadlines also undermine BSEE’s effectiveness for idle infrastructure on active leases and end-of-lease infrastructure in the Pacific. These enforcement issues have contributed to widespread decommissioning delays that have grown into a substantial backlog. For example, for Gulf leases that ended in 2010 through 2022, operators missed BSEE’s one-year decommissioning deadline for more than 40% of wells and 50% of platforms—many of which still have not been decommissioned. Over 75 percent of end-of-lease and idle infrastructure in the Gulf was overdue under BSEE’s deadlines as of June 2023—over 2,700 wells and 500 platforms.
GAO says that the other agency criticized in its report, BOEM, “does not effectively assure that operators have the financial and technical capacity to meet decommissioning obligations in advance of potential delays, bankruptcies, or other defaults. Specifically, BOEM held about $3.5 billion in supplemental bonds to cover between $40 billion and $70 billion in total estimated decommissioning costs as of June 2023. As a result, the federal government remains exposed to billions of dollars in financial risks from decommissioning liabilities if operators do not meet their obligations. BOEM has been working for over a decade on proposals to better address these risks but has not finalized changes in its approach. Additionally, BOEM has limited operator qualification standards that do not address decommissioning capacity or consider any past issues with meeting these obligations safely and timely.”
“Interior could better enforce decommissioning deadlines and mitigate the safety, environmental, and financial risks that unmet decommissioning obligations pose by ensuring BSEE and BOEM prioritize completing planned actions,” says GAO. “Additionally, given the extended duration and magnitude of these issues and insufficient progress in Interior’s efforts to address them, congressional oversight or direction may be warranted to better limit the growing scale of related risks.
- Download the full GAO report HERE
