The Gulf Energy Alliance (GEA) works with stakeholders on behalf of independent offshore oil and natural gas producers in the U.S. Gulf of Mexico (GOM) on the development and implementation of effective yet reasonable financial assurance requirements. The GEA remains firmly committed to the principle that the goal for any financial assurance framework should be to protect the American taxpayer from exposure to any financial loss associated with decommissioning liabilities in the GOM.
Joint and several liability is a bedrock principle in the GOM, and recent offshore bankruptcies have demonstrated that this remains the best possible protection for taxpayers from offshore decommissioning liabilities.
Providing multiple layers of protection for Independents and taxpayers.
We believe that financial assurance requirements must address the actual risks to U.S. taxpayers beyond the robust protection afforded by the joint and several liability of sellers of offshore properties. The GEA has long maintained that additional financial assurance may be appropriate on sole liability properties where the current owner is the only responsible party for the property, and where there are no prior interest holders in the chain of title. Additionally, the GEA also acknowledges that there are certain high-risk, non-sole liability properties where supplemental bonding may be appropriate depending on the financial strength of co-owners and predecessors in title. The GEA’s position is consistent with the Outer Continental Shelf Lands Act, the history of supplemental bonding regulations, and the bedrock principle of joint and several liability.
Requiring additional supplemental bonding will unnecessarily and disproportionately burden independent offshore oil and gas companies with no corresponding benefit for U.S. taxpayers.
Without our Independents exploring the bounty of these properties further, Deepwater Gulf of Mexico oil production would continue to follow the plummeting trajectory that began in the mid ‘80s. Since 2010, Independents have already begun to combat this decline, resulting in $126 million in federal royalties.
Since these contracts began in the 1990s for mature properties to be passed to Independents, the conclusions have been mutual agreements on purchase price and financial security. The major oil companies having benefited from harvesting the Gulf of Mexico Shelf for over 70 years, and there is no reason sellers shouldn’t be held to these willingly signed and agreed upon terms. If duplicative financial assurance becomes required, it will allow major oil companies to re-trade these deals, with the government creating additional protections outside of the original contracts. This would have zero benefit to the U.S. taxpayer, even putting them at risk to pay for additional infrastructure to be built.
In 2020, Fieldwood Energy went bankrupt. See how their decommissioning costs were distributed amongst predecessors.
In 2010, Energy XXI (now Cox) obtained fields from Exxon. After a 20+ year decline in production, this Independent brought production up.
Legal jargon, negotiations and complicated histories aside, it is evident that the 2020 Proposed Rule is not only the best option for U.S. taxpayers, but the planet, and Gulf Energy Alliance hopes you join us in fighting for Independents to continue the work they put into the longevity and sustainability of domestic U.S. oil production.
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