Offshore orphaned well proposal has small drilling companies crying foul


A proposed regulation that attempts to prevent orphaned oil and gas wells in the Gulf of Mexico has prompted complaints from small drilling companies that say the rule unfairly hamstrings their ability to compete with major corporations, while environmental advocates say it’s a necessary reform to protect coastal waters.

The Bureau of Ocean Energy Management recently announced proposed changes to the financial assurance requirements for offshore oil and gas infrastructure. Before companies can start drilling for fossil fuels in the Gulf of Mexico, they have to post a surety bond as a form of insurance in case the company goes bankrupt and leaves an oil or gas well unplugged or in disrepair.

An abandoned and unplugged well with no financially viable owner or former owner is known as an orphaned well. Aside from posing severe risks to the environment, they can be costly to taxpayers if the owner of the well goes bankrupt or posts an insufficient bond.

BOEM is proposing to increase the required bonding amounts for oil and gas lessees that don’t have the investment grade credit rating most major exploration companies have. The average net worth of a lessee with an investment grade credit rating is $115 billion, according to BOEM’s analysis.

Ken Beer, an executive with the small drilling company Cantium Oil & Gas, said this would effectively exempt all the major companies and hurt only the small independent drillers.

Read the full story about the proposed policy and its opponents from Louisiana Illuminator.