In 2024, the Bureau of Ocean Energy Management ("BOEM") issued new financial assurance ("FA") regulations requiring an estimated $6.9 billion in new supplemental FA from federal offshore oil and gas lessees and grantees, all in excess of base-level bonding amounts (the "Rule").1 Gulf states and certain trade groups sued in State of Louisiana, et al. v. Haaland, et al., No. 2:2024-cv-00820 (filed June 17, 2024 W.D. La.), challenging the Rule as unlawful and seeking vacatur. Plaintiffs sought a preliminary injunction or stay in the interim to prevent BOEM from enforcing the Rule while the litigation is pending. On March 10, 2025, the U.S. District Court for the Western District of Louisiana denied the plaintiffs' motion for preliminary injunction or stay for failure to prove the threat of irreparable harm, as well as due to unresolved issues requiring a contradictory hearing that prevented the court from finding plaintiffs have a substantial likelihood of success on the merits.
At this time, BOEM is reviewing its Biden-era FA regulations and plans to announce the efforts it will take to suspend, revise, or rescind the Rule. This regulatory review is being undertaken in response to President Trump's Executive Order 14154 § 3, Unleashing American Energy, issued Jan. 20, 2025 ("EO 14154"), 2 and U.S. Department of Interior Secretarial Order 3418 § 4(b), issued Feb. 3, 2025, implementing EO 14154. Considering the forthcoming BOEM announcement on the Rule, on April 7, 2025, the parties to the lawsuit filed a joint motion to stay further proceedings over the existing Rule, which was granted by the court (the "Stay"). Pursuant to the terms of the Stay, BOEM agreed to only seek supplemental FA covering select federal offshore properties:
Defendants are reviewing the Rule and anticipate announcing the efforts they will take to suspend, revise or rescind the Rule. . . . Defendants, consistent with their discretion under the Rule, agree not to seek supplemental financial assurance except in the case of (a) sole liability properties; and (b) those non-sole liability properties that are held by owners who are not financially strong (as described by the Rule) and that have no co-owners or predecessors who are financially strong (i) that are inactive, (ii) where the production end of life is fewer than five years, or (iii) with damaged infrastructure, regardless of the remaining property life of the surrounding producing assets.
Notably, this interim enforcement policy takes into consideration the financial strength, i.e., credit rating, of predecessors; whereas, the Rule considers the financial strength of only current co-lessees/grantees when making supplemental FA determinations. See 30 C.F.R. § 556.901(d)(3).
BOEM must provide a status report by Aug. 5, 2025, and at 90-day intervals thereafter. BOEM also agreed to provide a status report upon publication of a proposed or final rule affecting the existing Rule.
Footnotes
1 Risk Management and Financial Assurance for OCS Lease and Grant Obligations, 89 Fed. Reg. 31544 (Apr. 24, 2024). The Rule went into effect on June 29, 2024. 89 Fed. Reg. 47080 (May 31, 2024)
2 EO 1454, Unleashing American Energy, 90 Fed. Reg. 8353-59 (Jan. 29, 2025).
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