Drain the Swamp, Not the Gulf

17 April 2017 Publication
Author(s): John P. Melko

Oil & Gas Financial Journal

During the presidential campaign, the current administration promised to “Drain the Swamp” - shorthand for cutting federal bureaucracy. Candidate, now President, Trump also promised to be more friendly to the traditional energy industry and has nominated cabinet members, undergoing confirmation hearings at the time of this writing, who give every indication of at least understanding the traditional energy industry and its significance to the country. Certainly his January pronouncements on the Keystone and Dakota pipeline are encouraging.

In its waning months, the outgoing administration unleashed a tidal wave of federal regulations, much of which is aimed at energy. For the offshore segment of the energy industry, part of that effort is an announced intention to change the way that the Bureau of Energy Management (BOEM) will calculate the amount of third-party bonding it will require as a condition of allowing companies operating in waters over the Outer Continental Shelf (OCS) to continue to own and operate their leases, platforms, pipelines and rights of way, easements and rights of use agreements. A good place to start draining the regulatory swamp might be this new procedure.

“Rulemaking” by federal agencies normally starts with a Notice of Proposed Rulemaking, which is published in the Federal Register, inviting “comments,” and then holding public hearings if necessary. However, where agencies such as BOEM want to “clarify” their rules, they have wide latitude to do so. On September 12, 2016, BOEM issued NTL No. 2016-N01, “Requiring Additional Security.”

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