The Bureau of Ocean Energy Management (BOEM) released its long awaited new Notice to Lessees and Operators (NTL) updating the procedures and criteria used to determine when and if additional supplemental financial assurance is required for an Outer Continental Shelf (OCS) lease, pipeline right-of-way, or right-of-use and easement. New BOEM NTL No. 2016-N01, dated July 12, 2016, takes effect on September 12, 2016 and supersedes and replaces NTL No. 2008-N07, which was commonly referred to by industry as the “supplemental bond” NTL.
While NTL No. 2016-N01 contains several changes in policy, one of most significant for the offshore oil and gas industry is the elimination of the all-or-nothing financial exemption from the requirement to provide supplemental financial assurance allowed under NTL No. 2008-N07. Under new NTL No. 2016-N01, BOEM may allow a lessee or holder of a right-of-way or right-of-use and easement to self-insure up to 10% of that entity’s tangible net worth depending upon BOEM’s evaluation of that entity’s financial ability to carry out its obligations based on (1) financial capacity; (2) projected financial strength; (3) business stability; (4) reliability; and (5) record of compliance. BOEM plans to hold workshops in Houston and New Orleans prior to the effective date of new NTL No. 2016-N01. A copy of NTL No. 2016-N01, the NTL implementation timeline, and information regarding the BOEM workshops can be found at the links below.