The Government Accountability Office (GAO) recently released recommendations on how the Department of the Interior should improve its data system for tracking decommissioning and other activity involving offshore oil and gas infrastructure, as well as revise its system for making cost estimates on decommissioning projects to save the federal government from financial losses from inaccurate estimates.
The main lag, according to the GAO, is with tracking cost estimates related to these decommissioning liabilities. The current system requires manually entered data, and as a result, the costs associated with decommissioning may be inaccurate, posing a financial risk to the federal government to the tune of $2.3 billion in 2015, an amount that may not be covered by financial assurances.
Undetermined, however, is whether these faulty estimates are due to limitations in Interior’s data system. Of the remaining $35.9 billion in decommissioning liabilities, Interior held or required about $2.9 billion in bonds and other financial assurances and had foregone requiring about $33 billion in bonds for the remaining liabilities.
The specific resources in question are oil and gas produced on federal leases in the Gulf of Mexico; more than two-thirds of the active oil and gas leases in the Gulf, in excess of 5,000, are located in deep water. Decommissioning involves a de-activation of said resources when not in use – in this case, by plugging wells and removing platforms - so as to avoid safety and environmental hazards.
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