American Oil and Gas Reporter - January 2015 - 230

and redundant," he continues. "The effect
of this action has fallen disproportionately
on independent producers. We encourage
the BOEM to work with independent
producers to rationalize its approach to
security, avoid disincentives to offshore
investment, and protect the roles of independent producers in the OCS."
Eight-Step Suggestion
IPAA recommends eight steps for
BOEM and BSEE to ensure that bonds
cover the appropriate removal costs:
* When determining whether a company's finances are sufficiently strong to
excempt it from supplemental bond requirements, BOEM should not treat the
company as if it owes 100 percent of the
cost to clear a site if it actually owns 20
percent of the lease.
* In determining the amount needed
for a supplemental bond, the bureau should
account for money already held in escrow.
* BOEM should recognize that general
accounting principles already subtract from
a company's net worth the cost of abandoning wells and removing production facilities.
* To determine bonding exemptions,
the bureau should use modified criteria of
financial strength, such as the criteria financial institutions use in lending.
* Instead of exempting from bonding
a company with a net worth of $100
million, but not one worth $95 million; the
bureau should more rationally limit the
supplemental bond to the $5 million difference between the two net worth calculations.
* If a lease operator fails to plug wells
and remove production facilities on a lease,
BOEM and BSEE order co-lessees and
prior lessees to bear the burden, but the
agencies do not make the bonds available
to cover the costs of the decommissioning
work. The bureau should alter its policy to
let those willing to decommission have
access to the funds of those who fail to
fulfill their obligations.
* Instead of requiring supplemental
bonds prematurely, BOEM should require
a bond only when the lessee is ready to
drill the given well, limit the bond to the
cost of plugging, and release the bond
within an agreed time frame when the
lessee shows the well has been properly
plugged.
* BOEM's method of determining
bond amounts disregards the Financial Accounting Standards Board's accounting
standards. Instead, the bureau should
bond only the present value of the future
cost, and meet with the lessee annually
to adjust bond amounts for all the lessee's
removal liabilities.
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OZONE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FROM PAGE 36
the American public, with potentially
enormous costs to the economy, jobs and
consumers," Gerard says. "Tightened
standards could impose unachievable
emission reduction requirements on virtually every part of the nation. Even pristine areas with no industrial activity, such
as national parks, could be out of attainment."
According to API estimates, the new
ozone regulations will cost $270 billion
a year and place millions of jobs at risk.
It adds that states are only just beginning
to implement the 2008 standards, and
that EPA has not yet released its implementation guidance for those rules, making
meeting standards disruptive to states
and businesses.
"Operating under such stringent requirements could stifle investments necessary to create jobs and grow our economy," Gerard says. "The right policy
choice is to implement the current standards and allow air quality to continue to
improve."
America's Natural Gas Alliance urges
EPA to delay acting on its proposal
while Congress considers legislation.
Late in 2014, Senator John Thune, RS.D., introduced S 2833, a bill to block
EPA from implementing lower ozone
standards. His office says the Clean
Air, Strong Economies Act would mitigate the economic harm from a lower
ozone standard by requiring EPA to focus on the worst areas for air quality
before lowering national air quality
standards. Representative Pete Olson,
R-Tx., sponsored a companion House
bill, HR 5505.
ANGA says the bills continue both
the environmental and economic progress
made, and strike the right balance by allowing communities to catch up with existing standards before being subjected
to new mandates.
Charles T. Drevna, president of the
American Fuel & Petrochemical Manufacturers, says the new standards are the
latest restrictive rules that will undermine
the nation's economy as President Obama
pursues his green legacy.
"This regulation promises to be the
most expensive in U.S. history, while
providing little benefit to the environment
and consumers," Drevna charges. "Studies
have shown that, if enacted, the standard
could lead to millions of jobs lost and
could cost U.S. consumers hundreds of
billions of dollars every year, yet this administration doesn't seem to care."
The United States has cut ozone levels
by 30 percent since 1980, and that trend

230 THE AMERICAN OIL & GAS REPORTER

will continue without lowering ozone
standards as states and counties continue
the implementation process, Drevna says.
Under existing standards, 40 percent of
Americans live in nonattainment areas;
lowering the standard will increase that
number and put millions of jobs at risk.
"Today's ozone proposal is almost
comical, given the administration's extensive public focus on reducing greenhouse gas emissions, because any process
to achieve such stringent ozone requirements will require more energy and increase GHG emissions, in direct conflict
with other EPA regulations," Drevna concludes.
Public Comments
Public comments on the proposed
ozone standard, identified by Docket ID
No. EPA-HQ-OAR-2008-0699, may be
submitted by Internet, e-mail, mail or fax:
* When submitting through the federal
eRulemaking portal use http://www.regulations.gov. Follow the online instructions.
* E-mails may be sent to A-and-RDocket@epa.gov. Include the docket ID
number in the subject line of the message.
* Send two copies of comments by
mail to Environmental Protection Agency,
EPA Docket Center (EPA/DC), Mailcode
28221I, Attention Docket ID No. OAR2008-0699, 1200 Pennsylvania Ave. NW,
Washington, D.C.
* The fax number is 202-566-9744.
For further information, contact Susan
Lyon Stone, Health and Environmental
Impacts, Division, Office of Air Quality
Planning and Standards, at 919-541-1146,
or stone.susan@epa.gov.
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Sacramento Basin Well
Produces 1.6 MMcf A Day
SAN DIEGO-The McKinney well,
drilling in California's Sacramento Basin,
achieved a sustained rate of 1.6 million
cubic feet a day after opening an initial
two feet of a 65-foot gross interval, Royale
Energy Inc. says. Following the flow test,
it reports a pressure build test resulted in
a total pressure of 4,165 psi.
Based on the thickness, pressure and
areal extent, Royale Energy says it expects
the well to be one of its largest discoveries.
According to the company, it plans to
drill the well to its full 65-foot interval as
winter demand for natural gas increases.
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American Oil and Gas Reporter - January 2015

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