American Oil and Gas Reporter - August 2016 - 18

IndustryDigest
exploration wells, despite the fact these
wells may never be drilled," complains
Independent Petroleum Association of
America Senior Vice President of
Government Relations and Political
Affairs Dan Naatz about NTL 2016N01, released July 14 to become
effective Sept. 12.
"This mandate unfairly places the
burden on independent producers,
removing operators' flexibility and
making it as difficult as possible for
these smaller, independent companies to
remain in business. The new financial
requirements will double the cost of
insurance for offshore companies and
will tie up much-needed capital," Naatz
says, adding: "To date, industry has
absorbed 100 percent of its liability
with zero cost to U.S. taxpayers,
proving that the current financial
assurance system works. (NTL 2016N01) is not a 'balanced' solution."
National Ocean Industries
Association President Randall Luthi
calls it "a solution in search of a
problem. U.S. taxpayers never have
been left on the hook for offshore
decommissioning costs. We urge
regulators to recognize that private
agreements between companies can
address potential liability fully."
According to BOEM, NTL 2016N01 replaces NTL 2008-N07, under
which if BOEM determined that one or
more co-lessees or owners had
sufficient financial strength and
reliability, it was not necessary to

provide additional security. "Now," the
agency continues, "when determining
the amount of additional security that
may be required, the regional director
will consider 100 percent of your
decommissioning and other liability for
every lease, right of way and (right of
use and easement) in which you hold an
ownership interest."
The NTL also describes new criteria
BOEM will use to evaluate a lessee's
financial ability. Those are:
* Financial capacity;
* Projected financial strength;
* Business stability based on five
years of continuous operation on the
OCS or onshore;
* Reliability based on the lessee's
credit rating; and
* Record of compliance with
BOEM and Bureau of Safety and
Environmental Enforcement
regulations.
NOIA points out that properties
judged to pose the highest risk, which
BOEM says are those for which there is
only one leaseholder responsible for
decommissioning, will have 60 days to
comply with an order requiring
additional security. All other lessees
will have 120 days.
BOEM adds that self-insurance will
be limited to 10 percent of the lessee's
tangible net worth, but says the NTL
allows companies to use abandonment
accounts, third-party guarantees, and
"other forms of approved security" in
addition to surety bonds and pledges of

Members of the Independent Oil & Gas Association of New York gathered for the association's 2016 summer meeting, July 13-14 at the Peek'n Peak Resort and Conference
Center in Findley Lake, N.Y. Gordon DeLeys, a compliance assistance specialist with
the U.S. Occupational Safety & Health Administration, gives an update on initiatives and
regulations promulgated by OSHA. Other meeting presentations included revisions to
the Environmental Protection Agency's New Source Performance Standards, using ultrahigh-deﬁnition stratigraphy to evaluate horizontal drilling projects, and considerations
for plugging oil and gas wells.

18 THE AMERICAN OIL & GAS REPORTER

U.S. Treasury Securities.
While NOIA says it supports this
"tailored financial plan concept," it still
worries that "this NTL could cause
some of the very financial instability it
purports to protect against." ❒

PHMSA Releases More
Oil Train Regulations
WASHINGTON-The Department of
Transportation's Pipeline and
Hazardous Materials Safety
Administration, in conjunction with the
Federal Railroad Administration, has
proposed regulations requiring highhazard flammable trains (HHFTs) to
share information with state and tribal
emergency response commissions.
PHMSA says the proposed rule,
released July 13, also incorporates a test
method for initial boiling point for
flammable liquids into the hazardous
materials regulations.
"We have taken more than 30 actions
in the last two years to address (the risk
of explosion from a HHFT derailment),
and we continue to push the industry to
do more," comments U.S.
Transportation Secretary Anthony Foxx.
"This rule goes one step further to hold
industry accountable to plan and
prepare for the worst case scenario."
According to PHMSA, the rule
would expand the comprehensive oil
spill response plan requirements under
the Clean Water Act to certain HHFT
trains, based on the amount of crude oil
being transported. It would require the
operator to be prepared to respond to an
incident involving a worst-case
discharge, or the largest quantity of oil
reasonably expected to be discharged.
PHMSA says the rule also would
codify the requirement that railroads
share information about HHFT
operations by requiring them to provide
monthly notification, or certification of
no change, to state and tribal emergency
response commissions and relevant
emergency responders. These notices
must include:
* Reasonable estimates of the
number of HHFTs that are expected to
travel through each county weekly, and
the routes;
* Descriptions of the materials
shipped and applicable emergency
response information; and
* At least one point of contact at the
railroad.

American Oil and Gas Reporter - August 2016

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