Offshore Oil and Gas Resources: Information on Infrastructure Decommissioning and Federal Financial Risk
Published: 2017-05-17T00:00:00

Fast Facts:
Oil and gas produced in the Gulf of Mexico are an important part of the nation's energy supply.
When infrastructure associated with drilling (e.g., platforms) is no longer in use, the Department of the Interior requires oil and gas companies to decommission it so that it doesn't pose a safety or environmental hazard. Because decommissioning can cost millions of dollars, Interior requires companies to prove that they can pay these costs.
This testimony discusses oil and gas infrastructure in the Gulf, and how Interior oversees its decommissioning.

Highlights:
section_title: Why GAO Did This Study
paragraphs: Oil and gas produced on federal leases in the Gulf are important to the U.S. energy supply. When oil and gas infrastructure is no longer in use, Interior requires lessees to decommission it so that it does not pose safety and environmental hazards. Decommissioning can include plugging wells and removing platforms, which can cost millions of dollars. Interior requires lessees to provide bonds or other financial assurances to demonstrate that they can pay these costs; however, if lessees do not fulfill their decommissioning obligations, the federal government may be liable for these costs.
This statement describes offshore oil and gas infrastructure in the Gulf and Interior's requirements and procedures for overseeing decommissioning, and the risks posed by its financial assurances procedures. This statement is based on GAO-16-40 from December 2015. For that report, GAO reviewed agency regulations and procedures and interviewed officials from Interior, credit rating agencies, academia, and trade associations. GAO also followed up on the implementation status of the report's recommendations.
section_title: What GAO Found
paragraphs: As GAO reported in December 2015, offshore oil and gas infrastructure in the Gulf of Mexico (Gulf) varies in size and complexity, and lessees have installed and removed thousands of structures over the past half century. The simplest structures are found in shallow water and include a caisson, which is a cylindrical, large diameter steel pipe enclosing a well. A more complex structure in shallow water is a fixed platform, which uses a jacket and pilings to support the superstructure, or deck. A typical platform is designed so that multiple wells may be drilled from it. Structures in deep water rely on other methods to anchor to the ocean floor, such as using a narrow, flexible tower and a piled foundation. From 1947 through 2014, lessees drilled over 50,000 wells and installed over 7,000 structures in the Gulf. Over the same time period, lessees plugged almost 30,000 of these wells and removed about 5,000 of these structures. Oil production from deepwater wells increased significantly in recent decades, and in 2014, over 80 percent of Gulf oil production occurred in deep water.
The Department of the Interior (Interior) requires lessees to decommission offshore oil and gas infrastructure, and according to GAO's December 2015 report, Interior developed procedures for overseeing the decommissioning of offshore oil and gas infrastructure and estimating costs associated with decommissioning liabilities. According to Interior regulations, lessees must permanently plug all wells, remove all platforms and other structures, decommission all pipelines, and clear the seafloor of all obstructions created by the lease and pipeline operations when the lessee's facility is no longer useful for operations. Lessees must also permanently plug wells and remove platforms within 1 year after a lease terminates. According to officials GAO interviewed for its December 2015 report, Interior's procedures for overseeing decommissioning and estimating costs associated with decommissioning liabilities included (1) identifying and tracking unused infrastructure, (2) reviewing lessee plans to decommission infrastructure, and (3) using different cost estimates for decommissioning in shallow and deep water.
Interior requires financial assurances from lessees to cover decommissioning liabilities, but GAO's December 2015 report found that Interior's financial assurance procedures in place at that time posed risks to the federal government. Under Interior's financial assurance procedures in place at the time, each offshore lease with a decommissioning liability had to be covered by a bond unless Interior determined that a lessee had the financial ability to fulfill its decommissioning obligations. Interior's procedures allowed it to waive its requirement for a lessee to provide a bond if the lessee passed a financial strength test. However, GAO found that of $38.2 billion in decommissioning liabilities as of October 2015, Interior held or required about $2.9 billion in bonds and other financial assurances, and had foregone requiring about $33.0 billion in bonds for most of the remaining liabilities. Prior GAO work has shown that the use of financial strength tests in lieu of bonds poses risks to the federal government. GAO recommended that Interior address this risk by following through on plans to revise its financial assurance procedures. Interior issued revised financial assurance procedures in July 2016 but, according to Interior, delayed implementing them in 2017 pending a six-month review process.
section_title: What GAO Recommends
paragraphs: Among other recommendations, GAO recommended in GAO-16-40 that Interior complete plans to revise its financial assurance procedures to address risks posed by these procedures. Interior concurred with GAO's recommendations and has taken or described planned actions to address the recommendations, which GAO will continue to monitor.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our work on the  decommissioning of offshore oil and gas infrastructure on federal leases.  As you know, oil and gas resources located on federal leases on the  outer continental shelf are an important component of the nation’s energy  supply. The vast majority of the nation’s crude oil and natural gas  production on the outer continental shelf occurs in the Gulf of Mexico  (Gulf). Historically, most offshore oil and gas activities have occurred in  shallow water, but in recent decades these activities have moved into  deep water. Most active oil and gas leases in the Gulf are now located in  deep water.
Management of offshore oil and gas resources is primarily governed by  the Outer Continental Shelf Lands Act, which authorizes leasing,  exploration, development, and production of those resources. The  Department of the Interior (Interior) is responsible for establishing  procedures and managing oil and gas activities on offshore federal  leases, including activities associated with thousands of wells, platforms,  and miles of pipelines on the outer continental shelf. When this  infrastructure is no longer useful for operations or otherwise becomes  idle, or when a lease has been expired for more than 1 year, Interior  requires oil and gas lessees to decommission it so that it does not pose  potential safety hazards to marine vessels and environmental hazards to  sea life and humans.
Decommissioning refers to the process of plugging wells, removing  platforms and other structures, removing or cleaning out pipelines, and  clearing sites of debris. According to Interior estimates, in shallow water,  decommissioning infrastructure can cost tens of millions of dollars per  lease, depending on the number of wells and types of structures present.  In deep water, decommissioning can cost hundreds of millions of dollars  per lease. In addition, infrastructure damaged by hurricanes is  significantly more expensive to decommission than undamaged  infrastructure.
Two bureaus within Interior are responsible for managing offshore oil and  gas infrastructure. Interior’s Bureau of Ocean Energy Management  (BOEM) oversees resource management activities, including preparing  the 5-year outer continental shelf oil and gas leasing program; reviews oil  and gas exploration and development plans and environmental studies;  and conducts National Environmental Policy Act analyses. Interior’s  Bureau of Safety and Environmental Enforcement (BSEE) oversees  operations and environmental compliance, including reviewing drilling  permits, inspecting offshore drilling rigs and production platforms,  assessing civil penalties, developing regulations and standards for  offshore drilling (including those related to decommissioning), and  ensuring the conservation of natural resources.
My testimony today discusses information presented in our December  2015 report on potential federal liabilities associated with the  decommissioning of offshore oil and gas infrastructure. In particular, I will  discuss (1) oil and gas infrastructure in the Gulf, (2) Interior’s  requirements and procedures for overseeing the decommissioning of oil  and gas infrastructure, and (3) Interior’s requirements and procedures for  obtaining financial assurances for decommissioning liabilities and the  risks posed by these procedures.
For that report, we reviewed Interior’s regulations regarding its  management of leases for offshore oil and gas production. We  interviewed BSEE officials in their Washington, D.C., headquarters office  and Gulf regional office in New Orleans, Louisiana, and reviewed and  summarized relevant BSEE procedures, guidance, and related  documentation. We also interviewed BOEM officials in their Washington,  D.C., headquarters office and Gulf regional office in New Orleans,  Louisiana, and reviewed and summarized relevant BOEM guidance,  procedures, and related documentation. Our December 2015 report  includes a more detailed explanation of the scope and methodology we  used to conduct our work. We also followed up on the implementation  status of the report’s recommendations.
We conducted the work on which this testimony is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Offshore Oil and Gas Infrastructure in the Gulf Varies in Size and Complexity, and Lessees Have Installed and Removed Thousands of Structures Over the Past Half Century
paragraphs: As we reported in December 2015, offshore oil and gas infrastructure in  the Gulf varies in size and complexity, and lessees have installed and  plugged or removed thousands of wells and structures over the past half  century. The simplest structures are found in shallow water and include  caissons and well protectors. A caisson is a cylindrical or tapered large  diameter steel pipe enclosing a well conductor and is the minimum  structure for offshore development. A well protector provides support to  one or more wells with no production equipment and facilities. Lessees  drill wells to access and extract oil and gas from geologic formations.  According to an Interior publication, “exploratory” wells are drilled in an  area with potential oil and gas reserves, while “development” wells are  drilled to produce oil and gas from a known reserve. An exploratory well  may not actually produce any oil or gas, while a successful development  well produces oil or gas. Some wellheads are located on a fixed platform  (typically in shallow water), while other wellheads are located on the  seafloor (typically in deep water).
A more complex structure in shallow water is a fixed platform, which uses  a jacket and pilings to support the superstructure, or deck. The deck is  the surface where work is performed and provides space for crew  quarters, a drilling rig, and production facilities. Most of the large fixed  platforms have living quarters for the crew, a helicopter pad, and room for  drilling and production equipment. A typical platform is designed so that  multiple wells may be drilled from it. Wells from a single platform may  have bottom-hole locations many thousands of feet (laterally displaced)  from the surface location.
Structures in deep water rely on other methods to anchor to the ocean  floor. For example, a “compliant tower” structure supports the deck using  a narrow, flexible tower and a piled foundation. According to an industry  publication, the flexible nature of the compliant tower allows it to  withstand large wind and wave forces associated with hurricanes. Other  common deep-water structures include the tension leg platform, floating  production system, and spar platform. Illustrations of these structures  are shown in figure 1.
In our December 2015 report, we also discussed the oil and gas  infrastructure installed and removed in the Gulf over time. Figure 2 shows  the annual number of wells drilled and plugged in the Gulf from 1947  through 2014. During this period, lessees drilled a total of 52,223 wells in  the Gulf (including 18,447 exploratory wells and 33,776 development  wells) and plugged a total of 29,879 wells (including 4,017 temporarily  abandoned wells and 25,862 permanently abandoned wells).
Figure 3 shows the annual number of structures installed and removed in  the Gulf from 1947 through 2014. During this period, lessees installed a  total of 7,038 structures in the Gulf. In addition, starting in the 1970s,  lessees began removing structures from the Gulf. Specifically, lessees  removed a total of 4,611 structures from 1973 through 2014. Most of the  structures installed and removed were fixed platforms and caissons  installed in shallow water.
From the late 1940s through the early 1960s, lessees only drilled wells in  shallow water. However, starting in the mid-1960s, lessees began drilling  wells in deep water. Figure 4 shows the annual number of wells drilled  and plugged in deep water in the Gulf from 1966 through 2014. During  this period, lessees drilled a total of 6,468 wells (including exploratory and  development wells) and plugged a total of 2,489 wells (including  temporary and permanently abandoned wells) in deep water. Lessees  also installed 112 structures—mostly fixed platforms, spar, tension leg  platforms, and floating production systems—and removed 19 structures in  deep water during this period.
From 1985 through 2014, oil production from deepwater wells has  increased significantly, as shown in figure 5. While the number of wells  drilled decreased in recent years, offshore production increased as  lessees drilled wells in deep water that are more productive than wells in  shallower water. In 2014, over 80 percent of Gulf oil production occurred  in deep water, up from 6 percent in 1985. According to BSEE officials  we interviewed for our December 2015 report, activities in deep water,  including drilling and decommissioning, are significantly more expensive  than those in shallow water because of the technology required and  challenges associated with deep water, such as very high pressures at  significant water and well depths.
section_title: Interior Requires Lessees to Decommission Offshore Infrastructure and Developed Procedures to Oversee the Process and Estimate the Associated Costs
paragraphs: As we reported in December 2015, Interior requires lessees to  decommission offshore oil and gas infrastructure, and Interior’s BSEE  developed procedures to oversee the decommissioning process for  offshore oil and gas infrastructure and to estimate costs associated with  decommissioning liabilities. According to Interior regulations, lessees  must permanently plug all wells, remove all platforms and other  structures, decommission all pipelines, and clear the seafloor of all  obstructions created by the lease and pipeline right-of-way operations  when the lessee’s facility is no longer useful for operations. Generally,  lessees must permanently plug wells and remove platforms within 1 year  after a lease terminates. As we reported in December 2015, BSEE  referred to infrastructure that was no longer useful for operations on  active leases as idle infrastructure (or “idle iron”) and infrastructure on  expired leases as terminated lease infrastructure. In general, BSEE’s  guidance defined idle infrastructure as follows:
A well is considered idle if it has not been used in the past 5 years for  operations associated with exploration or development and production  of oil or gas, and if the lessee has no plans for such operations.
A platform is considered idle if it has been toppled or otherwise  destroyed, or it has not been used in the past 5 years for operations  associated with exploration or development and production of oil or  gas.
According to BSEE officials we spoke with as part of our December 2015  report, companies may postpone decommissioning idle wells and  platforms to defer the cost of removal, increase the opportunity for resale,  or reduce decommissioning costs through economies of scale and  scheduling, among other reasons. However, they said that postponing  decommissioning can be costly because the longer a structure is present in the Gulf the greater the likelihood it will be damaged by a storm.  According to Interior documentation, decommissioning a storm-damaged  structure may cost 15 times or more the cost of decommissioning an  undamaged structure. In 2005, Hurricanes Katrina and Rita destroyed  116 structures and significantly damaged another 163 structures and 542  pipelines in the Gulf, according to Interior documentation. According to  BSEE officials, as of April 2015, the Gulf contained 13 destroyed  structures with 16 associated wells.
Storm-damaged or toppled structures present a greater risk to safety and  require difficult and time-consuming salvage work. After preliminary  salvage work that can take weeks, divers cut and remove structural  components while crane assemblies remove the components and place  them on a barge for transport and disposal. Additionally, when working in  areas with strong currents and unconsolidated material, coffer dams are  often constructed on the seabed to prevent material from slumping back  in on the dive crews and equipment.
In December 2015, we reported that BSEE had developed procedures for  overseeing the decommissioning of offshore oil and gas infrastructure  and estimating costs associated with decommissioning liabilities. Under  BSEE’s regulations, lessees must apply for approval before plugging  wells, removing platforms or other facilities, and decommissioning  pipelines. According to BSEE regional officials, they reviewed  applications to ensure that they contained the required information (see  table 1 below). Once this process was complete, BSEE officials approved  a lessee’s application, which authorized the lessee to begin  decommissioning activities.
After lessees completed all planned decommissioning, they were required  to report to BSEE on the outcome of these activities so that BSEE could  verify that all their decommissioning obligations had been met, including  clearing the seafloor around wells, platforms, and other facilities.  According to BSEE regional officials we spoke with as part of our  December 2015 report, they reviewed lessee reports on decommissioning  activities to ensure that the results were consistent with the information  presented as part of the application process. Table 2 summarizes BSEE’s  reporting requirements related to the results of decommissioning  activities, as of December 2015.
In addition to reviewing lessee applications and reports, the BSEE Gulf  region identified and tracked idle and terminated lease infrastructure.  According to BSEE regional officials we spoke with as part of our  December 2015 report, the BSEE Gulf region began identifying and  tracking idle lease infrastructure in 2010 and updated a list of this  infrastructure on an annual basis. BSEE began identifying and tracking  terminated lease infrastructure prior to 2010, according to BSEE regional  officials. At the beginning of each calendar year, BSEE regional officials  obtained data from Interior’s main data system—the Technical  Information Management System—on wells and structures on leases that  meet the criteria for idle and terminated lease infrastructure. Based on  these data, BSEE sent a list of idle and terminated lease infrastructure to  each lessee, requesting a decommissioning plan and schedule for  decommissioning the lessee’s inventory. According to BSEE regional  officials, BSEE worked with lessees to verify the accuracy of their  inventory of idle and terminated lease infrastructure, and BSEE tracked  lessees’ progress in meeting their schedules.
According to BSEE regional officials we spoke with for our December  2015 report, BSEE estimated the costs associated with decommissioning  liabilities by counting the number and types of wells, pipeline segments,  and structures on a lease and using data on the water depth associated  with this infrastructure. Using these data, BSEE then calculated the  costs associated with (1) plugging and abandoning wells, (2) removing  platforms and other structures, (3) decommissioning pipelines, and (4)  clearing debris from the site.
In general, the cost to plug wells and remove structures increases as the  water depth increases. For example, according to BSEE’s methodology at  the time of our December 2015 report, its estimate of the cost to plug a  dry tree well attached to a fixed structure in shallow water was $150,000,  while its estimate of the cost to plug a subsea well in deep water was a  minimum of about $21 million. Likewise, BSEE’s estimates of the costs to  remove fixed platforms in shallow water ranged from approximately  $85,000 to $4.6 million, while its estimate of the cost to remove a floating  structure (and associated equipment) in deep water was a minimum of  $30 million.
In our December 2015 report, we found that BSEE generally did not have  access to current data on decommissioning costs but had taken steps to  address this issue. Prior to December 2015, under BSEE’s regulations,  lessees were not required to report costs associated with  decommissioning activities to BSEE. According to BSEE regional officials,  data on decommissioning costs were considered proprietary, and  companies generally did not share this information with BSEE. Instead,  BSEE regional officials told us that they relied on other sources of data— some of which were decades old and, as a result, likely inaccurate—to  estimate costs associated with decommissioning liabilities. For example,  according to BSEE regional officials, their estimates for decommissioning  liabilities in shallow water were based on data provided by the oil and gas  industry in 1995. However, in December 2015, BSEE issued a final rule  requiring establishing new requirements for lessees to submit expense  information on costs associated with plugging and abandonment, platform  removal, and site clearance.
section_title: Interior Requires Lessees to Provide Financial Assurances for Decommissioning Liabilities, but Our December 2015 Report Found that Interior’s Procedures Posed Risks to the Federal Government
paragraphs: As we reported in December 2015, Interior’s BOEM requires financial  assurances from lessees to cover decommissioning liabilities, but we  found that Interior’s financial assurance procedures in place at that time  posed risks to the federal government. Under The Outer Continental  Shelf Lands Act, Interior has issued regulations and developed financial  assurance procedures to protect the government from incurring costs if a  lessee fails to meet its lease obligations, including its obligation to  decommission offshore infrastructure.
Under the regulations and procedures in place at the time of our  December 2015 report, BOEM regional directors could require a lessee to  provide a bond —referred to as a “supplemental bond”—that covers the  estimated costs of decommissioning for a lease. BSEE is responsible  for estimating costs associated with decommissioning liabilities. If a  lessee was unable to accomplish decommissioning obligations as  required, the federal government could use the bond to cover  decommissioning costs. However, where there are co-lessees or prior  lessees, if BOEM determined that at least one lessee had sufficient  financial strength to accomplish decommissioning obligations on the  lease, BOEM might waive the requirement for a supplemental bond.
Under BOEM and BSEE regulations, lessee liability is “joint and  several”—that is, each lessee is liable for all decommissioning obligations  that accrue on the lease during its ownership, including those that  accrued prior to its ownership but had not been performed. In addition, a  lessee that transfers its ownership rights to another party will continue to  be liable for the decommissioning obligations it accrued. According to  BOEM officials we spoke with as part of our December 2015 report,  BOEM ensured that all decommissioning obligations on offshore leases  were required to be covered by either a supplemental bond or a current  lessee that had the financial ability to conduct decommissioning.
Under BOEM’s financial assurance procedures in place at the time of our  December 2015 report, each offshore lease with a decommissioning  liability had to be covered by a supplemental bond unless BOEM  determined that a lessee had the financial ability to fulfill its  decommissioning obligations. BOEM staff evaluated the financial ability of  a lessee to fulfill its decommissioning obligations by means of a financial  strength test. BOEM’s financial strength test required a lessee to meet the  following criteria: provide an independently audited financial statement indicating a net  worth greater than $65 million; possess a total decommissioning liability (as determined by BSEE) of  less than or equal to 50 percent of its audited net worth; possess total company liabilities of no more than 2 to 3 times the  value of the adjusted net worth;, and demonstrate reliability, as shown by a record of compliance with laws,  regulations and lease terms, among other factors.
According to our December 2015 report, if a lessee passed the financial  strength test by demonstrating its financial ability to pay for  decommissioning on its leases, BOEM waived its requirement for the  lessee to provide supplemental bonds. Other responsible parties on the  lease would also be waived from the requirement to provide supplemental  bonds. According to BOEM officials, BOEM waived these parties as well  because the waived lessee could be held responsible if another party on  a lease did not fulfill its decommissioning obligations. In addition, a  waived lessee might provide financial assurance in the form of a  corporate guarantee of the lease obligations of a lessee on another  lease.
According to our December 2015 report, after BOEM waived a lessee  from the requirement to provide supplemental bonding, it monitored the  financial strength of the lessee to ensure it continued to pass BOEM’s  financial strength test. BOEM conducted quarterly financial reviews for  the first 2 years after a lessee received a waiver and then an annual  review thereafter. In addition, on a weekly basis, BOEM compared the  decommissioning obligations (as determined by BSEE) of all waived  lessees with the financial information provided by lessee audited financial  statements. If BOEM found that a lessee no longer passed its financial  strength test, BOEM conducted a more in-depth review of a lessee’s  financial status by reviewing financial statements, credit ratings, and other  financial information. BOEM might also conduct an unscheduled financial  review if: (1) BSEE revised its estimate of a lessee’s decommissioning  liability, (2) a lessee’s financial status changed as reported by credit rating  agencies, or (3) a lessee did not pay the required royalties to the federal  government. According to BOEM officials, these reviews could have  caused BOEM to revoke a lessee’s waiver from the requirement to  provide supplemental bonding. For example, in May 2015, BOEM  revoked the waiver of one lessee and, according to BOEM officials, the  waived lessee and related parties could have been required to provide as  much as $1 billion in supplemental bonds.
However, in our December 2015 report, we found that BOEM’s financial  assurance procedures posed financial risks to the federal government in  several ways. In particular, under BOEM’s procedures in place at the  time, less than 8 percent of estimated decommissioning liabilities in the  Gulf were covered by financial assurance mechanisms such as bonds.  Specifically, as of October 2015, according to BOEM officials, for an  estimated $38.2 billion in decommissioning liabilities in the Gulf, BOEM  held or required about $2.9 billion in bonds and other financial  assurances. For $33.0 billion in decommissioning liabilities, BOEM had  waived 47 lessees from the requirement to provide supplemental bonds  based on BOEM’s reviews of the lessees’ financial strength, according to  BOEM officials.,  As we have found in prior GAO reports, the use of financial strength tests  and corporate guarantees in lieu of bonds pose financial risks to the  federal government. Specifically, we found, in August 2005, that the  financial assurance mechanisms that impose the lowest costs on the  companies using them—such as financial strength tests and corporate  guarantees—also typically pose the highest financial risks to the  government entity accepting them. In that report, we found that, if a  company passes a financial strength test but subsequently files for  bankruptcy or becomes insolvent, the company in essence is no longer  providing financial assurance because it may no longer have the financial  capacity to meet its obligations. Such financial deterioration can occur  quickly. While companies no longer meeting the financial test are to  obtain other financial assurance, they may not be able to obtain or afford  to purchase it. In addition, in May 2012, we found that, according to the  Bureau of Land Management and the Environmental Protection Agency,  corporate guarantees are potentially risky because they are not covered  by a specific financial asset such as a bond. Therefore, in our  December 2015 report, we concluded that BOEM’s use of the financial  strength test and corporate guarantees in lieu of bonds raised the risk that  the federal government would have to pay for offshore decommissioning  if lessees did not.
According to BOEM officials we spoke with for our December 2015 report,  BOEM recognized the financial risks associated with its financial  assurance procedures and planned to revise its procedures to reduce  risk. Specifically, BOEM officials told us that BOEM’s planned revisions  would eliminate the use of financial strength tests to completely waive  lessees from the requirement to provide supplemental bonding. Instead,  BOEM planned to conduct financial reviews of lessees’ financial status  and, based on those reviews, assign lessees an amount of credit that  may be used to reduce required bonding associated with  decommissioning liabilities on leases. Lessees would be able to apportion  this credit to leases, in coordination with other responsible parties on  those leases, to ensure that lease decommissioning liabilities are fully  covered by apportioned credit or supplemental bonds. However, because  it was unclear whether BOEM’s planned revisions would improve its  procedures and the extent to which these revisions would increase the  amount of bonding that lessees provide, we recommended in our  December 2015 report, that BOEM complete its plans to revise its  financial assurance procedures, and Interior concurred.
Since the issuance of our December 2015 report, BOEM revised its  financial assurance procedures. Specifically, on July 12, 2016, BOEM  issued revised procedures, effective on September 12, 2016, containing  several changes to BOEM’s policy concerning additional financial security  requirements for leases, pipeline rights-of-way, and rights-of-use and  easement, including the use of alternative measures of financial  strength. In December 2016, BOEM issued orders to sole liability  lessees requiring them to provide additional security. In January 2017,  BOEM delayed implementation of its revised financial assurance  procedures for 6 months. The following month, BOEM withdrew its  December 2016 orders to sole liability lessees, stating that these orders  will be discussed as part of the six-month review process related to the  financial assurance procedures. We have not evaluated the extent to  which these financial assurance procedures and orders, if fully  implemented, would address the concerns we have identified about the  financial risks to the federal government. We will continue to monitor  Interior’s actions to address our recommendations.
Chairman Gosar, Ranking Member Lowenthal, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.
section_title: GAO Contact
paragraphs: If you or your staff have any questions about this testimony, please  contact Frank Rusco, Director, Natural Resources and Environment, at  (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement.
section_title: Staff Acknowledgments
paragraphs: GAO staff who made key contributions to this testimony are Jason  Holliday, Christine Kehr, and David Messman.
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