The Biden administration promised to release a new standard for ocean drilling that could help clean up a growing number of old oil and gas wells, but the first-of-a-kind rule has yet to arrive with just two months before President-elect Donald Trump reenters the White House.
The fitness to operate standard — intended to weed out companies unable to cover cleanup costs or guilty of safety and environmental infractions — carries huge implications if it’s not rewritten or indefinitely delayed by the Trump administration.
A draft rule could land in January as the last major effort of the Biden administration to reshape the nation’s offshore fossil fuel program, in lieu of retiring the program, as President Joe Biden promised during his 2020 presidential campaign. If finalized, the standard could block so-called bad actor companies from buying new drilling leases offshore, giving federal regulators an added way to pressure companies to improve their compliance records and decommission their old wells, pipelines and platforms.
The rule “would basically say to the industry, ‘If you don’t meet your safety obligations, your environmental obligations and your decommissioning obligations, then you lose your ability to operate,’” said Andrew Hartsig, senior director of the Arctic program at the Ocean Conservancy.
A swelling decommissioning challenge has been thrust into the spotlight by Democratic lawmakers and environmental watchdogs. A congressional watchdog report this year found more than 75 percent of end-of-lease and idle infrastructure in the Gulf of Mexico — where most U.S. offshore drilling is located — was overdue for decommissioning. That totaled roughly 2,700 wells and 500 offshore platforms, which are large structures built in the ocean to facilitate oil and gas production.
The number of wells needing decommissioning could surge to roughly 5,000 by the end of the decade based on the number of wells nearing retirement, if the backlog isn’t addressed, according to Hartsig.
“A lot of the shallow water wells are going to reach the end of their useful life in the near future,” he said. “This trend is going to continue.”
The Bureau of Safety and Environmental Enforcement (BSEE) — one of the Interior Department bureaus that oversees the offshore oil and gas program — said in an email that it may propose regulatory changes to address the underlying challenges to decommissioning oil and gas infrastructure on time.
Some members of the oil and gas industry are wary of the fitness rule, unsure how broad or severe the new standard might be.
An oil and gas professional with a midsize offshore company told POLITICO’s E&E News that the fitness standard is about “optics” to show the public that the Biden administration is tough on decommissioning after several high-profile bankruptcies in recent years threatened to abandon thousands of offshore wells on the U.S. taxpayer. The oil and gas expert was granted anonymity to speak freely about a controversial issue in the industry.
“They invited bad actors that have led to bad outcomes,” he said of the Interior bureaus that oversee oil and gas.
A notice of proposed rulemaking, which would begin the process of inking fitness to operate standards, was originally scheduled for this fall. But it’s now scheduled for January. The rule is being developed by the Bureau of Ocean Energy Management (BOEM), in collaboration with BSEE.
In August, BOEM told the Government Accountability Office it was working with BSEE to finalize the rule by December 2026.
But the fitness standard could face serious roadblocks as a result of this month’s presidential election.
Trump has nominated Republican Gov. Doug Burgum of North Dakota, the second-largest oil producing state in the nation, as his Interior secretary, in a nod to his support for oil and gas on public lands. The president-elect also made Burgum the head of a new National Energy Council that Trump said in a statement would “oversee the path to U.S ENERGY DOMINANCE” by cutting regulations and boosting the private sector.
Trump is set to take office after U.S. oil and gas production hit a record high under Biden.
In his victory speech this month, Trump called oil “liquid gold.”
“We have more liquid gold than any country in the world. More than Saudi Arabia. We have more than Russia,” he said.
The Trump transition team did not provide comments for this story. Trump’s inauguration is set for Jan. 20.
Addressing ‘bad actors’
Without a draft to review, observers say it’s difficult to predict how Interior may approach the fitness to operate rule.
The most recent regulatory agenda from the White House says the rule will “establish safety, environmental, and financial responsibilities for companies to meet in order to operate” in federal waters.
BOEM said in an emailed statement that it will “assess and revise qualification requirements to consider decommissioning and compliance history to ensure that offshore oil and gas operations are managed in a safe and environmentally responsible manner and in ways that minimize costs to the U.S. government and taxpayers.”
But it’s unclear if the proposal would constrain existing operators, or if it would simply limit the sale, or transfer, of offshore oil leases to companies that do not meet the new criteria.
“It could be good. If they think they need a rule to prevent [lease] assignments to bad actors,” said Elmer Danenberger, a former chief of offshore energy engineering and operations at Interior, of the planned rule.
He said the standard could work in tandem with BSEE’s existing disqualification process, which targets operators that are guilty of numerous violations. If operators consistently flout safety and environmental regulations, BSEE can put those operators on probation and ultimately they can be barred from operating one or more facilities.
A fitness standard could prohibit BOEM from selling new leases to any companies on probation or that have been restricted from operating, Danenberger said.
The unnamed industry expert said the rule is overkill, because the twin bureaus — BOEM oversees offshore leasing and BSEE regulates the day to day industry — already have several other “bites at the apple” to limit oil and gas companies from operating in federal waters.
For example, each company that operates in federal waters must get a qualification card from BOEM that essentially grants permission to operate. BOEM can revoke a company’s status as an operator, on BSEE’s recommendation, because of poor compliance with rules.
The industry expert warned that the new rule could be used to pressure smaller companies out of the market. Offshore drilling is dominated by major international oil companies, but many wells are also operated by midsize firms, whose leaders have complained that the Biden administration has targeted them with new rules.
The Biden administration’s regulatory regime has driven a wedge between major offshore oil and gas operators and some smaller firms.
Earlier this year, BOEM finalized a new cleanup rule for offshore oil and gas drillers that could increase by nearly $7 billion the amount of money the federal government holds to take down offshore infrastructure when companies abandon sites. That rule will mostly apply to midsize, independent companies.
Some oil and gas trade groups, and several Republican attorneys general from states in the Gulf region, have sued to block the rule, which some companies argue could shoulder midsize operators out of the business, or even prompt them to file for bankruptcy.
Conversely, the American Petroleum Institute, which has large operators such as BP and Shell as members, tried to join the lawsuit in defense of the Biden administration.
Major companies are often the last line of defense before wells have to be cleaned up at the expense of the federal government. They can be held liable for abandoned wells and facilities they once had interests in. The new rules create more of a financial buffer between major companies and their former liabilities.
BOEM said in a statement that its financial assurance rule struck an appropriate balance between managing offshore oil and gas resources in a responsible way and protecting taxpayers and environmental interests. BOEM said it included provisions that ease the rule’s impact on some companies, including a phased-in implementation option and allowing companies without a qualifying credit rating to seek a proxy rating.
Likewise, BOEM said it’s fitness rule will be developed with input from regulated companies as well as the general public.
“These public comments will be used to develop the provisions included in the final rule and to develop the final regulatory impact analysis,” the bureau said.
API declined to comment to E&E News on the fitness to operate rule. The National Ocean Industries Association — which remains neutral on decommissioning issues — and the Independent Petroleum Association of America also declined to comment.
‘A huge failure’
The Biden administration first flagged standards for who is allowed to operate offshore drilling in federal waters in 2021, when Interior released a report critical of the federal oil and gas program.
According the report, the high cost of developing oil and gas in the ocean weeds out some underfinanced speculators from operating. But the report said some companies with “poor environmental, safety, or reclamation histories are still allowed to bid for leases or acquire them from other companies.”
A fitness to operate rule is meant to address those concerns — and those firms.
For proponents of offshore drilling reform, the fitness rule is about making sure only financially strong companies are permitted to operate in the ocean, where cleanup costs and environmental risks are high.
“If you get to the point of an orphan well, that’s already a huge failure,” said Hartsig of the Ocean Conservancy.
The U.S. oil and gas industry has maintained that most offshore oil and gas infrastructure is not abandoned at the cost of the U.S. taxpayer but permanently decommissioned by operators. Just 106 offshore oil and gas wells are currently orphaned in the Gulf of Mexico — of nearly 30,000 former oil and gas wells that have been retired and permanently shut in the Gulf of Mexico alone.
But Mark Agerton, an assistant professor in the Department of Agricultural and Resources Economics at the University of California, Davis, said the oil and gas industry’s strategy is often to delay clean-up liability and push those costs to a future date to make their current financial position look stronger.
But that can lead to a fiscal cliff.
“If the company is going to go bankrupt today if they’ve got to fund this decommissioning, what’s going to be different about tomorrow?” Agerton said.
He co-authored a decommissioning study published in Nature Energy last year that suggests more than 6,000 inactive wells sit in shallow federal waters and many are unlikely to return to production. The cost to permanently plug those wells is roughly $5.6 billion, according to the study.
Some of those wells may add to an existing problem. The GAO found in 2024 that — for Gulf oil and gas leases that ended between 2010 and 2022 — companies missed BSEE’s deadline to decommission within one year on more than 40 percent of wells and 50 percent of platforms. Many of those facilities had yet to be decommissioned at the time of the report, according to GAO.
In a statement, BOEM said that “a large number of older wells could be due for decommissioning in the coming years.”
Both BOEM and BSEE provide public databases to track offshore infrastructure, with estimated costs for decommissioning and how much bonding the federal government holds for properties.
BSEE said in an emailed statement that the bureau is also convening a team to assess the GAO report on overdue decommissioning.
The bureau said it is planning to propose revisions to its regulations to address the “existing challenges with ensuring timely decommissioning.” A notice for proposed rulemaking for those revisions is scheduled to come out in mid-2025, according to the White House regulatory agenda.
“BSEE takes every effort to ensure the decommissioning activities are conducted safely, cause no harm to the environment, and are completed in a timely manner,” the bureau said. “BSEE believes the observations highlighted in [the GAO] report are only part of the complicated process to properly decommission aging oil and gas infrastructure.”
Brian Snyder, another author of the report with Agerton and an associate professor in the Department of Environmental Sciences at Louisiana State University, said the Biden administration fitness rule could be a “proactive” measure to protect against future financial realities for oil and gas companies.
He said in an email that the oil industry could face financial threats due to decarbonization — the move away from fossil fuels in favor of renewable or low-carbon energy or carbon capture efforts — that could affect their ability to decommission wells.
Extreme weather events are also a risk in the Gulf region, Snyder said, noting Hurricane Milton. The storm became a massive category 5 hurricane while still in the Gulf of Mexico — though it missed most oil and gas infrastructure and came ashore in October as a Category 3.
“The [current] regulations were developed for a world that no longer exists,” Snyder said. “A hurricane like Milton could cause billions of dollars of damages to offshore infrastructure, which very few companies could absorb.”
