Bob Marshall’s July 18 column shows that he does not understand the laws that govern liability for the costs of decommissioning (cleaning up) oil and gas facilities after they are retired.

With respect to oil and gas leases covering government-owned lands, Marshall states that, if a company sells the lease to another company, responsibility for decommissioning transfers “to the new owner” and, Marshall implies, the original owner is off the hook. With respect to federal and state waters, he states that there is a different rule — liability for decommissioning “remains with the original owner” and, he implies, the new owner is off the hook.

But Marshall is wrong about the law. For both lands and waters, if a lease is transferred between companies, both the original owner and the new owner are liable for 100% of decommissioning costs. This protects taxpayers because, if either company goes bankrupt, regulators can look to the other to pay all decommissioning costs.

Marshall also describes a system of proportional liability that supposedly would do a better job (than existing laws) of protecting against the risk that taxpayers will have to pay a portion of decommissioning costs. Marshall states that, under a proportional liability system, if a company owns a lease for 60% of the life of the lease, that company would be responsible for 60% of decommissioning costs, but no more.

Such a scheme would not do a better job of protecting taxpayers. Under that scheme, if a company that owned the lease for 40% of the life of the lease goes bankrupt, taxpayers would pay 40% of decommissioning costs. In contrast, under existing laws, each company that ever owned a lease is liable for up to 100% of decommissioning costs.


energy law professor

Baton Rouge