Analysis of the financial assurance problem for decommissioning of oil and gas wells and facilities

The harmful effects of oil and gas projects on the environment are not limited to the production period. Unlike operating production facilities, control over the state of abandoned wells and fields falls on the state. In the Russian Federation, the obligations of subsoil user companies to properly perform decommissioning operations are not legally regulated and financially secured. Based on world experience, the paper analyzes the most common schemes for formation and accounting of financial assurance for decommissioning operations and examines the state of legislative regulation on this problem in Russia and the world. It presents recommendations on state regulation to guarantee full completion of decommissioning operations by subsoil users, improve their quality and monitor the environmental safety of abandoned wells.

Comparative analysis of financial assurance instruments for offshore oil decommissioning and mine restoration

This paper introduces how different bonding mechanisms for oil and gas decommissioning and mine restoration can ensure operators’ accomplishment of restoration/decommissioning liability and affect their budget. Four mechanisms presented and compared herein include surety bonds, cash collateral bonds, decommissioning and abandonment provisions, and lease-specific abandonment accounts. The author also provides some cautions and recommends amendments for each mechanism to be efficiently applied to oil and gas decommissioning in Vietnam so as to assure operators’ decommissioning duties without discouraging their potential investments.

Asbestos Fibre and Mineral Counts from Filtered Dust Collected in Human Settlements Asbestos Mine Dumps in Mpumalanga Province, Republic of South Africa

Dust generation sources come from mining sites including mine dumps, crushing, hauling, grinding and offloading of waste material from open pit and underground operation and non-operations, movement of trucks on unpaved roads, etc. Many mine dumps in South Africa are not rehabilitated due to the possibility of re-mining in the case of asbestos dumps or have been abandoned by previous owners for different reasons. Some of the reasons for abandonment include bankruptcy, ineffective enforcement, lack of financial assurance, minimal penalties for non-compliance and commodities like gold, asbestos and coal are affected. Historically, only long asbestos fibres were used for manufacturing purpose. While short fibres were unwanted

Revitalization of Coal Brownfields in Solving Environmental Problems and Structural Development of Kuzbass Economy

The life cycle of mines lasts from several years to several decades. The closure of the mine occurs when its recourses are completely extracted, or mining is no longer profitable within its leasehold. Most regulatory authorities all around the world require the plan of mines and open-pits closure even before the mining begins, as it must be determined that the site would not pose a threat to the environment or society in future. Depending on the location, the site of mine or open-pit may be used in alternative way after closure or restored to the pre-operational condition. Local authorities increasingly require financial assurance that the funds needed to close mining enterprises will also be available in emergency situations. Special attention is paid to the environmental insurance intended to limit liability related to pollution elimination after mining activities at abandoned fields are over. In close connection with environmental insurance is post-mining – the development of alternative use of mining sites after the closure of mines and open-pits.

Alberta’s Oil Sands: An Unsecured Asset? An Analysis of the Mine Financial Security Program in Relation to Surface Mining of the Alberta Oil Sands

This article conducts a comprehensive review of Alberta’s Mine Financial Security Program (MFSP), the provincial program that governs the collection of financial assurance for reclamation liabilities (also known as “reclamation liability security,” “financial reclamation sureties,” or “closure bonds”). This article assesses the MFSP program in relation to surface oil sands mining. It concludes that while the recently implemented MFSP has improved some aspects of the oil sands reclamation security regime, Alberta’s MFSP still suffers from issues of transparency, inadequate collection of financial security, and utilization of underinclusive classifications of environmental liabilities. Moreover, this article analyzes the particular risk that oil sands assets have of “stranding” (namely, being unanticipatedly or prematurely written off, downwardly revalued, or converted to a liability) as well as how stranding would impact Alberta’s financial assurance regime.This article concludes that while the oil sands are at a heightened risk for asset stranding compared to the international oil industry as a whole, international oil and gas assets are unlikely to become completely stranded. This article also finds that investors have likely already priced the risk of asset stranding at 1.5–2 percent and will be unlikely to readjust their portfolios unless divestment campaigns strengthen or environmental legislation becomes more certain. The MFSP uses a method that does not account for large fluctuations in oil prices, nor does it sufficiently account for the risk of partial stranding. If asset stranding were to occur, the only way the Alberta government would be able to afford the costs of reclamation would be to paradoxically develop the very resource that was defaulted on, against the environmental legislation or political pressures that caused the stranding.

Review and proposed extension of the APPEA Method for estimating levels of financial assurance

In 2014, the Australian Petroleum Production and Exploration Association (APPEA) published the ‘Method to assist titleholders in estimating appropriate levels of financial assurance for pollution incidents arising from petroleum activities’, referred to as the APPEA Method. The APPEA Method provides a standard approach to quantifying the appropriate level of financial assurance required under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act). The National Offshore Petroleum Safety and Environment Management Authority (NOPSEMA) endorsed the APPEA Method for an initial period of 2 years (until December 2016) with the requirement that APPEA review the method against a broader range of case studies to confirm its validity. In 2017, APPEA applied the APPEA Method to 18 case studies, comparing independently calculated cost estimates with the APPEA Method cost band for each case study. For 17 of the 18 case studies, the independent cost estimate was less than the APPEA Method cost band, confirming the validity of the APPEA Method for those case studies. For one of the case studies involving marine fuel oil, the APPEA Method cost band potentially underestimated the response and clean-up costs. The robustness of the APPEA Method can be improved by amending the hydrocarbon type impact score for fuel oils. Based on the review, NOPSEMA has since endorsed the APPEA Method until September 2018. The APPEA Method is currently endorsed for incidents in which the total volume of hydrocarbon released is <1 000 000 m3 and the total volume of oil ashore is <25 000 m3. Based on an assessment of the response and clean-up costs from three additional case studies that exceeded these limits, amendments to the APPEA Method are proposed that would extend the range of incidents to which it could be applied.