Letter — House Committee on Small Business to Bureau of Ocean Energy Management (August 3, 2023)

Summary

The House Committee on Small Business writes to Liz Klein, Director of the Bureau of Ocean Energy Management (BOEM), to inquire about BOEM's proposed rule change to the financial requirements for Outer Continental Shelf (OCS) lease and grant holders. The letter says it appears BOEM may not have properly considered the effects on small entities. It describes the proposed rule as eliminating the existing five-part analysis in favor of a credit rating-based system and says small businesses will be disfavored by the new credit rating standards. The committee asks for information no later than August 17, 2023, with questions on whether the rule disproportionately impacts small businesses. The signature block names Chairman Roger Williams, Jake Ellzey, Aaron Bean and Wesley Hunt.

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Full text

                                             August 3, 2023

Ms. Liz Klein
Director
Bureau of Ocean Energy Management
1849 C Street NW
Washington, D.C. 20240

Dear Director Klein:

       The House Committee on Small Business writes to inquire about the Bureau of Ocean
Energy Management’s (BOEM) recent proposed rule change to the financial requirements for
Outer Continental Shelf (OCS) lease and grant holders.1 It appears that the BOEM may not have
properly considered the effects this would have on small entities during this rulemaking process.

        This proposed rule would increase the number of OCS lease and grant holders that are
required to have reserve product or funds for decommissioning offshore oil, gas, or sulfur wells
and pipelines. It would eliminate the existing five-part analysis for determining these financial
requirements, in favor of a credit rating-based system.2 Given that small businesses are less
likely to have a business credit score and credit ratings agencies consider an entity’s size in
determining its credit rating, small businesses will be disfavored by these new credit rating
standards.3

       It is important for agencies to properly consider small businesses, which make up 99.9
percent of all businesses in the United States, when passing any new rule. America’s small
businesses deserve to have their voices heard and considered. We therefore request the following
information as soon as possible but no later than August 17, 2023:

    1. Will this rule, by establishing tiers largely based on credit ratings, disproportionately
       impact small businesses?4

            a. Will the BOEM’s proxy credit ratings also adversely rate small entities based on
               their size?

1
  Risk Management and Financial Assurance for OCS Lease and Grant Obligations, 88 Fed. Reg. 42136, 42157-58
(to be codified at 30 C.F.R. 550, 556, 590).
2
  Id. at 42141-42.
3
  Arsebe Lui, Does Size Matter? Incorporating Company Size in Credit Risk Assessment, STANDARD & POOR’S
(Nov. 20, 2021).
4
  Id.
Ms. Liz Klein
August 3, 2023
Page 2 of 3


    2. Since this rule relies on ratings from credit ratings agencies, did the BOEM include the
       costs associated with a small business receiving a rating when drafting this rule?

    3. Are there readily accessible resources for small entities to assist them in appealing a
       supplemental financial assurance demand?

    4. The BOEM’s analysis indicates that non-investment grade companies will pay four times
       more for decommissioning bonds than investment grade companies.5 What alternatives
       did BOEM consider?

            a. This rule discusses alternative rules that are similar to this standard but are
               slightly more or less restrictive. Did the BOEM only consider these options, or
               did it consider any alternatives which were more narrowly tailored to meet the
               needs of small businesses?

    5. Since 2009, most bankruptcy filings by OCS lease and grant holders did not result in cost
       to the taxpayer, for what reason does the BOEM believe there is substantial risk of
       needing taxpayer dollars to cover decommissioning expenses?6


       To schedule the delivery of your response or ask any related follow-up questions, please
contact Committee on Small Business Majority Staff at (202) 225-5821. The Committee on
Small Business has broad authority to investigate “problems of all types of small business” under
House Rule X. Thank you in advance for your cooperation with this inquiry.”

                                             In God We Trust,




_________________________                                  _________________________
Roger Williams                                             Jake Ellzey
Chairman                                                   Member of Congress
Committee on Small Business                                Committee on Small Business




5
  Bureau of Ocean Energy Mgmt., Risk Management Financial Assurance and Loss Prevention Initial Regulatory
Impact Analysis (Jun. 29, 2023).
6
  Risk Management and Financial Assurance for OCS Lease and Grant Obligations, 88 Fed. Reg. 42136, 42139 (to
be codified at 30 C.F.R. 550, 556, 590).
Ms. Liz Klein
August 3, 2023
Page 3 of 3




_________________________                    _________________________
Aaron Bean                                   Wesley Hunt
Member of Congress                           Member of Congress
Committee on Small Business                  Committee on Small Business


cc:   The Honorable Nydia M. Velasquez, Ranking Member
      Committee on Small Business


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