Texas, Louisiana, and Mississippi on 17 June sued the US government to block the Biden administration's proposed rule that would require the offshore oil and gas industry to provide nearly $7 billion in financial assurances to cover costs of dismantling old infrastructure.
The rule, which would take effect later this year, will predominantly affect smaller companies that do not have investment grade ratings or sufficient proven oil reserves. Oil majors are more likely to meet the credit criteria or have large reserves.
The lawsuit was filed against the US Bureau of Ocean Energy Management (BOEM), which has said the rule could affect around three-quarters of operators in the Gulf of Mexico.
The BOEM declined to comment on the lawsuit. When the rule was announced in April, the Department of the Interior said it was "to protect taxpayers from covering costs that should be borne by the oil and gas industry when offshore platforms require decommissioning."
Decommissioning old wells can cost billions of dollars, and that expense could fall to taxpayers if companies fail to meet their obligations because of bankruptcies or the transfer of assets from large to smaller companies with fewer resources.
Louisiana Attorney General Liz Murrill filed the lawsuit in a Louisiana federal district court and was joined by attorney generals of Texas and Mississippi.
"This is a really egregious direct assault on intermediate level producers of oil and gas, and that affects a lot of business in our state," Murrill told Reuters in an interview.