Decommissioning escrow accounts

Section 5 of the Outer Continental Shelf Lands Act (43 U.S.C. 1334) is amended by adding at the end the following: (k) Escrow account for decommissioning liability (1) In general The holder of an oil and gas lease shall, in accordance with this subsection, make payments to an interest-bearing escrow account, established and administered by the Secretary, in order to fully meet the total cost of decommissioning the oil and gas infrastructure located on the area subject to the lease. (2) Decommissioning cost estimate (A) In general For each oil and gas lease, the Secretary, or an independent third-party entity designated by the Secretary, shall calculate and periodically update a probabilistic estimate of the total cost of decommissioning existing and proposed oil and gas infrastructure, including platforms, wells, and pipelines, located on the area subject to such lease. (B) Initial estimate The Secretary, or the independent third-party, shall calculate an initial estimate of the total costs described in subparagraph (A) prior to the issuance of a new lease. (C) Reevaluation and updates The Secretary, or the independent third-party, shall reevaluate and, if necessary, update the estimate of the total costs described in subparagraph (A) at a minimum— (i) not less frequently than once every 2 years, to reflect any changes in such total costs; (ii) prior to the approval of a development and production plan pursuant to section 25; (iii) prior to the end of the schedule for payments established under paragraph (3); and (iv) following the disbursal of funds from the escrow accounts for a use approved under paragraph (4). (3) Payment schedule (A) In general The Secretary shall establish a mandatory schedule for payments required by paragraph (1). (B) Deadlines to establish schedules (i) New leases With respect to the issuance, extension, or transfer of an oil and gas lease after the date of enactment of this subsection, the Secretary shall establish the schedule for payments prior to such issuance, extension, or transfer. (ii) Existing leases With respect to any lease in effect as of the date of enactment of this subsection, the Secretary shall establish the schedule for payments by not later than 1 year after such date of enactment. (C) Minimum payments by 5 years Each schedule of payments established under subparagraph (A) shall provide that the total amount of payments made to the escrow account by the date that is 5 years after the schedule is established be not less than the total decommissioning costs for all oil and gas infrastructure located on the area of the applicable lease. (D) Initial payments No lease may be issued, and no development and production plan may be approved under section 25, unless the recipient responsible party or leaseholder makes a payment to the escrow account in an amount equal to the greater of— (i) 25 percent of the average cost to decommission oil and gas infrastructure located on a typical lease at similar depths; and (ii) 25 percent of the total decommissioning costs for all oil and gas infrastructure proposed to be installed on the area subject to the lease pursuant to the plan. (E) Lease extensions and transfers (i) Missed payments The Secretary may not extend the term of, or approve the transfer of, a lease if the holder of the lease owes any outstanding payments to the escrow account. (ii) Adoption of payment schedule The Secretary may not approve the transfer of a lease unless the recipient responsible party agrees to adopt the schedule for payments established for the lease. (F) Adjustments The Secretary shall adjust a schedule for payments established under subparagraph (A) to reflect any update to the applicable cost estimate under paragraph (2)(C). (G) Supplemental financial assurances If the combined amount of the funds in an escrow account for a lease and any supplemental financial assurances provided by the holder of the lease exceeds the total decommissioning cost estimate calculated by the Secretary pursuant to paragraph (2), the Secretary shall correspondingly reduce the supplemental financial assurances required until the combined figure is equivalent to the decommissioning cost estimate. (H) Interest Any interest paid on funds in an escrow account established under paragraph (1) shall become part of the principal funds in the account. (I) Amounts from joint and several liability All funds accrued from previous holders of an oil and gas lease as a result of joint and several liability for the purposes of decommissioning shall be deposited into the corresponding escrow account. (J) Return of remaining funds after decommissioning After decommissioning is complete, any funds remaining in an escrow account for a lease established under paragraph (1) shall be returned to any parties that made payments to the escrow account, excluding any amounts deposited pursuant to subparagraph (I), based on the proportion of the payments made by the respective party. (4) Use of funds (A) In general The holder of a lease may only use funds in an escrow account established under paragraph (1)— (i) for the purposes of decommissioning the oil and gas infrastructure located on the area subject to the lease; and (ii) if the use is approved by the Secretary. (B) No use as collateral No person may commit funds held in an escrow account established under paragraph (1) as collateral. (5) Penalties If the required payments into an escrow account established under paragraph (1) are delinquent by more than 60 days, the Secretary shall— (A) raise the royalty rate for the applicable lease at a rate sufficient to recover the delinquent amount within 6 months and deposit the recovered amount into the applicable escrow account established under paragraph (1); or (B) suspend the lease, pursuant to section 5(a)(2), until the holder of the lease provides the delinquent amount. (6) Definitions In this subsection, the terms decommissioning, parent company, and recipient responsible party have the meanings given such terms, respectively, in section 34..