Note 11 - AROs

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Asset Retirement Obligation Disclosure [Text Block]

(11) AROs

Refinery and Facilities

Management has concluded that there is no legal or contractual obligation to dismantle or remove refinery and facilities assets. Management believes that refinery and facilities assets have indeterminate lives under FASB ASC guidance for estimating AROs because dates or ranges of dates upon which we would retire these assets cannot reasonably be estimated at this time. When a legal or contractual obligation to dismantle or remove refinery and facilities assets arises and a date or range of dates can reasonably be estimated for the retirement of these assets, we will estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using present value techniques.

Pipelines and Facilities and Oil and Gas Properties

We have AROs associated with decommissioning our pipelines and facilities assets, as well as plugging and abandoning our oil and gas properties.  We recorded a discounted liability for the fair value of an ARO with a corresponding increase to the carrying value of the related long-lived asset at the time the asset was installed or placed in service, and we depreciated the amount added to property and equipment. From time to time we record an increase in liability or an impairment due to changes in estimates or the timing of decommissioning the assets. During the three months ended March 31, 2024 and 2023 we did not record an increase in liability or an impairment related to our pipeline and facilities assets.

Because our pipelines and facilities assets have been inactive for an extended period, BOEM mandated that they be decommissioned. In October 2023, management met with BSEE to discuss BDPL’s path forward for meeting decommissioning requirements.  Management worked with a consultant to develop a decommissioning plan, and BDPL is following the plan. Separately, management is exploring alternatives to reactivate the assets under a potential alternate Rights-of-Use and Easement (RUE).  Based on updated estimates for pipeline decommissioning, platform removal, and associated costs, as well as resource availability and projected weather conditions, we believe decommissioning and remediation of all associated INCs will be completed by the end of the third quarter of 2024.  However, BDPL’s work plan does not relieve BDPL of its obligations to comply with BSEE’s mandate or of BSEE’s authority to impose financial penalties. Further, there can be no assurance that BDPL will be able to complete the anticipated work or predict the outcome of BSEE INCs. Accordingly, we did not record a liability related to potential penalties on our consolidated balance sheets as of March 31, 2024 and December 31, 2023.  At March 31, 2024 and December 31, 2023, BDPL maintained $3.0 million and $4.5 million, respectively, in AROs related to abandonment of these assets, which amount does not include potential penalties.

Due to BDPL’s failure to complete decommissioning of the offshore pipeline and platform assets and remedy associated INCs within the timeframe mandated by BSEE, BDPL could be subject to regulatory oversight and enforcement, including but not limited to failing to correct an INC, civil penalties, and revocation of BDPL’s operator designation, which could have a material adverse effect on our earnings, cash flows, and liquidity.  On January 26, 2024, BSEE assessed a civil penalty of $0.2 million against BDPL for failure to complete annual platform inspections in a timely manner.  We recorded a liability for the maximum proposed amount of $0.2 million on our consolidated balance sheets within accrued expenses and other current liabilities as of  March 31, 2024.  Although BDPL filed an appeal to the civil penalty on  March 25, 2024, BDPL filed a motion to withdraw the appeal on April 17, 2024.  BDPL paid the civil penalty related to platform inspections on April 19, 2024.

ARO liability as of the dates indicated was as follows:

	March 31,			December 31,
	2024			2023
	(in thousands)
AROs, at the beginning of the period	$	4,504		$	3,710
Changes in estimates of existing obligations		-			1,558
Liabilities settled		(1,505	)		(823	)
Accretion expense		-			59
Less: AROs, current portion		(2,999	)		(4,504	)
Long-term AROs, at the end of the period	$	-		$	-

See “Note (15)” to our consolidated financial statements for disclosures related to decommissioning of our offshore pipelines and platform assets and related risks.