Comments on the major offshore provisions:

  • The bill neither repeals nor amends the massive land withdrawals by Presidents Obama, Trump, and Biden that have fenced the OCS program into portions of the central and western Gulf of Mexico. Worse yet, the bill tacitly endorses those withdrawals by specifically stating that they are not affected in any way (Sec. 20114).
  • Sec. 20107 mandates that at least 2 lease sales be held annually in the GoM. The certainty would provide some incremental benefit, but is unlikely to stem the decline in GoM reserves. We are becoming increasingly dependent on the 4% of our OCS that may be leased, about 3/4 of which is not prospective or has limited production potential.
  • The bill also mandates at least 2 sales per year offshore Alaska. What will be offered given that most Alaska areas are off limits? We have seen how little interest there is in the Cook Inlet.
  • Sec. 20601 lowers the revenue to the US Treasury and increases the revenue to Gulf producing states. This would garner further support from those states, but will have little effect on production.
  • Sec. 20106 requires DOI to publish information and report to Congress on the processing of drilling permits. However, delayed drilling permit approvals do not seem to be a significant issue on the OCS.

Remembering the 123 offshore workers who lost their lives on this day in 1980 🙏

Photo: Norwegian Petroleum Museum

The Minister is optimistic about the prospects for production offshore Barbados:

“I don’t want to go and give news now before it is ready to be given, but let us say the prospectivity is highly regarded,” he told a local academic forum in the Eastern Caribbean tourism paradise.

He also sends a message to “keep it in the ground” crowd.

 “Let’s be frank: All of the oil producers of the world, including Canada, speak the language of climate change and putting a stop to that, which is now being done by small entities or like those of us in Barbados who are contemplating finding natural gas, but the reality is, none of them is saying ‘I will not continue to produce the oil that I produce’ or ‘I’m shutting down all my wells,’” he said. “The Americans are not going to tell you that that’s what’s going to happen in Texas. The British, for all their partnership value, will not tell you that the North Sea will not be full of Brent crude. They’re not going to do that because they intend to produce for the next 50 years. Nobody is coming forward to say we are prepared to pay you to keep the natural gas and the oil in the ground.”

The OCS Orders were the foundation for the current operating regulations in the US and many states and other countries. They were logically organized, easily updated, and published for public comment prior to being finalized.

I have an email message indicating that the first OCS Order No. 1 (Identification of Wells, Platforms, and Structures) was signed on 1/31/1957 and the first OCS Order No. 2 (Drilling) dates back to 2/3/1958! (If anyone has access to the actual documents, please let me know.) The orders were developed much further in the 1970s and 1980s.

Contents of the 1/1980 Atlantic Orders:

  • OCS Order No. 1: Identification of Wells, Platforms, Structures, Mobile Drilling Units, and Subsea Objects
  • OCS Order No. 2: Drilling Operations
  • OCS Order No. 3: Plugging and Abandonment of Wells
  • OCS Order No. 4: Determination of Well Producibility
  • OCS Order No. 5: Production Safety Systems
  • OCS Order No. 6: Well Completions and Workover Operations
  • OCS Order No. 7: Pollution Prevention and Control
  • OCS Order No. 8: Platforms and Structures
  • OCS Order No. 9: Oil and Gas Pipelines
  • OCS Order No. 10 (reserved)
  • OCS Order No. 11: Oil and Gas Production Rates, Prevention of Waste, and Protection of Correlative Rights
  • OCS Order No. 12: Public Inspection of Records
  • OCS Order No. 13: Production Measurement and Commingling

You can view the full set of 1977 Gulf of Mexico OCS Orders here

There has been much discussion, particularly since the 1988 Piper Alpha tragedy, regarding the optimal approach to offshore safety regulation be it prescription, goal setting, safety cases, management systems, or some combination, and how to best influence facility, company, and industry safety culture.

My personal view is that the quality and type of regulations are not nearly as important as the people implementing them. My take:

  • Good regulators are more important than good regulations and are the key to a successful regulatory program. 
  • Regulators must understand and be committed to their organization’s mission and the strategy for achieving that mission. 
  • While they should have a good understanding of the activities that they regulate, their focus is on challenging operators, not directing them. 
  • Regulators should audit operator activities and carefully review incident and performance data.  They should identify problems and concerns, but should not direct solutions. 
  • Safety leaders should be applauded and poor performers should be penalized. 
  • The quality of regulators is more important than the quantity. 
  • Internal and external communication and collaboration are critical to their success.
  • Management should ensure that regulators are able to focus on their mission and that organizational distractions are minimized.  

From Hersh’s substack:

The agency did its job and, with the help of German intelligence, concocted and planted stories about an ad hoc “off the books” operation that had led to the destruction of the pipelines. The scam had two elements: a March 7 report in the New York Times citing an anonymous American official claiming that “[n]ew intelligence…suggests” that “a pro-Ukrainian group” may have been involved in the pipeline’s destruction; and a report the same day in Der Zeit, Germany’s most widely read weekly newspaper, stating that German investigative officials had tracked down a chartered luxury sailing yacht that was known to have set off on September 6 from the German port at Rostock past Bornholm island off the coast of Denmark. 

“It was a total fabrication by American intelligence that was passed along to the Germans, and aimed at discrediting your story,” I (Hersh) was told by a source within the American intelligence community.

The comments following the “SHEERPOST” re-posting of the Hersh update piece are also interesting.

Last week, my colleague Keith Meekins attended a presentation by petroleum geologist Samuel Epstein. Like the late Paul Post, a leading expert on the petroleum geology of the Atlantic OCS, Epstein believes the US Atlantic has major resource potential. Per Epstein:

Untested ultra-deep potential hydrocarbon resources are located in the BOEM play area 8, termed the BCT Structural Belt Jurassic-Cretaceous Interior Shelf. Thus, significantly more risked recoverable reserves, due to 1) Two salt ridges penetrating Middle Jurassic age sediments identified in seismic records located to the north of the Schlee Dome, analogous to the ultra-deep salt related Norphlet Formation, offshore Gulf of Mexico and the onshore East Texas, Pearsall Field and 2) stratigraphic plays including below a 60 m thick and 7500 km square evaporitic feature in Early Jurassic rocks flanking the Schlee Dome.

Looking more broadly at Atlantic resource potential, Paul Post had estimated that the US Atlantic could contain 21.4 billion BOE with the major caveat that the presence of a working petroleum system was required and that could only be determined through drilling. Per Paul:

The US Atlantic stands out. It has not been explored in paleo deep- and  ultra-deepwater using exploration concepts proven successful in similar settings.

Paul Post slide

Also, see “Opportunity Lost

Relax; just kidding about the California part (or am I? 😉).

BOE’s Mexican correspondent, Andrew Konczvald, took pictures of what looks like a deepwater drillship parked near the beautiful Pacific coast resort town of Manzanillo. Upon further review, our crack investigators determined that the rig is the Hidden Gem, a deepsea mining vessel, owned by The Metals Company (TMC). Last year, TMC conducted a pilot nodule collection program in the Clarion Clipperton Zone between Hawaii and Mexico.

The terms for congressionally mandated Gulf of Mexico Sale 261 have been proposed. As is also the case for Sale 259, the royalty for leases in <200 m or water is 50% higher than for prior sales. This is partly because of the royalty floor (16 2/3%) established in the Inflation Reduction Act, and partly because the Dept. of the Interior opted for the highest royalty allowed (18 3/4%). The royalty for shelf leases is thus the same as for deepwater leases with much greater production potential.

Rental terms for leases in <200 meters of water are higher and more punitive (for delayed development) than for previous sales and for deepwater leases.

Minimum bid requirements are unchanged from sales 256 and 257, and are higher for deepwater leases ($25/acre for <400m and $100/acre for >400m).

Bottom line: While the terms for deepwater leases are unchanged from Sales 256 and 257, that is far from the case for shelf leases where royalty rates were increased by 50% and rentals were increased by 43% for all lease years.

SaleDate% royalty
year 1-5/6/7/8+ rentals
($/acre, <200m)
year 8+ rentals for
leases in 400m+ ($/acre)

The BBB or BoerBurgerBeweging (Farmer-Citizen Movement) party won 17 seats in the Senate, more than any other party.