Water depth: 2500 m (Mexico’s first ultra-deepwater project)
Distance from US maritime border: 30 km
Distance offshore: 180 km
Reserves: 324.7 million BOE proved, 478.7 million BOE probable
Production: Floating Production Unit with an oil production capacity of 100,000 B/D connected to an FSO vessel with a capacity of 950,000 bbl. Gas not used to power FPU will be reinjected
The civil penalties provision in the 1978 OCS Lands Act (OCSLA) Amendments was flawed in that it stipulated that operators must be given time to take corrective action before a civil penalty could be assessed. The “time to take corrective action” requirement was confirmed by a 1983 Federal Court decision in Louisiana:
The Court agrees with Chevron’s construction of Section 24(b) and holds that civil penalties may only be imposed under Section 24(b) for violations which continue after the violator has been notified of the breach and has failed to correct it within a reasonable period allowed. This conclusion is based primarily upon a careful review of the pertinent statute. The first sentence sets forth the conditions of liability:
If any person fails to comply with any [provision of the Act] after notice of such failure and expiration of any reasonable period allowed for corrective action, such person shall be liable for a civil penalty of not more than $10,000 for each day of the continuance of such failure.
The court decision gutted the Minerals Management Service (MMS) civil penalties program. Civil penalties could no longer be assessed until the operators had been given time to correct their violations, even those that endangered workers and the environment.
Ironically, Congressman George Miller (D-CA), an ardent opponent of the offshore oil and gas program, proved to be an important MMS ally by adding language to the Oil Pollution Act of 1990 that amended the OCSLA civil penalties provision. The first draft of that language expanded the civil penalties authority to include violations that may constitute a threat of serious, irreparable, or immediate harm or damage to life, property, or the environment.
We were able to revise that draft by adding the words “or constituted” after “constitute” to cover situations where the threat was no longer present. For example, if an inspector found that a well had been drilled without required elements of the well control system in place, the threat may no longer be present at the time the violation was detected but it certainly was when the well was drilled.
The revived MMS civil penalties program was fair and effective, and BSEE seems to be administering the program in a similar manner. Civil penalties data for the past 4 years will be posted next week.
For those interested in safety and compliance data, a good BSEE update for the Gulf of Mexico is attached.
Interestingly, (slide pasted below), there were 20% fewer Incidents of Noncompliance (INCs) per component inspected but 37% more INCs/inspection. This would seem to imply high INC rates at less complex (typically older) facilities with relatively fewer components.
The plaintiffs assert “insufficient and arbitrary environmental analyses, in violation of the National Environmental Policy Act (NEPA) and the Administrative Procedure Act (APA).” The court filing is attached.
All of this will have to be resolved in the next 3 weeks, as the congressionally mandated sale, scheduled for 27 September, (presumably) cannot be postponed.
This Court should grant Plaintiffs—the State of Louisiana, the American Petroleum Institute (“API”), and Chevron U.S.A. Inc. (“Chevron”)—a preliminary injunction and prevent those unlawful provisions from permanently disrupting the result of the fast-approaching lease sale (which Congress has directed must occur by September 30, and which cannot be delayed without causing Plaintiffs even more serious injury).
Only 1 of the 3 tracts was sold, and the amount bid was a modest $5.6 million. Given the extensive lease sale planning and promotion, this would seem to be a rather embarrassing outcome.
RWE Offshore US Gulf LLC won the Lake Charles tract. Neither of the 2 Galveston tracts received bids. RWE’s headquarters are located in Essen, Germany.
From a regulatory policy standpoint, this appears to be a strong filing. Operationally, the most important points pertain to the costly and premature Rice’s whale restrictions first discussed on this blog.
Most notably, the plaintiffs seek (p.39):
A preliminary and permanent injunction striking, setting aside, and enjoining BOEM from implementing the specific challenged provisions of the Final Notice of Sale and Record of Decision for Lease Sale 261;
An order vacating the specific challenged provisions of the Final Notice of Sale and Record of Decision for Lease Sale 261;
An order compelling Defendants to proceed with Lease Sale 261 on September 27, 2023, without the challenged provisions;
The Bureau of Ocean Energy Management (BOEM) is extending the public comment period on our notice of proposed rulemaking (NPRM), “Risk Management and Financial Assurance for Outer Continental Shelf Lease and Grant Obligations,” by 10 days.
Bud's Offshore Energy (BOE) 