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Archive for the ‘Regulation’ Category

The attached letter to the General Accountability Office (GAO) asserts that there were “deeply entrenched ethical issues and conflicts of interest within the former Minerals Management Service (MMS),” and implies that these issues were among the factors contributing to the tragic Macondo well blowout.

I retired from MMS shortly before the Macondo well blew out on April 20, 2020, and testified before the Senate Energy and Natural Resources Committee on May 11, 2010. My comments on MMS employee ethics still stand and are reiterated below:

I also want to express my disappointment in certain media comments directed at my former MMS colleagues. These comments have not only been ill-informed and unsubstantiated, but malicious. Without hesitation, I can tell you that MMS regulatory personnel–inspectors, engineers, scientists, and others–are 100% committed to their safety and pollution prevention mission. MMS inspectors are themselves exposed to risks every day when they fly offshore and inspect facilities. MMS personnel have repeatedly made personal sacrifices to support the regulatory mission. After Ivan, Katrina, Rita, Gustav, and Ike, MMS employees worked to restore oil and gas production essential to our economy, even when their personal lives had been disrupted by the onshore impacts of these hurricanes. These personnel work under strict ethics standards, and despite a few isolated and highly publicized incidents that occurred more than four years ago, conduct themselves with the highest degree of professionalism. While a critical review of the entire offshore regulatory regime is necessary and appropriate, unsubstantiated accusations and personal attacks are not.


The comprehensive Chief Counsel’s Report, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, was the only inquiry to consider whether ethical lapses were a contributing factor to the blowout. In the “Regulatory Observations” chapter, the Chief Counsel addressed ethics concerns directly (p. 261):

“In recent years various bodies have concluded that certain MMS offices and programs have violated ethical rules or guidelines. In the wake of the Deepwater Horizon disaster, some questioned whether ethical lapses played any role in causing the blowout. The Chief Counsel‘s team found no evidence of any such lapses.

This blog closely followed the Macondo blowout. I have read all of the investigation reports and many of the court documents. I also served on the defense team for Bob Kaluza, the BP Well Site Leader who was fully acquitted after being shamefully prosecuted in the wake of the blowout. My thoughts on the Macondo tragedy are summarized in a six part series.

Because of the false ethics narrative and scapegoating of MMS, experts who should have been directing the well control efforts, were pushed to the back of the bus shortly after the blowout began. Had that not been the case, I believe the top kill operation would not have been aborted in late May and the well would have been killed 48 days sooner, reducing the oil spill volume by at least 2.4 million bbls. (See the analysis by Dr. Mayank Tyagi and his colleagues at LSU.) Also, keep in mind that the USCG Incident Commander almost required BP to resume flow from the well after the capping stack successfully shut-in the well on 7/15/2010, and would have likely done so were it not for forceful input from an engineer from the former MMS.

The consolidation of BOEM and BSEE into a single bureau makes sense. As I previously commented:

This is an excellent step that many OCS program veterans have been advocating. In addition to the inefficiencies associated with overlapping and intertwined BOEM and BSEE responsibilities, the associated regulatory fragmentation is a significant safety risk factor.

The primary OCS functions including leasing, resource evaluation, economic analysis, permitting, inspection and enforcement, investigations, environmental assessment, spill response preparedness, promulgation of regulations, technology assessment, research,and decommissioning, are inextricably linked, cannot be effectively segmented, and should not be stovepiped.

Finally, with regard to the reorganization planning questions posed at the end of the attached letter, perhaps GAO should first consider the abrupt, unplanned termination of MMS. At a 2011 Ministerial Forum in Washington, an international offshore safety expert criticized that rash decision noting – “It took 87 days to stop the blowout, but only 30 days to get rid of the regulator.”

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The Piper Alpha fire (July 6, 1988) was the worst disaster in the history of offshore oil and gas operations and sent shock waves around the world. Eight months later another interactive pipeline-platform fire killed 7 workers at the South Pass 60 “B” facility in the Gulf of Mexico. A US Minerals Management Service task group reviewed the investigation reports for both fires and recommended regulatory changes with regard to:

  1. the identification and notification procedures for out-of-service safety devices and systems,
  2. location and protection of pipeline risers,
  3. diesel and helicopter fuel storage areas and tanks,
  4. approval of pipeline repairs, and
  5. location of ESD valves on pipelines.

Paul Schneider and I wrote a paper on the task group’s findings and that paper was published in Offshore Operations Post Piper Alpha (Institute of Marine Engineers,1991). The proposed regulations that followed summarized these findings and can be be found at this Federal Register link.

Lord Cullen’s comprehensive inquiry into the Piper Alpha tragedy challenged traditional thinking about regulation and how safety objectives could best be achieved, and was perhaps the most important report in the history of offshore oil and gas operations. Per Cullen:

Many current safety regulations are unduly restrictive because they impose solutions rather than objectives. They also are out of date in relation to technological advances. Guidance notes lend themselves to interpretations that discourage alternatives. There is a danger that compliance takes precedence over wider safety considerations and that sound innovations are discouraged.

Cullen advocated management systems that describe the safety objectives, the system by which those objectives were to be achieved, the performance standards to be met, and the means by which adherence to those standards was to be monitored. He called for safety cases that describe major hazards on an installation and provide appropriate safety measures. Per Cullen, each operator should be required in the safety case to demonstrate that the safety management systems of the company and the installation are adequate to assure that design and operation of the platform and its equipment are safe.

Full Piper Alpha Inquiry – 2 parts.

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Gulf of America lease map: 199 oil and gas leases were wrongfully acquired for carbon disposal purposes. At Sale 261, Repsol acquired 36 nearshore Texas tracts in the Mustang Island and Matagorda Island areas (red blocks at the western end of the map above). Exxon had acquired 163 nearshore Texas tracts (blue in map above) at Sales 257 (94) and 259 (69).

As expected, the carbon disposal era in Federal offshore waters is ending before it began, and rightfully so.

Energy Intelligence is reporting that Exxon is relinquishing “more than 160 leases” in nearshore Federal waters off Texas. The actual number of oil and gas leases that the company improperly acquired for carbon disposal purposes is 163 (map above).

The reason being cited for the lease relinquishments is that the Dept. of the Interior has shelved regulations for carbon disposal on the OCS. Kudos to the DOI officials responsible for that decision. Carbon disposal has the support of no one except the companies that hope to profit from it. Further, there is no scenario under which Interior could have allowed these wrongfully acquired oil and gas leases to be converted to carbon disposal leases.

Now that these carbon disposal leases are being relinquished, it would be nice to see Exxon start acquiring OCS oil and gas leases for their intended purposes. Exxon and Mobil are historic Gulf operators who were once important contributors to the success of the OCS program.

History of the Exxon and Repsol CCS lease acquisitions.

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Sable Offshore began ramping up production at Platform Harmony last May delivering oil and gas to their Los Flores Canyon Processing Facility. In March, they resumed transportation to the Pentland pipeline segments and achieved first sales.

Below are BOEM production data for Harmony through March 2026. Harmony production was expected to increase to 22,000 bopd in May. Similarly, Sable forecasted Heritage production of 30,000 bopd for that month. The actual production numbers should be available in a month or two.

Nothing in the March production data for Harmony is particularly surprising. The gas-oil ratio (GOR) of ~1000 cu ft/bbl is rather typical for oil production in the region, as is the water cut, although less water production would be preferred. Produced water is not discharged from the platform, but is injected subsurface through disposal wells.

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After 41 years of offshore safety leadership, Mike Saucier, an outstanding engineer and manager, is retiring from the Bureau of Safety and Environmental Enforcement (BSEE).

Like many of the offshore program’s stalwarts, Mike earned a petroleum engineering degree from the Louisiana State University (LSU). In 1984, he began his Federal career in the Houma District Office of BSEE’s predecessor, the Minerals Management Service (MMS), where he was mentored by the great John Borne.

Mike has held many important engineering and supervisory positions including Drilling Engineer and District Manager in the highly regarded Houma District Office, Regional Supervisor for Field Operations, Regional Supervisor for District Field Operations, Acting Deputy Regional Director for District Operations, and Senior Technical Advisor for the Office of the Director. When the New Orleans District Manager retired during a hiring moratorium, Mike stepped up and assumed those duties as well.

Mike impressed his colleagues with his commitment to safety achievement, the essential core element of the offshore program. His diligence, and his firm, fair, and consistent enforcement of the safety and pollution prevention regulations, earned him respect throughout the offshore industry.

Mike is an avid outdoorsman who enjoys hunting and fishing, and has 4 grandsons to mentor in those skills. Note the impressive achievements cited in the Order of the Alligator certificate (below) 😉. The Order of the Alligator recognition is most fitting given Mike’s alligator hunting expertise, which greatly impressed those of us who were unfamiliar with such exploits!

In recognition of Mike’s outstanding career, the Board of Directors of the former Minerals Management Service (fMMS) has unanimously voted to induct Mike into the fMMS Hall of Fame! Mike receives (is sentenced to? 😉) lifetime membership in the fMMS and a registered copy of the offshore world’s prized masterpiece, the painting Rig at Sunset 😉. (image and short explanation below).

Congratulations to Mike! You made a difference!

“Rig at Sunset” was painted 50 years ago by a US Geological Survey (USGS) employee who chose to remain anonymous. Initially, the masterpiece was presented to USGS (later MMS) engineers and scientists who had made important contributions to the offshore oil and gas program. Understandably, the intended recipients were so humbled by the magnificence of the painting that they could not accept it. As the painting grew in value and international prominence, framed copies were presented to outstanding retirees and the original painting was kept at a secure, undisclosed location.

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In the ongoing Santa Ynez Unit production restart saga, John Smith informs that a California Appellate Court ruled against Sable Offshore by a vote of 2-1, with a strong dissent from one of the three judges.

The decision (attached) affirms the California Coastal Commission’s regulatory authority over Sable’s Los Flores Canyon pipeline repairs, meaning that Sable could be ordered to cease operating the pipeline. However, this is just one element of a complex legal maze. An important case regarding PHMSA’s emergency special permit for the pipeline will be heard by the Federal 9th Circuit Court of Appeals in July.

The dissenting judge’s opinion beginning on p.15 of the attachment sets the stage for the upcoming arguments in the 9th Circuit. Excerpt:

“But first, a dose of reality. The repair work has been done. It is a “fait accompli.” And, pursuant to federal intervention, oil is now flowing in the pipeline without incident. The supremacy clause of the United States Constitution takes precedence. The federal Government trumped the state’s Commission “cease and desist” order and it trumps the preliminary injunction order. Based upon these events, the trial court should vacate the preliminary injunction, dismiss the matter as moot, and nullify the civil penalties.”

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Meanwhile, the California Coastal Commission notified Sable Offshore that it intends to issue a cease and desist order aimed at shutting down crude oil extraction in the Santa Barbara Channel.

Sable responds: “Sable Offshore Corp. (“Sable”) through its subsidiary, Pacific Pipeline Company (“PPC”), continues to lawfully operate through its existing coastal development permits which were issued in 1986.”

California cage fight! Who ya’ got?

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DOT and others shouldn’t make statements they can’t back up (see the X post below).

As a supporter of responsible offshore oil and gas operations, I find statements like this to be irresponsible and embarrassing. Sable Offshore is not using newer or safer drilling technology than is used in many other areas.

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Jennette Barnes/CAI

Pointing to the potential financial implications for GE Vernova, Recharge News cites this serious fraud accusation by Vineyard Wind (VW):

“This exceptional misconduct includes [GE Vernova’s] intentional scheme to falsify critical quality assurance data… and to intentionally misrepresent the quality of those blades to [Vineyard Wind] in a brazen fraudulent, and willful breach of the TSA, ultimately resulting in the catastrophic blade failure…”

Recharge also discusses the findings of the Project Engineer appointed by VW to resolve claims between parties. Under the terms of the contract, the engineer’s determinations are binding unless overturned in arbitration.

  • The engineer determined that GE Vernova was liable for project delays, blade defects, vessel costs, and a $185m rescission of previously certified payments.
  • The damage claims issued by the project engineer total $853m.
  • On the basis of those determinations, VW withheld 100% of the outstanding invoices issued by GE Vernova. Even netted against sums allegedly owed to GE Vernova, VW says the turbine maker owes around $545m.
  • Per the contract, there are no limitations on liability in cases of “fraud, gross negligence, deliberate default or willful misconduct.”

My take: VW’s charges against GE Vernova will be resolved in the courts. However, VW is the lessee and operator, and is thus the party responsible to the Federal govt for project safety and environmental protection.

  • Operator responsibility is a fundamental tenet of the OCS regulatory program. As lessee/operator, VW bears ultimate responsibility for project safety and environmental protection.
  • VW is responsible for contractor selection, management, and oversight.
  • If a contractor violates a regulation, the violation notice is given to the operator. If a contractor causes pollution, the operator is responsible for the cleanup.
  • DNV, the Certified Verification Agent (CVA) hired by VW, was required to verify the design, fabrication, and installation procedures. Did they raise any issues to VW and the regulators?
  • At VW’s request, BOEM waived a Fabrication and Installation Report (FIR) requirement so the project could stay on schedule. The FIR addresses quality assurance measures, so the waiver is highly relevant and concerning.
  • Did the division of responsibilities between BOEM and BSEE weaken regulatory oversight? BOEM, ostensibly just the leasing bureau, should not have been authorized to grant departures that could affect structural integrity and operational safety.
  • It’s surprising that VW has not been cited for civil penalties resulting from the blade failure and the resulting environmental damage.
  • How can a judge prevent a contractor from stopping work for an operator that has filed serious fraud allegations against the contractor, has stopped making payments, and has, along with the Governor, declared the project to be complete?

Lastly, nearly two years after the blade failure, we are still awaiting BSEE’s investigation report.

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SYU near-term workover plan; estimated reserve additions exceed production.

Those who have been following the Santa Ynez Unit saga should take a look at Sable’s informative PowerPoint update (attached). The presentation includes reserve data, well operation plans, production forecasts, financial and legal updates, and regional energy supply information.

Also, Sable CEO Jim Flores has announced that Energy Secretary Wright and Interior Secretary Burgum will be visiting the project this week. Transportation Secretary Duffy was also expected, but he will not be attending.

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