As summarized below and explained in the attachment, the more realistic independent estimates were 2-3 times higher than the operators’ “high end” estimates.
BSEE has a very good Safety Alert program that merits close attention. However, this amusing entry doesn’t qualify. Perhaps this alert was issued in response to a government-wide anti-scamming directive.
Scam Alert: Suspicious Requests for Payment The Bureau of Safety and Environmental Enforcement (BSEE) is issuing this Safety Alert to inform users about possible scams requesting payment of fines for violations. Be aware the documents you receive may appear to be printed on official government letterhead and could be used to justify requests for payments or loans. BSEE does require payment of fines for certain violations, but BSEE will never:
Request payment via phone or through any social media platforms.
Require a payment from an individual to exit an offshore facility. (Huh? How would this work? Would a BSEE inspector stand at the helideck and require payment before a worker boarded the helicopter? Seriously?)
Request any payment using a gift card. (“You violated an OCS safety regulation. Please make payment with a Target gift card.” 😀)
Demand any payment without prior notification.
Send letters containing spelling, grammar, and punctuation errors. (Yes, all regulations, notices, and other correspondence are in “plain English” and perfectly understandable. 😀 😀 😀)
Should BSEE require a payment for a civil penalty or a fine, the fine will be paid by the operator, not by an individual. BSEE will always send an initial notice to the operator and provide them the opportunity to engage with the BSEE Civil Penalty team.
“Exxon Mobil has led a persistent and apparently successful lobbying campaign behind the scenes to push the US federal government to adopt rules that would allow the conversion of existing oil and gas leases in the Gulf of Mexico into offshore carbon capture and storage (CCS) acreage, according to documents seen by Energy Intelligence and numerous interviews with industry players.”Energy Intelligence
The Energy Intelligence article documents the ongoing carbon disposal lobbying by Exxon and others. Those meetings are okay prior to publishing a Notice of Proposed Rulemaking (NPRM) for public comment. However, the article implies that the next step is a final rule: “Whether or not Exxon succeeds will become fully clear when the US issues final rules guiding CCS leasing, expected sometime this year.”
A final rule this year is unlikely, because an NPRM has to be published first for public comment. The only exception would be if BOEM was able to establish “good cause” criteria for a direct final or interim final rule in accordance with the Administrative Procedures Act. Such an attempt at corner cutting seems unlikely, especially in an election year when all regulatory actions are subject to additional scrutiny.
Exxon must have thought they had a clear path forward after 11th hour additions to the “Infrastructure Bill” authorized carbon disposal on the OCS, exempted such disposal from the Ocean Dumping Act, and provided $billions for CCS projects. Keep in mind that the Infrastructure Bill was signed just two days before OCS Oil and Gas Lease Sale 257, at which Exxon acquired 94 leases for carbon disposal purposes.
What the Infrastructure Bill did not provide is authority to acquire carbon disposal leases at an oil and gas lease sale. Now the lobbyists are apparently scrambling to overcome that obstacle administratively.
A single company or small group of companies should not be dictating the path forward for the Gulf of Mexico. Super-major Exxon is a relative minnow in the Gulf of Mexico OCS. They have not drilled an exploratory well since 2018, not drilled a development well since 2019, operate only one platform (Hoover, installed in 2000), ranked 11th in 2023 oil production, and ranked 29th in 2023 gas production.
Lastly, and most importantly, public comment on the myriad of technical, financial, and policy issues associated with GoM carbon disposal is imperative. That input is essential before final regulations are promulgated.
At Sale 261, Repsol was the sole bidder for 36 nearshore Texas tracts in the Mustang Island and Matagorda Island areas (red blocks at the western end of the map above). Exxon acquired 163 nearshore Texas tracts (blue in map above) at Sales 257 and 259.
Decommissioning specialist John Smith has summarized the major provisions of BOEM’s decommissioning financial assurance rule for OCS oil and gas operations. He has highlighted his comments in red.
Proved reserves should not be a basis for reducing supplemental assurance. The uncertainty associated with reserve estimates and decommissioning costs can easily negate the assumed buffer in BOEM’s 3 to 1 reserves to decommissioning costs ratio. That approach failed completely at the Carpinteria Field in the Santa Barbara Channel (Platforms Hogan and Houchin). See other points on this issue.
Given that the reverse chronological order process for determining predecessor liability was dropped from consideration last April, there is no defined procedure for issuing decommissioning orders to prior owners. The absence of such a procedure increases the likelihood of confusion, inequity, and challenges, particularly when orders are first issued to companies that owned the leases decades ago, in some cases prior to the establishment of transferor liability in the 1997 MMS “bonding rule.”
BOEM’s concern (below) about investment in US offshore exploration and production is interesting given that their 5 year leasing plan strongly implies otherwise.
BOEM’s goal for its financial assurance program continues to be the protection of the American taxpayers from exposure to financial loss associated with OCS development, while ensuring that the financial assurance program does not detrimentally affect offshore investment or position American offshore exploration and production at a competitive disadvantage
I’m just guessing here, but my sense is that BOEM was pressured to finalize this rule in a timely manner (<10 months is timely for such a complex rule) and was thus reluctant to make any significant changes to the proposal published last summer. A public workshop during the comment period would have been a good idea to facilitate informed discussion on the important issues addressed in this rule. Such workshops were once commonplace for major rules.
Bud and Odd (2008 photo)L to R: Jan de Jong (Inspector General, State Supervision of Mines, the Netherlands), Max Ruelokke (CEO, Canada – Newfoundland and Labrador Offshore Petroleum Board), and Odd FInnestad
Yesterday, I learned that Odd Bjerre Finnestad passed away on Christmas Eve, 2021. Odd was an international safety leader, a founder of the International Regulators’ Forum (IRF), and a driving force behind the IRF book, “A legacy of safety.”
In 2003, the US Minerals Management Service honored Odd, two other Norwegians, Magne Ognedal and Gunnar Berge, and Taf Powell from the UK, with International Leadership Awards for their outstanding leadership in facilitating the exchange of information among offshore regulatory agencies, encouraging cooperation on offshore safety and pollution prevention issues, coordinating participation in the development of international standards, cooperating on safety audits and research projects, compiling incident data, exchanging training information and discussing materials and equipment issues.
Odd was also an important contributor to this blog during the difficult times following the Montara and Macondo blowouts in 2009 and 2010.
Pasted below is the English language version of the excellent obituary that appeared in the Stavanger Aftenblad. RIP Odd; your impressive contributions to offshore safety are greatly appreciated.
Memorial: Odd Bjerre Finnestad died on Christmas Eve 2021, aged 79. Odd was employed by the Norwegian Petroleum Directorate (OD) in 1980, later the Petroleum Safety Authority (Ptil) when resource and safety management was divided into two agencies in 2004. He worked there until his retirement in 2013.
Born in the maritime city of Stavanger, he chose a maritime career. As a young naval officer, he met his Anna Dorothy in Londonderry in Northern Ireland. They married in 1967, and our thoughts go out to her and the rest of the family today. His maritime education and experience led Odd to a scholarship position at the Norwegian Institute of Maritime Research and a research program focusing on personal safety at sea. This was an important experience as head of the Section for Worker Protection and the Working Environment in NPD.
Even though most of the Working Environment Act had been applied to permanent installations on the Norwegian continental shelf as early as 1977, demands for employee participation and tripartite cooperation met resistance in parts of the industry.
Odd took on the big challenges with great commitment. On the drilling deck there was still something of the cowboy culture, where safety and the working environment had poor conditions. Several of the residential quarters appeared to be barrack-like accommodation and little had yet been arranged for women in the new industry.
He was concerned that the professional environment should have professional diversity, and that the work should be anchored in research and development. At a time when the share of women offshore was minimal, he was a driving force behind realizing the film project “Norwegian continental shelf – also for women”.
The major accidents with the Bravo blowout in 1977 and the Alexander L Kielland disaster in 1980 had documented the risks in the business in the worst possible way. With these as a backdrop, he participated in the work to develop a new supervision scheme with subsequent information work. This laid the foundation for a three-year engagement at the International Labor Organization (ILO) in Geneva from 1989, where he worked on a global study on various inspection regimes related to the working environment.
For the rest of his professional life, Odd was closely linked to international cooperation at government level. The most important arena was the International Regulators ́ Forum (IRF) where the Ptil director represented the Norwegian authorities. The forum meets annually, but much of the work takes place through ongoing contact between the participating countries. This is where Odd’s ability to see connections and make strategic contacts came in handy. He actively contributed to the IRF developing a culture for rapid and effective exchange of information on risk levels, regulations and supervision.
Odd monitored all channels almost around the clock, in order to convey news of interest. Often before these were picked up by the world press. He thereby also became an important contributor to Ptil’s information environment.
It is a pioneer in Ptil’s role as watchdog and promoter of safety and the working environment in the petroleum industry who has now passed away. We will remember Odd as a committed colleague and friend.
Houston, TX, March 29, 2024. Beacon Offshore Energy LLC (“Beacon”) announced today the completion of the divestment of its non-operated interests in certain fields in the deepwater Gulf of Mexico in accordance with a previously executed definitive agreement with GOM 1 Holdings Inc., an affiliate of O.G. Oil & Gas Limited. The divestment includes Beacon’s 18.7% interest in the Buckskin producing field, 17% interest in the Leon development, 16.15% interest in the Castile development, 0.5% interest in the Salamanca FPS/lateral infrastructure, and 32.83% interest in the Sicily discovery.
According to BOEM records, GOM 1 HOLDINGS INC, a Delaware company, registered with BOEM effective 3/15/2024. The parent entity, O.G. Oil & Gas Limited, is a privately held E&P company incorporated in 2017 and based in Singapore.
O.G. Oil & Gas Ltd is part of the Ofer Global Group, “a private portfolio of international businesses active in maritime shipping, real estate and hotels, technology, banking, energy and large public investments.”
After a partial takeover by O.G Oil & Gas Limited in 2018, New Zealand Oil and Gas is now 70% owned by the Ofer Global Group. Among other interests, NZ Oil and Gas produces from fields offshore Taranaki, NZ.
Because they are jointly and severally liable for safe operations and decommissioning, minority investors should take a strong interest in safety management and financial assurance. Investors should remember that partners are adversely affected by the mistakes of the operating company. Anadarko and Mitsubishi took a hit following the Macondo blowout. To what extent had they been monitoring bp’s risk and safety management programs for drilling operations?
A post from last March discussed the high and seemingly unfair royalty and rental rates for new leases in the shallow waters of the Gulf of Mexico shelf. A 50% increase in the shelf royalty rate for lease sales 259 and 261 combined with rather punitive rental rates have likely contributed to the sharp decline in bidding for shelf lease blocks (see table below).
This decline in shelf bidding is unfortunate because the smaller companies that operate in the shallow waters of the Gulf are critical to sustaining the production infrastructure. These companies are also significant producers of environmentally favorable nonassociated (gas-well) natural gas.
lease sale
shelf blocks with bids (excluding CCS bids)
sum of high shelf bids ($million, excluding CCS bids)
BOEM has completed their evaluation of the Sale 261 shelf bids (see below). Each of these blocks received only a single bid, and every bid was accepted. Ironically, the invalid CCS bids for blocks that have no oil and gas value, were the first to be accepted. This was also the case for Sales 257 and 259.
Company
Block
high bid ($) per acre ($)
date accepted
Byron
SM 60
128,750 25.75
2/2
Byron
SM 70
182,235 33.32
2/20
Cantium
GI 35
125,000 25.00
2/20
Cantium
GI 36
125,000 25.00
2/20
Cantium
MP 314
125,000 25.00
3/12
Cantium
SP 63
125,000 25.00
3/12
Arena
EI 231
135,000 27.18
2/20
Arena
EI 277
135,000 27.18
2/20
Arena
EI 281
135,000 27.18
2/20
Arena
EI 340
135,000 27.18
2/20
Arena
EI 343
135,000 27.18
2/20
Arena
WD 119
135,000 26.75
3/12
Focus
V 152
121,152 25.16
2/20
Repsol
36 CCS bids
187,200 (1) 32.50
1/23
(1) All of the Repsol bids were $32.50/ac. Total bids varied by block size, but were $187,200 for the 5760 acre blocks.
Suggestions:
Seek a legislative fix to the Inflation Reduction Act😉 provision that established a 1/6 royalty rate floor for all OCS leases (formerly the royalty rate was 1/8 for leases on the shelf).
In the interim, administratively lower the royalty for shelf leases to 1/6 (from 18 3/4%).
For future oil and gas lease sales, accept all high bids that exceed the specified minimum bid (currently $25/ac for the shelf). The Gulf of Mexico shelf has been extensively explored and developed for 70 years. While prospects remain, they are generally marginal as evidenced by the recent lease sale results. Fair market value is what any company is willing to bid (above the specified minimum).
Focus on assuring that lease purchasers are technically qualified to minimize safety risks, and that financial assurance for decommissioning (for new and existing leases owned by the high bidder) has been fully addressed.
The Fraser Institute’s 2023 Canada-US Energy Sector Survey of senior executives in the upstream oil and gas sector provided data for assessing the competitiveness of US and Canadian jurisdictions. The resulting perception index (below) ranked Wyoming at the top with a score of 100.0 and California at the bottom with a score of 0.0. Perhaps one or more of the respondents have been mired in the California decommissioning quagmire. ☹
(2) the Secretary may not issue a lease for offshore wind development under section 8(p)(1)(C) of the Outer Continental Shelf Lands Act (43 U.S.C.1337(p)(1)(C)) unless— (A) an offshore lease sale has been held during the 1-year period ending on the date of the issuance of the lease for offshore wind development; and (B) the sum total of acres offered for lease in offshore lease sales during the 1-year period ending on the date of the issuance of the lease for offshore wind development is not less than 60,000,000 acres.
Lease Sale 261 was held on 12/20/23. Absent legislative action, no wind leases may be issued after 12/20/24 unless another oil and gas lease sale is held prior to that date. Given that the minimalist 5 year oil and gas leasing plan, which is being challenged, does not propose a sale until 2025, wind lease issuance will likely be suspended at the end of the year. (Note: I wonder if the legislative restriction also applies to lease assignments from existing owners to new owners? Probably not, but that would be very significant given the current state of the offshore wind industry.)
Perhaps the wind program should be required to develop 5 year leasing plans, as is the case for the oil and gas program. This might facilitate a more holistic approach to wind energy development and ease concerns about cumulative impacts.
Bud's Offshore Energy (BOE) 