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Archive for the ‘Regulation’ Category

Consistent with the findings of their inspections and data gathering (as discussed further here), BSEE has published a safety alert (attached) that identifies significant shortcomings in medical evacuation planning and performance.

The findings suggest that a renewed focus on medevac preparedness should be an immediate industry priority. Note the evacuation time, supply, training, and other planning issues summarized in the BSEE alert. Also note the helideck safety issues that were identified. These issues are particularly troubling in light of last December’s fatal crash.

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The plan looks good. It appears to be consistent with previous contingency plans. Offshore operations should not be impacted.

During the shutdown BSEE will continue critical permitting, oversight, preparedness verification, and related activities that are necessary to protect workers and the environment from operations associated with conventional and renewable energy development on the Outer Continental Shelf. Approximately 40% of the 851 BSEE employees will be retained to accomplish these activities and will be designated as exempt, as their salaries will be funded from non-lapsing prior year carryover. Should an extended shutdown occur, exhausting current funding sources, all the exempt personnel would be designated as excepted as they are essential for life and safety.”

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Federal funding lapses, real or threatened, are rather common. They range from false alarms to the extended shutdown of 35 days that occurred in 2018-19. In no case have offshore oil and gas operations been significantly affected. BSEE and its predecessors developed and implemented contingency plans that identified “essential employees” needed to monitor operations and review necessary permits.

Most Federal agencies have posted updated Federal contingency plans on the OMB page established for the purpose. Noticeably absent is the plan for the Department of the Interior (DOI), which includes the bureaus responsible for overseeing energy operations on Federal onshore and offshore lands. Presumably this is just a bureaucratic delay, and DOI has plans for the safe continuation of operations. However, the Petroleum Association of Wyoming was sufficiently concerned that they wrote a letter to Secretary Haaland and the Director of the Bureau of Land Management, which is responsible for oil and gas operations on Federal onshore lands. That letter is attached below.

Hopefully, DOI will provide clarity on these matters today, since a Federal government shutdown could begin at midnight tomorrow. Needless to say, any disruption in ongoing oil and gas production operations would have significant safety and economic implications.

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Of note (emphasis added):

IT IS ORDERED that appellants’ opposed motion for partial stay pending appeal is GRANTED in part. The preliminary injunction that was entered by the Memorandum Order of September 21, 2023, is hereby AMENDED only in that the sale that was set for September 27, 2023, is ORDERED to take place by November 8, 2023. No extension will be granted. That is to say: Insofar as the preliminary injunction is concerned, the final paragraph of the Memorandum Order remains in effect, pending appeal of the preliminary injunction, with the exception that “September 30, 2023,” is changed to “November 8, 2023.”

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BOEM is allowed to delay the sale until Nov. 8, which is consistent with the Federal government’s request. 

All other aspects of the Preliminary Injunction remain in place, but the 5th Cir. still needs to hear and decide the government’s appeal of the PI. Monday’s decision was on the emergency motion and not the merits of the Preliminary Injunction. 

The sale intrigue is also on hold! 😉

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Assuming the Gulf of Mexico oil and gas lease sale proceeds tomorrow in accordance with Judge Cain’s order, some interesting questions and issues remain:

  • Will the lingering Rice’s whale issues affect bidding for deepwater leases? Friday’s court order is not a final resolution of those issues, either legally or administratively. While the Rice’s whale stipulation, at the direction of the Federal court, will not be included in the Sale 261 leases, BOEM’s Notice to Lessees and Operators (NTL) includes the same provisions and still stands pending further consultations with NOAA. Although the NTL is a “guidance document” (wink-wink), there are ways of making it stick through the exploration plan approval process. Even without binding requirements, companies might choose to fully comply to minimize legal risks.
  • When will the next GoM lease sale be held? Will the uncertainty spur or constrain bidding?
  • Will the 14 blocks with rejected high bids at Sale 259 receive bids at Sale 261? If so, will the bids be higher or lower?
  • Will bp, Chevron, Shell, Equinor, Oxy, and Woodside continue to be bullish on the GoM?
  • Will Red Willow Offshore, owned by the Southern Ute tribe, again be an active bidder?
  • Will Exxon again seek to acquire carbon sequestration leases at an oil and gas lease sale? After a long absence, it would be good to see the US super-major acquire leases for oil and gas purposes. Ditto for ConocoPhillips.
  • How many companies will participate in the sale? 30-35 would be a nice outcome.
  • What will be the sum of the high bids? >$300 million would be a good result.

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The Federal Government has joined the Sierra Club et al in appealing Judge Cain’s order on Sale 261. BOEM has nonetheless committed to complying with the order if the appeal fails (likely).

BOEM is taking steps to comply with an order issued on September 21, 2023, by the U.S. District Court for the Western District of Louisiana regarding Gulf of Mexico Outer Continental Shelf Oil and Gas Lease Sale 261.   

Lease Sale 261 will be conducted on September 27, 2023. In accordance with the court’s order, BOEM will include lease blocks in Lease Sale 261 that were previously excluded due to concerns regarding potential impacts to the Rice’s whale distribution in the Gulf of Mexico.  

BOEM is also extending the bid submission period to 3 p.m. CST on September 26, 2023. 

BOEM

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Quotes from the judge’s order (emphasis added):

The challenged lease term for the expanded Rice’s whale area only arose in a July 2023 district court filing and then appeared in the FNOS for Lease Sale 261 on August 25, 2023—one month before the statutory deadline for the sale. BOEM failed to follow its own procedures by making significant changes to the FNOS, thereby depriving both affected states and the public the opportunity for meaningful review and comment. The procedural error is particularly grave here, because of both the compressed timeline and BOEM’s inexplicable about-face on the scientific record it had previously developed. (p.19)

The challenged provisions inserted into these leases at the eleventh hour, and the acreage withdrawal, are based only on an unexplained change in position by BOEM on a single study a few months after that supplemental EIS. The process followed here looks more like a weaponization of the Endangered Species Act than the collaborative, reasoned approach prescribed by the applicable laws and regulations. (p.22).

According to an affidavit from Shell’s commercial manager, the new restrictions on vessel traffic apply to an area of the northern Gulf that separates Shell’s existing offshore leases from the onshore infrastructure that supports them. Shell Offshore Inc., No. 2:23-cv-1167, at doc. 4, att. 2, ¶¶ 23–27. (p. 23).

Given the shaky justification offered by BOEM, the court cannot find that the challenged provisions are so necessary that withholding them even on a preliminary basis will outweigh the risk of irreparable economic harm shown by plaintiffs. Additionally, “there is generally no public interest in the perpetuation of unlawful agency action.” (p. 26)

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For the reasons stated above, the court hereby ORDERS that the Motions for Preliminary Injunction be GRANTED. Accordingly, the government defendants are enjoined from implementing the acreage withdrawal and Stipulation 4(B)(4) as described in the Final Notice of Sale and Record of Decision for Lease Sale 261. Government defendants are ordered to proceed with Lease Sale 261, absent the challenged terms, by September 30, 2023.

Full docket: State of Louisiana v. Haaland (2:23-cv-01157)

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Impressively, 4 GoM operators with significant production and well activity did not incur a single civil penalty payment during the most recent 4 year period. Each of these operators also had low incident of noncompliance (INC) to inspection ratios. The companies are as follows:

Operator2022 oil production (million bbls) 2022 oil production rank2022 gas production (bcf)No. of platformsNo. of well starts (2019-2022)
Hess21.6746.535
Kosmos8.5147.8subsea tiebacks 6
Beacon7.21512.2subsea tiebacks4
Cantium4.7196.18637
  • All of these companies deserve kudos.
  • Cantium’s record is especially impressive given that most of their platforms were installed more than 40 years ago and some date back to the 1950s. They have also been a very active development well driller.
  • Hess is the 7th biggest oil producer and 5th biggest gas producer in the GoM. Hess CEO John Hess made some encouraging comments (pasted below) about the deepwater GoM at a recent energy conference.
  • While Kosmos and Beacon have somewhat lower violation and penalty exposure because their production is via subsea wells tied back to surface facilities operated by other companies, they are demonstrating that entrepreneurial deepwater independents can also be safety leaders.

“The Pickerel-1 prospect was our first (exploration well on the Mississippi Canyon 727) and we are delighted that it was an oil discovery. Black Pearl will be the next and that will hopefully be a tieback (to Tubular Bells with first oil expected mid-2024).

“Then we have a wildcat opportunity (the Vancouver exploration prospect) later in the year in the Green Canyon. With the other 80 exploratory blocks that we have in the Gulf, we will be actively drilling for the next several years,” Hess said.

OilNow

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