The need for alternate energy/use legislation was obvious to Minerals Management Service (predecessor of BSEE and BOEM) personnel decades ago given the growing interest in renewable energy projects and the reuse of offshore platforms. Twenty years ago, MMS staff took the initiative to draft alternate use amendments to the OCS Lands Act that MMS Director Johnnie Burton and the congressional liaison office worked closely with Congresswoman Barbara Cubin of Wyoming to gain support for the amendments and they were adopted as part of the Energy Policy Act of 2005
Attached below are the talking points used by MMS in briefing congressional staff and other agencies. These talking points were spot-on and have endured the test of time.
GUILDFORD, UK — Alpha Petroleum Resources, Energean UK and Orsted Hornsea Project Four will consider repurposing the Wenlock gas platform in the UK southern North Sea, which is nearing the end of its productive life.
One possibility is to reuse the facility as an artificial nesting site to offset the impact on certain bird species of offshore wind developments in the area.
Black-legged kittiwakes have set up nests on various North Sea platforms, according to Orsted’s recent surveys. Repurposing an existing platform as an artificial nesting structure is seen as an alternative to building a new artificial nesting structure to support the local development of the Hornsea Four offshore wind farm.
When we (MMS) drafted the OCSLA amendments (incorporated into the Energy Policy Act of 2005) that authorized offshore wind operations, we envisioned complementary and synergistic programs. Offshore wind and oil/gas development have many similarities and a common purpose – energy production. There is considerable overlap among the operating companies and contractors.
Unfortunately, politicians are better at dividing than uniting, and a provision in the Schumer-Manchin legislation pits the offshore wind and oil/gas programs against each other. The text (pasted below) from p. 646 of the bill restricts wind leasing when no oil and gas lease sale has been held in the prior year.
I share the concerns about the OCS program evolving into a wind-only program, as has already happened in the Atlantic (more on this at a later date). However, oil and gas sales should be held because they make economic and environmental sense, not because they are a condition for holding wind sales. Oil and gas sales are not punishment and wind sales are not rewards, and holding a single GoM lease sale each year does not balance the offshore program.
(b) LIMITATION ON ISSUANCE OF CERTAIN LEASES OR RIGHTS-OF-WAY.—During the 10-year period beginning on the date of enactment of this Act—
(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.
The energy sections begin on page 232 and continue until the end (page 725!). Some highlights from an offshore energy perspective (more important items in bold):
p. 429 – Tax credit eligibility for offshore wind energy components including blades, nacelles, foundations, and towers.
p. 447 – Credits for CCS equipment
p. 460 – For offshore wind facilities, this section specifies the % of the total costs that must be expended in the US for the facility to qualify as being manufactured in the US. That % rises gradually to 55% after 12/31/2027.
p. 518 – Eligibility of CCS for credits
p. 615 – $100 million for offshore wind electricity transmission planning, modelling, and analysis. (Seems like a lot for planning and analysis.)
p. 621 – $10 million for oversight by DOE Inspector General. (Those folks will have their hands full!)
p. 628 – Authorizes wind leasing in the EGOM and South Atlantic areas withdrawn from all leasing at the end of the Trump administration.
p. 631 – Authorizes offshore wind leasing adjacent to US territories. (Should be interesting!)
p. 632 – Codifies increase in offshore royalty rates: range of 16 2/3% – 18 3/4% for 10 years; not less than 16 2/3 % thereafter
p. 640 – The provision requiring that royalty be paid on flared/vented gas could be problematic. The exceptions are not consistent with those currently in the regulations, and would be difficult for BSEE/ONRR to manage. The proposed legislation (exception 1) exempts “gas vented or flared for not longer than 48 hours in an emergency situation that poses a danger to human health, safety, or the environment.” However, current BSEE regulations allow limited (48 hours cumulative) flaring for certain operations (e.g. during the unloading or cleaning of a well, drill-stem testing, production testing, and other well-evaluation testing). This flaring is essential but not normally an emergency situation. Requiring royalty payments for such essential, but not emergency, flaring would be unreasonable and inconsistent with the intent of this provision (minimize unnecessary flaring and venting).
p. 641 – Per our previous post, this section reinstates Lease Sale 257 (GoM) and requires that the scheduled 2022 lease sales 258 (GoM) and 259 (Cook Inlet) be held by 12/31/2022. Lease Sale 261 (GoM) must be held by 9/30/2023. Saddle up!
The study will help to determine the extent to which hydrogen can be transported in natural gas pipelines without introducing embrittlement and other pipeline safety risks.
BSEE has posted the slides and presentation video announcing their draft Request For Proposals (RFP) to contract for the decommissioning of facilities on five Gulf of Mexico leases. Phase 1 involves the plugging of 15 wells. Per the presentation, this work would be paid for using “orphan well” funds appropriated in the 2021 Infrastucture bill.
Per BSEE’s online borehole file, the wells in question were drilled by Matagorda Island Gas Operations, Anglo-Suisse Offshore Partners, and Bennu Oil and Gas. Matagorda and Bennu declared bankruptcy and are no longer in business. The status of Anglo-Suisse is not entirely clear, but presumably they are no longer financially accountable.
Looking at BOEM online data, these leases had other owners including two US super-majors. However, the wells identified by BSEE were drilled after these and other financially strong companies had assigned their interest. They are thus not legally accountable, which is presumably why these wells were chosen for the RFP.
The unprecedented use of Federal funds for decommissioning reflects poorly on the offshore industry and Federal lease management practices. The financial risks associated with decommissioning have been apparent for more than 30 years (see the July 1991 Forbes article below). Why have these issues not been effectively addressed? Some thoughts:
Operating companies showed little interest in private industry-wide solutions. Rod Pearcy, one of the most respected managers in the history of the Federal offshore program, advocated an industry funded and managed entity to ensure financial assurance and guarantee well and facility decommissioning. This concept never gained traction.
Industry factions disagreed strongly on the regulatory approach that the Federal government should take. Simply put, “majors” wanted to limit future liability for leases they assigned. “Independents” wanted the assigning companies to retain liability such that their financial assurance requirements were minimized. These divisions continue to this day and are the main reason financial assurance regulations are so difficult to update.
Decommissioning costs vary wildly depending on the particular circumstances, making it difficult to establish the amounts of financial assurance to be required. For example, storm damage typically increases well and structure decommissioning costs by a factor of at least 10. Requiring worst case financial assurance amounts would preclude many assignments and the associated increase in oil and gas recovery.
Realistic amounts of bonding and other forms of financial assurance are routinely challenged by lessees and their political representatives.
Poor lease assignment and financial management decisions have significantly increased the risk exposure of predecessor lease owners and taxpayers. The troubling case of Platforms Hogan and Houchin, Santa Barbara Channel, demonstrates the implications of questionable lease assignments and the irresponsible use of decommissioning funds.
Government funded decommissioning will likely be more expensive and will subject the public to unforeseen costs and future liabilities should the operations not go as planned.
The future decommissioning of wind turbines is already a major issue, and measures must be taken to ensure that liability is clearly established and operator funding is assured.
In the past, the regulators, operating companies, and insurers have found ways to ensure that decommissioning costs did not fall on the taxpayer. BSEE continues to be resourceful in that regard. Private solutions should always be the objective. The proposed RFP opens the door to the potential for far greater Federal liabilities down the road, particularly given the uncertainty about predecessor liability in some important cases.
On October 19, 2021, RODA issued the government agencies a 60-day Notice of its Intent to Sue if they did not comply with the Clean Water Act, Endangered Species Act, Outer Continental Shelf Lands Act, and other federal environmental statutes. “The Alliance received no reply, and the environmental violations were not remedied,” Hawkins stated. “The decisions on this project didn’t balance ocean resource conservation and management, and must not set a precedent for the enormous “pipeline of projects” the government plans to facilitate in the near term. So we had no alternative to filing suit.”
Vineyard Wind 1 is a 62-turbine offshore wind project to be built 15 miles south of Martha’s Vineyard, and is the first commercial-scale wind project approved for US offshore waters.
Of particular interest to the offshore industry, RODA’s court filing raises concerns about the structural integrity of the 13 MW Haliade-X turbines during Atlantic hurricanes, ice shedding in the winter, radar interference, pile driving noise, Jones Act violations, and failure to consider decommissioning issues.
The number of GoM platforms is down 75% from its peak and continuing to decline.
Most new production is in the deepwater GoM and is accomplished with very few, remote and widely dispersed facilities. There are currently only 57 deepwater platforms across the entire Gulf.
The wind industry appreciates the synergy between offshore oil and gas and offshore wind operations. Indeed the oil industry has been very supportive of offshore wind, and some of the same operating companies and contractors are major players in both industries.
t has been 17 years since the enabling legislation was passed, yet we are still awaiting the first commercial wind project in the US Atlantic. You can’t blame the oil and gas industry for that delay. To the contrary, one can make the case that the presence of oil and gas operations would have accelerated Atlantic wind development.
The enabling legislation for offshore wind was drafted by the agency that managed the offshore oil and gas program and recognized the compatibility of oil and wind development. Wind development is clearly a high priority for BOEM, the current OCS land manager.
Will the Administration appeal the court decision to vacate the lease sale or does the decision assist them by reinstating their leasing pause? How will the conflict between the DC court decision and the injunction invalidating the leasing pause (Federal Court for the Western District of Louisiana) be resolved?
What does this mean for the 94 leases that were to have been acquired for carbon sequestration purposes? Will BOEM have a proper CCS sale after conducting an environmental assessment, determining bidding terms and evaluation criteria, and publishing a Notice of Sale? Or will there be a legislative end run that authorizes the issuance of the leases without these steps?
See the video below. The size and durability of the bladders could be issues at locations where there are other seafloor activities (e.g. trawling), but this and other pumped hydro-storage concepts are promising. Onshore testing of this concept is scheduled for 2023 in the Netherlands. Energy storage and stable, reliable power supply will be critical to the long-term success of offshore wind projects.
Nearly 17 years after the Energy Policy Act of 2005 (incorporating language drafted by Minerals Management Service staff) authorized wind energy projects in Federal offshore waters, commercial offshore wind power is not imminent. Despite enthusiastic political support and promised State and Federal subsidies, no commercial scale offshore wind development has commenced. The groundbreaking ceremony for Vineyard Wind I (pictured above), the first project approved by BOEM, may prove to have been premature. The project faces multiple lawsuits from commercial fishing organizations and an organization concerned about possible impacts to the endangered right whale.
Bud's Offshore Energy (BOE) 