Bud's Offshore Energy (BOE)

Per BSEE’s Incidents of Non-Compliance (INC) data base, the number of violations surged in 2021, both in terms of the total number of INCs and the INCs/inspection ratio (see chart below). Remarkably, a single company – Fieldwood Energy – was responsible for 845 INCs or 44% of the total number issued. Normalizing for the number of inspections, Fieldwood facilities were cited for 1.46 INCs/inspection versus 0.46 INCs/inspection for all other companies. An unprecedented 61 of Fieldwood’s 2021 INCs called for facility shut-ins, many times more than any other operator. Through the first 17 days of 2022, Fieldwood has already been cited for 21 INCs, 5 of which required facilities to be shut-in.

Fieldwood and its affiliates have experienced multiple bankruptcies and the company has once again been reorganized with the blessing of the courts. Chevron’s comprehensive objection to the reorganization plan asserted that Fieldwood has $9 billion in current and anticipated decommissioning obligations. These enormous decommissioning liabilities and their implications for predecessor lessees (former facility owners) and the Federal government were the main issue in these proceedings, and the bankruptcy plan includes settlements with predecessor companies and the government.

Even more significant than the financial matters and INCs are the following:

• A worker died while repairing a badly corroded Fieldwood facility in May 2020.
• Per BSEE, Fieldwood was the responsible party in 4 of the 13 civil penalty cases settled in FY 2020.
• In January 2021, two Fieldwood employees were indicted for allegedly allowing oil to spill into the Gulf.

While BSEE regulations provide for the removal of operating rights for poor safety performance, companies can reorganize and problem managers can reappear elsewhere. As a result, marginally financed and ineffective operating companies are a major challenge for BSEE as evidenced by the INCs, civil penalties, and investigations. (See the related saga of Platforms Hogan and Houchin in the Pacific Region.)

Poor safety performers drag down the entire industry. The costs of mega-disasters like the Santa Barbara and Macondo blowouts have been widely discussed. However, chronic poor performance and the associated incidents also weaken the industry and damage the integrity of the offshore oil and gas program. These performance issues can’t be left entirely to BSEE and the Coast Guard to resolve. The industry needs to do a better job of self-evaluation, calling out poor performers, and exercising judgement in the assignment of offshore properties.