Bud's Offshore Energy (BOE)

Attached is a settlement agreement between NOAA and 4 NGOs that could have major implications for deepwater oil and gas operations in the Gulf of Mexico.

As background, the Rice’s Whale (formerly Bryde’s whale) area has been expanded (see map above) such that it fences off deepwater leases by creating a barrier to vessel transportation. The expansion is based on a single study that concluded that Rice’s whales were “the most plausible explanation” for moan calls observed in the northwest GOM shelf break area. No Brice’s whales were sighted in the expanded area during this study. The authors do point to a 2017 sighting offshore Corpus Christi, which is apparently the only actual sighting of a Brice’s whale along the NW GoM shelf break.

The settlement agreement commits BOEM, presumably with their concurrence, to exclude the expanded area from future leasing, to issue a Notice to Lessees and Operators (exhibit 1 below) and to attach stipulations to new leases (exhibit 2). Because BOEM’s authority to impose major new requirements without proposing a regulation for public review and comment is questionable, the Notice (NTL) describes the restrictions as “recommended measures.” However, the liability risks associated with the failure to comply with this “guidance” would be unacceptable to most companies. Adding to the muddle, the language in the lease stipulation differs by making it perfectly clear that compliance is required.

The most troubling restriction from an operational standpoint:

“To the maximum extent practicable, lessees and operators should avoid transit through the Expanded Rice’s Whale Area after dusk and before dawn, and during other times of low visibility to further reduce the risk of vessel strike of Rice’s whales.“

Comments:

• Deepwater facilities are typically far from shore, and a requirement to transit only between dusk and dawn, particularly in the winter, is unrealistic and onerous. This is further complicated by the speed limit provision.
• Those who have worked offshore know that periods of low visibility are unpredictable and can extend for days. The low visibility transit restriction is thus highly punitive and increases operational risks on the vessels and at the facilities they serve.
• The vague “to the maximum extent practicable” caveat provides little comfort for planners, managers, and crews, and is a de facto acknowledgement that the requirement is unreasonable.
• These restrictions, coupled with the required Automatic Identification System data, open the door to endless challenges, especially given the keen interest of the litigious organizations that are parties in the settlement agreement.
• Deepwater GoM operations are few in number and highly dispersed, which is a more important mitigating factor than those included in the agreement. More on this tomorrow.
• In addition to the deepwater operations that will be much more difficult to supply, there are currently 81 production platforms within the expanded Rice’s whale area (100 to 400 m water depth).These include important facilities like Amberjack, Cognac, Cerveza, and Lobster. What are the implications for these platforms? Will they be required to have full-time whale observers? Can they only be supplied during daylight hours with good visibility? Why not consider using these platforms as bases for more definitive studies?
• Further to the previous point, there are 103 existing leases in the 100-400 m depth zone that is now excluded from leasing? 90 of these leases are still in their primary term, and 21 were issued in the past 2 years. How will the contractual rights of these leaseholders be protected? (In fact, the value of all 1550 active leases in >100 m water depth is affected by this agreement.)
• Have BSEE and Coast Guard been consulted on the practicality and safety implications of these requirements?
• Deepwater operations have been ongoing in the GoM for 50 years, and there is no apparent evidence of impacts to this species. Why can’t the consultation process and any necessary followup studies be completed before decisions are made regarding operating restrictions?
• These types of restrictions, coupled with the diminished state of the Strategic Petroleum Reserve and tightening oil markets, raise serious energy security and economic concerns.

Finally, BOEM’s third footnote in the NTL (pasted below), doesn’t demonstrate great confidence in the need for the onerous requirements that are being imposed.

“This is not meant to be construed as a blanket determination as to whether BOEM, at present, has determined that there is a “reason to believe” that incidental take may occur, within the meaning of the ESA, the consultation regulations, or BOEM’s regulations. Those decisions will be made on a case-by-case basis in accordance with BOEM regulations referenced below.” Comment: Huh??? How are these blanket restrictions case-by-case, and how are they being imposed without public review?

Read Full Post »