Posts Tagged ‘BOEM’
DC Judge rules in favor of higher oil and gas prices
Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged BOEM, DC Federal Court, energy justice, energy poverty, Lease Sale 257, oil prices on January 31, 2022| Leave a Comment »
The very disappointing 68 page ruling on Lease Sale 257 boils down to the following:
- BOEM had correctly determined that, from a GHG standpoint, US offshore production was preferable to more carbon intensive foreign production.
- The plaintiffs, who are seemingly intent on stopping all oil and gas production regardless of the economic consequences, argued that BOEM failed to consider the “positive” effect that higher prices (the logical result of lower production) would have on reducing demand.
- In particular, the plaintiffs asserted that BOEM failed to consider the effect that reduced production (and higher prices) would have on foreign consumption and the associated GHG emissions.
- The judge not only decided in favor of the plaintiffs, but ruled that BOEM’s omission was so serious that the lease sale had to be vacated.
- The judge reached this decision even though (1) the five year leasing plan expires in June leaving the timing of any future sale very much in doubt and (2) all of the sale 257 bids are now public information compromising the integrity of the leasing process at the next sale (if and when that occurs).
So, if BOEM has to consider the environmental benefits of higher oil and gas prices, shouldn’t they also have to consider the negative economic and environmental effects from the resulting price inflation and energy poverty? Are higher prices, which are most detrimental to the poor and to developing nations, “energy justice?”
If your only objective is the destruction of the US offshore oil and gas program, this was a great decision. For everyone else, this is yet another reason to be concerned about our energy future.
Another California law suit: Center for Biological Diversity sues BOEM, BSEE, NMFS for failure to protect endangered species
Posted in California, decommissioning, Offshore Energy - General, pipelines, tagged BOEM, BSEE, Center for Biological Diversity, endangered species, law suit, NMFS on January 26, 2022| Leave a Comment »
The law suit makes reference to the aging offshore facilities and the Huntington Beach pipeline spill:
Oil companies have been drilling off California for more than 50 years. The first platforms were installed in 1968 and production continues today. Much of this infrastructure has outlived its expected lifespan and is well beyond the age scientists say significantly increase the risk of oil spills.
Indeed, just months ago a pipeline connected to a platform in federal waters off Huntington Beach ruptured and spilled tens of thousands of gallons of oil into the marine environment. The spill fouled sensitive marine, beach, and wetland habitat; forced closure of fisheries; and harmed and killed birds, fish, plants, invertebrates, and marine mammals.
CBD law suit
BOEM approves 2nd North Atlantic Wind Project
Posted in Offshore Energy - General, Offshore Wind, Wind Energy, tagged BOEM, North Atlantic, Offshore Wind, RODA, South Fork Wind, Vineyard Wind I on November 29, 2021| Leave a Comment »
- South Fork Wind: 19 miles southeast of Block Island, Rhode Island
- 12 or fewer Siemens-Gamesa’s 11-megawatt turbines
- BOEM approved the larger (62 turbine) Vineyard Wind 1 project on July 15, 2021. Those turbines will be located approximately 15 miles south of Martha’s Vineyard and Nantucket. On Oct. 19, the Responsible Offshore Development Alliance (RODA) filed a 60-day Notice of Intent to Sue the Federal Government over violations of lease management and environmental statutes.
DOI Report on the Federal Oil and Gas Leasing Program (11/26/2021)
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Regulation, tagged BOEM, BSEE, DOI, financial assurance, leasing report, royalty on November 29, 2021| Leave a Comment »
Observations and comments on the offshore findings and recommendations in the Dept. of the Interior’s report:
- From an offshore perspective, this report is more moderate than expected. No major complaints.
- The report was issued the Friday after Thanksgiving. Was there a desire to minimize attention?
- The report does not include a recommendation on raising royalty rates. DOI will continue to study such actions (prudent decision).
- BSEE estimates current liability for “orphaned infrastructure” at only $65 million. They must be using a very narrow definition of orphaned infrastructure.
- “Financial assurance coverage should be strengthened.” (Few would argue with that statement.)
- “BSEE and BOEM will carefully consider comments on the 2020 proposed financial assurance rule.” (Deja vu? Expect a long, slow process.)
- BOEM will establish a “fitness to operate standard.” Comments: (1) This is an old concept that has proven to be difficult to execute. Hold companies accountable, make them demonstrate financial assurance, and don’t pander to bad actors (see the case of Hogan and Houchin) (2) Why is BOEM establishing this standard and not BSEE, the safety bureau? (The division of responsibilities between BOEM and BSEE has created serious overlap, inefficiency, and confusion and needs to be addressed.)
- “BOEM should consider advancing alternatives to the practice of area-wide leasing.” Tract selection makes sense in frontier areas with little operational history. It would have been perfect for the Mid- or South Atlantic or the EGoM, all of which were cynically removed from future leasing consideration by the previous President just before the 2020 election. The Central and Western Gulf of Mexico is too mature for a return to tract selection; employing that approach after 40 years of area-wide leasing is likely to generate less revenue and production.
Sale 257 and Federal funding of carbon sequestration
Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, tagged BOEM, CCS, infrastructure bill, Lease Sale 257 on November 24, 2021| Leave a Comment »
The text below, excerpted from the Infrastructure Bill (signed 2 days before Sale 257), requires the Federal government to provide funding for commercial CCS projects. $2.5 billion is appropriated. Given these incentives, how does BOEM possibly issue leases for CCS purposes when there was no public notice (as required by 30 CFR § 556.308) that CCS bids would be accepted at the oil and gas lease sale?
SEC. 40305. e) Large-scale Carbon Storage Commercialization Program.-- ``(1) In general.--The Secretary shall establish a commercialization program under which the Secretary shall provide funding for the development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide transport infrastructure, including funding for the feasibility,site characterization, permitting, and construction stages of project development. (h) Authorization of Appropriations.--There is authorized to be appropriated to the Secretary to carry out this section $2,500,000,000 for the period of fiscal years 2022 through 2026.
More questions on the Sale 257 “CCS leases”
Posted in CCS, energy policy, Gulf of Mexico, Offshore Energy - General, tagged BOEM, CCS, Exxon, Lease Sale 257 on November 18, 2021| Leave a Comment »
- Should CCS leases have been offered in a separate sale as is the case for salt, sulfur, and wind operations?
- Was CCS activity considered in the environmental reviews for this sale?
- Was CCS mentioned in the Notice of Sale?
- How will these CCS bids be evaluated?
- Will the CCS bidding influence the Judge’s decision on the pending Sale 257 litigation?
Carbon intensity workshop recommended
Posted in conferences, energy policy, Gulf of Mexico, Offshore Energy - General, tagged BOEM, carbon intensity, deepwater operations, GHG emissions, GRP, NASEM, NOIA, Wood Mackenzie on October 21, 2021| Leave a Comment »
With regard to air emissions, the advantages of deepwater Gulf of Mexico production are rather obvious:
- High production rates per well
- Few surface facilities (57 deepwater platforms, 3% of GoM total, produce 90+% of oil)
- Modern gas turbines for power generation
- Tightly enforced restrictions on flaring and venting
- Better control of fugitive emissions
- Distant from shore (not a factor for GHG effects)
Wood Mackenzie, NOIA, and others contend that restrictions on GoM leasing are contrary to carbon reduction goals.
An important and unintended consequence of enacting more restrictive policies such as a lease ban or increase in royalty rate in the Gulf of Mexico is that it could give rise to carbon leakage to countries that export crude to US.
Wood Mackenzie
In light of the policy implications of GHG emissions, a Carbon Intensity Workshop is highly recommended. The estimates generated by Wood Mackenzie, Rystad, and others need to be explored in depth. Is data quality an issue? How are the data verified? Is there regulator or third party oversight? What are the assumptions behind the estimates? Also, for the purposes of US policy decisions, product transportation emissions should certainly be included. A barrel produced in the Middle East is not the same as a barrel produced in the GoM.
Looking at the chart above, I have immediate questions about the drilling emissions (blue). What wells are included? What about workovers and other well operations? I’m surprised that the deepwater GoM drilling emissions are so high relative to the other regions. While dynamically positioned MODUs have high fuel consumption rates, deepwater wells are few in number relative to shale drilling. Also, why are Brazil’s drilling emissions, which I assume are primarily associated with deepwater operations, so much lower that those for the GoM.
BOEM/BSEE and/or the Gulf Research Program (NASEM) would seem to be good sponsors for such a workshop.
The troubling case of Platforms Hogan and Houchin, Santa Barbara Channel
Posted in California, Offshore Energy - General, Regulation, tagged BOEM, BSEE, decommissioning, Hogan, Houchin, OIG, Santa Barbara Channel on September 21, 2021| Leave a Comment »
Platforms Hogan and Houchin were installed 52 and 53 years ago respectively on Lease OCS P-0166 in the Santa Barbara Channel. The lease, which had initially been issued to Phillips Petroleum, Cities Service Oil Co., and Continental Oil Co., was assigned to Signal Hill Service effective 2/19/1991. The assignment was approved despite concerns within the Minerals Management Service (MMS) about the financial strength of Signal Hill and the technical competence of Pacific Operators Offshore Inc (POOI), the affiliate that would operate the facilities.
Three decades of frustration followed for MMS, BOEM, and BSEE regulators in the Pacific Region. Per the terms of the assignment, Signal Hill was required to establish an Abandonment Escrow Account, funded from oil production revenue, with a “target balance” equal to the abandonment cost, plus 25 percent. These payments were seldom made in a timely and consistent manner.
Compliance with safety regulations was also poor. In that regard, violations data are consistent with anecdotal reports from inspectors. POOI accounted for a high percentage of the regional Incidents of Noncompliance (INCs), and Platforms Hogan and Houchin had INC/inspection ratios that were far higher than Pacific or Gulf of Mexico platform averages (see inspection data below).
| INC’s | Warnings | Component Shut-ins | Facility Shut-ins |
| POOI | 485 | 562 | 46 |
| All companies (Pacific Region) | 1965 | 3103 | 281 |
| POOI % of total | 24.6 | 18.1 | 16.4 |
A 9/20/2020 Inspector General report found significant irregularities in the use of funds from an offshore production company’s escrow account. While the IG’s summary (pasted below in its entirety) doesn’t say so, the company is assumed to be Signal Hill.
The OIG investigated allegations that an offshore oil and gas production company improperly paid operational expenses with money from an escrow account dedicated to paying expenses related to decommissioning offshore platforms in Federal waters.
DOI OIG, 9/20/2020
We found that the company routinely used funds from its decommissioning account to pay what appeared to be various operating expenses. We also found instances where the company appeared to claim reimbursement for duplicate expenses.
Based on our findings, the company submitted credits and adjustments, totaling $1.9 million, to the decommissioning account to cover these expenses and other disbursements. In addition, we referred a number of unresolved expenses for non-decommissioning activities to the Bureau of Safety and Environmental Enforcement and the Bureau of Ocean Energy Management for resolution.
We referred this matter to the U.S. Department of Justice, which declined to pursue it.
Questions:
- Why haven’t BOEM, BSEE, or the OIG released the full report? The public and the offshore industry certainly have a right to know given the potential costs to the taxpayer and the reputational damage to the industry.
- Why was a company with such a poor payment and compliance record allowed to withdraw funds from their decommissioning account to cover operating expenses?
- Signal Hill owes the State $287,000 in unpaid rentals. What unpaid royalties are owed to the Federal government?
- BSEE (2014) estimated decommissioning costs of $74.3 million. What is the current estimate? What is the remaining balance in the escrow account?
- How do the escrow account irregularities affect the decommissioning obligations of prior lessees?
GoM reserves tick upward after long decline
Posted in energy policy, Gulf of Mexico, Offshore Energy - General, oil, tagged BOEM, Gulf of Mexico, oil and gas reserves on September 14, 2021| 1 Comment »
BOEM just released their update of Gulf of Mexico OCS oil and gas reserves as of 12/31/2019. Oil reserves increased by 35.2% as a result of 6 new fields being added.
The reserve additions are necessary and welcome given the high depletion rates from 2002 to 2018 when reserves (plotted above) declined steeply while production rates held steady or increased. The concerns about the sustainability of current GoM production rates, as expressed in our 7/26/2021 post, remain given the historically low levels of exploratory drilling. For the reasons presented in that post, our view is that the importance of GoM production will increase, not decrease, over the next decade.
Bud's Offshore Energy (BOE) 