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Posts Tagged ‘BSEE’

Cox bankruptcy update

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , , , , , , , on September 18, 2024| Leave a Comment »

The previously discussed sale of Cox assets in 6 GoM fields to W&T was completed in January for $72 million, $16.5 million less than the proposed price. W&T, an established GoM operator, believes they can increase the pre-bankruptcy production (8300 boepd) through workovers, recompletions, and facility repairs.

The extent to which W&T is assuming decommissioning liability for the Cox assets is unclear to this observer. Decommissioning information from W&T’s SEC filing is pasted at the end of this post.

In February, Cox won court approval to sell “about a dozen oil fields to Natural Resources Worldwide LLC for about $20 million following a bankruptcy court auction.” This sale is more concerning given that the purchaser has no operating history in the GoM, and scant information about the company can be found online. Perhaps they are affiliated with Natural Resources Partners L.P., an energy investment firm which “owns mineral interests and other rights that are leased to companies engaged in the extraction of minerals,” but “does not mine, drill, or produce minerals, has no operations, and conducts business solely in an office environment.”

Per BOEM data, Cox filed requests to assign a number of leases to Natural Resources Worldwide (NRW) in May, but those requests have yet to be approved. Hopefully, BOEM is taking a hard look at these requests and their obligations following the court auction. Decommissioning liabilities should be their number one concern. (Note: NRW was just listed as the operator of the former Cox platform at EI 361, so presumably at least some of those assignments have now been approved.)

According to BOEM’s platform data base, Cox and affiliates Energy XXI and EPL still operate 243 platforms, down from 435 in June 2023. Also per the data base, the Cox companies have not removed any platforms during 2023 or 2024 YTD, so the reduction in platforms is presumably the result of the W&T transaction. Most of the remaining Cox platforms are old – 16 of their 77 major platforms were installed in the 1950s!

Meanwhile, Cox and affiliates continue to be the GoM violations leader by far with 549 incidents of non-compliance (INCs) in 2024 YTD, 45% of the GoM total for all operators. No other company has more than 100 INCs (although Whitney Oil and Gas has a disappointing 93 INCs, including 33 facility shut-ins on only 65 inspections!)

operatorplatforms/
major platforms		warning INCscomponent shut-in INCsfacility shut-in INCs
Cox209/69407444
Energy XXI19/77312
EPL5/11611
Total Cox233/77496467
Total GoM1519/73683131768
INCs are for 2024 as of 9/17/2024. A major platform has at least 6 well completions or more than 2 pieces of production equipment.

From W&T’s quarterly SEC filing:

Contingent Decommissioning Obligations

The Company may be subject to retained liabilities with respect to certain divested property interests by operation of law. Certain counterparties in past divestiture transactions or third parties in existing leases that have filed for bankruptcy protection or undergone associated reorganizations may not be able to perform required abandonment obligations. Due to operation of law, the Company may be required to assume decommissioning obligations for those interests. The Company may be held jointly and severally liable for the decommissioning of various facilities and related wells. The Company no longer owns these assets, nor are they related to current operations.

During the three months ended March 31, 2024, the Company incurred $2.6 million in costs related to these decommissioning obligations and reassessed the existing decommissioning obligations, recording an additional $5.3 million. As of March 31, 2024, the remaining loss contingency recorded related to the anticipated decommissioning obligations was $20.8 million.

Although it is reasonably possible that the Company could receive state or federal decommissioning orders in the future or be notified of defaulting third parties in existing leases, the Company cannot predict with certainty, if, how or when such orders or notices will be resolved or estimate a possible loss or range of loss that may result from such orders. However, the Company could incur judgments, enter into settlements or revise the Company’s opinion regarding the outcome of certain notices or matters, and such developments could have a material adverse effect on the Company’s results of operations in the period in which the amounts are accrued and the Company’s cash flows in the period in which the amounts are paid. To the extent that the Company does incur costs associated with these properties in future periods, the Company intends to seek contribution from other parties that owned an interest in the facilities.

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“Plug Offshore Wells Act”

Posted in decommissioning, energy policy, Offshore Energy - General, Offshore Wind, tagged , , , , , , , on September 17, 2024| Leave a Comment »

Federally funded decommissioning in the Matagorda Island area of the Gulf of Mexico. Not a success story.

I’m not typically aligned with the sponsors of the attached “Plug Offshore Wells Act,” but the call for transparency is understandable given that taxpayer funds are, for the first time, being used to decommission offshore platforms in the Matagorda Island area of the Gulf of Mexico, massive liabilities associated with the Cox bankruptcy loom, and the Hogan and Houchin saga drags on without resolution.

The bill would require an annual report on well, platform, and pipeline decommissioning including applications, deadlines, and enforcement actions. BSEE does have a good facility infrastructure page for the GoM, but much of the information called for in H.R. 9168 is not publicly available.

Improved oversight of decommissioning requirements for offshore wind projects should also be considered in light of the precedent setting waiver granted to Vineyard Wind and BOEM’s “modernization rule” that relaxes financial assurance requirements for wind development.

BILLS-118hr9168ihDownload

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Excellent JPT article on advances in deepwater technology

Posted in Gulf of Mexico, Guyana, Offshore Energy - General, well control incidents, tagged , , , , , , , , on September 6, 2024| Leave a Comment »

Chevron slide: Advances in seismic imaging help characterize deepwater development opportunities

A new JPT article features comments from BOE contributor Lars Herbst on advances in HPHT technology, control systems, sensors and transmitters, and automation that are facilitating the next era of deepwater development.

Well capping technology, which provides a tertiary well control capability, is an essential element of post-Macondo exploration and development. Lars points to the importance of BSEE’s unannounced drill program to verify that capping stacks can be transported and installed in a timely manner. Chevron expresses pride in leading a team that deployed and installed a capping stack in 6,200 feet of water in a drill monitored by BSEE. During that drill, a remotely operated vehicle (ROV) closed 10 valves to shut in a simulated well.

Exxon’s Jayme Meier aptly characterizes the challenge and excitement of deepwater development:

“You are floating on a surface, and you have to be able to pinpoint exactly where you’re going to land subsea hardware, exactly where you’re going to moor an FPSO and hit target boxes that are a few feet by a few feet, and they’re 6,000 ft below you,” she said. “It is the most exciting thing that I’ve ever been involved in. And it involves technology, technical know-how, and an ability to really plan the base plan and the contingency plan.”

Advances in deepwater technology are indeed impressive, but continuous improvement must always be the objective. In that regard, Lars rightfully emphasizes the importance of sustaining research through the industry’s up and down cycles.

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Director Kevin Sligh is departing BSEE. He will be replaced by Kati Kovacs.

Posted in energy policy, Offshore Energy - General, Uncategorized, tagged , , , , on August 30, 2024| Leave a Comment »

Kevin Sligh
Kati Kovacs

Excerpts from US Dept. of the Interior Announcement

WASHINGTON — The Department of the Interior today announced that Bureau of Safety and Environmental Enforcement (BSEE) Director Kevin M. Sligh will depart his position effective September 6, after serving in the role for the past two and a half years. Kathryn (Kati) E. Kovacs, who serves as Deputy Assistant Secretary for Land and Minerals Management, will assume leadership of the bureau.

A cornerstone of Director Sligh’s tenure was a focus on the enhancement of BSEE’s emergency response capabilities. This included the first capping stack exercises in a decade, critical high-stakes operations designed to demonstrate the bureau’s readiness to rapidly seal off uncontrolled well blowouts on the Outer Continental Shelf (OCS). In addition, BSEE implemented improvements to its capabilities at its National Oil Spill Response Research and Renewable Energy Test Facility (Ohmsett), where new technologies and training are helping the United States and the international community better plan for and respond to oil spills and advance new renewable energy science and technologies. These efforts were essential in testing and proving BSEE’s ability to manage potential offshore incidents effectively, ensuring that the bureau and industry responders are equipped to act swiftly and efficiently if needed.

In her current role, Kovacs has had oversight over BSEE, focusing on their regulatory agenda. Thanks to both Kovacs’ and Sligh’s leadership during the Biden-Harris administration, the Department made significant progress in expanding its oversight of renewable energy sources, including the enactment of a final rule that transferred safety and environmental compliance responsibilities for offshore renewable energy from the Bureau of Ocean Energy Management (BOEM) to BSEE. The rule recognized that the scopes of the bureaus’ roles and responsibilities had matured since they were created more than a decade ago following the Deepwater Horizon tragedy and supports the Department’s commitment to independent regulatory oversight and enforcement in the renewable energy program.

Prior to joining the Department in April 2022, Kovacs was a professor of law at Rutgers University. Kovacs’ public service career also includes 12 years in the Department of Justice’s Environment and Natural Resources Division, Appellate Section and service as a senior advisor to the director of the Bureau of Land Management in 2016. Kovacs also served in the Baltimore City Law Department as an attorney and clerked for former Chief Judge of the Maryland Court of Appeals Robert C. Murphy. She is a graduate of Yale University and the Georgetown University Law Center.  

Interestingly, on 18 Sept., Ms. Kovacs will be making a presentation at the Case Western Reserve School of Law entitled Regulating Energy and Land Management at the Department of the Interior. There is no charge to register.

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How are Orsted’s Ocean Wind 1 and 2 leases still active?

Posted in energy policy, Offshore Wind, tagged , , , , , , on August 28, 2024| Leave a Comment »

  • 10/31/2023: Citing economic factors, Orsted announces they “will cease development of the Ocean Wind 1 and Ocean Wind 2 projects.” (This should have resulted in termination of the leases.)
  • 1/19/2024: Orsted requests a 2 year “suspension of operations” to extend the leases they had ceased developing. (Presumably, this was a hedge with hopes of marketing the leases or getting better terms.)
  • 2/29/2024: True to form, BOEM approves the questionable 2 year suspension request. The approval letter was dated one day before the leases’ 8th anniversary when they would have presumably expired. (This is unconfirmed because the lease document and BOEM’s wind regulations lack clarity regarding lease expiration.)
  • BOEM’s approval letter (attached) curiously asserts that “suspension of the operations term is necessary for the Lessee’s full enjoyment of the lease in this circumstance to ensure sufficient time for project operations in support of the Project’s economic viability.” (Interesting wording that expresses the accommodative and promotional philosophy of the Federal wind program.)
  • 8/14/2024: The New Jersey Board of Public Utilities formally vacated all of its Orders that approved the Ocean Wind One and Ocean Wind Two offshore wind projects.
  • 8/14/2024: Cape May County comments that they are likely to amend their Federal Court filings “since the actions of the NJBPU would appear to have nullified Orsted’s federal permits.”
  • 8/27/2024: Despite the fact that Orsted has ceased development and New Jersey has vacated its approvals, the Federal leases are still active.
  • Good luck keeping an oil and gas lease if you cease development and request a suspension of operations. BSEE will rightfully deny your request.
Lease Suspension Approval Letter for Ocean Wind 1_ OCS-A 0498Download

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Turbine blade observations

Posted in accidents, Offshore Wind, tagged , , , , , , , on August 27, 2024| 1 Comment »

  • The “highly unusual and rare” talking point for turbine blade failures seems to have finally been discarded.
  • 3 new GE Haliade-X blades failed shortly after installation at Dogger Bank and Vineyard Wind. A total of only 48 turbines had been installed.
Offshore wind projectHaliade-X turbines installedblade failures
Dogger Bank272
Vineyard Wind211
Dr. Gunter – The GE Verona 13Download

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Is the fragmented turbine blade symbolic of the regulatory regime?

Posted in accidents, energy policy, Offshore Energy - General, Offshore Wind, tagged , , , , , on August 14, 2024| 2 Comments »

A close-up of the damaged GE Haliade-X turbine blade at the Vineyard Wind farm in late July. Photo by Burton Balkind

From the Nantucket Current:

Additionally, ultimate authority over the wind farm remained unclear, with various federal agencies claiming responsibility over different portions of the permitting, licensing, review, and operation of the wind farm.

“Sometimes I have a hard time figuring out, who do we talk to? Who is going to keep us safe? Who is the responsible boss here? Who is going to make the hard decision?” Select Board member Matt Fee asked.

As previously discussed, regulatory fragmentation is a safety and environmental risk factor.

Causes of regulatory fragmentation:

  • Separate legislation granting redundant or overlapping authority to different departments or agencies.
  • Legislation that is non-specific, assigning broad authority to the President or cabinet level level officials, leaving it up to the bureaus to resolve.
  • Bi- and multi-lateral agreements like MOA’s and MOU’s, which are intended to “coordinate the redundancy,” often cause more confusion than they prevent, creating gaps in the process.
  • “Fixing” problems by adding redundancy.

The Dept. of the Interior’s division of responsibilities for offshore wind, which was finalized in January 2023, inexplicably assigns review and approval of Construction and Operations Plans to the Bureau of Ocean Energy Management (i.e. the land manager, lessor, and wind energy promoter) rather than the Bureau of Safety and Environmental Enforcement (i.e. the principal regulator of the activities described in those plans).

More significantly, the offshore wind responsibilities of the 2 bureaus are so intertwined (as is also the case for offshore oil and gas), that attempts to separate the functions have, at a minimum, created inefficiencies and increased regulatory and operational costs.

FTR, the idea that having the BOEM and BSEE functions combined in a single bureau, as was the case with the predecessor bureau (MMS), had anything to do with the Macondo blowout is a complete fallacy. Regarding the accusations that were made toward MMS, the Chief Counsel for the national commission that investigated the tragic incident found no evidence that ethical lapses on the part of MMS employees played any role in causing the blowout. 

There were important regulatory changes made after the Macondo blowout. These included capping stack requirements, mandatory safety management systems, and updated rules and standards for cementing/zonal isolation and blowout preventer systems. None of these improvements were precipitated by or dependent on the division of MMS into two bureaus.

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BOEM waived fabrication report requirement so Vineyard Wind project could stay on schedule

Posted in accidents, energy policy, Offshore Wind, Regulation, tagged , , , , , , , , , on August 6, 2024| 2 Comments »

damaged Vineyard Wind turbine – Cape Cod Times photo

BOEM’s long list of approved departures from the renewable energy regulations includes the eyebrow-raising approval of Vineyard Wind’s request to shortcut the review of design, fabrication, and installation reports.

Contrary to the regulations, Vineyard Wind was authorized to begin the fabrication of facilities before BOEM “received and offered no objections to the their Facility Design Report (FDR) and Fabrication and Installation Report (FIR).” The approval letter is attached, and excerpts (emphasis added) are pasted below. [Note: The requirement that was then at §585.700(b) is found at §585.632 in the current regulations.]

“Vineyard Wind requests a regulatory departure from §585.700(b) requiring that fabrication of approved facilities not begin until BOEM provides notification that it has received and has no objections to the submitted Facility Design Report (FDR) and Fabrication and Installation Report (FIR). Vineyard Wind proposes to fabricate, but not install the following project elements:
1) Monopile foundations;
2) Electrical service platform;
3) Export cable;
4) Inter-array cables; and
5) Wind turbine generator facilities.

….allowing these fabrication activities to take place earlier in time would allow Vineyard Wind to adhere to its construction schedule, maintain its qualification for the Federal Investment Tax Credit, and meet its contractual obligations under the Power Purchase Agreements with Massachusetts distribution companies.

30 cfr 585.103 requires that a departure provide safety and environmental protection equal to or greater than the provision in the regulations that is waived. BOEM’s letter fails to explain how allowing fabrication to begin before fundamental design and fabrication reports are submitted and reviewed meets this test.

It’s noteworthy that GE Vernova has attributed the Vineyard Wind turbine blade failure to a fabrication issue. The FIR is thus particularly pertinent, because it addresses quality assurance measures, significant factors in the Vineyard Wind blade failure.

Perhaps even more troubling is BOEM’s response to subsequent requests by other companies to waive the FDR and FIR requirement (example). In these responses, BOEM asserts that their “current interpretation” is that no departure is needed because “the regulation prohibits only fabrication and installation activities on the Outer Continental Shelf (OCS) itself.” How does that make sense given the important activities, including the fabrication of turbine blades and other turbine components, that take place onshore?

In their letters approving the Vineyard Wind and other departures, BOEM implies that their review of these reports is unnecessary because “the design and fabrication of these components would occur under the supervision of the approved CVA” (Certified Verification Agent). That assertion misconstrues the role of the CVA. These agents, nominated and funded by the operator, provide third party oversight that is complementary to, not a substitute for, BOEM/BSEE project reviews.

According to this memo, DNV was the CVA for Vineyard Wind. Their insights on the turbine blade failure will presumably be included in BSEE’s investigation report.

The Vineyard Wind and other departures reinforce concerns that BOEM’s commitment to promoting offshore wind and accelerating development influenced their regulatory decisions. This concern, along with the division of responsibilities between BOEM and BSEE, should be part of the Vineyard Wind investigation. Hopefully, the investigation panel will be accorded a high degree of independence.

3837-Early-Fabrication-Departure-Approval-Vineyard WindDownload

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New Order from BSEE to Vineyard Wind

Posted in accidents, energy policy, Offshore Energy - General, Offshore Wind, tagged , , , on July 29, 2024| 1 Comment »

link

“The order comes as the bureau continues its oversight and investigation into the July 13, 2024, turbine generator blade failure. The order continues to prohibit Vineyard Wind 1 from generating electricity from any of the facilities or building any additional wind turbine generator towers, nacelles, or blades. This order also requires Vineyard Wind 1 to submit to BSEE an analysis of the risk to personnel and mitigation measures developed prior to personnel boarding any facility. Vineyard Wind 1 is not restricted from performing other activities besides those specifically directed for suspension or additional analysis. For example, Vineyard Wind 1 is still permitted to install inter-array cables and conduct surveys outside of the damaged turbine’s safety exclusion zone.” 

BSEE also advises that they are conducting their own investigation, and promises to release the findings to the public.

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Should wind leasing and development be paused until the Vineyard Wind investigation is completed?

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Offshore Wind, Regulation, tagged , , , , , on July 23, 2024| 1 Comment »

The Vineyard Wind turbine incident, which littered Nantucket beaches, has also tarnished the US offshore wind program. BSEE has prudently halted Vineyard Wind operations and construction pending an investigation into the blade failure.

Offshore wind development is structure rich, so public confidence in the design of turbines and support platforms is critical. BOEM lists 37 active wind leases on the US OCS. Most of these leases have not yet reached the construction phase. A hold on the approval of any Construction and Operations Plans would seem to be appropriate pending completion of the Vineyard Wind investigations.

Per the leasing schedule below, BOEM intends to hold 4 wind sales during the remainder of 2024, all within a 3 month period. Only 1 sale is scheduled for each of the following 2 years. Deferring the 2024 sales until the investigations are complete would assist potential lessees by ensuring that the issues of concern were fully understood.

Unfortunately, BOEM’s failure to conduct a 2024 oil and gas lease sale has boxed in the wind program. The Inflation Reduction Act prohibits BOEM from issuing wind leases unless an oil and gas sale has been held within the previous year. Lease Sale 261 was held on 12/20/23 meaning that no wind leases may be issued after 12/20/24. BOEM has compressed the wind leasing schedule, presumably to beat the legislative deadline. It would have been better for both the oil and gas and the wind programs if at least one oil and gas sale had been held in 2024 as has been customary since the 1950s.

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