Posts Tagged ‘California’

The Supreme Court has decided to allow the 9th Circuit decision on offshore well stimulation to stand.

From a regulatory and technical standpoint, the 9th Circuit decision is highly questionable. The limited well stimulation operations offshore California were conducted 9-31 years ago and were carefully reviewed and monitored. No fluids were released or escaped to the marine environment.

During the Obama administration (and under the capable leadership of Directors Brian Salerno and Abigail Ross Hopper), BSEE and BOEM conducted a Programmatic Environmental Assessment (EA) and issued a Finding of No Significant Impact (FONSI) from the use of specific well stimulation treatments in oil and gas activities on the Pacific OCS. The 9th Circuit decided that wasn’t enough and the SCOTUS chose not to review their decision.

Given the current state of Pacific offshore operations, the court decisions will have little or no effect on well activity now or in the foreseeable future. If the BSEE well permitting site is up-to-date, there have been no Pacific well operations in the past 3 years. For the 2 years prior to that, the only well operations were for plugging and abandonment purposes. Therefore, the main concerns are the decision to require an EIS prior to any future well stimulation operations, and perhaps more importantly, the implications of the decision on offshore operations elsewhere.

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In the attached paper, John Smith and Robert Byrd summarize the daunting decommissioning challenges facing California offshore operators:

  1. Large, deep-water structures.
  2. Lack of decommissioning infrastructure and services locally.
  3. High HLV mobilization costs.
  4. Jones Act restrictions.
  5. Limited onshore processing and disposal options.
  6. Air quality compliance costs.
  7. Site clearance and debris removal requirements.
  8. Environmental and space use operating constraints.
  9. A complex regulatory framework and risk of litigation.
  10. An unworkable reefing law and lack of a State approved artificial reefing program.

Does the regulatory framework prevent you from doing what the regulations require? Catch-22?

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The subject Nature Energy paper is helpful in that it contributes to the important dialogue on the financial aspects of offshore decommissioning. There have been numerous posts on that topic on this blog. The use of Federal funds to cover well abandonment expenses for OCS wells, although rather limited to date, is a major disappointment for those of us who have worked hard to prevent such an outcome.

The data in the paper appear to be reasonably accurate. However, there is one glaring error regarding Pacific operations, and the reference to the Macondo blowout in the environmental discussion is rather provocative and misleading.

Per the authors:

California wells are drilled in relatively shallow water—mostly less than 100 feet—while GoM wells can be in up to 10,000 feet of water.

California’s fault block shelf drops off very quickly, and deepwater drilling activity has been common for decades. Of the 23 platforms in Federal waters, only Platform Gina is in <100′ of water (95′). The other platforms are in water depths of 154 to 1178′. Six of the platforms are in >600′ of water and 2 are in >1000′. Platform Harmony (jacket pictured below) is one of the world’s largest and heaviest steel tower platforms. Relative to the numbers of facilities, the decommissioning challenges offshore California are more daunting and complex than those in the Gulf. This includes the financial liability aspects.

Jacket for Platform Harmony

With regard to the environmental risks, the Nature Energy paper’s reference to the Macondo blowout, while muted, is what some media outlets embraced. Per the authors:

Releases from improperly abandoned wells will probably be chronic and small compared with Macondo, but the underlying biochemical and ecological processes that influence the ecological impacts have many similarities.

The Macondo well blew out while it was being suspended in preparation for subsequent completion operations. Ill advised changes to the well suspension plan were among the primary contributing factors to the blowout (see diagram below). The Macondo well was entirely different from the depleted end-of-life wells that are the subject of the paper.

Some media outlets ran with the Macondo angle, weak as it was. This ABC news piece featured numerous Macondo pictures. Other outlets noted that Macondo was a temporarily abandoned well, which it was not. The Macondo well never got to that point.

National Commission, Chief Counsel’s Report, p. 132

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Relax; just kidding about the California part (or am I? 😉).

BOE’s Mexican correspondent, Andrew Konczvald, took pictures of what looks like a deepwater drillship parked near the beautiful Pacific coast resort town of Manzanillo. Upon further review, our crack investigators determined that the rig is the Hidden Gem, a deepsea mining vessel, owned by The Metals Company (TMC). Last year, TMC conducted a pilot nodule collection program in the Clarion Clipperton Zone between Hawaii and Mexico.

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After 20 rounds yesterday, the sale resumes today.

The biggest difference between the wind and the oil and gas programs may be the way the sales are conducted. For oil and gas leases, you submit a single sealed bid. Here is a simplified description of how a wind lease sale is conducted:

  • At the start of each round, BOEM will state an asking price for each Lease Area. A bid at the full asking price is referred to as a “live bid.”
  • If the bidder has qualified for a non-monetary credit, it will meet the asking price by submitting a multiple-factor bid—that is, a live bid that consists of a monetary (cash) element and a non-monetary credit.
  • To participate in the next round of the auction, a bidder is required to have submitted a live bid for one of the Lease Areas (or have a carried-forward bid) in each previous round.
  • As long as there are two or more live bids (including carried-forward bids) for at least one of the Lease Areas, the auction moves to the next round
  • If there was only one live bid (including carried-forward bids) or no live bids for a Lease Area in the previous round, the asking price would not be increased.
  • A live bid would automatically be carried forward if it was uncontested in the previous round, and the bidder who placed the uncontested bid would not be permitted to place any other bid in the current round of the auction.
  • Conversely, if a live bid was contested in the previous round, the bidder who placed the contested bid would be free to bid on any Lease Area in the auction in the next round, at the new asking price.
  • If a bidder decides to stop bidding before the final round of the auction, there are circumstances in which the bidder could nonetheless win a lease.
  • Between rounds, BOEM will disclose to all bidders that submitted bids: (1) the number of live bids (including carried-forward bids) for each Lease Area in the previous round of the auction.
  • In any round after the first round, a bidder may submit an “exit bid” only for the same Lease Area as the bidder’s contested live bid in the previous round. An exit bid is a bid that is greater than the previous round’s asking price, but less than the current round’s asking price.
  • The auction ends (finally) when a round occurs in which each of the Lease Areas in the auction receives one or zero live bids (including carried-forward bids), regardless of the number of exit bids on any Lease Area.

Perfectly clear? You can read the full description in the Sale Notice.

Is this the best way to award offshore wind leases?

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As a result of a provision in the Inflation Reduction Act, leases may be sold but not awarded. See the paragraph below that was inserted at the end of the sale notice. No wind leases may be issued until Sale 259 oil and gas leases are issued (presumably late next spring).

XV. Compliance With the Inflation Reduction Act (Pub. L. 117-169 (Aug. 16, 2022)(Hereinafter, the “IRA”):

Section 50265(b)(2) of the IRA provides that “[d]uring the 10-year period beginning on the date of enactment of this Act . . . 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.” Section 50264(d) of the IRA provides that “. . . not later than March 31, 2023, the Secretary shall conduct Lease Sale 259[.]” Conducting Lease Sale 259 is needed for BOEM to satisfy the requirements in section 50265(b)(2) of the IRA and issue the leases resulting from this lease sale. Notwithstanding the foregoing, nothing in the IRA prevents BOEM from holding this auction.

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In addition to the settlement with the Dept. of Justice, the pipeline operator has reached settlements with the State and County. In addition to a $4.9 million fine, the company agreed to inspection and leak detection measures similar to those in the Federal settlement.

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Not really, but current economic and energy security realities doomed a bill to prohibit drilling and production in State waters. Strong quotes from bill opponents:

“SB 953 was held because it didn’t work — it was going to cost the state billions of dollars for a symbolic victory,” Andrew Meredith, president of the State Building and Construction Trades Council of California, said in a statement. “The California Senate is rightfully more concerned with actually improving the plight of workers and our environment than chasing headlines.”


“I think most legislators understand that every barrel of oil we don’t produce here under our strict environmental rules must be imported by foreign tankers floating offshore in our crowded ports from Iraq, Saudi Arabia, or the Ecuadorian rainforest,” California Independent Petroleum Association CEO Rock Zierman said in a text message.


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Per our post about old disputes preventing common sense decommissioning solutions for offshore California facilities, we were pleased to learn that an Orange County Coastkeeper’s workshop will address the flaws in the California’s unworkable rigs-to-reefs program with the objective of advancing decommissioning programs.

Coastkeeper’s upcoming Retiring Offshore Rigs Summit, or ROR, comes roughly ten years after Coastkeeper’s Rigs to Reef Conference in 2010. While that conference succeeded in passing new decommissioning and artificial reef enhancement laws, the language was not workable. In the decade since that legislation, known as AB 2503, or the “California Marine Resources Legacy Act” was signed into law, it was never implemented by the state.

Orange County Coastkeeper

Link for further information on the workshop.

Previous posts on California decommissioning:

Platform Houchin, Santa Barbara Channel

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Boats survey behind the surf with oil rigs in the background.
LA Times
Courage stopped O.C. oil platform blowout – Orange County Register

Per the LA Times, a DCOR pipeline has been identified as the source of a sheen in California State waters near Bolsa Chica State Beach. The pipeline transports oil from Platform Eva. All platform and pipeline operations in the vicinity have ceased.

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