Coast Guard photo. Thanks to Lars Herbst for bringing this incident to my attention.
In what the Coast Guard is describing as an “uncontrolled discharge” (euphemism for blowout), an 82-year-old oil well has been spewing oil, gas, and water into the coastal marshes of southern Plaquemines Parish, Louisiana, for more than a week.
In hopes of future production, prior and current owners had elected not to permanently plug the well, apparently with the State’s acquiescence.
The Coast Guard has taken over the response and has accessed the Oil Spill Liability Trust Fund.
We don’t need relaxed decommissioning and financial assurance requirements. We need a cooperative Federal, State, and industry effort to ensure that wells are plugged in a timely manner and that financial assurance is provided to protect the public interest.
Those who are concerned about minimizing the Federal government’s decommissioning risk exposure should closely monitor this process. Some companies and their political allies have sought to minimize the financial risks associated with plugging wells and removing facilities. As a result, it has been necessary to defend BOEM from unwarranted commentary about decommissioning issues and the financial assurance rule. Stay tuned!
Of particular interest are mandated reviews of the:
RIsk Management and Financial Assurance Rule: Those who want to gut this rule should come to the table with proposals that better protect the taxpayer from decommissioning liabilities. Pretending that decommissioning financial risks don’t exist or that they are someone else’s (or the govt’s) problem is unacceptable.
5 Year leasing program – This review is urgently needed. See this and this!
BOP/Well Control Rule – This keystone safety rule has undergone multiple reviews in recent years. Because of the rule’s importance, further review for continuous improvement purposes may nonetheless be warranted. Here are the blog comments on the current version of the rule.
Forbes (USGS map of active wind turbines): “The U.S. Wind Turbine Database contains more than74,695 wind turbines built since 1980, spread between 1,699 wind power projects in 45 states. However, thousands of wind turbines are reaching the end of their operational lifespan and need to be either repowered to make way for updated (often larger) turbines or entirely decommissioned to allow for new uses of the land they occupy. Unfortunately, there is no uniform legal framework to regulate the steps involved, nor is there an accepted industry-wide set of best practices, and the environmental costs are considerable.”
Forbes: “As is often the case when new technologies come to market, unintended downstream consequences are not always immediately obvious to the players. Enthusiasm for clean energy initially pushed the first wind turbines into existence in the U.S. without considering the environmental and monetary costs that would be involved in either upgrading or bringing projects to a close later in their life cycle. “
“At the heart of the dispute are rules from the federal Bureau of Ocean Energy Management – BOEM – which require energy producers in the Outer Continental Shelf to provide a bond to pay for well, platform, pipeline and facilities cleanup if the operating company fails to do so.”
“These insurance companies and their unreasonable demands for increased collateral pose an existential threat to independent operators like W&T.”
Comment: If insuring offshore decommissioning is so risk-free and lucrative, why aren’t other companies entering the market?
“Several states, including Texas, are challenging the BOEM rule and in one case they specifically cite W&T as an example of how the rule could be misused to irreparably harm energy producers.“
Comment:As previously posted, the concerned States should propose alternative solutions that would promote production while also protecting taxpayer interests. Arguing that decommissioning financial risks are not a problem is neither accurate nor a solution.
“In over 70 years of producer operations in the Gulf of Mexico, the federal government has never been forced to pay for any abandonment cleanup operations associated with well, platform facility, or pipeline operations.”
Comment: Shamefully, from the standpoints of both the offshore industry and the Federal government, that statement is no longer true. The taxpayer has now funded decommissioning operations in the Matagorda Island Area offshore Texas (BSEE photo below) and more significant decommissioning liabilities loom.
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.
Comments on the 3 risk reduction factors cited in the letter:
Factor 1: Those “robust insurance policies” may soon be tested given the costs associated with the turbine blade incident and potential law suits. (The notice pasted below informs that Nantucket officials will meet on Tuesday to consider litigation. A question for attorneys is the extent to which Nantucket is compromised by their good “Good Neighbor Agreement” with Vineyard Wind. That agreement essentially calls on Nantucket to promote the Vineyard Wind projects in return for payments that seem modest relative to the economic benefits from tourism and fishing.)
Factor 2: To the extent that GE Vernova Haliade-X 13 megawatt turbines are proven technology (and that is very much in doubt), the use of proven technology doesn’t prevent premature abandonment associated with unexpected incidents.
Factor 3: Reliable power generation and predictable long-term income remain to be demonstrated.
BOEM’s land rush approach to offshore wind leasing will add up to 1086 turbine towers and 28 offshore substations (OSSs) in the Atlantic just from active projects with approved Records of Decision (RODs). (See the table below.) Another 17 active Atlantic commercial projects have yet to reach the ROD stage. Those projects should increase the total number of structures to >3000. Five more Atlantic wind lease sales are scheduled.
project
turbine towers
offshore substations
Coastal VA Offshore Wind
202
3
Revolution Wind
100
2
Sunrise Wind
94
1
Atlantic Shores South
200
up to 10
Ocean Wind 1
98
up to 3
Vineyard Wind 1
100
2
Empire Wind 1 & 2
147
2
New England Wind (phases 1&2)
150
5
Per the Construction and Operations Plan (COP) for Vineyard Wind, the topsides for a conventional electrical service platform (ESP) (also known as an offshore substation or OSS) are 45 x 70 x 38 m, which is larger in surface area than a typical 6-pile oil and gas platform (~30 x 30 m), and is comparable in size to a large jackup drilling rig.
The Atlantic Shores plan calls for 10 small, 5 medium, or 4 large OSSs. (Uncertainty regarding the number and types of structures seems rather common in wind COPs.) The large OSSs have topsides that are 90 m by 50 m and rise to 63 m above MLLW. These are large offshore structures whether for wind or oil and gas.
Per BOEM, the “Rule to Streamline and Modernize Offshore Renewable Energy Development” is intended to “make offshore renewable energy development more efficient, [and] save billions of dollars. Unfortunately, the savings associated with relaxed financial assurance requirements translates to increased risk for power customers and taxpayers.
BOEM signaled their intentions on offshore wind (OSW) decommissioning three years ago when they granted a precedent setting financial assurance waiver to Vineyard Wind. Despite compelling concerns raised by commenters, the “streamlining” regulations codified this decision.
No one knows what the financial future will be for wind projects and the responsible companies. Financial assurance should therefore be established when the structures are installed, not years into the future as allowed by the revised regulations. What leverage will BOEM have then?
Nordsee One substation, Germany. Rystad Energy projects 137 new power substations offshore continental Europe this decade, requiring $20 billion in total investment.
The limited media coverage of the lawsuit originated from a single Reuters article. Apparently Reuters learned about the suit and reached out to the litigants. Their article quoted Louisiana Attorney General Liz Murrill as follows:
“This is a really egregious direct assault on intermediate level producers of oil and gas, and that affects a lot of business in our state,” Murrill told Reuters in an interview.
That quote is all we have from the AGs. Why the absence of announcements:
Interest in working with industry and the Federal govt to seek policy solutions that best address OCS decommissioning issues? (This would be encouraging.)
State of Louisiana, Louisiana Oil & Gas Association, State of Mississippi, State of Texas, Gulf Energy Alliance, Independent Petroleum Association of America and U S Oil & Gas Association
Defendant:
Deb Haaland, U S Dept of Interior, Bureau of Ocean Energy Management, Elizabeth Klein, Steve Feldgus and James Kendall
Case Number:
2:2024cv00820
Filed:
June 17, 2024
Court:
US District Court for the Western District of Louisiana
Presiding Judge:
James D Cain
Referring Judge:
Thomas P LeBlanc
Nature of Suit:
Other Statutes: Administrative Procedures Act/Review or Appeal of Agency Decision
Cause of Action:
28 U.S.C. § 2201 Constitutionality of State Statute(s)
Bud's Offshore Energy (BOE) 