Posts Tagged ‘macondo’

Linking an interesting academic paper on regulatory fragmentation:

Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government’s official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. We find that fragmentation increases the firm’s costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry. These effects arise from regulatory redundancy and, more prominently, regulatory inconsistency between agencies. Our results uncover a new source of regulatory burden: companies pay a substantial economic price when regulatory oversight is fragmented across multiple government agencies.

Regulatory Fragmentation

The US has a highly fragmented offshore regulatory regime that has become even more fragmented with the complex division of responsibilities between BOEM and BSEE. The slide below is from a presentation on this topic.

While the linked paper focuses on costs and productivity, fragmentation may also be a significant safety risk factor. A UK colleague once asseted that “overlap is underlap,” and I believe there is something to that. If multiple agencies have jurisdiction over a facility, system, or procedure, the resulting redundancy, inconsistency, and ambiguity may create significant gaps in industry and governmental oversight.

For example, regulatory fragmentation was arguably a significant factor in the most fatal US offshore fire/explosion incidents in the past 35 years – the South Pass B fire in 1989 and the Macondo blowout in 2010. More specifically:

South Pass 60 B: The investigation of the 1989 South Pass 60 B platform explosion that killed 7 workers noted the inconsistency in regulatory practices for the platform, regulated by DOI, and the pipeline regulated by DOT. Cutting into the 18-inch pipeline riser did not require an approved procedure, and the risks associated with hydrocarbon pockets in the undulating pipeline were not carefully assessed. Oversight by the pipeline operator was minimal, and the contractor began cutting into the riser without first determining its contents. A massive explosion occurred and 7 lives were lost.

Decades later, DOT and DOI pipeline regulations and oversight practices are still inconsistent. Note the confusion regarding the applicable regulations following the Huntington Beach pipeline spill in 2021. As posted following that spill:

One would hope that this major spill will lead to an independent review of the regulatory regime for offshore pipelines. Consideration should be given to designating a single regulator that is responsible and accountable for offshore pipeline safety (a joint authority approach might also merit consideration) and developing a single set of clear and consistent regulations.

Macondo: While the root causes of the Macondo blowout involved well planning and construction decisions regarding the casing point, cementing of the production casing, and well suspension procedure, the blowout would likely have been at least partially mitigated (and lives saved) if the gas detection system was fully operable, the emergency disconnect sequence was activated in a timely manner, flow was automatically diverted overboard, or engine overspeed devices functioned properly. Indeed, regulatory overlap led to underlap as summarized below:

Macondo contributing factorjurisdiction
flow not automatically diverted overboardDOI/USCG (also concerns about EPA discharge violations)
some gas detectors were inoperableDOI/USCG
generators did not automatically shutdown when gas was detectedUSCG/DOI
failure to activate emergency disconnect sequence in a timely manner (training deficiencies and chain-of-command complications)USCG/DOI
engine overspeed devices did not functionUSCG/DOI
hazardous area classification shortcomingsUSCG/DOI

MOUs and MOAs are seldom effective regulatory solutions as they are often unclear or inconclusive, and tend to be more about the interests of the regulator and protecting turf. They also do nothing to ensure a consistent commitment among the regulators. In the case of the US OCS program, BOEM-BSEE have a greater stake in the safety and environmental outcomes given that offshore energy is the reason for their existence. That is not the case for any of the other regulators identified in the graphic above.

The contributing factors listed in the Macondo table are not clearly or effectively addressed in the current MOAs for MODUs and floating production facilities.

Helicopter safety is another example of MOA inadequacy. Three offshore workers and a pilot died in December when a helicopter crashed onto the helideck of a GoM platform during takeoff. The most recent Coast Guard – BSEE MOA for fixed platforms added to helideck regulatory uncertainty by assigning decks and fuel handling to BSEE and railings and perimeter netting to the Coast Guard. This is the antithesis of holistic, systems-based regulation.



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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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There are a number of recent articles related to the Guyana Supreme Court ruling on Exxon’s financial assurance obligations. An Oil Now piece (quoted below) is the most informative. It seems that the Supreme Court decision is based on a provision of Exxon’s EPA permit and that EPA is siding with Exxon in this dispute.

The Guyana government and the Environmental Protection Agency (EPA) are set to appeal a recent Guyana Supreme Court ruling that determined that the EPA and ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL), breached the terms of the Liza 1 environmental permit. The permit was revised and granted to EEPGL last year for operations in the Stabroek Block, offshore Guyana.

Justice Sandil Kissoon granted several declarations, including that the EPA failed to enforce compliance by EEPGL of its Financial Assurance obligations to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement to indemnify and keep indemnified the EPA and the Government of Guyana against all environmental obligations of the Permit Holder (EEPGL) and Co-Venturers (Hess and CNOOC) within the Stabroek Block.

While acknowledging the court’s ruling, the Government of Guyana, as a major stakeholder, maintained in a statement that the Environmental Permit imposes no obligation on the Permit Holder to provide an unlimited Parent Company Guarantee Agreement and/or Affiliate Company Guarantee Agreement. The government believes that Justice Kissoon erred in his findings and that the ruling could have significant economic and other impacts on the public interest and national development.


Unlimited liability is a rather daunting and open-ended obligation that would trouble permittees in any industry.

In the US, the liability for oil spill cleanup costs is unlimited for offshore facilities, but there is a liability cap for the resulting damages. That cap is currently $167.8 million after a recent inflation adjustment. BP, of course, paid far more than that for damages associated with the Macondo blowout. BP’s costs, which amounted to an astounding $61.6 billion, were both voluntary and compulsory as a result of agreements and settlements. Keep in mind that the damage liability limit was only $75 million at the time. One can imagine what would have happened if a company with less financial strength or more inclination to fight had been responsible for the spill.

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Sharing this touching tribute to the 11 men who died on the Deepwater Horizon on April 20, 2010. These American heroes gave their lives exploring for energy to power our economy. The video is introduced by singer Trace Atkins, a former Gulf of Mexico rig worker. Please take a moment to watch.

Other Macondo posts.

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BOE continues to call for an International Offshore Safety Day each year on April 20th.

Proposal: Let’s make April 20th International Offshore Safety Day to honor those who have been killed or injured, to recognize the many workers who provide energy for our economies and way of life, and to encourage safety leadership by all offshore operators, contractors, and service companies.


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Lars Herbst analyzed GoM permitting and drilling activity from 2011 to 2021. His data and observations are summarized below.

  • Shelf (shallow water) exploratory drilling is at historic low levels with only a single exploration well drilled in both 2020 and 2021. That trend appears to have continued into 2022, as only one shelf exploration well (drilled by Contango) has been spudded YTD.
  • 2021 also saw a significant drop in deep water development wells.
  • Over the time period examined, deep water development is led by deepwater exploration. The same cannot be said for the development of shallow water leases where prospects are more mature and data are more available.
  • The only shelf well drilled in 2021 (Walter Oil and Gas) was in relatively deeper water (566 feet). That well was drilled with a deepwater semisubmersible (the Valaris 8503). This is the shallowest water depth for a GoM semisubmersible drilling operation in recent history. The rig had a modified DP/moored configuration with explosive disconnects on the mooring lines so the rig could move off location if needed during an emergency disconnect scenario. That mooring disconnect would also let the rig evade hurricanes without the need for anchor handling vessels. 
  • The 2012 spike in deepwater permit approvals is the result of the Macondo drilling moratorium backlog.
GOM OCS New Drilling Well Permits and Well Spuds 2011-2021
YearNew Shallow Water Drilling Well Permits ApprovedShallow Water Expl.; New Well SpudsShallow Water Dev.; New Well SpudsNew Deep Water Drilling; Well Permits ApprovedDeep Water Exp.;
New Well Spuds
Deep Water Dev.;
New Well Spuds
Note: Only includes new wells not sidetrack or bypass boreholes.

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Contrary to some post-Macondo commentary, well control has always been the highest priority of the US offshore regulatory program. This was the case regardless of the administration, party in power, responsible bureau, or politics of the day. The first specific well control requirements were in OCS Order No. 2 (Drilling) which dates back to 1958.

Continuous improvement must always be the objective; hence the many revisions to these regulations over the years.

BSEE’s recently proposed Well Control Rule includes updates that should be reviewed by all who are interested in drilling safety and well control regulations. I will be submitting comments to the docket and will post some of those comments on this blog. I hope others take the time to review the relatively brief BSEE proposal and submit comments

Industry comments are typically consolidated which limits the technical discussion and diversity of input. Consensus industry recommendations tend to be less rigorous from a safety perspective than some companies might submit independently. There are also far fewer operating companies than there were in the past. Most of you surely remember Texaco, Gulf, Getty, Amoco, Arco, Mobil, Unocal, and other important offshore operators that have merged into even larger corporations. This further limits the diversity of input.

Of course, the operating company is fully accountable for any safety incident at an OCS facility, including well control disasters like the 1969 Santa Barbara and 2020 Macondo blowouts. This should be ample incentive for comprehensive safety management programs. Unfortunately, risk management, culture, and human/organizational factors are complex, and good intentions don’t always lead to good results.

Although the operating company is legally accountable, the regulator and industry as a whole also bear some responsibility for safety performance. What is the purpose of the regulator if not to prevent safety and environmental incidents? Also, the industry can do better in terms of assessing data, updating standards, and publicly calling out poor performance.

On a more positive note, the offshore industry has collectively had some spectacular well control successes. Perhaps most impressive is this: Prior to 2010, 25,000 wells had been drilled in US Federal waters over the previous 25 years without a single well control fatality, an offshore safety record that was unprecedented in the U.S. and internationally. That number of offshore wells over a 25 year period is by itself a feat that will never again be achieved in any offshore region worldwide. The well control safety record makes that achievement extraordinary.

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[Disclosure: I assisted the legal team that defended Bob Kaluza. That said, I completely disagreed with the charges against him and Don Vidrine before my involvement in the case.]

Bob Kaluza (L) and Don Vidrine

Unsurprisingly, there was a lot of tough guy talk in Washington DC after the blowout:

“Our job is basically to keep the boot on the neck of British Petroleum” 

Ken Salazar, Secretary of the Interior

Weeks after the explosion, President Obama told NBC’s Matt Lauer he was trying to figure out “whose ass to kick.”

Texas Monthly

It was therefore predictable that the Department of Justice (DOJ) would choose to prosecute BP employees individually. There were BP managers who would have been good candidates, but instead DOJ chose to criminally prosecute the working stiffs – the two BP well site leaders on the rig. They were the lowest ranking BP employees associated with the incident. This was apparently acceptable to BP, since their plea agreement blamed Kaluza and Vidrine’s for their role in overseeing the negative pressure test (#blametheworker). Never mind that:

  • BP management was responsible for the well planning and shortcuts that were the root causes of the blowout (see the previous posts in this Macondo series).
  • the extent to which the negative pressure test was misconducted and misinterpreted was and remains a topic of dispute.
  • there were no regulations or standards requiring this test or explaining how it should be conducted, and BP’s internal guidance was woefully inadequate.
  • Bob Kaluza was a temporary replacement for the regular well site leader, had worked primarily onshore, and had never conducted or witnessed a negative pressure test.
  • Kaluza and Vidrine were themselves victims and were fortunate to have survived the incident.

Despite all of this, DOJ still chose to prosecute the two well site leaders. However, the weaknesses in the DOJ case became more obvious over time, and DOJ dropped all but a misdemeanor water pollution charge. Vidrine, who had health issues that were exacerbated by the case, accepted a plea deal. Kaluza was confident of his innocence and chose to make his case in court. His defense team was very strong, and the trial was essentially a walkover. After less than 2 hours of deliberation, the jury fully acquitted Bob Kaluza (2/25/2016). Sadly, Don Vidrine passed away the following year.

LInked is a very good Texas Monthly article about the case.

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Contrary to national and regional planning documents and the associated response exercises, Energy Secretary Chu, whose department had no jurisdiction over offshore oil and gas operations or the emergency response, assumed the leadership role on the well control aspects of the blowout. Secretary Chu is a Nobel prize winning physicist and had the President’s support to get involved with the response. Although he was not a drilling engineer or geologist, he soon became the dominant figure on well control decisions.

BP’s top kill operation (see diagram above) was intended to overcome and halt the flow of oil by pumping heavy mud into the well bore. Per an excellent paper by Dr. Mayank Tyagi and colleagues at LSU  (Analysis of Well Containment and Control Attempts in the Aftermath of the Deepwater Blowout in MC252), the operation was not successful because the pumping rate and mud weight did not generate sufficient pressure. 

Consistent with Dr. Tyagi’s analysis, the well would likely have been killed on 5/28/2010, shortening the blowout by 48 days, had Secretary Chu not stopped the top kill operation over the objections of BP engineers. While it was reasonable for the Secretary and his team to be concerned about possible casing leaks and the fracturing of subsurface formations, the subsequent (7/15/2010) closure of the capping stack demonstrated that the well had sufficient integrity to support the top kill operation. Questions about the aborted top kill effort and how that decision was made are therefore important and merit careful review. Did the Macondo well flow unnecessarily into the Gulf for an additional 48 days (5/28-7/15)? Did the National Incident Command facilitate or delay source control?

Keep in mind that the National Incident Command almost made a similar mistake in July. Even after the capping stack successfully shut-in the well on 7/15, Incident Commander Thad Allen (USCG) continued to call the closure of the capping stack a temporary test and threatened to require BP to resume flow from the well. We thus had a bizarre situation where the Federal Incident Commander was threatening to require the resumption of a blowout. Fortunately, informed input from experienced engineers prevailed. The well remained shut-in and the static well-kill operation was successful.

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