Archive for the ‘Offshore Drilling’ Category

28 Sep

Arctic Drilling: What’s it Worth?

Posted by John Renehan in Gas and Oil Leases, Offshore Drilling, Oil and Gas Sector, The Arctic.

Beaufort Sea, Alaska, one of Shell’s drill sites. Photo by NASA/Kathryn Hansen, some rights reserved.

Last week, Shell called off its plans to drill in the Arctic until next summer after part of its spill-containment system was damaged. Earlier, encroaching sea ice forced the company to abandon its drill site in the Chukchi Sea off Alaska just a day after it started drilling. Now that Shell has spent $4.5 billion on its Arctic drilling sites since 2005, we might ask, is it worth the money?

Geologists from the United States Geological Service sparked a discussion on the costs of drilling in the Arctic this week, including a succinct piece in Grist. Their research suggests that the amount of oil that can be pumped out of accessible fields in the Arctic is significantly lower than previously thought, requiring huge exploration budgets to even access the oil (this considering Arctic oil in Greenland and Russia as well). They estimate that prices of $100 to $300 a barrel would be necessary for Arctic drilling to be economically feasible.

Right now, we know little about the average cost of producing oil in the Arctic besides that it is high. It is worth noting that in the 1970s, Canadian companies ended a decade of exploration projects by sealing off drilling sites because commercial production was too expensive. We do know, however, that in the oil boom in Mozambique, French Guiana, and Angola, marginal costs are less than $70 a barrel, and that plans for drilling there go through the 2020s.

Where does that leave us? Well, with 7,000 blocks of drilling leases over 38 million acres of the Gulf of Mexico up for auction in 2013. Sure seems like there are easier places to get your oil than the Beaufort Sea.

15 Jun

Offshore Drilling: Alaska, and More.

Posted by John Renehan in Environmental Enforcement, EPA, Gas and Oil Leases, Offshore Drilling, Oil and Gas Sector, The Arctic.

Photo by Jim Bain. Some rights reserved.

The Interior Department is very publicly scrutinizing every detail of Shell’s plan to begin drilling in the fragile Arctic this summer. Top officials are personally reviewing equipment bound for the drilling sites in Alaska and held a press conference Thursday to tout DOI’s robust testing.

The past year has seen a series of approvals for Shell’s plans. In March, DOI approved Shell’s oil spill response plans, following the EPA’s announcement in September that it had granted air pollution permits to ships associated with the drilling sites.

Last May, the Obama administration created an inter-agency team to streamline the Alaskan permitting process to help speed up domestic development and responding to political pressure over high gasoline prices as well as what Republicans have called bureaucratic permitting delays.

But the Interior Department, increasing its safety standards and scrutiny of drilling plans, wants to ensure it is seen as taking every precaution in the wake of last year’s BP spill in the Gulf of Mexico. Interior’s Bureau of Safety and Environmental Enforcement director James Watson called his agency’s standards “the most rigorous safety and oversight program ever.”

Meanwhile, despite the delays to Shell’s Alaska plan, Republican South Carolina senator Lindsey Graham introduced a bill that would allow his state to open parts of its coast, to offshore drilling 10 to 100 miles off the coast – after which it would petition the federal government for approval.

Further abroad, the questions and politics of offshore drilling are alive and well in France – Paris on Wednesday suspended  exploratory permits for offshore oil in its district of Guyana, in northeastern South America. The French environment minister cited concerns for the local marine environment and said the permits will be suspended until the mining code is reviewed. Shell and other oil companies have found significant oil reservoirs in the region, which they believe mirror the oil reserves off the coast of western Africa.

10 May

EXTRA! EXTRA! Knowledge Mosaic Continues to Fill Out Its Energy & Environmental Materials!

Posted by Hester Serebrin in Knowledge Mosaic, Offshore Drilling.

Photo by DRB62. Some rights reserved.

It might not be the most headline-grabbing environmental news, but a recent memo from Fulbright & Jaworski announced that a 2010 BSEE Notice to Lessees and Operators (NTL No. 2010-N05) has been vacated as the result of an appeal to the Interior Board of Land Appeals by the Independent Petroleum Association of America (IPAA).

The appeal challenged “the NTL’s requirement that the Chief Executive Officers of federal offshore operators had to certify, on short notice and under threat of administrative sanction and criminal penalty, that their companies were in compliance with offshore regulations and had completed certain reviews of its operations.”

After a bit of back and forth between the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) – the earlier incarnation of Bureau of Safety and Environmental Enforcement (BSEE) and the Bureau of Ocean Energy Management (BOEM) – and the IPAA, BOEMRE complied with the IPAA request by vacating the NTL.

What does this all have to do with Knowledge Mosaic?

Well, late last week we fleshed out our agency materials by adding all current BSEE Notices to Lessees and Operators to our Laws, Rules, and Agency Materials search page. A search page, might I add, that allows you to not only search, but save, share and alert.

But it’s not all BSEE Notices to Lessees and Operators. We’ve now got press releases, speeches & testimony, guidance, and more from BSEE, BOEM, and even the now-defunct BOEMRE. We’ve also rounded out our Department of Energy and FERC offerings.

Don’t just take my word for it – check us out now!

30 Mar

Shell a Step Closer to Arctic Drilling

Posted by John Renehan in DOI, EPA, Fish & Wildlife Service, Gas and Oil Leases, Offshore Drilling, Oil and Gas Sector.

Beaufort Sea ice and Brooks Mountain Range. Photo by U.S. Fish and Wildlife Service, some rights reserved.

On Wednesday, the Department of the Interior announced approval of Shell’s oil spill response plan for its Arctic drilling plans, another milestone in the oil giant’s years-long efforts to drill in the Arctic.

For now, Shell has its eyes on two sites for Arctic drilling. Off the north coast of Alaska lie the shallow waters of the Beaufort Sea, and sitting atop the Bering Strait is the Chukchi Sea, separating northwest Alaska from Russia and its East Siberian Sea.

The Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) has approved Shell’s oil spill response plans for the two drilling sites, following the EPA’s announcement in September that it had granted air pollution permits to Shell’s drill ships, supporting icebreakers, and oil-spill response vessels for both sites.

For its part, the DOI has increased safety standards and scrutiny of drilling plans in the wake of last year’s BP spill in the Gulf of Mexico. BSEE director James Watson stresses that they have “conducted an exhaustive review of Shell’s response plan,” and that the Bureau will follow up with exercises, reviews, and inspections, according to the Hill’s post on the approval.

In May, the Obama administration created an inter-agency team to streamline the Alaskan permitting process as part of an effort to speed up domestic development, responding to political pressure over high gasoline prices as well as what Republicans have decried as undue bureaucratic permitting delays. The past year has seen a string of approvals fall into place for Shell.

Still, a long list of federal approvals await before wells can be drilled. Each well must receive an individual permit from the DOI, and the U.S. Fish & Wildlife Service and National Marine Fisheries Service must sign off on the plans.

Shell hopes to begin drilling in both regions this summer.

29 Mar

All of the Above? NRDC Wants None of It

Posted by Hester Serebrin in BOEMRE, DOI, Endangered Species Act, Environmental Impact Statements, Natural Gas, NRDC, Oceans, Offshore Drilling, Oil and Gas Sector.

Photo by NOAA's National Ocean Service. Some rights reserved.

Quick on the heels of an upbeat Department of the Interior Press Release came an equal-and-opposite reaction from the National Resources Defense Council.

The commentary focused on a recently released Programmatic Environmental Impact Statement from DOI’s Bureau of Ocean Energy Management that evaluates potential significant environmental effects of multiple geological and geophysical “G&G” activities in support of oil and gas exploration and development, renewable energy, and marine minerals in the Mid- and South Atlantic. All part of Obama’s all-of-the-above energy strategy, according to the DOI, which called these steps “critical,” and the PEIS “a milestone […] consistent with the Proposed OCS Oil and Gas Leasing Program for 2012-2017.”

But the NRDC sees it differently. The same G&G processes that might be used to “understand the extent, properties and geography of hydrocarbon resources, as well as the potential to site renewable energy structures and locate marine mineral resources like sand and gravel” – such as seismic air guns – are apparently “equivalent to blasting dynamite in a neighborhood every 10-12 seconds for weeks or months on end,” according to the NRDC, and “can cause hearing damage and death to marine mammals like endangered North Atlantic right whales that calve off the coasts of Georgia and Florida.”

Feel strongly one way or the other? The public may submit written comments by email to ggeis@boem.gov.

17 Jan

Injured On the Job, Offshore

Posted by Hester Serebrin in Death & Disability, Litigation, Offshore Drilling.

Photo by Patrick Mackie. Some rights reserved.

A Mayer Brown Legal Update published late last week discussed the January 11, 2012, Supreme Court Opinion in Pacific Operators Offshore, LLP v. Valladolid, which held that “an injury is covered by the OCSLA [Outer Continental Shelf Lands Act, 43 U.S.C. 1331 – 1356] when there is a ‘substantial nexus’ between the injury and extractive operations on the Outer Continental Shelf (OCS).”

Juan Valladolid, an employee of Pacific Operators Offshore, LLP, was killed in a forklift accident onshore, though he spent “99%” of his time working offshore on drilling platforms off the coast of California. His widow sought benefits under the Longshore and Harbor Workers’ Compensation Act (LHWCA, 33 U.S.C. §901 et seq.), pursuant to the OCSLA, but because LHWCA only covers injuries “occurring as the result of operations conducted on the [OCS],” an Administrative Law Judge dismissed her claim – Valladolid was onshore when the accident occurred, after all.

The Department of Labor’s Benefits Review Board affirmed the decision, but the Ninth Circuit reversed it, concluding that a claimant seeking benefits under the OCSLA “must es­tablish a substantial nexus between the injury and extractive opera­tions on the shelf.”

The Supreme Court held that OCSLA extends coverage to an employee who can establish a substantial nexus between his injury and his employer’s extractive operations on the OCS.

On this “substantial-nexus” test, the Supreme Court says:

The test may not be the easiest to administer, but Administrative Law Judges and courts should be able to determine if an injured employee has estab­lished the required significant causal link. Whether an employee in­jured while performing an off-OCS task qualifies will depend on the circumstances of each case. It was thus proper for the Ninth Circuit to remand this case for the Benefits Review Board to apply the “sub­stantial-nexus” test.

28 Jul

BOEMRE Recusals Show Substantial Agency-Industry Coziness

Posted by Hester Serebrin in BOEMRE, Conflicts of Interest, Ethics, Offshore Drilling, Oil and Gas Sector.

Photo by currybet. Some rights reserved.

Some diligent FOIA handiwork by the Associated Press has dug up quantitative confirmation of the ties between the Bureau of Ocean Energy Management, Enforcement and Regulation (BOEMRE) – the federal agency that regulates offshore energy development – and the companies doing the developing.

The AP obtained forms submitted by employees of BOEMRE requesting recusal from duty because of conflicts of interest or previous employment. Under policy instituted in August of last year, employees of BOEMRE are required to request such recusal from “any inspection or other official duty that relates to a designated operator, contract operator, or drilling contractor who employs a member of the district employee’s family or personal friend of the District employee[.]” Additionally, BOEMRE employees are not allowed to “perform any official duties” involving a former employer “who is a designated operator, contract operator, or drilling contractor” within two years of their last employment by that employer.

And who might these operators or contractors be, to whom BOEMRE has been romantically linked? The AP is reporting major names like Chevron, Shell and BP. Big surprise.

Also unsurprising? There’s nothing related to this story to be found on the BOEMRE website – not in their Newsroom, not on their Ethics page, and not on their FOIA page. But perhaps the sudden spotlight could prompt more transparency and stricter ethics rules going forward – a recent offshore drilling safety bill (currently stalled in the Senate) includes proposed amendments to the Outer Continental Shelf Lands Act (43 U.S.C. 1355) with explicit “Conflicts of Interest” provisions.

16 May

Last Week in Environmental Contingencies and Proceedings Disclosure – Oil and Gas Extraction Industry Edition!

Posted by Hester Serebrin in Environmental Disclosure, Environmental Enforcement, Hydraulic Fracturing, Natural Gas, Offshore Drilling, Onshore Drilling.

As we’ve posted in the past, public companies must generally disclose material legal proceedings in their annual and quarterly reports to the SEC. Today we’ve pulled some disclosures of environmental liabilities from companies in the Oil and Gas Extraction Industry. We did this by limiting our search on the knowledgemosaic SEC filings page to the following Standard Industrial Classification Codes: 1311, 1321, 1381, 1382, and 1389.

Given the recent hubbub surrounding methane-contaminated drinking water near fracking sites, we think you’ll find the disclosure from Chesapeake Energy Corp especially interesting.

  • TETRA TECHNOLOGIES INC | Form 10-Q | 5/10/2011

One of our subsidiaries, TETRA Micronutrients, Inc. (TMI), previously owned and operated a production facility located in Fairbury, Nebraska. TMI is subject to an Administrative Order on Consent issued to American Microtrace, Inc. (n/k/a/ TETRA Micronutrients, Inc.) in the proceeding styled In the Matter of American Microtrace Corporation, EPA I.D. No. NED00610550, Respondent, Docket No. VII-98-H-0016, dated September 25, 1998 (the Consent Order), with regard to the Fairbury facility. TMI is liable for future remediation costs and ongoing environmental monitoring at the Fairbury facility under the Consent Order; however, the current owner of the Fairbury facility is responsible for costs associated with the closure of that facility.

In August of 2009, the Environmental Protection Agency (EPA), pursuant to Sections 308 and 311 of the Clean Water Act (CWA), served a request for information with regard to a release of zinc bromide that occurred from one of our transport barges on the Mississippi River on March 11, 2009. We timely filed a response to that request for information in August 2009. In January 2010, the EPA issued a Notice of Violation and Opportunity to Show Cause related to the spill. We met with the EPA in April 2010 to discuss potential violations and penalties. It has been agreed that no injunctive relief will be required. We have finalized a joint stipulation of settlement with the EPA, whereby we are responsible for a penalty of $487,000, which was submitted to the Department of Justice and the U.S. District Court for the Western District of Tennessee. The settlement was entered into the record on April 28, 2011. We expect to pay this penalty amount during the second quarter of 2011 and expect the full amount to be covered by insurance.

On June 22, 2007, Riverbend Gas Gathering, LLC (“Riverbend” [a Gasco subsidiary]) voluntarily notified the United States Environmental Protection Agency (“EPA”) Region 8 office in Denver, Colorado, of its discovery that Riverbend apparently had not obtained certain air permits or complied with certain air pollution regulatory programs applicable to its operations at the Riverbend Compressor Station in Uintah County, Utah. Subsequent to this notice and negotiations on the matter, Riverbend and the EPA entered into a consent decree that was lodged in the United States District Court of the District of Utah on December 30, 2010. The consent decree resolves the apparent violations, requires Gasco to pay a civil penalty of $350,000, which was paid on May 5, 2011, specifies the appropriate corrective action, provides a schedule for Riverbend to achieve such corrective action, and includes a covenant not to sue that will authorize Riverbend to continue its operations, including certain capacity expansions, while the specified corrective action is being implemented. The consent decree was approved and entered by the reviewing court on April 6, 2011.

Under the Purchase Agreement dated January 29, 2010 by which the Company sold its gathering system and its evaporative facilities located in Uintah County, Utah to Monarch, the Company retained the obligation to pay any civil penalty assessed and the capital cost of the equipment required to be installed pursuant to the consent decree, and also agreed to reimburse Monarch for certain miscellaneous expenses incurred to finalize the consent decree and obtain certain changes to the Riverbend Compressor Station’s air permits that are required by the consent decree. Monarch is also a party to the consent decree and will be responsible for implementing most of the consent decree requirements at the Riverbend Compressor Station other than payment of the civil penalty, which has already taken place, and the installation of capital equipment. The Company believes that all necessary pollution control and other equipment required by the consent decree is already installed at the site or accounted for in our capital budget, and that the expenses required by the consent decree will not materially affect the Company’s financial position or liquidity.

  • CHESAPEAKE ENERGY CORP | Form 10-Q | 5/10/2011

There are pending against us enforcement actions initiated in the 2010 fourth quarter and 2011 first quarter by the Pennsylvania Department of Environmental Protection (DEP) related to alleged methane migration into the groundwater and residential water wells and by the U.S. Environmental Protection Agency (EPA) related to our compliance with Clean Water Act permitting requirements in West Virginia. We have responded to all pending orders and are actively cooperating with the relevant agencies. We believe that each of these actions will result in monetary sanctions exceeding $100,000. We are estimating a fine of approximately $1 million in the Pennsylvania action but are unable to estimate the amount of any fines that might be imposed by the EPA in the West Virginia action.

Following a well control incident in Bradford County, Pennsylvania on April 20, 2011, Chesapeake voluntarily suspended well completion operations in the state and has responded to a notice of violation issued by the Pennsylvania DEP. We have provided information regarding our investigation of the incident and the potential environmental impact of the event. We believe our investigation has identified the origin of the well control incident as occurring within the wellhead, and we have conducted wellhead inspections on other wells in the completion phase in the Marcellus Shale and implemented responsive measures. We are working closely with the Pennsylvania DEP to obtain its concurrence that we may resume completion operations in the state as soon as possible. We are unable to predict at this time the amount of any fines or penalties that will result from this incident.

In June 2009, Alagasco received a General Notice Letter from the United States Environmental Protection Agency (EPA) identifying Alagasco as a responsible party for a former manufactured gas plant (MGP) site located in Huntsville, Alabama, and inviting Alagasco to enter an Administrative Settlement Agreement and Order on Consent to perform a removal action at that site. The Huntsville MGP, along with the Huntsville gas distribution system, was sold by Alagasco to the City of Huntsville in 1949 with such sale being approved by the APSC. While Alagasco no longer owns the Huntsville site, the Company and the current site owner have entered into a Consent Order, developed an action plan for the site and are in the process of executing the plan. Based on information available at this time, Alagasco estimates that it may incur costs associated with the site of approximately $4.4 million, including costs previously incurred. During the three months ended March 31, 2011, the Company incurred costs of $1 million associated with the site. As of March 31, 2011, the Company has accrued a contingent liability of $2.5 million in addition to the costs previously incurred. The estimate assumes an action plan for excavation of affected soil and sediment only. If it is determined that a greater scope of work is appropriate, then actual costs  will likely exceed the estimate. Alagasco expects to recover such costs through future rates and has recorded a corresponding amount to its Enhanced Stability Reserve regulatory asset account.

23 Feb

BP Oil Spill Continues to Impact Gulf Residents

Posted by Julia Wentzel in BP, Clean Water Act, Deepwater Horizon, Dolphins, Offshore Drilling, Oil Spills.

Photo by Mark O'Neil. Some rights reserved.

Though much of the world seems to have moved on from the 2010 Deepwater Horizon oil spill, the struggle continues along the Gulf of Mexico. Last week, the Gulf Coast Claims Facility (GCCF) announced its final rules governing payment options and final payment methodology after receiving more than 1,440 comments from individuals and businesses. These comments range from pleas to move forward quickly to a 24-page comment from BP PLC itself, saying that Kenneth Feinberg’s allocation of the $20 billion damages fund has been overly generous.

In a recent press release, the Gulf Coast Restoration and Protection Foundation announced that qualified workers will have a second opportunity to apply for financial assistance this spring, stating that “up to 9,000 people might qualify for awards ranging from $3,000-30,000.”

There is another mammalian population that seems to be suffering from the fallout of the spill that cannot even apply for restitution. The Institute for Marine Mammal Studies (IMMS) announced this week that dead baby dolphins have been washing ashore at ten times the normal rate. Some 26 dolphins, many aborted before they reached maturity, have been found along the Mississippi and Alabama coastlines in recent weeks.

Though experts have not officially linked the spike in death rates to the oil spill, this is the first birthing season for dolphins since the oil spill last year. As institute director Moby Solangi told reporters, “this is more than just a coincidence.”

Mortality rates in the Gulf Coast dolphin population tripled last year; with a gestation period of 11 to 12 months, the baby dolphins now being found were conceived at least two months before the Deepwater Horizon exploded.

Meanwhile, in light of the continued unrest in Libya (the world’s 17th-largest oil producer) and the surrounding area, key House Republicans are urging the Obama Administration to move forward with the issuing of offshore oil-and-gas drilling permits. BP has announced this week that it will pay $7.2 billion for a stake in India’s rapidly expanding oil industry; the historic partnership with Reliance Industries Limited is slated to combine Reliance’s project management expertise “with BP’s world-class deepwater  exploration and development capabilities.”

13 Sep

Oil industry feeling pinched all over

Posted by Hester Serebrin in Offshore Drilling.

Proposed tax break reductions and new offshore safety rules are making players in the oil industry look like job-saving martyrs in the news this week.

Take away oil and gas tax deductions, and you’ll be taking away 154,000 U.S. jobs, says a recent report commissioned by the non-profit but conservatively-connected American Energy Alliance. Joseph Mason, an economist and the author of the report, estimates that we would lose $68 billion in wages nationwide under proposed energy tax changes President Obama has promoted. Bloomberg reported last week that White House officials said these scaled back tax breaks could help pay for $50 billion in improvements to the nation’s roads, railroads, and runways.

Shallow water drillers are also arguing that jobs at stake – theirs – because of increased safety measures implemented after the BP oil spill.  The Shallow Water Energy Security Coalition is up in arms about a slowdown in project approval by the Interior Department. The slowdown is a natural result of the extra time it takes “to submit and verify the additional required information,” said Michael Bromwich, director of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) in a recent statement. However, shallow water drillers maintain that shallow water operations are safe and use well-proven techniques, and shouldn’t be subject to the same regulatory burdens as deep water operations. Bromwich isn’t budging: “We will not approve applications until and unless they fully comply with the new requirements. That will not make everyone happy, but it is the right way to proceed.”

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