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Deepwater Horizon ripples help sink US Arctic drilling: Regulation and Environment

Deepwater Horizon ripples help sink US Arctic drilling: Regulation and Environment thumbnail

Investigators into the 2010 Deepwater Horizon disaster in the US Gulf of Mexico often lament the failure of Congress to pass any meaningful safety-related measures informed by the lessons learned from the tragedy.

But make no mistake — the ripples of Deepwater Horizon have been felt by the industry and can be clearly seen in the decision of Shell to abandon its offshore Alaska exploration as well as the canceling of Arctic lease sales for the remainder of the current US five-year leasing plan.

The Macondo Effect, if you will, can also be seen in more subtle ways, as a close reading of the recent 300-plus page final consent decree between BP and federal and state governments reveals.

Shell’s decision to indefinitely suspend exploration offshore Alaska may have been sparked mainly by the disappointing results from the one well spud in the Chukchi Sea. But the company made it clear that regulatory uncertainty as well as the safety requirements that forced it to spend millions of dollars and launch a flotilla of ships to drill only one well were also to blame.

Those requirements were a direct result of the ordeal that BP and US responders had bringing the gushing blown-out Macondo well under control in 2010. From April to July, BP experimented with untried technologies, inventing on the spot (with the enormous assistance of government scientists) containment domes, capping stacks and other equipment before finally halting the flow.

That experience informed the decision by US regulators to require Shell to have a containment dome on site and to have a backup rig available to drill a relief well in the case of a blowout in the harsh Arctic seas.

Shell, to its credit, complied with all that was asked. But as a result, it became economically impossible to carry out a robust exploration program offshore Alaska. That reality led the Interior Department to cancel the remaining lease sales.

Whether future lease sales in the Chukchi and Beaufort Seas remain in the 2017-2022 leasing plan remains to be seen. But if they are removed, it will be easy to connect the dots between the April 20, 2010 Macondo blowout and the reluctance to risk a similar fate in Arctic waters.

There are some interesting bits in the consent decree worth noting.

BP will pay $82.6 million to the US, which consists mainly of the 75% share of royalties owed by BP and its partner MOEX on the 3.19 million barrels of crude that leaked from Macondo into the Gulf. The US is still litigating its claim that the third partner, Anadarko, owes royalties on the remaining 25%.

The decree mentions the previous criminal plea agreement from 2013 that requires BP to initiate, in conjunction with industry and government, at least four pilot projects “to evaluate technology enhancements intended to improve operational safety with respect to deep water drilling.” The results are to be shared with others “on commercially reasonable terms.” No word yet from BP on whether these projects have been launched.

Is it RIP for the RFS in the United States?

The never-ending debate over the US Renewable Fuels Standard flared up again recently, with the announcement that the Environmental Protection Agency’s own auditor will examine the issue.
One of the main questions that the EPA’s inspector general will examine is the lifecycle impacts of the biofuels mandate. The details of the current probe were well laid out in a story written by Platts reporter Herman Wang in the October 20 Oilgram News.

The narrow issue is whether the EPA has full considered research on the carbon intensity of biofuel sources, including corn ethanol. The larger issue is whether the RFS has acted to boost the interests of the corn lobby at the expense of advanced biofuels.

The debate goes back to the earliest efforts by the EPA to implement the Congressional biofuels blending mandate.

Early on, the EPA proposed using the concept of “Indirect Land Use Change,” which considers the impact of growing demand for corn ethanol on old growth forests in the Amazon and other places.
This approach actually assigns to corn ethanol the consequences of land use decisions abroad. In 2009, the EPA threatened to classify ethanol as having a worse greenhouse gas profile than gasoline because of the ILUC calculations.

The EPA backed off that position and now the agency’s inspector general is going to examine it fresh. Stay tuned.

platts



17 Comments on "Deepwater Horizon ripples help sink US Arctic drilling: Regulation and Environment"

  1. makati1 on Mon, 26th Oct 2015 7:48 pm 

    A lot of excuses for the fact that Arctic oil is too expensive (not profitable) and always will be for most oil companies.

  2. rockman on Mon, 26th Oct 2015 8:19 pm 

    I know exactly what mistakes were made that led to the BP blowout. Maybe I haven’t seen it but I’ve yet to see any new regs that would have prevented it. What we see in this piece are regs to deal with a blowout after it happens…not to prevent it.

    OTOH I suspect Shell et al understand BP’s mistake and would never follow its flawed proceedure.

  3. ghung on Mon, 26th Oct 2015 8:54 pm 

    Nothing like a major f&ck-up to kick enforcement and oversight into high gear, eh? Most engineers have had to deal with this sort of thing at one time or another. Somebody screws up and everyone else is guilty until they prove themselves innocent… $$$$

  4. apneaman on Mon, 26th Oct 2015 9:27 pm 

    I have no doubt Shell understands BP’s mistakes. I bet BP understood but did it anyway. Obviously the majors know more than we do.

    Exxon Knew about Climate Change Almost 40 Years Ago
    A new investigation shows the oil company understood the science before it became a public issue and spent millions to promote misinformation

    By Shannon Hall | October 26, 2015

    http://www.scientificamerican.com/article/exxon-knew-about-climate-change-almost-40-years-ago/

  5. rockman on Mon, 26th Oct 2015 10:00 pm 

    Apeman – If you never saw the transcript there was a very heated argument between two supervisors on the rig before the blowout. The concerned one lost the argument. But his last comment on the subject in front of witnesses: “I guess that’s why we have BOP”.

    That was not an ad lib: been made by many others including the Rockman once. It’s essentially saying that if it goes bad I’m going to help crucify you. I saw that statement come close to causing a fistfight once. In the Rockman’s case it got his consulting contract cancelled and was “run off”. Which was OK by him: didn’t want to stay on a job that might kill him.

  6. apneaman on Mon, 26th Oct 2015 10:22 pm 

    I think BP had cultivated a culture of cutting corners leading up to the big blow out. I have personally been involved in cutting corners/loose interpretations of the rules; usually when the pressure is on to meet a date. I also have some formal training in accident investigation and know that over looking a series of little things often leads to big bad things eventually. The number of near misses is staggering. It’s the experienced guys who have been getting away with practicing bad habits for a while, intentionally or not, that are the most dangerous. I’m most familiar with the men on tools bad practices, but it happens at every level.

  7. Bloomer on Mon, 26th Oct 2015 10:59 pm 

    Unfortunately, there are always those who are willing to roll the dice and take risk if it means saving a buck.

    Capitalism will create its’ own undoing and will take the rest of us down with it.

  8. rockman on Tue, 27th Oct 2015 12:07 am 

    Apeman – Something like cutting corners by BP. Too much engineering to explain but I estimate they were trying to about $5 million on a well that ultimately would cost at least $150 million. And they lost tens of $billions on that foolish bet.

    But that isn’t the worst part. Even their idiotic effort to save money could have failed as it did but the well would not have blown out and burned had the drill crew followed basic safety proceedures. They could have controlled the well kick and not have spilled a drop of oil had the hands been pay attention. Attention to something something that was a standard proceedure on every well I ever drilled.

  9. apneaman on Tue, 27th Oct 2015 12:38 am 

    Top down. When leaders blatantly lie and cheat, suffer no consequences and are rewarded for it, the rest are soon to follow – lying, cheating, resentment, no trust and all around shitty attitudes. People who once cared stop caring. Like what we see with the greater society. Once the rule of law becomes a corrupt farce, so does the society. Historically, it is always one of the major factors in dying civilizations.

    How BP’s Browne Created Culture of Risk, Incompetence

    http://www.bloomberg.com/news/articles/2011-02-15/swashbuckling-bp-was-ruthless-operator-even-before-the-blowup-interview

  10. joe on Tue, 27th Oct 2015 6:03 am 

    The example they set was that they proved just how risky deep water drilling is. It’s significant because in less advanced nations it’s likely there won’t be any enforceable laws. Imagine deep water drilling off the coast of say Myanmar etc. It would cause ecological disaster as important as global warming. The BP oil spill for me, proves deep water drilling is dangerous and not relevant in the requirements for future energy sources. It’s like cold fusion experiments, it looks good, but it’s just a stupid idea to think it can actually work.

  11. rockman on Tue, 27th Oct 2015 7:36 am 

    Joe – “The example they set was that they proved just how risky deep water drilling is.” It’s been a while since I’ve explained the details of Macondo so here I go again: Of course there’s always risk with major mechanical operations. And not that the repercussion weren’t worse being offshore but the accident itself had nothing to do with being a “risky” Deep Water well or even an offshore well. It would have blown out if it were sitting in a corn field in Nebraska. It wasn’t a risky well at all compared to many DW and shelf wells drilled. The reservoir pressure was just around 12,000 psi. I’ve drilled many wells that had bottom hole pressures in the 16k to 20k psi range. And it didn’t blow out just because it had a bad cement job. There are countless bad cement jobs every year including DW wells. They are so common each rig carries the equipment to fix it. I’ve had to redo bad cement jobs on the same well up to half a dozen times. I was on a shelf well where they tried the fix an unbelievably 23 times. And it still didn’t work so they had to abandon a $48 million hole.

    And even worse: this was a well with casing already run to bottom. Almost every well that has ever blown out occurred while drilling and not in this phase. The typical blow out scenario: the drilling mud weight is set at a level that would be greater than the reservoir pressure. So if the bottom hole pressure was at 12,000 psi a mud weight that exerted a BHP of 13,000+ psi would be used to drill it. IOW a 12,000 psi reservoir can’t flow into a hole that has 13,000 psi pressure in it. Very simple physics.

    This is what BP did that I’ve never personally seen in my 40 years: they were suspending the well so they could come back later and complete it. And while the mud weight was more than sufficient to hold the reservoir back when they drilled it: after casing it they displaced some of the drill mud with sea water. This lowered the BHP to significantly less than the reservoir pressure. This allowed the reservoir to flow up the casing, reach the rig floor and explode. We call this putting a well in an “unbalanced condition”. I’ve done this many times on a cased hole when I was perforating a reservoir: it’s done so the reservoir will instantly flow to the surface. Yes…intentionally. But you expect it to happen and are prepared to run the oil/NG to the production system. But I’ve never seen a well intentionally put into an unbalanced condition when reservoir flow wasn’t expected. This is why the cement failure, which as I said isn’t an uncommon event at all, gathered so much attention. The cement isn’t pumped to hold the casing in place: once run to bottom it’s almost impossible to move. The purpose of the cement is to seal off the annulus…the portion of the hole between the casing and the original open hole. This would have prevented the well from blowing out had it not failed. They did run a test on the rig to determine if the cement had set properly and sealed off the reservoir.

    And that was the basis for the argument on the rig: some thought it was a good test and some thought it wasn’t a valid test. The “good test” argument won but that’s where the “I guess that’s why we have BOP’s” comment came from. Now here’s the human failure part that I will never fully understand. The standard procedure for determining if a well is “kicking” (trying to blow out) is to “check for flow”. When drilling you are pumping the mud down the inside of the drill pipe so it naturally u-tubes and flows back to the surface outside the drill pipe. Checking for flow: stop pumping the mud and it should stop coming out of the well. If it continues to flow out then obviously something down hole if pushing it out. And that would be a “kick”…the hint that the well is trying to blowout.

    And what I’ll never understand: despite being unbalanced and having concerns about the cement job no one was checking for flow when the pumps had been turned off. There are several hands specifically tasked to monitor for flow so why weren’t they? Again: dumb ass human nature. The rig was shutting down getting ready to move off location. I’ve been in that position before: all the hands are trying to organize themselves to get off the rig as fast as possible. Particularly if you’re hoping to get a seat on the next chopper out. But one person did have a hint that the well was flowing/kicking: a boat captain tied to the rig. They were transferring drilling mud to his tanks. He radioed to the rig to stop offloading mud because his tanks were full. The rig response: you’re wrong because we still have a lot of mud left up here. And the reason for that was the well was unloading all the mud and sea water in the hole: the well was flowing just as every well I ever perforated underbalanced was supposed to. And it ain’t rocket science to “check for flow”: you look at the return pipe and see if mud coming out when it shouldn’t since the pumps were off. A 10 yo child could have been given that job. And once he alerted you the well was kicking you would have shut the well head in. And that would have prevented the blowout, explosion massive oil spill and death. But no one was checking flow. How common is it to shut a well in when a kick/ flow is detected: probably happens hundreds of times a year around the world. It does get your attention but seldom is it life threatening. You just bleed off the pressure and “kill the well” by pumping heavier mud into it.

    I take safety very seriously. It’s one of my primary responsibilities. I’ve seen dead bodies transported away from a rig more than once. It’s easy to take such accident personally even if it didn’t put me at risk. In the case of Macondo it was even a bit more personal: one of the hands killed has the nephew of a friend. A friend who had to help his sister cope with her son’s death while he was still grieving over his adult son’s death in a car accident two weeks earlier. A very sad time to say the least.

    And no: I stopped going to oil patch memorials and funerals long ago. Can’t do anything at that point. But you can try real hard to make sure it doesn’t happen again on your watch.

    What happened at Macondo wasn’t an accident waiting to happen. It was just carelessness stacked on top of careless. I have no doubt the decision to go unbalanced came from the corporate level. But mismanagement on the rig was a major factor. IOW human nature. And it’s very difficult to regulate that.

    And though I’ve looked for it many times I’ve never seen any indication that the feds still don’t allow an offshore well to be left in the same unbalanced condition that led to the Macondo blowout. As I said earlier all the changes I’ve seen advertised address what happens after a well blows out.

  12. paulo1 on Tue, 27th Oct 2015 8:34 am 

    Excellent explanation, Rockman. Thanks.

    One thing I have to say about deepwater, and this coming from a long time pilot and construction worker. I could alsway park my plane and walk away with the log book until it was fixed. I could write a notation in the log book which effectively grounds the machine until it is fixed. I can walk off a jobsite and not go back and/or call in WCB. In many cases I can go to my Union and say such and such is unsafe. Sometimes, jobs are shut down and everyone walks off.

    On a drill rig where the company controls transportation, and the industry itself seems to blackball ‘troublemakers’, you can’t do jackshit until your shift is over and maybe you decide not to come back. You’re sitting on a road flare in the middle of the ocean with no way to leave or stop events from unfolding, events controlled by supervisors with their noses company/shareholder brown.

  13. Dredd on Tue, 27th Oct 2015 9:19 am 

    Good post.

    There are other ramifications that are equally impactful (Oil-Qaeda & MOMCOM Conspire To Commit Depraved-Heart Murder- 2).

    RICO !

  14. Kenz300 on Tue, 27th Oct 2015 9:58 am 

    Fossil fuels are the energy source of the past……….Alternative energy sources like wind and solar are the future…………

    There are safer, cleaner and cheaper ways to produce energy.

  15. rockman on Tue, 27th Oct 2015 10:22 am 

    Paulo – Exactly. Just that way offshore. But not so much an industry wide “black ball”. In fact not even a case of being black balled by a specific company over a period of time…those hard feelings can quickly disappear with new management. Twice I’ve hired field personnel who were “run off” by the operator of a field my company acquired. Often those “trouble makers” can bring very useful info to the table…they know “where the bodies are buried”. LOL

    Not only have I never run off a hand complaining about safety procedures but I have fired more than one for either not following them or covering up violations for someone else. About three years ago I had to reprimand a roustabout unloading casing off a ruck because he wasn’t moving out of the drop zone of the forklift every time it swung around. He did not care for my comment: had I not been on my polio crutches at the time he probably would have taken a swing at me. I told that two weeks earlier just 40 miles away another hand was crushed to death doing the same thing. Now get this: the other hand helping him said: “Yeah…I heard about that.” I told him that was more inclined to run his ass off because he didn’t tell the careless hand that story. But that’s the other common problem we have in operations: one hand watching another doing something stupid and not saying anything.

    Macho BS or for whatever reason I always beat it into them they if they don’t want to say anything come tell me and it will be our little secret. LOL.

  16. Kenz300 on Thu, 29th Oct 2015 10:35 am 

    All Fossil fuel companies need to transition to “ENERGY” companies and embrace safer, cleaner and cheaper alternative energy.

    Wind Power Now Cheaper Than Natural Gas for Xcel, CEO Says – Renewable Energy World

    http://www.renewableenergyworld.com/articles/2015/10/wind-power-now-cheaper-than-natural-gas-for-xcel-ceo-says.html

  17. Davy on Thu, 29th Oct 2015 10:37 am 

    Kenny kenz, quit being a dick and contribute and not advertise your asshole agenda. You have a valid message that is destroyed by your childish actions.

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