GCREAG Regulatory Update March 2014

Jodie ConnorJ. Connor Consulting, Inc.

Key Topics

• Status of Agency changes• Lease Sales• Proposed Rules• Offshore Safety Institute Update• Incident Data Update• Civil Penalties Paid

Reorganization

Sec. of the InteriorSally Jewel

BSEEBrian Salerno

• Permits• Inspections• Spill Response

BOEMTommy Beaudreau

(Open)• Leasing• NEPA Analysis• Resource Evaluation

IRU• Investigate

Allegations of Misconduct

ONRRGregory Gould

• Revenue Collections

Asst. Secretary Policy, Management & Budget

Rhea S. Suh (Tommy Beaudreau – nominated)

Asst. Secretary Land & Minerals ManagementTommy Beaudreau (Janice Schneider - nominated)

BOEM CPA/EPA Lease Sale

BOEM Final Notice of Sale• Central Planning Area Sale 231• Eastern Planning Area Sale 225 • 9:00 a.m., Wednesday, March 19, 2014• Mercedes-Benz Superdome – New Orleans

Oil Spill Limit of Liability

BOEM Proposed Regulation – 2/24/14Comment Period ends – 3/26/14• Add a new subpart to 30 CFR 553 regarding Limits of Liability for

Offshore Facilities– Designed to increase the limit of liability for damages applicable

to offshore facilities under OPA 90, from $75 million to $133.65 million, to reflect significant increases in the Consumer Price Index since 1990

• This increase reflects a 78.2 percent increase in the Consumer Price Index from 1990 through 2013.

– Establish a methodology BOEM would use to periodically adjust limits of liability for inflation

Oil Spill Limit of Liability

• Future CPI adjustments to the offshore facility limit of liability in § 553.702 will be published in the Federal Register

• Not later than every three years from the year the limit of liability was last adjusted for inflation, BOEM will evaluate whether the cumulative percent change in the Annual CPI-U since that year has reached a significance threshold of three percent or greater.

Oil Spill Financial Responsibility

• OSFR is not increased by the proposed rule• BOEM may propose various changes to the Oil Spill Financial

Responsibility regulations in a separate rulemaking• Stats provided in Federal Register

* Most companies self insure or use guarantor

Companies Required to Provide OSFR

Total $70 MM or Less

$105 MM $150 MM*

170 110 5 55

BSEE Proposed Rulemaking• Published proposed rulemaking • Oil and Gas Production Safety Systems – Subpart H

– Published August 22, 2013, comment period was extended and closed December 5, 2013

– Includes: Safety and pollution prevention equipment lifecycle analysis, production safety systems, subsurface safety devices, and safety device testing

• In preparation, due out mid-2014 • Blowout Prevention Systems • Arctic (joint with BOEM)

BSEE Proposed Rulemaking• Upcoming rulemaking

– Suspensions of Production and Operations – Natural Gas Fluids Measurement – Oil Spill Mechanical Recovery

BSEE/USCG Quarterly Meeting• 2/19/14 First 2014 Quarterly

Meeting at Headquarters– GOM operations updates from

both BSEE and USCG– Developing and capturing offshore

facility data and creating a system to share that information

– BSEE and USCG inspection requirements for offshore rigs and fixed facilities

– Creation of joint training opportunities for personnel

BSEE INCIDENT REPORT

OCS Incidents/Spills by Category: CY 2007 – 2013  

TYPE 2007 2008 2009 2010 2011 2012 2013

FATALITIES 5 11 4 12 3 4 3

INJURIES 423 318 285 273 213 253 226

LOSS OF WELL CONTROL 7 8 6 4 3 4 9

FIRES/EXPLOSIONS 110 139 133 126 103 134 97

COLLISIONS 20 22 29 8 14 9 19

SPILLS ≥ 50 bbls  4 33 11 5 3 8 ^

OTHER 268 278 308 155 186 236 272

INCIDENT TOTAL FOR THE YEAR 837 809 776 583 525 648 626

BSEE INCIDENT REPORT (OTHER)

OTHER 2007 2008 2009 2010 2011 2012 2013  

Crane 127 164 170 81 94 120 137

Personnel/Material Handling 25 26 31 12 7 37 31

Gas Release 8 15 17 12 15 8 9

Structural Damage 6 13 10 0 8 6 5

Damaged Disabled Safety System

3 1 4 6 2 4 2

H2S Release 2 3 4 3 0 1 6

Incident >$25K 10 3 4 6 5 4 12

Muster for Evacuation 18 37 51 25 35 41 52

Pipeline 6 11 11 6 6 3 8

Miscellaneous Other 63 5 6 4 14 12 10

OTHER (TOTALS) 268 278 308 155 186 236 272

Year No. of INCs with Civil Penalties Pd

Total Civil Penalty $

Highest Penalty $

2013 42 2,814,000 270,000

2012 31 2,022,500 480,000

2011 30 1,866,250 460,000

2010 26 2,073,000 435,000

2009 22 1,093,000 440,000

2008 31 2,210,250 505,000

2007 36 3,106,000 697,500

2006 41 1,480,000 165,000

2005 26 796,600 140,000

2004 21 885,750 190,000

BSEE Oversight10 Yr Comparison of Civil Penalties

Prepared by JCC using data from BSEE.gov

BSEE Unannounced Exercise

• 2/19/14 – BSEE Unannounced SMT TTX– Freeport McMoRan Oil & Gas – Actual deployment of skimmers at three separate

locations– Simulated dispersant use – Simulated well containment and on-water spill

response. – Participants included USCG, EPA, USFWL, NOAA, State

of Louisiana, State of Texas

Offshore Energy Safety Institute

• Accepting applications for Director• Planning for a series of forums, to be hosted by

the Institute in 2014, covering topics:– Risk, research, failure data reporting– Best available and safest technologies– Human factors of risk

Forms Update - APD / APM

• Application for Permit to Drill and Application for Permit to Modify updates will include a certification statement to state that false submissions are subject to criminal penalties

• Minor APD modifications • Comments on each are due by Feb. 3, 2014

Deepwater Initial EP Approval Times

Time Period EP Avg. Approval Time (Days)

Pre DWH 52

2010 (Post DWH) 234

2011 144

2012 121

2013 118

Analysis of Data – from BSEE’s website• Data analyzed for period since mandatory

reporting for OCS operators was required (2010 thru 2012).

• Most of the results were a mixed bag. • Just a handful of measures showed significant

trending (those dealing with drilling).

OCS Performance Measures Program 2004-2012

• “Drilling, Workover, & Allied Services” hours showed significant growth (up 76%).– Drilling Recordables are down 34%.– Drilling DARTs are down (37%).– Combined (Production, Drilling, Construction)

Recordables and DARTs were down too, but that is a result of the Drilling numbers driving the overall numbers.

OCS Performance Measures Program 2004-2012

• Likewise, in the same period, BSEE’s oversight of Drilling is up:– Total OCS INCs are up 174%– Total OCS Rigs inspected are up 76%

OCS Performance Measures Program 2004-2012

Observations• BSEE targeting high risk drilling operations • BSEE’s INCs are outpacing industry’s growth in

hours; they are tightening up on what constitutes an INC

OCS Performance Measures Program 2004-2012

Conclusions• If you conduct drilling or workovers, expect BSEE

to show up more frequently.• If you conduct drilling or workovers, expect BSEE

to “INC” you more often.• Contractors can expect to be INC’d too. • BSEE needs to show the public they are having a

positive impact on safety on the OCS.

OCS Performance Measures Program 2004-2012

Down the Road

• March 10-12 Decommissioning & Abandonment - Houston

• March 19 – Central GOM Lease Sale 231 – N.O.• March 19 – Eastern GOM Lease Sale 225 – N.O.

(following CGOM sale) • April 9-10 – Center for Offshore Safety 2nd Annual Forum• May 5-8 International Oil Spill Conference – Savannah,

GA• June 4 - SEMS II Implementation Date