Vladimir's Energy Blog

“Ye blind guides, which strain at a gnat, and swallow a camel.”

A March 17 press release from BOEMRE announced the approval of Petrobras’s permit application for the Gulf of Mexico’s first FPSO (“Floating Production Storage Offloading” facility), offshore Louisiana.

I have no problem with FPSOs per se. The technology has been used around the world, in places like Brazil, Angola, the North Sea and off Australia. But this would be the first FPSO in U.S. waters, under BOEMRE and U.S. Coast Guard jurisdiction.

What I do question is the timing of this particular permit approval. Shallow water operators are experiencing difficulty with routine Shelf gas well permits, where the potential environmental consequences of a mishap are miniscule compared to the multitude of things that might go wrong with an FPSO.

Plus it’s for Petrobras, the national oil company of Brazil, which President Obama apparently likes better than any American oil company.

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The White House Blog, in a post entitled “Expanding Safe and Responsible Energy Production”, lays out the case for the Obama Administration as a long-time supporter of domestic oil and gas:

One area where we have focused our efforts since the start of the administration – long before this current spike – is increasing responsible domestic energy production – including oil and gas. In fact, oil production last year rose to its highest level since 2003. From 2008 to 2010, oil production from the Outer Continental Shelf increased more than a third – from 446 million barrels in 2008 to an more than 600 million barrels of estimated production in 2010.

Have these people no shame? (Rhetorical question.)

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We all know that BOEMRE has lifted the Deepwater Drilling Moratorium. We also know that few rigs have gone back to work, either in the deepwater or the shallow water Shelf. That’s because of several factors, one of which is the new Interim Final Rule which governs all offshore drilling. Compliance with the Interim Final Rule is necessary for the operator to secure a permit.

The Interim Final Rule contains this little chestnut:

When BOEMRE incorporates a document by reference, any recommendations in the document will be interpreted as requirements, unless otherwise specified.  For example, this section incorporates API [American Petroleum Institute] documents that recommend certain actions using the word should.  In the Foreword to its recommended practices, API explains that the word shall indicates that the recommended practice has universal applicability to the specific activity, while the word should denotes a recommended practice where a safe comparable alternative practice is available.  Despite this explanation, for API documents incorporated by reference into this part, the terms should and shall mean must.

Offshore drilling and production practices are regulated by a voluminous set of regulations known as 30 CFR 250. Even the Federal Government can’t specify every nuance of the industry so it “incorporates by reference” the design codes for wells, structures, vessels, pipelines, etc., promulgated by specialized standards-setting bodies (e.g., the American Society for Testing and Materials [ASTM], the American Institute of Steel Construction, Inc. [AISC] or the American National Standards Institute [ANSI]). You can get an idea of the volume involved here.

In many cases, those standards specify what constitutes a proper design. The word “should” gives the designer/engineer latitude to use common sense in a particular application that is not contemplated by the standards.

BOEMRE’s paragraph changes 14,000 instances of “should” to “must”.

1. [Ctrl-F]> S-H-O-U-L-D
2. [Replace with?]> M-U-S-T [cr]
3. Done!

This is not engineering, this is engineering malpractice.

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This press release is the biggest load of hooey I’ve seen for a while. The Department of the Interior wants to create two new agencies to remedy what they term “conflicting missions” within a single agency. Hooey.

WASHINGTON, D.C. - Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich today announced the structures and responsibilities of two new, independent agencies that will carry out the offshore energy management and enforcement functions once assigned to the former Minerals Management Service (MMS). …

“The former MMS was saddled with the conflicting missions of promoting resource development, enforcing safety regulations, and maximizing revenues from offshore operations,” said Director Bromwich. “Those conflicts, combined with a chronic lack of resources, prevented the agency from fully meeting the challenges of overseeing industry operating in U.S. waters. The reorganization is designed to remove those conflicts by clarifying and separating missions across the three agencies and providing each of the new agencies with clear missions and new resources necessary to fulfill those missions.” [emphasis added]

Two new bureaucracies, eh? This plan is a prescription for disaster for the Gulf of Mexico. It should serve as a wake-up call for any thinking person who thinks America’s energy security is an important issue. Or, for that matter, for anyone who doesn’t relish the thought of $8.00/gallon gasoline.

“Conflicting missions?” Baloney. Like “walking” and “chewing gum” at the same time are conflicting missions.

Please indulge an allegory.

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As many of you know, your humble correspondent is a veteran of 32 years of service in the oil and gas industry, currently serving as the operations manager for a small Gulf of Mexico exploration and production company. This week, the President’s Oil Spill Commission published its 380-page report on the BP blowout and spill on the Deepwater Horizon. I won’t pretend to have read the thing, but there are a few recommendations and outcomes worth commenting upon.

Panel: More reform needed to prevent future spills

When asked about the likelihood Congress would enact some of its suggestions, especially with a Republican majority in Congress looking to curb government regulation and spending, panel co-chair and former Florida Democratic Senator Bob Graham said that the magnitude of the disaster “would override an ideological preference for less government, less government intrusion, less government cost.” …

The panel said Congress should draft legislation to create within the Interior Department an independent safety agency and a separate environmental office to evaluate the risks of oil drilling to natural resources. Such a change would not require any additional funding.

Two new bureaucracies, eh? Color me unsurprised.

Reading these government reports, one gets the impression that the oil and gas business would conduct itself like the Seventh Fleet on shore leave, were it not for the stalwart defenders of safety and the environment embodied in the Department of the Interior’s inspectors.

In the wake of the BP Spill, we’ve seen a raft of new regulatory initiatives from the BOEMRE, the Interior agency which has oversight responsibilities for offshore oil and gas operations. Many of the new regs have nothing to do with addressing the problems of BP or Transocean at Macondo. Some of the new requirements for drilling wells arguably don’t add a margin of safety and may even increase the risk of a well’s failure. Industry’s attempts to convince the regulators of this, however, have fallen upon deaf ears. There’s a new sheriff in town, and he aims to let everyone know who’s boss.

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