DRILLBITS – September 2012
This Month’s Articles
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IADC supports member case in Brazil
IADC recently provided supporting information to Transocean Brasil as the company works to reverse a court injunction effectively barring it from conducting offshore operations pending investigation of a November 2011 incident on the Frade field. IADC’s letter noted that, “due to the complex nature of our business, outsiders do not have a full understanding of the commercial and technical structure and the roles of the numerous contractors and other companies engaged in the process. Drilling a well is a complex endeavor conducted in accordance with the operator’s specifications and under their direction.”
Given the operator’s proprietary knowledge of the geological formations, nearby wells and other operational variables, the operator is generally responsible for:
Drilling contractors and service companies may perform actions prescribed by the operator in accordance with contracts, but the responsibility to act in a timely and appropriate manner remains with the operator, IADC stated.
Industry wins dismissal of lease sale lawsuits
Two separate lawsuits challenging a Gulf of Mexico (GOM) lease sale have been dismissed. In 2010, the Defenders of Wildlife and other NGOs in Alabama federal district court challenged the issuance of leases pursuant to Central GOM Lease Sale 213; the Center for Biological Diversity (CBD) in DC federal district court also filed a challenge.
Although Lease Sale 213 was conducted before Macondo, many leases were not issued until after the event, and the lawsuits challenged that the then-Minerals Management Service issued leases without engaging in new National Environmental Policy Act (NEPA) and Endangered Species Act (ESA) analyses.
IADC, API, the Independent Petroleum Association of America (IPAA) and the US Oil & Gas Association (USOGA) have succeeded in persuading the Alabama court first to dismiss all claims other than those relating to Lease Sale 213, and then to dismiss the Lease Sale 213 claims themselves. Defenders of Wildlife initially appealed the latter ruling to the Eleventh Circuit but later dropped the appeal.
Similarly, the DC court dismissed all claims other than those relating to Lease Sale 213, and the Lease Sale 213 claims remained pending, which made industry potentially vulnerable to an adverse ruling in DC on the Lease Sale 213 claims.
However, the CBD and the government have agreed on a Stipulation of Dismissal. The CBD dismissed its Lease Sale 213 NEPA claims with prejudice, and the CBD dismissed its Lease Sale 213 ESA claims without prejudice. The CBD will be able to pursue the ESA claims in the future only if the Bureau of Ocean Energy Management (BOEM) fails to complete its ongoing renewed ESA consultations by May 2013.
Separately, IADC, API, IPAA and USOGA are fighting challenges to Lease Sale 216/222, filing a motion to intervene in the litigation challenging the 20 June 2012 sale, which resulted in more than US $1.7 billion in high bids on 454 tracts.
Oceana, Defenders of Wildlife and the CBD challenge the adequacy of the Supplemental Environmental Impact Statement prepared by BOEM with respect to Lease Sale 216/222 pursuant to NEPA.
Industry groups believe they are entitled to intervene in this litigation as of right or through permissive intervention. The court recently granted the groups’ motion to intervene in a similar lawsuit challenging Western GOM Lease Sale 218.
IADC VP visits Poland, assesses emerging shale gas market
IADC regional VP of European operations Jens Hoffmark recently visited oil companies, suppliers and regulators in Krakow and Warsaw, Poland. The goal was to collect information on shale gas development in the country and promote awareness of the IADC Critical Issues for Shale Europe 2013 Conference & Exhibition, 23-24 October in Warsaw.
Poland currently imports 98% of its oil from Russia, and its natural gas production of 3.5 billion cu meters per year is not enough to meet the total demand of 14.5 billion cu meters. The country has been in search of alternatives, such as shale gas and renewable energy, in an effort to increase energy independence.
The Polish Ministry of Environment has granted 112 concessions so far to several international oil companies, with the most positive traces of shale gas being found close to the Baltic Sea in the northern part of Poland. It is reported that six companies out of 11 are considering further development based on exploration results thus far.
The US Geological Survey forecasted in 2009 that Poland could hold approximately 3 trillion to 5 trillion cu meters of shale gas. The estimate has since been revised to 38 billion cu meters, although no certainty can be established until additional drilling is carried out. A minimum of 200 wells are required to produce a more precise reserves estimate, but only 28 wells have been drilled so far.
One challenge is that the Polish government is still lacking clear guidelines on taxation, HSE requirements and ownership rights to shale gas discoveries. To address this, the government is negotiating two bills on taxation and technical issues such as HSE. The Ministries of Finance, Environment, Economy and Treasury are working out relevant legislation, and it remains to be seen when the work will be completed. Until then, oil companies working in Poland are still left with uncertainty.
For further information, please contact Jens Hoffmark at jens.hoffmark@iadc.org.
Industry comments on fracturing guidance
IADC, along with the Independent Petroleum Association of America, the Association of Energy Service Companies and the International Association of Geophysical Contractors, recently submitted comments to the US EPA in regards to permitting guidance for oil and gas hydraulic fracturing activities using diesel fuels.
The groups urged the EPA to retract both its website assertion of an Underground Injection Control (UIC) permitting requirement under the Safe Drinking Water Act (SDWA) and the Draft Guidance document.
The industry groups believe the EPA should “revisit its use of this authority in the context of (1) the current state regulatory programs and (2) the mandates of the SDWA prohibiting regulations that would impede or interfere with American oil and natural gas production unless requirements are essential to assure that underground sources of drinking water (USDW) will not be endangered by injection.”
The EPA and other federal officials have repeatedly confirmed that hydraulic fracturing has not adverse affected USDW. Industry groups believe the EPA’s actions have violated its overarching SDWA mandate.
The EPA’s Draft Guidance also seeks to expand the group’s authority, which is limited to regulating the use of diesel fuel in the context of hydraulic fracturing. The EPA has proposed regulation of chemical products that are not diesel fuel, and current and proposed actions threaten the federal-state primacy structure. Further, the definition of diesel fuel must be written to be easily understood, certain and stable.
Industry suggests the EPA initiate a rulemaking process that includes examination of:
Workshop proposed for Indonesia operations
IADC is planning to hold a workshop for its drilling contractor members on understanding the procedures of goods and services procurement based on Indonesia’s amended Procurement Working Procedure Manual PTK 007/Rev.2/I/2011.
A minimum of 10 participants is required for IADC to hold the workshop, which would be a one-day session conducted by Indonesian consulting firm PT Patra Mitra Konsulindo on 25 October at the Marina Bay Sands Expo and Convention Centre in Singapore.
To express interest in participating or to get more information, please contact IADC Asia regional representative Chit Hlaing at chit.hlaing@iadc.org or IADC industry affairs consultant Derek Morrow at derek.morrow@iadc.org.
Maritime Labour Convention to enter into force in August 2013
The International Labour Organization (ILO) has announced that the Maritime Labour Convention 2006 (MLC 2006) has met the criteria for entry into force, having been ratified by 30 nations representing more than 33% of the world’s gross shipping tonnage. As a result, MLC 2006 will enter into force on 20 August 2013.
The Convention establishes minimum requirements for almost all aspects of working conditions for seafarers, including conditions of employment, hours of work and rest, accommodation, recreational facilities, food and catering, health protection, medical care, welfare and social security protection. Intended as a “flag-State” instrument, MLC 2006 is particularly ill-suited for application to MODUs, where the coastal States in which these units operate commonly extend their social and labor requirements to MODUs operating in areas under their jurisdiction and where large numbers of third-party personnel (who may be considered “seafarers” under the Convention) may be employed on board.
For further information, contact Alan Spackman at ext 207 (alan.spackman@iadc.org).
USCG: Credential required to work on vessels
The US Coast Guard (USCG) Eighth District has issued a new interpretation and application of section 8701 of the United States Code as it applies to US merchant vessels of at least 100GRT – except MODUs – with regard to the requirement for personnel employed onboard these vessels to obtain and hold a valid merchant mariner’s document.
In particular, the USCG denied a recent request to allow non-crew member, specialist personnel to conduct business on a US-flag offshore supply vessel because these specialists did not hold merchant mariner credentials.
This negatively affected that offshore vessel’s operations immediately, and IADC is concerned this may further expand to encompass all personnel on offshore energy vessels. This could include maintenance gangs, diver teams, ROV teams, paint and blasting teams, wireline crews, plug and abandon teams, hydraulic fracturing teams, classification surveyors, SEMS auditors, ISM auditors, oil spill cleanup personnel and thousands of others.
In response to this USCG denial, IADC and the Offshore Marine Service Association have submitted comments to the Eighth District Commander expressing the offshore industry’s concerns and offering assistance in rectifying the questionable interpretation and application of this statute.
For more information, please contact John Pertgen at ext 203 (john.pertgen@iadc.org).
IADC criticizes BSEE noncompliance citation policy
IADC has expressed concern about the Interim Policy Document by the US Bureau of Safety and Environmental Enforcement (BSEE), which affirms that BSEE inspectors can issue Incidents of Noncompliance (INCs) to drilling contractors as well as oil companies. The unprecedented policy demonstrates a significant deviation from the global paradigm of holding operators ultimately responsible for accidents at the well site.
“BSEE’s guidance is inconsistent with the industry model and creates a whole new area of ambiguity,” said Brian Petty, IADC executive vice president – government affairs. Global government regimes have always held operators responsible, he said.
“This new guidance opens the door to unknown levels of liability for contractors and additional uncertainty for contractors. At a minimum, it could increase contractors’ insurance premiums, but it also could potentially eliminate coverage for many companies in the US altogether.” Such additional costs and uncertainty could drive contractors out of the US Gulf of Mexico.
For more information about the BSEE policy, please contact Brian Petty at +1/202-293-0670 (brian.petty@iadc.org).
Jackup site assessment provisions available
ISO 19905-1:2012 – Site-specific Assessment of Mobile Offshore Units – Part 1: Jackups is available from ISO, national standards bodies and various technical publications providers. The standard specifies requirements and guidance for the site-specific assessment of independent-leg jackups. It addresses (1) manned non-evacuated, manned evacuated and unmanned jackups and (2) the installation phase at a specific site.
A related document, ISO/TR 19905-2 – Site-specific Assessment of Mobile Offshore Units – Part 2: Jackups Commentary and Detailed Sample Calculation, has passed ballot and will be available soon. To ensure reliability, the provisions of ISO 19905-1:2012 form an integrated approach, which is used in its entirety for the site-specific assessment.
For further information, contact Alan Spackman at ext 207 (alan.spackman@iadc.org).
Asia Operations Forum to be held 24 October
IADC will hold its second Asia Operations Forum meeting of the year on 24 October at the Marina Bay Sands Expo and Convention Centre in Singapore.
The meeting provides a forum to discuss key regional issues, as well as an update of IADC activities in the Asia Pacific region. IADC also will invite a guest speaker.
To suggest topics of interests or critical issues for discussion at the meeting, please contact IADC Asia regional representative Chit Hlaing at chit.hlaing@iadc.org.
Accreditation Updates
Rig Pass
WellCAP
Safety Alerts
For the latest safety alerts, visit www.iadc.org/safety-alerts
Alert 12-19: Deep vein thrombosis.
Alert 12-20: Helideck obstruction hazard – marking and notification.
Alert 12-21: Lack of communication results in multiple injuries.
Reminders
Rigs Receive ISP Certificates
For certificates received since last LTI (in years):
New IADC Members
IADC welcomes 24 new members:
DRILLBITS Volume 22, Number 9
Dan Rabun, Chairman • Stephen Colville, President and CEO • Linda Hsieh, Editor
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