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Offshore Oil Rig Decommissioning and Rigs-to-Reef Programs in the Gulf of Mexico:
Current Status and Strategies, and a Review of Decommissioning Cost Estimation
Elena KobrinskiDecember 13, 2016
Our Coasts, Our Future, Our ChoiceRestore America’s Estuaries 8th National SummitNew Orleans, Louisiana
Topics of discussion:
1. The big picture: Why this study is important, what decommissioning is in the Gulf of Mexico, and some definitions
2. The problem
3. A possible solution presented in this dissertation research
The Gulf of Mexico:
• Hurricanes, severe weather
• Navigation
• Environment
• Ninth largest body of
water in the world
• Boasts some of the
most productive
fisheries globally
• Encompasses over
five million acres of
habitat
• Supports a $20 billion
tourism industry
• Nation’s primary
offshore source of oil
and gas
Why is this study important?
• Federal oil and gas leasing
• Decommissioning
• Rigs-to-reefs programs: TX, LA, MS (CA)
Definitions:
~ Bureau of Safety and Environmental Enforcement (BSEE) 2016
Decommissioning is the
process of ending
offshore oil and gas
operations at an offshore
platform and returning
the ocean and seafloor
to it’s pre-lease condition.
This is required by law.
What are rigs-to-reefs?• Studies have documented a connection among fish
and other marine life and the oil and gas structures
• Fishermen, divers, and coastal states have been concerned with removal
• The federal government (BSEE) addressed these concerns, creating rigs-to-reefs
Source: Rigs-to-reefs: Towers of Life
~Texas Parks and Wildlife Department (TPWD) 2016
Does the removal
requirement change due to rigs-to-reefs? Yes
What is the problem?
Oil and gas infrastructure is not being removed according to lease contract
timelines and requirements, and platforms and wells are now sitting idle in the Gulf.
This is a major problem for the federal government.
1. Almost 3,000 platforms in the Gulf
As of January 2016:
243 idle platforms
2089 idle wells
These numbers will continue to increase…
and the federal government is responsible for managing this.
2. Their biggest problem? Finances
• Cost estimation
• Financial security and liability
• Bonding
• Current liabilities: $2.3 billion (GAO Report 2016)
• Future liability $50 billion
3. Transparency and trust among all parties
Why is this happening? The problem is threefold:
This is a perfect storm… and why this study is important.
The current problems are leading to the possibility of the taxpayer paying for current and future decommissioning costs.
Why?
In short, because the federal government is becoming responsible for the bill, due to:
• High cost of removal
• Relinquished leases
• Subleasing and bankruptcy
• Lack of roll-back liability and adequate bonding
With finances and cost estimation so problematic, what has the federal government done to address this?
• The ‘idle iron’ policy (September 2010)
• The interim policy document (2013)
• Government Accountability Office (GAO) Report, January 2016
• Statement by BOEM Director to the House Committee on Natural Resources, March 2016
• Notice to Lessees No. 2016-01, September 2016
Requiring Additional Security
A possible solution presented in this dissertation research:
Figure 1 lists 13 possible decommissioning options, falling under the broad headings of ‘leave in place’ or ‘remove’
Table 1 lists selection criteria for decommissioning decisions, with broad heading categories of:
EnvironmentalFinancialSocioeconomicHealth and safetyAdditional stakeholder concerns:
Commercial fishing accessRecreational fishing opportunitiesDiving opportunitiesClear seabedUnobstructed ocean views
Plan for the model:
• Choose two platforms as case studies in the Gulf of Mexico
• Make all necessary changes to figure 1 and table 1 to apply to the Gulf
• Develop a focus group/committee (made up of experts, government, industry, stakeholders, public) that will rank options, based on categorical headings
• Committee ranks options
• Data analysis will determine the best option based on the rankings received from the committee
1. The increase in idle iron Yes
2. Financial issues Possibly… why?
3. Transparency and trust among all parties Yes
Will it work?
Does the design of the model address the problems?
Thank you
Acknowledgements• Our Coasts, Our Future, Our Choice: Restore America’s Estuaries 8th Annual Summit on Coastal and
Estuarine Restoration and 25th Biannual Meeting of The Coastal Society
• Committee Chair, Dr. Richard McLaughlin, Endowed Chair for Marine Policy and Law, Harte Research
Institute for Gulf of Mexico Studies
• NOAA Environmental Cooperative Science Center / Center for Coastal and Marine Ecosystems• Committee Members:
• Dr. Alexey Sadovski, Professor of Mathematics, Department of Science and Engineering, Texas A&M University
• Dr. Anita Reed, Associate Professor, College of Business, Texas A&M University• Dr. Brooke Shipley, Artificial Reef Chief Scientist and GIS Specialist, Texas Parks and Wildlife
Department• Mr. John Embesi, Research Specialist, Flower Garden Banks National Marine Sanctuary• Graduate Faculty Representative: Dr. Gary Jeffress, Director, Conrad Blucher Institute
• Harte Research Institute for Gulf of Mexico Studies• Texas A&M University – Corpus Christi• Texas Parks & Wildlife Department• Beveridge & Diamond, P.C., Washington, D.C.• Bureau of Safety and Environmental Enforcement (BSEE)
Gulf of Mexico Outer Continental Shelf Region, New Orleans
This material is based upon work supported by the National Oceanic and Atmospheric Administration, Educational Partnership Program, U.S. Department of Commerce, under Agreement No. NA11SEC4810001. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Commerce, National Oceanic and Atmospheric Administration.