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.