Houston’s Black Elk Energy had history of violations before fatal fire

Before last week’s fatal fire at one of Black Elk Energy’s oil production platforms, the five-year-old firm had racked up more than 300 documented mistakes and violations offshore, according to federal regulators who cracked down on the Houston-based company Wednesday.

Federal regulators threatened to bar Black Elk from working in the Gulf of Mexico if it doesn’t take immediate steps to improve safety.

The Bureau of Safety and Environmental Enforcement ordered Black Elk Energy to develop a plan for boosting the safety of its operations by Dec. 15 and told it to immediately halt burning, welding and other activities that could ignite fires at its 98 production facilities in the Gulf of Mexico. Regulators also are barring the firm from launching operations at facilities that are currently offline.

“Black Elk has repeatedly failed to operate in a manner that is consistent with federal regulations,” said James Watson, director of the Bureau of Safety and Environmental Enforcement that oversees offshore oil operations.

“BSEE has taken a number of enforcement actions, including issuing numerous incidents of non compliance, levying civil penalties and calling in the company’s senior leadership to review their performance and the ramifications of failing to improve,” Watson added. Wednesday’s action “is an appropriate and necessary step as we continue to investigate the explosion and fire that resulted in the tragic loss of life and injuries last week.”

The Nov. 16 explosion on board Black Elk’s platform roughly 18 miles off the Louisiana coast killed one worker, critically injured others and left one still missing.

In a statement, Black Elk spokesman Leslie Hoffman stressed the company’s commitment to safety.

“We appreciate the perspective of the Bureau of Safety and Environmental Enforcement,” Hoffman said. “Safety is a high priority for Black Elk Energy, and we will continue to work cooperatively with local and national federal agencies to understand exactly what happened with the incident at our rig in the Gulf of Mexico.”

Black Elk’s long history of violations offshore has been documented in 315 “incidents of non-compliance” issued by the safety bureau since 2010. On 12 separate occasions, the agency ordered the company to shut in its facilities because the violations were considered so severe or life threatening that work could not safely continue.

During that same two-year time frame, the safety bureau ordered Black Elk to shut off specific equipment 145 times because it was too risky to continue operating. The agency also issued 158 warnings to the company, ordering it to correct violations identified during inspections of Black Elk’s facilities.

In one case two years ago, regulators ordered Black Elk to pay a $307,000 fine after the safety bureau determined the company had not tested a safety valve every six months as mandated. When it finally was tested, the valve was found to be leaking excessively — and then it took another 117 days to be repaired or replaced.

In a letter to the company Wednesday, BSEE said it had documented “numerous troubling safety incidents involving Black Elk facilities,” including last week’s fatal platform fire. According to the safety bureau, Black Elk also:

  • was hit with 45 incidents of non-compliance for violations at nine of its facilities in the South Marsh Island area of the Gulf of Mexico in October.
  • showed “disregard for the safety of personnel” in a series of incidents, including an Oct. 20 accident that sent six workers to the hospital because improper precautions were taken while an acid-based chemical was used to treat one of Black Elk’s wells.

Wednesday’s move was decried by some as too little, too late, and it raised fresh questions about the effectiveness of safety changes imposed after the 2010 Gulf oil spill.

Bob Dean, an associate director at the Natural Resources Defense Council, likened the government’s approach to “locking the gate after the horse has bolted the barn.”

“This is the right thing to do,” Dean said. “Unfortunately it comes too late for the killed or injured workers and their families.”

Marilyn Heimann, with the Pew Environment Group, said Wednesday’s disclosures show “there is still more to do on prevention and safety,” two years after the explosion of the Deepwater Horizon rig claimed 11 lives and launched the nation’s worst oil spill. “We commend BSEE for their strong response to this incident, but they still need more resources and support to prevent these problems.”

Dean stressed that robust inspections and “decisive action” are needed to discourage companies from cutting corners.

“There’s a difference between issuing citations and protecting our workers, waters and wildlife,” he said. In the case of Black Elk, he said, “that’s 300 warnings, 300 red flags, 300 opportunities for authorities to step in and demand better. Why did it take a tragic disaster for enforcers to step in and connect the dots?”

Although Black Elk was first formed in 2007, it has only been operating facilities in the Gulf of Mexico since 2010. In the past year, safety bureau officials have inspected Black Elk platforms 214 times and well operations on two dozen occasions. The agency appeared to step up those inspections in recent months.

Some lawmakers on Capitol Hill have unsuccessfully pushed legislation that would make it easier to block companies with repeated violations from buying offshore drilling leases or working on the outer continental shelf altogether.

While federal regulators already have some latitude, current law limits their powers. The Interior Department can disapprove or revoke a company’s status as an operator, but only after determining that the firm’s “operating performance is unacceptable.” The safety bureau stopped short of issuing a notice of unacceptable performance on Wednesday.

And while incidents of non-compliance can kick off a lengthy civil penalty process, fines are capped at $40,000 per incident per day. Any significant hike in the maximum fine would be up to Congress; otherwise, current law limits the safety bureau to making periodic adjustments for inflation.

After the Deepwater Horizon disaster, the Bureau of Safety and Environmental Enforcement issued incidents of non-compliance to BP, the London-based company that operated the failed Macondo well in the Gulf. But the safety bureau did not deem BP’s overall performance “unacceptable” or move to bar the company from operating offshore.

BSEE does not routinely disclose the number of violations logged by oil and gas companies working offshore or the fines imposed on those firms.

That can foster a false sense of security about what’s happening offshore, said Jacqueline Savitz, a senior campaigns director with Oceana.

“You want to think everything is going smoothly, but the fact of the matter is, when you scratch the surface, you see there are a lot of problems,” Savitz said.

Following last week’s platform fire, a Coast Guard search was suspended late Sunday. Black Elk called off additional searches Tuesday evening, after one body was found.

Inspectors with the safety bureau have been at the platform securing potential evidence, ensuring the site is safe and overseeing a cleanup of residual oil that could spill into the Gulf of Mexico. The Chemical Safety Board, an independent federal agency that has investigated more than 50 industrial accidents, also has subpoenaed Black Elk Energy and Grand Isle Shipyard, the contractor working on the platform at the time of the fire, seeking combustible gas testing results, hot work permits, safety assessments and other documents.

Scrutiny has focused on the possibility that a torch ignited flammable materials on the site. Black Elk CEO John Hoffman said the explosion occurred during maintenance work at the site, when workers were cutting a water line. He said workers may have used a cutting torch instead of a saw, igniting flammable vapors in the line and subsequently triggering an explosion in connected oil tanks.

Activities that involve burning, welding or other operations capable of starting fires or explosions — called “hot work” in industry parlance — have been blamed for more than 60 deaths in the United States over the past two decades. Hot work has been a major factor in so many industrial accidents that the federal Chemical Safety Board has warned companies to monitor the amount of flammable gas in the atmosphere constantly before using burning, welding or other sparking tools.

Founded in 2007 by Hoffman, a former BP and Amoco executive, Black Elk holds interests in 854 wells connected to 155 platforms spanning the Gulf of Mexico. It is the main operator on 98 platforms, according to federal records.

The company has adopted an aggressive acquisition plan that is focused on buying older wells and facilities. The wells linked to the platform involved in Friday’s accident date back decades to the 1950s and 1960s.

Those decades-old facilities come with big maintenance needs, increasing the need for construction work on the sites and possibly boosting the chance of accidents.

Black Elk’s acquisition strategy _ along with the platform fire _ appears to have driven rating agency Standard & Poor’s decision Wednesday to warn investors about the company’s credit risk.

“The ratings on Black Elk reflect our view of its ‘vulnerable’ business risk and ‘highly-leveraged’ financial risk, incorporating the company’s small reserve and production base, high operating costs, and acquisitive growth strategy,” the agency said Wednesday. “While we do
not expect (Friday’s accident) to materially affect oil and gas production or cash flow, Black Elk has very limited liquidity and we believe little capacity to absorb unexpected expenses or incurred liabilities.”

Letter to Black Elk

Black Elk Energy Enforcement Statistics