Feds order five companies to halt offshore work

WASHINGTON — The federal government has ordered five companies to halt offshore oil and gas operations, after they failed to give regulators an audit of safety plans newly required since the 2010 Deepwater Horizon disaster.

The companies forced to shut down their offshore work — all relatively small operators — are Houston-based Breton Energy, EP Energy and XTO Energy, as well as Louisiana-based firms Virgin Offshore USA and Matagorda Island Gas Operations. EP Energy said its shutdown order was in error, and sent to the company for facilities that have since been sold to other operators.

The Bureau of Safety and Environmental Enforcement, which ordered the stand down, said the effect on U.S. oil and gas supplies would be “minuscule,” given most of the firms are primarily involved in decommissioning old offshore facilities and only Matagorda has logged any energy production this year. According to Interior Department records, the company has produced just 383 million cubic feet of natural gas so far this year.

At issue is a requirement that companies working offshore implement broad “safety and environmental management systems” for holistically assessing and managing risks at every stage of their work. Companies were required to have those so-called SEMS programs in place by November 2011 and submit audits of the programs to the safety bureau by Nov. 15. Separate third-party audits are due in June 2015.

But the five companies ordered to stop offshore work missed the Nov. 15 deadline. The bureau said none had submitted an audit plan or a completed audit in time.

Seven other companies who submitted audit plans — but not the actual reviews themselves — were ordered to complete the assessments immediately and certify under penalty of perjury that they have SEMS programs in place. Those companies were: Houston-based Monforte Exploration and Tengasco Inc.; The Woodlands, Texas-based GoMex Energy Offshore; and Louisiana-based Badger Oil Corp., Conn Energy Inc., Legacy Resources Co. and Petsec Energy.

Companies may face fines of up to $40,000 per day for failing to comply with the SEMS mandates.

Safety bureau director Brian Salerno said his agency would “vigorously enforce compliance with this fundamental requirement.”

“An effective, fully implemented SEMS program is essential to reducing risks across offshore operations,” Salerno said in a statement. “BSEE must be assured that companies are addressing the key elements of SEMS and that they are not needlessly putting their workers and the environment at risk.”

Although many large operators working across the globe had SEMS programs governing their work in the North Sea and other regions, the requirement to stand up the programs — much less subject them to audits — was relatively new for some smaller companies confined to the Gulf of Mexico.

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In the runup to last week’s deadline, offshore drilling regulators have complained that the audits were slow to arrive at the bureau. Just six companies had voluntarily submitted their own audits to the safety bureau by mid-December 2012 and the assessments have been trickling in ever since.

All told, 72 offshore operators gave the bureau audits of their SEMS programs in time. The bureau is still analyzing the documents.

The agency may eventually do its own spot checks of the programs, to ensure they are robust and that the audits are complete. Although the bureau has not launched a single SEMS audit itself yet, Salerno said it remains a possibility.

“I wouldn’t rule it out,” he said during an interview earlier this month.

“We have no definitive plans for that yet but I think the third-party audit and the audit function in SEMS will continue to evolve,” Salerno said. “I’d like to see what we get (first).”

Salerno also stressed that he wants to make sure that those safety plans don’t become “shelf ware”, with the documents prepared but later ignored.

He said there is a low risk of that with some companies that are emphasizing safety and are “sincere” in making it a priority. But,he acknowledged, “there’s a range of commitment” and the bureau aims “to level the peaks and valleys.”

EP Energy said in a statement that it does not currently own or physically operate any of the facilities targeted by the safety bureau’s shut-down order. “We will continue to work with the agency and the current owner to clarify this matter promptly,” the company said. “There is no impact to our ongoing operations or financial results.”

XTO emphasized that it has no producing assets in the Gulf of Mexico — just two older wells that are in the process of being plugged and abandoned. “We are working with BSEE to correct any inaccuracies,” the company said.

The safety bureau noted that while most of the affected companies are conducting plugging and abandonment or other decommissioning activities, “the elements of a SEMS program are applicable to all offshore operations.”