Bromwich acknowledged that what he knew about offshore drilling before taking on the job “could fit into a thimble.” But, he insists, “When you’re thrust into a crisis, you learn about the issues quickly.”

And, Bromwich said, his lack of knowledge was an asset – not a liability – because it gave him a fresh perspective to judge what worked and what didn’t.

For instance, Bromwich said, it drove his decision to upend the federal government’s traditional practice of only regulating oil and gas companies that hold leases to drill offshore – instead of also policing the thousands of service companies and other contractors that work for them.

“That has not made me a popular guy in the industry,” Bromwich conceded. But the former federal prosecutor said he never got “persuasive or convincing answers” justifying the old approach.

The operator-only enforcement plan was convenient in that government could go against oil and gas companies and then let them fight out conflicts with their contractors, Bromwich noted.

But, he added: “I didn’t think we should give across-the-board immunity to everyone that was a contractor.”

A blunder?

Landry called that one of Bromwich’s biggest blunders.

“We have, for decades now, had a nice linear chain of command that was easy to follow,” Landry said. “He believes in his effort and wisdom and all of his lack of understanding of the industry that that chain of command is somewhat dysfunctional.”

Landry also blames Bromwich for fostering an adversarial relationship between regulators vetting offshore drilling plans and the companies that submit them. He created an atmosphere where those regulators “began to distrust the industry and second-guess their own instinct,” he said.

Leaders of industry trade groups, including the American Petroleum Institute, tangled with Bromwich over the breadth – and speed – of new regulations imposed after the Gulf spill. They also vehemently opposed a five-month moratorium on deep-water drilling and have accused the government of dragging its feet in approving offshore exploration.

Some oil company executives have taken a different view. Chevron CEO John Watson has repeatedly insisted that regulators are not “trying to slow-walk permits” and instead are “trying to do their job well.”

Shell Oil Co. President Marvin Odum also has said that initial permitting delays resulted from both industry and regulators working to decipher new post-spill standards for well design, equipment testing and accident response.

jennifer.dlouhy@chron.com

Royal Dutch Shell has applied for a permit to drill in the shallow waters of Alaska’s Beaufort Sea next year and unveiled plans for an improved oil spill response system for the Arctic.

The well, in the Sivulliq prospect about 15 miles off Alaska’s North Slope, will be drilled in about 120 feet of water. The Noble Discoverer rig is lined up for the job, but a second rig has been stationed in Dutch Harbor to be on hand to drill a relief well in the event of a blowout or other accident.

In 2009, the government approved Shell’s offshore Alaska plan for exploration, which included drilling in the Chukchi Sea, but environmental and community groups challenged the decision. The Ninth Circuit Court of Appeals upheld the plan in May, but the federal drilling moratorium and issuance of new rules following BP’s Deepwater Horizon accident further delayed plans to drill.

Only one well

The new permit application is for just one well in the Beaufort. Any Chukchi plans will wait until courtroom challenges are resolved, Shell Alaska Vice President Pete Slaiby said in a conference call Wednesday.

“We have every reason to believe the administration will permit 2011 exploration drilling in Alaska,” Slaiby said. “We should have approval by the fifth of November, but that could be extended.”

Shell also released details of an oil spill containment system to capture oil at the source in the event of a shallow-water blowout.

The system looks similar to the containment domes BP used with varied success in trying to capture some of the oil flowing from the blown- out Macondo well in the Gulf of Mexico this past summer.

Sea ice a complication

The shallower depths and lower pressures expected in the Arctic should make spill containment and response easier compared to the Gulf of Mexico. But the presence of sea ice for part of the year and the sites’ remote locations create other challenges.

Because the Arctic Ocean ices over for part of the year and sea ice sometimes pushes down into the seafloor, the blowout preventer and other wellhead equipment would be located in a 40-foot-deep hole — known as a mud line cellar – in the seafloor. This helps protect the equipment from ice but makes efforts such as placing a new capping system on a leaking well not feasible.

The presidential commission looking into BP’s oil spill said Wednesday that Shell’s Arctic spill response plan should be given closer scrutiny given the lessons learned from the Deepwater Horizon. In a paper on Arctic spill response, the commission credits Shell with exceeding current spill response requirements in its Alaska plans.

“But other drillers may not,” the paper says.

Coast Guard presence

The paper also says there should be an closer look at increasing Alaska’s Coast Guard resources to respond to a possible Arctic spills, since it’s only industry resources available for such problems.

“Because the Coast Guard has an admitted lack of response capacity in the Arctic, immediate responsibility would fall on industry and their oil spill response contractors,” the paper says. “Shell, at least, accepts this responsibility.”

Cindy Shogan, executive director of the Alaska Wilderness League, warned that the area Shell plans to drill in is frequented by endangered bowhead whales. She said the Department of Interior should require Shell to submit an entirely new exploration plan.

tom.fowler@chron.com

SOURCE ARTICLE

Eric Kayne For the Chronicle: Matt Allen, an engineer, works at Shell’s real-time operations center this month in Houston. The center monitors data from wells around the clock.

Shore-based engineers for Shell monitor offshore rigs 24/7 from high-tech centers

While no one claims such centers could have prevented the deadly April 20 blowout at BP’s Macondo well, they are getting a closer look as oil companies face pressure by regulators and the public to ensure the safety of offshore drilling.

This summer, in fact, BP began building a 24-hour real-time operations center at its west Houston campus. Expected to be completed by year-end, it will continuously monitor all the company’s drilling and completions work in the Gulf of Mexico, company spokesman Daren Beaudo said. Others could follow suit.

Major oil companies including Exxon Mobil Corp., Chevron Corp. and ConocoPhillips say they use real-time well data to keep tabs on offshore drilling projects, especially big and costly deep-water wells. The information, collected by sensors on drilling rigs and inside wells and beamed to land by satellite, allows shore-based engineers to assist during important drilling phases and intervene when problems arise.

The data also can be stored to create a black-box-like record of each offshore well. But few companies have dedicated staff to track the information as it comes in.

Investigators have relied heavily on real-time data from BP’s Macondo well in reconstructing the hours and minutes leading up to the blowout that killed 11 workers and triggered the worst oil spill ever in the U.S.

The British oil giant, in an internal investigation report this month, concluded that BP and Transocean crew members on the Deepwater Horizon drilling rig misinterpreted clear warning signs about dangerous conditions in the well prior to the explosion and took steps to regain control of the well only after it was too late.
Macondo’s problems

Since the accident, Shell’s well-monitoring engineers have also looked at publicly available data on the Macondo well and noticed problems brewing in the two hours before the blowout, van Oort said. But he declined to speculate on how Shell might have responded differently.

Shell’s first real-time operations center was established in 2002 in New Orleans as a pilot program — and it grew out of a costly mistake.

The year before in the Gulf of Mexico, Shell drilled what van Oort called “our own well from hell,” paraphrasing a BP engineer’s characterization of the Macondo that surfaced in e-mails during the accident investigation. Shell’s project far surpassed its budget, then drillers found when they reached their target that faulting in the formation had allowed all the oil and natural gas to leak out.

“So, we said, ‘We don’t want to do that anymore. It’s just too painful,’ ” van Oort said.
Two goals

The idea behind a dedicated center was twofold.

First, it was to do more well planning on the front end by fostering more collaboration among geologists, reservoir engineers, drillers and others who traditionally had done their work in isolation.

Next, it was to provide around-the-clock monitoring of well data – both to enhance safety and reduce costly errors.

Van Oort estimates Shell’s global network of real-time operation centers now saves the company more than $100 million a year in reduced lost time on wells and other benefits.
Houston center’s focus

In North America, Shell keeps tabs on Gulf of Mexico wells from its center in New Orleans. A center in Calgary, Alberta, watches unconventional gas projects in Canada, and the Houston center handles international wells. The company also has real-time centers in Malaysia, the United Kingdom, Africa and the Middle East.

Inside the Houston center, engineers sit at stations facing 12 stacked computer monitors, four for each of three wells they’re assigned to watch. At one terminal, screens are tracking dozens of streams of data from a key Shell project in Libya. Another terminal follows wells in Brazil and Nigeria, while others are tied to projects elsewhere.

Even small anomalies might prompt an instant message to a crew member on a drilling rig on the other side of the globe, said Luis Hartenstein, one of the engineers. A bigger problem could spur shore-based monitors to recommend shutting in the well, though they cannot operate rig controls remotely.
Big Brother?

Van Oort said some veteran rig personnel initially bristled at the idea of what they saw as Big-Brother-like oversight by the company, but they later came to understand the centers ultimately were keeping offshore crews out of trouble.

“Foremen are busy. Mud loggers on the rig are busy. They have tasks to do. They are not focused on keeping eyes on pit levels,” he said, referring to rig equipment that monitors well fluid levels for dangerous gas influxes. “That’s what we provide.”

Eric Smith, associate director of Tulane Energy Institute in New Orleans, said regulators could require the industry to monitor well data from shore more closely in the wake of the BP accident, and Shell’s centers may provide a template.

“When all of the evidence is in, I’m sure there are going to be people who say, ‘If somebody had been looking at the data at BP, they could have told these guys to stop.’ ”

EXTRACTS:

Americans may be torn up by the BP oil spill and its destruction of the Gulf of Mexico’s natural habitat – and torn up we should be – but that habitat has not been pristine for decades. In many ways, Louisiana made its deal with the devil long ago.

“big oil plays an unnatural role in our politics. … Oil elects presidents, drives our foreign policy, our domestic policy, our climate change policy. … It’s led us to terrible energy policies and a breakdown of regulation. We look to the Niger Delta as an example of what an oil state does to its own environment, but it’s precisely what we’re doing to our own environment.”

Louisiana has paid a steep price for its bargain with the oil industry

By STEVEN MUFSON
Washington Post

July 24, 2010, 3:54PM

Huey Long, the famous Louisiana populist, launched his political career by waging war on the big oil companies, especially what he called Standard Oil’s “invisible empire.”

“I would rather go down to a thousand impeachments than to admit that I am the governor of the state that does not dare to call the Standard Oil Company to account,” he declared in a 1929 campaign circular.

But the threat of a thousand impeachments notwithstanding, Long later built his own invisible oil empire: In 1934, while he was a senator, he and his political associates formed the Win or Lose Corp. The company — which had a reputation of never losing – bought up state mineral leases and resold them to oil companies at a healthy profit, while keeping a share for itself. Although Long died in 1935, his family and friends received royalties for decades.

This dividend came at a price for the rest of Louisiana. The oil leases Long and his associates sold were generally in wetlands; in the process of tapping the oil and gas below, oil companies built a sprawling network of roads and canals, leaving behind a trail of damaged marshes. Wildcat wells came to dot the state’s landscape, and refineries and port facilities followed. Today, thousands of wells have been drilled within three miles of the far-from-pristine shoreline.

But it was a price Louisianans went along with: Since oil was first discovered there, the state has produced 159.5 trillion cubic feet of natural gas and 17.5 billion barrels of oil, according to the Louisiana Department of Natural Resources. That’s as much oil as the entire United States has produced over the past nine years.

Americans may be torn up by the BP oil spill and its destruction of the Gulf of Mexico’s natural habitat – and torn up we should be – but that habitat has not been pristine for decades. In many ways, Louisiana made its deal with the devil long ago.

And what a bad deal it was. Long before the oil spill, the state’s embrace of the petroleum industry cast it under what economists call “the resource curse”: the paradox that countries rich in minerals or petroleum tend to grow more slowly and have lower living standards than other nations. Simply put, Louisiana is the closest thing America has to a petro-state.

Instead of blessing Louisiana with prosperity, the oil industry fostered dependency, corruption and an indifference to environmental damage. Our bayou sheikdom’s oil and gas riches – like those of the Niger Delta, the Orinoco belt in Venezuela and the Iraqi marshes – also stunted its development, leaving it far behind states with fewer natural resources.

According to the Census Bureau and Harvard University health data, Louisiana ranks 49th among the states in life expectancy, has the second-highest rate of infant mortality, comes in fourth in violent crime, ranks 46th in percentage of people older than 25 with college degrees, and ties for second in percentage of people living below the poverty line.

Oil riches didn’t create these problems, of course, but it is striking that they didn’t ameliorate them. “We’ve always been a plantation state,” said Oliver Houck, an environmental law professor at Tulane University. “What oil and gas did is replace the agricultural plantation culture with an oil and gas plantation culture.”

Even though Louisiana’s oil and gas production peaked in 1970 and many companies moved their offices to Houston, refineries, oil import facilities on the coast and a web of thousands of miles of pipelines continue to make the industry a powerful force in the state. It is embedded in Louisiana’s mental and economic infrastructure, and remains one of its leading employers. The recent development of shale gas in the northern, poorer part of the state will bolster its influence even further.

All this explains why, even as the oil spill threatens Louisiana’s tourism, fisheries and shoreline, local politicians have continued to speak up on behalf of continued offshore drilling: They, and their state, are addicted to oil.

“There are no risk-free ways of producing the energy we rely on today,” Sen. Mary Landrieu, D-La., wrote in a June letter asking President Barack Obama to lift his moratorium on deepwater offshore drilling. She said the impact of idling 33 deepwater exploration rigs was “like closing 12 large motor vehicle assembly plants, all at once.”

Like Landrieu, Gov. Bobby Jindal and Sen. David Vitter, both Republicans, have called for an end to the moratorium, and Vitter has warned that the drilling halt “could kill thousands of Louisiana jobs.”

It’s an argument with rare bipartisan support in an age of bitter division. A Rasmussen Reports poll last month showed that 79 percent of Louisiana voters think offshore drilling should continue, far higher than the 60 percent who say the same nationwide.

Some of these voters will undoubtedly be among those who turn out to celebrate the 75th annual Louisiana Shrimp and Petroleum Festival in Morgan City this fall. The festival’s Web site says it is “an event that will prove that oil and water really do mix.”

Louisiana’s dysfunctional relationship with oil dates to 1901, when a farmer near Jennings noticed some bubbles in his rice field. He took an old stovepipe out to the field, threw a match inside and the bubbles ignited. With that, the rush was on. As word of his discovery spread, local businessmen bought up adjoining property, brought in a Texas driller and struck oil – so much that it flooded the farmer’s field, creating a small oil lake and ruining several acres of rice.

This pattern of rich oil and gas rewards coupled with environmental damage continued. “The oil and gas industry basically crisscrossed our wetlands with canals to make it easier to go out with service rigs and explore,” said Adam Babich, a law professor and director of the Tulane University environmental law clinic. Babich said the companies left dredged material “piled up on the side of the canals, making little berms all over the place, which has completely screwed up the hydrology of the wetlands.”

As the companies continued to develop the wetlands, more and more land was lost. The disposal of chemical drilling materials and equipment further polluted the state’s delicate ecosystem.

“We got all this great oil and gas production and we’ve let those guys rape our state,” says Foster Campbell, Louisiana’s public service commissioner. “They say they gave us jobs. Yeah, but they made billions.”

As in foreign petro-states, those billions have sparked quarrels over tax and royalty revenues. When Harry Truman was president, Louisiana powerbrokers rejected a revenue-sharing deal on offshore oil extracted from federal waters; after a lengthy court battle, the state ended up with nothing.

So Louisianans believed they got their due when they extracted a deal similar to the one the state rejected half a century ago. In 2006, in negotiations over drilling in a new section of the Gulf’s federal waters, Landrieu got the federal government to give 37.5 percent of the royalties to Gulf states to preserve and restore coastal habitats.

This time it was lawmakers from other states who were upset about the government giving up tens of billions of dollars of future revenue. The whole revenue flap echoed, in a more civil manner, the disputes between the Niger Delta states and Nigeria’s central government, or between the Kurds, Shiites and Sunnis over the division of oil revenue in Iraq.

Although the oil industry plays an outsized role in Louisiana’s economy, the money it brings in has decreased in recent years, and the state has struggled to make up for the resulting shortfall. The Louisiana Mid-Continent Oil and Gas Association says that the industry accounts for 13 percent of state revenue, down from 40 percent when oil and gas output was higher. And unlike oil-rich nations such as Norway, which has squirreled away about $437 billion from its oil sales in pension and sovereign wealth funds, Louisiana has no stash of money for investments or rainy days.

Nor have Louisianans managed to diversify their economy. There is no Silicon Valley here, no northern Virginia tech corridor. In the 1990s, when Louisiana realized it needed new sources of tax revenue to make up for declining oil receipts, the best idea it could come up with was to expand riverboat gambling.

The economic reach of the oil industry has helped it win over the state’s political establishment, which has supported the industry and been supported by the industry in return.

“There is certainly a friendly relationship between elected officials and the industry,” former senator Bennett Johnston, D-La., told me. “The fact that you were a friend of an industry that is important to your state doesn’t mean you didn’t believe it,” he said. “I think the oil and gas industry is very important to my state and, I think, to the country.”

After Johnston retired in 1996, he became more than a friend of the industry: He joined the boards of Chevron and Columbia Energy Group, a natural gas transmission company. In 2009, his lobbying firm, Johnston & Associates, received $160,000 from the American Petroleum Institute, according to data collected by the Center for Responsive Politics.

For his part, former senator John Breaux, D-La., says that the relationship is no different than those between Michigan politicians and auto companies or California politicians and the entertainment or high-tech industries. “We supported them and they supported us,” he told me.

After he left office in 2005, Breaux formed a lobbying firm with Republican Trent Lott. In 2009, the firm was paid $530,000 by Chevron, $330,000 by Royal Dutch Shell and $600,000 by Plains Exploration and Production, an independent oil company.

Because energy holdings are such a common presence in the investment portfolios of Louisiana’s leading citizens, including members of the judiciary, it can be hard to find an impartial judge to hear an oil case.

In late June, the New Orleans federal judge who suspended the Obama administration’s moratorium on offshore drilling disclosed that he had bought and sold shares of a variety of oil and gas companies. He hurriedly sold off shares of Exxon Mobil after realizing that the company was affected by the freeze.

And last October, the plaintiffs in an unusual case about global warming couldn’t get enough impartial appellate judges to hear their case, which alleges that, in emitting greenhouses gases, energy and chemical firms added to the “ferocity” of Hurricane Katrina, thereby inflicting extra damage on the plaintiffs’ property.

Half of the 16 judges on the U.S. Court of Appeals for the 5th Circuit in New Orleans recused themselves because of conflicts of interest. Moreover, disclosure forms show that four of the judges who did not recuse themselves had investments in energy partnerships or companies. One judge owned shares in five firms: BP, Chevron, ConocoPhillips, Devon Energy and Diamond Offshore Drilling.

At times, the industry’s influence has been even more brazenly displayed in the Louisiana legislature, as the recent experience of Tulane University’s environmental law clinic suggests. Students working there have won a range of cases involving coal plants, wetlands and landfills – and the oil industry. In one suit Tulane students filed, a judge found that a refinery operated by Exxon Mobil had 2,600 violations of the Clean Air Act.

Earlier this year, the Louisiana Chemical Association – whose members include Exxon Mobil, Shell and Chevron – supported a bill that would have blocked state funding for any university whose legal clinic sued a government agency, a business or an individual.

During hearings, the association’s president, Dan Borné, sat side by side with the bill’s sponsor, Republican state Sen. Robert Adley, who also owns Pelican Gas Management.

The measure, debated shortly after the BP spill began, died in committee. But before the legislative session ended, oil industry supporters did succeed in blocking a bill that would have allowed the state to retain outside counsel against BP.

In the 1970s, Venezuela’s oil minister predicted that oil, which he called “the devil’s excrement,” would lead his country to ruin. More than a generation later, the nation is ruled by a mercurial leader who doles out cheap gasoline in an effort to paper over persistent social inequality.

While Louisiana is a far cry from Venezuela, does it have any better chance of breaking free from its oil addiction?

According to Jeffrey Sachs, an economist who heads Columbia University’s Earth Institute and who has written about the resource curse, a better question is whether the rest of the country will. Sachs is no expert on Louisiana, but he says that the United States, once the world’s biggest oil producer and exporter, itself exhibits all the symptoms of “a pretty classic oil nation.”

Louisiana, in other words, is not alone in suffering the pathologies of oil dependence.

“We have lots of the characteristics of petro-states ourselves even though we use that term for others,” he says. He cites our overdependence on oil and a tax policy that keeps oil relatively cheap. Moreover, he adds, “big oil plays an unnatural role in our politics. … Oil elects presidents, drives our foreign policy, our domestic policy, our climate change policy. … It’s led us to terrible energy policies and a breakdown of regulation. We look to the Niger Delta as an example of what an oil state does to its own environment, but it’s precisely what we’re doing to our own environment.”

Mufson covers energy for The Washington Post. This article is reprinted with permission from the Post.

SOURCE ARTICLE

Money-saving measures BP took while designing the Macondo well in the Gulf of Mexico appear to have dogged efforts to bring the massive oil spill under control.

Documents released by congressional investigators show that modifications to the well design BP made last year included a reduction in the thickness of a section of the casing — steel piping in the wellbore

The modification included a slight reduction in the specified thickness for the wall of a 16-inch-diameter section of pipe toward the bottom of the well, according to a May 14, 2009, document.

Retired Coast Guard Adm. Thad Allen, commander of the response to the blowout and oil spill, has confirmed reports that concern about the strength of the casing led officials to stop efforts last month to plug the well from the top by injecting drilling mud and cement in a procedure called a top kill.

Another proposed spill control method, placing a blowout preventer on top of the one that failed in the original April 20 blowout, also was abandoned over concerns about well integrity. A blowout preventer is a system of shears and valves installed as a last line of defense against loss of well control.

The condition of the well also limits how much oil and gas can flow into containment systems now being used successfully to capture some of the flow. Even if a vessel could capture all the hydrocarbons gushing from the well, some would have to be released to keep well pressure under control.

Marvin Odum, president of Houston-based Shell Oil, the U.S. arm of Royal Dutch Shell, told the Houston Chronicle last week that the integrity of the well casing is a major concern. Odum and others from the industry regularly sit in on high-level meetings with BP and government officials about the spill.

If the well casing burst it could send oil and gas streaming through the strata to appear elsewhere on the sea floor, or create a crater underneath the wellhead – a device placed at the top of the well where the casing meets the seafloor – that would destabilize it and the blowout preventer.

The steel casing used in oil wells is strong, said Gene Beck, petroleum engineering professor at Texas A&M, but pressures deep in a well are powerful enough to split strong steel pipe or “crush it like a beer can.”

The strength and thickness of casing walls are key decisions in well design, he said. If the BP well’s casing wasn’t strong enough, it may already be split or could split during a containment effort.

BP spokesman Toby Odone said the decision to reduce the pipe thickness was made after careful review. The company said it doesn’t know the condition of the well casing and has no way of inspecting it.

BP is drilling two relief wells to intercept the Macondo well near the reservoir and plug it with cement. A rupture in the Macondo well casing probably wouldn’t affect that effort, said Donald Van Nieuwenhuise, director of geoscience programs at the University of Houston.

“When they start the bottom kill the cement will try to follow oil wherever it’s escaping, so it would actually hide a lot of sins in the well bore,” Van Nieuwenhuise said.

So far there are no signs that the section of the pipe below the sea floor is leaking.

The blowout preventer has been listing slightly since the accident, but officials believe that may have happened when the Deepwater Horizon sank while still attached to the well via a pipe called a riser.

A report from the National Oceanic and Atmospheric Administration on Monday noted research vessels found natural gas seeping from the sea floor several miles away from the well. Those appear to be pre-existing seeps that occur naturally, a NOAA spokeswoman said, and unrelated to the spill.

But the longer the well flows uncontrolled the more likely it is that the well casing could be damaged or the blowout preventer damaged further. Sand and other debris that flows through the pipes at high velocity can wear through metal over time, said Van Nieuwenhuise.

The chances of the well eroding from underneath and the blowout preventer tipping may seem unlikely.

“But everything about this well has been unlikely,” said David Pursell, an analyst with Tudor Pickering Holt & Co.

Reporter Monica Hatcher contributed to this report.

tom.fowler@chron.com ericnalder@hearst.com