USA: Oil company ordered to pay $4 million for offshore violations

U.S. oil company Energy Resource Technology (ERT) has been sentenced to three years of probation, and has to pay a $4 million fine and $200,000 community service payment for violations on its Gulf of Mexico facilities in 2012.

The company pleaded guilty to two felony counts of violating the Outer Continental Shelf Lands Act and two felony counts of violating the Clean Water Act related to conduct on its offshore oil production facilities in the Gulf of Mexico.

According to the U.S. Department of Justice (DOJ), U.S. District Judge Ivan L.R. Lemell ruled that during the period of probation, ERT, its subsidiaries, agents and affiliated business entity Talos Energy Offshore, LLC, and employees thereof, will be required to comply with a Safety and Environmental Compliance Plan.

To remind, Talos Energy LLC, a privately held Houston-based oil and gas company, in February 2013 bought Energy Resource Technology, the then subsidiary of Helix Energy Solutions Group, Inc. for $620 million.

Knowingly failed to comply

Court documents, cited by the DOJ, reveal that on or about November 26, 2012, ERT “knowingly and willfully” failed to comply with the regulations for hot work on its offshore production platform known as Ship Shoal 225. Specifically, contractors for ERT violated regulation which mandates that welding and associated activities, also known as hot work, on offshore facilities shall not take place within 10 feet of a well bay unless production in that area is shut-in.

Furthermore, in November, 2012, on Ship Shoal 225, ERT “knowingly and willfully” failed to comply with the regulations for blowout preventer testing.

A blowout preventer system is designed to ensure well control and prevent potential release of oil and gas and possible loss of well control. According to the Code of Federal Regulations, the blowout preventer system must be pressure tested at regular intervals, and the entire system must pass the pressure tests prior to resuming normal operations. The results of the pressure testing then must be recorded, with test record and pressure chart  signed and dated by the onsite representative as correct.

Inspectors aboard

According to the Department of Justice, ERT’s contractors on November 27, 2012, only 6 of the 7 required components were tested. The chart showed pressure testing failures that required the workers on the platform to re-test the blowout preventer system. However, at the conclusion of the testing, the blowout preventer chart was not approved for accuracy by the ERT on-site representative on duty nor did the workers re-test the system. Then, on or about November 29, 2012, inspectors with BSEE came onboard the platform at Ship Shoal 225 for a routine inspection and requested blowout preventer testing records. ERT could not produce an acceptable pressure test chart because of the deficiencies in the November 27, 2012 testing.

Truth hidden in coffee filters

Furthermore, the oil company violated the Clean Water Act by “tampering” with the method of collecting the monthly overboard produced water discharge samples to be tested for oil and grease content pursuant to its NPDES permit.

In spring 2014, ERT became suspicious that contract operators were manipulating the integrity of the overboard produced water samples at some of its platforms by filtering the sample through coffee filters or other similar means to ensure that ERT would not be found to be in violation of its Permit.

Although the Discharge Monitoring Reports for the platforms from October 2012 through March 2014, showed that the platforms were not discharging oil and grease in excess of the permit requirements, when ERT began an investigation, the results of which it self-reported to the United States, DOJ says, and took the samples in accordance with the Permit requirements, multiple platforms were shown to be in violation of the monthly discharge allowances.

Multiple discharges

From April 2014 through June 2014, discharge monitoring samples correctly taken by ERT showed multiple Gulf of Mexico platforms, including High Island 557A, South Marsh Island 107A, Ship Shoal 225, Ship Shoal 224A, East Cameron 346A, Eugene Island 302C, South Timbalier 63A, Vermilion 331A and 171A, to be discharging oil and grease in excess of their monthly allowance under the Permit, the statement by the Department of Justice said.

ERT’s most recent Clean Water Action violation occurred on or about June 9, 2015. On that day, two contract operators on an ERT oil production platform in the Gulf of Mexico at platform Vermilion 195A were engaged in bleeding pressure from the production casing on a plugged well.

Operators routinely encounter liquid, including pollutants such as well bore fluid, acid, and hydrocarbon/oil residue, when bleeding pressure from well casings, and therefore precautions against an unpermitted discharge into the Gulf of Mexico should be taken.

On or about June 9, 2015, the two contract operators onboard VR 195A did not take any precaution against a discharge of pollutants when they began bleeding down the pressure from the production casing, the DOJ says. The contract operators attached a hose to the valve from which the casing pressure was to be released and put the end of the hose at the edge of the platform, allowing well bore fluid mixed with hydrocarbons to shoot out over the Gulf of Mexico falling into the water below in violation of the Clean Water Act.

“It’s imperative that energy extraction be done responsibly and in ways that doesn’t put human health and the environment at risk,” said Ted Stanich, Acting Director of EPA’s criminal enforcement program. “When oil and gas operators cut corners and break the law, EPA will work with its law enforcement partners to hold them accountable in order to protect human health and the Gulf Coast ecosystem from harm.”

The case was investigated by the Department of Interior-Office of Inspector General (Energy Investigations Unit) with assistance from the Investigations and Review Unit, Bureau of Safety and Environmental Enforcement and the Environmental Protection Agency-Criminal Investigation Division.

The case was prosecuted by Assistant United States Attorney Emily K. Greenfield of the United States Attorney’s Office’s National Security Unit.

Legacy issues resolved

Commenting on the case, Talos Energy sent the following statement to Offshore Energy Today:

“Since our acquisition of Energy Resource Technology, we have examined every aspect of our offshore operations and have made a number of key organizational changes as part of integrating the ERT business into the broader Talos organization in order to achieve the best, most sustainable HSE and compliance culture possible.

These changes include conducting an independent third party audit of all of our HSE processes and our compliance culture, the addition of a senior level HSE executive that reports directly to the CEO and the Board, and increased training and leadership programs for personnel in the field to ensure incidents like these are not repeated. Talos has a zero-tolerance policy regarding regulatory non-compliance. We are committed to getting this exactly right.

Following our internal audits we reported violations to the appropriate authorities, which in part have led to the current settlement with the Department of Justice. This settlement allows us to resolve these legacy issues and move our organization forward with the high standards of HS&E culture and practice expected by Talos management.”

The article has been amended to include a statement by Talos Energy.

Offshore Energy Today staff