New York Times
March 10, 2018
By ERIC LIPTON
PORT FOURCHON, La. — A dozen miles off the coast, on a rusty, aging platform, workers in hard hats and overalls spend their days extracting oil and gas from the ocean floor before retreating at night into tiny weather-beaten steel cubes that act as dorms.
The platform, owned by a Houston-based energy company that until recently was bankrupt, has none of the grandeur — or profits — of the deep-sea structures over 100 miles offshore that are operated by international giants like Exxon Mobil and Chevron.
But the company, Energy XXI, and other struggling operators in the shallow waters of the Gulf of Mexico are beneficiaries of the Trump administration’s efforts to increase offshore production here — in large part by upending financial, environmental and safety regulations that the companies oppose.
While attention has been focused on President Trump’s disputed decision in January to reverse drilling restrictions in nearly all United States coastal waters, the administration has also pursued a rollback of Obama-era regulations in the Gulf. Those rules include safety measures put in place after the explosion and sinking of the Deepwater Horizon rig in 2010, a disaster that killed 11 people and resulted in the largest marine oil spill in United States’ drilling history.
Smaller oil and gas companies, many backed by Wall Street and private equity firms, say they need the relief to survive financially, and the top safety official at the Interior Department appointed by Mr. Trump has appeared an enthusiastic ally.
“Help is on the way, help is on the way,” the official, Scott Angelle, said in September at a gathering in Lafayette, La., of oil and gas executives from so-called independent companies, which focus on drilling alone rather than the extended drilling-to-gas-station operations of bigger competitors.
But an analysis of federal inspection data by The New York Times found that several of the independent companies seeking the rollback, including Energy XXI, had been cited for workplace safety violations in recent years at a rate much higher than the industry average. Their offshore platforms suffer in some cases from years of poor maintenance, as well as equipment failures or metal fatigue on aging devices, records show.
In addition, there was a string of serious environmental and safety episodes in the last six months involving independent operators, including the death in February of a worker who was removing firefighting equipment from a platform about 30 miles offshore, and an oil spill in October that is considered the largest since the Deepwater Horizon event, according to Interior Department records.
“These regulations were written with human blood,” said Lillian Espinoza-Gala, a former offshore worker who now serves as an industry safety consultant and opposes easing protections. “The only way we can honor those who lost their lives is for us to learn how to do this in the correct way.”
But Mr. Angelle has close personal and recent ties to the oil and gas industry, particularly the smaller companies seeking his intervention. Earlier, as a state official, he worked with them to end a temporary moratorium on new offshore drilling imposed by the Obama administration after the Deepwater Horizon accident.
From Texas to Alabama, the Gulf of Mexico is host to 27,000 miles of federally regulated pipelines, and about 2,000 oil and gas platforms.
Now he is the top official at the Interior Department’s Bureau of Safety and Environmental Enforcement, a division created under President Obama to toughen safety standards and enforcement in offshore drilling because of problems exposed by Deepwater Horizon. Mr. Angelle spent his first months on the job, records show, traveling between Washington, Texas and his native Louisiana to meet with executives at most of the top offshore oil companies, including some repeatedly cited for safety violations.
During the gatherings, most of which were behind closed doors, he asked for suggestions about how federal safety and environmental rules should be rewritten. Sometimes he offered up his cellphone number, urging attendees to call rather than send emails or text messages, which could be subject to public records requests.
“Not all the good ideas in America come over the banks of the Potomac River,” Mr. Angelle said at a meeting in Houston in September that was sponsored by an affiliate of the American Petroleum Institute, the large industry lobbying group, and attended by a reporter. “To the degree this industry wants to be part of the discussion, tell me where you want me to be and we will be there,” he said, evoking applause.
Mr. Angelle’s leveraging of his role as a safety official to help channel the industry’s financial concerns and loosen regulations represents a sharp departure from his predecessors at the agency, which include a former Coast Guard vice admiral and a former federal prosecutor.
“What appears to be going on is a redefinition of the agency’s mission,” said Michael R. Bromwich, a former federal prosecutor and inspector general at the Justice Department who became the first head of the bureau in May 2010. “This is a safety and environmental protection agency. It is not part of the agency’s mission or mandate to increase production of oil or gas. That is inappropriate.”
Mr. Angelle declined to be interviewed for this article. But in a written statement, he disputed that his agency had backed off its commitment to safety. “We must never have another Deepwater Horizon or anything close to it,” Mr. Angelle said.
An agency spokeswoman said that all Americans benefited from his efforts.
“The work we are doing in BSEE benefits the entire nation, and we are supporting the president’s objective of safely achieving energy dominance in order to contribute to national security, economic security and energy security,” said Eileen Angelico, the spokeswoman, adding, “The fact that Director Angelle deeply understands the industry we regulate is a good thing.”
The agency is starting an enforcement effort that will focus inspectors on platforms with the most frequent problems, reducing paperwork requirements so they can spend more time on checking equipment.
But Mr. Angelle’s speeches often center on helping the oil and gas industry cut costs and grow their businesses. And agency documents suggest moves he has already made could save the industry more than $1.3 billion in compliance costs over the next decade.
The Interior Department has joined the effort more broadly. Last year, the department suspended a requirement imposed on Gulf rig owners, a change that will save them hundreds of millions of dollars. The rule required owners to buy additional bonds or provide other assurance that they could cover the costs of removing rigs once they stopped producing.
The rule was meant to keep taxpayers from having to pick up the tab, but a collection of operators last year — with help from high-profile lobbyists like former Senator Trent Lott of Mississippi — convinced the Trump administration that the requirement was too onerous. The change has mostly benefited independents like Energy XXI.
Separately, the administration has reduced the royalties independent companies pay when drilling on new leases on the continental shelf, the shallow area of the Gulf before the ocean floor drops more than a mile deep.
And it has eased up on deadlines for the removal of unproductive or damaged platforms, a change that also primarily benefits the independents, as they own wells on the shelf that in many cases are decades old and will soon need to be repaired or demolished.
The rollbacks have been popular across Louisiana, which is home to dozens of companies that serve offshore operations and is where Mr. Angelle grew up.
“Too much damn regulation in the world,” said John Girard, 72, a neighbor of Mr. Angelle’s from Breaux Bridge.
Foraging for ‘Forgotten Assets’
In a presentation to Wall Street analysts, Houston-based Renaissance Offshore, one of the Gulf’s independent operators, called its business plan “a targeted acquire and exploit strategy.”
While major oil companies had given up on shallow-water drilling in favor of bigger prizes farther offshore, Renaissance was “happy to assume control of forgotten assets with bypassed reserves on the continental shelf,” the presentation said.
When oil was selling for $100 a barrel, it was relatively easy for independent companies to find private equity firms willing to invest in buying the aging platforms and deploying new technologies — such as horizontal drilling — to tap reserves that Exxon Mobil and others had left behind.
The “used cars” of the offshore oil patch were becoming profitable fleets again for companies like Renaissance, Energy XXI and Fieldwood Energy, which often bought up hundreds of platforms at a time as the major companies moved to deeper, more lucrative waters.
Even as the price of oil dropped precipitously in recent years, the purchases continued, including a move last July by Cantium, a Louisiana start-up, to buy 300 active wells, along with 152 platforms and other offshore structures, from Chevron, one of the last major oil companies to leave shallow waters.
“We see tremendous potential,” said Mark Ian Smithard, Cantium’s chief operating officer. “We see changes taking place in the regulatory environment, and we are working with our industry partners to make sure they go through.”
But federal safety inspection records hint at the difficulties many of the independents have faced, and help explain why regulatory changes by the Trump administration are seen as so crucial to the shallow-water industry’s survival.
Approximately 240 platforms in the shallow waters of the Gulf, serving over 2,000 oil and gas wells as of last year, are listed by the Interior Department as “idle iron.” This means that they are severely damaged, not operating and no longer economically viable, and that they pose environmental and safety hazards. Most of the platforms are controlled by independent companies like Energy XXI and are decades old.
Even as safety has improved for the industry as a whole, some independent operators have lagged significantly behind, the records show.
Renaissance, which produced 1.5 million barrels last year, as well as 3.8 billion cubic feet of gas, received 47 safety warnings or citations in 48 inspections in 2017. Among these were 20 orders to immediately shut down malfunctioning or unsafe equipment on offshore platforms. Overall, Renaissance had a violation ratio that was nearly twice the average, according to a Times analysis of agency data obtained through a public records request.
There were two accidents on Renaissance platforms during that period, including a fire that erupted 48 miles offshore. Two workers jumped into the Gulf after concluding that the firefighting equipment on board was essentially useless, like “putting water on a hot grease fire,” the records show. Crew members were rescued by a passing boat after they got into life rafts.
In the past 18 months, the company was also issued a violation notice by the Environmental Protection Agency for not complying with a permit that allowed it to dump wastewater, and by the Transportation Department for failing to have qualified staff inspect its 32 miles of underwater pipeline, federal records show.
The institutions of democracy are under attack, which include the EPA and Bureau of Safety and Environmental Enforcement as government’s…
Energy XXI, which emerged from Chapter 11 bankruptcy at the end of 2016, was found to have 207 safety violations during 337 inspections. Conditions were so serious that inspectors moved nine times to shut down entire oil platforms, not simply broken components they found.
Last year, the company paid more than $1.1 million in fines for four different episodes. In one case, it abandoned two offshore wells without ensuring that they had been properly plugged, allowing natural gas to bubble up from the ocean floor.
In 2017, the Interior Department conducted four separate investigations into accidents on Energy XXI platforms (out of 46 conducted across the entire Gulf). One of the inquiries looked at a fire that broke out in October just six miles off the coast, in 49 feet of water, when a gas compressor built in 1979 ruptured and melted.
The most serious offenses involved Black Elk Energy Offshore Operations, which was convicted in August of eight felony violations related to a platform explosion that killed three workers and injured several others. It has since gone out of business, one of at least 19 oil and gas companies that have operated in the Gulf to go bankrupt since 2015.
Representatives from Energy XXI declined repeated requests for comment.
A spokesman for Renaissance said the company had already moved to improve its compliance record this year. “As a company we not only adhere to industry best practices but look to exceed on them in every way,” Renaissance said in a written statement.
Ridgelake Energy, a small company operating in shallow waters, also had a large number of reported violations last year. Its owner, William M. Hines, blamed the run-down condition of equipment he acquired from one of the Gulf’s many bankrupt operators.
“There is a lot of broken stuff out there,” he said. “We are working to get all this back into shape.”
Concern among enforcement officers has been growing because some of the independent companies are looking to extend operations toward the Gulf’s deep waters, where the risks are even greater.
On the same day in February that it filed for bankruptcy, Fieldwood announced that it was going to acquire $700 million in oil wells from Noble Energy, which is leaving the offshore area to focus on shale drilling on land. With that purchase, Fieldwood hopes to start major explorations in deep water, even as it faces scrutiny for violations on the shelf.
A spokesman for Fieldwood said the company was already operating in deep water and would be “be much stronger financially when we come out of this restructuring.”
Lars Herbst, the Gulf director for the Bureau of Safety and Environmental Enforcement, warned offshore operators at a briefing last year that certain kinds of shutdown had doubled. He attributed the spike in such orders, which involve an “unsafe situation” that “poses an immediate danger to the entire facility or personnel,” to a large number of “financially at-risk companies.” Those businesses, he said, operated 449 of the 2,104 active facilities in the Gulf.
More recently, the agency conducted a two-day inspection blitz involving gas leaks on offshore platforms, many of them owned by independent operators in shallow waters. Inspectors found that 17 percent of the 36 platforms and well operations they visited had “oil and gas accumulations,” industry lingo for leaks that can lead to fires, agency records show. Eight facilities either lacked operating gas detectors or had other problems with their leak-detection systems.
“It was quite concerning,” said Jason Mathews, the agency’s chief for safety management in the Gulf.
A Native Son Leads the Charge
The Cajundome in Lafayette is well known as a venue for college basketball games, country music concerts and monster truck shows. But for Mr. Angelle, 56, it is associated with an enduring alliance he forged with the offshore oil and gas industry nearly eight years ago.
In July 2010, just three months after the Deepwater Horizon accident, Mr. Angelle, then lieutenant governor, stood in the arena before more than 10,000 locals, offshore workers and industry executives. He promised to pressure the Obama administration to end the moratorium on new offshore drilling, which had deeply angered communities that depended on it. The ban was lifted that October.
“Enough is enough,” he said with a thick Cajun accent in a rousing speech laced with rhymes and applause lines. “And it’s time to quit punishing innocent American workers to achieve some unrealistic political agenda.”
One of nine children whose father owned a local Ford dealership before going into Louisiana politics himself, Mr. Angelle turned the arena on fire by ticking off the names of local families.
“This moratorium is not hurting the stockholders of BP, or Exxon or Chevron,” he declared. “This moratorium is hurting the Cheramies, and the Calaises, and the Dupuises, and the Robins, and the Boudreauxs and the Thibodeauxs!”
Mr. Angelle knew his audience well: After graduating from the University of Louisiana at Lafayette, he started his career by scouting for onshore drilling sites. He eventually went on to lead the state agency charged with regulating the oil and gas industry, and made a series of appeals to Interior Department officials — some at the safety agency he now runs — to press the federal government to soften its response to the Deepwater Horizon accident.
His ties to the industry are also financial. Mr. Angelle was paid $1 million to serve for four years on the board of directors at Sunoco Logistics, a pipeline company. And when he ran unsuccessfully for governor in 2015, he benefited from large contributions from the industry. One of these was a $1.25 million donation to Louisiana Rising, a political action committee that backed him, from a top executive at an oil and gas company that then had hundreds of Gulf platforms. Mr. Angelle promised voters that he was “fighting for Louisiana’s energy industry” in one advertisement.
After being appointed to his current post, Mr. Angelle made a return visit to the Cajundome last September as part of his outreach to oil and gas executives. Mr. Angelle, agency officials note, has sold off any industry stock assets to comply with federal conflict-of-interest rules.
His job was new, but his message was familiar: How can I help your companies thrive? In addition to safety enforcement, he made it clear that he viewed his role as helping the industry grow.
“One of the things that we want to do is help unlock the next wave of investment into the Gulf of Mexico,” he said at the time. “That is what we want to do.”
The next day, at a meeting with executives in Houston, Mr. Angelle acknowledged that efforts to assist the industry could be hampered if safety problems persisted.
“At the end, we are only as strong as the weakest link,” he said. “And if we have someone who is a bad actor, you owe it to yourselves, you owe it to your families, you owe it to the industry, you owe it to America, to call them out.”
Even before this gathering, the Trump administration had signed off on the first rollback of industry regulations, including the one pertaining to the removal of unproductive offshore platforms. The lobbying effort on that rule was funded in part by companies, like Renaissance and Energy XXI, that were plagued by safety violations. It involved both Mr. Lott and his partner, John Breaux, a Democrat and former senator from Louisiana, according to a disclosure report.
The rule had taken effect late in the Obama administration after government auditors estimated that it would cost nearly $40 billion to remove the old wells, but determined that oil companies had issued just $2.9 billion worth of bonds to cover the expense.
The Obama administration’s remedy was to require companies to buy more bonds, or provide other financial guarantees, to prove they had the capacity to pay for the removal of the wells. The industry’s reaction was swift.
The problems associated with the old platforms can be severe, as seen in an oil leak 12 miles off the Louisiana coast that has been spreading a sheen across the Gulf for more than a decade. The leak, from a collapsed platform once operated by the now defunct Taylor Energy Company, could continue for 100 years unless it is properly sealed, the safety agency has estimated.
Next, the oil and gas companies pushed to unravel a major safety requirement known as the well-control rule, which regulates methods used to drill new oil and gas wells — and prevent explosions.
It took six years after the Deepwater Horizon accident to enact the rule, a process that involved thousands of hours of consultations with industry experts and public safety officials, according to Mr. Bromwich, the former federal prosecutor who helped start the process.
The new rule, which took effect in July 2016, required additional inspections of devices called blowout preventers, the equipment that failed during the Deepwater Horizon disaster. To prevent accidents, another provision required oil and gas platforms to shut down temporarily when so-called lift boats positioned themselves for repair work.
At a meeting Mr. Angelle called in September, industry officials detailed their objections while members of staff — some of whom helped write the rule — sat taking notes. Separately, Mr. Angelle held private meetings with representatives from the same companies, according to a copy of his calender, obtained through a public records request.
“It is mostly knee-jerk reactions that came out of Washington,” Craig Castille of Stone Energy said in prepared remarks that called for more than a dozen changes to the regulation. “The pendulum has swung way too far to the right.”
Two days later, Mr. Angelle directed his top aides to prepare documents explaining how the agency had justified the requirement, according to emails obtained through the public records request.
“Please highlight the sections around the drilling margin and any discussion on blowout preventer,” Mr. Angelle wrote. “This will help inform me.”
In late December, Mr. Angelle sent the White House a proposal to overhaul the well-control rule, estimating that oil companies would save $986 million in the coming decade. The proposal included many changes requested by the industry, such as loosening inspection requirements for blowout preventers and eliminating the need to shut down operations as lift boats approached.
“Oil and natural gas operators raised concerns about certain regulatory provisions that impose undue burdens on their industry, but do not significantly enhance worker safety or environmental protection,” said the confidential draft, a copy of which was obtained by The Times.
Though the proposal is undergoing a review before the revisions are made public, the White House has made clear that it welcomes the effort. A White House spokeswoman declined to comment.
To some longtime residents and activists, the changes, and the hundreds of millions of dollars they will save for companies, are not worth the possible trade-offs in safety and environmental protections.
“It’s always the workers who pay,” said Scott Eustis of the Gulf Restoration Network, an environmental group. “And Gulf Coast workers will pay with their bodies, their lives, their children, who will grow up without fathers.”
Mr. Bromwich, like other former officials who spent years drafting the safety rules, lamented the move to weaken them.
“It’s just a terrible signal to the industry as to who is in charge,” Mr. Bromwich said. “It is classic swamp behavior.”
But for offshore crews, the changes bring excitement and renewed optimism about work.
“It affects from the lowest guy to the highest guy, regulations, all day long,” said Don LeBoeuf, an Energy XXI crew worker here in Port Fourchon, before he boarded a boat to a platform 60 miles offshore.
Huge drillships — with names like Deepwater Asgard, owned by Transocean, the same company that owned Deepwater Horizon — have been anchored in place 18 miles offshore for months at a time with their generators running and their crews on board, waiting for work.
When a small boat with a reporter and photographer recently pulled up alongside Deepwater Asgard, workers peered over the side, wondering why they had visitors. Asked what they thought about the Trump administration’s rollback of regulations in the Gulf, one of them yelled, “Drill, baby, drill!”
Several weeks later, the ship actually did get a drilling contract, and is now back at work.
Regulations and Tough Times
Even in a difficult period, the Gulf generates 97 percent of offshore oil in the United States, about 18 percent of the country’s crude oil and $2.8 billion a year in royalty and lease payments to the federal government. And 2017 was a record year for the Gulf, with a total of 1.65 million barrels a day.
There are 2,200 offshore oil and gas platforms along an 820-mile stretch of coast between Brownsville, Tex., and Mobile, Ala., and they are an imposing presence, resembling in places a battalion of Imperial Walkers from the “Star Wars” movies.
But in early March, the number of drilling rigs used in the Gulf was just 14, compared with 145 at the industry’s peak in 2000.
The downturn was set off by a drop in oil prices, competition from fracking and other sources and, local businesses will tell you, an overbearing regulatory reaction to the Deepwater Horizon accident. Talk of lifting regulations echoes throughout the coastal communities that serve offshore operations, particularly the smaller concerns that specialize in shallow-water drilling.
“There is just not a lot of business out there right now for the offshore service companies,” said Court B. Ramsay, president of Aries Marine of Lafayette, which has a fleet of 26 boats used in repairing oil and gas platforms in shallow waters. “It would be a shot in the arm for sure, for my business and many business like mine, if we can get some relief from some of these rules.”
Statistics from the Greater Lafourche Port Commission, which operates the port here about 160 miles from Lafayette, show that as many as 450 boats passed in and out of the piers each day, mostly to serve the oil and gas industry, during drilling’s peak. Now there are about 300. In addition, diesel fuel sales have dropped from about 40 million gallons a month to about 20 million, said Chett Chiasson, the port’s executive director.
The fall in oil prices certainly contributed to the decline, Mr. Chiasson said, but he also blames the Obama administration.
“There were regulations that were not necessarily increasing safety, but they were just increasing the cost of the activities in the oil and gas industry and thus hindering their ability to keep operating in the Gulf,” he said. “We know things need to be safe and operate in a safe manner. But we don’t need to overregulate in a way that disincentivizes investment.”
Port Fourchon itself has the feel of a moon base. It is reached via an eight-mile bridge intended to keep the port operating even during flooding, an increasingly common occurrence because of damage to protective wetlands caused by drilling and dredging. Every major oil and gas company has an encampment with ships and repair warehouses. Hundreds of workers converge daily in a rush-hour scramble of muddy pickup trucks.
The port operates around the clock, 365 days a year, with hundreds of service boats and helicopters ferrying crews to and from offshore platforms and drilling rigs. Giant workboats — the equivalent of floating dump trucks — carry loads of mud, fuel, water, food and other supplies the crews require.
Safety remains a focus. There are signs on the drillships and offshore platforms reminding crews of the importance of following safety rules. At the port entrance, a memorial depicts a mermaid ascending from the water, complete with a cloak that includes an oil rig. The Our Lady of the Gulf statue was installed last year to honor offshore workers who have died in the Gulf, including the those killed in the Deepwater Horizon explosion.
But the primary concern voiced here is economic.
“Half the supply boats and crew boats up and down the bayou have been seized by the banks,” said Kathleen Chiasson, who once ran a truck-dispatching company that supplied the industry, and now works behind the counter of a gas-station mini market. “I just hope someone can do it to get it back to at least half the way it used to be.”