FEDERAL REGULATION OF FPSOs IN THE GULF OF MEXICO

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FEDERAL REGULATION OF FPSOs IN THE GULF OF MEXICO

• Jonathan A. Hunter
• Liskow Lewis
• New Orleans, LA

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Outer Continental ShelfLands Act

• All OCS leasing, exploration, and development
  (beyond State waters) is governed by the OCSLA,
  43 U.S.C. 1331 et seq.
• Pursuant to the OCSLA, the Secretary of the
  Interior administers the federal offshore leasing
  program, and the Secretary has broad authority to
  promulgate regulations, approve operations,
  regulate facilities, etc.

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Outer Continental ShelfLands Act

• OCSLA declares as policy that operations ...
  should be conducted in a safe manner by
  well-trained personnel using technology,
  precautions, and techniques sufficient to prevent
  or minimize the likelihood of blowouts, loss of
  well control, fires, spillages, physical
  obstruction to other users of the waters or
  subsoil and sea bed, or other occurrences which
  may cause damage to the environment or to
  property, or endanger life or health. 43 U.S.C.
  1332.

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Minerals Management Service

• MMS is the subagency within Interior that is
  responsible for performing the Secretary of the
  Interiors duties under the OCSLA.
• Among other things, MMS holds offshore lease
  sales, approves exploration and development
  plans, approves changes in ownership of leases,
  conducts inspections, collects lease payments,
  AND specifies the criteria that govern the design
  and use of offshore facilities.

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Minerals Management Service

• MMS has extensive regulations and programs in
  place relating to OCS oil and gas operations,
  including regulations that address the types of
  facilities that may be used, design requirements
  for facilities, reporting requirements regarding
  operations and production, and similar matters.
  See 30 CFR Part 250.

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Minerals Management Service

• Interior, through the MMS, thus has a dual role
  it is both lessor (interested in increasing
  production and collection of lease payments) and
  regulator (interested in conservation, ensuring a
  domestic supply of hydrocarbons, protecting the
  environment, requiring safety, etc.).

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MMS Approval Of FPSOs

• Although FPSOs have been used in offshore
  operations internationally, they have not been
  used in the United States. Because of the
  governing statutory and regulatory framework, MMS
  must approve the use of FPSOs in the Gulf of
  Mexico. In January 2002, MMS announced that it
  has, at least conceptually, approved the use of
  FPSOs in the Gulf.

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MMS Approval Of FPSOs

• The process started in 1996, when MMS commenced
  discussions with members of the offshore oil and
  gas industry about the potential introduction of
  FPSOs into the Gulf of Mexico.
• Increased interest in FPSOs was a by-product of
  the increase in deep water exploration. FPSOs
  respond to the need created by the lack of an
  existing pipeline infrastructure in deep water
  areas also, they potentially offer cost savings
  for marginal discoveries.

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MMS Approval Of FPSOsJanuary 1999

• MMS and United States Coast Guard issue an
  updated Memorandum of Understanding (MOU)
  concerning their respective jurisdictions,
  including with respect to Mobile Offshore
  Drilling Units (MODUs) and Floating OCS
  Facilities (including FPSOs).

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MMS Approval Of FPSOsJune 1999

• MMS publishes Notice of Intent to Prepare Draft
  Environmental Impact Statement (EIS) with regard
  to the use of FPSOs in the Gulf of Mexico,
  pursuant to the National Environmental Policy Act
  (NEPA), which requires preparation of an EIS on
  any major Federal action that may have a
  significant impact on the environment.
• MMS believed that a completed, programmatic EIS
  would hasten the approval of future requests to
  use FPSOs for specific operations.

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MMS Approval Of FPSOs1999

• The EIS evaluated what MMS considered to be the
  most typical FPSO to be used in the Gulf of
  Mexico in the next ten years permanently
  moored, double-hulled, ship-shaped, storage up to
  1 million bbls, multiple subsea wells,
  conventional shuttle tankers with 500,000 bbl
  storage, and used in water depths exceeding 200
  meters in the Central and Western Planning Areas
  of the Gulf.

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MMS Approval Of FPSOs1999

• MMS also funded a separate Comparative Risk
  Analysis (CRA) by the Offshore Technology
  Research Center. The CRA was a quantitative risk
  analysis performed to assess and compare oil
  spill and fatality risks for four types of
  production systems Spars, Tension Leg
  Platforms, Hub/Host Jacket Systems, and FPSOs.

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MMS Approval Of FPSOs2000

• Work on the EIS and CRA proceed.
• MMS issues NTL 2000-N06, containing guidance on
  obtaining agency approval for Deep Water
  Operations Plans (DWOPs) for projects involving
  nonconventional facilities, including FPSOs.

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MMS Approval Of FPSOsFebruary 2000

• MMS issues Final EIS and CRA, both of which find
  that FPSOs present safety and environmental risks
  comparable to those of other production systems.

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MMS Approval Of FPSOsFebruary 2001

• EIS proposed three alternative regulatory
  systems
•  Alternative A Approve the general concept of
  using FPSOs in deepwater areas of the Western and
  Central Planning Areas of the Gulf.
• Alternative B Approve the general concept of
  using FPSOs with geographic and operational
  restrictions or conditions.
• Alternative C No action at this time.

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MMS Approval Of FPSOsDecember 2001

• MMS issues its Record of Decision, reviewing the
  EIS alternatives and choosing Alternative B-1,
  according to which FPSOs are approved in the
  Central and Western GOM except in USCG-designated
  lightering prohibited areas.
• The prohibited area is just off of the
  continental shelf from Galveston to New Orleans.
  MMS will revisit this prohibition in two years,
  following discussions with the USCG and further
  study of environmental issues applicable to this
  area.

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MMS Approval Of FPSOsDecember 2001

• MMSs announced policy, like the EIS, is limited
  to the period 2001-2010.
• MMS also proposed new regulations relating to the
  use of FPSOs and other Floating Production
  Systems (66 FR 66851, 12/27/01).

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MMS Approval Of FPSOsJanuary 2002

• MMS has completed a rigorous environmental and
  safety review of FPSOs for use in the deepwater
  areas of the Central and Western Gulf of Mexico.
  We examined the environmental risks and found
  them comparable to other types of production
  systems currently accepted for use in these
  deepwater areas. Therefore, we have concluded
  not to categorically exclude them from use as an
  offshore production system.While we will accept
  applications for the use of FPSOs, each will be
  considered on a case-by-case basis. Acting
  Director, Lucy Querques Denett.

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MMS Approval Of FPSOsJanuary 2002

• While this programmatic level decision does not
  approve any specific FPSO site or project, it
  provides a foundation for considering a specific
  request by a company to use an FPSO for a
  project. When a specific project is applied for,
  MMS will still conduct a site-specific
  environmental assessment as well as a
  project-specific technical and operational review
  before a project is approved. A review for
  projects that fall within the base case can now
  be completed in less time, since an EIS has
  already been prepared. Acting Director, Lucy
  Querques Denett.

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MMS Approval Of FPSOs

• MMS has extended the comment period on its
  proposed regulations to May 28, 2002. A final
  rulemaking is not anticipated for 6-12 months.
• Generally, the proposed regulations incorporate
  by reference a series of industry-approved
  technical standards (primarily API standards) for
  planning, designing, constructing and installing
  column-stabilized units, FPSOs, TLPs, Spars, etc.
  The goal of the proposed regulations is to
  streamline the permitting process.

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MMS Approval Of FPSOs

• Finalization of the proposed regulations is not a
  prerequisite to obtaining agency approval to use
  an FPSO
• An operator/lessee may seek approval to use an
  FPSO in essentially the same manner as with other
  nonconventional facilities (like TLPs or Spars)

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MMS Approval Of FPSOs

• Deep Water Operations Plan (DWOP) and the
  Development Operations Coordination Document
  (DOCD) main vehicles for agency approval
• Any proposed FPSO operation that is not within
  the range of operations evaluated in the
  programmatic EIS will require a more extensive
  environmental review and NEPA documentation
  than would a proposed operation within the range
  addressed in the EIS. (MMS Press Release)

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MMS Approval Of FPSOs

• Key components of this regulatory framework
  include the deepwater operations plan (NTL
  2000-N06) and the development operations
  coordination document (30 CFR 250.204) with
  associated conservation reviews (NTL 2000-N05)
  and environmental reviews (NTL 2000-G21).
  Additional engineering reviews of the facility
  and safety systems will ensure the FPSO can
  operate safely. Once an FPSO system is
  installed, MMS inspectors will examine the
  facility on a routine basis. (MMS Press
  Release)

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MMS Approval Of FPSOs

• Concerns over how to handle natural gas
• The MMS will require the operator to transport
  produced gas to market. This will likely require
  a dedicated pipeline for gas production. The MMS
  has stated throughout the development of the FPSO
  strategy that flaring of gas would not be
  permitted on an extended basis. (MMS, December
  2001)

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MMS Approval Of FPSOs

• MMS has received no applications to use an FPSO

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Other Agencies

• Despite its extensive role, MMS is not the only
  federal agency with jurisdiction over offshore
  oil and gas operations.
• Other agencies are involved as well most
  notably for FPSOs, the United States Coast Guard
• FPSOs will also have to satisfy certain USCG
  regulations, but MMS and the USCG are working
  together to minimize any overlap between their
  respective jurisdictions. See 1999 MOU (64 FR
  2660)