Feds struggle to get smaller oil companies, contractors to follow new offshore safety rules

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wwltv.com

Posted on November 14, 2013 at 11:32 PM

Updated Saturday, Nov 16 at 5:11 AM

David Hammer / Eyewitness News
Email: dhammer@wwltv.com | Twitter: @davidhammerWWL

NEW ORLEANS – In spite of a new industry focus on safety since the 2010 Deepwater Horizon rig explosion and oil spill, nearly 20 smaller oil companies continue to score poorly on safety inspections and have had their offshore platforms placed on a special watch list, according to data WWL-TV fought for months to get from the federal government.

On Friday, all Gulf oil and gas operators will have to turn in independent audits of their safety management systems. Experts believe this will provide the most comprehensive view to date of what companies are doing to improve safety offshore.

“I think what we realize now is, the days when we can give lip service to safety and say we have a safety culture and not be able to show it, are over,” said Ken Wells, president of offshore safety consulting firm Lifeline Strategies.

But the data suggest that there’s still a long way to go, particularly for oil companies that don’t make the massive profits of BP, Chevron and Shell, industry leaders that all score better than average on inspections and have implemented strong safety management programs.

And government regulators don’t even track the safety records of contractors and other oilfield-service companies that provide most of the offshore workers who often make major decisions on rigs and platforms – and end up injured or killed when things go wrong. In fact, the federal Bureau of Safety and Environmental Enforcement has only just begun to issue violations to contractors for their role in accidents.

Overall, the records suggest that new federal regulations and tougher enforcement have caused larger, more established operators to improve their safety culture, but that the government’s offshore safety agency is still struggling to make sure smaller independents and their far-flung contractors are stepping up their game.

Poster child: Black Elk

Take, for example, Black Elk Energy, formed by former BP employee John Hoffman in 2007 and described by him as the “fastest growing company in the Gulf of Mexico.” A year ago, on Nov. 16, 2012, three workers died on Black Elk’s West Delta 32 E Platform when they cut into a gas line with flammable fumes still present.

A federal accident report released this month blamed Black Elk and its contractors for the deaths of three Filipino workers. The report said the contractors communicated poorly about when it was safe to perform “hot work,” and failed to follow their own safety procedures. (See full accident report)

In one particularly damning section of the report, investigators said gas detectors were not functioning, and when employees complained, their supervisor told them not to worry and to hang the broken devices as “decoration.”

The findings made the Philippines Ambassador to the United States, Jose Cuisia Jr., question whether American regulators have enough control over contractors.

“I sometimes wonder whether contractors are required to follow the same procedures because my understanding from the workers that were injured in that oil rig explosion last year, the safety drills that were standard procedure for companies like Shell, BP and Chevron were not being followed by the smaller companies, like Black Elk,” Cuisia said.

But Black Elk’s issues go beyond that one incident. It has 38 platforms on the Bureau of Safety and Environmental Enforcement’s Increased Oversight List, by far the highest number on the list regulators keep to track the most troubled Gulf rigs.

Federal regulators cited Black Elk platforms for deficiencies on almost 9 percent of all components they inspected in 2012, more than twice the industry average. (See offshore safety inspections)

In addition to the three welders who died last year, Black Elk has lost control of two different wells on four separate occasions in the last few years, meaning the company didn’t keep the pressures in those wells in proper balance. None of them saw the worst-case scenario that BP did when the Deepwater Horizon crew lost control of its well and experienced a massive blowout, but even minor well-control incidents are an indicator of how safely or dangerously a company operates.

And when we spoke to workers in the Philippines, we found Francisco Villanueva (pictured to left), who said he worked  on other Black Elk platforms and found his supervisor smoking.

“Even when we had the gas flowing, they allowed people to smoke,” Villanueva said in Tagalog, through an interpreter.

“I told the supervisor I’ve worked on platforms for Shell and Chevron and I’ve never seen such carelessness. I told him he’s a supervisor, he shouldn’t be doing that.”

Black Elk declined to respond to questions for this story.

Contractor conundrum

Black Elk and its contractors are far from the only ones with poor safety marks.

Multiple sources, who spoke on condition of anonymity because the information was supposed to be kept confidential, told us that contractors working for three different oil companies were issued surprise well-control tests this year and all three had at least one employee who flunked.

Charlie Williams, director of the Center for Offshore Safety, which the industry opened after Deepwater Horizon, says he speaks to member companies all the time about how to make sure contractors are on the same page on safety.

“I think one of the significant challenges in the industry now, in fact, is managing this operator-contractor relationship, and then the contractors managing the contractor-subcontractor relationship,” Williams said.

After Deepwater Horizon, the industry claimed shallow-water wells were safer; they are in well-studied zones near the shore and require less complicated equipment to drill and produce. But they also tend to have aging equipment on platforms that have been passed on from larger companies to smaller ones.

And so, there may be more danger in those operations than initially believed. The data show that all five fatalities in the last year and four of the seven losses of well control happened on older, shallow-water platforms.

Some of the incidents are occurring at long-dormant wells, often on corroding platforms the companies are trying to shut down for good.

Eric Smith, professor at the A.B. Freeman Business School at Tulane University and associate director of the Tulane Energy Institute, says that’s a function of economics more than anything.

“The farther you go towards being a bottom-feeder (company), the less margin you have to work with,” Smith said. “You're trying to produce the last vestiges of oil in the field and you don't have the economic rationale to support the same sort of safety culture that best practice would indicate.”

Danger in the shallows

Two of the 10 fatalities since 11 men died on the Deepwater Horizon in April 2010 (pictured above) were on platforms owned by Energy Resource Technology GOM. ERT was purchased this year by Talos Energy, and that firm says it’s cleaning up the safety procedures implemented by ERT’s former owners. But since taking over, Talos suffered a well-control incident this summer, and a worker toppled to his death last month while trying to dismantle one of ERT’s old platforms.

The federal safety bureau made ERT the second Gulf operator, after Black Elk, to be placed on a Performance Improvement Plan, another new tool in regulators’ arsenal to try to change an operator’s safety culture.

ERT spokesman David Blackmon said the company responded swiftly to the government’s demands to improve crane safety, platform oversight, welding work and other issues.

“The PIP (Performance Improvement Plan) does provide a framework for understanding the expectations and broad perspective of the regulator and provides for a higher level of inspections than normal,” Blackmon said. “That said, we had already addressed the great majority of what was requested in the PIP prior to receiving it, and would likely have addressed most, if not all of the remainder in the normal course of business.”

ERT has a better-than-average inspection record. By contrast, there’s Virgin Offshore U.S.A., a New Orleans-based company that has what could be the worst measured safety record in the Gulf. Inspectors cite it for deficiencies at a rate 36 times higher than the industry average. It got more citations for deficient components on its platforms than the total number of components that were inspected in 2012 – meaning that, on average, most components had at least one observed defect.

And eight of its platforms are on the feds’ problem-child watch list, third most behind Black Elk and Merit Energy Co., which did not respond to our requests for comment. (See complete watch list)

Virgin Offshore is in bankruptcy and its offices downtown are vacant. Its bankruptcy attorney did respond to our questions. Attorney Rick Shelby explained that the bankruptcy trustee has been working diligently to clean up what he called “mismanagement” by the pre-bankruptcy ownership, and even joined a lawsuit against the former owners alleging “various … misdeeds.”

The trustee has begun a process of dismantling Virgin Offshore’s platforms, none of which are producing any oil or gas right now, Shelby said.

 

Cameras turned off... or held off?

Safety bureau director Brian Salerno told international regulators in Australia last month that policing safety culture is a big challenge, especially now that media attention has waned, with the BP spill fading into memory.

"Unfortunately, with any highly visible disaster that garners international media attention, there comes a point when the cameras turn off, the stories fade into distant memories and people believe the problems have been fixed, and their focus shifts," Salerno said to his colleagues in Perth.

But Salerno's agency hasn’t exactly been receptive to our continuing efforts to expose safety information.

When the station initially asked for the bureau’s Increased Oversight List in December, the agency tried to claim no such list existed. We knew it existed because of a bureau document that had been posted on the Internet. The agency finally turned the list over this summer after WWL-TV appealed under the Freedom of Information Act.

And when Salerno announced a new safety institute in Texas to advise the agency, he brushed off our questions about the flunked well-control tests and the difficulty of policing contractors.

“You raise some very good questions regarding safety culture and a lot of those were underscored in the (Black Elk accident) report released this (month), about the relationships between operators and contractors,” Salerno said. “That will be an area of focus for us. It will continue to be an area of focus in the months and years ahead.

“So, I think that's a little bit outside the scope of today's discussion, but I'd be happy to follow up with you in some separate venue on those issues."

We requested a full interview with Salerno. His office declined.

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