Drillers Say Fed Rig Rules Not Enough

Two days before this year's hurricane season began, federal officials announced changes in the anchoring standards for floating drilling rigs -- changes that are supposed to limit the kind of crippling damage inflicted on the Gulf of Mexico's oil fields by storms last summer, when 18 drilling rigs broke from their moorings and smashed their way ashore, aground or into pieces.

But even as the new rules were touted in Washington, D.C., news conferences, industry insiders worried that the changes do not represent enough of an improvement in anchoring the massive rigs that caused much of the destruction and resulting high oil and natural gas prices associated with Ivan, Katrina and Rita.

A key problem is that the more stringent new rules require only that anchor systems hold a rig in place during a Category 1 hurricane, the weakest type, though the Gulf has been visited by six Category 4 or higher storms since 2004.

Also, the rules will not immediately apply to many of the Gulf's drilling rigs, which were anchored prior to the introduction of the new standards and are largely exempt until they relocate, according to federal officials, leaving many of the rigs as vulnerable as they were last year. Rigs may drill on a location for months or even a year at a time.

Three major drilling companies have opted to go far beyond the new federal regulations and anchor some of their largest rigs so that they could survive Category 5 hurricanes. Drillers said the new federal rules were not tough enough to ensure that their equipment would stay put during the kind of storms that have churned through the Gulf in recent times.

Federal officials said that those companies were being pushed by their insurers to use more and stronger anchors for their rigs, something that the drilling companies disputed.

"It's just not good business practice to be out there floating around after a storm. We want to do whatever we can to make sure those rigs stay on station and we can go back to work for our customers," said Gary Krenek, with Houston-based Diamond Offshore Drilling Inc. "Nothing was driven by insurance."

The Press-Register asked the U.S. Minerals Management Service, which regulates the offshore oil and gas fields, why more rigorous rules were not required for the industry at large. The MMS has not responded to that question.

The new rules, like the old ones, were drafted by the American Petroleum Institute -- an oil industry trade organization -- and then adopted by federal officials. About 130 rigs are now active in the Gulf.

Broken pipelines, broken rigs

Hurricanes last year and the year before ripped 28 of the 30-million-pound drilling rigs from their offshore locations, according to industry accounts. Those rigs ended up sinking or careening through the most densely crowded oil field in the world, driven by 140 mph winds and waves up to 130 feet tall. Runaway rigs smashed into permanent production platforms and dragged anchors or supporting legs weighing thousands of pounds across dozens of the nation's most important pipelines.

A total of 457 pipelines was damaged last summer, with 100 of those classified as major pipelines, according to federal officials. Engineers note that some pipelines were wrecked by underwater mudslides, primarily near the mouth of the Mississippi River, where the sea floor is known to be unstable.

While former Interior Secretary Gale Norton stated for months that there were "no significant spills" during the hurricanes, a new federal update released in May indicates that nearly 400,000 gallons of oil spilled last summer. That includes one spill of 152,000 gallons, classified as a "major" incident, according to federal standards.

Also, up to 3 million barrels were spilled 30 miles off Louisiana in November after a tanker collided with the unmarked wreckage of an oil platform destroyed in one of the storms. Several ships, including a salvage ship trying to put buoys on unmarked oil industry wreckage, have sunk after encountering some of the hundreds of other pieces of unmarked debris left in the Gulf's rig fields.

Last year's damage -- still not fully repaired -- has so far prevented 29 percent of the Gulf's annual oil production and 21 percent of the natural gas from reaching shore over the last year, and is blamed by the Bush administration for contributing to sharp price spikes for gasoline and natural gas.

The MMS has initiated multiple studies since last year's hurricanes -- in addition to six studies following Ivan in 2004 -- looking at how the drilling rigs fared, and the damage they caused. While most of those studies won't be completed until 2007, their conclusions are likely to closely mirror those of earlier studies over the past decade, according to engineers.

It is unclear if the new studies will result in more rule changes than the earlier studies, which were largely ignored, according to some of the scientists who worked on them. Attempts to impose more stringent rules have, in the past, been rebuffed by industry, according to engineers who drafted the rejected standards.

The rates charged by drilling companies for their rigs have jumped since last year, due in large part to rigs destroyed in storms, according to Drilling Contractor, an industry magazine. Rates for a single rig have increased by up to $70,000 per day, depending on the rig's size and capabilities.

Still vulnerable

"Both of these (rule changes) were produced in record time, and they're quality documents. It was not a rush job," Danenberger said. "If there are storms like last year there's going to be damage again. But we think it will be minimized."

The government waited until the start of hurricane season to enact the new rules, so the changes in anchoring standards will apply only to drilling efforts following the start of that season four weeks ago, according to federal officials.

"It's going to be difficult to make them go make a change to something we've already permitted," said Lars Herbst, regional deputy supervisor of MMS, discussing drilling rigs already on site and working prior to the introduction of the rules.

But, he added, many of the drillers are going far beyond the federal standards. "Almost every rig out there is being upgraded from an 8-anchor system to a 12-anchor system," Herbst said.

Herbst called those changes voluntary. There is no federal timetable for completing them. Drillers say they may not complete all of their mooring upgrades before the height of hurricane season, in August and September, and not all drillers are upgrading their anchor systems beyond the new standards.

"The bigger push on this is insurance, even more than regulatory. Insurance is pushing on this," Herbst said.

Representatives of some of the Gulf's biggest insurance companies declined to comment for this story.

Petroleum Institute officials have described offshore damages totaling $18 billion to $31 billion to rigs, platforms and pipelines in 2005, or more than 20 times what insurers collected in premiums for the year. As a result, premiums have gone up for the Gulf's drillers. Greg Coffin, chief financial officer and senior vice president of Transocean Inc., one of the Gulf's biggest drilling companies, reported in a recent conference call with investors that the company's insurance rates were refigured in May and rose from $13 million a quarter to $20 million a quarter.

Semisubs and jackups

Engineers say that statistically, a class of drilling rigs known as "semisubmersibles" are the type most likely to end up drifting through the Gulf, and are the only type that drag anchors across pipelines. Nineteen semisubs -- which float on huge pontoons -- lost their moorings in 2004 and 2005, out of a fleet of about 30 semisubs that work in the Gulf.

Houston-based Noble Corp. "is voluntarily investing in upgrades of its mooring systems based on recent hurricane-related mooring line failures," reads a brochure handed out by the company.

The company wrote that federal standards have not been adequate to keep its equipment in place. Noble needed "a step-change to higher design criteria in order to mitigate safety, environmental and financial risks to the offshore industry," according to the brochure.

Noble will be anchoring its rigs to handle Category 5 storms, which pack winds of 150 mph, although the new federal standards require only that rigs survive Category 1 winds and waves about half as tall as those encountered in some recent hurricanes.

The company says it is using standards designed for mooring permanent production structures in the Gulf, noting "there were no reported failures of permanent mooring systems" in last year's hurricanes.

Transocean Inc. is also upgrading the mooring systems on its big drill rigs for Category 5 conditions. Officials put the cost at $6 million to $8 million per rig. The company's smaller semisubs, which held their moorings in recent storms, will not be upgrading their anchor systems.

Herbst, with MMS, said that another class of drilling rigs, known as "jackup rigs," will be easier to bring into compliance with at least parts of the new regulations right away, though that is no guarantee they will survive big storms.

Jackups -- unlike semisubs -- do not use anchors. Instead, jackups float to a drilling location on a hull that serves double duty as the rig's work deck. Once on location, the combo deck and hull is ratcheted up out of the water atop three or four enormous metal legs. Those legs are sturdy enough to support a deck area weighing tens of millions of pounds. The work deck on a jackup rig can be larger than a football field.

In recent storms, jackups have been toppled by waves, or had their legs either break off or bend at awkward angles, dragging the bottom as the floating decks of the rigs were pushed ashore by winds and waves.

"For jackups, the failure mechanism is wave inundation on the platform decks. They collapse if a wave gets in the hull," Herbst said. "It's not so much of an issue in shallower water, where the waves are smaller."

MMS officials acknowledged that the maximum required air gap of 62 feet was far below the tops of the biggest hurricane waves, but said other engineering considerations make it unwise to raise the rigs any higher.

"It's a stability issue. They get too high and the wind affects them more," blowing rigs over, Herbst said.

Diamond Offshore Drilling reported in a company newsletter that "the Ocean Warwick, even with an 83-foot air gap, broke off its legs and the drill floor came off." That rig ended up about 70 miles away from its drill site, its crumpled superstructure stranded just off Dauphin Island. The rig was declared a total loss.

Jackup rigs make up the bulk of the Gulf's drill fleet, accounting for about 100 of the approximately 130 rigs in use offshore.

Last year, David Rowan with Noble Denton, an oil industry engineering and consulting firm, told the Press-Register that his company drafted much tougher standards for the drill rig fleet several years ago. But, he said, there was "huge resistance" within the industry to adopting more stringent standards, which would have cost companies millions of dollars.

Rowan declined to comment for this story, citing "the feedback I received from last year," when he was quoted discussing the potential need for more stringent standards.

A 1995 study produced by Rowan's company, titled "Evaluation of Securing Procedures for Mobile Offshore Drilling Units When Threatened by Hurricanes" concluded in part, "with the expansion of the deepwater development programs in the Gulf of Mexico, the number of semisubmersibles exposed to hurricanes is likely to increase. ... one can expect an increase in the number of semisubmersibles that break loose and cause consequential damage."

New rules, same storms

One notable change in the new rules requires that floating drilling rigs have global positioning systems onboard with transponders that will automatically report their locations should they lose their moorings.

While that seems like an obvious requirement for rigs worth hundreds of millions of dollars, GPS transponders had never been required before. In the past, days could pass after a hurricane before all floating rigs were accounted for.

Some rigs are known to have dragged their anchors for over 100 miles, according to federal documents, but until the GPS requirement, it has not been possible to track the routes they traveled or assign blame for pipeline damages to a specific rig.

Herbst, with MMS, said another significant change in the new rules involves a complicated "risk analysis" form that must be filled out by drilling companies. It helps determine whether drilling in a proposed location might require setting anchors near pipelines or other infrastructure.

"It used to not matter so much if you had an anchor drag, because there wasn't much out there in the Gulf," Herbst said. "Now, if you are in close proximity to a surface structure, or you have an anchor set near an important subsea pipeline ... we're looking at maybe we have to reject that request until after hurricane season."

Herbst said the ability to postpone drilling in some particularly crowded or major production areas during hurricane season might be more important than the new anchoring and air gap regulations when it comes to keeping Gulf oil and natural gas flowing.

But some industry experts suggested that if MMS is reluctant to impose more rigorous anchoring standards on drillers, the agency might be equally reluctant to withhold a drilling permit for the six months of hurricane season.

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