Black Elk Energy accident renews offshore oil safety questions ...

The unfortunate timing of the explosion and fire aboard Black Elk Energy?s West Delta Block 32 production platform -- a day after BP pleaded guilty to criminal charges stemming from the Deepwater Horizon explosion and oil spill -- predictably prompted familiar questions about whether the oil and gas industry?s safety culture in the Gulf of Mexico has changed. Environmental groups said the incident reinforced their concerns about continued drilling in the Gulf of Mexico, in particular when it?s done by small companies like Black Elk.

But industry advocates, while acknowledging that offshore work can be dangerous, said the explosion should be viewed as an accident that could have happened in any industrial worksite.

The platform, about 25 miles southeast of Grand Isle, had been ?shut in,? meaning the flow of oil to the platform had been stopped, while a pipeline from the platform to shore was being replaced, he said.

The accident apparently resulted from a worker using a cutting torch to cut through a pipeline connected to a tank that still contained oil and gas vapors.

Two employees of Grand Isle Shipyard, which had contracted with Black Elk to do the maintenance, were still missing Friday night, while Hoffman said seven other workers were taken to area hospitals. Two workers have been released from hospitals.

?We have clear priorities and the No. 1 priority in the company is the safety of all the workers, and when something like this happens, especially to a smaller company, you know we feel like family, we act like family, we treat our contractors as part of our family,? Black Elk?s CEO John Hoffman told KTRK-TV.

Black Elk has moved into a unique niche in the offshore oil and gas environment off the coasts of Louisiana and Texas, buying up oil and gas wells that had seemingly reached the end of their lives, and reworking them to extract remaining oil, Hoffman said.

?We are part of an evolution in the Gulf of Mexico where these properties become unimportant, if you will, to the larger companies,? Hoffman said. ?We have a lot of expertise and we go into these properties and continue to get additional reserves for the U.S.?

But some environmental groups worry that smaller companies like Black Elk may not be able to afford either the post-Deepwater Horizon safety requirements issued by the new federal Bureau of Safety and Environmental Enforcement and the Coast Guard, or the cost of clean-up of oil spills.

?The ink was barely dry on the BP settlement? when the accident occurred, said Anne Rolfes, founding director of the Louisiana Bucket Brigade. ?This accident is sad evidence of the obvious: The oil industry is a rogue industry with an accident problem that it refuses to address.?

Frances Beinecke, president of the Natural Resources Defense Council, who served on a presidentially appointed commission that examined the BP spill and the industry as a whole, said the new accident should be considered as another spur to move away from fossil-based fuels. ?We need stronger safeguards and increased oversight to reduce the risk of accidents,? Beinecke said. ?And we need to prioritize safer forms of energy that don?t threaten the lives of our workers and foul our waters. Until then, we?ll remain stuck on this collision course with disaster.?

But industry observers say Friday?s accident reflects the reality that work in the offshore oil and gas industry is a risky business. And they point out that the incident is much different from what occurred at BP?s Macondo well, There, natural gas from the well a mile below the Gulf surface flowed unchecked onto the deck of the Deepwater Horizon drilling rig as workers attempted to plug it. The result was a catastrophic explosion and fire, and the 86-day release of as much as 4.9 million barrels of oil.

The Black Elk facility is an old platform that was the collection point for oil from several wells. On the platform, ?produced water,? a waste product, was stripped from the oil, which was then shipped ashore. Hoffman said workers also were repairing water treatment equipment on the platform.

The investigation by federal officials and the company is likely to focus on why the line still contained oil and natural gas when it was cut. ?The line should have been depressurized, purged and filled with nitrogen or another inert gas? that would not catch fire, before the pipe was cut, said Eric Smith, associate director of the Tulane Energy Institute.

He said companies doing such work are now required to submit plans to BSEE in advance, explaining the procedures they will follow, and when it?s complete, file paperwork confirming they followed the procedures. ?If they violated the procedures, in terms of what they told BSEE they would do, they?re likely to face fines and other restrictions,? Smith said.

He said the new regulations and the increased time needed to get permits places additional pressure on smaller firms working in Gulf waters. That pressure is exacerbated by the comparatively low price the companies are receiving for oil and natural gas.

?One of the big concerns in the industry is whether we?ve got a viable offshore oil and gas industry in the way we?ve known it in the past, with all the new regulations,? he said.

Other industry executives said the accident should be viewed more like an onshore industrial accident than a potential cataclysm like the Horizon spill. ?This can?t be compared to BP,? said Don Briggs, president of the Louisiana Oil and Gas Association. ?When men are on a platform and they?re welding and cutting, it?s a high-risk industry. We have accidents.?

With more than 3,700 platforms in the Gulf of Mexico, a single accident should not be considered a sign of a significant safety problem, he said. ?This is not like going to the grocery store,? Briggs said. ?It?s a serious business and we already have all kinds of regulations.?

The Black Elk accident will result in investigations by both the Coast Guard and the federal Bureau of Safety and Environmental Enforcement, which will determine how the accident occurred and the proper enforcement steps that should follow, said Randal Luthi, president of the National Ocean Industries Association, an oil and gas industry organization.

?It?s just too early to say more than that,? he said. ?When you have an accident like this, everybody pays attention. But we need to stop, take a breath, find out what happened, and make sure again that safety is foremost.?

This is not the only brush with regulators that Black Elk has seen in the five years since its founding.

The company?s most recent quarterly financial report to the Securities & Exchange Commission describes an accident very similar to the Deepwater Horizon?s blowout preventer failure at Black Elk?s High Island 443 A-2 ST well, off Texas. The report said blind/shear rams, similar to metal scissors, failed to close and shut in the well. Tests found that casing piping inside the well ?to be most likely compromised,? and BSEE ordered the well plugged and abandoned.

The company also paid a $300,000 civil fine in September related to an April 2011 site inspection that found the company was not following proper testing procedures on one of its platforms. And it?s facing another civil penalty of $140,000 for an October 2011 incident on another platform.

Last month, the company announced a major expansion, including plans to drill 23 new wells in the Gulf of Mexico. According to its quarterly statement, the company has an interest in 1,167 wells, including 351 that are producing oil or gas, and has an interest in oil leases representing 560,000 acres.

The company?s majority equity owner is Platinum Partners Value Arbitrage Fund.

Hoffman, the CEO, said Black Elk hopes to have the platform back up and operating as quickly as possible. ?After we?ve taken care of the people and the spill (of an estimated 3 ? gallons of oil during the accident), then we will go and perform an investigation,? Hoffman told KTRK-TV in Houston Friday afternoon. ?We will then do an engineering assessment of damage to the platform and we will rebuild.?

Source: http://www.nola.com/environment/index.ssf/2012/11/black_elk_energy_accident_rene.html

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