Proposed regulations clarify the meaning of a safe drilling margin in the OCS

Following the BP spill, the Bureau of Safety and Environmental Enforcement (BSEE), under the Department of the Interior, issued proposed amendments to well control regulations for offshore well operators in the outer continental shelf (OCS).

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James R. Parish

Baker, Donelson, Bearman, Caldwell & Berkowitz PC

Following the BP spill, the Bureau of Safety and Environmental Enforcement (BSEE), under the Department of the Interior, issued proposed amendments to well control regulations for offshore well operators in the outer continental shelf (OCS). The proposed amendments, available online and published in the Federal Register on April 17, 2015, address several well control issues, including what constitutes a "safe drilling margin." The goal here is to examine the proposed amendments that define what constitutes a safe drilling margin, and review how those amendments would alter the current regulations.

Currently, offshore well operators in the OCS must, while drilling, maintain a safe drilling margin identified in an approved Application for Permit to Drill (APD) (30 C.F.R § 250.427(b)). This safe drilling margin is required in order to ensure that mud weights are capable of controlling the pore pressure and formation fluids while not fracturing the formations. If an operator cannot maintain the safe drilling margin, it must "suspend drilling operations and remedy the situation."

If BSEE detects a violation of § 250.427(b), it may issue an Incident of Noncompliance (INC) and either issue a warning or require that the well be shut-in, depending on the extent of the violation. BSEE may issue a maximum civil penalty of $40,000 per day per violation if the operator fails to correct the violation within the amount of time specified in the INC or if the violation constituted a threat of serious, irreparable harm to aquatic or human life and the environment. Additionally, damage caused by a violation could subject the operator to civil lawsuits by individuals, entities, and state and federal governments.

Federal regulations do not define the safe drilling margin, but the industry standard is generally considered 0.5 ppg between the mud weight and the fracture gradient. What is less clear under the current regulations is the appropriate data or estimates operators should use to determine whether they are maintaining the safe drilling margin. For example, may an operator solely rely on data taken from higher in an interval to determine if it is maintaining a safe drilling margin while drilling lower in the interval? Historical regulations, since repealed, seemed to answer this question in the negative.

In a civil trial arising out of the BP oil spill, the operator argued that the safe drilling margin is calculated as the difference between the formation integrity test performed at the top of the interval below the prior casing shoe and the static downhole mud weight. Stated a different way, the operator argued that it did not need to consider real-time or other data on downhole conditions when analyzing whether it was maintaining a safe drilling margin; the operator could rely solely on data taken from higher in the interval. Opposing parties argued that the safe drilling margin should be calculated as the difference between the weakest fracture gradient encountered while drilling, derived from all of the data available to the operator, and the mud weight.

The proposed amendments agree with the opposing parties' argument on this question and also codify the 0.5 ppg as the safe drilling margin between the mud weight and the fracture gradient. The pertinent current and proposed amendments to those regulations are set forth below:

30 C.F.R. § 250.427 What are the requirements for pressure integrity tests?

(b) While drilling, you must maintain the safe drilling margin identified in the approved APD. When you cannot maintain this safe margin, you must suspend drilling operations and remedy the situation.

(Proposed) (b) While drilling, you must maintain the safe drilling margins identified in § 250.414. When you cannot maintain the safe margins, you must suspend drilling operations and remedy the situation.

30 C.F.R. § 250.414 What must my drilling prognosis include?

Your drilling prognosis must include a brief description of the procedures you will follow in drilling the well. The prognosis includes but is not limited to the following:

(c) Planned safe drilling margin between proposed drilling fluid weights and estimated pore pressures.

(Proposed) (c) Planned safe drilling margins between proposed drilling fluid weights and the estimated pore pressures, and proposed drilling fluid weights and the lesser of estimated fracture gradients or casing shoe pressure integrity test. Your safe drilling margins must meet the following conditions:

(1) Static downhole mud weight must be greater than estimated pore pressure

(2) Static downhole mud weight must be a minimum of one-half pound per gallon below the lesser of the casing shoe pressure integrity test or the lowest estimated fracture gradient

(3) The equivalent circulating density must be below the lesser of the casing shoe pressure integrity test or the lowest estimated fracture gradient and

(4) When determining the pore pressure and lowest estimated fracture gradient for a specific interval, you must consider related hole behavior observations.

Pursuant to the proposed amendment to § 250.427, the safe drilling margin would no longer be defined by an APD approved by BSEE. Instead, the safe drilling margin would be defined in § 250.414 and include the following margins:

(1) Proposed drilling fluid weights and the estimated pore pressures and

(2) Proposed drilling fluid weights and the lesser of (a) the estimated fracture gradients or (b) the casing shoe pressure integrity test.

Unlike the explicit terms of current regulations, these margins would be required to comply with four conditions. First, the static downhole mud weight must always be greater than the estimated pore pressure. Second, the static downhole mud weight must be at least 0.5 ppg below the lesser of the casing shoe pressure integrity test or the lowest estimated fracture gradient. Third, the equivalent circulating density must be below the lesser of the casing shoe pressure integrity test or the lowest estimated fracture gradient.

Finally and perhaps most importantly, when determining the pore pressure and lowest estimated fracture gradient, the operator must "consider related hole behavior observations." This final criteria seems to impose an obligation on operators to evaluate downhole real-time and other data to ensure that the safe drilling margin is maintained.

In summary, the proposed amendments put the onus on the operator to evaluate downhole conditions using all available data when determining whether it is maintaining a safe drilling margin. An operator cannot solely rely on data taken from higher in the interval. If an operator fails to maintain a safe drilling margin consistent with the requirements of the proposed amendments, it may be subject to enforcement actions by the BSEE, civil penalties, and other civil damages claims. •

The author

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James R. Parish is an associate in Baker Donelson's New Orleans office. Parish concentrates his practice in commercial litigation, mass tort and environmental matters. He has extensive experience in several multi-district litigation cases including the BP oil spill and Chinese drywall MDLs.

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