mariculture and other uses for offshore - ecorigs and other uses for offshore oil and gas platforms:...

Mariculture and Other Uses for Offshore Oil and Gas Platforms:

Rationale for Retaining Infrastructure

By Steve Kolian and Paul W. Sammarco

Eco-Rigs Technical Report

Eco-Endurance Center12605 South Harrel’s Ferry Road, Suite 3Baton Rouge, Louisiana 70816USA

Eco-Rigs is a Louisiana-based non-profi t organization created to preserve offshore oil and gas platforms habitats for mariculture, recreational fi shing and diving, and other eco-technologies that produce economic and environmental benefi ts to the citizens of Louisiana.

Mariculture and Other Uses for Offshore Oil and Gas Platforms: Rationale for Retaining Infrastructure

By Steve Kolian and Paul W. Sammarco

Cover and Interior Design: Steve Kolian

Library of Congress Cataloguing [Publication Data]

Kolian, S.R., and P.W. Sammarco. Mariculture and Other Uses for Offshore Platforms: Rationale for Retaining Infrastructure.

Publisher: Eco-Rigs of Eco-Endurance Center, A non-profi t organization, 12605 S. Harrel’s Ferry Road, Suite 3, Baton Rouge, LA 70816, USA © 2005

ISBN#

Cataloguing Information:

Printed in the United States of America

Acknowledgements

We would like to thank Allen Walker, Toby Armstrong, Gregory S. Boland, Josh Collins, and Amy Atchinson for use of photographs. Images provided by Gregory S. Boland are not associated with any endorsement of the contents of this report. Many organizations provided valuable technical information, particularly Apache Oil, ChevronTexaco, Murphy Oil Corp., Advanced Resources International, U.S. Department of Commerce National Oceanic and Atmospheric Administration, and U.S. Department of Energy Offi ce of Fossil Energy. We would also like to express our gratitude to Chuck Bedell, Dailey Berard, Charles Broussard, Albert Guede, Scott Porter, Charles Reith, John Supan, and Tom Newland for interesting and valuable discussions on the issues covered in the text. Many thanks to Kevan Main (Mote Marine Laboratory), Ken Leber (Mote Marine Laboratory), Donald Kent, (Hubbs-SeaWorld Research Institute), Paula Sylvia (Hubbs-SeaWorld Research Institute), and Jeff Kaiser (Marine Science Institute, University of Texas), for their comments on the manuscript.

Mariculture and Other Uses for Offshore Oil and Gas Platforms:Rationale for Retaining Infrastructure

i

Executive Summary ...................................... 1-1

Section 1: Introduction to Marine Aquaculture (Mariculture) .............. 1-5

Section 2: Current Situation and Future Opportunities ............................... 2-1

Offshore Industries in Louisiana are in Decline ..................................................... 2-1

Substantial Future Oil and Gas Resource Potential Exists in the Louisiana Offshore ...... 2-3

Other Potential Energy Opportunities Exist Offshore of Louisiana .......................... 2-8

Section 3: The Promise of Mariculture for Louisiana’s Offshore Waters ............. 3-1

Net-Pen Culture ........................................ 3-1

Oyster Depuration (Relaying) ....................... 3-3

Recreational Fishing and Diving .................... 3-5

Ornamental Fish Culture ............................. 3-6

Culture of Coral, Sponge, and Medically Valuable Organisms .................................... 3-8

Sea Farms ...............................................3-11

Section 4: Environmental, Socio-Economic, and Regulatory Issues ......................... 4-1

Environmental Stewardship ......................... 4-1

Socio-Economic Implications ........................ 4-4

Regulatory Assessment .............................. 4-7

Section 5: Conclusion ................................... 5-1

Bibliography ............................................................ A-1

Appendix .....................................................A-9

TABLE OF CONTENTS

Technical Reportii

Executive Summary 1-1

ExEcutivE Summary

Purpose of Report

The Louisiana continental shelf is home to nearly 3,600 federal offshore and 2,000 state coastal oil and gas platforms. When production from these platforms becomes unprofitable, under cur-rent federal regulations, operators are required to remove the structures (30 CFR 250.112 & LSA RS 30:4). Most offshore fields in water depths less than 600 feet will become unproductive within the next 10–15 years, requiring that 150–200 platforms be removed annually (Pulsipher et. al. 2001). Platform removals are currently costing the oil and gas industry $300–$400 million per year (NRC 1996), and it will eventually cost over $8 billion for the removal of all structures in shal-lower offshore waters. The platforms could be utilized for a number of other applications after their profit-able life in minerals production:

Marine aquaculture; e.g., food fish (net-pens), coral and sponges, oyster depuration, ornamental fish Greenhouse gas sequestrationWind energyOcean energy; e.g., current, wave, ocean thermal, salinity gradients, and bio-fuels Recreational fishing and diving parksCooperative sea farmsNatural gas storage and re-gasification (closed loop)Pipeline maintenance to help transport deep water oil and gas production.

With the anticipated pace of production decline, the speed of platform removal could increase significantly. The removal of offshore platforms and the disman-tling of their associated pipeline systems would economically strand a large vol-

Offshore Louisiana Platforms as of 2004

Platforms represent the only hard substrate across much of the Louisiana continental shelf, a region flooded by sediments from the Mississippi River and other tributaries.

The purpose of this report is to examine the feasibility of utilizing retired oil and gas plat-forms after their profitable life in minerals production for marine aquaculture. The report examines the potential economic benefits that could result from a mariculture industry in Louisiana, characterizes the potential impact of mariculture on the marine ecosystem in the Gulf of Mexico, and reviews legal and regulatory considerations to establishing a mariculture industry using existing oil and gas platforms. Other potential future uses for retired oil and gas platforms are also identified, including renewable ocean energy production, greenhouse gas sequestration and recovery of “stranded” hydrocarbon resources.


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ume of crude oil and natural gas that could be produced with emerging oil and gas recovery technology. An estimated 67 percent of the crude oil and 45 percent of the natural gas in oil and gas fields in state and shallow federal offshore waters (< 200 m) will be “stranded” because the cost of extraction will exceed rev-enues using traditional production practices (ARI 2005). Recovery rates and efficiencies, however, continuously improve with advances in technology. An analysis of 99 large state and federal offshore oil fields, represent-ing 80 percent of the crude oil resource off the coast of Louisiana at < 200 m depth, shows that, with “state-of-the-art” carbon dioxide (CO2)-enhanced oil recov-ery (EOR) technology, approximately 4.5 billion barrels of incremental oil (28 per-cent of this stranded resource) is tech-nically recoverable, and with appropriate “risk mitigation” incentives and reason-able costs of delivered CO2, as much as 3.6 billion barrels could be economically recoverable (ARI 2005). Mariculture could provide an economic catalyst to affect the petroleum production economics by preventing platform shutdown of retiring platforms. Mariculture ventures or other appli-cations could extend the life of these platforms until the “stranded” oil and gas becomes eco-nomically viable to produce. However, should

Offshore platforms have an average 17.5 year productive lifespan before they are removed (Pulsipher 2001). At this pace, almost all the existing platforms will disappear in next 15 years. While many platforms are still being installed, the new fields tend to be in deep water (>600 ft.), because most of the inshore reserves are exhausted. Louisiana will lose most of the existing platforms by 2020 at the current rate of platform life expectancy.

the fields be abandoned and the platforms removed, the feasibility of returning to these fields with improved recovery technology would be economically prohibitive.The potential economic benefits from maintaining this infrastructure could be substantial:

Assuming that the 3.6 billion barrels of stranded oil resources are developed over a 40-year time frame, by 2025, this would amount to:

Incremental oil production of 200,000 to 250,000 barrels per day;More than 8,000 jobs retained by the Louisiana oil and gas industry;Increased economic activity amounting to $500 million per year to Louisiana; and Increased state and federal revenues of over $250 million per year. Under current fiscal arrangements, more tha 90 percent of this revenue will go to the federal government.

Offshore oil and gas production platforms support one of the most prolific ecosys-tems, by area, on the planet. Stanley and Wilson (2000) reported that 10,000–30,000 adult fish reside around a plat-form in an area about half the size of a football field. They create the only reef habitat across thousands of square miles of generally featureless, sometimes hy-poxic, continental shelf (Sammarco et al. 2004). Over 80 species of federally man-aged protected fish, crustaceans, corals, soft corals, sponges, and sea turtles in-habit and/or forage around the offshore structures (Adams 1995, Beaver 2002, Rademacher and Render 2003, Sam-marco 2004, and Walker 2004). They are essential habitat to protected and en-dangered species. No formal legal structure exists to utilize retired platforms for purposes other than producing petroleum. The central economic concern of all parties interested in the conversion of these platforms to alternate uses is the long-term care and transfer of ownership and liability. Mariculture and other ventures on platforms will have to comply with the same state and

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Executive Summary 1-3

federal regulations and structural codes that oil and gas operators currently maintain. Several expenses will be germane to any venture uti-lizing retired offshore platforms. These include expenses associated with a platform removal bond, navigational aids, maintenance, liability insurance, and cathodic protection. Unfortu-nately, the high cost of the platform removal bond could well prohibit the economic success of many types of alternative applications. Recommendation 1: Revise Outer Continen-tal Shelf Lands Act (OCSLA) platform removal requirements and adjust codes for alternative uses; create OCSLA language to terminate leaseholder’s interest and liability; create clear legal foundation for transfer of ownership; create a federal trust fund to provide liability to the former oil and gas operators to ensure that they will not be sued; provide low inter-est loans to mariculture ventures and fisher-men; and provide general performance bonds to mariculture platforms so that they could be eventually turned into artificial reefs and not blasted out of the water and hauled to shore. Mariculture ventures face a complex array of regulatory and legal obstacles. Mariculture ventures will probably pursue several different culture applications on the same platform. In the 109th Congress, the federal government will propose a National Offshore Aquaculture Act that provides the Department of Com-merce clear authority to regulate offshore aquaculture. The Gulf of Mexico Fisheries Man-agement Council (Gulf Council) is currently drafting a Fisheries Management Plan (FMP) for Marine Aquaculture. Recommendation 2: Endorse the upcoming legislation in the National Offshore Aquacul-ture Act and support efforts by the Gulf Council in drafting and approving their FMP for marine aquaculture.This study focused primarily on five mariculture activities and recreational fishing that could potentially utilize Louisiana offshore platforms for operations. Mariculture activities of focus included net-pen operations, oyster depura-tion, culture and harvest of ornamental fish, coral, and sponge, and platform sea farming. The economic feasibility of the various mari-culture applications on offshore platforms still needs to be documented. Recommendation 3: Complete a comprehen-sive study on the economic feasibility and cost-benefits of mariculture and other applications utilizing platforms.

Oil and gas platforms, if they are properly maintained, can last for hundreds of years. They could be retrofitted to facilitate a number of eco-technologies over the years such as greenhouse sequestration (CO2 injec-tion), wind energy, and pollution mitigation; as well as for a wide variety of mariculture applications.

The greatest obstacle currently facing offshore mariculture facilities is the limited availabil-ity of marine fish fingerlings for stocking off-shore cage operations. Most of the research efforts into fish farming in the United States have been directed toward freshwater species. Elsewhere around the globe, most notably in Japan, there have been numerous successful efforts to spawn and raise marine species for net-pen culture and sea farming. Several major technological hurdles exist, however, and the first important local obstacle is the absence of a fish hatchery in Louisiana. Recommendation 4: Build a state-of-the-art marine fish hatchery in Louisiana.


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All the platforms in the Gulf of Mexico are geo-referenced in a Minerals Management Service (MMS) database with more than 100 descriptive variables that could be combined with physical, biological, chemical, and ocean sediment databases. This information could be programmed into a geo-referenced model to help make decisions on retiring platforms. This could help address the following questions: should decommissioned platforms be used for mariculture or other applications, remain in place or be relocated for biological reasons, or moved for navigational concerns or user conflicts. Many variables could influence the placement of platforms. This GIS model would be the first technology item to help develop a defensible long-term plan for mariculture de-velopment in Louisiana’s offshore waters.Recommendation 5: Create an ArcGIS platform computer program interface that will allow us-ers to anticipate the lifespan of platforms in petroleum production and decide whether to relocate or leave the structures once they reach retirement.

Section 1: Introduction to Marine Aquaculture (Mariculture)

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In 2002, the United Nations Food and Agriculture Organization (FAO) reported that most capture fisheries around the world are fishing fully exploited stocks and cannot expect to increase the volume. They predicted a 40 percent increase in fishery prod-uct needs by 2020, increasing from 130 million metric tons in 2001 to 180 million metric tons by 2030. They concluded that population growth and an increase of per capita fish consumption will create a 50 million metric ton production gap by 2030 — a gap that aquaculture could potentially fill (FAO 2002).Over the past three decades, aquaculture has progressed to become the fastest growing food production sector in the world (Jia et al. 2001). Aquaculture production processes have expanded, diversified, intensified, and advanced in technology. Petroleum and seafood represent the first and second largest import commodities in the U.S., respectively. In 2002, the United States imported $10.1 billion of edible seafood and $9.6 billion of non-edible seafood, for a total of $19.7 billion on imports — representing an increase of $1.2 billion from 2001. Despite this large and grow-ing demand for seafood, the United States currently only contributes to 2 percent of the worldwide aquaculture production (FAO 2002).

“Aquaculture, not the internet, represents the most promising investment opportunity of the 21st century.”

– Peter Drucker, Economist and Nobel Laureate

SEction 1: introduction to marinE aquaculturE (mariculturE)

Definition of Mariculture

“Aquaculture is the cultivation of aquatic animals and plants in controlled or se-lected environments for commercial, recreational, or public purposes. Such organisms are raised primarily to supply seafood for human consumption, but they can also be used to enhance wild popu-lations, for breeding programs in public aquariums and zoos, rebuilding popula-tions of threatened and endangered spe-cies, baitfish production, and to produce other non-food products, such as phar-maceuticals.” (NOAA 2002)

State-of-the-Art of Mariculture

Worldwide. Offshore mariculture is expanding rapidly in countries such as Chile, Norway, Ireland, Spain, Taiwan, Korea, Philippines, and in Mediterranean countries such as Greece, Italy, Cyprus, and Turkey (Ryan et al. 2004). The European Union devotes over $400 mil-lion annually to the fisheries sector, which includes $260 million for aquaculture. Canada has just dedicated $75 million (Canadian dollars) to federal research and development. Even Vietnam is financing aquaculture development and diversification (National Marine Fisheries Service, 2002).

Photo by Gregory S. Boland


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Focus of this Report Not Examined in this Report

Net-pen or cage culture Fish sanctuaries

Oyster depuration or oyster relaying Artificial upwelling

Ornamental fish culture Nursery habitat grounds

Recreational fishing and diving Offshore fish processing

Coral and sponge culture Research platforms

Sea farming Fish hatcheries

Japan. As an island nation with limited land resources, Japan has traditionally focused on the sea for socio-economic development. The Japanese are chang-ing their commercial fishing fleet from a “catch fishery” to a “culture fishery” or from “predatory” methods to “sustain-able” methods (Grove et al. 1994). Japan has invested approximately $8 billion dollars into an ambitious marine fisheries enhancement program (Grove et al. 1994). In the 1970s, the govern-ment spent $�7 million on research and planning alone (Bohnsack 1985; Mottet 1981). The Japanese employ a variety of mariculture techniques. One ambi-tious project designed and installed an offshore platform specifically for maricul-ture. Biologists train, release, and feed juvenile fish in the open ocean for even-tual recapture (Grove et al. 1994). Some efforts have been more successful than others. Matsuda and Tsukamato (1998) reported that the Fukashima Prefecture has achieved a 30 percent recapture rate and is experiencing a cost-benefit ratio of more than 300 percent with their ma-rine stock enhancement program. They also have installed an offshore platform to clean up a polluted bay using novel and non-carbon producing energy sources (Matsuda et al. 1999).

United States. To date, the United States has been slow to pursue large-scale mariculture operations off its shores. The most promising platform mariculture ven-ture on the horizon is the Hubbs SeaWorld Research Institute’s Grace Mariculture Project off the California coast, utilizing an old oil and gas production platform. The Institute has 20 years experience with stock enhancement and aquaculture pro-duction. They are currently engaged in a lengthy permitting process for this facility, and expect to be permitted in the autumn of 2005. Hubbs SeaWorld Research In-stitute intends to first raise striped bass and, if methods prove successful, they plan to grow white sea bass, California halibut, California yellow tail, and bluefin tuna, as well as invertebrates such as abalone and mussels. They also plan to create an offshore hatchery on the Grace platform (GMP 2004).Gulf of Mexico. Mariculture on platforms in the Gulf of Mexico has been explored offshore of Texas to a limited extent in off-shore coastal waters. Several cage sys-tems were tested; cage maintenance and production cost made it difficult to achieve project goals for this first-of-a-kind proj-ect (Kaiser 2003). (The one commercial venture by SeaFish, Inc. recently lost the right to use the offshore facility because the owner found new petroleum resourc-es and restarted oil and gas production operations (Kaiser 2003)).

Focus of this Report

The items in the table below on the left were covered in detail in this report. Other applica-tions (to the right) will not be covered in depth here. They are still, however, of interest and may have potential for development on offshore platforms. (See www.ecorigs.org for additional related information and videos of naturally oc-curring fish, corals, and other reef organisms.)

Section 2: Current Situation andFuture Opportunities

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SECTION 2: CURRENT SITUATION AND FUTURE OPPORTUNITIES

Offshore Industries in Louisiana are in Decline

Louisiana’s Oil and Gas Production are Declining

Louisiana derives a signifi cant portion of its general revenue and an important portion of its economic and employment base from the oil and natural gas sector. However, production in Louisiana’s shallow offshore waters (< 200 m water depth) has been in decline:

Crude oil production has dropped from more than 630,000 barrels per day in 1992 to 380,000 barrels per day in 2003.Natural gas production has declined from 3.3 trillion cubic feet (Tcf) per year in 2002 to 2.3 Tcf per year in 2003. While increases in production from the deeper federal waters (> 200 depth meters) have helped offset declines in shallow-water production, Louisiana is nonetheless receiving decreasing revenues from offshore oil and gas production.

The Louisiana economy is also highly de-pendent on a wide variety of industries that depend on offshore oil and gas pro-duction. For example, Louisiana is the third largest consumer of natural gas in the U.S., and a large number of chemical industry jobs in Louisiana are highly dependent on the continued avail-ability of adequate volumes of mod-erately priced natural gas.Given the increasing maturity of Louisiana’s offshore fi elds, along with the relatively slow pace of de-velopment in the deep-water areas, most analysts forecast a continued decline in oil and natural gas pro-duction from offshore Louisiana.

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Given the anticipated pace of production decline, by 2020, most of the current platform inventory in the Gulf of Mexico could be abandoned.

Louisiana’s Fishing Industry is Also in Decline

Each year, more and more fi shing regu-lations are imposed on commercial and recreational fi shermen in an effort to re-build the stocks of exploited species. Fed-eral regulations impose size, trip limits, and fi shing seasons on sport fi shermen. A recreational charter boat moratorium and another commercial reef fi sh mora-torium are currently in effect in Louisi-ana’s offshore waters. The commercial fi nfi sh sector is experiencing net-bans and an unyielding series of regulations on harvested fi sh.

Natural Gas Production in Offshore Louisiana Shallow Water (< 200 Meters) (1992-2003)

Source: U.S. Department of Interior, Minerals Management Service and the Louisiana Department of Natural Resources

Crude Oil Production in Offshore Louisiana Shallow Water(< 200 Meters) (1992-2003)

Source: U.S. Department of Interior, Minerals Management Service and the Louisiana Department of Natural Resources


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Louisiana continental shelf is home to 90% of the fi sheries in the Gulf of Mexico (Globec 2000).Second-largest producer of seafood in the U.S.Generates $2.8 billion/yr in economic output and directly creates 31,400 jobs (Southwick 1997).Saltwater recreational fi shing stimulates $745 million in economic output and creates 7,786 jobs (ASA 2001).

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Seafood and Fishing Industry

Including the federal outer continental shelf (OCS), Louisiana is still the largest oil producing state and second-largest gas producing state in the U.S. despite rapidly declining production.The oil and gas exploration and production industry directly employs 50,000 people in Louisiana. The Louisiana industry facilitates the transport and distribution of nearly two billion barrels of crude oil and petroleum products and 4.5 Tcf of natural gas annually to consumers throughout the nation.

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Oil and Gas Industry

A Substantial Portion of Louisiana’s Economic Foundation is at Risk

The oil and gas industry and the seafood and fi shing industries are the two most im-portant industries to the Louisiana economy. Unfortunately, for a variety of reasons, both of these industries are in decline.

Offshore Oil and Gas Infrastructure is Signifi cant and Widely Dispersed

For the approximately 3,600 platforms that exist in the federal offshore waters of Louisiana, more than 700 have been operating for more than 40 years (Min-erals Management Service, 2004). With cathodic protection, these platforms can maintain their integrity for hundreds of years. Nonetheless, on average, from 150 to 200 platforms are removed per year, following federal guidelines written in the mid-1970s. To date, over 2,000 platforms have been removed (Minerals Management Service, 2004).Connected to this production infrastruc-ture are over 26,000 miles of oil and gas pipelines and gathering systems. Moreover, offshore oil and gas produc-tion operations support a vast spectrum of other activities in the state, including platform fabrication, drilling and related services, offshore transport and helicop-ter operations, and gas processing.

Offshore Oil and Gas Infrastructure is at Risk of More Rapid Abandonment

With the anticipated pace of production decline, the speed of platform removal could increase signifi cantly. The removal of offshore platforms and the dismantling of their associated pipeline systems would economically strand a large volume of crude oil and natural gas that could be produced with emerging oil and gas re-covery technology. A variety of future eco-nomic activity in the Gulf of Mexico could take advantage of this infrastructure, if it remains in place.


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15.7Stranded Oil

(BBbls)

11.4Produced to Date

(BBbls)

1.0Remaining ProvedReserves (BBbls)

Original Oil in Place – 28.1 Billion Barrels

Stranded Oil Resources in Offshore Louisiana

70.0Stranded Gas

(Tcf)

119.5Produced to Date

(Tcf)

16.5Remaining Proved

Reserves (Tcf)

Original Gas in Place – 206 Tcf

Stranded Natural Gas Resources in Offshore Louisiana

Substantial Future Oil and Gas Resource Potential Exists in the Louisiana Offshore

The decline of offshore oil and gas production and the increasing maturity of offshore oil and gas fi elds off the coast are Louisiana are causing fi eld and platform abandon-ments that, unless mitigated or reversed, could lead to signifi cant volumes of oil and gas being “stranded,” or left behind, in these fi elds. Tabulation of stranded oil and natural gas volumes in the Louisiana offshore (consisting of the Central Planning Area; < 200 depth meters) in the Gulf of Mexico federal waters and offshore Loui-siana state waters) by the U.S. Department of Energy (DOE) (ARI 2005) shows that 56 percent of the original oil in-place and 33 percent of the original gas in-place will remain unrecovered with traditional technology and recovery practices:

In Louisiana state waters, based on data from the Louisiana Department of Natural Resources and the U.S. Energy Information Administration (EIA), an estimated 60 percent of the crude oil and 44 percent of the natural gas will remain unrecovered with traditional practices.

� In offshore federal waters, less than 200 m deep, based upon Minerals Management Service (MMS) data for larger oil and gas fi elds, an estimated 55 percent of the original oil in-place (and 33 percent of the original gas in-place) will remain unrecovered without the introduction of improved recovery

practices.Important advances are being made in oil and gas extraction technologies that could enable the economic recovery of some of this stranded resource en-dowment. Perhaps the most promising advancement is CO2-based enhanced oil recov-ery (EOR). This stranded oil re-source represents the “prize” awaiting the application of more advanced recovery practices. However, should the fi elds be abandoned and the platforms removed, the feasibility of re-turning to these fi elds with improved technology would be economically prohibitive.

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Estimates of “Stranded” Oil & Natural Gas in Louisiana Offshore Waters

Crude Oil(Billion Bbls)

Natural Gas(Tcf)

State Federal Total State Federal Total

Original In-Place

3.6 24.5 28.1 22.0 184 206

Produced to Date 1.4 10.0 11.4 12 108 120

Remaining Proved 0.1 0.9 1.0 1 16 17

“Stranded” Resource 2.2 13.5 15.7 10 61 71

% Recovery, Traditional Practices

40% 45% 44% 56% 67% 67%

Source: Advanced Resources (2004), based on Louisiana Department of Natural Resource data.

Substantial Portions of This “Stranded” Resource Could Be Economic to Develop and Pro-duce

An analysis was made of 99 large state and federal offshore oil fi elds, represent-ing 80 percent of the crude oil resource off the coast of Louisiana in < 200 m depth. This analysis shows that, with “state-of-the-art” CO2-EOR technology, a signifi cant fraction of the stranded oil in these fi elds — amounting to approxi-mately 4.5 billion barrels of incremental oil (another 20 percent of the original oil in place, or 28 percent of the stranded resource) — is technically recoverable, as summarized below. The economic recovery potential of this resource was assessed under several

“scenarios” incorporating alternative oil price, CO2 cost, and risk mitigation incen-tives.

Offshore Louisiana Fields with Future Incremental Oil Recovery Potential


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Estimates of Currently Recoverable Oil Resources in the Louisiana Offshore Environment

No. of Fields OOIP(MM Bbls)

Technically Recoverable(MM Bbls)

State Offshore 12 1,100 237

Federal Offshore 87 20,950 4,213

Total 99 22,050 4,450

Under Reference conditions (Scenario #1), with oil prices of $25 per barrel, delivered CO2 costs at 5 percent of the oil price, and a hurdle rate of 25 percent before taxes (to account for the techni-cal/economic risk associated with CO2-EOR technology in offshore applications), no incremental resource is economically recoverable.To improve the economic feasibility of us-ing CO2-EOR in these fi elds, two “risk miti-gation” and cost-reduction options that could provide possible routes for better economic performance were evaluated:Scenario #1A – Reduced CO2 Costs: An assumed CO2 emission reduction in-centive, combined with improved technol-ogy, could allow CO2 to be delivered to the platform at reduced costs (3 percent of the oil price). This action, however, is not suffi cient to encourage economic recovery from CO2 -EOR.

Scenario #1B – Public/Private “Risk Mitigation”: An assumed risk mitiga-tion incentive, reducing risk to investors (15 percent rate of return (ROR) after taxes, achieved through signifi cant fi eld demonstration pilot projects), and roy-alty relief on incremental oil produced by CO2-EOR (even when still relying on high-er cost “EOR-ready” CO2), would provide 1.3 billion barrels of economic oil recov-ery potential. Scenario #2: When both “risk mitiga-tion” and reduced CO2 costs are com-bined, 3.6 billion barrels could be eco-nomically recoverable.

Impacts of CO2 costs and Risk Sharing on CO

2-EOR Economics

Impacts of CO2 Costs and Risk Sharing on CO2-EOR Economics


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Economic Benefi ts of Producing Incremental Oil from CO2-EOR

Assuming that 3.6 billion barrels are developed over a 40-year time frame, by 2025 this would amount to:

Incremental production of 200,000 to 250,000 barrels per day;Over 8,000 jobs retained by the Louisiana oil and gas industry;Increased economic activity amounting to over $500 million per year to the Louisiana economy; andIncreased state and federal revenues of over $250 million per year.

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Substantial Stranded Gas Resources Also Exist on Louisiana’s Continental Shelf

Substantial volumes of stranded natural gas resources also exist at < 200 m depth off the Louisiana coast:

Particular reservoir fl ow conditions, primarily a strong natural bottom water drive, preclude effi cient recovery and, without a change in recovery techniques, could “strand” one-third or more of the gas in-place. An estimated 70 Tcf is stranded, with 42 Tcf in a series of large attractive fi elds.

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No assessment has been performed of the economic recovery potential of stranded gas resources in offshore Loui-siana. Nonetheless, given its large po-tential, production of this latent resource merits an assessment for potential eco-nomic feasibility.

Signifi cant Undiscovered Gas Resource Potential Exists in Deep Formations off the Louisiana Coast

The MMS estimates that as much as 55 Tcf of technically recoverable natural gas exists in the shallow waters off the Gulf of Mexico at formation depths > 15,000 ft. MMS has recently announced fi nancial in-centives for the pursuit of these resourc-es, providing royalty relief for the fi rst 25 Bcf produced from deep gas wells. Exist-ing platform infrastructure could be uti-lized to support production of these deep gas resources.


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The concept behind the Canyon Express Project, which focuses on deep water natural gas development, could also be used for deep formation gas development. This fi rst-of-its-kind deep water gas project in the Gulf of Mexico combines a central hub and subsea system with a 500 MMcf/day pipeline system that takes produc-tion from three different discoveries and transports the produced gas more than 50 miles to the existing Canyon Station platform for processing and transport to shore.

Sub-Sea Wells with Tiebacks to Existing Platforms Could Help Facilitate Deep Gas Development

“Canyon Express” Project

Sub-SeaWells (#)

Field Size (Bcfe)

Water Depth

(ft)

Aconcagua (MC* 305) 3–4 300 7,070’

Camden Hills (MC 348) 2 500 7,200’

King’s Peak (MC 217)

4 100 6,500’

* MC = Mississippi Canyon

Pursuing the Undeveloped Offshore Oil and Gas Potential

It is essential that the infrastructure (plat-forms, wells, and pipeline system) for these large offshore oil fi elds and natural gas fi elds be maintained until the technol-ogy and/or economics of enhanced oil and natural gas recovery improves. This is essential for conserving this domestic hydrocarbon resource endowment. The economic recovery of this undeveloped offshore oil and gas resource will also depend upon:

Future crude oil and natural gas prices;Cost of future supplies of CO2 (perhaps infl uenced via incentives for reducing CO2 emissions, such as the geologic sequestration of anthropogenic CO2); and

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Gas Pipeline

Umbilical

Subsea Well

Central Gathering Facility

Canyon Station

(MP 261)

Aconcagua

Camden Hills

King’sPeak

The economic risk associated with these projects, because of their technological challenges (perhaps infl uenced through government risk-sharing programs via fi scal incentives to encourage CO2-EOR).

In addition, more comprehensive assess-ments of this potential are required, and policy makers and industry decision-mak-ers must be informed of this potential.

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Other Potential Energy Opportunities Exist Offshore of Louisiana

In addition to oil and gas extraction and mariculture, the existing oil and gas infrastruc-ture in the state of Louisiana could be used for a number of other applications. Some of these opportunities are described below.

Liquefi ed Natural Gas (LNG)

Some existing offshore oil and gas plat-forms could be converted to accom-modate offshore LNG operations. This conversion could utilize existing platform operations to re-gasify LNG. Increasing imports of LNG are seen by most in-dustry analysts as critical for supplying increasing U.S. demand for natural gas (NPC 2003). Moreover, as gas production in Loui-siana continues to decline, increased LNG imports could help utilize existing industry infrastructure in the state that would otherwise be under-utilized, such as gas-processing facilities and gas-gath-ering and transportation infrastructure. In addition, it can help provide continued low-cost natural gas to power generation and large industrial gas consumers in the state. Recent studies have shown that substantial economic benefi ts could ac-crue to the State of Louisiana from the development of LNG facilities off its coast (Dismukes 2004).

One concern associated with onshore LNG re-gasifi cation facilities is the poten-tial threat they pose to neighboring com-munities in the event of an accident or terrorist event. Offshore facilities located far from population centers pose a much more limited threat to coastal communi-ties, however, there is concern that cool-ing waters may have a detrimental affect on fi sh larvae.

Carbon Sequestration

In a CO2-EOR project, once oil production declines below a point where the revenues from this production do not cover the cost of operations, the project is discontinued. As mentioned earlier, in the case of an offshore project, under current federal regulations, the platform and associated equipment would need to be dismantled and removed. Even after production has been discon-tinued, this same facility could be used to take CO2 emissions from onshore in-dustrial facilities and, using existing infra-

structure, sequester this CO2 back into the geological formations of depleted oil and gas fi elds and per-haps other deep formations, such as saline aquifers. An estimated 400 Tcf, or 22 gigatons, potential sequestration capacity exists in oil and gas reservoirs in the offshore Gulf of Mexico. This can allow for the removal of CO2, a greenhouse gas, from the atmosphere. This use of these facilities for sequestering CO2 can occur in parallel with off-shore mariculture operations and would be expected not to interfere with them (ARI 2005).

Natural Gas

astlineline

CO2 CaptuFacility

Plant

Power Out

ogic FormationGeologic Formation

CO2 Pipeline

22 Pipeline

Powe

Greenhouse gases can be utilized to recover “stranded” petroleum (45 –67% ) nor-mally left behind because of mandatory removal. CO

2 is captured from power plant

emissions and the atmosphere and is condensed and piped offshore and injected into the ground to force up the petroleum.


2-9

Generator

PowerLine

Power

Interfaceng

Utility GridSystem

Electrical SubStation andSales Meter

Transformerer

ShoreLine

Power Cable(BuriedPipe Lines)

Existing OffshorePlatform Field

Power Line

Each wind turbine on offshore platforms anticipated to generate 1.5–3.6 megawatts of power (Louisiana Department of Natural Resources, 2004).

Wind Energy

A number of wind energy developers are looking to the offshore Gulf of Mexico as a viable area for wind energy devel-opment. Existing offshore platforms are being used as part of this development. A recent study by a research group at Stanford University (Archer and Jacob-son 2003) determined that the offshore Gulf of Mexico environment is character-ized by some of the strongest sustained winds in the country. Offshore wind energy projects are already on-line in Denmark, Germany, and the United Kingdom, and over 3,000 megawatts (MW) of wind energy projects have been proposed off the New England coast. One project pro-posed for development off the coast of Massachusetts (www.capewind.org) has recently received a positive environmen-tal assessment.The fabrication of offshore wind energy facilities would involve most of the same skills and workforce capabilities currently associated with the fabrication of off-shore oil and gas platforms, providing for the continued economic vitality for this important Louisiana industry.

Under most applications, platforms sup-porting wind energy production could also simultaneously support mariculture operations. However, no established regulatory framework for permitting and overseeing these offshore wind energy facilities currently exists.

Ocean Energy

Several scenarios to harness energy from the ocean have been entertained. Ocean Thermal Energy Conversion (OTEC) processes utilize the heat energy stored in the ocean to generate electrici-ty. Wave, currents, and salinity gradients are also sources of energy that could be harnessed from the sea. A non-profi t or-ganization, Practical Ocean Energy Man-agement Systems, Inc. discusses these energy technologies and lists installa-tions already in operation in the U.S. and around the world (www.poemsinc.org/links.html). These applications require suitable sea states and water tempera-tures that may or may not be present at platform site.


2-10

Oil and Gas Platform

MariculturePlatform

Mariculture Platform with CO2 Injection

Mariculture Platform with Wind Farm

Disposal Zone

Oil Reservoir

The Louisiana continental shelf experi-ences population increases in algae dur-ing the spring and summer months. This is a direct result of nutrient enrichment derived from run-off from the Missis-sippi River and other tributaries. These algae could be harvested and processed into bio-fuels on offshore platforms and piped inshore using the existing pipeline system. The effl uent from the system is aerated water. Planktonic algae (diatoms) contain the highest concentration of oils (bio-fuel) in the plant kingdom (Sheehan et. al. 1998). Waste products (proteins) could be used to supplement fi sh food in mariculture operations. There are about 800 platforms located in the hypoxic zone off the Louisiana coast, where these algal population increases occur. This technol-logy is in the developmental stage. More research is needed to identify the species of algae present on the Louisiana conti-

nental shelf that is most suitable for this purpose. In addition, a mechanism to ex-tract the algae needs to be developed. These technologies are also compatible with mariculture operations; many engi-neering and economic issues, however, need to be addressed prior to implemen-tation. Bottom Line: The economic viability of the energy development options under consideration for Louisiana’s offshore wa-ters, the same as with many of the mari-culture applications, are critically depen-dent on the availability and maintenance of the existing energy infrastructure in the offshore Gulf of Mexico.

The oil and gas platforms are built to last 100 years and could be retrofi tted to facilitate a number of technologies over the years. Aquaculture could co-exist with a variety of eco-technologies such as greenhouse sequestration (CO

2

injection), wind energy, and pollution mitigation.

Section 3: The Promise of Mariculture for Louisiana’s Offshore Waters

3-1

SECTION 3: THE PROMISE OF MARICULTURE FOR LOUISIANA’S OFFSHORE WATERS

Net-Pen Culture

The depth, current, and clarity of the water at many offshore platform locations (> 100 ft) present ideal conditions for accommodating large-scale mariculture pro-duction operations using net-pens. The platform provides a fi xed base of operations for environmental sensors, systems control, and communications. The platforms are suitable for large-scale fi sh production and can be used to distribute food to many fi sh cages. The current limiting factor for long-term success of offshore mariculture is fi ngerling production. If a steady supply of juveniles is available, one offshore platform in 100–150 feet of water was estimated to facilitate nine large net-pens for fi nfi sh (Sea Grant 2001).

Ocean Spar fi sh net-pens and mariculture facility. The platform would distribute food and maintain nets.

Potential Culture Species

The number of species available for mari-culture production in Louisiana is current-ly limited to redfi sh and striped bass (P. Picard, pers. comm., Dixie Fish 2004). Some experimental production of mutton snapper and cobia has occurred in the Gulf (Watanabe 2001). Fish farmers in Taiwan have been raising cobia for over a decade and recently produced 4,500 tons of this species in 2003 (J. McVey, pers. comm.).Numerous mariculture efforts around the world are producing oceanic species at commercial-scale levels, for species such as mahi-mahi, amberjack, tuna, pompa-no, and grouper (Ryan et al. 2004). The paucity of fi ngerling production in the Gulf of Mexico is partly due to technological limitations related to larval production and nutrition. Moreover, unfortunately, there are currently no incentives to produce fi n-gerlings. In fact, at present, it is illegal to possess fi sh in net-pens (Magnuson Act) in the Gulf of Mexico exclusive economic zone (EEZ). This is clearly a regulatory is-sue that needs to be addressed directly by amending current legislation.

Current Status of Mariculture in the U.S.

Seafood is the second largest import item in the U.S. There is great need for fresh, warm-water species, such as those found in the Gulf of Mexico, and the commercial fi shermen cannot meet the high demand. Finfi sh are heavily reg-ulated in both the commercial and recre-ational fi shing sectors. In addition to the trip limits, size limits, and seasons, there are moratoria on commer-cial reef fi sh permits and recreational char-ter boats as well as ear restrictions, net bans, and catch prohibitions on important recre-ational species.


3-2

Barriers to Implementation of New Mariculture Initiatives

Certain barriers are currently inhibiting the implementation of net-pen maricul-ture in the northern Gulf of Mexico:

30 CFR 250.112-15 currently requires oil and gas production platform to be removed one year after production ceases.No regulatory framework for mariculture currently exists.Permitting and monitoring are very expensive.No fi sh hatcheries currently exist to support mariculture production/No liability structure currently exists for the transfer of ownership and long-term care of offshore oil and gas platforms.

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Role of Platforms in Offshore Net-Pen Mariculture

Because of concern over deteriorating wa-ter quality conditions and potential harm-ful impacts of fi sh farming, environmental interests have initiated efforts around the globe to move aquaculture activities off-shore — away from the sensitive coastal zone (Ryan et al. 2004, Burgrove et al. 1994; Thompson 1996). Large-scale offshore net-pen mariculture operations address these environmental concerns by placing them in the presence of cur-rents and suffi cient water column depths to distribute and dilute mariculture wastes (Sea Grant 2004; Ryan 2004; Gowen et al. 1989).

Vision for the Future

The fi rst requirement to initiate offshore net-pen mariculture operations in the Gulf of Mexico is a state-of-the-art fi sh hatch-ery to provide fi ngerlings. If a steady sup-ply of juveniles is available locally, Louisiana mariculture ventures will have a higher probability of success. Even if one of these mariculture platforms were utilized for stock enhancement, it could potentially to signifi cantly increase the populations of highly regulated fi sh in the Gulf. The Grace Mariculture Project is planning to raise fi n-gerlings on one platform off the California coast. Offshore fi sh hatcheries could over-come many of the technological hurdles facing fi sh larval and fi ngerling production and also maintain a healthy genetic pro-tocol. An enormous gene pool is available right at the platforms’ sites; from 10,000 to 30,000 fi sh reside off each platform (Stanley and Wilson 2000).

Fish feed and fecal waste; i.e., carbon, nitrogen, sedimentationEscapement of fi sh and genetic integrityFish disease and therapeuticsOperational waste; e.g., paint, grease, anti-fouling agents, etc.

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Potential Environmental Concerns Associated with Large Scale Net-Pen Operations

Water depths of 100 ft. and greater generally provide safe environmental conditions for open ocean net-pen operations along the Louisiana continental shelf. Zones of hypoxia cover portions of the Gulf fl oor during mid-summer and early autumn along the inner continental shelf from the Mississippi River delta to the upper Texas coast (Rabalais 1994). These conditions are not prevalent outside of the 100 ft. contour.



3-3

Oyster Depuration (Relaying)

Shellfi sh are known to be carriers of infectious and sometimes dangerous or lethal diseases. Their consumption is risky because they are often eaten raw or partially cooked. The bacteria Vibrio vulnifi cus occurs naturally in estuarine waters and may be found in oysters harvested from the Gulf of Mexico. While most individuals in good health are not affected by the organism, it can induce illness or prove fatal for indi-viduals with compromised immune systems.The presence of V. vulinifi cus is highly correlated with warm water temperature, and virtually all Gulf-harvested oysters contain some concentration of it in the warmer summer months.Research has shown that populations of V. vulnifi cus in oysters can be signifi cantly reduced by running (relaying) them offshore and suspending them in deep water for certain periods of time (Motes and DePaola 1996). Exposure of the oysters to cooler waters beneath the thermocline (>50 feet depth) that are naturally free of this bacterium allow the oysters to purge themselves over a 16-day period (Supan 2004). Oysters could be effectively relayed by containers (Supan 1991; Supan and Cake 1989), a method already approved by the National Shellfi sh Sanitation Program (NSSP) (NSSP 2003).

This picture shows fi shermen depurating oysters offshore in clean salty water from inshore waters. Regulations may require oysters to be treated. Two hundred million pounds of oysters are harvested annually in Loui-siana. Offshore platforms could provide suitable equipment and facilities to depurate oysters at industrial levels.

“The oyster industry is approaching a signifi cant crossroad in the next three years.”

– Dr. John Supan, 2004 Coordinator of Gulf Oyster Industry Initiative Program

Current State of Oyster Regulations

The Interstate Shellfi sh Sanitation Conference (ISSC) now requires states to develop and implement a V. vulnifi cus Risk Management Plan (ISSC 2002). The collective goal of these risk management plans is to reduce rates of V. vulnifi cus illness by 40 percent for 2005–2006, and 60 percent for 2007–2008.While the Food and Drug Administration (FDA) supported this plan, the ISSC has not yet adopted it. Hence, there appears to be some uncertainty about what would happen after 2008 if the above goals are not reached.The industry’s current capability to treat post-harvest oysters would be woefully inadequate if the state mandated treatment for its total oyster harvest, which averages approximately 200 million pounds of oysters and 12 million pounds of oyster meat annually (Supan 2004). If the above goals are not achieved, additional measures would have to be implemented (U.S. GAO 2001). These measures would include, among others, “requiring that during the months of May through September, when V.

1.

2.

3.

4.

5.

vulnifi cus levels are known to be highest: 1) all oysters are subjected to post-harvest treatment to reduce V. vulnifi cus bacteria to a nondetectable level, and 2) all oysters are to be labeled for shucking by a certifi ed dealer; or 3) shellfi sh growing areas are to be closed for the purpose of harvesting oysters intended for the raw market.”


3-4

Other methods to treat oysters of V. vul-nifi cus kill the oyster and compromise the taste. Depuration keeps fresh oysters alive and improves the taste.

Role of Offshore Platforms in Oyster Depura-tion

If the FDA enforces V. vulnifi cus regula-tions, offshore plat-forms could play a critical role in pro-ducing a desirable oyster that meets these proposed standards. New federal regulations may require oys-

ters to be treated. Two hundred million pounds of oysters are harvested annually in Louisiana. The industrial cranes and generators on offshore platforms could provide suitable equipment and facilities to depurate oysters at a level to support large-scale commercial production. Moreover, many feel that oysters taste better after they have been placed in clean and cool salty water. The alterna-tives to oyster relaying offshore to meet the proposed standards include: 1) hy-drostatic pressure, 2) a mild heat treat-ment known as cool pasteurization, and 3) cryogenic individual quick freezing; 4) exposure to gamma radiation (Diagne and Kiethly 2004). The fi rst three options

unfortunately compromise the taste of the oysters. Offshore platforms could supply the industrial equipment required to han-dle the massive weight of whole oysters, which yield to about 6 pounds of meat for every 100 pounds of shell (Diagne and Ki-ethly 2004).

Barriers to Implementation

A number of barriers currently exist that inhibit the implementation of potential oyster depuration in the offshore Gulf of Mexico. These include:

The need for FDA approval of oyster depuration at retired oil and gas platforms, andThe need for economic incentives to implement such activities, unless the ISSC adopts more protective measures.


The relatively rapid economic turnover of relaying equipment allows quick returns on capital investments and provides a more immediate cash fl ow for oyster dep-uration when compared to other forms of fi sh farming. Oyster depuration could be one of a suite of mariculture applications practiced simultaneously at offshore plat-forms. Offshore platforms could provide ideal staging areas for offshore oyster re-laying a relatively simple and cost-effective mariculture operation (Supan 2004).

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“Oyster Depuration” on offshore platforms purges harmful bacteria from coastal oysters by submerging in clean offshore water. Exposure beneath the thermocline of colder Gulf of Mexico waters (>50 ft depth) that are naturally free of V. vulnifi cus allows the oysters to purge themselves free of the bacteria over a 16-day period.


3-5

Red snapper caught on an oil and gas platform.

Recreational Fishing and Diving

Oil and gas platforms are a favored destination of Louisiana sport fi shermen. Approxi-mately 70 percent of the offshore fi shing trips target the structures in the pursuit of fi sh (Stanley and Wilson 1989). The platforms are also picturesque diving spots. As mentioned above, almost all these structures are scheduled to be removed within the next 15 years, and this has already caused some concern among recreational fi shing organizations in Louisiana. Sporting clubs and conservation efforts are interested in preserving these artifi cial reef habitats and promoting sustainable fi shing practices. Retired platforms could potentially be converted into fi shing and diving hotels (Reggio 1989). Large vessels capable of accommodating 100 fi shermen could anchor near dozens of some of the largest artifi cial reefs in the world.

Current State of Artifi cial Reef Use for Recreational Fisheries

Artifi cial reef programs have attracted large investments and produced consid-erable economic contributions in Flori-da’s tourist fi shing industry. In a survey of southeast Florida citizens (Johns et al. 2001), residents responded that they are willing to invest $26.63 million/yr to install and preserve artifi cial reefs. Their artifi cial reef program has created a $2.4 billion annual economic impact (Johns et al. 2001). Three cost-benefi t studies from Gulf States on the econom-ic benefi ts of artifi cial reefs indicate sig-nifi cant fi scal impacts from artifi cial reef programs.

Role of Offshore Platforms

Artifi cial reef programs for recreational fi shermen and divers in many coastal states and around the world invest sig-nifi cant resources to build and install artifi cial reefs. The costs average about $140/m3 to build and install such reefs using reef balls, grouper ghettos, and sophisticated Japanese artifi cial reefs. Considering all Gulf platforms in waters >50 feet, the collective volume is 94,450,807 m3 (July 2004). Using these rates as a guide, the collective value of these platforms is $13.2 billion (Appendix A). Retired platforms clearly represent a valuable resource in the Gulf of Mexico, irrespective of their value as petroleum producers.


In addition to the numerous regulatory issues creating an obstacle to the use of platforms for mariculture mentioned

above, on the whole, there is no immedi-ate incentive for recreational fi shermen to encourage the retention of the plat-forms. There are still 3,600 platforms in place and generally open access to them. The loss of platforms has not yet inspired a signifi cant response from the recreational fi shing sector, although some fi shermen are beginning to notice platform removals and becoming strong advocates of their retention (McNemar 2003). Unfortunately, most inshore plat-forms are scheduled to be removed over the next 10–15 years.


A standing platform, with 20 or 30 large artifi cial reefs placed around it, would cre-ate an exceptional fi shing spot. The stand-ing platform could serve as a rendezvous for charter boats, recreational divers, and fi shermen; and it could be accessed by helicopter, decreasing lost time in ship transit for passengers. Sport fi shing and diving would be more cost-effective and comfortable. Recreational park facilities could provide live bait, fuel, ice, and op-erational gear to the charter boats and clients. The standing platform at a recre-ational park can also provide lodging to any recreational enthusiast who might be suffering from seasickness.

Offshore platforms are a paradise in the ocean for those looking for adventure. All the different kinds of fi sh from the Gulf of Mexico can be found in one spot.

– Manny Puig

Economic Analysis of Artifi cial Reefs

Area Annual Economic Impact Jobs Source

Southeast Florida $2.4 billion 26,800 Johns at al., 2001

Northwest Florida $415 million 8,100 Bell et al., 1998

Mississippi $78 million No data Southwick et al., 1998


3-6

Ornamental Fish Culture

Attractive Caribbean fi sh inhabit the upper 90 feet of the blue water platforms. There are about 25 species of obligatory reef and cryptic species (p.v. Walker 2004; Radem-acher and Render 2003), many of which are desirable aquarium fi sh. They are usually wide-bodied “poster-colored” demersal fi sh that reside on the platforms for the dura-tion of their lives. These species are often sold in the U.S. aquarium trade market.

Current State of FisheryThe U.S. Commission on the Ocean (2004) noted that the U.S. is the world’s largest importer of ornamental coral reef resources and suggests that we have a responsibility to eliminate destructive harvesting practices of fi sh and other reef organisms. These “resources are destroyed by methods that destroy reefs and overexploit ornamental species.”

In U.S. pet stores, fi sh products remained the most popular category based on the dollars spent, generating nearly $1.2 billion/yr. in retail sales (1998) (Hellwig 1999). The U.S. imported $45 million (wholesale) in 1998 in ornamental fi sh (Adams et al. 2001). The collection of marine tropical fi shes and invertebrates for the ornamental fi sh industry has caused extensive damage to coral reef environments throughout Southeast Asia. Especially destructive is

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cyanide fi shing, an illegal but extensively used fi sh collecting method in this region (Mackey and Chau 2001). Some estimates place the percentage of fi sh cultured in the ornamental fi sh market is ~10 percent, but it is generally accepted within the industry that the actual fi gure is considerably lower — somewhere between 2–5 percent (Mackey and Chau 2001).

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Potential culture species.

Water clarity and temperature are important factors in cultivating ornamental fi sh. Suitable areas for raising ornamental fi sh are in the deeper waters offshore of Louisiana >200 ft.


3-7


There are no known fi shery regulation barriers for ornamental fi sh. They are not currently managed by the Gulf of Mexico Fisheries Management Council (Gulf Council). Ornamental fi sh are not included in the Reef Fish Fisheries Man-agement Plan for the Gulf of Mexico. The barriers to implementation that ex-ist in this area no different than those germane to all ventures seeking to use platforms after their productive life in minerals production.


Reef dependent fi sh can be found from larval stages to adult stages (Hernandez et al. 2003) They feed, mate, nest, and spawn at platforms. All the necessities for survival are present at the platform. The offshore location provides a clean water source, and the platform offers a number of advantages to the maricultur-ist:

Large larval and food supply are available naturally at the platforms;Large numbers of adult fi sh; andLarge numbers of juvenile ornamental fi sh. These naturally occurring fi sh could be harvested and separated in tanks and raised to marketable size on the platform.


Ornamental fi sh include a variety of angel-fi sh such as the rock beauty, queen angel, French angel, blue angel, and townsend angel. Other species include damselfi sh, blue tang, creole fi sh, black durgon, and many other varieties. Videos taken by A. Walker show about 25 species of obliga-tory reef fi sh, many of which are desir-able in the aquarium trade.

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The U.S. aquarium trade is an economi-cally signifi cant industry and there is tre-mendous potential for environmentally friendly sustainable sources of maricul-ture products. Raising ornamental fi sh could occur while cultivating corals, growing fi sh in pens, or at platform sea farms.


3-8

Culture of Coral, Sponge, and Medically Valuable Organisms

Platforms could potentially serve as excellent facilities to culture some rare, commer-cially valuable, deep-water invertebrates, such as deep-water sponges currently being used for producing powerful anti-cancer compounds (discodermalide; Gunasekera et al. 2002; Paul et al. 2002; Lin et al. 2004). Large plates could be seeded with coral larvae in the laboratory, and the spat could be reared to a point where they reach a size-refuge (Sammarco 1982), carrying a higher probability of survivorship to the adult stage (Heyward et al. 2002). They could then be transported offshore and attached on the platform (Sammarco et al., work in progress) at the appropriate depth for op-timum growth for a period of up to 2–3 yrs.Secondly, a large number of reef invertebrates such as sponges, bryozoans, gorgoni-ans (sea fans), soft corals, etc. are known to live on offshore platforms (Gallaway & Lewbel 1981; Driessen 1989; Bright et al. 1991; Adams 1996; Boland 2002). The larvae of these organisms are carried by currents from their natal reefs around the Gulf of Mexico until they fi nd suitable substrate upon which to settle (Lugo-Fernandez 1998; Sanvicente-Anorva et al. 2000; Lugo-Fernandez et al. 2001; Pederson and Peterson 2002). Many of these organisms are the same as those raised and sold commercially world wide in the ornamental aquarium trade (Ogawa and Brown 2001). Coral and sponge culture could simultaneously include both raising target organisms of specifi c value to commerce or research, and harvesting wild organisms occurring naturally on the platform legs.

Current State of Coral Reefs on a Global Scale

Coral reefs, and particularly coral popu-lations themselves around the world are suffering high levels of mortality due to over-fi shing, under-grazing, nutrient en-richment, deforestation and resultant runoff, pollution, increased sea surface

temperatures, which induce mass coral bleaching, chemical pollution, physical dis-turbance, disease — both bacterial and fungal (Shinn 2003; Sammarco 1996; Wilkinson 1999; Gardner et al. 2003; Whittingham et al. 2003; McClanahan et al. in press). The federal protection of cor-als from harvest (see Sammarco 2003) combined with the international agree-ments not to trade them (Harriot 2003) also restricts their supply to scientists to conduct research on many of the causes of these ill effects and investigate possible mitigation techniques. The mariculture of corals would help to meet the demand for scientifi c research in the U.S. and else-where. This would also help to supply a need for corals to be introduced on dam-aged reefs during reef restoration activi-ties on U.S. coral reefs, particularly in the Florida Keys (Sammarco 1996; Becker and Mueller 1999; Sammarco et al. 1999; Zobrist 1999).

The habitat range of coral on the platforms is believed to be limited to blue water; however, recent investigations reveal that coral is found in more turbid waters closer to shore.


3-9

Close-up of corals growing on platform.

Diver collecting stony coral colonies. Thousands colonize the horizontal transoms.


The purpose of culturing marine inverte-brates such as those on platforms would be three-fold. Firstly, organisms such as these are in great demand within the or-namental aquarium trade. Many, such as corals and soft corals, are protected from harvest or seizure by federal leg-islation. Secondly, they are protected from international trade by treaty. This is due to the excessive harvesting that has occurred in past years, decimating populations in certain tropical countries possessing coral reefs (Bruckner 2001; Daw et al. 2001; Simpson 2001; Tis-sot and Hallacher 2003). Mariculture of these organisms would provide a domes-tic supply for them, obviating the need for importation of Indo-Pacifi c soft corals and the like. This would serve an addition-al function in that there is growing con-cern about the accidental or purposeful release of these Indo-Pacifi c ornamental species into coastal waters (Gulko 2001; Semmens et al. 2004), with the possible impact of introducing yet more harmful species introductions (Minchin 1999; Englund and Baumgartner 2000; Shi-ganova 2002). Thirdly, the mariculture of such local organisms would also initiate a new industry for the northern Gulf of Mexico, creating a new source of employ-

ment and revenue in the region and the nation. The demand for the organisms al-ready exists; at this point, however, most of the supply is com-ing from overseas and represents lost revenue to the U.S. (Sammarco 2003).


In recent studies, it has been determined that scleractinian corals are expand-ing their geographic range within the northern Gulf of Mexico (Sammarco et al. 2003). In addition, from an ongoing study, it is also known that ahermatypic corals may be found extensively on plat-forms within 30 km of the shoreline in the far-western Gulf and within 120 km of the coast in the central-western Gulf (Sammarco et al., submitted). Platforms at the edge of the continental shelf in the northern Gulf of Mexico plus those just off the edge of the shelf are now known to be able to support coral populations. We know that the biogeographic range of corals in the Gulf of Mexico for both her-matypic (reef-building) and ahermatypic (non-reef-building) corals extends as far west as the Matagorda Island and Bra-zos, South Addition regions, as far north as the inner West Cameron region, and as far south as 210 kms offshore near the Flower Garden Banks region (Sam-marco 2003). The central and eastern regions of the northern Gulf of Mexico are scheduled to be surveyed soon to determine the limits of this group in this region.


3-10

Vision for Future

The ocean is Earth’s last great untapped reserve. Many reef organisms possess natural chemical compounds which are unique to a given species (Faulkner 2000). These are called complementary or secondary compounds (Sammarco and Coll 1997). It is from these types of compounds that many valuable pharma-ceuticals are derived (Shu 1998; Duck-worth 2001; Dey et al. 2002; Haefner 2003). Marine coral, sponges, mollusks, algae, and bacteria may possess bioactive compounds that can make a signifi cant contribution to the health and nutritional industries (Pomponi 1999). Simple and abundant marine algae, let alone a host of other organisms which occur on the platforms, represent potential sources of pharmaceuticals agents, agricultural chemicals, food, industrial chemical feed-stocks, and other useful products.Some of the organisms that produce bio-active compounds, such as certain spong-es, occur in deep water, are unreachable by SCUBA and occur only rarely in their natural environment (Duckworth 2001). They require highly expensive equipment — such as manned submersibles associ-ated with large tender ships. Some of the valuable compounds isolated from these species, which have been shown to be

highly effective in the treatment of certain types of cancer, occur in very low concen-trations within their tissues (S. Pomponi, pers. comm.). In addition, they are so large and complex that it would be prohibi-tively expensive to synthesize and manu-facture them, or even make functional de-rivatives in the laboratory (closely related compounds that function in the same way as the original, natural compound, but are patentable). Because of this, even the testing of these compounds for bioactiv-ity and potential biomedical use requires quantities of these organisms which are extremely diffi cult and expensive to obtain (Duckworth 2001). Nonetheless, they are required in order to extract appropriate amounts and this is causing a marke de-cline in some source populations.Offshore platforms offer a unique mecha-nism by which to culture organisms such as sponges, and could obviate the need for expensive deepwater harvesting. Sponges in general are quite easy to grow in their natural environment and could easily be cultured at the required depths on these platforms. All of these activities would produce revenue in addition to that derived from fi sh mariculture. In addition, the activities may be conducted in paral-lel without jeopardizing other mariculture activities on the same platform.


3-11

Platform sea farms can provide an infrastructure for a variety of mariculture applications. It is an effort to utilize the thousands of platforms expected to be removed in the next 10-15 years.

Sea Farms

The “sea farm” plan is a plan to incorporate the scores of platforms scheduled to be retired (150–200/year) into a large mariculture production system to raise a diverse range of organisms. The decommissioned structures could be submerged as artifi cial reefs or left standing to provide a number of services. The scene below depicts the utilization of standing platforms for fi sh hatcheries and nutrition. They can be used for power, maintenance and supplies, fi sh unloading and transport to shore, and invertebrate culture. Crab, lobster, scallops, coral, sponge, and other cryptic and attaching invertebrates could be raised on the submerged structures at the sea farms. Oyster relaying, ornamental fi sh culture, and net-pens are other mariculture options at sea farms.


The location of the system will determine what species are suit-able to culture. A sensible sea farming strategy is to diversify the number of culture species and limit the harvest to sustain-able levels. Focusing on raising a single species may stress the local ecosystem. If pressure on a particular species becomes too great, stocking and feeding fi sh at the sea farm may supple-ment the exploited stocks. Japan leads the world in sea farming in-novation, and the Japanese are already practicing all the maricul-ture technologies discussed in this text and culturing dozens of species (Grove 1994; Matsuda 1998).

Current State

In Japan, sea farming is commonly prac-ticed. They have embraced sea farming in an effort to transform their commer-cial fi shing fl eet from a predatory fi shery into a culture fi shery (Grove et al. 1994). In the U.S., Mote Marine laboratory is currently involved in a marine enhance-ment program that utilizes artifi cial reefs with the stocking of red snapper (Leber et al. 2002). Hatchery-reared snapper are released at the artifi cial reef sites. The release sites are then revisited and examined three months later to deter-mine the fi delity of the red snapper to the artifi cial reefs (Ziemann et al. 2004). The research is still in the experimental stage.

Platform farms should be located in mid to deep water (>100 ft.-<400 ft.) to avoid user confl icts with the commercial trawling industry. The majority of the Louisiana shrimp fl eet pursues shrimp in depths less than 60 ft. of water. The site also has to be deep enough to “reef ” the structures.


3-12

The U.S. has quite a few stock enhancement programs and most coastal states have an artifi cial reef program; how-ever, outside of the experimental project in Flor-ida, there are no sea farming operations that combine these technologies. The largest U.S. stock enhance-ment project is Alaska’s salmon stock-enhance-ment program

which receives $156M/yr in governmen-tal funding (McIIwain 2003) and which reportedly produced $270M in commer-cial landings of salmon in 2001 (National Marine Fisheries Service, 2002). In the U.S., cooperative stock enhancement projects between the public and private sectors are pioneering practices for red drum (in Florida, South Carolina, and Tex-as); Pacifi c threadfi n, mullet, and snap-per (in Hawaii); red snapper (Alabama, Florida, and Mississippi); white seabass

(California); summer fl ounder (North Car-olina); cod (Maine); lingcod (Washington); snook (Florida); and winter fl ounder (New Hampshire). These initiatives, however, are mostly in the research phase (Nation-al Marine Fisheries Service, 2002; Leber 2002).


Sea farming carries regulatory concerns that are beyond the scope of this report. The question of ownership fi sh in the wa-ter column is of keen concern to fi shery managers. Harvest quotas are also a constant source of contention in the fi sh-ing community. The issue of “ownership” comes to the forefront, because wild fi sh can easily swim into a culture area and culture fi sh can swim out.

Fish feed wasteEscapement of fi sh and genetic impact on wild populations

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Potential Environmental Concerns Associated with Large Scale Sea Farm Operations

The Japanese are world leaders in sea farming technology and they are striving to transform their fi shery from a “capture fi shery” to a “culture fi shery” (Grove 1994).

Stanley and Wilson (2000) reported that 10,000-30,000 adult fi sh reside around the platform in an area about half the size of a football fi eld.

Sea farms would preserve these fertile habitats on the Louisiana continental shelf.


3-13

Endangered species, coral and sponge and protected fi sh and crustaceans colonize the platform’s submerged structure.

Role of the Platforms

Platform jackets are 10 times larger and stronger than the best Japanese artifi cial reefs. The platforms are du-rable and could easily be modifi ed in numerous ways to accommodate many different mariculture applications. Reg-gio (1989) reported that, if left as is, the structures should last 300 years as artifi cial reefs on the ocean fl oor. They could remain standing indefi nitely if ca-thodic protection and structural integrity were maintained. However, they would have to be repaired after hurricanes (ChevronTexaco, pers. comm.)


The sea farm could create a foundation upon which a multitude of different fi sh-ery management operations could fl our-ish. The commodities that are commer-cially viable today may be insignifi cant to the discoveries that will be found in the future. A great deal of research and planning is needed to fully assess the implementation of a platform sea farm. They will be developed gradually over the years as decommissioned structures become available in the area.

Platforms produce some of the most prolifi c ecosys-tems, by area, on the planet. Sea farming systems could transform our fi shing techniques from preda-tory methods to sustainable methods of harvest.


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Section 4: Environmental, Socio-Economic, and Regulatory Issues

4-1

Environmental Stewardship

SECTION 4: ENVIRONMENTAL,

SOCIO-ECONOMIC, AND REGULATORY ISSUES

Environmental and Ecological Issues

The following is a list of general environmental and ecological concerns associated with mariculture.

Fish feed and fecal waste. The decomposition of feed and organic wastes, fi sh respiration, and nitrifi cation of metabolic wastes can lower dissolved oxygen levels in the water column in and down current of the net-pens. Dissolved oxygen and organic enrichment are interrelated in that organic enrichment fuels bacterial decomposition and results in oxygen depletion. The decay of solid waste may also result in alterations in the benthic community due to burial and chemical changes affected within the sediments.Escapement of fi sh and genetic integrity. The principal problems that have developed are: 1) displacement of indigenous species by the introduction or escapement of non-indigenous species into the wild (Blankenship and Leber 1995; Stickney 2002; Leber 2001 and Blaylock et al. 2000); and 2) the threat of altered natural gene pools from the introduction or escapement of hatchery-produced fi shes with limited genetic diversity into the wild (NRC 2002; Blankenship and Leber 1995; Trinigali and Leber 1999; Traniguchi 2004).Use of native indigenous species. It is recommended to culture only indigenous species. A sound genetic protocol of indigenous species addresses many of the genetic integrity concerns with escapement and stock enhancement (Leber 2002).

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Fish disease. Introduction of diseases from hatchery-produced fi sh to wild fi sh can occur. Naturally occurring diseases, toxic alga blooms, stress from low oxygen, cold stress, nipping, or degraded feeds can all potentially cause mortality of fi sh reared in cages.Use of wild caught fi sh to feed culture fi sh. Harvesting populations of ground fi sh or menhaden to feed culture fi sh may add fi shing pressure on wild fi sh. Louisiana shelf is home to the Mississippi “fertile crescent” where 90 percent of the fi sheries in the Gulf of Mexico (GLOBEC 2001) are located, including large populations of ground fi sh and menhaden.

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Platforms provide offshore habitat for marine turtles. Their forage and prey organisms are readily available all over the platforms.



4-2

Mariculture Applications

Mariculture System Potential Problems State of Knowledge

Net-pen culture TSS, NH3, BOD, thera-

peutics, chemical agents, genetic integrity of wild stocks, operational waste, and site selection

Disease and pollution problems decrease with increased depth, current, and distance from shore

Ornamental fi sh By-catch Offshore culture is non-existent, all aquaculture has occurred inshore

Coral and sponge Species competition Widely practiced in Florida

Oyster relaying TSS, fecal, and site selec-tion

The relaying or depuration process is approved by FDA, however, relaying to offshore platforms will probably require FDA approval

Sea farm TSS, genetic integrity of wild fi sh, operational waste, site selection

Commonly practiced in Japan but virtually unknown in the U.S.

Effects of mariculture on communities associated with platforms. The factors of concern include discharges from large net-pen operations that could exert environmental stress on the fi sh and invertebrates already resident on the platform. Operational waste. These types of wastes fall into two categories — routine discharges of sanitary waters, and potential spills of materials such as fuels, paints, and anti-fouling compounds, etc.

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The table above examines each of the fi ve mariculture applications. The assessment identifi es the problems, re-views the state of knowledge, and makes recommendations on the environmental concern.

What to Do About Environmental Concerns

A number of relatively straightforward ac-tions could be pursued to help alleviate or minimize many of these environmental concerns. These include:

Culture only native fi sh;Establish Best Management Practices (BMPs) and safety and environmental protocols for mariculture operations; andMove mariculture activities to sites offshore to deep water, swift currents, and far from land, to minimize impacts to environments nearer to shore.

Environmental Benefi ts Associated with Leaving Offshore Structures in Place

Leaving offshore platforms and oil and gas infrastructure in place, rather than remov-ing these platforms within one year after the cessation of production, could result in a number of environmental benefi ts, both locally and globally.

These platforms and their associated pipeline infrastructure could provide the foundation for facilitating the permanent sequestration of as much as 22 gigatons of greenhouse gases into depleted oil and gas formations, with additional potential capacity in deep saline aquifers (ARI 2005).Existing platforms and infrastructure could provide low-cost facilities to support a number of non-CO2 producing energy sources, such as wind, current, ocean thermal, wave, bio-fuels, etc. The mariculture of corals would assist in the restoration of damaged natural coral habitats. It would also help to protect coral reefs elsewhere in the world from exploitation and destruction by reducing the demand for importation of ornamental organisms for the aquarium trade, simultaneously reducing import demand and bolstering domestic revenue sources.

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�TSS=total suspended solids

NH3=ammonia

BOD=biological oxygen demand


4-3

This Sperm Whale was fi lmed next to a platform. The whale was sighted swimming around a deep-water fl oating structure in 1,000 m of water among a large school of squid (Walker 2004).

These structures could help support the development of offshore LNG re-gasifi cation facilities, remote from coastal communities in area of reduced threat from accidents or security risks.In the future, it is possible that these platforms would be made available again to recover stranded offshore oil resources and increase domestic petroleum supplies, reducing the need for petroleum imports.

Need for Action

Oil and gas platforms represent a source of hard substratum in the euphotic zone in shallow water in the northern Gulf of Mexico, which otherwise would be extremely limited. At present, 150–200 platforms are being removed each year. These artifi cial reefs provide habitat for endangered species such as sea turtles, coral, and federally protected fi sh and invertebrates.

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Many of these platforms can provide facilities for a wide range of future viable industries, each of which could carry substantial environmental benefi ts with them, both locally and globally.In this light, the current federal requirement that offshore platforms be removed within one year of the cessation of production requires a close look at re-drafting and amendment.

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The Hawksbill Turtle has been on the endangered species list since 1970.


4-4

The retired sulfur mine on Main Pass 299 is preparing to be retrofi tted to store natural gas.

Socio-Economic Implications

The domestic oil and gas industry currently spends on the order of $300 to $400 million per year removing offshore platforms (NRC 1996). It will eventually spend over $10 billion to remove and haul to shore all platforms currently in the Gulf of Mexico.

The Role of Platforms in Supply Future Domestic Energy Requirements

With the advent of new drilling technol-ogy, leaving the infrastructure in place for mariculture could provide future op-portunities to recover oil and natural gas resources that are currently stranded, as well as natural gas reserves found at depths greater than 15,000 feet below the sea surface (Minerals Management Service, 2003). Leaving the existing 26,000 miles of pipeline in place could provide a conduit to service potential fu-ture LNG re-gasifi cation facilities and CO2 sequestration operations, while simulta-neously reducing the concentration of atmospheric gases attributed to global warming. In addition, offshore facilities could provide some of the infrastructure to support future offshore energy produc-tion from wind and OTEC power generat-ing systems.

The potential economic benefi ts from maintaining this infrastructure could be substantial:

Assuming that the 3.6 billion barrels of stranded oil resources are developed over a 40-year time frame, by 2025 this would amount to:

Incremental production of 200,000 to 250,000 barrels per day;More than 8,000 jobs retained by the Louisiana oil and gas industry; Increased economic activity amounting to $500 million per year to Louisiana (ARI 2005); andIncreased state and federal revenues of more than $250 million per year, with greater than 90 percent, under current fi scal arrangements, going to the federal government.

A recent study by the Louisiana State University Center for Energy Studies showed a potential $2.2 billion impact associated with the construction of LNG facilities in Louisiana and the Gulf of Mexico, with nearly 14,000 jobs created from the construction of these facilities, and 1,600 associated with their operation. Annual economic benefi ts could be on the order of $220 million per year (Dismukes et al. 2004)Benefi ts could also be derived from developing stranded and deep undiscovered natural gas resources, as well as from the development of offshore wind and OTEC power generation systems.

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4-5

Potential Economic Benefi ts from Mariculture Operations

Mariculture ventures on platforms will have to comply with the same state and federal regulations and structural codes that oil and gas operators currently main-tain, not to mention navigational aids re-quired by the U.S. Coast Guard. Several expenses will be germane to any venture utilizing retired offshore platforms. These include expenses associated with a plat-form removal bond, navigational aids, maintenance, liability insurance, and ca-thodic protection. Unfortunately, the high cost of the platform removal bond could well prohibit the economic success of many types of mariculture applications. Cost-sharing of these expenses with com-panies sponsoring activities other than mariculture could help to offset these ex-penses and make mariculture operations economically viable. The recent publication “Farming the Deep Blue” (Ryan 2004) described many suc-cessful international open ocean mari-culture ventures; at present, however, there are very few of these operations in U.S. waters. A few offshore mariculture sites are currently operating in the state waters of Hawaii, Puerto Rico, and New Hampshire (Bridger and Reid 2001). Mariculture on platforms in the Gulf of Mexico has been explored in Texas off-shore waters. Several cage systems have been tested there, but cage maintenance and production cost made it diffi cult to achieve project goals (Kaiser 2003). In one case, a commercial venture (Sea-Fish, Inc.) lost its right to use the plat-form because it was brought back into production again (Kaiser 2003). Net-Pens

In the U.S., limited economic literature exists for mariculture operations in the open ocean environment. One particular study of interest (Waldemar Nelson Int. 1998; NOAA-Sea Grant College 2001), reported that the use of offshore produc-tion platforms for net-pen culture of red drum would be technically feasible. In an economic analysis of raising fi sh in net-pens, the construction of a fi sh hatchery was essential to project viability. An evalu-ation of start-up, capital, and operating

costs revealed that an initial investment of $12 million would be required to ex-ecute the project as outlined in the feasi-bility study. The base-case evaluation esti-mated employing over 20 individuals and a net cash fl ow of $17 million by year seven.

Ornamental Fish Culture

The opportunity for environmentally friendly mariculture products in the U.S. aquarium trade is substantial. The U.S. imported $45 million (wholesale) in 1998 in live ornamental fi sh (Adams et al. 2001). More research is needed, however, to determine the economic fea-sibility of ornamental fi sh culture. Ornamental Coral Culture

Hundreds of coral colonies are now known to exist on many offshore plat-forms (Sammarco et al. 2004). Some of these can be harvested directly. In addi-tion, by using an onshore breeding facil-ity, thousands of small colonies can be cultured on settlement plates deployed on the platform and harvested annually or semi-annually on a rotating basis (Sam-marco, work in progress). The proceeds from this could range from $120,000 to $1.2 million annually (Porter 2004).

Japanese reefs are large and designed to last 30 years. Platforms are 10 times larger and stronger and we spend about as much money removing platform as the Japanese spend installing artifi cial reefs.


4-6

Economic Impact of Mariculture on Local Commercial Fishermen

Mariculture production will almost certain-ly be more evolutionary than revolutionary in nature. That is, the fi rst such opera-tions will be experimental in nature and will require an environmental adjustment period (Gramling 2004).

Net-pen mariculture production of cobia, redfi sh, and mutton snapper would have little effect on the commercial fi shermen. Redfi sh are illegal to possess in the Gulf Exclusive Economic Zone (EEZ) and cannot be harvested with gill nets in state waters. Cobia regulations limit the harvest to two fi sh per trip, and the Louisiana average annual landing (1995–1997) of cobia is 70,371 pounds (Horst 1998). Mutton snapper are caught at offshore platforms but are not harvested and sold in signifi -cant numbers in Louisiana (Horst 1998). At this time, commercial fi shermen do not harvest ornamental coral, sponge, and fi sh in Louisiana; thus, the culture of these organisms would not compete with traditional fi sheries. Oyster depuration is a post-harvest treatment and does not pres-ent any threat to traditional oyster fi sher-ies. Sea farming will rely on fi shermen to harvest the fi sh, corals, and sponges, and manage the oysters and net-pens. Sea farming will present job opportunities for commercial fi shermen.

Oyster Depuration

The cost of offshore oyster relaying is still unknown. If the costs are >$10 per sack, the economic feasibility would be ques-tionable, based upon the costs of cur-rently available systems. Comparison of costs alone, however, may be misleading. That is, all available post-harvest systems alter the prod-uct (i.e., kills the oyster); and the industry has expressed con-cern that this may reduce the demand for this type of seafood. Relaying of oys-ters to offshore facilities would not kill the product and may indeed in-crease its value (Kiethly 2004). Sea Farming

The Japanese spend approximately $140/m3 to build and install artifi cial reefs. Platforms in the Gulf of Mexico are >10 times stronger and larger than these Japanese artifi cial reefs. Considering all

the platforms in waters >60 ft depth, their col-lective value as artifi cial reefs could equal nearly $14 bil-lion (see Appen-dix). Since it is more cost-ef-fective to leave the structures offshore, a sav-ings on removal

cost would accrue if operators were able to re-deploy them as artifi cial reefs. The sea farming production system discussed here would be the fi rst of its kind in the Gulf of Mexico; therefore, any informa-tion regarding current investment and production represents an estimate only. Three studies performed in Gulf States on the potential economic benefi ts of ar-tifi cial reefs (see table), however, indicate signifi cant economic impacts from artifi -cial reef programs.

The platforms serve as subtrate for many benthic marine organisms that possess novel natural products, sometimes functioning for their own anti-biotic protection. Some of these compounds have already been demonstrated to show promise as strong anti-cancer compounds. It may be possible to farm these organisms on the platforms, while simultaneously sampling the abenthos for additional candidates. A small few of them can cure cancer and generate billions of dollars in the pharmaceutical industry.



Southeast Florida $2.4 billion 26,800 Johns at al., 2001




4-7

Culturing ornamental fi sh and coral seen above does not require an expensive and time consuming permit.

Regulatory Assessment

Obtaining permits to utilize a retired platform for net-pen mariculture will be a chal-lenge. There are currently no legal mechanisms available at the state or federal level to transfer the use of a platform from oil and gas production operations to another application. A single federal jurisdiction over mariculture activities on offshore plat-forms has not been established.

Regulatory Changes Required to Use Platforms for Non-Petroleum Operations in Federal Waters

Currently, no legal structure currently ex-ists at the state or the federal level to permit retired platforms for purposes other than producing petroleum. The Out-er Continental Shelf Lands Act (OCSLA) regulations (30 CFR 250.112) mandate that the owner/operator of an offshore platform removes it and return the site to pre-production conditions within one year after production has ceased. It is important to note that, despite this, it is still currently possible to extend the re-moval date by submitting a “right of use of easement” to allow utilization of an off-shore platform for mariculture purposes under 30 CFR 250.7. The National Fish-ing Enhancement Act (1985) Public Law 98.623, title II (1984) provides for the redeployment of retired platforms for ar-tifi cial reefs. Artifi cial reef sites require a Corps of Engineers (COE) Section 10 permit to install obstructions in navigable waters. Legal issues must be resolved to transfer ownership of an offshore structure from an oil and gas company to a mariculture venture. The OCSLA will have to be modi-fi ed. Regardless of what method is used to ex-tend the life of an offshore platform for mariculture use, MMS will still require the operator to remove the platform if the company dissolves. The high cost of the surety bond could easily prohibit the eco-nomic success of many types of maricul-ture applications. If a mariculture venture fails, a federal indemnifi cation program is needed to assure that the mariculture fa-cilities are redeployed into artifi cial reefs. The program would alleviate the need to remove the structure and therefore, the platform removal bond.

Former Louisiana U.S. Congressman Da-vid Vitter (now a U.S. Senator) introduced the Rigs to Reefs Act of 2003 (H.R. 2654), which proposed to authorize the use of decommissioned offshore produc-tion platforms for mariculture purposes in the Exclusive Economic Zone (EEZ). The proposed legislation would exempt oil and gas companies from platform re-moval requirements and offer tax credit incentives for using platforms for mari-culture. Such legislation could be most helpful in providing the authority to move forward with the development of maricul-ture operations in the Gulf of Mexico.


4-8

Sunset view of an offshore cage in the Gulf of Mexico near an oil rig.

Recommended ActionsTo address the issues raised above, the following actions are recommended:

Revise OCSLA platform removal requirements and adjust codes for alternative uses;Create OCSLA language to terminate leaseholder’s interest and liability;Create clear legal foundation for transfer of ownership;Create a federal trust fund to cover liability exposure for the participating oil and gas operators. In addition, limit the liability to further deter frivolous suits. Provide low interest loans to mariculture ventures and fi shermen and provide general performance bonds to turn default mariculture platforms into artifi cial reefs and maintain navigational aids.

Specifi c Regulatory Changes Recommended for Net-Pen Mariculture Operations in Federal Waters

No specifi c federal legislation currently exists permitting offshore net-pen mari-culture. The Magnuson Act, which autho-rizes the Gulf Council to manage federal fi sheries in the Gulf of Mexico, was not originally drafted with mariculture in mind. The federal agencies directly involved in

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mariculture, however, have created pro-cedures allowing a mariculture project to commence through the issuance of a one-year Exempted Fishing Permit (EFP).Sea Farms

Sea farms will require the same permits as net-pen facilities. It is anticipated that there will be many management issues associated with the various types of mari-culture that can co-occur on sea farms. For example, with respect to stocking and feeding fi sh, how would cultured fi sh be distinguished from the wild stock? With no method to distinguish the organisms, ownership is impossible to demonstrate. What regulations and operational proce-dures would be needed for recreational and commercial harvesters at such a fa-cility? Ornamental Fish and Invertebrates

Ornamental fi sh are not regulated by the Gulf Council and can be harvested without permits. Coral and sponge can be raised and collected from artifi cial structures. National Oceanic and Atmospheric Ad-ministration (NOAA) Fisheries issues “Live Rock” permits for culturing from natural substrate in coastal and offshore waters. In fact, several live-rock ventures are cur-rently operating in the federal waters off-shore of Florida (Fisheries Management Plan [FMP] Coral).

New Gulf Council Fisheries Management Plan for Mariculture

New regulations for mariculture in the Gulf are currently being drafted by the Gulf Council in their FMP for Mariculture. This represents and important step forward in providing for mariculture in the Gulf of Mexico. The FMP is currently in revision and is anticipated to be submitted for ap-proval in 2006.


4-9

Mariculture Operation Changes Required Comments

Ornamental fi sh None No permit needed. Ornamental fi sh are not regulated in Gulf Council’s Reef Fish FMP.

Coral and sponge None NOAA Fisheries/Gulf Council already has satisfactory permitting system.

Oyster depuration None The depuration process is approved by the FDA, however, it is assumed that depura-tion at retired oil and gas platforms will need approval from FDA*.

*The National Shellfi sh Sanitation Program (NSSP) addresses this and other public health issues within the Interstate Shellfi sh Sanitation Conference (ISSC). The ISSC now requires states to develop and implement a Vibrio vulnifi cus Risk Management Plan. The collective goal of these risk management plans is to reduce rates of V. vulnifi cus illness by 40% for 2005-2006, and 60% for 2007-2008.

New NOAA Fisheries Mariculture Legislation

NOAA is presently drafting a National Off-shore Aquaculture Act to address many of the confounding regulatory and legal issues facing marine aquaculture in fed-eral waters. If approved, the draft NOAA legislation would be a signifi cant advance-ment in mariculture management. The current draft legislation addresses many profound regulatory obstacles and will help to streamline permitting. Moreover, the new regulations will exempt maricul-ture activities from the Magnuson Act. It is anticipated that in the 109th Con-gress, the Executive Branch will present this Act, providing the Department of Commerce with clear authority to regu-late offshore aquaculture.The Alabama-Mississippi Sea Grant Legal program suggested that one avenue that could provide for sustainable offshore aquaculture is the consolidation of aqua-culture leases into a single area to be known as a Marine Aquaculture Zone (MAZ). Zoning has been a useful land-based tool in the U.S., setting aside par-ticular areas for industry development. The creation of a MAZ requires that one federal agency be responsible for: the management of the zone; issuance of leases of the water column and sea-bed in the zone; and issuance of a permit which would incorporate the concerns of other relevant federal and state agencies (Fletcher and Neyrey 2001).

NOAA’s general council ruled that mariculture constituted fi shing activities and is therefore subject to Gulf Council’s regulations that were designed for fi shing vessels. If the venture involves raising regulated fi sh, the nature of mariculture will most likely breach a number of fi shing regulations:

• possession of fi sh in excess of bag limits or trip limits;

• possession of fi sh below the legal size limits; and

• sale of regulated fi sh during closed season.

An exempted fi shing permit (EFP) is required for mariculture ventures to exempt them from the Gulf Council’s regulations.


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Section 5: Conclusion 5-1

SECTION 5: CONCLUSION

Current federal and state regulations require that offshore oil and gas platforms be removed within one year after cessation of production. About 150 to 200 platforms are scheduled to be removed annually for the next 20 years (MMS). The vast majority of these platforms on the Louisiana continental shelf will be gone in 10–15 years at this rate of removal. The oil and gas industry is spending $300–$400 million a year removing these platforms (NRC 1996) and will eventually spend over $10 billion for onshore dismantling and disposal.

In contrast, offshore platforms currently provide a foundation for one of the most prolifi c ecosystems, by area, on the plan-et. Stanley and Wilson (2000) reported that 10,000–30,000 adult fi sh reside in an area about half the size of a football fi eld. Coral, sponges, endangered spe-cies, and “protected” fi sh and inverte-brates colonize the platform’s submerged structure. Platforms create reef habitat that would otherwise not exist over tens of thousands of square miles of soft bot-tom on the northern continental shelf of the Gulf of Mexico. Maintaining this existing offshore infra-structure for future economic applica-tions could help preserve habitat that is critical to many organisms, as well as provide substantial opportunities in a va-riety of areas, including:

Providing infrastructure for a wide variety of mariculture applications;Economizing and increasing domestic seafood production;Reducing exploitation of natural coral reefs internationally;Helping to facilitate the incremental recovery of additional crude oil and natural gas reserves in the future;Providing future facilities for LNG storage and offl oading;Supporting drilling in the future of deep natural gas formations below existing oil and gas fi elds;

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Thousands of fi sh, millions of invertebrates, and billions of microorganisms colorize each platform.

Providing opportunities for the sequestration of greenhouse gases; andFacilitating and hosting the development of wind, wave, current, ocean thermal, and other renewable energy sources.

In Japan, Norway, Spain, Germany, and Ireland, offshore platforms have already been installed for purposes other than petroleum production. These countries are utilizing offshore platforms to culture fi sh, generate carbon-free energy, and mitigate pollution. All the mariculture applications discussed in this report are already being practiced in Japan.

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Mariculture and Other Uses for Offshore Oil and Gas Platforms:Rationale for Retaining Infrastructure

5-2



Southeast Florida $2.4 billion 26,800 Johns et al., 2001



Little is known about the economic viability of mariculture on oil and gas platforms; however, the economic impact of artifi cial reefs programs in the Gulf States has been found to produce a considerable in-fl uence on the local economies: The United States is spending billions of dollars removing oil and gas platforms while other countries are installing off-shore platforms for purposes other than petroleum production. Collectively, we need to energize discussions at the lo-cal levels in the areas of stewardship and governance to help promote the rational utilization of these offshore platforms for future, viable applications. Moreover, a comprehensive framework for reviewing, and in some cases revamping, national ocean policies is required.Accomplishing this will allow for the con-tinued economic viability and growth of several industries — oil and gas produc-tion and fi shing and seafood production — critically important to the State of Loui-siana and to our nation.

Moreover, the potential economic ben-efi ts from maintaining this infrastructure could be substantial:

Assuming that the 3.6 billion barrels of stranded oil resources are developed over a 40-year time frame, by 2025 this would result in

An incremental production of 200,000 to 250,000 barrels per day;More than 8,000 jobs retained by the Louisiana oil and gas industry;Increased economic activity amounting to $500 million per year to Louisiana; and Increased state and federal revenues of greater than $250 million per year, with more than 90 percent, under current fi scal arrangements, going to the federal government.

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live, ornamental “fi sh” in the U.S. and Florida. Sea Grant Technical Paper Number 113, Nov. 2001, Proj. No. R/LR-A-23.

Adams, C.L. 1996. Species composition, abundance and depth zonation of sponges (Phylum: Porifera) on an outer continental shelf gas production platform, northwestern Gulf of Mexico. Final report and M.Sc. thesis, Center for Coastal Studies, Texas A&M University-Corpus Christi, Corpus Christi, TX.

Advanced Resources International (ARI). 2005. Basin Oriented Strategies for CO2 Enhanced Oil Recovery: Louisiana Offshore, (Draft), US Dept. Energy/Offi ce of Fossil Energy, Jan. 24, 2005.

American Sportfi shing Association. 2002. Sportfi shing in America: Values of our traditional pastime. In, Economic Analysis of Sportfi shing, Southwick and Associates, Alexandria, VA. http://www.asafi shing.org/asa/images/statistics/economic_impact/fi sh_eco_impact.pdf.

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Appendix A-9

APPENDIX Cost to Build Artifi cial Reefs: Estimation of Volume of Oil and Gas Structures in Gulf of Mexico

The Gulf of Mexico platforms are magnitudes larger and more durable than Japanese designs. The size and the construction materials and installation expense affect the cost of deploying artifi cial reefs. They are sold in units of volume usually in units of cubic meters. In literature review, a range was found between $67/m3 - $320/m3 with $140/m3 (Table 1) the average cost.Platform jackets closely resemble some of the most expensive artifi cial reefs, however, the other designed artifi cial reefs tend to have a more com-plex structure and more surface area-decks have a tremendous amount of surface area. The construction materials of other designed artifi cial reefs consist of reinforced cement, plastic and cement, and steel (steel being the most expensive). The structural integrity of a platform is signifi cantly stronger than other designed artifi cial reefs and should survive longer on the ocean fl oor — 30 years for Japanese artifi cial reefs (Grove 1994) and 300 years for platform jackets (Reggio 1989).

Description of Calculations to the Model

In order to calculate the volume and value of offshore oil and gas platforms in the Gulf, a model was developed to generate estimates based on MMS data. The number of platforms used in the model does not include 4-pile platforms. It does not include platforms in water depths of less than 50ft nor does it include caissons or well heads from any depths. The search was fi ltered to exclude any platforms with a removal date. The results include only major plat-forms. This search resulted in 3,942 major platforms in all water depths and was fi ltered 2,265 in water depths greater than 50ft. The source of informa-tion is gathered from the MMS Platform Master Database and Report MMS Aug 2004. (1) Oil and gas structures are made of two basic components: a jacket and a deck. The jacket supports the deck above water and it raises to about 10 ft. above sea level where it joins with the deck. So when a platform is in 50 ft of water it is really 60 ft in height and so 60 ft is used in the volume equation instead of 50 ft for a platform in 50 ft of water. (2) 55 platforms are in water depths between 500 ft–1,400 ft and instead of calculating each increment of 10, all the platforms used a factor of 500 ft for the height in the volume equation.

Table 1. Estimation of cost to build and install artifi cial reefs.


A-10

Table 2. Results from modeling volume of offshore platforms and cost to build and install equivalent volume.

Appendix A-11

Calibration Data

Calibration data is provided by the Wood Group Production Services. The data matched up pretty well within 20% above and below the numbers predicted in the model.See data below:


A-12

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