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US Agents Raid Office of Deep-Water Driller in Rare Move After Oil Spill

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(Bloomberg) -- Federal investigators raided a deep-water oil explorer’s Louisiana office last week as part of a probe into an offshore spill, a rare escalation for a US environmental case.

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QuarterNorth Energy LLC’s office in Lafayette, Louisiana, was searched by investigators from the US Interior Department and the Environmental Protection Agency for materials related to a leaking well, according to people with knowledge of the situation.

The investigation follows a leak at a well off southeast Louisiana owned by QuarterNorth’s predecessor company, Fieldwood Energy LLC. That spill may have violated a promise of good behavior that Fieldwood signed with federal prosecutors in February 2021 in response to previous pollution incidents, one of the people said.

Under Fieldwood’s two-year deal, the US Attorney’s Office for the Eastern District of Louisiana agreed not to prosecute the company or any of its officers or directors for alleged criminal liabilities over Gulf spills that occurred in 2015 and 2018. In exchange, the driller was fined $2 million and promised to conduct activities in a safe and workmanlike manner, and also to cooperate with law enforcement.

The Justice Department has been stepping up enforcement of such non-prosecution and deferred-prosecution agreements since last year. The department will “urge prosecutors to be bold in holding accountable those who commit criminal conduct,” Deputy Attorney General Lisa Monaco told an American Bar Association forum in October. Where companies “do not live up to their obligations, we will hold them accountable.”

Representatives at QuarterNorth didn’t respond to multiple requests for comment. Representatives of the Interior Department declined to comment on the probe. The Environmental Protection Agency said in an emailed statement it “does not comment on any potential or ongoing enforcement actions.”

In January last year, an alignment pin plug on a QuarterNorth well off southeast Louisiana was found to be leaking gas, but it wasn’t immediately reported to federal officials, according to an investigation into the incident by the Bureau of Safety and Environmental Enforcement, part of the Interior Department that oversees the offshore energy industry.

Instead, representatives at the facility bled pressure from the well at least once a day to prevent gas from leaking, and a contractor unsuccessfully tried to intervene.

That strategy was jeopardized in August 2021 by an approaching hurricane that could have forced the evacuation of personnel on site, the bureau said in its investigation report. Without staff on hand to conduct that operation every day, the alignment pin plug would leak uncontrollably, and at that point, according to the bureau, Fieldwood informed it of the leak. Fieldwood told regulators it learned of the leak on Aug. 24, 2021, the bureau said.

Responsibility for the well shifted to Hess Corp. when the bankruptcy court approved Fieldwood’s plan in June 2021, public filings show. Fieldwood relinquished its lease on Oct. 26, 2021, according to the bureau’s report, but through a contractor, the company continued performing maintenance and monitoring work at the site under its bankruptcy plan and a transition agreement.

Under federal law, previous operators can be held liable for cleaning up aging offshore wells if the current operator cannot afford to do so. A Hess spokeswoman declined to comment for this story.

Interventions over several months failed to arrest the leak, culminating in an episode in January 2022 when equipment got stuck inside the well and caused the spill to worsen, forcing the evacuation of 19 workers who were on board, the bureau said. An estimated 107 gallons -- or 2.5 barrels -- of hydrocarbons were spilled as a result, it said. At that time, according to the bureau, the production platform was being maintained by QuarterNorth.

Bureau investigators found that problems stemmed from work carried out on the well roughly a decade earlier, corrosion at the site and a build-up of paraffin within the well tubing. The agency also cited Fieldwood’s “lack of urgency to remediate the threats caused by the well.”

“Fieldwood’s lack of mitigation, communication and urgency to address the issues associated with the D-36 well played a major role in the events leading up to the incident,” the bureau said.

QuarterNorth -- a reference to the 25th parallel north that bisects the Gulf -- was one of the entities that emerged when Fieldwood exited bankruptcy in August 2021.

(Updates with details from safety bureau investigation starting in seventh paragraph.)

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