REGULATORY AND STRATEGIC CONSULTING Project Case Studies

Transcription

1 Project Case Studies

2 Pipeline DOT Records Program for Expense, Maintenance Capital and Capital Projects Major Interstate Pipeline Houston, Texas s Senior Management identified that its US DOT Pipeline Records Programs could present significant risks toward: 1) full compliance with US DOT requirements, 2) possible corrective actions reducing MAOP, and 3) 3rd party liability exposure from major-loss accidents. These risks stemmed from: Outdated and inconsistent record quality, routing, timing, and retention standards and processes; and Inadequately defined governance / management system (roles and responsibilities / tracking). Define pipeline records required by US DOT for projects from inception to abandonment / sale of asset. Conduct gap analysis of client s current records against US DOT requirements. Evaluate existing governance, management systems, policies, processes and procedures and identify strengths, weaknesses and opportunities for improvement. Perform risk assessment of existing program. Enhance governance and management system. Develop consistent standards for project records. Evergreen matrix identifying all US DOT requirements for pipeline projects. Defined and specified improvements to existing records and new records to ensure compliance with US DOT requirements. Communicated shortfalls and risks to senior management. Enhanced governance and management system for US DOT Pipeline Records that consisted of clear policies, roles and responsibilities, management of change, performance monitoring, risks assessments, training and management review. Consistent and updated standards for pipeline records. Significant reduction of risks initially assessed.

3 FERC Compliance Management System for Blanket Certificate and Section 2.55 Projects Major Interstate Pipeline Houston, Texas s Senior Management identified authorization determination and reporting processes that could present significant risk toward full Federal Energy Regulatory Commission (FERC) compliance, including: Potential inconsistent understanding of regulatory requirements by the stakeholders; Inadequately defined roles and responsibilities; and Ad-hoc approach to compiling FERC reports. Assure uniform understanding of the regulatory requirements. Develop policies and procedures necessary to minimize risk of noncompliance with FERC requirements and improve operational efficiency Gain stakeholder buy-in by assigning clear roles and responsibilities and testing and improving G2-developed processes with users. Develop compliance assurance program with defined: Management of change and compliance; Monitoring review procedures; and Continuous improvement strategy. Defined policies, procedures, and processes to assure activities undertaken by engineering, transmission, and other stakeholders comply with current FERC rules, regulations, and reporting requirements. Provided the stakeholders with clear, streamlined, and repeatable processes and procedures for making accurate FERC authorization determinations, thereby increasing client s compliance performance and operational efficiency. Developed a framework that contemplates and reacts to changes in rules and regulations, construction and abandonment plans, and scope modifications during all phases of project execution. Established compliance monitoring program consisting of self-assessments, risk assessments, monitoring metrics, and procedures to assure periodic management review and continuous improvement.

4 Remediation and Long-Term Residual Care of Disposal Facilities Major Industrial and Chemical Manufacturer Louisiana and West Virginia A major industrial and chemical manufacturer was faced with significant corporate risk as a result of environmental liabilities associated with legacy environmental conditions at three hazardous waste sites: two in Louisiana and one in West Virginia. Environmental liability and responses to one of the sites was complicated because of substantial ongoing third-party manufacturing operations. The client s available funds to address remediation obligations and third party claims were limited. Develop an exit strategy for remediation, existing claims, and regulatory obligations that satisfied state environmental regulators and the US EPA. Allow client to move forward with reorganization plans without hindrance of legacy environmental liability. Facilitate unencumbered third-party manufacturing operations on a legacy site. Principals work allowed all parties to divest themselves of environmental liability under a structure that offered several benefits. Facilitated the client s emergence from a complicated Chapter 11 bankruptcy. Ensured the support of environmental agencies. Allowed third parties to operate their businesses without environmental risk or interference. Engineered and procured a comprehensive integrated insurance program that protected against remediation cost overruns, legacy environmental conditions, and third-party claims.

5 Tiered Due Diligence and Risk Management Support for Acquisition of Major Crude Oil Pipeline System 1/2 Large Oil Company New Mexico, Texs and Oklahoma desired to establish competitive position to purchase 2,300-mile crude oil pipeline system with 36 pump stations / tank farms located in NM, TX, and OK. sought tiered evaluation of environmental, health, and safety (EHS) risks and supporting cost effective risk mitigation to both manage potential liabilities and maintain the desired competitive bid. Upon being selected and entering exclusive negotiations, required a more comprehensive analysis of EHS risks, related mitigation strategies, and a risk transfer approach to support the development of a final Purchase Sale Agreement (PSA). Upon purchasing assets, desired seamless integration of these assets into existing operations. Support s bids to purchase assets, identify key EHS risks and develop initial conclusions on valuation of risks. Support PSA development and transaction closing: Conduct comprehensive review of EHS risks broken down into: remediation / cleanup; air, water, and waste compliance; rupture and releases; and safety compliance. Develop mitigating strategies / plans to address risks and establish values to implement. Identify permits needed for operations and necessary actions to transfer existing permits or establish new permits. Assist in development of risk transfer / allocating provisions of PSA. Evaluate existing EHS resources (internal and external) and develop integration plan. Develop EHS compliance action plans for first year of operation. Provide detailed cost estimates for all of the above items.

6 Tiered Due Diligence and Risk Management Support for Acquisition of Major Crude Oil Pipeline System 1/2 Post-closing support: Transfer permits to s operations. Implement initial portions of compliance action plans; and Integrate risk mitigation strategies into ongoing EHS operations. successfully purchased assets; Risk transfer provisions of transaction provided appropriate coverage for client against EHS risks; and Effective risk management approaches were successfully integrated into existing operations in a seamless manner with minimal disruptions.

7 Midstream Analysis: Eagle Ford, Permian, Niobrara and Anadarko Basins 1/2 Major Private Equity Firm Eagle Ford, Permian, Niobrara and Anadarko Basins Accurate current and projected future market information is a fundamental component to a well vetted superior investment strategy. Investment Management firms must understand market opportunities, the competition and risks to evaluate alternative strategies and select an optimal investment program. was retained with the primary objective of identifying major midstream operators and midstream service providers (engineering, field inspection / surveying and pipeline integrity / operational compliance) within several rapidly expanding oil and natural gas shale basins. Key factors for accomplishing this objective were: Determining the approximate market size of each basin utilizing production data, reserve estimates and overall capital expenditure of the major producers. Identifying the top midstream operators and their historical and projected capital spend (overall and by basin when available) related to each of the Basins. Identifying the top midstream technical service providers and the key selection criteria used by midstream operators for their selection of technical service providers. Sources of key information to satisfy the project objectives included: Data from generally published documents; Information obtained from resource management and regulatory agencies, and: Most importantly, from confidential survey data obtained from many of G2 s clients operating in one or more of the basins.

8 Midstream Analysis: Eagle Ford, Permian, Niobrara and Anadarko Basins 2/2 Through G2 s in-depth research, the client now has an accurate view of potential acquisition targets within several rapidly growing oil and natural gas shale basins that will allow its Managers to determine and assess: The relative magnitude of activities in the various basins; Key Operators in each basin; Technical Service Providers for each area of interest to the ; A qualitative evaluation of how each service provider is viewed by the Key Operators.

9 Phytoremediation of Hydrocarbons in Groundwater, South Texas Major Midstream Operator Nueces County, Texas Active midstream natural gas compressor facility in Nueces County, Texas was underlain by impacted groundwater. Residual free-phase and dissolved petroleum hydrocarbons, as well as high metal concentrations, were present in groundwater. The site had relatively low permeability surface soil (silty clay) over sand. Remediate the site in a cost-effective manner. Facilitate timely regulatory closure for the facility. Prevent offsite migration of residual hydrocarbon plume. Appease regulators and community stakeholders by implementing a green, innovative remedial strategy. Conduct a two-year TreeWell phytoremediation pilot program, followed by a two-year full scale program. team designed and implemented a phytoremediation system that resulted in hydraulic gradient control and contaminant degradation. Project benefits to the client included: Hydraulic control prevented off-site plume migration. Increased hydrocarbon microbial degradation occurred with the trees root zone. Metals were physically contained and stabilized via sequestration along roots. Continuous long-term operation needed minimal maintenance and did not interfere with the active operating facility. Overall remediation costs were low compared to traditional remediation techniques. Management challenges associated with traditional remediation approaches (i.e., water disposal, spill prevention, potential for air emissions, potential conflicts with current facility activities) were avoided. The project was presented with the Environmental Project of the Year award from the Southern Gas Association.

10 Strategy Review and Development of Environmental Reserve Estimates 1/2 Multi-National Energy Company Texas, Louisiana, Michigan A large, multi-national energy company desired to evaluate soil and groundwater liability mitigation regulatory and technical strategies, and re-estimate their environmental reserves for their corporate balance sheet. Their objectives were: 1. Determine appropriate life cycle estimates to complete site remediation by applying a consistent and robust methodology across the portfolio of sites, 2. Optimize site-specific regulatory and technical strategies and implement across entire portfolio. G2 conducted detailed, bottoms-up, technical and regulatory reviews, and developed cost estimates for eighteen (18) current or former operating facilities where environmental site assessment and/or remediation was being conducted by several third party consultants. The objective was to evaluate each site, recommend go-forward regulatory and technical strategies, and update the estimates-to-complete utilizing an approach entirely consistent with Generally Accepted Accounting Practices (GAAP). G2 and the client selected an Expected Value Monte Carlo approach, one of the most robust alternatives, to fulfill this objective as follows: For each of the sites, G2 thoroughly reviewed available reports and historic data, and discussed regulatory and technical aspects with the client and their respective third party consultants. Developed several practical, alternative technical and regulatory strategies to achieve cost-effective closure at each of the sites. Utilized Decision Tree methodology to derive: 1) an expected estimated cost, 2) a most likely estimated cost, and 3) a distribution of potential costs for each of the sites. Reviewed historic polychlorinated biphenyl (PCB) projects, including those associated with sampling, surface cleanup, encapsulation, and monitoring to project future costs at similar sites. Reviewed client s historic overhead and Project Management Office (PMO) expenditures in order to forecast these costs for the next five years.

11 Strategy Review and Development of Environmental Reserve Estimates 2/2 As a result of the above activities, the client has: Up-to-date, full life-cycle site remediation cost estimates based on a robust, consistent, and GAAP compliant approach for the entire portfolio of sites. An estimate to complete hydrocarbon soil and groundwater and PCB surface cleanup and monitoring at all of their impacted facilities. Thorough understanding of their historic overhead and internal management costs, as well as an accurate forecast for these costs in the future.

12 Beneficial Reuse Associated with Superfund Landfill Cleanup 1/2 Midstream Energy Company New Jersey owned the following two parcels: 70-acre parcel with historical landfill purchased in early 1970s. 75-acre adjacent idle parcel that included some rich riparian wooded wetlands. The landfill was listed on Federal Superfund National Priorities List (NPL) in The client was interested in achieving the following objectives: Transfer of the cleanup liabilities for a guaranteed, fixed price; and A reduction of final risk transfer costs through recovery of value from both unproductive parcels. Take ownership of both parcels on an as-is, where-is basis; Assume Superfund cleanup obligation as the lead Responsible Party with USEPA; Procure environmental insurance to protect against cleanup cost overruns and 3rd party liabilities; Implement expanded PCB hot spot investigation in the landfill area; Implement contaminant removal and containment remedy; Enhance and preserve wetlands for Natural Resource Damages (NRD) for sale to 3rd parties; and Pursue Innocent Party Grant funds with New Jersey s Hazardous Discharge Site Remediation Fund.

13 Beneficial Reuse Associated with Superfund Landfill Cleanup 2/2 Credited client for purchase of adjacent parcel and Superfund site at closing. deposited balance of funds necessary for cleanup, risk transfer, and maintenance costs into an escrow account. Sold adjacent parcel to Middlesex County for open space initiative. Negotiated and obtained Innocent Party Grant. Positioned impacted NPL-listed property for future eco-resource sale from the creation of wetlands and sensitive habitat. Required cleanup continues under state oversight using escrowed funds.

14 Former Marine Terminal Purchase and Redevelopment Fortune 10 Energy Company Coos Bay, Oregon 7-acre marine petroleum terminal constructed in 1923: 4-acre upland, 3-acre tidelands. Hydrocarbon impacted soil and groundwater. Property shut down in mid-1990s and underutilized. s goal to eliminate environmental liabilities and monetize land value. Acquire property as-is, where-is. Procure combined cleanup cost cap and pollution legal liability insurance to protect against cleanup cost overruns and 3rd party liabilities. Procure environmental insurance to protect against cleanup cost overruns and 3rd party liabilities; Demolish / Dismantle existing structures (i.e., tanks, pipelines, etc.). Remediate soil and groundwater to applicable standards. Subdivide uplands and tidelands into two parcels. Reposition uplands portion as the basis for a larger commercial development. Closed as-is, where-is acquisition, with a full credit given to client for property value. Completed demolition; demolition costs were reduced by monetizing scrap and salvage value. Sold waterfront portion of property (tidelands and commercial dock). Maintained positive cash flow during demolition / cleanup phase, despite land value credit provided to client at closing. Remediation completed ahead of schedule and under budget. No further action determination received from Oregon Department of Environmental Quality. Sale of uplands portion of site pending.

15 Fixed Cost Solution for Remediation of Petroleum Product Terminals Refined Products Pipeline and Terminal Company Kansas and Iowa experienced consistent cost overruns in conducting three large remediation projects at refined product terminals in the Mid-West. The s Board of Directors negatively perceived routine accrual increases and rapidly growing environmental reserve. sought solution to cap remediation clean-up expenditures for its three largest cleanup projects. Develop innovative performance contract to align contractor to reverse current course and complete remediation projects within financial expectations. Develop innovative closure strategies involving risk-based clean-up actions to reverse historically costly approaches. Gain regulatory acceptance of these innovative risk-based clean-up approaches. Completed innovative performance contract that capped s cost for active remediation work ( retained long-term monitoring). Achieved regulatory closure for active remediation obligations within first three years of contract (ahead of schedule) and came in under budget. Obtained regulatory acceptance to risk-based closure at remaining terminal that resulted in implementing a more cost effective remedy.

16 Development of Comprehensive Environmental Compliance Program LNG Import Facility in Mexico 1/2 Large Diversified U.S. Energy Company Mexico constructing large Liquefied Natural Gas (LNG) facility in Baja California, Mexico. Facility needed to develop an Integrated Environmental Compliance Program (IECP) to comply with: Requirements of applicable local, state, and federal laws, regulations and Normas Oficiales Mexicanas (NOMS Official Mexican Standards); and Good practice measures implemented under s Corporate Environmental Policy. Develop IECP encompassing the following areas of environmental protection: Compliance with environmental conditions of permits issued for the project; Environmental Emergency Response Plan; Spill Prevention, Control, and Countermeasures Plan; Emissions Monitoring, Reporting, and Recordkeeping; Waste Management Plan; Seawater Discharge Plan; Stormwater Pollution Prevention Plan; Environmental Operations Procedures; Corporate Environmental Policy; Conduct training sessions in both classroom and field to include all Management and Operations personnel at the facility. Test trainees to assure principal concepts were learned.

17 Development of Comprehensive Environmental Compliance Program LNG Import Facility in Mexico 2/2 IECP was developed in English and Spanish, on time and within budget. Training and testing materials were developed in English and Spanish. Two seven-day, interactive training sessions were conducted in Spanish with approximately 100 total attendees, including: Presentations of the key purposes and responsibilities for each Management and Operations position; Interactive exercises with and between attendees to assure that areas requiring joint participation were fully understood and appreciated; and Periodic testing of participants to assure that key factors and interfaces were fully understood.

18 Cleanup of Oil Lagoons at Bahamas Terminal Facility International Petroleum Company Bahamas, Terminal Facility has three oil/water/sludge filled lagoons each with a surface area of approximately 2.5 acres. The lagoons are man-made structures, approximately 173 meters long by 45 meters wide originally utilized for ballast water storage. Currently the lagoons are filled with a mixture of crude oil, water and sediments. Crude oil originated from facility s tank cleanup operations. The lagoons have a limestone liner reported to be six inches thick. had attempted to clean the lagoons through various contractors without success. The three lagoons are to be emptied and the crude oil, sediments, and water processed utilizing a state of the art three-phase centrifuge. Once processed through the centrifuge: Approximately 100,000 barrels of crude oil will be stored for future sale. The water is to be treated using ultra filtration technology and discharged to the ocean. The sediments are to be treated to target cleanup level of 2,700 parts per million (ppm) total petroleum hydrocarbons (TPRH) is reached utilizing chemical oxidation or thermal desorption. It is possible that these sediments can be sold for beneficial reuse with little or no treatment. The lagoon bottoms / sides will be excavated to remove any contaminated liner material to 2,700 ppm TPRH or a maximum depth of six inches whichever occurs first. Teamed with contractor with unparalleled experience on crude oil separation and processing. Oil/water/sludge has been transferred from Pond 1 into Pond 2. The excavation of minimal liner material is expected to occur shortly after which confirmation samples will be collected and analyzed. Large 3-phase centrifuge and ancillary equipment has been constructed and is awaiting shipment to site. Processing of entire contents should be completed within six to nine months.