Note 14 - Commitments and Contingencies	9 Months Ended
Sep. 30, 2024
Notes to Financial Statements
Commitments and Contingencies Disclosure [Text Block]	(14) Commitments and Contingencies Third Amended and Restated Operating Agreement See “Note (3)” to our consolidated financial statements for additional disclosures related to operation and management of all Blue Dolphin assets by an Affiliate under the Third Amended and Restated Operating Agreement. Offshore Pipelines and Platform Requirements BDPL has pipelines and platform assets subject to BSEE’s idle iron regulations. Idle iron regulations require lessees and rights-of-way holders to permanently abandon and/or remove platforms and other structures when they are no longer useful for operations. Until such structures are abandoned or removed, lessees and rights-of-way holders are required to inspect and maintain the assets in accordance with regulatory requirements. Platform Inspections. We are required by BSEE to perform annual structural inspections of our offshore platform, as well as to perform monthly platform checks of navigational aids, fog horns, and lifesaving equipment. In January 2024, BSEE assessed a civil penalty of $0.2 million against BDPL for failure to complete annual platform inspections in a timely manner. BDPL paid the civil penalty in April 2024. Decommissioning Obligations. BOEM mandated that our pipelines and facilities assets offshore in federal waters be decommissioned due to their extended period of inactivity. In October 2023, management met with BSEE to discuss BDPL’s path forward for meeting decommissioning requirements. Management worked with a consultant to develop a decommissioning plan, and BDPL was following the plan. BDPL completed a significant portion of the project from late December 2023 to mid- February 2024. However, due poor weather conditions that contributed to significant cost overruns, in July 2024 BDPL requested a BSEE extension to decommission the remaining portion of the Blue Dolphin Pipeline System and associated platform until the second quarter of 2025. BDPL’s request for a decommissioning extension was denied by BSEE in September 2024. Management is currently assessing the feasibility and cost of performing decommissioning work in late November or December of 2024 during off-peak weather conditions in the U.S. Gulf of Mexico and vendor availability. Separately, management is also exploring alternatives to reactivate the assets under a potential alternate Rights-of-Use and Easement (RUE). BDPL's delay in decommissioning its offshore assets does not relieve BDPL of its obligations to comply with BSEE's mandate or of BSEE's authority to impose civil penalties. Further, there can be no assurance that BDPL will be able to complete the anticipated work or predict the outcome of BSEE INCs. Accordingly, we did not record a liability related to potential penalties on our consolidated balance sheets as of September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023, BDPL maintained $3.0 million and $4.5 million, respectively, in AROs related to abandonment of these assets, which amount does not include potential penalties. In April 2024, BDPL received another civil penalty referral letter from BSEE related to INCs issued by the agency in September 2023. Although the civil penalty referral letter noted that BSEE would provide BDPL information related to its review within 90 days from the date of its letter, as of the filing date of this report BDPL had not received any further communication related to this letter. In August 2024, BDPL received two more civil penalty referral letters from BSEE related to INCs issued in October and November 2023. BSEE's 90-day review period related to these letters ends in late November 2024. Default Under a Secured Loan Agreement See “Note (9)” to our consolidated financial statements for additional information regarding a default under a secured loan agreement and its potential effects on our business, financial condition, and results of operations. Financing Agreements and Guarantees Indebtedness. See “Notes (3) and (9)” to our consolidated financial statements for disclosures related to Affiliate and third-party indebtedness and defaults thereto. Guarantees. Affiliates provided guarantees on certain debt of Blue Dolphin and its subsidiaries. The maximum amount of any guarantee is equal to the principal amount and accrued interest, which amounts are reduced as payments are made. See “Notes (3) and (9)” to our consolidated financial statements for additional disclosures related to Affiliate and third-party guarantees associated with indebtedness and defaults thereto. Health, Safety and Environmental Matters The operations of certain Blue Dolphin subsidiaries are subject to extensive federal, state, and local environmental, health, and safety regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum products and hazardous substances; the emission and discharge of materials into the environment; waste management; characteristics and composition of jet fuel and other products; and the monitoring, reporting and control of air emissions. These operations also require numerous permits and authorizations under various environmental, health, and safety laws and regulations. Failing to obtain and comply with these permits or environmental, health, or safety laws could result in fines, penalties or other sanctions, or a revocation of our permits. Legal Matters In the ordinary course of business, we are involved in legal matters incidental to the routine operation of our business, such as mechanic’s liens and contract-related disputes. We may also become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. Large, sometimes unspecified, damages or penalties may be sought from us in some matters, which may require years to resolve. Although we cannot provide assurance, we believe that an adverse resolution of the matters described below would not have a material impact on our liquidity, consolidated financial position, or consolidated results of operations. Resolved Matters. RLI Surety Bonds. Blue Dolphin currently has several surety bonds through RLI as required by different regulatory agencies, including BOEM and the Railroad Commission of Texas. The bonds total approximately $1.25 million in the aggregate, of which $0.2 million is collateralized in cash. In June, July, and December 2023, RLI demanded Blue Dolphin provide additional cash collateral or a letter of credit totaling approximately $1.0 million or provide bond exonerations and replacement bonds. Although Blue Dolphin received a proposal from another surety to replace the RLI bonds at a 50% collateral requirement, management was hopeful Blue Dolphin and RLI could reach an understanding whereby the existing bonds could be maintained until BDPL completed decommissioning of the subject assets. Abandonment of BDPL’s offshore pipeline and platform assets will eliminate the need for all BOEM supplemental pipeline bonds, reducing the amount of surety bonds held by RLI from $1.25 million to $0.3 million. On February 19, 2024, RLI filed suit against Blue Dolphin, BDPL, and BDEX seeking an injunction for the payment of approximately $1.0 million of additional collateral for the bonds. BDPL filed its answer to RLI's lawsuit on April 23, 2024 denying RLI's claims. On July 22, 2024, BDPL presented a settlement proposal to RLI to resolve the matter through a series of payments collateralizing the bonds with cash. On July 26, 2024, RLI informed the court that the parties reached a settlement in principle, and the parties executed a settlement agreement on September 12, 2024. BDPL made payments to RLI under the settlement agreement in September and October 2024 of approximately $0.3 million and $0.1 million, respectively. As of the filing date of this report, BDPL was in compliance with the settlement agreement with RLI. Pilot Dispute Related to Terminal Services Agreement. Effective May 9, 2019, NPS and Pilot entered into a Terminal Services Agreement, pursuant to which NPS agreed to store jet fuel purchased by Pilot at the Nixon facility. On August 25, 2022, Pilot provided the 60-day notice of its intent to terminate the Terminal Services Agreement, which became effective on October 24, 2022. As of the Terminal Services Agreement termination date, approximately 185,000 barrels of Pilot’s jet fuel remained at the Nixon facility. On October 28, 2022, Pilot commenced an action and application for a temporary restraining order (“TRO”) against NPS in Harris County District Court (the “Texas Action”). After a hearing on the application on October 28, 2022, Pilot’s application for the TRO was denied the same day. On December 2, 2022, NPS filed its answer in the Texas Action. On December 6, 2022, NPS provided notice under Section 7.206(a) of the Texas Business and Commerce Code ("TBCC") of its intent to sell the remaining inventory of Pilot’s jet fuel at the Nixon facility by January 7, 2023. After negotiations, NPS agreed to forbear from exercising its remedies under the TBCC while the parties explored a potential dispute compromise pursuant to a Forbearance and Accommodation Agreement dated January 12, 2023, with a forbearance period terminating on February 28, 2023. As part of the forbearance and accommodation agreement, Pilot paid NPS approximately $1.5 million in January 2023. On March 31, 2023, NPS and Pilot executed an Amendment to Forbearance and Accommodation Agreement, extending the forbearance period and all deadlines in the unresolved Texas Action to June 15, 2023. As part of amendment, Pilot paid NPS approximately $1.1 million and $0.2 million in April and June 2023, respectively. The parties also negotiated the sale of all 185,000 barrels of stored jet fuel in April 2023. On June 16, 2023, following the expiration of the forbearance and accommodation agreement, the parties agreed to extend the deadline for responses to outstanding discovery requests in the Texas Action to August 31, 2023. On August 28, 2023, the parties filed a joint motion to stay the case in anticipation of planned mediation in December 2023 to settle all outstanding disputes. A confidential Settlement Agreement by and among LEH, NPS, LE, LRM, Lazarus San Antonio Refinery, LLC, and Blue Dolphin (together the "Lazarus Entities"), on the one hand, and Pilot, Starlight Relatively Holdings LLC, Starlight Relativity Acquisition Company LLC, Tartan, The San Antonio Refinery LLC, and Falls City Terminal LP (together, the "Pilot Entities"), on the other hand, was executed on December 29, 2023. Among other matters addressed, NPS's contract-related dispute related to set-off payments and LRM’s contracted-related dispute involving a revenue-sharing arrangement for storing and selling crude oil with Pilot and Tartan, respectively, were fully resolved, and the parties agreed to mutually release all claims against each other. Further, Pilot and NPS agreed to take such actions as necessary to dismiss the Texas Action. For the avoidance of doubt, all contractual agreements between the Lazarus Entities and Pilot Entities were terminated. OSHA Settlement Agreement. In September 2022, we entered into an Informal Settlement Agreement with OSHA related to process safety management violations at the Nixon refinery. Under the agreement, we paid penalties totaling $0.05 million in November 2022. We remediated a significant portion of identified violations before December 31, 2022. We remediated the remaining violations on a progressive schedule by April 2023. Unresolved Matters. BOEM Supplemental Pipeline Bonds. To cover the various obligations of lessees and rights-of-way holders operating in federal waters of the Gulf of Mexico, BOEM evaluates an operator’s financial ability to carry out present and future obligations to determine whether the operator must provide additional security beyond the statutory bonding requirements. Such obligations include the cost of plugging and abandoning wells and decommissioning pipelines and platforms at the end of production or service activities. Once plugging and abandonment work has been completed, the collateral backing the financial assurance is released by BOEM. Historically, BDPL maintained $0.9 million in pipeline bonds with BOEM to decommission its trunk pipeline offshore in federal waters. In March 2018, BOEM ordered BDPL to provide additional financial assurance totaling approximately $4.8 million for five (5) existing pipeline rights-of-way, an increase of approximately $3.9 million. In June 2018, BOEM issued BDPL INCs for each right-of-way that failed to comply. BDPL appealed the INCs to the IBLA. Although the IBLA granted multiple extension requests, the Office of the Solicitor of the U.S. Department of the Interior indicated that BOEM would not consent to further extensions. The solicitor’s office signaled that BDPL’s adherence to decommissioning its offshore pipelines and platform would likely help in future discussions with BOEM related to the INCs. Fulfilling abandonment obligations related to the subject assets will significantly reduce or eliminate the amount of supplemental pipeline bonds required by BOEM, which may serve to partially or fully resolve the INCs. BDPL’s pending appeal of the BOEM INCs does not relieve BDPL of its obligations to provide additional financial assurance or of BOEM’s authority to impose civil penalties. There can be no assurance that we will be able to meet additional supplemental pipeline bond requirements. If BDPL is required by BOEM to provide significant additional supplemental pipeline bonds or is assessed significant penalties under the INCs, we will experience a significant and material adverse effect on our operations, liquidity, and financial condition. We cannot predict the outcome of the supplemental pipeline bond INCs. Accordingly, we did not record a liability on our consolidated balance sheets as of September 30, 2024 and December 31, 2023. At both September 30, 2024 and December 31, 2023, BDPL maintained approximately $0.9 million in pipeline rights-of-way surety bonds issued to BOEM through RLI. However, as noted below, RLI desires to reduce its risk profile related to BDPL's bonds. Of the pipeline rights-of-way bonds, $0.7 million was credit-backed and $0.2 million was cash-backed. TCEQ Proposed Agreed Order. In October 2021, LRM received a proposed agreed order from the TCEQ for alleged solid and hazardous waste violations discovered during an investigation from January to March 2020. The proposed agreed order assessed an administrative penalty of $0.4 million and identified actions needed to correct the alleged violations. In September 2023, TCEQ presented its final penalty offer of $0.35 million, which LRM accepted. Although LRM believed the penalty matter was resolved in principle, TCEQ referred the matter to the State Office of Administrative Hearings. A preliminary hearing, the purpose of which was to set a hearing schedule, was held on August 8, 2024. Management participated in the hearing. The next hearing is scheduled for January 2025. At September 30, 2024, we accrued $0.4 million on our balance sheet within accrued expenses and other current liabilities related to this matter. BSEE Civil Penalties. We are required by BSEE to perform annual structural inspections of our offshore platform, as well as to perform monthly platform checks of navigational aids, fog horns, and lifesaving equipment. In January 2024, BSEE assessed a civil penalty of $0.2 million against BDPL for failure to complete annual platform inspections in a timely manner. BDPL paid the civil penalty in April 2024. In April 2024, BDPL received another civil penalty referral letter from BSEE related to INCs issued by the agency in September 2023. Although the civil penalty referral letter noted that BSEE would provide BDPL information related to its review within 90 days from the date of its letter, as of the filing date of this report BDPL had not received any further communication related to this letter. In August 2024, BDPL received two more civil penalty referral letters from BSEE related to INCs issued in October and November 2023. BSEE's 90-day review period related to these letters ends in late November 2024. Default under a Secured Loan Agreement. We are currently in technical default under a secured loan agreement. See “Note (9)” to our consolidated financial statements for additional disclosures related to third-party debt, default on such debt, and the potential effects of such a default on our business, financial condition, and results of operations. If the lender exercises its rights and remedies due to the default under our secured loan agreement, our business, financial condition, and results of operations will be materially adversely affected.

Note 14 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Text Block]

(14) Commitments and Contingencies

Third Amended and Restated Operating Agreement

See “Note (3)” to our consolidated financial statements for additional disclosures related to operation and management of all Blue Dolphin assets by an Affiliate under the Third Amended and Restated Operating Agreement.

Offshore Pipelines and Platform Requirements

BDPL has pipelines and platform assets subject to BSEE’s idle iron regulations. Idle iron regulations require lessees and rights-of-way holders to permanently abandon and/or remove platforms and other structures when they are no longer useful for operations. Until such structures are abandoned or removed, lessees and rights-of-way holders are required to inspect and maintain the assets in accordance with regulatory requirements.

Platform Inspections. We are required by BSEE to perform annual structural inspections of our offshore platform, as well as to perform monthly platform checks of navigational aids, fog horns, and lifesaving equipment. In January 2024, BSEE assessed a civil penalty of $0.2 million against BDPL for failure to complete annual platform inspections in a timely manner. BDPL paid the civil penalty in April 2024.

Decommissioning Obligations. BOEM mandated that our pipelines and facilities assets offshore in federal waters be decommissioned due to their extended period of inactivity. In October 2023, management met with BSEE to discuss BDPL’s path forward for meeting decommissioning requirements. Management worked with a consultant to develop a decommissioning plan, and BDPL was following the plan. BDPL completed a significant portion of the project from late December 2023 to mid- February 2024. However, due poor weather conditions that contributed to significant cost overruns, in July 2024 BDPL requested a BSEE extension to decommission the remaining portion of the Blue Dolphin Pipeline System and associated platform until the second quarter of 2025. BDPL’s request for a decommissioning extension was denied by BSEE in September 2024. Management is currently assessing the feasibility and cost of performing decommissioning work in late November or December of 2024 during off-peak weather conditions in the U.S. Gulf of Mexico and vendor availability. Separately, management is also exploring alternatives to reactivate the assets under a potential alternate Rights-of-Use and Easement (RUE). BDPL's delay in decommissioning its offshore assets does not relieve BDPL of its obligations to comply with BSEE's mandate or of BSEE's authority to impose civil penalties. Further, there can be no assurance that BDPL will be able to complete the anticipated work or predict the outcome of BSEE INCs. Accordingly, we did not record a liability related to potential penalties on our consolidated balance sheets as of September 30, 2024 and December 31, 2023. At September 30, 2024 and December 31, 2023, BDPL maintained $3.0 million and $4.5 million, respectively, in AROs related to abandonment of these assets, which amount does not include potential penalties.

In April 2024, BDPL received another civil penalty referral letter from BSEE related to INCs issued by the agency in September 2023. Although the civil penalty referral letter noted that BSEE would provide BDPL information related to its review within 90 days from the date of its letter, as of the filing date of this report BDPL had not received any further communication related to this letter. In August 2024, BDPL received two more civil penalty referral letters from BSEE related to INCs issued in October and November 2023. BSEE's 90-day review period related to these letters ends in late November 2024.

Default Under a Secured Loan Agreement

See “Note (9)” to our consolidated financial statements for additional information regarding a default under a secured loan agreement and its potential effects on our business, financial condition, and results of operations.

Financing Agreements and Guarantees

Indebtedness. See “Notes (3) and (9)” to our consolidated financial statements for disclosures related to Affiliate and third-party indebtedness and defaults thereto.

Guarantees. Affiliates provided guarantees on certain debt of Blue Dolphin and its subsidiaries. The maximum amount of any guarantee is equal to the principal amount and accrued interest, which amounts are reduced as payments are made. See “Notes (3) and (9)” to our consolidated financial statements for additional disclosures related to Affiliate and third-party guarantees associated with indebtedness and defaults thereto.

Health, Safety and Environmental Matters

The operations of certain Blue Dolphin subsidiaries are subject to extensive federal, state, and local environmental, health, and safety regulations governing, among other things, the generation, storage, handling, use and transportation of petroleum products and hazardous substances; the emission and discharge of materials into the environment; waste management; characteristics and composition of jet fuel and other products; and the monitoring, reporting and control of air emissions. These operations also require numerous permits and authorizations under various environmental, health, and safety laws and regulations. Failing to obtain and comply with these permits or environmental, health, or safety laws could result in fines, penalties or other sanctions, or a revocation of our permits.

Legal Matters

In the ordinary course of business, we are involved in legal matters incidental to the routine operation of our business, such as mechanic’s liens and contract-related disputes. We may also become party to lawsuits, administrative proceedings, and governmental investigations, including environmental, regulatory, and other matters. Large, sometimes unspecified, damages or penalties may be sought from us in some matters, which may require years to resolve. Although we cannot provide assurance, we believe that an adverse resolution of the matters described below would not have a material impact on our liquidity, consolidated financial position, or consolidated results of operations.

Resolved Matters.

RLI Surety Bonds. Blue Dolphin currently has several surety bonds through RLI as required by different regulatory agencies, including BOEM and the Railroad Commission of Texas. The bonds total approximately $1.25 million in the aggregate, of which $0.2 million is collateralized in cash. In June, July, and December 2023, RLI demanded Blue Dolphin provide additional cash collateral or a letter of credit totaling approximately $1.0 million or provide bond exonerations and replacement bonds. Although Blue Dolphin received a proposal from another surety to replace the RLI bonds at a 50% collateral requirement, management was hopeful Blue Dolphin and RLI could reach an understanding whereby the existing bonds could be maintained until BDPL completed decommissioning of the subject assets. Abandonment of BDPL’s offshore pipeline and platform assets will eliminate the need for all BOEM supplemental pipeline bonds, reducing the amount of surety bonds held by RLI from $1.25 million to $0.3 million. On February 19, 2024, RLI filed suit against Blue Dolphin, BDPL, and BDEX seeking an injunction for the payment of approximately $1.0 million of additional collateral for the bonds. BDPL filed its answer to RLI's lawsuit on April 23, 2024 denying RLI's claims. On July 22, 2024, BDPL presented a settlement proposal to RLI to resolve the matter through a series of payments collateralizing the bonds with cash. On July 26, 2024, RLI informed the court that the parties reached a settlement in principle, and the parties executed a settlement agreement on September 12, 2024. BDPL made payments to RLI under the settlement agreement in September and October 2024 of approximately $0.3 million and $0.1 million, respectively. As of the filing date of this report, BDPL was in compliance with the settlement agreement with RLI.

Pilot Dispute Related to Terminal Services Agreement. Effective May 9, 2019, NPS and Pilot entered into a Terminal Services Agreement, pursuant to which NPS agreed to store jet fuel purchased by Pilot at the Nixon facility. On August 25, 2022, Pilot provided the 60-day notice of its intent to terminate the Terminal Services Agreement, which became effective on October 24, 2022. As of the Terminal Services Agreement termination date, approximately 185,000 barrels of Pilot’s jet fuel remained at the Nixon facility.

On October 28, 2022, Pilot commenced an action and application for a temporary restraining order (“TRO”) against NPS in Harris County District Court (the “Texas Action”). After a hearing on the application on October 28, 2022, Pilot’s application for the TRO was denied the same day. On December 2, 2022, NPS filed its answer in the Texas Action. On December 6, 2022, NPS provided notice under Section 7.206(a) of the Texas Business and Commerce Code ("TBCC") of its intent to sell the remaining inventory of Pilot’s jet fuel at the Nixon facility by January 7, 2023. After negotiations, NPS agreed to forbear from exercising its remedies under the TBCC while the parties explored a potential dispute compromise pursuant to a Forbearance and Accommodation Agreement dated January 12, 2023, with a forbearance period terminating on February 28, 2023. As part of the forbearance and accommodation agreement, Pilot paid NPS approximately $1.5 million in January 2023.

On March 31, 2023, NPS and Pilot executed an Amendment to Forbearance and Accommodation Agreement, extending the forbearance period and all deadlines in the unresolved Texas Action to June 15, 2023. As part of amendment, Pilot paid NPS approximately $1.1 million and $0.2 million in April and June 2023, respectively. The parties also negotiated the sale of all 185,000 barrels of stored jet fuel in April 2023. On June 16, 2023, following the expiration of the forbearance and accommodation agreement, the parties agreed to extend the deadline for responses to outstanding discovery requests in the Texas Action to August 31, 2023. On August 28, 2023, the parties filed a joint motion to stay the case in anticipation of planned mediation in December 2023 to settle all outstanding disputes.

A confidential Settlement Agreement by and among LEH, NPS, LE, LRM, Lazarus San Antonio Refinery, LLC, and Blue Dolphin (together the "Lazarus Entities"), on the one hand, and Pilot, Starlight Relatively Holdings LLC, Starlight Relativity Acquisition Company LLC, Tartan, The San Antonio Refinery LLC, and Falls City Terminal LP (together, the "Pilot Entities"), on the other hand, was executed on December 29, 2023. Among other matters addressed, NPS's contract-related dispute related to set-off payments and LRM’s contracted-related dispute involving a revenue-sharing arrangement for storing and selling crude oil with Pilot and Tartan, respectively, were fully resolved, and the parties agreed to mutually release all claims against each other. Further, Pilot and NPS agreed to take such actions as necessary to dismiss the Texas Action. For the avoidance of doubt, all contractual agreements between the Lazarus Entities and Pilot Entities were terminated.

OSHA Settlement Agreement. In September 2022, we entered into an Informal Settlement Agreement with OSHA related to process safety management violations at the Nixon refinery. Under the agreement, we paid penalties totaling $0.05 million in November 2022. We remediated a significant portion of identified violations before December 31, 2022. We remediated the remaining violations on a progressive schedule by April 2023.

Unresolved Matters.

BOEM Supplemental Pipeline Bonds. To cover the various obligations of lessees and rights-of-way holders operating in federal waters of the Gulf of Mexico, BOEM evaluates an operator’s financial ability to carry out present and future obligations to determine whether the operator must provide additional security beyond the statutory bonding requirements. Such obligations include the cost of plugging and abandoning wells and decommissioning pipelines and platforms at the end of production or service activities. Once plugging and abandonment work has been completed, the collateral backing the financial assurance is released by BOEM.

Historically, BDPL maintained $0.9 million in pipeline bonds with BOEM to decommission its trunk pipeline offshore in federal waters. In March 2018, BOEM ordered BDPL to provide additional financial assurance totaling approximately $4.8 million for five (5) existing pipeline rights-of-way, an increase of approximately $3.9 million. In June 2018, BOEM issued BDPL INCs for each right-of-way that failed to comply. BDPL appealed the INCs to the IBLA. Although the IBLA granted multiple extension requests, the Office of the Solicitor of the U.S. Department of the Interior indicated that BOEM would not consent to further extensions. The solicitor’s office signaled that BDPL’s adherence to decommissioning its offshore pipelines and platform would likely help in future discussions with BOEM related to the INCs. Fulfilling abandonment obligations related to the subject assets will significantly reduce or eliminate the amount of supplemental pipeline bonds required by BOEM, which may serve to partially or fully resolve the INCs.

BDPL’s pending appeal of the BOEM INCs does not relieve BDPL of its obligations to provide additional financial assurance or of BOEM’s authority to impose civil penalties. There can be no assurance that we will be able to meet additional supplemental pipeline bond requirements. If BDPL is required by BOEM to provide significant additional supplemental pipeline bonds or is assessed significant penalties under the INCs, we will experience a significant and material adverse effect on our operations, liquidity, and financial condition. We cannot predict the outcome of the supplemental pipeline bond INCs. Accordingly, we did not record a liability on our consolidated balance sheets as of September 30, 2024 and December 31, 2023. At both September 30, 2024 and December 31, 2023, BDPL maintained approximately $0.9 million in pipeline rights-of-way surety bonds issued to BOEM through RLI. However, as noted below, RLI desires to reduce its risk profile related to BDPL's bonds. Of the pipeline rights-of-way bonds, $0.7 million was credit-backed and $0.2 million was cash-backed.

TCEQ Proposed Agreed Order. In October 2021, LRM received a proposed agreed order from the TCEQ for alleged solid and hazardous waste violations discovered during an investigation from January to March 2020. The proposed agreed order assessed an administrative penalty of $0.4 million and identified actions needed to correct the alleged violations. In September 2023, TCEQ presented its final penalty offer of $0.35 million, which LRM accepted. Although LRM believed the penalty matter was resolved in principle, TCEQ referred the matter to the State Office of Administrative Hearings. A preliminary hearing, the purpose of which was to set a hearing schedule, was held on August 8, 2024. Management participated in the hearing. The next hearing is scheduled for January 2025. At September 30, 2024, we accrued $0.4 million on our balance sheet within accrued expenses and other current liabilities related to this matter.

BSEE Civil Penalties. We are required by BSEE to perform annual structural inspections of our offshore platform, as well as to perform monthly platform checks of navigational aids, fog horns, and lifesaving equipment. In January 2024, BSEE assessed a civil penalty of $0.2 million against BDPL for failure to complete annual platform inspections in a timely manner. BDPL paid the civil penalty in April 2024. In April 2024, BDPL received another civil penalty referral letter from BSEE related to INCs issued by the agency in September 2023. Although the civil penalty referral letter noted that BSEE would provide BDPL information related to its review within 90 days from the date of its letter, as of the filing date of this report BDPL had not received any further communication related to this letter. In August 2024, BDPL received two more civil penalty referral letters from BSEE related to INCs issued in October and November 2023. BSEE's 90-day review period related to these letters ends in late November 2024.

Default under a Secured Loan Agreement. We are currently in technical default under a secured loan agreement. See “Note (9)” to our consolidated financial statements for additional disclosures related to third-party debt, default on such debt, and the potential effects of such a default on our business, financial condition, and results of operations. If the lender exercises its rights and remedies due to the default under our secured loan agreement, our business, financial condition, and results of operations will be materially adversely affected.