Action Item: The recently published Well Control Rule will require significant changes to Blow-Out Preventer (“BOP”) systems and well operations. Stakeholders in offshore oil and gas operations should carefully evaluate the new measures, review safety procedures, and develop plans to come into compliance within the time frames mandated by the regulations.

New Developments

The Department of Interior’s Bureau of Safety and Environmental Enforcement (“BSEE”) released its Final Rule on Well Control Regulations (the “Final Rule”) on April 14, 2016. The Final Rule adopts new standards for safety and well operations that will be required for owners and operators of offshore wells and facilities. The Final Rule has yet to be published in the Federal Register, but will be shortly, and it will go into effect 90 days after publication, with some provisions being implemented at later dates.

Background

Following the Deepwater Horizon incident, the former Bureau of Offshore Energy Management, Regulation, and Enforcement (“BOEMRE”) (now reorganized into BSEE and Bureau of Ocean Energy Management or BOEM) published an Interim Final Rule (“IFR”) titled “Increased Safety Measures for Energy Development on the Outer Continental Shelf” on October 14, 2010. Highlighting the five-year anniversary of the Deepwater Horizon incident, the Bureau of Safety and Environmental Enforcement (“BSEE”) issued its Proposed Rule on April 17, 2015, regarding BOPs and Well Control, and the Department of the Interior published a joint BSEE/BOEM notice describing the reforms the agencies have implemented since the 2010 incident. (See Proposed Rule and Joint Notice.) We have covered these developments in previous advisories, most notably our April 2015 advisory titled “BSEE and DOI Take Action on Five-Year Anniversary of Deepwater Horizon.”(See http://www.blankrome.com/index.cfm?contentID=37&itemID=3571.)

BSEE’s Final Rule on Well Control

BSEE’s stated goal in implementing the Final Rule was to “ensure safe and responsible offshore oil and gas development.” To this end, the Final Rule sought to incorporate lessons learned from the Deepwater Horizon incident, the subsequent investigations of the incident, and the hundreds of comments received by BSEE. Most requirements become effective three months from the publication of the Final Rule, while some requirements have extended timeframes for compliance.

The Final Rule amends standards, controls, and maintenance requirements for BOPs, requires real-time monitoring capability for some drilling activities, and modifies requirements for well control and decommissioning.

The Final Rule, among other things, will accomplish the following:

• incorporates new industry standards for baseline requirements for the design, manufacture, repair, and maintenance of BOPs;
• mandates more controls over the maintenance, inspection, and repair of BOPs;
• requires the use of deepwater and surface BOPs with double shear rams, designed to include technology that allows drill pipe centering during shearing operations;
• requires more vigorous third-party verification and certification of BOP equipment;
• requires real-time monitoring of deepwater and high-temperature and high-pressure drilling activities, as well as shallow water operations in high-risk cases;
• establishes regulatory criteria for testing subsea well containment equipment based on an existing Notice to Lessees on well containment;
• increases reporting requirements of failure data;
• adopts criteria for safe drilling margins, according to recommendations of investigations of the Deepwater Horizon incident;
• specifies requirements for remote operating vehicle use;
• mandates the testing frequency of BOPs used on workover and decommissioning operations the same as drilling operations; and
• incorporates guidance from several Notices to Lessees and Operators.

Industry and Environmental Response

There have been concerns about the rulemaking process and the requirements in the Final Rule. In particular, some industry segments expressed concerns about the unintended consequences of uniform regulations for diverse operations. Some of these concerns were addressed in the Final Rule. For example, the “safe drilling margin” established in the Final Rule provides more flexibility to operators than what was in the proposed rule. Industry also expressed concerns regarding the implementation schedule. BSEE claims to have addressed this concern by delaying implementation of certain provisions.

However, one area of industry concern that was not addressed by BSEE was regarding the rulemaking process. In particular, the National Ocean Industries Association (“NOIA”) noted that the Final Rule was the culmination of a flawed rulemaking process due in part to BSEE’s refusal to extend the time for comments, including time to consider new economic studies, and pull back and rewrite portions of the rule.

The American Petroleum Institute, NOIA, and other industry groups have stated that they support the Final Rule’s attempt to build upon the progress made by the industry on safety. However, other groups noted that there were less restrictive means to accomplish BSEE’s goals.

Environmental groups have also shared a diversity of opinions. Some groups have signaled that the Final Rule is an improvement over the status quo. However, they note their belief that the Final Rule does not go far enough in mandating safety and environmental requirements.

Conclusions

Now that the Final Rule has been published, and regardless of whether a particular entity or organization has supported this rulemaking, it is time for owners and operators of offshore facilities, contractors, and other stakeholders to do a deep-dive, so to speak, to fully examine the Final Rule and to take the necessary time to understand and develop a plan to come into compliance within the mandated timeframes. Challenges to the Final Rule are already beginning to take shape. For example, it was announced two days after the Final Rule’s release that Senator David Vitter (R-La.) has proposed an amendment to the Energy Bill, which has been stalled for a while but is now moving, that would require BSEE to conduct a review of the Final Rule’s economic impact on small businesses. Time will tell whether some companies will decide to challenge certain provisions of the Final Rule or take other action to seek alternatives or relief.