On August 15, 2012, the Bureau of Safety and Environmental Enforcement ("BSEE") took two significant actions that further entrench its claim to extend its jurisdiction over service companies conducting oil and gas support activities on the Outer Continental Shelf ("OCS").
First, BSEE issued an Interim Policy Statement that expressly adopted a uniform policy to hold service companies jointly and severally liable with the lease operator for violations when those companies perform any activity that is subject to the BSEE's regulations. Previously, BSEE and its predecessors looked only to the lessee and any formally designated and approved operators. However, starting with informal press releases and public speeches in May 2011, BSEE expressed an intention to begin holding service companies responsible and, in October of that year, issued citations for violations to two service companies involved in the Macondo oil spill. The Interim Policy Statement therefore represents a significant solidifying of the enforcement policy.
While the policy statement claims to be a document solely for internal purposes, it purports to list the standards and procedures that the agency will follow when issuing citations to service companies for violations. However, a cursory review shows that the standards and procedures are based on purely discretionary decisions by agency personnel, starting with the claim that citations will be issued only for undefined "major" matters. Likewise, the policy describes procedures that provide for upper management review by the regional supervisor, but there is no standard for the regional supervisor to follow in making a final decision.
Second, BSEE issued a Final Rule for Offshore Drilling Safety (which was published in the Federal Register on August 22, 2012). The Final Rule finalizes safety reforms that had been previously issued in the agency's Interim Final Rule in October 2011. The reforms strengthen requirements for safety equipment, well control systems and blowout prevention practices on offshore oil and gas operations in light of the Macondo oil spill. Specifically, the Final Rule establishes new standards for casing and cementing, including integrity testing requirements; third-party certification and verification requirements; blowout preventer capability, testing and documentation obligations; and standards for specific well control training to include deepwater operations.
Equally important, the Final Rule reiterated – at several places – BSEE's claim to extend its enforcement jurisdiction to service companies. By highlighting this policy in its Final Rule, BSEE has ratcheted up its claim of expanded enforcement authority, belying its contention in the Interim Policy Statement that this policy is limited to internal agency purposes.
All service companies operating in OCS waters should be fully aware of this further entrenching of BSEE's claim to extend its jurisdiction over them. If BSEE's assertion of expanded jurisdiction is not overturned, service companies will need to consider the impact on all facets of operations, including securities filings, insurance coverage, compliance plans and financing covenants. Contact counsel for further information on these developments and necessary responses.
