Oil Discharge Planning, Preparedness and Response (“PPP MOU”)

by Baker Donelson
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Following on this week’s series regarding the new batch of four USCG-BSEE MOUs, this post will discuss the second, concerning oil spill planning, preparedness and response.

The second of the January 17, 2017 MOUs concerns oil spill response on the OCS, and in this regard supersedes a prior MOU entered in April 2012.  That said, the January 17, 2017 more or less tracks the April 2012 MOU, with various updates based on the agencies’ experiences since 2012 and with the most substantial updates appearing in a newly added section regarding “Oil Spill After Action Reviews.”

This PPP MOU sets up (yet another) matrix defining which agency has spill response authority for certain types of OCS assets (i.e. fixed v. floating facilities, MODUs, FPSOs, etc.) and for what phase of the response (i.e. planning, preparedness, response, source control).

Essentially, BSEE has authority for all efforts at source control in a blowout scenario, as well as review/approval of Oil Spill Response Plans (as required by OPA 90); the USCG has authority for all response efforts and removal of hydrocarbons, as well as mitigation of environmental damages.

Likewise, this MOU elaborates on BSEE and the USCG’s preparedness enforcement responsibilities, including specifically BSEE’s program of unannounced facility inspections (purportedly still averaging the same 40-per-year as indicated in the April 2012 MOU).  Additionally, BSEE and the USCG share equipment inspection responsibilities, with BSEE shouldering the lion’s share vis-à-vis “oil discharge response, source control, and subsea containment equipment;” and the USCG in the lead role for equipment inspections in connection with National Preparedness for Response Exercise Program (PREP) area drills pursuant to OPA 90 requirements.

As to the primary change from the prior MOU, the newly added section regarding “Oil Spill After Action Reviews” clarifies the roles and reporting interface between BSEE and the USCG in the wake of an oil discharge incident on the OCS.

The remainder of the PPP MOU (again essentially tracking the prior MOU) provides additional information regarding inter alia information gathering/database maintenance, information sharing, enforcement concerns, and interagency training/coordination efforts.

While this MOU is relatively innocuous and consistent with the prior MOU on the same topics, recent BSEE regulatory activity that falls within the broader ambit of this MOA is particularly (if indirectly) important.

Specifically, BSEE issued a Notice of Proposed Rulemaking on August 22, 2013 to overhaul 30 C.F.R. Subpart H of the BSEE regulations, which govern “Oil and Gas Production Safety Systems” (i.e. systems for production activities, as opposed to exploration):

This proposed rule would amend and update the Subpart H, Oil and Gas Production Safety Systems regulations. Subpart H has not had a major revision since it was first published in 1988. Since that time, much of the oil and gas production on the OCS has moved into deeper waters and the regulations have not kept pace with the technological advancements.

These regulations address issues such as production safety systems, subsurface safety devices, and safety device testing. These systems play a critical role in protecting workers and the environment.

78 Fed. Reg. 52239, 52240 (Aug. 22, 2013).

Perhaps most critically, these proposed regulations included “[i]n addition to Subpart H revisions, [revisions to] the regulation [30 C.F.R. §250.107] in Subpart A requiring best available and safest technology (BAST) to follow more closely the [OCSLA] statutory provision for BAST, 43 U.S.C. 1347(b).”    This general and very broad BAST provision – which applies not only to the systems covered by Subpart H, but to all areas/systems that fall under BSEE’s authority – is often cited by BSEE in connection with “Incidents of Non-Compliance” (INCs) issued under BSEE’s OCSLA civil penalty authority.   The proposed updates to the BAST regulation would give BSEE broad (and apparently highly discretionary) authority to dictate when and whether operators (and apparently their contractors) must use a certain BAST, presumably on penalty of regulatory enforcement actions:

Proposed Sec. 250.107(c) would provide that wherever failure of equipment may have a significant effect on safety, health, or the environment, an operator must use the BAST that BSEE determines to be economically feasible on all new drilling and production operations, and wherever practicable, on existing operations. Under this proposed provision, BSEE would specify what is economically feasible BAST. This could be accomplished generally, for instance, through the use of NTLs, or on a case-specific basis. To implement the exception allowed by the Act, proposed Sec. 250.107(c)(2) would allow an operator to request an exception from the use of BAST by demonstrating to BSEE that the incremental benefits of using BAST are clearly insufficient to justify the incremental costs of utilizing such technologies.

78 Fed. Reg. 52239, 52243 (Aug. 22, 2013).

The extensive scope of these proposed regulations (beyond the expansive BAST revision) is readily apparent:  Subpart H currently includes eight numbered sections, but the proposed rule intended to expand it to over ninety.

Moreover, the prior version the BAST regulation at §250.107 included certain “safe harbor” language providing that (1) BAST was only required “whenever practical” and (2) that compliance with BSEE regulations would “in general” constitute the use of BAST. However, the NPRM specifically intended to remove these safe harbors:

Existing §250.107(c) requires the use of BAST ‘‘whenever practical’’ on ‘‘all exploration, development, and production operations.’’ Moreover, it provides that compliance with the regulations generally is considered to be the use of BAST. The existing provision is problematic for a number of reasons. The use of the phrase ‘‘whenever practical’’ provides an operator substantial discretion in the use of BAST. The statute [43 U.S.C. §1347(b), regarding BAST on the OCS], on the other hand, requires the use of BAST that [BSEE] determines to be economically feasible on all new drilling and production operations. With respect to existing operations, the Act requires operators to use BAST ‘‘wherever practicable,’’ which does not afford the operator complete discretion in the use of systems equipment. In addition, although operators must comply with BSEE regulations, such compliance does not necessarily equate to the use of BAST. Existing paragraph (d) is written in terms of additional measures the Director can require under the Act, and includes a general requirement that the benefits of such measures outweigh the costs.

The proposed rule would more closely track the Act. Proposed §250.107(c) would provide that wherever failure of equipment may have a significant effect on safety, health, or the environment, an operator must use the BAST that BSEE determines to be economically feasible on all new drilling and production operations, and wherever practicable, on existing operations. Under this proposed provision, BSEE would specify what is economically feasible BAST. This could be accomplished generally, for instance, through the use of NTLs, or on a case specific basis. To implement the exception allowed by the Act, proposed §250.107(c)(2) would allow an operator to request an exception from the use of BAST by demonstrating to BSEE that the incremental benefits of using BAST are clearly insufficient to justify the incremental costs of utilizing such technologies.

78 Fed. Reg. 52239, 52243 (Aug. 22, 2013)

The expansion of Subpart H – along with the removal of the prior BAST safe harbor under revised §250.107 – became a reality in BSEE’s Final Rule published on April 29, 2016.  81 Fed. Reg. 25888.  As a result, BSEE newly expanded BAST authority will likely be front and center in future inspections and enforcement efforts across the matrix of facilities/systems over which BSEE has either direct/sole authority or shared authority with the USCG.  Indeed, there is some question as to whether BSEE’s newly broadened BAST authority – which again ostensibly extends to all areas/systems/facilities under BSEE’s authority –  may potentially supersede  even in areas where the USCG otherwise has exclusive regulatory authority (as discussed with respect to DP systems previously on this blog).

As evidenced by these BAST concerns in light of the PPP MOU, the “One Gulf, One Standard” approach is a laudable goal for both the regulators and for industry interests, but it is one that will continue to evolve, with the constant threat of “growing pains” given the inherent difficulties of shared regulatory space.

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