“One Gulf, One Standard” Evolves – USCG and BSEE Sign Four New MOUs in Efforts to Clarify Their Regulatory Roles on the OCS

For the past few years, this blog has attempted to chart the fraught and developing regulatory overlap between the United States Coast Guard (USCG) and Bureau of Environmental Enforcement (BSEE) in the fallout from the DEEPWATER HORIZON disaster and ensuing  ramped up regulatory action on the Outer Continental Shelf (OCS).  As part of these increased regulatory enforcement efforts, the USCG and BSEE entered a series of Memoranda of Understanding (MOUs) in the months and years following the April 2010 DEEPWATER HORIZON blowout in an attempt to circumscribe each agency’s distinct sphere of authority.  These MOUs, however, left many gray areas and blurred lines as to whether one entity – or both – may hold sway on certain enforcement issues, none of which is good for a technologically complex and constantly evolving industry that requires precision in order to ensure compliance.

As part of the continued effort toward the (arguably) “white whale” goal of establishing a “One Gulf, One Standard” approach to regulating the OCS, the USCG and BSEE recently entered four additional MOUs (effective January 10, 2017) in an effort to “increase collaboration, clarify responsibilities, and streamline information sharing.”  This post will be followed by a series in the coming days that will provide a brief discussion of each of these MOUs.

Civil Penalties

The first of the four MOUs concerns the USCG and BSEE’s civil penalty authorities.

The USCG and BSEE both have authority to issue civil penalties within their respective spheres of regulation, and both wield that civil penalty authority as to certain OCS facilities/units pursuant to 33 C.F.R. Subchapter N (although this Subchapter is technically promulgated under the USCG’s authority).  Indeed, 33 C.F.R. § 140.10 specifically authorizes both the USCG and BSEE to conduct inspections on OCS facilities for purposes of determining Subchapter N violations.  In this regard, the USCG and BSEE entered a previous MOU in September 2014 that set forth each agency’s respective inspection responsibilities for specific systems and subsystems on fixed OCS facilities, as detailed in a system-by-system matrix appended to the MOU.  . For example, BSEE is the designated inspecting authority for all “production” systems (i.e. wells and wellheads, injection systems, etc.); the USCG is the designated inspecting authority for aids to navigation and oil/hazardous material transfers to platforms from vessels.  Likewise, the two agencies also entered an MOU in 2013 regarding inspections on mobile offshore drilling units (MODUs).  However, the MODU matrix leaves some areas of ambiguous overlap.  For example, both BSEE and the USCG retain jurisdiction over crane operations depending on whether the cranes are considered “marine cranes and lifting systems” or “drilling associated” cranes and lifting systems.  BSEE requires compliance with API crane standards (specifically API RP D2),[1] whereas the USCG has its own set of vessel-specific crane regulations.[2]

In any event, BSEE retains sole authority to issue civil penalties for pure OCSLA-related violations (i.e. 30 C.F.R. Chapter 2), and the USCG retains sole authority to issue civil penalties for vessel-related activities and/or OPA/MARPOL issues (i.e. Titles 46 and 33 of the C.F.R., while (as noted above) both agencies share regulatory authority under 33 C.F.R. Subchapter N.

The January 10, 2017 “Civil Penalties” MOU clarifies that each agency may refer a violation otherwise within the other agency’s unique authority for determination of a civil penalty by that agency.

In the case of BSEE referring a violation to the USCG, the USCG must confirm BSEE’s determination of a violation, and the putative violator must be given a grace period to establish compliance (as required by 43 U.S.C. §1350(b)(1)).

Alternatively, in the case of the USCG referring a violation to BSEE, BSEE will assign a reviewing officer to process the referred violation under BSEE’s usual procedure for issuing civil penalties, with a copy of the final casefile forwarded to the USCG once the penalty is paid and the file is closed.  That said, the putative violator must have an opportunity to appeal within the USCG’s procedure before the USCG can refer the violation to BSEE.

Notably, this MOU was issued less than a month after the Western District of Louisiana’s landmark decision in Island Operating Co. v. Jewell et al., Case No. 16-145 (W.D. La. Dec. 23, 2016), which held that BSEE has no authority to issue civil penalties to non-leaseholder/non-operator offshore contractors pursuant to 43 U.S.C. §1350.  As a practical matter, in typical OCS operations, vessel owning/operating entities will only rarely (if ever) qualify as leaseholders or operators for purposes of falling under BSEE’s now-limited regulatory jurisdiction under §1350. Thus, in the wake of the Jewell decision, the new “Civil Penalties” MOU may be implicitly limited insofar as BSEE may no longer have any regulatory authority over vessel contractors on the OCS (either on its own or via any referral from the USCG), at least with respect to pure OCSLA, non-vessel-specific regulatory requirements.

[1]  See 30 C.F.R. §250.108.

[2] See 46 C.F.R. §107.309, §§107.258-60.