“One Shelf, One Standard” Continues to Evolve – USCG Issues Final Rule Regarding Electrical Equipment in Hazardous Locations

The United States Coast Guard (“USCG”), continuing its “One Shelf, One Standard” approach to regulating the Outer Continental Shelf (“OCS”) (as previously discussed in this blog here and, indirectly, here) recently issued a Final Rule enacting new regulations governing electrical equipment in hazardous locations on all “newly constructed  mobile offshore drilling units (MODUs), floating [OCS] facilities, and vessels other than offshore supply vessels (OSVs) that engage in OCS activities.”  80 Fed. Reg. 16980 (Mar. 31, 2015) (hereinafter “EEHL Rule”).

Notably, these regulations were originally intended for implementation within 30 days of finalization, but an overwhelming backlash from industry during the comment period regarding the overly burdensome cost of that proposed timeframe (which would have wreaked havoc on budgets for MODUs and other facilities under construction and/or already under contract for construction) caused the  USCG to change the implementation date to April, 2018.  Thus, these new regulations will govern only new construction .

Likewise, these new regulations are expressly not applicable to OSVs, which have recently (after much anticipation) garnered their own unique set of regulations (albeit still in interim rule form) for OSVs larger than 6,000 gross tons at Chapter L of Title 46 of the Code of Federal Regulations (“CFR”).  See THE OSV REGS COMETH.  That said, however, the EEHL Rule notes that the OSV interim rule includes an inconsistent requirement (regarding USCG-approved certification of certain electrical equipment), and thus in this regard will be amended before finalization so as to be uniform with the EEHL Rule.

In brass-tack terms, the EEHL Rule enacts only nine new regulatory sections, with the real “meat” of the regulations appearing solely at 46 CFR §111.108-3, which provides the technical/industry standards applicable under the new rules.  The EEHL Rule expressly recognizes that foreign-flagged MODUs/vessels/facilities – which previously have been bound only by the regulations of their flag states vis-à-vis electrical equipment – will bear the brunt of the cost burden under the new regulations, as these vessels will now be required to have their systems certified by USCG-approved laboratories.  U.S.-flagged MODUs/vessels/facilities, on the other hand, will effectively have no cost burden, as their systems will be subject to the most up-to-date standards as a result of domestic industry practice.  In this regard, the USCG – echoing their “One Shelf, One Standard” mantra – notes the intent of the EEHL Rule to provide a unified standard on the OCS:

For electrical equipment in hazardous locations, we believe this rule is necessary to ensure that all vessels engaged in OCS activities meet the same, OCS-specific safety standards. In this final rule, therefore, we require that new foreign MODUs, floating OCS facilities and vessels meet the same standards for explosion protection in hazardous areas as their U.S. counterparts before operating on the OCS.

This comment is a jumping off point for perhaps the most interesting, and more broadly notable, aspect of the EEHL Rule – namely, the USCG’s commentary on how it views the scope of its regulatory authority in the face of similar/overlapping regulations promulgated by the Bureau of Safety and Environmental Enforcement (“BSEE”).  At a high level, the USCG and BSEE share regulatory authority over electrical equipment on MODUs under  the June 4, 2014 Memorandum of Agreement (OCS-MOA8) – albeit with the USCG’s sphere related to installations other than those on the drill floor, which is BSEE’s bailiwick.  Additionally, given the regulatory overlap of the terms “unit” and “facility” which define the jurisdiction of the USCG and BSEE, respectively, in scenarios where OSVs that may be engaged in downhole or vessel-to-rig operations in which equipment from a support vessel/USCG “unit” may be attached to a BSEE “facility” and thus part of that “facility” – BSEE’s electrical installation regulations may arguably apply to such vessels in certain circumstances.

With this backdrop of expressly and implicitly shared authority, the USCG states in the EEHL Rule as follows:

BSEE and Coast Guard have a shared responsibility for safety on the OCS. In general, the Coast Guard is responsible for the vessel or facility and all of its supporting systems while BSEE is responsible for systems related to the drilling  and production of resources. Classification of hazardous locations and design of electrical systems is a vessel-wide or facility-wide task and the Coast Guard maintains a holistic view of the vessel or facility. The Coast Guard, in this rule, provides an expanded list of standards that are applicable to systems under the Coast Guard’s jurisdiction as explained in BSEE–USCG MOA OCS–8. The electrical safety standards contained in BSEE’s OCS regulations, 30 CFR part 250, are acceptable to the Coast Guard. Frequently, drilling and production components will be installed on vessels or facilities on a temporary or semitemporary basis. In general, BSEE oversees these systems and if they find them acceptable, their installation is acceptable to the Coast Guard.

This comment presents a nuanced gloss on the USCG’s “One Shelf, One Standard” approach that arguably undercuts the very foundation of that approach.  In effect, the EEHL Rule provides USCG-authorized regulations for certain aspects of certain equipment on MODUs/non-OSV vessels/facilities, but also acknowledges a second, penumbral set of BSEE regulations that may also possibly apply.  This implicit recognition of a dual – not singular – regulatory authority becomes even more problematic in light of BSEE’s recent rulemaking regarding “Best Available Safety Technology” (“BAST”).  As previously discussed here, BSEE’s new BAST regulation (30 C.F.R. §250.107, which is awaiting Final Rule status) will require (if adopted as drafted) that “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 . . . [with] BSEE [to] specify what is economically feasible BAST.”

Thus, given that BSEE has claimed regulatory jurisdiction over all OCS contractors (including vessels), and that the USCG has expressly recognized that any system acceptable to BSEE and governed by the EEHL Rule will be acceptable to the USCG, there is arguably not “One Standard” governing these electrical systems on the OCS.  The continued tension evident in the EEHL Rule between the USCG and BSEE’s shared regulatory authority on the OCS illustrates that the often conflicting shared roles of the USCG and BSEE serve as a fundamental impediment to the USCG’s “One Shelf, One Standard” goal.