United States: Little-Noticed Provision In BSEE's Well Control Rule May Have A Major Impact On Risk Reduction

Last Updated: October 7 2016
Article by Michael D. Farber, Jonathan D. Simon and R. Scott Nuzum

In recent years, the U.S. Department of the Interior, acting through the Bureau of Safety and Environmental Enforcement (BSEE), has undertaken significant reforms in the oversight of offshore oil and gas operations.  A cornerstone of those reforms is the final "Blowout Preventer Systems and Well Control Rule" (Well Control Rule), which BSEE published in the Federal Register on April 29, 2016.  While much has been made of the potential impacts of the Well Control Rule's drilling margin requirements (among other provisions), another provision of  the Rule—section 250.107(a)(3)—has not received much attention, but may create challenges for industry by mandating that companies conducting offshore operations affirmatively address and mitigate risks. 

Section 250.107(a)(3) states that "[y]ou must protect health, safety, property and the environment by utilizing recognized engineering practices that reduce risks to the lowest level practicable when conducting design, fabrication, installation, operation, inspection, repair, and maintenance activities."  30 CFR 250.107(a)(3).  Notably, section 250.107(a)(3) applies to all offshore operations and is much broader in scope than most of the other provisions contained in the Well Control Rule.

While many companies have long worked diligently to assess and mitigate risks associated with offshore oil and gas operations, until now there has been no affirmatively-stated legal obligation to do so.  Accordingly, section 250.107(a)(3) may create new legal risks that companies should manage and plan for prior to engaging in offshore operations.  This alert provides a brief overview of the impetus for section 250.107(a)(3) and frames how the provision fits within the federal government's efforts to hold offshore operators accountable for incidents that occur on the outer Continental Shelf (OCS).  This alert also discusses how BSEE's new section 250.107(a)(3) might impact offshore operations and offers some observations on how industry might address those risks.

The concept of lowest practicable risk is not a new one - it is central to the United Kingdom's "safety case" approach to oversight of offshore oil and gas operations.  The formulation of this performance-based standard in the UK is slightly different - as low as reasonably practicable (ALARP).  

The preamble to the Well Control Rule does not offer much to explain the impetus behind the addition of section 250.107(a)(3); but it is consistent with BSEE's move to what it calls a "hybrid" regulatory approach, which has been described as a combination of performance-based and prescriptive regulatory standards.  

This shift in oversight policy was recommended in a Report to the President, issued in 2011 by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (Presidential Commission), which stated:

Government agencies that regulate offshore activity should reorient their regulatory approaches to integrate more sophisticated risk assessment and risk management practices into their oversight of energy developers operating offshore. They should shift their focus from prescriptive regulations covering only the operator to a foundation of augmented prescriptive regulations, including those relating to well design and integrity, supplemented by a proactive, risk-based performance approach that is specific to individual facilities, operations, and environments. This would be similar to the "safety case" approach that is used in the North Sea, which requires the operator and drilling rig owners to assess the risks associated with a specific operation, develop a coordinated plan to manage those risks, integrate all involved contractors in a safety management system, and take responsibility for developing and managing the risk management process. 

BSEE Director Brian Salerno, in a November 2015 article in FuelFix, described how BSEE's oversight approach was shifting as recommended by the Presidential Commission by stating that "the Well Control Rule is a critical part of BSEE's overall efforts to improve and modernize existing outdated regulations. . . . We must continue to be vigilant to ensure that offshore operators are appropriately assessing, mitigating, and eliminating risks."

Other federal agencies have similarly flagged risk reduction as a central goal of effective oversight.  In an April 2016 report, the Chemical Safety Board (CSB) issued a number of recommendations focused on enhancing federal offshore oversight to achieve "a more robust risk management regulatory framework that embodies key regulatory attributes found in other global offshore regions, including but not limited to systematic analysis and documentation by the responsible companies that risks have been reduced to ALARP and barriers are effective to manage major accident hazards."  Though the CSB report did not appear to fully consider section 250.107(a)(3), the CSB's recommendations indicate that there is support across federal agencies for requiring companies to proactively mitigate risks.

Another initiative that shows the federal government's focus on offshore operational risks is the Department of Justice (DOJ)-led initiative on worker endangerment.  In a series of speeches and memoranda, the DOJ signaled that it would pursue companies that ignored risks and endangered the lives of workers (including offshore workers).  One of the first prosecutions announced after the launch of this initiative was a criminal action against multiple parties following a November 2012 explosion on a Black Elk-operated facility that resulted in three fatalities.

Suggestions for Complying with BSEE's New Mandate

1.  Promptly Address Significant Safety and Environmental Risks

Section 250.107(a)(3) may create additional legal risks for offshore companies and executives that fail to take action to address and mitigate significant safety and environmental risks.  Once such risks are identified and documented, a company will be on notice that unsafe and possibly illegal conditions may exist.  A failure to address significant, documented operational risk stands in direct contrast to the affirmatively-stated obligation to reduce risks to the lowest level practicable.  If significant operational risks are ignored and a serious incident occurs, the company and any company officials who did not act to address those risks may be exposed to civil and perhaps even criminal liability.

Given this potential legal exposure, companies should empower their workers to begin efforts to address significant operational risks promptly after such risks have been identified.

2.  Evaluate the Effectiveness of Your SEMS Program

The new emphasis on driving down operational risks may increase the legal risks resulting from an ineffective Safety and Environmental Systems Management (SEMS) plan.  Previously, during the first few years following the enactment of the SEMS Rule, legal exposure was largely limited to situations in which a company was completely ignoring its obligations to maintain a SEMS program.

In a recent article, BSEE's SEMS Section Chief writes that the link between SEMS and risk reduction is best explained by noting that "[SEMS] [e]ffectiveness will also grow when workers are provided a say in how to best mitigate the recognized hazards in the context of their operations, an ability to measure the success of risk management via performance indicators, and a willingness to continually learn from past experiences so that risks may be eliminated or mitigated during future evolutions."

Now that companies have a legal obligation to both maintain an effective SEMS plan and to reduce risk to the lowest level practicable, a SEMS plan that ignores or does not effectively assess and mitigate operational risks may have more severe legal consequences.  And if a serious incident was to occur, BSEE and potentially other federal enforcement agencies may investigate whether the Company effectively reduced risk through implementation of a SEMS plan and whether an ineffective SEMS plan was a contributing cause of the incident.

Given this possibility, companies are advised to evaluate the overall effectiveness of their SEMS plans in assessing and reducing risks.  If possible, company procedures should allow workers to have direct input on how to promptly mitigate recognized risks and hazards.

3.  Carefully Analyze the Safety and Compliance Record of Contractors

Companies should be vigilant in evaluating the safety and compliance record of their contractors and should take action to address risks created by unsafe or non-compliant activities.  BSEE and other government agencies are likely to look at selection, management, and oversight of contractors as part of their overall evaluation of whether a company has reduced risk to the lowest level practicable.

4.  Ensure Risk Mitigation Efforts Are Documented

Last but not least, if the company acts to mitigate operational risks, it should clearly document all such efforts to develop a record of risk reduction practices.  Ideally, documents associated with the company's SEMS program would reflect how the risks were identified, the steps taken to eliminate or mitigate the risks, and any precautions taken to help ensure that similar types of operational risks do not reoccur in the future.

There may be additional steps companies can take to achieve the type of risk reduction called for in Section 250.107(a), depending on the nature and extent of the operational risks identified.  A spot-check of the company's SEMS program and how risks are assessed and mitigated might also help to identify potential legal exposure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions