Historically, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) has issued Incidents of Non-Compliance (INC’s) to oil and gas lease holders on the Outer Continental Shelf for a variety of accidents, spills, and other incidents offshore. However, as a result of the events that led to the Deepwater Horizon explosion and the subsequent investigation, BSEE began issuing INC’s to contractors working for the lessees and operators on the OCS.
In Interim Policy Document (IPD) No. 12-07 (effective August 15, 2015), the director of BSEE advised that while the primary focus of BSEE’s enforcement actions will continue to be on lessees and operators, BSEE would also issue INC’s to contractors for serious violations of BSEE regulations. In instances where INC’s are issued to a contractor, INC’s would also be issued to the lessee or operator.
Since the issuance of IPD No. 12-07, BSEE has consistently issued INC’s to contractors and operators alike. Many contractors have cried foul and objected to this new policy. They argue that BSEE has overstepped its bounds and misinterpreted the existing law, and they may have a legitimate argument.
One such contractor, Island Operating Company, Inc., filed suit in the United States District Court for the Western District of Louisiana to challenge BSEE’s interpretation. Island Operating Co, Inc., v. Sally Jewell, Secretary U.S. Dept. of the Interior; et. al., Civil Action No. 16-145. While the District Court may issue a ruling favorable to either Island or the U.S.A., it is virtually guaranteed that the losing party will file an appeal with the United States Fifth Circuit, with an eye towards the U.S. Supreme Court as the final word on this matter.
The facts in this matter are not in dispute. On June 3, 2012, a fire erupted on an offshore oil production platform causing two individuals to jump into the Gulf of Mexico for their own safety. The two individuals were employed by Island; they were the only individuals aboard the platform. The offshore production platform was owned by Apache. The two Island employees were tasked with transferring a highly flammable chemical to a day tank on the platform. To complete the transfer, Island’s crane operator lifted the chemical tank to gravity feed the highly flammable chemical into the platform tank through a hose. Due to the height of the chemical tank, the Island employee on the deck of the platform could not reach its shut off valve. Thus, the only way to stop the flow was for Island’s crane operator to lower the chemical tank. Unfortunately, during the transfer, the crane operator left the crane to get lunch for himself and a co-worker. In the meantime, the receiving tank overflowed and the wind blew the chemical to the nearby pipeline exhaust stack where it was ignited. Separate investigations into the incident by BSEE, Apache, and Island all determined that the two Island employees were the sole cause of the fire.
Within days of the fire, BSEE conducted an onsite investigation and issued an INC to Apache. Several months later, on March 5, 2013, BSEE issued an INC to Island Operating. On March 19, 2013, Island asked BSEE to rescind the INC based on its status as a contractor. On April 17, 2013, BSEE declined to rescind the INC. Island filed an appeal to the Interior Board of Land Appeals on May 2, 2013 which was denied on September 25, 2015. Thereafter, Island filed suit challenging BSEE’s authority to issue the INC’s.
The District Court determined that the case would be tried on the briefs. Island submitted its brief on September 9, 2016; BSEE submitted its opposition brief on October 14, 2016. The briefs are lengthy. They also adopt polar opposite positions. Simply stated, Island argues that BSEE does not have the authority to issue INC’s to contractors under either OCSLA or Part 250 of the Code of Federal Regulations. If Island is correct, then this decision will be a regulatory victory for offshore contractors in the Gulf of Mexico. Island’s argument is founded mainly in the legislative history of the federal laws and the definition of the term “You” as it’s used in the CFR’s. In response, BSEE details why it believes it has the right to issue INC’s to contractors, based in part on its role as the governmental agency burdened with enforcing offshore safety rules. BSEE argues that it only makes sense that with the high percentage of offshore platforms being operated by contractors that BSEE should have some oversight over them. Also, with only Island employees responsible for this accident, it would be unreasonable to INC only Apache and not hold Island accountable for its actions. The District Court has taken this matter under advisement, and its final ruling, which is guaranteed to have a wide range of implications for operations in the Gulf of Mexico, is still pending. We will continue to closely monitor this case and provide an update when a final decision has been issued.