April 01, 2011

Clock is Ticking on Compliance with New Offshore Regulations

Posted on April 1, 2011 by Eva Fromm O”Brien

Thirteen months. Seems like a long time, right? In many cases, thirteen months is enough time to buy or sell a major business unit, or perhaps even litigate a minor dispute to trial. In this light, it’s easy to think at first glance that thirteen months should be plenty of time to implement the Bureau of Ocean Energy Management, Regulation and Enforcement’s (“BOEMRE”) six-page regulation requiring offshore operators to adopt a Safety and Environmental Management System (“SEMS”) by November 15, 2011. 75 Fed. Reg 63619 (Oct. 15, 2010). Unfortunately, companies who delay preparations to implement 30 C.F.R. Part 250 Subpart S are in for an ugly surprise particularly given that there are now just eight months remaining in the race to compliance. The challenge is amplified because the new regulation adopts the American Petroleum Institute’s Recommended Practice 75 (“RP 75”) in its entirety, converting the formerly voluntary practices into required elements of the regulation. 30 C.F.R. § 250.1902(c).

In my experience, companies tackling the job of creating a SEMS program that is compliant with the new federal regulations have encountered a number of challenges. Although at least sixty percent of operators already have a SEMS program that incorporates many of the elements of RP 75, converting a voluntary program intended to assist companies with internally identifying and resolving weaknesses in environmental, health and safety performance into a full-scale regulatory program complete with public disclosure is a daunting prospect. As an initial matter, the sheer number of potentially-applicable elements is astounding—by my count the regulation imposes well over 150 separate requirements. In order to thoroughly address all applicable requirements, it is likely that many business units or departments will be involved in creating the SEMS plan. While the Health, Safety and Environmental divisions will be inexorably intertwined in the effort, departments that manage contractor relationships and training should also be involved. As with all endeavors that involve multiple personalities and levels of management, coordinating such a large group of people is bound to be taxing. In addition, creating or modifying training programs and rolling those out to employees will be time-consuming. When viewed as a whole, the thirteen-month period to achieve compliance is no walk in the park—for many companies it will be a sprint to the finish.

Although complying with the now-required API practices is a daunting task in and of itself, the regulations, though short, contain significant requirements in addition to RP 75. Most notably, the new regulations require companies to audit themselves and disclose the results of the audit to BOEMRE. The purpose of the audit is to identify areas in which safety and environmental performance need improvement. Under Subpart S, an audit must be conducted by an independent third-party or “designated and qualified” internal personnel. Id. § 250.1920. Before the audit is even conducted, the operator must submit an audit plan to BOEMRE thirty days prior to the audit. The audit plan will identify the facilities to be audited (the audit must cover at least 15% of the operator’s facilities), and the persons conducting the audit. BOEMRE reserves the right to strike a selected independent third party or designated and qualified personnel if they do not meet BOEMRE’s criteria; specifically, the auditor must have an appropriate background, education, technical capabilities, previous experience with BOEMRE requirements, and no conflicts of interest. BOEMRE may also modify the list of facilities selected for auditing. The first audit must be conducted within the first two years of adopting the operator’s SEMS plan; after that, the company may space its audits out by up to three years. The resulting audit report must disclose any deficiencies in the SEMS uncovered by the audit, and must be submitted to BOEMRE within thirty days of the audit’s completion. Along with the audit report, the operator must submit a plan that addresses any deficiencies identified by the audit report, and identifies the individual employee responsible for correcting each deficiency. Given the tough requirements imposed by BOEMRE’s auditing requirements, operators that are already comfortable with their SEMS plan should consider conducting a trial audit prior to the regulation’s effective date, as all audits conducted after November 15, 2011 must follow BOEMRE’s pre-approval and disclosure requirements. The audit should identify any gaps in compliance and provide a roadmap for areas needing corrective action before the November 15th deadline. 

Tags: Water


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