CHAPTER 3 FEDERAL OFFSHORE REGULATORY ENFORCEMENT BASICS

• Jurisdiction: United States

Federal Offshore Regulatory Enforcement
(Jan 2016)
CHAPTER 3
FEDERAL OFFSHORE REGULATORY ENFORCEMENT BASICS

Jonathan A. Hunter
Shareholder
Liskow & Lewis
New Orleans, LA

[Page 3-1]

JONATHAN A. HUNTER is a shareholder in the New Orleans office of Liskow & Lewis, where he devotes his practice full time to representing oil and gas companies. As leader of Liskow & Lewis's federal oil and gas practice, he advises upstream oil and gas companies on matters governed by the Outer Continental Shelf Lands Act, the Mineral Leasing Act, the False Claims Act, the Federal Oil and Gas Royalty Management Act, the Foreign Investment and National Security Act, the National Environmental Policy Act, and numerous other environmental statutes and related regulations. He has successfully represented federal oil and gas lessees in dozens of administrative and judicial proceedings, including numerous regulatory enforcement and penalty proceedings, as well as disputes involving multi-billion dollar royalty, lease cancelation, and fraud claims. A graduate of Yale College and the Louisiana State University Law Center, he has written and lectured extensively on oil and gas subjects. He is the 2015-2016 Vice President of the Rocky Mountain Mineral Law Foundation. He helped create and has co-chaired the Foundation's Short Course on Federal Offshore Oil & Gas Leasing and Development, and has taught Federal Offshore Oil and Gas Law and basic Oil and Gas Law at Tulane Law School. He has been listed in both Chambers USA America's Leading Lawyers for Business and The Best Lawyers in America for many years.

This paper addresses the principal statutes and regulations that authorize federal agencies to bring enforcement actions against federal offshore oil and gas lessees and other parties engaged in conduct relating to such leases. Only one of these statutes - the Outer Continental Shelf Lands Act - applies specifically and solely to federal offshore leases and related operations. The remaining statutes - ranging from the Oil Pollution Act of 1990 to the Marine Mammal Protection Act to Title 18 of the United States Code - apply not only to federal offshore leases, but also to a wide variety of other contexts. Importantly, a single event - a spill, a crane incident and related casualty, a permit violation, a dropped object, an unintended release of gas, a routine maintenance deficiency, a clerical reporting error - can potentially trigger multiple types of civil and criminal liability. Although not necessarily true historically, offshore operators today commonly have detailed emergency response plans and procedures in place; however, many such plans and procedures contain very little discussion of the immediate legal consequences of an incident. The best emergency response plans take into consideration the following statutes and other important state laws.

STATUTE NO. 1: THE OUTER CONTINENTAL SHELF LANDS ACT

A. General

The Outer Continental Shelf Lands Act ("OCSLA") is the statutory authority for the federal offshore leasing program.¹ In the OCSLA, Congress delegated the authority to administer the offshore leasing program to the Secretary of the Department of the Interior.² In turn, the Secretary of Interior has delegated her authority to three subagencies: the Bureau of Ocean Energy Management ("BOEM"), the Bureau of Safety and Environmental Enforcement ("BSEE"), and the Office of Natural Resources Revenue ("ONRR").³

Although the OCSLA vests Interior with primary authority over offshore oil and gas operations in federal waters, the OCSLA is only one of more than twenty-five statutes that can

[Page 3-2]

apply to such operations.⁴ The OCSLA itself expressly recognizes the authority of other agencies over offshore oil and gas lessees, including (among others) the Coast Guard, the Army, the Federal Trade Commission, the Environmental Protection Agency, and the Department of Energy. The OCSLA directs Interior to "cooperate with the relevant departments and agencies of the Federal Government and of the affected States" with respect to the enforcement of safety, environmental, and conservation laws.⁵

B. Legislative History

Congress enacted the OCSLA, along with the Submerged Lands Act ("SLA")⁶ in 1953, in direct response to the United States Supreme Court's rulings in the "Tidelands" cases. After certain coastal states (especially Louisiana and Texas) granted oil and gas leases offshore of their coastlines, the United States filed suit against the coastal states asserting trespass. The Supreme Court held in favor of the federal government, finding that that the United States, rather than the coastal states, had "paramount rights" to the seabed and minerals in all areas seaward of the coastline of each state.⁷ In the SLA, Congress gave back (at least in part) what the Supreme Court had taken away, by vesting the coastal states with title to mineral resources as to areas within three miles of the coastline.⁸ In the OCSLA, Congress established the offshore federal leasing program for areas seaward of state waters. The United States claims the right to grant leases pursuant to the OCSLA within the 200 mile "Exclusive Economic Zone" off of its coastline (and, in some cases, farther).⁹

Congress significantly amended the OCSLA in 1978 to address two concerns that had become prominent nationally: environmental protection and the need for greater energy

[Page 3-3]

independence. These competing concerns had their sources in (inter alia) the Santa Barbara blowout and resulting oil spill in 1969 and the Arab oil embargo of 1973. On the environmental side, the 1978 OCSLA amendments made the OCSLA function in sync with the National Environmental Policy Act ("NEPA") and the Coastal Zone Management Act ("CZMA"), stressed the importance of well-control techniques to minimize the likelihood blowouts and environmental damage, and generally gave the coastal zones a stronger voice in connection with offshore leasing. At the same time, the 1978 amendments sought to increase offshore federal leasing and production through new incentives and efficiencies. While there have been select amendments to the OCSLA since 1978, there has not been a significant revision or restructuring of the Act since 1978.

For present purposes, one of the most significant post-1978 amendments to the OCSLA was the amendment of the civil penalty provisions pursuant to the Oil Pollution Act of 1990 ("OPA 90"), enacted in direct response to the Exxon Valdez spill.¹⁰

C. Investigative And Enforcement Authority

1. Interior, The Coast Guard, And The Army

The OCSLA directs Interior, the Coast Guard and the Army to enforce safety and environmental regulations,¹¹ and it mandates that lessees and permit-holders "allow prompt access" for inspections of sites and records.¹² BSEE and the Coast Guard routinely conduct rigorous inspections of offshore facilities; some inspections are scheduled, while others are unannounced. The OCSLA mandates a "scheduled onsite inspection, at least once a year, of each facility on the outer Continental Shelf which is subject to any environmental or safety regulation promulgated pursuant to [the OCSLA], which inspection shall include all safety equipment designed to prevent or ameliorate blowouts, fires, spillages, or other major accidents."¹³

[Page 3-4]

In the event of a "major fire," "major oil spillage," "death," or "serious injury" occurring as a result of operations on an offshore federal lease, the OCSLA mandates that the Coast Guard and/or Interior conduct an investigation.¹⁴ BSEE (like the former MMS) routinely conducts formal investigations following any sort of evacuation, loss of well control, incidents involving crane operations, and other matters, and issues a public report at the conclusion of the investigation.¹⁵

A 2009 Memorandum of Agreement between the Coast Guard and the former MMS states that "the two agencies will coordinate with each other to ensure that at a minimum, each fatality, serious injury, major fire, and oil spillage of 200 barrels or more is investigated and documented."¹⁶ Both agencies agree that each may send inspectors/investigators to conduct an initial assessment, and that the resulting information will be shared. Subsequent to the initial investigation, three possibilities arise: (1) one agency will be designated to document the investigation and will consult with the other agency; (2) a joint investigation will be conducted (with one agency taking the lead); or (3) each agency will conduct its own independent investigation and publish its own report.¹⁷ An appendix to this 2009 MOA designates the lead agency for various offshore incidents.¹⁸

In addition, separately from the OCSLA, the Coast Guard's authority to conduct marine casualty investigations can often come into play following an offshore casualty, because so many vehicles, rigs, and types of equipment used in offshore oil and gas exploration and production

[Page 3-5]

activities qualify as "vessels" that are subject to Coast Guard jurisdiction.¹⁹ The Coast Guard investigates marine casualties under the authority of 46 U.S.C. §§ 6010 -6308. A marine casualty is characterized as, among other factors, (1) the death of an individual, (2) a material loss of property, or (3) significant harm to the environment.²⁰ The Commandant determines whether the investigation will rise to the level of a Marine Board Investigation.²¹

D. OCSLA Enforcement Tools

[Page 3-6]

In 30 C.F.R. Subchapter B, Interior has promulgated hundreds of regulations governing offshore mineral exploration, development, and production, including regulations (inter alia): requiring that operations be conducted safely and using best available and safest technology (30 C.F.R. § 250.107 ); requiring compliance with approved Exploration and Development Plans (30 C.F.R. § 250.280 ); requiring the lessee to prevent discharge of pollutants into offshore waters (30 C.F.R. §...