CHAPTER 7 INCS, CIVIL PENALTIES, AND THE APPEALS PROCESS

• Jurisdiction: United States

Federal Offshore Regulatory Enforcement
(Jan 2016)
CHAPTER 7
INCS, CIVIL PENALTIES, AND THE APPEALS PROCESS

Stephen W. Wiegand ¹
Shareholder
Liskow & Lewis
New Orleans, LA

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STEPHEN W. WIEGAND is a shareholder in the environmental section of Liskow & Lewis. He handles all types of environmental compliance-related issues arising under state and Federal law. He advises clients on a wide range of complex regulatory issues impacting onshore and offshore oil and gas operations, including compliance with operational and safety requirements and the applicability of environmental statutes, including the Outer Continental Shelf Lands Act, Clean Water Act, Oil Pollution Act, National Environmental Policy Act, and the Endangered Species Act, to the various stages of the mineral development process. He has handled numerous administrative appeals before the Interior Board of Land Appeals and has represented clients in administrative matters before the Bureau of Safety and Environmental Enforcement, the Environmental Protection Agency, and other administrative agencies. Prior to joining Liskow & Lewis, Mr. Wiegand served as a law clerk to the Honorable Ivan L.R. Lemelle, United States District Court for the Eastern District of Louisiana. Mr. Wiegand attended Loyola College of Law in New Orleans where he served as Editor-in-Chief of the Loyola Law Review.

I. Introduction

This paper will analyze issues related to the Bureau of Safety and Environmental Enforcement's ("BSEE") enforcement of safety and environmental regulatory requirements. Specifically, this paper will discuss the statutory and regulatory authority for BSEE's issuance of Incidents of Noncompliance ("INCs") and civil penalties. In addition, this paper will include a discussion of the BSEE civil penalty matrix, recent civil penalty statistics, and the common regulatory violations that lead to civil penalties. Finally, this paper will explain the procedure for appealing INCs and civil penalties to the Interior Board of Land Appeals ("IBLA"). Throughout, this paper will highlight recent legal issues that the IBLA has addressed in the safety and environmental enforcement context.

II. Legal Basis for Enforcement of Environmental and Safety Requirements

A. Overview

The Outer Continental Shelf Lands Act ("OCSLA") authorizes the Department of the Interior to enforce safety and environmental regulations promulgated under the Act.² In addition, OCSLA requires that Interior conduct "periodic onsite inspections without advance notice to the operator...to assure compliance with such environmental or safety regulations."³ Prior to 2010, OCSLA enforcement authority was delegated to the Minerals Management Service ("MMS"). In the wake of the Deepwater Horizon incident, the MMS was renamed the Bureau of Ocean Energy Management, Regulation and Enforcement ("BOEMRE"). On May 19, 2010, the Secretary of the Department of the Interior replaced BOEMRE with three new organizations.⁴ BSEE exercises jurisdiction over safety and environmental enforcement. BSEE enforcement is the primary focus of this paper. The Bureau of Ocean Energy Management ("BOEM") exercises general management functions involving resource evaluation, planning, and leasing. In particular, BOEM has jurisdiction over lease sales and leasing activities, economic analysis, and National Environmental Policy Act ("NEPA") analysis.⁵ Finally, the Office of Natural Resources Revenue ("ONRR") handles royalty and revenue functions including royalty and revenue collection, distribution, and auditing and compliance.

B. INCs

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BSEE's regulations do not specifically address the issuance of INCs. The INC process is explained largely in BSEE guidance materials including the Potential Incident of Noncompliance (PINC) List.⁶ The PINC List includes a list of coded violations arranged in categories, including general, pollution, drilling operations, well completion, well workover, abandonment of wells, production operations, pipelines, production measurement and site security, hydrogen sulfide, crane lifting, and electrical systems.

Each entry on the PINC list includes a unique PINC number, a PINC statement which sets forth a description of the requirement, and the regulatory authority for the requirement. Each entry also includes an inspection procedure that applies to the particular requirement, an explanation of the number of INCs that should be issued for identified violations(s), and a description of the possible enforcement action to be taken if a violation is determined.⁷ In general, a "warning" ("W") INC is issued when the situation poses no immediate danger to personnel or equipment. A "component shut-in" ("C") INC is issued for a piece of equipment or location when it is determined to be part of an unsafe situation or it poses an immediate danger to personnel or other equipment and it can be shut in without affecting the overall safety of the facility. Finally, a "facility shut-in" ("S") INC is issued when the unsafe situation poses an immediate danger to the entire facility or personnel and the specific piece of equipment or location cannot be shut in without affecting the overall safety of the facility.⁸ The PINC List provides that in after-the-fact situations where no correction is possible, a warning INC will normally be issued since a shut-in would serve no useful purpose. However, the guidance also notes that an after-the-fact INC that may result in a civil penalty review recommendation should be issued with the appropriate shut-in enforcement action.⁹

An example of an entry on the PINC list is as follows:

G-110 DOES THE LESSEE PERFORM ALL OPERATIONS IN A SAFE AND WORKMANLIKE MANNER AND PROVIDE FOR THE PRESERVATION AND CONSERVATION OF PROPERTY AND THE ENVIRONMENT?

Authority: 30 CFR 250.107(a) Enforcement Action: W/C/S

30 CFR 250.401(e)

INSPECTION PROCEDURE:

Observe all operations for unsafe and/or unworkmanlike practices, procedures, or operations.

IF NONCOMPLIANCE EXISTS:

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Issue a warning (W) INC when the situation poses no immediate danger to personnel or equipment.

Issue a component shut-in (C) INC for a specific piece of equipment or location when it is found to be part of an unsafe situation if it poses an immediate danger to personnel or other equipment and it can be shut-in without affecting the overall safety of the facility.

Issue a facility shut-in (S) INC when the unsafe situation poses an immediate danger to the entire facility or personnel and the specific piece of equipment or location cannot be shut-in without affecting the overall safety of the facility.

INSPECTION COUNT/INC COUNT:

Enter one item checked/issue one INC per facility, per enforcement action. ¹⁰

Upon determination that a violation has occurred, BSEE issues the appropriate INC in accordance with the guidelines set forth in the PINC List. An INC is typically issued on BSEE Form 1832 "Notification of Incident of Noncompliance." The information included on Form 1832 includes the PINC number for the particular violation, the enforcement action taken (warning, component shut-in, or facility shut-in), the regulatory authority, and a narrative description of the violation. The operator is required to sign a copy of the form, enter the date the violation was corrected, and return the form within 14 days.¹¹ In addition, the form provides that all component and facility shut-in INCs must be corrected before operations can resume.

The following chart summarizes the INC statistics from 2010-2013:¹²

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2010-2013 INC Statistics

C. Civil Penalties

OCSLA sets forth the standard for issuing civil penalties for violations of environmental and safety requirements promulgated thereunder. Specifically, 43 U.S.C. § 1350 provides:

(b) Civil Penalties; hearing

(1) Except as provided in paragraph (2), if any person fails to comply with any provision of this Act, or any term of a lease, license, or permit issued pursuant to this Act, or any regulation or order issued under this Act, after notice of such failure and expiration of any reasonable period allowed for corrective action, such person shall be liable for a civil penalty of not more than $20,000 for each day of the continuance of such failure. The Secretary may assess, collect, and compromise any such penalty. No penalty shall be assessed until the person charged with a violation has been given an opportunity for a hearing. The Secretary shall, by regulation at least every 3 years, adjust the penalty specified in this paragraph to reflect any increases in the Consumer Price Index (all items, United States city average) as prepared by the Department of Labor.

(2) If a failure described in paragraph (1) constitutes or constituted a threat of serious, irreparable, or immediate harm or damage to life (including fish and other aquatic life), property, any mineral deposit, or the marine, coastal, or human environment, a civil penalty may be assessed without regard to the requirement of expiration of a period allowed for corrective action. ¹³

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Thus, the general rule is that BSEE may only issue a civil penalty for a regulatory violation after notice of the violation and expiration of a reasonable time period for correction. However, in the case of violations that constitute a threat of serious, irreparable, or immediate harm to human life, property, or the environment, BSEE may issue a civil penalty without a period of corrective action.

30 C.F.R. § 250.1404 lists the types of violations that BSEE will review for civil penalties, which include:

(a) Violations that you do not correct within the period BSEE grants;

(b) Violations that BSEE determines may constitute, or constituted, a threat of serious, irreparable, or immediate harm or damage to life (including fish and other aquatic life), property, any mineral deposit, or the marine, coastal, or human environment;

(c) Violations that cause serious,

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