|January 10, 2014|
Previously published on January 7, 2014
Last August, the Bureau of Safety and Environmental Enforcement (“BSEE”) proposed the first complete updating and restructuring of 30 CFR 250 Subpart H—Oil and Gas Production Safety Systems—since the regulations were promulgated in 1988.
According to BSEE, these new rules are necessitated by industry’s shift in focus to ultra deepwater production which in turn has required technological advancements in safety equipment and the reliance on complex safety equipment located on the seafloor. BSEE believes its current regulations have not kept pace with offshore safety technologies; particularly with the development of subsea trees and other technologies such as foam firefighting systems, electronic-based emergency shutdown systems (“ESD”), subsea pumping, waterflooding, gaslift, and new alloys and equipment for high-temperature and high-pressure wells
To address newer and emerging safety technologies, BSEE also proposes to revise Subpart A’s general requirement for the use of best available and safest technology (“BAST”) (proposed 30 C.F.R. §250.107 (c) & (d)). According to BSEE, its proposed changes merely follow more closely the requirements of the Outer Continental Shelf Lands Act (“the OCSLA”). Among other things, the proposed rules remove the “safe-harbor under which compliance with BSEE standards is presumed to be BAST, and as a result there will be new regulatory focus on what constitutes “economic feasibility” test for BAST.
The Loss of BAST’s Safe-Harbor Provision
The current regulation imposing BAST states:
§250.107 What must I do to protect health, safety, property, and the environment?
(c) You must use the best available and safest technology (BAST) whenever practical on all exploration, development, and production operations. In general, we consider your compliance with BSEE regulations to be the use of BAST.
(d) The Director may require additional measures to ensure the use of BAST:
(1) To avoid the failure of equipment that would have a significant effect on safety, health, or the environment;
(2) If it is economically feasible; and
(3) If the benefits outweigh the costs.
BSEE has proposed deleting subsection (d) in its entirety and rewriting subsection (c) to state the following:
(c)(1) Wherever failure of equipment may have a significant effect on safety, health, or the environment, you must use the best available and safest technology (BAST) that BSEE determines to be economically feasible on
(i) All new drilling and production operations; and
(ii) Wherever practicable, on existing operations.
(2) You may request an exception by demonstrating to BSEE that the incremental benefits of using BAST are clearly insufficient to justify the incremental costs of utilizing such technologies.
BSEE proposes to delete from the rules the safe-harbor provision: “[i]n general, we consider your compliance with BSEE regulations to be the use of BAST.” This safe-harbor provided operators with a degree of assurance that meeting BSEE regulatory requirements was enough to comply with BAST. Therefore, the loss of this provision has injected legal uncertainty (i.e., “Am I in compliance?”) into future operations.
Economic Feasibility as the Key to Future BAST Determinations
Although economic feasibility is a requirement for current BAST determinations, the removal of the presumption that compliance with existing BSEE regulations is BAST will make BAST determinations more of a moving target based on what BSEE determines to be economically feasible at any given moment. BSEE has not said how it will determine BAST or what factors its believes are important and controlling in an economic feasibility determination.
Industry Comments on the Proposed Subpart H Rules
Operators submitted numerous comments to BSEE concerning this rulemaking. One of their greatest concerns involves the agency’s sole responsibility for selecting economically feasible BAST. Nowhere in the rulemaking does BSEE explain the criteria and methodology it will follow to accomplish this task. In addition, there is no discussion about whether BSEE will seek out industry expertise when analyzing BAST or even if it will allow industry to have a voice in this process. For example, will an operator and/or equipment manufacturer be able to request a BAST determination, or are they limited to requesting a departure? Like the loss of the safe harbor provision, all of these unknowns have created legal and operational uncertainties that will need to navigated in future OCS developments. Faced with these uncertainties, operators and their counsel must be aware of any new regulatory developments or guidance related to this rulemaking in general and BAST in particular, and be ready to adapt their technology and compliance programs accordingly.