BOEMRE Proposes Additional SEMS Program Requirements

On September 14, 2011, the Department of the Interior's Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) published a Proposed Rule that would revise its regulations requiring Safety and Environmental Management Systems (SEMS) programs for oil, gas, and sulfur operations in the Outer Continental Shelf (OCS). BOEMRE first promulgated the SEMS regulations, located in 30 C.F.R. pt. 250, subpart S, on October 15, 2010. Generally, the Proposed Rule would establish additional requirements for SEMS programs, requires third-party auditing of the programs, and further revise subpart S to conform to new SEMS program requirements. The deadline for comments on the Proposed Rule is November 14, 2011.

New Definitions – 30 C.F.R. § 250.1903

The Proposed Rule would introduce two new definitions related to the Proposed Rule's new requirements:

• Management means a team of individuals who have the day-to-day responsibilities of overseeing operations conducted on a facility or providing instruction to operational personnel, including but not limited to employees and contractors working on a facility or in the company's onshore offices.
• Mobile offshore drilling unit or MODU means a vessel capable of engaging in drilling well workover, well completion and well servicing operations for exploring or exploiting subsea oil, gas or other mineral resources.

New Requirements

The Proposed Rule would introduces four new elements that operators must include in their SEMS programs. Generally, the new elements (1) authorize employees to stop any BOEMRE-regulated activity that may cause imminent danger or harm, (2) require the identification of the person with the ultimate authority for safety and decision making at a facility, (3) require an action plan showing the involvement of employees in the development of the SEMS program, and (4) require guidelines for reporting unsafe work conditions.

Stop Work Authority (30 C.F.R. § 250.1930). The Proposed Rule would requires new Stop Work Authority (SWA) procedures that make responsible and authorize any and all personnel (including contractors) who witness an activity creating an "imminent risk or danger to the health or safety of an individual, the public, or to the environment" to stop the activity. An activity creates an "imminent risk or danger" if it could reasonably be expected to cause "(1) Death or serious physical harm immediately or before the risk or danger can be eliminated through enforcement procedures, or (2) Significant, imminent harm to land, air, aquatic, marine or subsea environments or resources." The person with ultimate work authority must determine that the imminent risk or danger no longer exists before an activity can be resumed. SWA authority and expectations must be included in all job safety analysis drills, and all new employees and contractors must receive SWA training. Also, all safety meetings must include a review of the SWA policy.

Ultimate Work Authority (30 C.F.R. § 250.1931). The Proposed Rule would requires SEMS programs to identify the person with the ultimate work authority (UWA) for a facility or MODU. The person with the UWA is "the person located on the facility or MODU with the final responsibility for making decisions relating to activity and operations on the facility." In the event of an emergency creating an imminent risk or danger, "the person with the UWA is authorized to pursue the most effective action necessary in that person's judgment for mitigating and abating the conditions or practices causing an emergency." The SEMS program must ensure that all personnel know who is in charge of each specific activity, and also who has UWA for the facility. The operator is responsible for ensuring the implementation of the SEMS program.

Employee Participation (30 C.F.R. § 250.1932). The Proposed Rule would requires management to consult with employees on the development and implementation of a company's SEMS program and further requires management to develop an action plan for employee participation in SEMS program development. Each employee and contractor must have access to the SEMS program. Management must provide BOEMRE a copy of the employee participation program and make the participation program available during audits.

Reporting Unsafe Work Conditions (30 C.F.R. § 250.1933). The Proposed Rule would requires the SEMS program to include procedures for personnel to report unsafe work conditions. The procedures must cover all personnel and contractors on a facility. A report of unsafe work conditions can be made in writing or by telephone to a BOEMRE hotline and must contain sufficient credible information for BOEMRE to determine that legal or regulatory violations have occurred or that an unsafe working conditions exist. BOEMRE may not reveal the identity of the person making a report without that person's consent, except to BOEMRE employees who need the information. Upon reviewing a report, BOEMRE may notify the operator of any deficiency or hazard or commence enforcement measures. Operators must post a notice explaining personnel rights and remedies, train employees on the unsafe work conditions policy, and provide each employee with the BOEMRE hotline number.

Revised Requirements

The Proposed Rule would revises the current regulation's job safety analysis requirement, and also revises training and reporting requirements based on the newly introduced program elements.

Job Safety Analysis (30 C.F.R. § 250.1911). The current SEMS regulations require an SEMS program to include hazard analyses, including a job safety analysis (JSA), which "is a technique used to identify risks to personnel associated with the activity and the appropriate mitigation to reduce these risks." JSAs must be developed and implemented for each BOEMRE-regulated activity that is identified in the SEMS program. Under the Proposed Rule, the JSA must include all personnel "involved with or affected by" the activity. In addition to the JSA requirements in the current regulations, the Proposed Rule would require that both the immediate supervisor of the crew conducting the activity and the "person onsite designated by the operator as the person in charge of the facility" must approve and sign the JSA. All employees and contractors who perform regulated activities "must be trained on recognizing and identifying and hazards, and the development and implementation of [the] JSA."

Training (30 C.F.R. § 250.1915). The Proposed Rule would revises the SEMS program training requirements to incorporate the four new program elements, and also to specify that training "must address the methods of recognizing and identifying hazards."

Auditing Requirements (30 C.F.R. §§ 250.1920, 250.1924). Like the current regulations, the Proposed Rule would require SEMS programs to be audited. The Proposed Rule, however, would eliminates the current regulations' option of having a company's designated personnel audit the program. Instead, the Proposed Rule would require that an independent third party perform the audit. The Proposed Rule would also revise § 250.1924, which addresses BOEMRE's assessment of SEMS programs, to reflect the proposed independent third party audit requirement.

Third Party Auditor Requirements (30 C.F.R. § 250.1926). The Proposed Rule would revises the qualification requirements for auditors, not only to reflect the requirement that an independent third party perform that audit, but also requiring BOEMRE approval of the third party auditor. A company must nominate the third party auditor in writing and submit a request for BOEMRE approval at least 30 days prior to the audit. The request for approval must identify the individual, describe specific qualifications, and include a statement by the management that the nominated auditor is "not owned or controlled by, or otherwise affiliated with, the operator's company." Procedures must also be established to avoid conflicts between the development of the SEMS program and the third party auditor. BOEMRE may or may not approve the nomination. If BOEMRE does not approve the nomination, a different independent third party auditor must be nominated.

Recordkeeping (30 C.F.R. § 250.1930). The Proposed Rule would revises the recordkeeping and documentation requirements to require documentation and records of SWA training and reviews, and also of employee participation in the development of the SEMS program.

Procedural Matters

Based on its Regulatory Impact Analysis, BOEMRE has estimated that the Proposed Rule would result in average annual compliance costs of $26.9 million among OCS oil and gas operators. More specifically, BOEMRE predicts $15.2 million in recordkeeping, administration, and related costs, and $11.7 million in costs related to training associated with the Proposed Rule. Furthermore, based on the November 15, 2011 compliance deadline, BOEMRE estimated an additional $40.0 million in legacy implementation costs covered by the Paperwork Reduction Act. BOEMRE, however, considered such compliance costs "very minor" in contrast to the costs and dangers resulting from the occurrence of a major accident such as the 1987 underground blowout in the Gulf of Mexico, a 1989 fire at a production facility, and the 2010 Macondo blowout, all of which BOEMRE specifically references in the Proposed Rule.

BOEMRE also determined that the burden of the Proposed Rule would have a significant impact on small companies. Of those affected by the rule, BOEMRE estimated that 65 percent would be considered small. Such small companies can anticipate bearing 40 percent of the costs of the Proposed Rule, or $10.7 million of the $26.9 million estimated compliance costs. In support of the rule, BOEMRE suggested that the operating risks are "not necessarily lower" for small companies than other larger operators. Though BOEMRE noted that it considered various compliance alternatives for smaller operators, the Proposed Rule does not indicate precisely what alternatives were considered and specifically why they were rejected. Rather, BOEMRE asserted only that it was "unable to identify [alternative] provisions that would achieve the same safety objectives." BOEMRE has invited comments to the Small Business and Agriculture Regulatory Enforcement Ombudsman and its 10 Regional Fairness Boards regarding the effect of the Proposed Rule on small businesses.

In addition, BOEMRE is soliciting comments specific to the reporting and recordkeeping burdens imposed by the Proposed Rule. BOEMRE estimated the total additional hours burden of the Proposed Rule at 177,077 hours in addition to those already approved under existing regulations. In addition to feedback on several general questions regarding this burden, set forth in the Proposed Rule, BOEMRE also requests comments to aid in estimating additional non-hour cost burdens. Although the comment period on the Proposed Rule runs until November 14, 2011, the deadline for submission of comments to OMB specifically with respect to the reporting and recordkeeping burdens is October 14, 2011.