On October 15, 2010, the Bureau of Ocean Energy Management, Regulation and Enforcement (“BOEMRE”) issued a final rule that makes mandatory and expands API RP 75, a voluntary industry standard initially promulgated in the 1990s, that addresses the management of safety and environmental risks associated with Outer Continental Shelf (“OCS”) operations and facilities. Issued seven months after the Macondo Well blowout and spill, the final rule requires operators to develop and integrate a comprehensive Safety and Environmental Management Systems (“SEMS”) program into the management of their OCS operations. The effective date of the rule is November 15, 2010. Operators must develop and implement comprehensive SEMS programs within one year of the effective date, by November 15, 2011.

The rule is vast in scope. Operators (a lessee, owner or holder of operating rights, or designated operator) will be required to achieve compliance within one year of its effective date. The rule applies to all OCS oil and gas and sulphur operations and facilities under BOEMRE jurisdiction, including drilling production, construction, well workover, well completion, well service and activities by pipelines regulated by the Department of the Interior. Within this expansive universe, operators must formulate what amounts to a vast multi-volume equipment and procedures manual that documents baseline information as to facilities, engineering design, and major equipment, sets forth hazards analysis at both the facility level and task level, and defines a myriad of work, training and contractor selection processes. The purpose, of course, is to minimize risk and achieve safe and environmentally sound offshore operations.

To appreciate the rule’s prescriptive and detailed character, it is useful to enumerate some of the specific requirements it imposes on operators. Under the rule, operators must, among other obligations:

• Gather and document information relating to facility and engineering design.
• Perform and document hazards analyses (at the facility level) and job safety analyses (operations/task level) for all of the company’s facilities.
• Formulate and document management of change procedures for equipment, operating procedures, personnel changes, materials and operating conditions.
• Identify the impact of changes on safety, health, and the coastal and marine environments.
• Rationalize and document a vast array of operating procedures under normal operations and contingencies, such as startup, emergency operations, weather-related evacuations, out-of-service equipment, and deviations from equipment operating limits.
• Identify the properties of, and hazards presented by, the chemicals used in operations.
• Adopt training programs, emergency response and control procedures, and procedures for investigating incidents.

From an enforcement perspective, the rule imposes audit requirements upon operators, and outlines several BOEMRE enforcement tools. Within two years of initial implementation and at least once every three years thereafter, an independent third-party or qualified internal personnel must conduct a comprehensive audit of all thirteen required elements of the company’s SEMS program, and must identify areas in which safety and environmental performance needs to be improved. The rule discusses several enforcement mechanisms that BOEMRE can implement on its own, including directing third-party audits, issuing incidents of non-compliance, imposing civil penalties, or restricting or revoking the operator’s privilege to operate on the OCS.

The substantial burdens imposed by the rule will be shared by both small and large operators. Small operators will have to formulate a SEMS program, perhaps for the first time. In contrast, many large operators who have long had voluntary safety and environmental programs in place may now be obliged to change them in order to comply with the precise requirements prescribed by the rule.

For some offshore operators, these challenges will be complicated by the imposition of new regulatory responsibilities for contractor practices and operations. These new responsibilities include:

• Documentation of contractor selection criteria.
• When selecting a contractor, obtaining and evaluating information concerning the contractor’s safety and environmental performance.
• Ensuring that contractors have their own written safety and environmental practices in place, and that these practices are documented before work begins.
• Disclosure of safety hazards to contractors.
• Periodic evaluations of contractors to ensure that they are fulfilling their obligations.
• Maintenance of a contractor employee injury and illness log.

These requirements will likely redefine many existing operator/contractor relationships. The prudent operator will take appropriate steps to ensure that existing and new contracts are aligned with the rule. Indeed, perhaps this is the rule’s most radical feature – its novel concept of how safety and environmental responsibilities will be shared.

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