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US Stiffens Oil & Gas Violation Fines

Thursday, June 30, 2011

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Federal fines for corroding pipelines, crumbling offshore structures, and other neglected facilities will soon increase, under new penalties announced this week.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) said Wednesday (June 29) that it would increase the maximum civil penalty rate for Outer Continental Shelf Lands Act (OCSLA) violations to $40,000 from $35,000 per day and hike the daily fine for violations of the Oil Pollution Act (OPA) to $30,000 from $25,000.

The increases, which take effect Aug. 1, coincide with adjustments in inflation, as required by both laws.

 Workers in Gumby suits await rescue
Offshore workers in “Gumby” suits await rescue after an explosion aboard Mariner Energy’s Vermilion Oil Rig 380 in September. New rules would increase fines for offshore facility violations and pollution.

However, with so many oil and gas pipeline and offshore leaks and fatal accidents in the last year, the Obama administration has also requested that Congress pass legislation to further raise the maximum civil penalty rates beyond the rate of inflation.

Fines Called Inadequate

“Even with the inflation adjustment, which is the limit of our current regulatory authority, our civil fine authority is inadequate,” said BOEMRE Director Michael R. Bromwich.

“That view is shared by energy companies operating on the OCS. The inadequacy of our civil authority hampers our ability to effectively regulate offshore activities, and renders such fines a trivial nuisance rather than an effective deterrent.”

“Our hope is that new legislation will raise this amount significantly, which would enable us to use the threat and reality of civil fines as viable methods to encourage compliance with offshore oil and gas rules and regulations and meaningfully deter violations.”

Civil Penalties

BOEMRE can impose civil penalties when an operator fails to correct a recorded violation or commits a violation that constitutes a threat of serious, irreparable, or immediate harm or damage to life, property, any mineral deposit, or the marine, coastal, or human environment.

The agency also imposes fines if there is evidence that operators do not have adequate financial responsibility to meet maximum liability amounts contained in OPA. Fines are assessed on a maximum per day rate, but can be compounded for multiple infractions.

According to the New Orleans Times-Picayune, BOEMRE issued $785,000 in fines for five violators in the first three months of 2011:

• $70,000 to Merit Energy Co. LLC for violations that included “several severely corroded critical areas on the equipment and platform;”

• $40,000 for Fairways Offshore Exploration Inc. for a leak caused by corrosion;

• $180,000 to W&T Offshore Inc., after inspectors said a lessee failed to comply with company “lock out/tag out procedures”;

• $460,000 to Mariner Energy Inc., after inspectors found casing pressure too high; and

• $35,000 to GOM Shelf LLC for “violations throughout the facility.”

Adjustments Prescribed

The Outer Continental Shelf Lands Act directs the Secretary of the Interior to adjust the maximum civil penalty amount at least once every three years to reflect any increase in the Consumer Price Index. The Bureau of Ocean Energy Management is also authorized to impose civil penalties for failure to comply with financial responsibility regulations that implement the Oil Pollution Act, and those amounts are to be reviewed and adjusted on a four-year cycle.

The notice is available for review in Federal Register. The Bureau is also issuing a notice to offshore oil and gas operators, informing them of the changes and listing infractions and fines.

‘Destroying Good Jobs’

News of the increases drew a stinging response from Sen. David Vitter (R-LA).

“I wouldn’t mind some increases in fines if the regulations themselves were reasonable and clear, and if permits were issued in a timely way,” Vitter told the Times-Picayune. “But Interior isn’t close to achieving those important goals. Maybe (President) Obama and (Interior Secretary Ken) Salazar should be fined for destroying good Louisiana jobs.”


Tagged categories: Corrosion; Health and safety; Offshore; Oil and Gas; Pipeline; Pipelines; Regulations; Violations

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