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Managing Risk in a Changing Regulatory Environment

Winds of Change in Offshore Oil and Gas. Managing Risk in a Changing Regulatory Environment. February 20, 2014 Jeanne M. Grasso. What We’ll Be Talking About …. Marine Casualty Reporting Requirements on the OCS and Elsewhere SEMS, SEMS II and Another SEMS

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Managing Risk in a Changing Regulatory Environment

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  1. Winds of Change in Offshore Oil and Gas Managing Risk in a Changing Regulatory Environment February 20, 2014 Jeanne M. Grasso

  2. What We’ll Be Talking About … • Marine Casualty Reporting Requirements on the OCS and Elsewhere • SEMS, SEMS II and Another SEMS • Jones Act and Other Enforcement Offshore

  3. Marine Casualty Reporting • Draft NVIC (January 14, 2014) • Goal is to provide guidance and clear policy as to the Coast Guard’s expectations to facilitate compliance • Proposed Rule (January 10, 2014) • Would broaden existing regulatory requirements for reporting marine casualties on the OCS by foreign-flag vessels and units

  4. Marine Casualty Reporting (cont.) • What must be reported in the navigable waters? • Grounding, allision, loss of propulsion/maneuverability, unseaworthiness/fitness for service, death, injury requiring professional medical treatment, certain property damage, significant harm to the environment Confusion as to whether certain marine casualties need to be reported Confusion whether something is a casualty

  5. Marine Casualty Reporting (cont.) • What must be reported for OCS Activities? • OCS Facility (not MODUs): Death, injury to 5 or more in a single incident, incapacitation for >72 hours, damage to lifesaving/firefighting equipment, certain property damage • Vessels (and MODUs): Death, injury to 5 or more in a single incident, incapacitation for >72 hours, BUT – U.S. flag vessels must report the same things as must be reported in navigable waters

  6. Marine Casualty Reporting – • Review and Comment • Expansion of requirements • Possible BSEE conflicts • Impractical and unintended results • Understand requirements • Penalties

  7. SEMS, SEMS II and another SEMS • SEMS (October 2010 Final Rule) • Required the establishment of policy and objectives to deal with safety hazards and environmental impacts with a focus on reducing human error and driving continuous improvement. • Key components: Hazards Analysis, Management of Change, Operating Procedures, Mechanical Integrity and Contractor Management • SEMS II (April 2013 Final Rule) • Added requirements for: • Stop Work Authority • Ultimate Work Authority • Employee Participation Plan, Guidelines for Reporting Unsafe Conditions • Third Party Audits

  8. Coast Guard’s SEMS Effort – ANPRM • Issued September 2013 with 16 questions • Would require all vessels engaged in “OCS Activities” to develop, implement and maintain a vessel-specific SEMS • Much consternation: • Multiple and overlapping management programs • Complicates an already complicated regime with existing controls • Duplication and overlap with ISM Code and BSEE’s SEMS, with requirements flowing to vessels from lessees

  9. Jones Act Enforcement Offshore • Trigger is the lading and unlading of merchandise at a coastwise point • So, how does this apply offshore? • No merchandise may be transported by water, or by land and water . . . between points in the United States embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in other than a coastwise-qualified vessel.

  10. Funny You Should Ask…. • Jones Act application offshore based on a long history of Customs rulings • July 2009 CBP proposal to modify/revoke 20 Jones Act rulings covering more than 30 years of established precedent • Rulings focused on determinations as to whether items carried on board would be “equipment” or “merchandise”

  11. Current State • CBP’s 2009 proposal withdrawn • No further guidance • No equipment rulings issued • Now being handled as an enforcement issue • Port Directors at the helm • “Everything on the OCS is a point” • “If it goes out, it must come back that voyage” • Uncertainty and leads to ad hoc policy changes through enforcement actions

  12. Criminal Enforcement • Deepwater Horizon • BP • $4 billion criminal plea • $7.8 billion civil settlement • Transocean • $400 million criminal fine • $1 billion civil fine • Haliburton • $ fine for destruction of evidence • $55 million donation to the National Fish & Wildlife Foundation • Rowan Companies • $8 million criminal settlement

  13. Avoiding This Trend • “The Department of Justice will continue to prosecute shipping companies who break the laws that protect our oceans.” • Comprehensive Environmental Compliance Program • Good Company Culture! • Transparency with regulators • Enhanced Compliance Training • Open Reporting System • Internal Investigations • Audit Program

  14. Do not be complacent… “Those who cannot remember the past are condemned to repeat it.” - George Santayana, The Life of Reason, 1905

  15. Questions? Jeanne M. Grasso Blank Rome LLP Grasso@BlankRome.com Tel: (202) 772-5927 Mob: (202) 431-2240 www.BlankRomeMaritime.com

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