On December 23, 2016, Judge Rebecca F. Doherty of the U.S. District Court for the Western District of Louisiana entered a very significant ruling in favor of OCSLA contractors that the Bureau of Safety & Environmental Enforcement (“BSEE”) cannot issue a Notice of Incident of Noncompliance (“INC”) to a contractor.

As discussed more thoroughly in our prior alert, a copy of which can be located here, BSEE issued an INC to Island Operating Co., Inc. for violation of BSEE safety regulations, despite Apache Corporation, not Island Operating, being the holder of a platform lease under the Outer Continental Shelf Lands Act (“OCSLA”). Island Operating requested that BSEE rescind the INC and argued that OCSLA does not grant BSEE enforcement authority against contractors. BSEE refused to rescind the INC, and Island Operating subsequently filed a notice of appeal with the Interior Board of Land Appeals, which affirmed BSEE’s issuance of the INC.

Island Operating timely appealed by filing its original complaint in the U.S.D.C. for the Western District of Louisiana. Judge Doherty reasoned that the threshold issue presented in Island Operating’s claim was a straightforward issue of statutory interpretation. Specifically, the Court was left to resolve “an alleged conflict of interpretation between the grounding statute, here the Outer Continental Shelf Lands Act, and the regulations created by [BSEE], by way of that statute.”

The Court noted that while Section 1350 of the OCSLA provides that “any person” who violates the provisions of the OCSLA may be liable for a penalty, only those “persons” against whom a duty has been imposed can violate that duty. Section 1348(b) establishes the duty imposed and provides that the duty applies to “any holder of a lease or permit.” So, the Court concluded that a “party who is neither a lease-holder nor a permit-holder, such as Island, is not identified in Section 1348 as having a duty related to environmental and safety standards, and, thus, cannot be found to have violated a duty with which it is not charged, and, therefore, cannot be subject to a penalty or fine.” Further, the Court held that BSEE’s regulations, despite having broader language than OCSLA, cannot expand the scope of the OCSLA.

After interpreting OCSLA, the Court held that BSEE had no authority to enforce safety or environment regulations against a non-lease holder or non-permit holder such as Island Operating and vitiated the INC.

As stated, this decision is significant because it curtails BSEE’s efforts to expand its regulatory authority over offshore marine and energy contractors in the wake of the BP Macondo oil spill, which has been criticized uniformly by the offshore marine and energy industry as executive overreach.

A link to a copy of the district court’s ruling is here.