On September 10, 2013, the Coast Guard issued an Advance Notice of Proposed Rule Making (“ANPRM”) outlining its intent to promulgate regulations that will require all domestic and foreign-flag vessels engaged in Outer Continental Shelf (“OCS”) activities to develop, implement, and maintain a vessel-specific Safety and Environmental Management System (“SEMS”). This proposal would be in addition to the SEMS requirements implemented under Bureau of Safety and Environmental Enforcement (“BSEE”) regulations by expressly requiring SEMS for vessels engaged in OCS activities, and proposing a vessel-specific safety standard based on the American Petroleum Institute’s Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities, Third Edition, May 2004 (“API RP 75”). Comments are due on December 9, 2013. (To view the ANPRM, please visit www.gpo.gov/fdsys/pkg/FR-2013-09-10/pdf/2013-21938.pdf.)
On October 15, 2010, the successor agency to the BSEE published a SEMS final rule entitled, ‘‘Oil and Gas and Sulphur Operations in the Outer Continental Shelf—Safety and Environmental Management Systems.’’ That rule established and required all OCS operators to have a SEMS program in place by November 15, 2011. On April 5, 2013, the BSEE published another final rule revising and adding several new requirements to its SEMS program (“SEMS II”). This new rule became effective on June 4, 2013. Compliance with these new requirements comes into effect on June 4, 2014, except for specified auditing requirements. Now, the Coast Guard has entered the foray on the OCS and is seeking comments on a plan to implement another SEMS program. (To view the SEMS II, please visit www.gpo.gov/fdsys/pkg/FR-2013-04-05/pdf/2013-07738.pdf; to view BSEE fact sheets, please visit www.bsee.gov/BSEE-Newsroom/BSEE-Fact-Sheets.aspx.)
The BSEE SEMS regime
The BSEE SEMS program has caused great confusion with respect to its applicability to vessels engaged in OCS activities. The SEMS rule requires operators to have a SEMS program. An offshore operator is the lessee, owner, or holder of operating rights, or the designated operator or agent of the lessee(s) of a pipeline right-of-way holder or a state lessee granted a right-of- use easement. The SEMS rule also requires an operator, when selecting a contractor, to obtain and evaluate the contractor’s safety and environmental performance prior to that contractor performing work for the operator. A contractor is anyone performing work for the lessee. However, as we understand it, although the BSEE did not intend to exercise its jurisdiction over vessels typically under the Coast Guard’s jurisdiction, due to the confusion in interpreting the rule, many of the major operators on the OCS are requiring all non-facility contractors to have work practices consistent with the operator’s SEMS, and in some cases are insisting that contractors adopt certain portions of the operator’s SEMS.
Discussion of the Coast Guard request for Comments
According to the Coast Guard, it is proposing the implementation of SEMS for vessels engaged in OCS activities that will complement existing vessel design and equipment specifications, be compatible with current safety regulations, be subject to periodic safety audits, and include procedures for emergency response and company internal incident investigations to help mitigate risk and prevent future mistakes.
In considering an appropriate safety management standard, the Coast Guard’s proposal recognizes that while certain categories of vessels engaged in OCS activities—such as self- propelled mobile offshore drill units, drill ships, heavy lift vessels, and offshore supply vessels—currently operate under a Safety Management System (“SMS”) as required by the International Safety Management (“ISM”) Code, these standards do not address the specific risks to vessels engaged in OCS activities because the ISM Code is focused on international voyages. The Coast Guard’s proposal would therefore increase the scope of the current regulations by requiring these vessels and all other vessels involved in OCS activities, including floating production, storage and offloading units, well stimulation vessels, and shuttle tankers, to implement SEMS. The Coast Guard also notes that some vessels have voluntarily adopted a SMS based on frameworks other than the API RP 75 or ISM Code. These may include the International Association of Drilling Contractors Health Safety and Environmental Case or the International Standards Organization 9001 (ISO 9001:2008). The Coast Guard is currently researching whether compliance with these management programs would be appropriate alternatives to the API RP 75.
According to the Coast Guard, although the designated lease operator’s SEMS program required by the BSEE includes elements of the API RP75, this program is too broad in that it is focused on overall lease activities and the offshore oil, gas, and sulphur operations of facilities on the lease; it is also not vessel specific. In addition, the proposal noted that although many lease operators require their contractors to implement their own safe working procedures, this does not address the personnel and environmental concerns specific to vessel operations on the OCS. As a result, there is a gap where the facility is also a vessel, as the BSEE does not focus on the unique nature of those vessel operations. The Coast Guard’s proposal requiring a vessel-specific SEMS attempts to fill this gap by merging the vessel owner and operator’s proposed requirements under the API RP 75 with those of the designated lease operator’s requirements under BSEE regulations.
Ultimately, according to the Coast Guard, its goal is to align current Coast Guard regulations with current BSEE SEMS requirements by requiring vessel owners and operators, as the entity that manages day-to-day personnel, vessel operations, and equipment maintenance, to be responsible for developing, implementing, and managing a vessel-specific SEMS. However, as discussed above, whether a SMS approach based on the API RP 75 is compatible with the lease operators SEMS remains to be seen.
In any event, the Coast Guard is doing the right thing by seeking comments from the public at this early stage before it commits to any particular language. Specifically, among other things, it is seeking comments regarding the feasibility of the proposal and whether SEMS based on the principles of the API RP 75 is appropriate for vessels engaged in OCS activities. In that regard, the Coast Guard has listed a series of sixteen questions to which it is asking the public to respond to in order to assist it with moving this rulemaking to the next stage
Owners/operators of vessels engaged in OCS activities and other parties with interests on the OCS, including those parties with experience with the BSEE SEMS program, are encouraged to review the ANPRM and consider the potential future effects the Coast Guard’s implementation of a SEMS program. In particular, parties should review and provide comments, among other things, on the sixteen questions asked by the Coast Guard by December 9, 2013.