Acadiana Business

BOEMRE: offshore drilling fine increase 'trivial nuisance'

by Leslie Turk

BOEMRE's director says the inflation-based increase in fines for companies that run afoul of drilling regs is still too low to deter violators, some of which are investing $1 million a day developing offshore leases.

The Bureau of Ocean Energy Management, Regulation and Enforcement's director says the inflation-based increase in fines for companies that run afoul of drilling regs is still too low to deter violators.

BOEMRE announced Thursday that the maximum civil penalty rate for Outer Continental Shelf Lands Act violations will increase from $35,000 to $40,000 per day; and from $25,000 to $30,000 per day for Oil Pollution Act financial responsibility violations. The increases coincide with adjustments in inflation, but the Obama administration is asking Congress to pass legislation to further raise the maximum civil penalty rates.

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

Regulation increased substantially in the wake of the Deepwater Horizon disaster, and Bromwich says new legislation is needed to "significantly" raise penalties on companies - some of which are spending $1 million a day on the development of deepwater leases.

Bromwich says a major bump in fines "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."

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. BOEMRE also imposes fines if there is evidence 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 if there are multiple infractions.

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 prepared by the U.S. Department of Labor. BOEMRE is also authorized to impose civil penalties for failure to comply with financial responsibility regulations that implement OPA; those amounts are reviewed and adjusted on a four-year cycle.