U.S. affirms policies for citing oilfield service contractors
BY ALISON SIDER
WASHINGTON D.C. -- The U.S. Bureau of Safety and Environmental Enforcement has given teeth to its policy that its inspectors can issue citations to oilfield service contractors operating offshore as well as the energy companies that control offshore leases.
The agency affirmed in an interim policy document that contractors as well as the oil companies they work for can be issued "incidents of non-compliance" for violating the rules. The factors inspectors must consider are the seriousness of the violation, the harm that resulted, and what control, if any, the contractor had over the situation.
Prior to the 2010 Deepwater Horizon disaster, in which a deepwater well operated by BP experienced a catastrophic explosion that killed 11 and unleashed a giant oil spill, regulators took a top-down approach to their oversight of offshore drilling, with well operators being held responsible for any violations.
But in 2011, the BSEE issued incidents of noncompliance not just to BP, the operator and lease holder of the ill-fated Macondo well, but also to rig owner Transocean and cementing contractor Halliburton for separate violations the agency found contributed to the explosion.
The document released Thursday indicates this will continue to be the agency's practice. Leaseholders and well operators will continue to be the primary focus of enforcement actions, the BSEE document states, but contractors can be cited "in appropriate circumstances...for serious violations of BSEE regulations."
Brian Petty, the International Association of Drilling Contractors' senior vice president for government affairs, said the group is "very nervous" about the impact the agency's policy could have on contractors' insurance rates.
He said contracts allow well operators to collect damages from contractors if the latter are found to have been negligent. A government agency stepping into the process upends the system currently in place, and could cause a spike in the insurance rates contractors have to pay, Mr. Petty said.
Analysts say drilling activity in the Gulf of Mexico has returned almost to pre-Deepwater Horizon levels. But Mr. Petty said if the BSEE is aggressive and "cavalier" about enforcement actions against contractors, some might decide it isn't worth it to drill there.
"At the very least it will be more expensive," he said, adding that in some cases the additional costs that come with exposure to civil penalties could be a "deal-killer" for drilling contractors.
Dow Jones Newswires
08/16/2012