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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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what we ll be talking about
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
marine casualty reporting
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
marine casualty reporting cont
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

marine casualty reporting cont1
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

marine casualty reporting1
Marine Casualty Reporting –
  • Review and Comment
    • Expansion of requirements
    • Possible BSEE conflicts
    • Impractical and unintended results
  • Understand requirements
  • Penalties
sems sems ii and another sems
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
coast guard s sems effort anprm
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
jones act enforcement offshore
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.
funny you should ask
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”
current state
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
criminal enforcement
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
avoiding this trend
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
do not be complacent
Do not be complacent…

“Those who cannot remember the past are condemned to repeat it.” - George Santayana, The Life of Reason, 1905


Jeanne M. Grasso

Blank Rome LLP

Tel: (202) 772-5927

Mob: (202) 431-2240