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BOEM to Raise Maximum Penalties in Offshore to Reflect Inflation

June 30, 2011
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The Interior Department Wednesday announced that it will raise the maximum civil penalty rate for violations of laws governing activities on the federal Outer Continental Shelf (OCS).

The maximum civil penalty rate for violations of the Outer Continental Shelf Lands Act (OCSLA) will increase to $40,000 per day from the current $35,000 a day, while financial responsibility violations of the Oil Pollution Act (OPA) will rise to $30,000 per day from $25,000 a day, according to Interior's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM).

The agency said the penalty rates adjustments were designed to keep up with inflation, as required by OCSLA and OPA. It further noted that the Obama administration has called on Congress to pass legislation that would raise the maximum civil penalty rates beyond the rate of inflation.

"Even with the inflation adjustment, which is the limit of our current regulatory authority, our civil fine authority is inadequate. 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 an an effective deterrent," said BOEM Director Michael R. Bromwich.

NGI asked BOEM to identify the energy companies that it said believe the agency's existing civil penalty authority is inadequate, but it did not immediately respond.

"Our hope is that new legislation will raise this amount significantly, which would enable us to use the threat and reality of civil fines as viable methods to encourage compliance with offshore oil and gas regulations and meaningfully deter violations," Bromwich noted.

BOEM can levy 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 environments. The agency also imposes fines if there is evidence that operators do not have adequate financial responsibility to meet the maximum liability amounts contained in OPA.

The OCSLA directs the Interior secretary to adjust the maximum civil penalty amount at least once every three years to reflect any increase in the Consumer Price Index, while OPA amounts are to be reviewed and adjusted on a four-year cycle.

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