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On Industry Requests, Interior Extends Comments on Offshore Liability Limits

Federal rules to increase penalties for offshore facilities involved in oil spills has been delayed to give the oil and natural gas industry more time for review, the Department of Interior said this week.

The Independent Petroleum Association of America and National Ocean Industries Association wrote to Interior officials requesting an extension of the comment period, which was granted on Tuesday.

The rules are part of some long-delayed regulations to implement more safeguards from oil spills and natural gas incidents in the offshore, brought about following the catastrophic Macondo well blowout in 2010 that destroyed the Deepwater Horizon platform and killed 11 men.

One year after the blowout, Interior raised the maximum civil penalty for violating laws governing activities on the Outer Continental Shelf to $40,000/day from $35,000 a day, while financial responsibility violations increased to $30,000/day from $25,000 (see Daily GPI, June 30, 2011).

The latest regulations center around the liability limits related to oil spill removal costs and related damages. Last month Interior's Bureau of Ocean Energy Management (BOEM) proposed to increase the limit of liability for removal costs and damages to $134 million from $75 million.

The increases as written would apply to offshore facilities in federal and state waters that are under the auspices of the Oil Pollution Act of 1990, and would be consistent with recommendations from the national commission that reviewed the Macondo blowout. Other studies also have called for a statutory increase in the limit of liability.

"This proposed change is the first administrative increase to the liability cap since the Oil Pollution Act came into effect 24 years ago and is necessary to keep pace with the 78% increase in inflation since 1990," said BOEM Director Tommy P. Beaudreau. "This adjustment helps to preserve the deterrent effect and the 'polluter pays' principle embodied in the law."

The regulations also would establish methods BOEM would use for future inflation adjustments to the liability cap. The adjustment is the maximum increase that may be implemented without legislation.

Peter Meffert, who directs regulations at BOEM, said the proposed rules were something that "should have been done a long time ago." The Obama administration wants the liability limit to be as high as $1 billion, he said, but that would require Congressional approval. BOEM may only raise the penalties to match the growth of inflation.

The Federal Register notice regarding the comment extension on Wednesday said Interior "originally limited the rulemaking comment period to 30 days since it did not anticipate receiving significant comments on this rulemaking." However, since the proposed rules were published Feb. 24, "numerous comments have been received and various groups have requested that additional time be provided for them to review and analyze the implications of this proposed rule. For that reason, the comment period is being extended."

BOEM extended the comment period through April 25. Send comments to the Department of Interior; BOEM; Attention: Peter Meffert; 381 Elden St., MS-4001, Herndon, VA 20170-4817. Comments also may be emailed to Meffert at peter.meffert@boem.gov.

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