Contractors Beware: U.S. Affirms Offshore Citation Policy

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August 16, 2012

The U.S. Bureau of Safety and Environmental Enforcement on Thursday gave 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 that 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 deep-water well operated by BP PLC (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 non-compliance not just to BP, the operator and lease holder of the ill-fated Macondo well, but also to rig owner Transocean Ltd (RIG) and cementing contractor Halliburton (HAL) for separate violations the agency found contributed to the explosion.

The document released Thursday indicates that 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.”

Halliburton did not immediately respond to a message seeking comment. A spokesman for Transocean declined to comment.

By Alison Sider. (c) 2012 Dow Jones & Company, Inc.

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