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BSEE Risk-Based Inspections: First Year Report and Second Year Expansion

V&E Environmental and Natural Resources Update, June 7, 2019

In 2018, the federal Bureau of Safety and Environmental Enforcement (“BSEE”) commenced performance of a new investigatory program at oil and gas exploration and production facilities on the federal Outer Continental Shelf (“OCS”) in the Gulf of Mexico. Dubbed the Risk-Based Inspections (“RBI” or “risk inspections”) Program, this new investigatory tool is intended by BSEE to supplement its regular safety and environmental inspections. The purpose of the RBI Program is to improve safety performance and environmental stewardship at offshore oil and gas facilities that go beyond applicable regulations. Only recently, in May 2019, BSEE issued an Assessment Report touting the apparent successes of its new RBI Program. BSEE points to the RBI Program as one of its emerging strategies to improve the safety and environmental culture at offshore facilities. BSEE is in the midst of its second year of risk inspections during 2019 but is already seeking to expand the use of inspection resources on higher-risk facilities, as its 2020 budget proposes a $5.5 million increase in the RBI Program budget. If Congress approves of BSEE’s 2020 budget, it is expected that BSEE will increase RBI Program inspections, resulting in an overall greater level of exposure to regulatory inspections and possible corrective actions.

I. BSEE Has Increased Regular Compliance Inspections.

The Outer Continental Shelf Lands Act (“OCSLA”) authorizes BSEE to regulate oil, gas and mineral exploration and development on the OCS. BSEE has more than 120 inspectors nationwide who conduct investigations pursuant to its mandate under OCSLA, with the great bulk of those investigations taking place in the Gulf of Mexico. Those inspectors assess energy production facilities under BSEE’s oversight at least once per year and also, as a general practice, inspect drilling facilities or work-over units at least once every 30 days, when on location.

Offshore compliance inspections conducted by BSEE have steadily increased over the past three years:

  • 2016: 8,508 inspections;

  • 2017: 9,275 inspection; and

  • 2018: 10,341 inspections.

II. Traditional Compliance Inspections Provide Data to ID Facilities and Issues for RBI.

BSEE’s regular inspections provide voluminous data. In developing the RBI Program, BSEE initially focused on trends in compliance and incident data arising for 2016 and 2017 to identify potential imminent safety or compliance concerns.

As explained by BSEE in comments made with respect to its launch of the RBI Program, the bureau reviews inspection findings and incident reports to assign a risk factor score to each production facility in the Gulf of Mexico. The risk score is based on specific performance and risk-related information that falls into two types of risk-based inspections:

  1. Facility-Based Risk Inspections:
    The Facility-Based risk inspections focus on low-probability, high-consequence items at a specific production facility on the OCS.

  2. Performance-Based Risk Inspections:
    The Performance-Based risk inspections focus on reducing the likelihood of adverse events across the OCS after an analysis of compliance and incident data identifies trends indicating risks associated with widely employed procedures or equipment.

Based on analysis of available data, BSEE groups areas of potential concern and prioritizes those areas requiring investigatory follow-up through performance of the RBI inspection.

In performing RBI inspections, BSEE has the opportunity to focus beyond regulatory compliance issues and assess day-to-day operational activities in an attempt to reduce the likelihood of incidents across the Gulf of Mexico region. Upon completion of risk investigations, BSEE makes operators of those facilities aware of the relative degree of risk present or, as necessary, directs such operators to conduct and complete corrective actions to mitigate those risks. The goal of the program is to drive safety performance and environmental stewardship improvements beyond what is required under applicable law so that energy operations on the OCS may become more safe for workers and result in a lesser number of adverse incidents occurring in the environment.

III. BSEE’s First-Year Performance of the RBI Program.

BSEE commenced the RBI Program in March 2018, with assessment of crane and lifting operational safety on the OCS. During 2018, BSEE conducted two Performance-Based and three Facility-Based risk inspections at facilities in the Gulf of Mexico. In total, during 2018, BSEE conducted inspections of some 67 facilities and reviewed almost 3,000 files.

  1. Performance-Based RBI Results.
    The breakdown of the two Performance-Based risk inspections is as follows:

    • Performance-Based RBI - Crane and Lifting Safety: Crane and lifting safety was identified during 2018 as a potentially imminent safety concern. In 2016 and 2017, 178 crane incidents were reported to BSEE by 30 different operators. Additionally, BSEE issued 103 crane-related incidents of non-compliance (“INCs”) during the review period. The proposed list of facilities to be assessed during this performance-based assessment was determined by identifying those operators with the most compliance or performance issues. The inspection protocol was established using the top incident factors identified during the review period (e.g., issues arising out of crane procedures, communications and worker qualifications).

      In conducting this Performance-Based risk inspection, BSEE visited some 30 production platforms and 10 well operations in the Gulf of Mexico region, operated by 14 specific operators. The Performance-Based risk inspection was a joint exercise with the U.S. Coast Guard.

      As a result of this targeted inspection, BSEE issued a safety alert noting that approximately 12.5% of the facilities inspected had documented incidents of non-compliance and, while operators were conducting periodic crane inspections in accord with the American Petroleum Institute standard, the inspections were not effective in identifying all deficiencies and/or operators were not aggressively closing out noted deficiencies.

      The safety alert made several recommendations, including urging (i) operators to verify that all API standard crane safety inspections are being performed as required and that such operators develop and maintain a crane maintenance tracker system that clearly assigns an individual or group of individuals responsibility for correcting any noted deficiencies; (ii) operator development and/or implementation of a maintenance program focusing on lifting equipment, such as slings and wire rope; and (iii) operator development of procedures, beyond required training certifications, to ensure understanding and competency for crane operators, riggers and crane inspectors. A copy of the safety alert and BSEE’s recommendations may be found here.

    • Performance-Based RBI – Fired Vessel Hazards: Fired vessels are hydrocarbon processing vessels in which the hydrocarbon is heated by a flame within the vessel. BSEE reviewed data generated from 2016 to 2018 regarding fired vessel activities and identified 17 fired vessel incidents reported by 12 different operators. In four of the incidents, potentially significant hazards resulted (e.g., injuries, damages to platform, and shut-in of production) that BSEE viewed as meeting the low-probability, high-consequence threshold for conducting a risk inspection. Additionally, 76 fired vessel-related INCs were issued during the review period, representing roughly 2% of the total INCs issued during this time period. BSEE inspection teams conducted a Performance-Based RBI on 27 production platforms in the Gulf of Mexico region operated by 14 operators in July 2018. The inspection protocol was established using the top incident factors identified during the review period (e.g., equipment, training, and procedures).

      As a result of this Performance-Based inspection, BSEE issued a safety alert advising operators that it found they were not making fired vessel operating procedures available to personnel involved in the equipment operations, operators were not consistently inspecting gauge cock valves to make sure they are functioning properly, and multiple operators were not in compliance with rules mandating that qualified third parties remove and inspect, and repair or replace, as needed, the fire tube for tube-type heaters.1 

      The safety alert made several recommendations, including urging: (i) operator verification that fired vessel operating procedures are accessible to all employees involved in the operations; (ii) operator review of gauge cock valves to ensure that they are equipped with appropriate automatic ball check shutoffs, and that personnel are familiar with and trained on gauge cock valve assemblies; (iii) operator review of fired vessel quality assurance/mechanical integrity procedures along with the vessel manufacturer’s recommendations for fuel gas filter maintenance; and (iv) operator inspection of fired vessels and correction of any deficiencies associated with equipment and systems prior to further use. A copy of the safety alert and BSEE’s recommendations may be found here.

  2. Facility-Based RBI Results.
    BSEE identified facilities on the OCS for a Facility-Based RBI through the use of Argonne National Laboratory (“ANL”) modeling. After identifying 25 facilities with the highest ANL risk scores, BSEE selected three facilities based on a facility’s highest production volumes, Offshore Safety Index rank, weighted INC-to-component rank, and incident severity rank of the Designated Operator. The Facility-Based risk inspections are based on BSEE’s analysis of low-probability, high-consequence areas located on specific facilities on the OCS.

    Following selection of the initial three facilities, BSEE reviewed facility drawings and performance data to identify low-probability, high-consequence topics that are specific to those facilities. The topical protocols include:

    • Facility One: protocols for uninterruptable power supply, cranes and lifting safety, energy isolation (lock out, tag out), and pre-startup review and management of change programs.

    • Facility Two: protocols for uninterruptable power supply, task level hazards analysis, subsea leak detection, and training and competency of personnel.

    • Facility Three: protocols for personnel on board (emergency response actions), cranes and lifting safety, gas compressors, simultaneous operations, and subsea operations and leak detection. 
       
    At the conclusion of each of the inspections, the Facility-Based RBI team hosted a close-out meeting with the operator to discuss the preliminary findings of the team and allow for feedback. Within 30 days of the meetings, the BSEE teams were tasked with submitting reports of findings to the operators. As necessary, BSEE also directed the operators to prepare corrective action plans to satisfactorily cure identified deficiencies.

IV. BSEE’s Lessons Learned from First-Year Performance of the RBI Program.

In May 2019, BSEE issued a Risk Based Inspection Assessment Report showcasing these Year 1 findings and articulating a path forward for the RBI Program. BSEE considers the first year of risk inspections to be a solid success, with those inspections resulting in: (i) issuance of two safety alerts with 19 recommendations for crane and lifting safety and fired vessel performance activities; (ii) imposition of facility and operator-specific corrective action plans for deficiencies identified in the Facility-Based risk inspections; and (iii) meeting with industry to discuss the RBI process, results from Year 1 inspections, and ways to work with offshore operators as partners to improve performance.

BSEE views the RBI Program as a supplemental investigatory tool (complementing compliance inspections) that serves to drive safety performance and environmental stewardship improvements through innovation and collaboration.

Based on lessons learned during the first year of implementing the RBI Program, BSEE plans to adjust the protocol and techniques used to improve the program as an inspection tool. Expected changes in Year 2 include:

  1. Allotted Hours for Data Review and Development of RBI Protocol:
    BSEE estimates that in Year 1, 200 to 250+ hours of time were spent by the bureau to review, analyze and plan an RBI inspection. Development of the facility protocol was among the most time-dependent tasks, owing to the uniqueness of each protocol and its one-time use. Based on its Year 1 experiences, BSEE plans to revise the process of data review and protocol development, such that the bureau expects to cut its time for data review and protocol development in half.

  2. Transforming Future Risk Inspections from “Known” to “Unannounced”:
    BSEE indicates that during the Year 1 risk inspections, industry typically became aware of the selected topical protocols and facilities being investigated, as a large number of BSEE staff received training and were in possession of inspection documents weeks in advance of scheduled inspections. To keep subsequent rounds of risk inspections “unannounced,” BSEE will schedule staff training as close to the date of inspection as possible. Additionally, the location of facilities targeted for risk inspections is shared only with BSEE “Supervisory Inspectors” for preparation of manifests, and only days before the inspection. Reportedly, these supervisors will receive specific directions not to release in advance any information about the selected facilities.

  3. Minimizing Operator Interruptions Due to Risk Inspections:
    A consequence of BSEE’s risk inspections that are supplemental to regular compliance inspections is that operators are burdened by additional, multi-day inspections multiple times a year. To minimize operators’ disruption of operations, BSEE will now attempt to coordinate risk inspections with OCSLA-mandated annual inspections.

  4. Pursuing Consistent Measures in Follow-Up to Risk Inspections:
    Following performance of a risk inspection, BSEE’s Office of Safety Management (“OSM”) conducts a secondary evaluation of certain of the subject facilities based on the inspection results. During Year 1, certain of the OSM evaluation protocols following performance of risk inspections have been inconsistent, resulting in some operators receiving multiple requests for documentation for different facilities, with short response times. In an effort to eliminate inconsistencies, the OSM will review the inspection results for multiple facilities as a whole, and generate a list of common evaluations to be conducted on all selected facilities, which is expected to reduce the number of facilities per operator included in secondary evaluations.

V. BSEE’s Year 2 RBI Program is Currently Underway.

The Year 2 RBI Program is underway. To date, two Performance-Based risk inspections have taken place in February and March 2019. Additional risk inspections are being planned during the remainder of the year. While the results of those 2019 inspections are yet to be announced, there is no doubt that BSEE has incorporated the RBI Program into its overall regulatory investigatory program.

VI. BSEE Seeks to Bolster the RBI Program’s Budget by $5.5 Million to Expand Offshore Facility Inspections.

Finally, BSEE Director Scott Angelle’s remarks made on April 4, 2019, to the Subcommittee on Interior, Environment, and Related Agencies, of the House of Representatives Committee on Appropriations with respect to the 2020 President’s Budget Request, acknowledged the continuing regulatory challenges faced by BSEE as offshore energy facilities continue to move into deepwater and ultra-deepwater on the OCS, and the bureau’s need of the proposed $200.5 million budget to address those challenges. In making these remarks, Director Angelle singled out the RBI Program as a positive BSEE initiative. He commented that he planned to use monies received under the 2020 budget to increase the RBI Program’s budget by $5.5 million to further expand the program to focus inspection resources on higher-risk facilities, enhance the monitoring of facility and operational risk profiles, ensure companies are adequately assessing risks, and develop the means for the continued improvement in risk management offshore to improve safety.

It is expected that bolstering of the RBI Program will ramp up the overall number of offshore operators that are subject to increased facility and operational inspections. There appears to be no doubt that the additional layer of offshore facility and operational risk-based scrutiny from the RBI program is here to stay.

Visit our website to learn more about V&E’s Environmental & Natural Resources practices. For more information about BSEE’s Risk-Based Inspection Program, please contact Vinson & Elkins lawyers Larry Nettles, George Wilkinson, or Larry Pechacek.

1 BSEE began enforcing the third-party inspection, repair and/or replacement requirements in September 2018.

Key Contacts

+1.713.758.4586
lnettles@velaw.com
+1.713.758.4834
gwilkinson@velaw.com
+1.713.758.2004
lpechacek@velaw.com

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.