BSEE Gets Out the INC Pen: Fines on Contractors

According to information on the BSEE website, the agency is following through on its threats to fine contractors.  In the past, BSEE only assigned Incidents of Non-Compliance (INCs) to oil and gas operators, but last summer it issued an interim policy, Issuance of an Incident of Non Compliance to a Contractor, which said “BSEE will, in appropriate circumstances, issue incidents of noncompliance (INCs) to contractors for serious violations of BSEE regulations.”

BSEE logo

Now nine months into the year, BSEE’s website section on penalties indicates that, of seven INCs leveled against companies in 2013, four of them have been to contractors.   The number may actually be much higher, because BSEE only publicizes the INCs that it writes as a result of incidents, not inspections.   So the agency is most definitely following through on its threat to hold contractors accountable for what BSEE considers to be safety or environmental lapses.

This is not a minor issue to contractors either.  Penalties can run up to $40,000 per violation, per day, not to mention the harm it could do to a contractor’s relationship with its offshore oil and gas customers.

However, it is possible that the BSEE INCs to contractors may not stand up in court.   One of the contractors that received an INC is challenging the penalty,

arguing that the agency does not have the regulatory authority to INC contractors.   BSEE disagrees.  It may be up to an administrative law appeals process to sort it all out.   But even if BSEE loses this round, many believe that it could still impose INCs on contractors at some point in the future, as long as it goes through the process of developing regulations on contractor INCs and allows the industry and public to make comments.

Bottom line:  Did anyone need another reminder that the costs of failing to have a strong safety and environmental management approach are too high to ignore?

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