1. MMS: Securing Ocean Energy & Economic Value for America Gulf Coast Environmental Affairs Group January 14, 2010 Galveston, Texas Civil Penalty Program

2. MMS: Securing Ocean Energy & Economic Value for America Agenda Statistics Inspections and Enforcement Civil Penalties Appeals

3. MMS: Securing Ocean Energy & Economic Value for America GOM Safety Statistics 2003200420052006200720082009 Fatalities 1035 5114 Injuries 394154275415318213 Blowouts 4442784 Collisions 1419 27202223 Fires 1046478132110138129 Pollution >50 bbls 1122411255

4. MMS: Securing Ocean Energy & Economic Value for America Inspection Types Primary –Sampling –Production Complete –Production Partial –Drilling –Workover –Pipeline –Accident Investigation –Onshore Meter –Coast Guard Secondary –Environmental –Flaring –H2S –Abandonment –Completion –Wireline –Coast Guard

5. MMS: Securing Ocean Energy & Economic Value for America Violations Termed as an “Incident of Noncompliance (INC)” –Documented using MMS National Potential Incidents of Noncompliance (PINC) List and; –MMS Form 1832 Carries 3 types of enforcement actions based on the severity of the violation. –Warning –Component Shut-in –Facility Shut-in May also result in civil penalties against the operator

6. MMS: Securing Ocean Energy & Economic Value for America Enforcement - Warning Warnings are issued when the violation poses no immediate danger to personnel, equipment, or the environment

7. MMS: Securing Ocean Energy & Economic Value for America Enforcement – Component Shut-in Component Shut-ins are issued for a specific piece of equipment or location when the violation poses an immediate danger to personnel, equipment, or the environment and it can be shut-in w/o affecting the overall safety of the facility.

8. MMS: Securing Ocean Energy & Economic Value for America Enforcement – Facility Shut-in Facility Shut-ins are issued when the violation poses an immediate danger to the entire facility, personnel, or the environment and the specific piece of equipment or location cannot be shut-in w/o affecting the overall safety of the facility.

9. MMS: Securing Ocean Energy & Economic Value for America GOM Region Drilling 20052006200720082009* Warning INCs 93124944858 Component SI INCs 2680311634 Facility SI INCs 334030720 Total INCs 15224415571112 Rig Inspections 12921183999870760 INC/Inspection Ratio.12.21.16.08.15 * As of January 5, 2010

10. MMS: Securing Ocean Energy & Economic Value for America GOM Region Production 20052006200720082009* Warning INCs 126811261149775958 Component SI INCs 1030115510407371018 Facility SI INCs 8195917997 Total INCs 23792376228015912073 Components Inspected 5492647144463235163454315 INC/Component Ratio.04.05.03.04 * As of January 5, 2010

11. MMS: Securing Ocean Energy & Economic Value for America Civil Penalty Program

12. MMS: Securing Ocean Energy & Economic Value for America OCS Civil Penalty History 1978 Lands Act Amendments – Section 24 –Created the Civil Penalties Program –Fine $10,000/day/violation 1983 Industry case against civil penalty –Must allow “reasonable time to correct” –MMS no longer pursued civil penalties 1990 Oil Pollution Act –If threat, no time needed to correct –Fine increased to $20,000/day/violation

13. MMS: Securing Ocean Energy & Economic Value for America OCS Civil Penalty History 1997 MMS Revised Civil Penalty Regulations –Plain English – streamlined process –Fine increased to $25,000/day/violation 2003 Fine increased to $30,000/day/violation 2007 Fine increased to $35,000/day/violation

14. MMS: Securing Ocean Energy & Economic Value for America Monetary Adjustment of Civil Penalties Public Law 101-380, Section 8201 states: –The Secretary shall, by regulation at least every 3 years, adjust the penalty specified in this paragraph to reflect any increases in the Consumer Price Index (all items, United States city average) as prepared by the Department of Labor.

15. MMS: Securing Ocean Energy & Economic Value for America Civil Penalty Matrix Note: W = Warning, C = Component Shut-in, and S = Facility Shut-in; * = Starting Point for Assessment GENERALIZED TABLE FOR CIVIL PENALTY ASSESSMENTS IN $/DAY/VIOLATION Enforcement Code Category ACategory BCategory C W $3,000 – 35,000 ($10,000)* $5,000 – 35,000 ($15,000)* $10,000 – 35,000 ($20,000)* C $5,000 – 35,000 ($15,000)* $10,000 – 35,000 ($20,000)* $15,000 – 35,000 ($25,000)* S $10,000 – 35,000 ($20,000)* $15,000 – 35,000 ($25,000)* $20,000 – 35,000 ($30,000)*

16. MMS: Securing Ocean Energy & Economic Value for America Civil/Criminal Penalty Program 30 CFR 250.1404 states that MMS will review the following violations for Civil Penalty: –Violations that cause injury, death, or environmental damage –Violations that pose a threat to human life, property or the environment –Violations that are not corrected within the time allowed –Violations of the Oil Spill Financial Responsibility Requirements

17. MMS: Securing Ocean Energy & Economic Value for America Responsibilities Districts –Conducts inspections –Issues violations (INCs) –Determines threat associated with violation –Builds civil penalty case –Forwards civil penalty case to regional coordinator Regional CP Coordinator –Reviews cp case –Assigns reviewing officer

18. MMS: Securing Ocean Energy & Economic Value for America Responsibilities Reviewing Officer –Reviews case –Reviews merits (violation & threat) of case –Seeks additional information –Issues NPCP –Reviews information submitted from operator –Makes decision based on the preponderance of the evidence presented. –Issues final decision

19. MMS: Securing Ocean Energy & Economic Value for America Civil Penalty Time Line

20. MMS: Securing Ocean Energy & Economic Value for America Civil Penalty Program 2004200520062007*20082009** Total Cases322841452333 Paid27203837218 Dismissed583724 Total INCs35258872369 Total Collected $953,750$548,000$2.45MM$3.1MM$1.16MM$210,000 Assessment Amount (Avg$/INC/day) $11,190$11,460$10,710$20,472 ^$12,924$18,888 * One case pending ^ CPI adjustment 3/2007 ** Pending cases = 21

21. MMS: Securing Ocean Energy & Economic Value for America Top Five Civil Penalty INCs 200420052006200720082009 P103 (15)P103 (11)P103 (21)P103 (24)G111 (8)G110 (5) G110 (3)G110 (5)G110 (10)G112 (14)P103 (6)G112 (2) G111 (2)G112 (1)P307 (10)G110 (9)G112 (4)E100 (1) P130 (2)G111 (1)P308 (10)E103 (4)P280 (2)E102 (1) P283 (2)E102 (1)P301 (6)E100 (4)G110 (1)

22. MMS: Securing Ocean Energy & Economic Value for America

35. Regulations Governing Appeals Any MMS decision can be appealed under 30 CFR 290 Subpart A. There are 2 types of Appeals: –Informal – An informal appeal may be made to the issuing officer’s next level supervisor. The informal appeal can also be elevated further up the chain of command if needed. –Formal – A formal appeal may be made to the Interior Board of Land Appeals (IBLA)

36. MMS: Securing Ocean Energy & Economic Value for America Formal Appeal Process –A formal appeal may be made to the Interior Board of Land Appeals (IBLA). See NTL 2009-N12 –A formal appeal MUST be filed within 60 days of the INC’s issue date or the receipt of a decision (NO extensions). –The Operators Statement of Reason must submitted to the IBLA within 30 after filing the Notice of Appeal.

37. MMS: Securing Ocean Energy & Economic Value for America Additional information: www.mms.govwww.mms.gov Email address: omm.fo.osm@mms.govomm.fo.osm@mms.gov Questions? Thank you David Dykes David.Dykes@mms.gov