The Courts Strike Down Oilfield Contractor Penalty Liabilities

On December 18, 2017, the U.S. Court of Appeals for the Fifth Circuit dismissed the U.S. government’s appeal regarding a Bureau of Safety and Environmental Enforcement (“BSEE”) Notification of Incident of Noncompliance (“INC”) civil penalty issued against an oilfield contractor. This development brings closure to the long-standing question of whether BSEE has authority to enforce civil and criminal penalties against offshore contractors.

Following the tragic explosion and subsequent sinking of the offshore drilling rig Deepwater Horizon on April 20, 2010, BSEE issued numerous INCs to offshore lessors and operators as part of larger U.S. government concerted efforts to hold alleged wrongdoers accountable. Surprisingly though, BSEE also attempted to issue INCs to oilfield contractors for reasons such as failing to “protect health, safety, property and the environment,” failing to “take measures to prevent unauthorized discharge of pollutants,” and failing to “take necessary precautions” related to well control. By issuing INCs to contractors, BSEE took novel steps towards imposition of civil penalties and fines in an enforcement posture with which offshore stakeholders at that time had not previously experienced.

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For additional information, please contact Jonathan K. WaldronSean T. Pribyl, or a member of Blank Rome’s Maritime group.