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APPENDIX B U.S. COAST GUARD INSPECTION PROGRAM FOR FINED OCS OIL AND GAS FACILITIES1 GENERAL BACKGROUND In 1953, the U.S. Coast Guard was given the authority to issue regulations to promote the safety of life on artificial islands and fixed structures on the outer continental shelf (OCS) of the United States. The ensuing regulations contained requirements for inspections, construction standards, lifesaving and fire fighting equipment, operating procedures, casualty reporting, safety zones, and penalties. P.L. 95-372, the OCS Lands Act Amendments of 1978 (OCSLA 1978), assigned new authority and responsibilities to the Coast Guard. As a result, the regulations (33CFR 140-147 [Subchapter N]) were extensively revised to address the new responsibilities. (The revised regulations were published in the Federal Register by the Coast Guard on March 4, 1982.~2 OCSLA 1978 states that The Secretary [of the Interior] and the Secretary of the Department in which the Coast Guard is operating shall individually, or jointly if they so agree, promulgate regulations to provide for 1. scheduled onsite inspection, at least once a year, of each facility on the Outer Continental Shelf which is subject to any environmental or safety regulation promulgated pursuant to this Act, which inspection shall include all safety equipment designed to prevent or ameliorate blowouts, fires spillages, or other major accidents; and 2. periodic onsite inspection without advance notice to the operator of such facility to assure compliance with such environmental or safety regulations." In the vast majority of instances the Coast Guard has had no reason to visit a fixed facility other than to conduct an annual inspection. Due to the magnitude of this task and the need to utilize available resources to respond to more critical safety areas, such as marine casualties and worker safety complaints, the Coast Guard has been unable to conduct annual inspections of all fixed facilities on the OCS. Recently, the Coast Guard further modified its regulations to require Prepared by the U.S. Coast Guard at the request of the committee. 2The U.S. Coast Guard inspection program for mobile offshore drilling units (MODUs) is more comprehensive. It is based on the classification of these units as vessels and addresses all on board systems in addition to industrial drilling and production equipment. 87

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~8 that annual inspections of fixed facilities be conducted by the facility owner's or operator's personnel or by a third party employed by the owner or operator. Under this program, the owner or operator certifies to the Coast Guard that the inspection was performed and states the results of the inspection, listing any deficient items. The efforts of Coast Guard marine inspectors then are focused on conducting unannounced oversight inspections of randomly selected fixed OCS facilities with resident personnel. Additionally, those fixed OCS facilities that are the subject of worker complaints or which have a poor safety record, as determined by Coast Guard field office and headquarters review of accident and self-inspection reports, are targeted for unannounced inspections by Coast Guard personnel. These oversight inspections, in turn, provide a means for the Coast Guard to monitor the application and effectiveness of the self-inspection program and to ensure that self-inspections are being conducted properly. A fixed OCS facility owner or operator who files a false self-inspection report is subject to a criminal penalty under the provisions of OCSLA 1978. DEVELOPMENT OF A NEVV PROGRAM In developing the modified inspection plan, the Coast Guard considered four principal alternatives. The first was to continue the current program in which Coast Guard marine inspectors were responsible for conducting annual inspections of all fixed OCS facilities. This approach was rejected because for some time the Coast Guard had not been able to visit each fixed facility once each year, so there was little incentive for an owner or operator to continually maintain a feed facility's safety equipment in top condition. Moreover, a court decision holding that OCSLA 1978 requires that the Coast Guard give the owner or operator of a fixed OCS facility notice of a failure to comply with any provisions of the act and a reasonable period for corrective action before it can invoke a penalty made civil penalties an ineffective sanction. The Coast Guard concluded that it would not be able to perform annual inspections of all OCS facilities and follow-up inspections related to compliance without substantially increased staffing and funding dedicated to this purpose. The second alternative considered was third-party inspection of fixed facilities with owner or operator certification that all deficiencies had been corrected. Under this alternative, an approved third-party would be hired by the owner or operator of a fixed OCS facility. Approved third parties would be designated by the Coast Guard, requiring the establishment of a Coast Guard program to evaluate third-party inspector qualifications. While this alternative would provide a group of qualified, licensed, fixed-facility inspectors in the private sector, the Coast Guard concluded that the attendant administrative burdens to both the industry and the Coast Guard would serve only to decrease efficiency and increase costs with no offsetting improvement in safety beyond that provided by the alternative ultimately selected. Therefore, this alternative was rejected. The third alternative was to engage MMS personnel to inspect fixed OCS facilities for compliance with Coast Guard regulations. However, involving another federal agency in conducting the inspection that initiates the Coast Guard's enforcement process could lead to unnecessary overlapping of enforcement activities by the two federal agenciesa result proscribed by the OCSLA. Therefore, this alternative was rejected. The fourth alternativethe one selected-was to require the owner or operator to conduct an annual inspection of the fixed facility utilizing a combination check-off list and reporting form developed by the Coast Guard. The Chief Counsel of the Coast Guard has construed the language of OCSLA 1978 as not mandating that Coast Guard personnel conduct these inspections, but only that the Coast Guard "provide fort the inspections by means of regulations. 3This change has no effect on the inspection program carried out by Minerals Management Service (MMS) covering, among other items, blowout and pollution prevention.

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89 SUMMARY OF BENEFITS The self-inspection program is expected to improve safety overall even though unmanned facilities seldom will be visited by Coast Guard inspectors. The Coast Guard, by requiring the industry to conduct the mandated annual inspection, will be able to focus its resources on those fixed OCS facilities that are manned, have a poor safety record, or are the subject of worker complaints. Further, since the Coast Guard will be conducting oversight inspections (spot-checks) of randomly selected manned facilities, many of these facilities will receive multiple inspections during any one year. Additionally, inspection reports involving manned and unmanned facilities and casualty reports now will be reviewed for inconsistencies and analyzed by Coast Guard field units and Headquarters, which will permit the Coast Guard to better evaluate the safety performance of individual operators. It will also provide a mechanism whereby industry trends can be identified or predicted. Fixed facilities with poor safety records (manned and unmanned) will receive additional inspections by Coast Guard marine inspectors. The owners or operators of fixed OCS facilities with good safety records will enjoy the benefit of less government intervention in their operations. i