United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Coast Guard 

and Maritime Transportation, Committee 

on Transportation and Infrastructure, 

House of Representatives 

DEEPWATER HORIZON

Coast Guard and Interior 

Could Improve Their 

Offshore Energy Inspection 

Programs 

Statement of Stephen L. Caldwell, Director 

Homeland Security and Justice 

and 

Frank Rusco, Director 

Natural Resources and Environment 

For Release on Delivery 

Expected at 10:00 a.m. EDT 

Wednesday, November 2, 2011 

GAO-12-203T 
 United States Government Accountability Office 

Highlights of GAO-12-203T, a testimony 

before the Subcommittee on Coast Guard and 

Maritime Transportation, Committee on 

Transportation and Infrastructure, House of 

Representatives 

November 2, 2011 

DEEPWATER HORIZON 

Coast Guard and Interior Could Improve Their 

Offshore Energy Inspection Programs 

Why GAO Did This Study 

The April 2010 explosion of the

Deepwater Horizon, a mobile offshore 

drilling unit (MODU), showed that the 

consequences of an incident on an 

offshore energy facility can be 

significant. A key way to ensure that 

offshore energy facilities are meeting 

applicable security, safety, and 

production standards is through 

conducting periodic inspections of the 

facilities. The Coast Guard and the 

Department of the Interior (Interior) 

share oversight responsibility for 

offshore energy facilities. The Coast 

Guard is to conduct security 

inspections of such facilities, whereas 

based on an agreement between the 

two agencies, Interior is to conduct 

safety compliance inspections on some 

offshore facilities on behalf of the 

Coast Guard as well as its own 

inspections to verify production. This 

testimony addresses: (1) the extent to 

which the Coast Guard has conducted 

security inspections of offshore energy 

facilities, and what additional actions 

are needed; (2) the extent to which 

Interior has conducted inspections of 

offshore energy facilities, including 

those on behalf of the Coast Guard, 

and challenges it faces in conducting 

such inspections; and (3) the Coast 

Guard’s oversight authority of MODUs. 

This testimony is based on GAO 

products issued from September 2008 

through October 2011. 

What GAO Recommends 

GAO has previously recommended 

that the Coast Guard develop policies 

and procedures to monitor and track 

annual security inspections for offshore 

energy facilities and that Interior 

address its human capital challenges. 

The Coast Guard and Interior agreed. 

What GAO Found 

The Coast Guard conducted about one-third of its required annual security 

inspections of offshore energy facilities from 2008 through 2010 and does not 

have procedures in place to help ensure that its field units conduct such 

inspections in accordance with its guidance. The Coast Guard’s guidance does 

not describe specific procedures for the way in which Coast Guard staff should 

track whether annual inspections have been conducted. For example, Coast 

Guard field unit supervisors and marine inspectors GAO interviewed from five of 

the six Coast Guard field units that are to conduct annual security inspections 

said that they do not maintain any tool to track whether such inspections had 

been conducted. GAO recommended in October 2011 that, among other things, 

the Coast Guard develop policies and procedures to monitor and track annual 

security inspections. The Coast Guard concurred and stated that it is planning to 

update its guidance for field units to address these issues. 

Interior’s inspection program has not consistently met its internal targets for 

production inspections, and faces human capital and reorganization challenges, 

but has met its limited target for compliance inspections conducted for the Coast 

Guard. In March 2010, GAO found that for four district offices it reviewed, Interior 

only met its production inspection goals once during fiscal years 2004 through 

2008. Further, GAO reported that difficulties in hiring, training, and retaining key 

staff had contributed to challenges in meeting its inspections goals. However, in 

recent years, Interior reported that it met its 10 percent target to conduct 

compliance inspections of staffed, fixed offshore energy facilities on behalf of the 

Coast Guard. In fiscal year 2010, Interior reported that it exceeded its target and 

conducts such inspections on 169 of the 1,021 staffed, fixed offshore energy 

facilities and has met this target for such inspections for the previous 5 years. In 

May 2010, Interior reorganized its bureau responsible for overseeing offshore 

energy activities. In June 2011, GAO reported that while this reorganization may 

eventually lead to more effective operations, GAO is concerned with Interior’s 

ability to undertake this reorganization while meeting its oversight responsibilities. 

Among other things, Interior plans to hire additional staff with expertise in 

inspections and engineering. Amidst these changes, Interior reported that it was 

difficult to determine how many inspections it would conduct in fiscal year 2012. 

The Coast Guard has limited authority regarding the security of MODUs registered 

to foreign countries, such as the Deepwater Horizon. MODUs are subject to Coast 

Guard security regulations if (1) they are self-propelled or (2) they meet specific 

production or personnel levels. Whereas the Coast Guard may physically inspect a 

U.S.-flagged MODU to ensure compliance with applicable security requirements, 

the Coast Guard’s oversight of foreign-flagged, self-propelled MODUs, such as the 

Deepwater Horizon, is more limited. The Coast Guard is conducting a study 

designed to help determine whether additional actions could better ensure the 

security of offshore energy facilities, including MODUs. Further, the Coast Guard 

has implemented a risk-based oversight policy for all MODUs to address safety 

and environmental protection issues. Although this policy does not directly address 

security, increased oversight resulting from this policy could help mitigate the risk 

of a terrorist attack to a MODU. View GAO-12-203T. For more information, 

contact Stephen L. Caldwell at (202) 512-9610 

or caldwells@gao.gov and Frank Rusco at 

(202) 512-3841 or ruscof@gao.gov. 
 

Page 1 GAO-12-203T 

Chairman LoBiondo, Ranking Member Larsen, and Members of the 

Subcommittee: 

We are pleased to be here today to discuss oversight and inspections of 

offshore energy facilities. The April 2010 explosion of the Deepwater 

Horizon mobile offshore drilling unit (MODU) showed that the 

consequences of an incident at offshore energy facilities can be significant. 

The explosion resulted in 11 deaths, serious injuries, and the largest oil 

spill in the history of the United States. Recent reports on the Deepwater 

Horizon incident, including the Incident Specific Preparedness Review, On 

Scene Coordinator Report, and Joint Investigation Team Report, have 

raised questions about the oversight of such offshore energy facilities.1 Our 

recent work raises similar concerns about federal inspections and related 

oversight of offshore energy facilities and MODUs.2

Offshore energy facilities include facilities that operate on the outer 

continental shelf (OCS) and are generally described as facilities temporarily 

or permanently attached to the subsoil or seabed of the OCS and which 

engage in exploration, development, or production of oil, natural gas, or 

mineral resources.3 There are currently about 3,900 such facilities in the 

Gulf of Mexico, which include fixed and floating offshore energy facilities as 

 

1

U.S. Coast Guard, BP Deepwater Horizon Oil Spill: Incident Specific Preparedness 

Review (Washington, D.C.: January, 2011); On Scene Coordinator Report: Deepwater 

Horizon Oil Spill (Washington, D.C.: September 2011); and Report of Investigation into the 

Circumstances Surrounding the Explosion, Fire, Sinking, and Loss of Eleven Crew 

Members Aboard the Mobile Offshore Drilling Unit Deepwater Horizon in the Gulf of 

Mexico, April 20-22, 2010, Volume I (Washington, D.C.: September 2011). 

2

GAO, Maritime Security: Coast Guard Should Conduct Required Inspections of Offshore 

Energy Infrastructure, GAO-12-37 (Washington, D.C.: October 28, 2011); Oil and Gas: 

Interior’s Restructuring Challenges in the Aftermath of the Gulf Oil Spill, GAO-11-734T 

(Washington, D.C.: June 2, 2011); and Oil and Gas Management: Interior’s Oil and Gas 

Production Verification Efforts Do Not Provide Reasonable Assurance of Accurate 

Measurement of Production Volumes, GAO-10-313 (Washington, D.C.: Mar. 15, 2010). 

3

See 33 C.F.R. § 101.105. The OCS is a designation for all submerged lands extending 

seaward from generally 3 nautical miles off the coastline to at least 200 nautical miles, and 

of which the subsoil and seabed appertain to the U.S. and are subject to its jurisdiction 

and control. See 43 U.S.C. § 1331(a); 33 C.F.R. § 140.10. 
 

well as MODUs.4 The nation’s economy and security are dependent, in 

part, on the domestic offshore exploration and production of oil and natural 

gas that occur at offshore energy facilities. However, if an incident occurs 

at one of these offshore facilities, it could be difficult for the Coast Guard 

and other federal or local agencies to respond quickly because such 

facilities are generally located many miles from shore. 

A key way to ensure that offshore energy facilities are meeting applicable 

security, safety, and environmental standards is through conducting 

periodic inspections of the facilities. The Coast Guard and the 

Department of the Interior (Interior) share oversight responsibility for 

offshore energy facilities. The Coast Guard—a component of the 

Department of Homeland Security—is the lead federal agency 

responsible for maritime security, including the security of offshore energy 

facilities. Interior, through its component agencies, is the lead federal 

agency responsible for enforcing safety, environmental oversight, and 

conservation compliance regarding offshore resources on the OCS.5

Our testimony today will address three main objectives: 

 the extent to which the Coast Guard has conducted security 

inspections of offshore energy facilities, and what additional actions 

are needed; 

 the extent to which Interior has conducted inspections of offshore 

energy facilities, including those on behalf of the Coast Guard, and 

what challenges it faces in conducting such inspections; and 

 

4

A fixed offshore energy facility is a bottom-founded facility permanently attached to the 

seabed or subsoil of the OCS, including platforms, guyed towers, articulated gravity 

platforms, and other substructures. A floating offshore energy facility is a buoyant facility 

securely and substantially moored so that it cannot be moved without special effort. This 

term includes tension leg platforms, spars, semisubmersibles, and shipshape hulls. A 

MODU is a vessel capable of drilling operations for exploring or exploiting subsea oil, 

natural gas, or other minerals. 

5

On October 1, 2011, the Bureau of Ocean Energy Management, Regulation, and 

Enforcement (BOEMRE), reorganized into two independent entities: the Bureau of Ocean 

Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement 

(BSEE). BOEM is responsible for managing development of the nation’s offshore 

resources in an environmentally and economically responsible way, and its activities 

include oversight of leasing, environmental studies, and economic analysis. BSEE is 

responsible for enforcing safety and environmental regulations. More information on this 

reorganization is provided later in this statement. 

Page 2 GAO-12-203T 
 

 the Coast Guard’s oversight authority of MODUs. 

This testimony is based on an October 2011 report on the Coast Guard’s 

efforts to ensure the security of offshore energy facilities6 as well as our 

body of work on Interior’s oil and natural gas leasing and royalty collection 

programs issued from September 2008 through June 2011.7 We 

conducted the performance audit work that supports this statement in 

accordance with generally accepted government auditing standards. 

Detailed information on the scope and methodology for our prior work can 

be found in those reports. Further, we reviewed memorandums of 

understanding or agreement between the Coast Guard and Interior 

regarding how the two agencies regulate offshore energy facilities as well 

as agency documents, such as budget justifications. 

Background 

Memorandum of 

Understanding Regarding 

Jurisdictions on the OCS 

In 2004, the Coast Guard and the Minerals Management Service—a 

component of Interior that was subsequently reorganized into the Bureau 

of Ocean Energy Management, Regulation, and Enforcement (BOEMRE), 

and, most recently, the Bureau of Ocean Energy Management (BOEM) 

and the Bureau of Safety and Environmental Enforcement (BSEE)—

signed a memorandum of understanding (MOU) to delineate inspection 

responsibilities between the agencies. Per the MOU, the Coast Guard is 

responsible for ensuring (1) the safety of life and property on offshore 

energy facilities and vessels engaged in OCS activities; (2) workplace 

safety and health, including enforcement of requirements related to 

personnel, workplace activities, and conditions and equipment on the 

OCS; and (3) security of offshore energy facilities. The MOU assigns 

Interior responsibility for, among other things, managing the nation’s oil, 

natural gas, and other mineral resources on the OCS in a safe and 

environmentally sound manner. 

 

6

GAO-12-37. 

7

GAO-11-734T; GAO-10-313; and GAO, Data Management Problems and Reliance on 

Self-Reported Data for Compliance Efforts Put MMS Royalty Collections at Risk, 

GAO-08-893R (Washington, D.C.: Sept. 12, 2008). 

Page 3 GAO-12-203T 
 

In addition to delineating inspection responsibilities between the Coast 

Guard and Interior, the MOU is further divided into five memorandums of 

agreement, one of which addresses the agencies’ responsibilities where 

jurisdiction overlaps. In accordance with this memorandum of agreement, 

the Coast Guard is the lead agency with responsibility for the inspection 

and testing of all marine and lifesaving equipment onboard fixed and 

floating offshore energy facilities and MODUs, and Interior is the lead 

agency with responsibility for the inspection and testing of all production 

and drilling equipment on these facilities. The Coast Guard, however, had 

authorized Interior (specifically, what was then the Minerals Management 

Service) to perform inspections of fixed offshore energy facilities and to 

enforce Coast Guard regulations applicable to such facilities. For 

example, the Coast Guard is to conduct an initial inspection of each new 

fixed offshore energy facility to determine whether it is compliant with 

Coast Guard safety regulations. However, after the initial inspection, the 

Coast Guard has authorized Interior’s inspectors to conduct such safety 

inspections on behalf of the Coast Guard and enforce Coast Guard 

regulations applicable to those facilities as a means to avoid duplicating 

functions, reduce federal costs, and increase oversight for Coast Guard 

compliance without increasing the frequency of inspections. Therefore, 

with respect to fixed offshore energy facilities, the only inspections for 

which the Coast Guard is exclusively responsible beyond the initial safety 

inspection are the annual security inspections, to the extent that these 

facilities meet the applicable criteria, as described below. The Coast 

Guard continues to have responsibility for conducting inspections and 

enforcing its regulations on floating offshore energy facilities and MODUs. 

Coast Guard’s Security 

Inspection Responsibilities 

In accordance with federal laws, agreements between the Coast Guard 

and Interior described above, and Coast Guard guidance, Coast Guard is 

responsible for conducting annual security inspections of offshore energy 

facilities that meet or exceed any one of three thresholds for production or 

personnel—(1) producing greater than 100,000 barrels of oil a day, (2) 

producing more than 200 million cubic feet of natural gas per day, or (3) 

hosting more than 150 persons for 12 hours or more in each 24-hour 

Page 4 GAO-12-203T 
 

period continuously for 30 days or more.8 We refer to the 57 offshore 

energy facilities that met or exceeded these thresholds at some point 

from 2008 through 2010—and were therefore subject to security 

inspections during those years—as “OCS facilities.”9 Of these 57 OCS 

facilities, all of which are located in the Gulf of Mexico, 41 are fixed OCS 

facilities and 16 are floating OCS facilities.10

Staff at Coast Guard headquarters oversee and develop policies and 

procedures for field staff to follow when conducting security inspections of 

OCS facilities and to assist affected owners and operators so that they 

can comply with maritime security regulations. Among other things, Coast 

Guard marine inspectors in the field units conduct security inspections of 

OCS facilities by taking helicopter rides to facilities that can range up to 

200 miles offshore. Once arriving, inspectors are to conduct on-site 

interviews with facility security officers and observe operations to verify 

whether required security measures are in place. As of August 2011, the 

 

8

See 33 C.F.R. § 106.105(a). In accordance with the Maritime Transportation Security Act 

(MTSA) of 2002, as amended, and its implementing security regulations, codified at parts 

101 to 106 of title 33, Code of Federal Regulations, the Coast Guard undertakes efforts to 

ensure maritime security by, among other things, reviewing and approving security plans 

produced by owners and operators of regulated vessels and facilities. See Pub. L. No. 

107-295, 116 Stat. 2064 (2002). An amendment by the Security and Accountability For 

Every (SAFE) Port Act of 2006 provides that, subject to the availability of appropriations, 

the Secretary of the Department of Homeland Security shall verify the effectiveness of 

facility security plans at least twice a year, one of which shall be an inspection of the 

facility conducted without notice. See Pub. L. No. 109-347, § 103, 120 Stat. 1884, 1888 

(2006) (codified at 46 U.S.C. § 70103(c)(4)(D)).The Coast Guard undertakes to assess 

the effectiveness of such facility plans by, for example, conducting security inspections.” 

9

Facilities that meet these thresholds are subject to 33 C.F.R. part 106, which include 

additional security related requirements. For more information on the security of facilities 

regulated under part 106, see GAO-12-37. 

10A fixed OCS facility is a fixed offshore energy facility that meets at least one of the 

applicable threshold criteria to be regulated for security under 33 C.F.R. part 106. Fixed 

OCS facilities include (1) production platforms that produce oil and/or natural gas; and (2) 

transmission platforms, whose primary purpose is the pumping, maintenance, and/or 

inspection of transfer pipelines. A floating OCS facility is a floating offshore energy facility 

that meets at least one of the applicable threshold criteria to be regulated for security 

under 33 C.F.R. part 106. This term includes tension leg platforms and permanently 

moored semisubmersibles or shipshape hulls, but does not generally include MODUs or 

other vessels. However, for the purposes of this report, we include non-self-propelled 

MODUs that meet relevant production or personnel thresholds in the category of floating 

OCS facilities because such MODUs are also regulated for security under 33 C.F.R. part 

106. From 2008 through 2010, there was one such MODU that was regulated for security 

under 33 C.F.R. part 106. 

Page 5 GAO-12-203T 
 

Coast Guard had about 12 active marine inspectors who were qualified to 

conduct security inspections of OCS facilities. These inspectors work out 

of six field units near the Gulf of Mexico—Mobile, Alabama; Morgan City, 

Louisiana; New Orleans, Louisiana; Corpus Christi, Texas; Galveston, 

Texas; and Port Arthur, Texas. 

Interior’s Inspection 

Responsibilities 

In line with the responsibilities set forth in the MOU discussed above and 

to ensure compliance with applicable laws and regulations, Interior has an 

offshore oil and natural gas inspection program intended to verify that the 

operator complies with Interior regulations and requirements at a well site. 

Interior’s offshore oil and natural gas oversight includes inspections of 

production activities including drilling, regular production activities, 

meters, abandoned platforms, and pipelines, among other things.11 Also 

in accordance with the MOU between the two agencies, Interior conducts 

both “full” and “limited” inspections of fixed offshore energy facility on 

behalf of the Coast Guard. During the full inspections of staffed, fixed 

offshore energy facilities, Interior’s inspectors are to review all applicable 

Coast Guard requirements, which include 27 safety items. During limited 

inspections, which are to be conducted on all fixed offshore energy 

facilities in the course of conducting inspections at those facilities for 

Interior’s purposes, Interior’s inspectors are to review less than half of the 

safety items. During these inspections, Interior’s inspectors are to, among 

other things, check for safety items such as the presence of equipment 

designed to prevent tripping, slipping, or drowning. 

 

11For the purposes of this testimony we refer to “production inspections,” which are 

measurement-related inspections that Interior defines as “site security” inspections. These 

inspections are designed to verify that offshore platforms and other measurement facilities 

meet Interior regulations concerning the handling of oil and gas production. Site security 

inspections typically include a visual examination of piping to verify that oil and gas do not 

flow around—or bypass—measurement meters. 

Page 6 GAO-12-203T 
 

Coast Guard OCS facility guidance provides that Coast Guard personnel 

are to conduct security inspections of OCS facilities annually, but our 

analysis of inspections data show that the Coast Guard has not 

conducted such inspections for most of these OCS facilities.12 For 

example, the Coast Guard conducted about one-third of the required 

annual inspections of OCS facilities from 2008 through 2010 (see table 

1).13 Specifically, our analysis of Coast Guard inspections data shows 

that in 2008 the Coast Guard inspected 7 of 56 OCS facilities, which was

13 percent of the required annual inspections. More recently, in 2010, th

Coast Guard inspected 23 of 51 (45 percent) OCS facilities that the Coast 

Guard should have inspected.

e 

 

14

Coast Guard’s 

Security Inspection 

Program Has Faced 

Challenges and Could 

Be Improved 

12We use the term OCS facility guidance to refer to the Coast Guard’s NVIC 05-03,

Implementation Guidance for the Maritime Security Regulations Mandated by the Maritime 

Transportation Security Act of 2002 for Outer Continental Shelf Facilities (December 15, 

2003). 

13We present security inspection data only from 2008 through 2010. We also analyzed 

security inspection data for 2011 (through June 24, 2011), but did not report on this 

information because most of the annual security inspections on OCS facilities are typically 

not conducted until the fall. From January through June 2011, the Coast Guard conducted 

four inspections of the OCS facilities. 

14These data come from the Coast Guard’s Maritime Information for Safety and Law 

Enforcement database. As discussed in GAO-12-37, we found that the database had 

limitations that make it difficult to determine if security inspections were conducted. To 

address these limitations, we worked with Coast Guard officials and took additional steps 

to assess the reliability of the data, which are described in that report. We recommended 

that the Coast Guard make improvements to the database or its guidance to better ensure 

that all OCS facilities are accurately and consistently identified and that the results of 

security inspections are consistently recorded to allow for better data analyses and 

management of the security inspections process. The Coast Guard concurred with this 

recommendation. 

Page 7 GAO-12-203T 
 

Table 1: Security Inspections Required and Conducted of OCS Facilities, Calendar Year 2008 through 2010 

2008 2009 2010 

Coast Guard field unit 

Inspection

s required 

Inspections 

conducted

Inspections 

required

Inspections 

conducted

Inspections 

required

Inspections 

conducted

Corpus Christi 2 1 2 1 2 1

Galveston 5 2 4 3 4 4

Mobile 1 0 1 0 1 0

Morgan City 31 3 32 7 31 7

New Orleans 10 1 7 2 6 5

Port Arthur 7 0 7 7 7 6

Total (%) 56 7 (13%) 53 20 (38%) 51 23 (45%)

Source: GAO analysis of Coast Guard data. 

Note: The number of OCS facilities fluctuates year-to-year based on whether a facility continues to 

meet or exceed the threshold criteria. For example, in 2009 there were 53 OCS facilities, but in 2010, 

2 of the facilities became “deregulated.” Once a facility (1) is below the production thresholds for a 

year or below the personnel threshold for 30 days; (2) has informed the Coast Guard; and (3) 

provided relevant documentation supporting that the facility is below the thresholds, the Coast Guard 

considers it no longer subject to 33 C.F.R. part 106 requirements and the facility will no longer be 

subject to security inspections. 

Our analysis of Coast Guard inspections data shows that the Coast 

Guard generally inspected a greater percentage of floating OCS facilities 

than fixed OCS facilities (see table 2). For example, from 2008 through 

2010, the Coast Guard conducted annual security inspections of 54 

percent of floating OCS facilities compared to 24 percent of fixed OCS 

facilities. During our interviews with Coast Guard marine inspectors and 

their supervisors, we learned that some field units did not know that they 

were responsible for conducting security inspections of these fixed 

facilities, approximately one-third of which are not staffed because 

operations are automated. For example, marine inspectors in the Coast 

Guard field unit that oversees more than half of the OCS facilities stated 

that they had only recently learned that they were responsible for 

conducting security inspections of fixed OCS facilities. These marine 

inspectors stated that they thought that security inspections of the fixed 

OCS facilities within their area of responsibility were carried out by 

another field unit and that they had only been conducting annual security 

inspections of the floating OCS facilities. Further, other Coast Guard 

officials stated that it is easier to arrange for security inspections of 

floating OCS facilities because marine inspectors visit those facilities 

more frequently for other types of inspections, such as hull or safety 

inspections, whereas for fixed OCS facilities, the Coast Guard is required 

to conduct an initial safety inspection of each new facility and then is 

Page 8 GAO-12-203T 
 

solely responsible for conducting annual security inspections of fixed 

OCS facilities once a year for annual security inspections.15

Table 2: Security Inspections Required and Conducted at OCS Facilities, by Type, 

Calendar Year 2008 through 2010 

Type Inspections required Inspections conducted Percentage

Fixed OCS facility 119 28 24%

Floating OCS facility 41 22 54%

Source: GAO analysis of Coast Guard data. 

The Coast Guard does not have procedures in place to help ensure that 

its field units conduct annual security inspections of OCS facilities 

annually in accordance with its guidance. Standards for Internal Control in 

the Federal Government state that internal controls should include control 

activities, such as policies, procedures, and mechanisms that help ensure 

management directives are carried out.16 However, the Coast Guard does 

not have such control activities in place. For example, the Coast Guard’s 

OCS facility guidance does not describe specific procedures for the way 

in which Coast Guard staff should track whether annual security 

inspections have been conducted. Further, Coast Guard district officials 

and most local field unit supervisors and marine inspectors we spoke with 

do not maintain any kind of tool, such as a spreadsheet or calendar, to 

remind them when annual security inspections of OCS facilities are due. 

Coast Guard officials from five of the six Coast Guard field units that 

conduct annual security inspections of OCS facilities told us that they do 

not maintain a spreadsheet or other management tool to track whether 

 

15As noted above, per the memorandum with Interior, the Coast Guard is solely 

responsible for the initial safety inspection of fixed offshore energy facilities, which 

includes fixed OCS facilities, after which Interior is authorized to conduct annual safety 

inspections of and enforce Coast Guard regulations applicable to such facilities. However, 

for floating facilities the Coast Guard still carries out various inspections throughout the 

year, including hull inspections. 

16GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). These standards, issued pursuant to the 

requirements of the Federal Managers’ Financial Integrity Act of 1982 (FMFIA), provide 

the overall framework for establishing and maintaining internal control in the federal 

government. Also pursuant to FMFIA, the Office of Management and Budget (OMB) 

issued Circular A-123, revised December 21, 2004, to provide the specific requirements 

for assessing the reporting on internal controls. Internal control standards and the 

definition of internal control in OMB Circular A-123 are based on GAO’s Standards for 

Internal Control in the Federal Government.

Page 9 GAO-12-203T 
 

annual security inspections had been conducted. For example, at three of 

these locations, Coast Guard officials told us they rely on owners and 

operators to inform them when inspections were due rather than 

independently tracking when annual inspections were due. As a result of 

no procedures or control activities to manage the offshore security 

inspection program, the Coast Guard is not complying with its established 

maritime security requirements for most of the OCS facilities. Without 

conducting annual inspections of OCS facilities, the Coast Guard may not 

be meeting one of its stated goals of reducing the risk and mitigating the 

potential results of an act that could threaten the security of personnel, 

the OCS facility, the environment, and the public. 

In our October 2011 report, we made a recommendation, among others, 

that the Coast Guard develop policies and procedures to monitor and 

track annual security inspections for OCS facilities to better ensure that 

such inspections are consistently conducted. The Coast Guard concurred 

with this recommendation and stated that it is planning to update its OCS 

facility policy guidance for field units to monitor and track annual security 

inspections for OCS facilities to better ensure that such inspections are 

consistently conducted. 

Interior’s inspection program has not consistently met its internal targets 

for production inspections, as we have reported in recent years. In 2008, 

we reported that Interior had not met its targets for conducting production 

inspections—examining metering equipment used to measure oil and 

natural gas production. Interior officials responsible for conducting 

production inspections in the Gulf of Mexico told us they completed about 

half of the required inspections in 2007, raising uncertainty about the 

accuracy of oil and natural gas measurement.17 In March 2010, we found 

that Interior had not routinely met its oil and natural gas production 

inspection goals. Specifically, we reported that Interior met its inspection 

goals only once—in 2008—during fiscal years 2004 through 2008, for four 

Interior’s Inspection 

Program Has Faced 

Challenges in Meeting 

Some Inspection 

Targets 

 17GAO, Mineral Revenues: Data Management Problems and Reliance on Self-Reported 

Data for Compliance Efforts Put MMS Royalty Collections at Risk, GAO-08-893R 

(Washington, D.C.: Sept. 12, 2008). 

Page 10 GAO-12-203T 
 

district offices we reviewed in the Gulf of Mexico and the Pacific.18 Interior 

inspection staff told us that, during these years, there was a shortage of 

inspectors and that inspections were delayed because of cleanup related 

to Hurricanes Katrina and Rita in 2005. We are unable to present data for 

these years because, according to Interior officials, district offices often 

did not correctly record production inspections on their inspection forms; 

since then, Interior instituted a policy to record inspections correctly. Also 

in March 2010, we reported that Interior had encountered persistent 

human capital challenges in its inspection programs designed to ensure 

accurate measurement of oil and natural gas from federal lands and 

waters.19 In particular, we reported that Interior was hindered by 

difficulties in hiring, training, and retaining key inspections staff. We 

reported that this difficulty in attracting and retaining key staff contributed 

to challenges in meeting its responsibilities to conduct inspections, 

thereby, reducing its oversight of oil and gas development on federal 

leases, potentially placing the environment at risk. In our report, we made 

a number of recommendations to Interior to address these issues, some 

of which Interior is already in the process of implementing. 

Although Interior has not consistently met its internal targets for 

production inspections, it has exceeded its target for Coast Guard 

compliance inspections. For fiscal year 2010, the most recent year 

reported, Interior’s goal was to conduct full inspections covering all 

applicable Coast Guard regulations on 10 percent of the estimated 1,000 

staffed, fixed offshore energy facilities. For fiscal year 2010, Interior 

reported that it more than met this goal by conducting such inspections on 

169 of the 1,021 staffed, fixed offshore energy facilities—about 17 

percent.20 Further, Interior reported that it has met internal targets for 

 

18In 2008, Interior changed its goal for measurement inspections for the Gulf of Mexico, its 

major production area. In 2008, the goal was to inspect the 100 highest-volume 

measurement locations in the Gulf. From 2004 through 2007, OEMM’s goals were to 

conduct measurement inspections on 100 percent of all measurement locations. During 

those years, the agency performed about half of the inspections required to meet these 

annual goals. 

19GAO, Oil and Gas Management: Interior’s Oil and Gas Production Verification Efforts Do 

Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes, 

GAO-10-313 (Washington, D.C.: Mar. 15, 2010). 

20Interior officials told us that Interior has never received additional funding to cover the 

inspections agreed upon in the MOU, and that Interior may review the MOU in the future 

based on level of future funding and its own inspection mandates. 

Page 11 GAO-12-203T 
 

these inspections for the previous 5 years. In addition, Interior reported 

that in fiscal year 2010 its inspectors also conducted limited inspections 

for compliance with Coast Guard regulations on all other fixed offshore 

energy facilities in the course of inspecting these facilities for their own 

purposes. 

Interior has recently been reorganizing its offshore inspection program, 

which has resulted in some uncertainty regarding its inspection 

capabilities. After the Deepwater Horizon incident in April 2010, Interior 

initiated a reorganization of its bureau responsible for overseeing offshore 

oil and natural gas activities. Specifically, in May 2010, Interior 

reorganized its Minerals Management Service—the bureau previously 

tasked with overseeing offshore oil and natural gas activities—and 

created the Bureau of Ocean Energy Management, Regulation, and 

Enforcement (BOEMRE). On October 1, 2011, Interior was further 

reorganized by dividing BOEMRE into two separate bureaus, the Bureau 

of Ocean Energy Management (BOEM)—which oversees leasing and 

resource management, and the Bureau of Safety and Environmental 

Enforcement (BSEE)—which is responsible for issuing oil and natural gas 

drilling permits and conducting inspections. We have reported that Interior 

could face challenges during its reorganization. In June 2011, we testified 

that Interior’s reorganization of activities previously overseen by MMS will 

require time and resources and may pose new challenges.21 We stated 

that while this reorganization may eventually lead to more effective 

operations, organizational transformations are not simple endeavors. We 

also expressed concern with Interior’s ability to undertake this 

reorganization while meeting its oil and natural gas oversight 

responsibilities. We believe that these concerns are still valid today. 

While Interior was reorganizing its oversight responsibilities, it was also 

reforming its inspection program and, according to Interior, these reforms 

have created uncertainty regarding future oversight inspections. As part 

of the inspections program reform, Interior plans to hire additional staff 

with expertise in oil and natural gas inspections and engineering and 

develop new training programs for inspectors and engineers involved in 

its safety compliance and enforcement programs. Specifically, Interior 

reported in February 2011 that it was seeking to hire additional inspectors 

for its offshore inspection program to meet its needs during fiscal years 

 

21GAO-11-734T. 

Page 12 GAO-12-203T 
 

2011 and 2012.22 Interior reported that it had 62 inspectors—which, it 

reported, was not sufficient to provide the level of oversight needed for 

offshore oil and natural gas production. Interior has also requested 

additional funding to implement these changes. Further, Interior has 

stated that its new inspection program may involve inspectors witnessing 

more high-risk activities, and in-depth examination of some aspects of 

Gulf oil and natural gas production, and so inspections may take more 

time in the future and be more difficult to fold into the existing inspection 

schedules. As a result, Interior reported that it was difficult to determine 

how many inspections would be conducted in fiscal year 2012. 

While the Deepwater Horizon incident was not the result of a breakdown 

in security procedures or the result of a terrorist attack, the loss of the 

Deepwater Horizon, a foreign-flagged MODU, and the resulting oil spill 

have raised concerns about U.S. oversight over MODUs that are 

registered to foreign countries.23 In this regard, various circumstances 

govern the extent to which the Coast Guard oversees the security of 

MODUs. In general, MODUs operating on the OCS implement security 

measures consistent with applicable security requirements—specifically, 

they implement requirements in accordance with U.S. security regulations 

and the International Maritime Organization’s International Ship and Port 

Facility Security (ISPS) Code.24 Depending on the particular 

characteristics and operations of the MODU—for example, its method of 

propulsion or its personnel levels—it may be subject to Coast Guard 

security regulations governing vessels (33 C.F.R. part 104) or OCS 

facilities (33 C.F.R. part 106). MODUs will fall under applicable Coast 

The Coast Guard Has 

Limited Authority 

over the Security of 

MODUs Registered to 

Foreign Countries 

 22The United States Department of the Interior, Bureau of Ocean Energy Management, 

Regulation and Enforcement, Budget Justifications and Performance Information, Fiscal 

Year 2012 (Washington, D.C.: February 18, 2011), 28. 

23The Deepwater Horizon was registered to the Republic of the Marshall Islands. 

24The Coast Guard’s security regulations—33 C.F.R. parts 101 through 106—are 

consistent with the ISPS Code. The International Maritime Organization is the international 

body responsible for improving maritime safety. It primarily regulates maritime safety and 

security through the International Convention for the Safety of Life at Sea, 1974. Among 

other things, the ISPS Code establishes an international framework, involving cooperation 

between contracting governments, government agencies, local administrations, and the 

shipping and port industries to detect and assess security threats and take preventive 

measures against security incidents affecting ships or port facilities in international trade, 

and to ensure confidence that adequate and proportionate maritime security measures are 

in place. 

Page 13 GAO-12-203T 
 

Guard regulations if (1) they are self-propelled—that is, they are capable 

of relocating themselves, as opposed to other types that require another 

vessel to tow them—in which case they are subject to the ISPS Code and 

33 C.F.R. part 104, or (2) they meet production or personnel levels 

specified in 33 C.F.R. part 106. Whereas the Coast Guard may physically 

inspect a U.S.-flagged MODU to ensure compliance with applicable 

security requirements, the Coast Guard’s oversight of foreign-flagged, 

self-propelled MODUs, such as the Deepwater Horizon, is more limited.25

In the case of self-propelled, foreign-flagged MODUs, the Coast Guard 

will assess compliance with part 104 by reviewing a MODU’s International 

Ship Security Certificate, which certifies compliance with the ISPS Code. 

While Coast Guard inspectors may also observe security measures and 

ask security related questions of personnel, absent consent from the flag 

state, the inspectors generally do not have authority to review a selfpropelled, foreign-flagged MODU’s vessel security plan. In all other cases 

where MODUs are subject to Coast Guard security requirements, the 

Coast Guard assesses compliance with part 104 or part 106 through 

annual security inspections.26 Figure 1 illustrates the types of MODUs, 

the applicable security requirements, and the means by which the Coa

Guard assesses compliance.

st 

 

27

25As a self-propelled, foreign-flagged MODU, the Deepwater Horizon was subject to the 

requirements of the ISPS Code. In July 2009, Coast Guard inspectors conducted a 

certificate of compliance examination on the Deepwater Horizon in which the inspectors 

reviewed all applicable licenses and other compliance documents, including those related 

to security; the inspectors found no deficiencies during this examination. 

26The Deepwater Horizon was self-propelled and foreign-flagged. 

27For more detail on the applicable security requirements for MODUs, see GAO-12-37. 

Page 14 GAO-12-203T 
 

Figure 1: Coast Guard Security Requirements Applicable to MODUs Operating in U.S. Federal Waters 

Self-Propelled

(ISPS Code Applicable)

U.S.-flagged Foreign-flagged

33 C.F.R. part 104 33 C.F.R. part 104

The Coast Guard

assesses compliance

through annual

security inspectionsa

The Coast Guard

assesses compliance

by verifying that the

MODU has a valid

International Ship 

Security Certificate, 

which reflects 

compliance with 

the ISPS Code

1 MODUb 9 MODUsb

Foreign-flagged

33 C.F.R. part 106

Applicable

if threshold 

criteria are met

33 C.F.R. part 106

Not Applicable

if threshold criteria

are not met

33 C.F.R. part 106

Applicable if 

threshold criteria 

are met

33 C.F.R. part 106

Not Applicable

if threshold criteria

are not met

The Coast Guard

assesses compliance

through annual

security inspections 

The Coast Guard does 

not assess compliance 

Coast Guard

assesses compliance

through annual

security inspections 

The Coast Guard does 

not assess compliance

0 MODUsb 5 MODUsb 0 MODUsb 34 MODUsb 

Not Self-Propelled

(ISPS Code Not Applicable)

U.S.-flagged

Source: GAO analysis of ISPS Code, 33 C.F.R. parts 104 and 106, and Coast Guard MISLE data, and U.S. Coast Guard. 

a

A self-propelled, U.S.-flagged MODU must also comply with the ISPS Code and possess an 

International Ship Security Certificate if it is on an international voyage. 33 C.F.R. part 104 security 

regulations, which govern self-propelled, U.S.-flagged MODUs, are consistent with the ISPS Code. 

b

There are no MODUs operating in U.S. federal waters that meet the threshold criteria for being 

subject to 33 C.F.R. part 106. The numbers for other categories of MODUs shown above—those that 

are subject to 33 C.F.R. part 104 and those that do not meet the threshold criteria for being subject to 

33 C.F.R. part 106—are the number of MODUs in each category that are, according to the Coast 

Guard, drilling in the Gulf of Mexico as of September 23, 2011. 

The Coast Guard may not be fully aware of the security measures 

implemented by self-propelled, foreign-flagged MODUs because of its 

limited oversight of such MODUs. The Coast Guard and BOEMRE, BSEE’s 

predecessor, conducted a joint investigation into the Deepwater Horizon

incident, and the Coast Guard’s report from the investigation emphasized 

the need to strengthen the system of Coast Guard oversight of foreignflagged MODUs. The Coast Guard’s report from the joint investigation 

stated that the Coast Guard’s regulatory scheme for overseeing the safety 

of foreign-flagged MODUs is insufficient because it defers heavily to the 

Page 15 GAO-12-203T 
 

flag state to ensure safety. While the investigation focused on issues that 

were not related to security, such as safety, these findings may have 

implications for security oversight because the Coast Guard also relies on 

the flag state to carry out responsibilities for assessing compliance with 

security requirements. The joint investigation team recommended, among 

other things, that the Commandant of the Coast Guard develop more 

comprehensive inspection standards for foreign-flagged MODUs operating 

on the OCS. The Commandant concurred with this recommendation and 

has chartered an Outer Continental Shelf Activities Matrix Team, which has 

been tasked with providing recommendations on the establishment and 

implementation of an enhanced oversight regime for foreign-flagged 

MODUs on the U.S. OCS. 

According to Coast Guard officials, it is likely that MODUs operating in 

deepwater would be subject to security requirements because the 

industry is increasingly using dynamically positioned MODUs that are 

able to maintain position without being anchored to the seabed, and as 

such MODUs are self-propelled, they would be subject to the ISPS Code 

and 33 C.F.R. part 104.28 Additionally, the Coast Guard is conducting a 

study designed to help determine whether additional actions could better 

ensure the security of offshore energy infrastructure in the Gulf of Mexico, 

including MODUs. This study is expected to be completed in the fall of 

2011. Gaining a fuller understanding of the security risks associated with 

MODUs could better inform Coast Guard decisions and potentially 

improve the security of these facilities. Further, the Coast Guard has 

implemented a new risk-based oversight policy for MODUs, including 

foreign-flagged MODUs, to address safety and environmental protection 

issues. This policy includes a targeting matrix to assist inspectors in 

determining whether a foreign-flagged MODU may require increased 

oversight, based on inspection history or other related factors, through 

more frequent examinations by the Coast Guard. Additionally, the policy 

calls on Coast Guard field units to conduct random, unannounced 

examinations of a portion of all MODUs in their areas of responsibility. 

Although this policy does not directly address security, increased 

oversight resulting from this new policy could help mitigate some of the 

ways in which a MODU might be at risk of a terrorist attack. 

 

28According to a 2006 report from Interior’s Mineral Management Service, deepwater is 

traditionally defined as those water depths greater than or equal to 1000 feet. See 

Department of the Interior, Minerals Management Service, Leasing Oil and Natural Gas 

Resources: Outer Continental Shelf (Washington, D.C.: 2006). 

Page 16 GAO-12-203T 
 

Chairman LoBiondo, Ranking Member Larsen, and Members of the 

Subcommittee, this completes our prepared statement. We would be 

happy to respond to any questions you may have at this time. 

For questions about this statement, please contact Stephen L. Caldwell at 

(202) 512-9610 or caldwells@gao.gov, or Frank Rusco at (202) 512-3841 

or ruscof@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this 

statement. In addition to the contacts named above, key contributors to 

this testimony were Christopher Conrad, Assistant Director; Jon 

Ludwigson, Assistant Director; Lee Carroll and Erin O’Brien, analysts-incharge; and Alana Finley. Thomas Lombardi provided legal support and 

Lara Miklozek provided assistance in testimony preparation. 

GAO Contacts and 

Staff 

Acknowledgments 

Page 17 GAO-12-203T 
Related GAO Products 

Page 18 GAO-12-203T 

Related GAO Products 

Maritime Security: Coast Guard Should Conduct Required Inspections of 

Offshore Energy Infrastructure. GAO-12-37. Washington, D.C.: 

October 28, 2011. 

Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving but 

Uncertain Federal Financial Risks. GAO-12-86. Washington, D.C.: 

October 24, 2011. 

Maritime Security: Progress Made, but Further Actions Needed to Secure 

the Maritime Energy Supply. GAO-11-883T. Washington, D.C.: 

August 24, 2011. 

Oil and Gas: Interior’s Restructuring Challenges in the Aftermath of the 

Gulf Oil Spill. GAO-11-734T. Washington, D.C.: June 2, 2011. 

Maritime Security: DHS Progress and Challenges in Key Areas of Port 

Security. GAO-10-940T. Washington, D.C.: July 21, 2010. 

Oil and Gas Management: Interior’s Oil and Gas Production Verification 

Efforts Do Not Provide Reasonable Assurance of Accurate Measurement 

of Production Volumes. GAO-10-313. Washington, D.C.: March 15, 2010. 

Mineral Revenues: Data Management Problems and Reliance on SelfReported Data for Compliance Efforts Put MMS Royalty Collections at 

Risk. GAO-08-893R. Washington, D.C.: September 12, 2008. 

Maritime Security: Coast Guard Inspections Identify and Correct Facility 

Deficiencies, but More Analysis Needed of Program’s Staffing, Practices, 

and Data. GAO-08-12. Washington, D.C.: February 14, 2008. 

Maritime Security: Federal Efforts Needed to Address Challenges in 

Preventing and Responding to Terrorist Attacks on Energy Commodity 

Tankers. GAO-08-141. Washington, D.C.: December 10, 2007. 

Maritime Security: The SAFE Port Act: Status and Implementation One 

Year Later. GAO-08-126T. Washington, D.C.: October 30, 2007. 

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