IRFA for RIN 1010–AD68 

December 27, 2010 

INITIAL REGULATORY FLEXIBILITY ANALYSIS, 

RIN 1010–AD68, SAFETY MEASURES INTERIM FINAL RULE 

Agency: Department of the Interior, Bureau of Ocean Energy Management, Regulation 

and Enforcement (BOEMRE). 

Regulatory Citations: The Safety Measures Rule is amending the drilling regulations at 

30 CFR 250, subparts D, E, F, O, and Q. The rule is titled RIN 1010–AD68, Interim 

Final Rule, Increased Safety Measures for Energy Development on the Outer Continental 

Shelf and was published as an Interim Final Rule (IFR). It was published in the Federal 

Register on October 14, 2010 (75 FR 63346), and comments are being accepted on the 

rule until December 13, 2010. 

Regulations.gov Docket ID: BOEM-2010-0034 

Summary: BOEMRE is publishing this Initial Regulatory Flexibility Analysis (IRFA) to 

aid the public in commenting upon the small business impact of its Safety Measures Rule 

which implemented drilling safety measures for the Outer Continental Shelf (OCS). The 

Bureau’s publication of the rule did not include a full IRFA pursuant to the Regulatory 

Flexibility Act (5 U.S.C. 603). The Regulatory Flexibility Act section of the Procedural 

Matters in the Safety Measures Rule stated that BOEMRE intends to publish a 

Supplementary Initial Regulatory Flexibility Analysis examining the impact of this 

regulation on small entities in greater detail than provided in the preamble. This is the 

analysis referenced in the Safety Measures Rule preamble (75 FR 63365). 

Comment Dates: 

 The comment period on this IRFA is open for 30 days after the date of publication 

of the Notice of Availability in the Federal Register. 

 Comments on this IRFA will be considered and any changes to the regulation 

because of these comments will be included in the RIN 1010–AD68, Increased 

Safety Measures for Energy Development on the Outer Continental Shelf when 

the final regulation is published. 

 The Safety Measures Rule published in the Federal Register on October 14, 2010 

(75 FR 63346), and comments are being accepted on the rule until December 13, 

2010. 

Addresses: You may submit comments on the IRFA by any of the following methods. 

Please use the Regulation Identifier Number (RIN) “1010–AD68, IRFA” as an identifier 

in your message. 

 Federal eRulemaking Portal: http://www.regulations.gov. In the entry titled 

“Enter Keyword or ID,” enter BOEM-2010-0034 then click search. Follow the 

instructions to submit public comments and view other supporting and related 

materials available for this rulemaking. BOEMRE will post all comments for this 

IRFA. 

 Mail or hand-carry comments to the Department of the Interior; Bureau of Ocean 

Energy Management, Regulation and Enforcement; Attention: Regulations and 

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Standards Branch (RSB); 381 Elden Street, MS–4024, Herndon, Virginia 20170–

4817. Please reference “Increased Safety Measures for Energy Development on 

the Outer Continental Shelf, 1010–AD68, IRFA” in your comments and include 

your name and return address. 

For Further Information Contact: Amy C. White, Bureau of Ocean Energy 

Management, Regulation and Enforcement, Office of Offshore Regulatory Programs, 

Regulations and Standards Branch, 703–787–1665, amy.white@boemre.gov. 

Supplementary Information 

BOEMRE has updated the estimated compliance costs and small business impacts from 

the projections reported in the Regulatory Flexibility Analysis of the Safety Measures 

Rule. These changes are minor and mostly result from updated categorization of 

companies operating on the OCS and analysis of the number of wells drilled by small and 

large companies rather than only by lease ownership. Over the last few years there have 

been some notable trends in the Gulf of Mexico. First, several of the new companies 

entering the Gulf of Mexico (GOM) are large foreign companies and not small 

businesses. Second, the number of deepwater wells drilled by small companies has 

increased as capital and technology has become more accessible to small entities. Third, 

a few of the smaller companies with meaningful OCS acreage have either sold their OCS 

assets to larger companies, become wholly owned subsidiaries, or merged with larger 

companies. Cumulatively, these trends result in a greater share of acreage, drilling, and 

production attributed to large companies. 

Our updated analysis shows there are currently about 140 Operators of Federal oil and 

gas OCS leases. Small entities that operate under the requirements of the Safety 

Measures Rule are coded under the Small Business NAICS codes 211111, Crude 

Petroleum and Natural Gas Extraction; and 213111, Drilling Oil and Gas Wells. For 

these NAICS code classifications, a small company is one with fewer than 500 

employees. Based on this criterion applied to the NAICS codes, approximately 90 (64 

percent) of the companies operating on the OCS are considered small companies and 50 

(36 percent) are considered large companies. 

Much of the information in this Supplemental IRFA is covered and discussed in the 

preamble of the Safety Measures Rule and the Benefit-Cost Analysis for the Safety 

Measures Rule. These documents can be found at http://www.regulations.gov under the 

Docket ID: BOEM-2010-0034. This document is not intended to duplicate all the 

explanations and analysis in those documents, but rather meet the requirement and intent 

of the Regulatory Flexibility Act. This IRFA analyzes and considers the impact of the 

Safety Measures Rule on small entities and seeks public comments on those impacts. 

Summary of Small Business Impacts 

We estimate the Safety Measures Rule will impose a recurring operational cost of $183 

million each year on operators drilling OCS wells. The rule will affect every new well 

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drilled after October 14, 2010; some requirements also apply to wells undergoing 

completion, workover, or abandonment operations on the OCS. Every operator both 

large and small must meet the same criteria for these operations regardless of company 

size. However, the overwhelming share of the cost imposed by these regulations will fall 

on the operating companies drilling deepwater wells, which are predominately the larger 

companies. We estimate that about 90 percent of the total costs will be imposed on 

deepwater lessees and operators where small businesses only hold 8 percent of the leases 

and drill 12 percent of the wells. About 10 percent of the total costs will apply to shallow 

water leases where small companies hold 45 percent of OCS leases and also drill 45 

percent of the wells. 

Nonetheless, small companies as both operators and lease-holders will bear meaningful 

costs under these regulations. Of the annual $183 million in annual cost imposed by the 

rule, we estimate that $19.5 million will apply to small businesses in deepwater and $7.4 

million in shallow water. In total we estimate that $27 million or 14.7 percent of the 

regulations’ cost will be borne by small businesses. 

The GOM represents 98 to 99 percent of annual OCS oil and gas drilling activity. Fiscal 

year 2009 aggregate annual GOM OCS oil and gas revenues were $31.3 billion. Using 

the lease ownership profiles of GOM producing wells, we estimate that 87 percent ($27.2 

billion) of the OCS revenues are ultimately received by large companies and 13 percent 

($4.1 billion) by small companies. As a share of fiscal year 2009 revenues, the interim 

final rule will cost approximately 0.57 ($0.156/$27.2) percent of OCS revenue for large 

companies and 0.66 ($0.027/$4.1) percent for small companies. Although the difference 

in these ratios is not significant, small companies may experience a somewhat greater 

economic impact than large companies from the regulation primarily because they have a 

lower production share in deepwater relative to the number of deepwater wells they drill. 

The likely reason for this difference is the migration of smaller companies into deepwater 

as they have accessed the technology and capital required for exploration and 

development. It can take a decade for an economic discovery in deepwater to reach 

production. Additional data on lease ownership, wells drilled, and production can be 

found in Table 1, Table 2, Table 3, and Table 4.

Description of the Reasons that Action by the Agency is Being 

Considered 

The interim final rule establishes regulations based on certain recommendations in the 

May 27, 2010, report from the Secretary of the Interior to the President entitled, 

“Increased Safety Measures for Energy Development on the Outer Continental Shelf” 

(Safety Measures Report). The President directed that the Department of the Interior 

(DOI) develop this report as a result of the Deepwater Horizon event on April 20, 2010. 

This event, which involved a blowout of the BP Macondo well and an explosion on the 

Transocean Deepwater Horizon mobile offshore drilling unit (MODU), resulted in the 

deaths of 11 workers, an oil spill of National significance, and the sinking of the 

Deepwater Horizon MODU. On June 2, 2010, the Secretary of the Interior directed 

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BOEMRE (formerly the Minerals Management Service) to adopt the recommendations 

contained in the Safety Measures Report and to implement them as soon as possible. 

The selected measures from the Safety Measures Report being implemented initially are 

those in the Interim Final Rule, AD–68 Safety Measures Rule. This IRFA is for the 

estimated impacts on small entities from this rulemaking. Some recommendations in the 

Safety Measures Report require additional review by the DOI, and yet other measures 

will be addressed through notice and comment rulemaking, as appropriate. 

The Safety Measures Rule (75 FR 63347) provides a table summarizing the rulemaking 

provisions. 

Description of, and Where Feasible, an Estimate of the Number of 

Small Entities to Which the Rule will Apply 

In order to understand the entities that will be impacted by the Safety Measures Rule, the 

role both operators and lessees play within the OCS oil and gas regulatory structure must 

be understood. While there may be multiple lessees holding an ownership interest, there 

can only be a single OCS operator for drilling or production operations on a lease. 

The designated operator is the responsible party for complying with all regulations and 

ensuring the safety of drilling operations on a lease or unit. The regulations at 30 CFR 

250.105 define “operator” as: 

Operator means the person the lessee(s) designates as having control or management 

of operations on the leased area or a portion thereof. An operator may be a lessee, 

the MMS-approved designated agent of the lessee(s), or the holder of operating rights 

under an MMS-approved operating rights assignment (30 CFR 250.105). 

If there are violations of laws or regulations, the operator will receive the citation or 

civil/criminal penalty. Consistent with the court’s interpretation that the RFA applies to 

entities directly affected by the rulemaking1

, the designated operator is the entity directly 

regulated by BOEMRE and impacted by this rulemaking. 

The regulations at 30 CFR 250.105 defines “lessee” as: 

Lessee means a person who has entered into a lease with the United States to explore 

for, develop, and produce the leased minerals. The term lessee also includes the 

MMS-approved assignee of the lease, and the owner or the MMS-approved assignee 

of operating rights for the lease. 

While the requirements in this rulemaking apply to drilling operations under control of 

the operator, lessees are the project owners and will bear the compliance costs for the 

increased safety measures in this rulemaking. This analysis considers impacts on small 

and large entities based upon the lease ownership profiles for OCS activities because the 

lease owners will bear the cost of these regulations. The three OCS activities analyzed 

are (1) lease ownership, (2) wells drilled, and (3) production. 

 

1

 Mid-Tex Electric Cooperative, Inc., v. FERC (Mid-Tex), 773 F.2d 327 (D.C. Cir. 1985). 

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Additionally, this rulemaking requires drilling contractors to preserve certain 

maintenance and testing records. BOEMRE has only identified two active shallow water 

or platform drilling rigs operated by a small company on the GOM OCS among the 

approximately 50+ usually working there. This increased cost incurred by owners of 

drilling rigs is expected to be negligible compared to the added expense incurred by the 

Operators and Lessee owners due to the lengthened time to drill wells and additional 

permitting paperwork requirements. 

Our updated analysis shows there are currently about 140 Operators of Federal oil and 

gas OCS leases, all of which will be impacted by the new regulations. This is an increase 

of 10 Operators from the 130 identified in the RFA section of the Safety Measures Rule 

preamble. Approximately 90 (64 percent) of the companies operating on the OCS are 

considered small companies and 50 (36 percent) are considered large companies 

Breakout of Small and Large Companies Operating on the OCS 

There are many arrangements for sharing project risks and expenses for OCS exploration 

and development projects. These include original and revised ownership agreements 

where the risk, equity, and other interests may be complex. When there is an assignment 

of lease rights among different parties, BOEMRE records the OCS lease assignments in a 

manner similar to county court property records. A snapshot of the OCS lease ownership 

profile and wells drilled on those leases for small and large companies’ form the basis for 

the Safety Measure Rule’s estimated impact on small entities. 

Using the updated categorization of small and large operators/lessees combined with the 

current lease ownership profile, BOEMRE found that the current results differ only 

slightly from the estimates published in the Safety Measure Rule’s Regulatory Flexibility 

Analysis. In the Regulatory Flexibility Analysis, BOEMRE states: 

The ownership share of deepwater leases for small entities is estimated to only be 

12 percent. While a larger percentage of the oil service industry supporting the 

deepwater operators are small businesses, the lessees that hire and direct these 

support businesses will bear the burden of this rule. Small companies hold 55 

percent of shallow water leases but a smaller portion of the costs of these 

regulations will affect drilling operations in shallow water. 

The primary differences between the estimates reported in the Safety Measures Rule and 

those reported in this analysis are the result of a more rigorous analysis of the companies 

that are truly small entities. The categorization of some companies as small entities in 

our original analysis was incorrect. Several companies originally identified as small were 

subsidiaries of larger companies, or had been merged with a larger company. 

 

We analyzed OCS activity for both deepwater and shallow water by company size. 

Operating in the shallower water depths is generally less expensive and the concentration 

of smaller companies is greater in shallow water. The most costly requirements in the 

Safety Measures Rule only apply to operations with subsea blowout preventer (BOP) 

stacks which are predominately used in deepwater drilling. The following results for 

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lease ownership, wells drilled, and production reflects leases with sole or fractional 

ownership as recorded by BOEMRE. 

Deepwater 

The updated categorization of company lessees shows that large companies (greater than 

500 employees) hold 92 percent of deepwater leases (greater than 500 feet) and small 

companies hold 8 percent. Cobalt International Energy is the only small company (less 

than 500 employees) among the top 30 companies holding deepwater acreage since 

earlier this year when Mariner merged with Apache. 

When we consider deepwater drilling activity the results are similar; of the wells spudded 

in deepwater during the last 3 years (2007-2009), 88 percent of deepwater wells were 

attributed to large company lessees and only 12 percent to small company lessees. These 

results include the factional ownership by some small entities that are only equity 

investors in projects including some venture capital funds. 

An even greater share of OCS deepwater hydrocarbon production and corresponding 

revenues accrued to large companies in calendar year 2009. While deepwater drilling 

activity attributed to small companies is increasing, economic projects cannot be brought 

to production for several more years. We use the most recent year for which complete 

data are available (2009) as a long-term proxy for the production split between small and 

large companies. Large companies produced 97.5 percent of oil and 92.1 percent of gas 

production in deepwater. Only 2.5 percent of deepwater oil production and 7.9 percent of 

deepwater gas production is from leases owned by small companies. 

Shallow water 

We find that small companies hold a much greater share of acreage in shallow water (less 

than 500 feet) than in deepwater. The top two acreage-holding lease owners, Apache and 

Chevron, are not small companies, but the next four lessees in rank order are small 

entities: McMoRan, W & T Offshore, Stone Energy, and LLOG Exploration. In shallow 

water, small companies hold 45 percent of the leases while large companies hold 55 

percent. 

The drilling activity over the past 3 years matches the small and large companies lease 

ownership profile. Of the wells spudded during 2007-2009, 45 percent of the wells were 

spudded by small companies and 55 percent by large companies. 

Hydrocarbon production in the shallow water depths shows that larger companies hold 

the most productive leases. Slightly less than two-thirds of both oil and gas production 

accrues to large companies and slightly more than one-third is produced by small entities. 

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Summary of Large and Small Company OCS Activity 

The following tables2 summarize the small and large company percentage breakouts of 

leases, wells drilled (2007-2009), production of oil and gas and value of OCS production. 

The results reflect lease fractional ownership shares among different companies. 

Table 1 Lease Ownership among Small and Large Companies (11/1/2010)

Leases 

11/01/2010 

Shallow Water 

Leases 

Deepwater 

Leases 

All Leases 

Large Co. 55% 92% 80% 

Small Co. 45% 8% 20% 

100% 100% 100% 

Table 2 Wells Spudded among Small and Large Companies (2007-2009)

(2007-2009) Shallow Water 

Wells Spudded 

Deepwater 

Wells 

Spudded 

All Wells 

Spudded 

Large Co. 55% 88% 65% 

Small Co. 45% 12% 35% 

100% 100% 100% 

Table 3 Production based on Recorded Lease Share for Small and Large Companies (2009)

2009 

Production 

Shallow Water 

Oil Production 

Deepwater 

Oil 

Production 

Shallow 

Water Gas 

Production 

Deepwater 

Gas 

Production 

All BOE 

Production 

Large Co. 64.6% 97.5% 63.2% 92.1% 85% 

Small Co. 35.4% 2.5% 36.8% 7.9% 15% 

100% 100% 100% 100% 100% 

Table 4 Estimated Production Value* ($millions) for Small and Large Companies (2009)

Est. 2009 

Production 

Value 

($million) 

Shallow 

Water Oil 

Production 

Deepwater 

Oil 

Production 

Shallow 

Water Gas 

Production 

Deepwater 

Gas 

Production 

All BOE 

Production 

Large Co. 2,581 17,284 3,271 4,079 27,215 

Small Co. 1,415 442 1,905 351 4,113 

TOTAL: 3,996 17,726 5,176 4,430 31,328 

*Office of Natural Resource Revenue, http://www.mrm.boemre.gov/MRMWebStats/default.aspx 

Recurring Regulatory Costs Imposed by the Regulation 

Table 5 summarizes the estimated recurring operational costs categories for three 

subgroups of wells affected by the new regulations. Those categories are (1) deepwater 

wells drilled by a MODU, (2) deepwater wells drilled from a platform and (3) all shallow 

water wells. 

 

2

 The categorization of companies as small or large is based upon publically available data as measured by number of 

employees as of October 2010. BOEMRE collects data on lease ownership, wells drilled and operator production in 

our Technical Management System Database (TIMS). 

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Table 5 – Estimated Recurring Cost Summary 

MODU 

Wells 

(112/yr) 

Fixed 

Platforms 

(48/yr) 

Shallow 

Wells 

(186/yr) 

Cost 

Shares 

Regulation Recurring Costs:

Total 

($MM) 

Total 

($MM) 

Total 

($MM) 

250.416(e) Independent third party shear 

certification 0.4 0.2 0.6 1%

250.420(a)(6) PE certification for well design 1.3 0.5 4.2 3% 

250.420(b)(3) Installation of dual mechanical 

barriers 4.4 1.4 4.5 6% 

250.423(c) Test casing strings for proper 

installation 32.1 6.0 7.0 25% 

250.449(j), (k) Subsea ROV function testing 

(drilling) 102.7 n/a n/a 56% 

250.451(i) Emergency cost of activated shear 

rams or LMRP disconnect 2.6 n/a n/a 1% 

250.516(d)(8), 

250.616(h)(1) 

Subsea ROV function testing 

(workover/completions) 15.5 n/a n/a 8% 

Estimated Cost per year: 158.8 8.1 16.3 $ 183.2 

Estimated Cost per well: 1.42 0.17 0.09 

*Numbers may not add due to rounding. 

The regulations impacts well costs differently depending on the type of drilling rig and 

category of well being drilled. As can be observed in Table 5, deepwater wells drilled by 

platform rigs and shallow wells drilled by jackups or platforms will incur lower 

incremental costs than deepwater wells drilled by MODUs, primarily because they use 

surface BOPs; while wells drilled by deepwater MODUs (drillships and 

semisubmersibles) will incur the greater incremental cost due to the new subsea BOP 

requirements. Additional explanation about these costs is provided in the Benefit-Cost 

Analysis for the Safety Measures Rule. 

For this analysis, BOEMRE estimates that 160 deepwater wells will be drilled each year, 

split between MODU wells (112/yr) and platform wells (48/yr). An estimated 186 wells 

will be drilled each year in the shallow water depths. Using the recent drilling profiles 

for small and large company lessees in Table 2, the following table estimates the number 

of wells to be drilled each year by large and small entities. 

Table 6 – Estimate of Future Wells Drilled (annually) 

MODU 

Deepwater 

Wells (112/yr) 

Fixed Platforms 

Deepwater 

Wells (48/yr) 

Shallow Wells 

(186/yr) 

Large Co. 99 (88%) 42 (88%) 102 (55%) 

Small Co. 13 (12%) 6 (12%) 84 (45%) 

TOTAL 112 48 186 

The estimated increased costs for each well drilled are taken from Table 5 to estimate the 

annual compliance costs for large and small companies by type of well. The calculations 

are shown in parentheses. Of the $183 million in annual cost imposed by the rule, we 

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estimate that the $19.5 million will apply to small businesses in deepwater and $7.4 

million in shallow water. In total, we estimate that $26.9 million or 14.7 percent of the 

regulation’s costs will be borne by small businesses. The following table shows the 

calculations for these estimates. 

Table 7 – Large/Small Company Estimated Additional Drilling Costs 

$millions Additional MODU 

Deepwater Well 

Cost (112/yr) 

Fixed Platforms 

Deepwater Wells 

(48/yr) 

Shallow Wells 

(186/yr) 

Total 

Estimated 

Cost 

Large Co. $140.3 (99*$1.42) $7.1 (42*$0.17) $8.9 (102*$0.09) $156.3 

Small Co. $18.5 (13*$1.42) $1.0 (6*$0.17) $7.4 (84*$0.09) $26.9 

TOTAL $158.8 $8.1 $16.3 $183.2 

*Numbers may not add due to rounding. 

Determining a precise number of small entities that will be “regulated” is complicated by 

the fact that the actual number fluctuates as OCS properties are bought, sold, and the 

designated operator changes. The same difficulty follows for the lease ownership profile 

of small and large entities. However, our best estimate of the impact on small entities 

when we consider how project and drilling costs are shared among lease owners is that 

small entities will bear 12 percent of increased regulatory costs in deepwater, and 45 

percent in shallow water. The annual small entity regulatory compliance cost imposed by 

this rulemaking is estimated to be $26.9 million or 14.7 percent of the total. 

BOEMRE seeks additional information and comment on our estimate of the Safety 

Measure Rule’s impact on small entities. 

Description of the projected reporting, recordkeeping, and other 

compliance requirements of the proposed rule, including an estimate of 

the classes of small entities that will be subject to the requirement and 

the type of professional skills necessary for preparation of the report or 

record. 

The benefit-cost analysis for the Safety Measures Rule identifies $183.2 million in annual 

operational costs; these costs are summarized in Table 5 and discussed in the previous 

section. Greater detail is provided in the benefit-cost analysis and rule preamble. This 

section primarily discusses the paperwork burden on drilling contractors. 

The Paperwork Reduction Act (PRA) section of the Safety Measures Rule preamble 

identifies 44,731 hours of paperwork, reporting, and recordkeeping required annually by 

the regulation. Using the Bureau of Labor Statistics estimated loaded hourly rate of 

$87/hr, the paperwork cost of this rulemaking is $3.9 million. The table of the estimated 

paperwork cost of this rulemaking is included in the PRA section of the rule preamble 

(75 FR 63368). A portion of it is reprinted below. 

Reporting and recordkeeping falls primarily on the OCS lessees and operators, although 

drilling rig operators do have some additional recordkeeping requirements. The 

frequency of response varies depending upon the requirement but is primarily based on 

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drilling activity. Responses and recordkeeping by the drilling companies fall primarily 

on the Deepwater MODUs where all the deepwater MODU operators in the GOM are 

large companies. Some additional recordkeeping requirements will fall on all OCS 

drilling rig operators. As of early November (11/4/2010 Rigzone), there are two shallow 

water rigs operating in the GOM OCS owned by a small company. They are both owned 

by Blake International and are under contract to Apache. The estimated additional 

recordkeeping cost for jack-up rig surface BOP stacks is about $5,000 annually for each 

rig. The direct estimated paperwork burden on the single small drilling operator currently 

active in the GOM is about $10,000 per year. The paperwork costs impacting this small 

entity are found in Table 8. 

Table 8 – Selected Paperwork Burden Requirements from AD68 PRA* 

Citation 

30 CFR 250 Reporting & Recordkeeping 

Requirement 

Hour 

Burden 

Average No. 

of Annual 

Responses 

Annual 

Burden 

Hours 

Subpart E 

516(g)(l) Document the procedures used for BOP 

inspections; record results; maintain 

records for 2 years; make available to 

BOEMRE upon request. 

7 days x 12 

hrs/ day = 

84 

105 rigs / once 

every 3 years = 

35 per year 

2,940

516(h) Document the procedures used for BOP 

maintenance; record results; maintain 

records for 2 years; make available to 

BOEMRE upon request. 

1 105 rigs 105

Subpart F 

617(a)(l) Document the procedures used for BOP 

inspections; record results; maintain 

records for 2 years; make available to 

BOEMRE upon request. 

7 days x 12 

hrs/ day = 

84 

105 rigs / once 

every 3 years = 

35 per year 

2,940

617(b) Document the procedures used for BOP 

maintenance; record results; maintain 

records for 2 years; make available to 

BOEMRE upon request. 

1 105 rigs 105

*Full table can be found at 75 FR 63368 

In the Benefit-Cost Analysis for the Interim Final Rule, paperwork burden costs were not 

included in the compliance cost estimate because most of the paperwork (including the 

recordation and documentation costs of drilling rig actions on the rig) will not add a 

meaningful amount of actual costs. Much of the paperwork is recording the results of 

tests and maintenance procedures and is expected to be completed by workers 

concurrently with the tests or in between other drilling tasks. Accordingly, the 

paperwork costs are judged to be inconsequential when compared to the added costs 

imposed by this rule and much more so in comparison to the cost of drilling an OCS well. 

Nevertheless, we plan to revisit the issue of paperwork costs for all entities in the Final 

Benefit-Cost Analysis and will include our findings in the Final Regulatory Flexibility 

Analysis. 

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BOEMRE seeks additional information and comment on our estimate of the paperwork 

burden’s impact on small entities either through comments on the Safety Measures Rule 

or this IRFA. 

Identification, to the extent practicable, of all relevant Federal rules that 

may duplicate, overlap, or conflict with the rule 

The only regulations from other Federal agencies that may closely relate to the scope of 

BOEMRE regulations in this rulemaking are from the U.S. Coast Guard. However, for 

the Safety Measures Rule there is no overlap, conflict, or duplication with Coast Guard 

regulations. Under BOEMRE/USCG Memorandum of Understanding (MOU), 

BOEMRE has authority over spill abatement - which includes well control. All of the 

regulatory provisions in the rulemaking are focused on well control. Additionally and 

consistent with the MOU, BOEMRE has regulatory authority for drilling operations of 

MODUs on station while conducting drilling operations. 

There are several MOUs between the agencies that outline the division of duties and 

shared responsibilities. BOEMRE has authority over drilling and oil and gas operations 

on the OCS while the Coast Guard has authority over the integrity and safety of floating 

vessels conducting OCS operations. The MOUs can be found at: 

 http://www.uscg.mil/hq/cg5/cg522/cg5222/docs/mou/PURPOSE.pdf 

 http://www.uscg.mil/hq/cg5/cg522/cg5222/docs/mou/FLOATING_OFFSHORE_

FACILITIES.pdf 

 http://uscg.mil/hq/cg5/cg522/cg5222/docs/mou/CIVIL_PENALTIES.pdf 

Even though we have not identified any provisions of the Safety Measures Rule that 

overlap or conflict with other agencies, we welcome comments on this topic. 

Description of any significant alternatives to the rule that accomplish 

the stated objectives of applicable statutes and that minimize any 

significant economic impact of the rule on small entities, including 

alternatives considered, such as: 

1. Establishment of differing compliance or reporting requirements or 

timetables that take into account the resources available to small entities. 

2. Clarification, consolidation, or simplification of compliance and reporting 

requirements under the rule for such small entities. 

3. Use of performance rather than design standards. 

4. Any exemption from coverage of the rule, or any part thereof, for such small 

entities. 

Under the published Safety Measures Rule, the requirements are prescriptive and lease 

operators submitting permits to BOEMRE or conducting drilling operations must comply 

with the requirements. Even though this rule may not have a significant economic impact 

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on small businesses, BOEMRE has analyzed several alternatives for the provisions 

included the Safety Measures Rule. 

Alternative 1, Different Compliance Requirements for Small Entities 

During the drafting of the Safety Measures Rule, BOEMRE considered lengthening the 

compliance deadline for both large and small companies. The primary reason for not 

including additional compliance time or different requirements is the overriding need to 

reduce the chance of a catastrophic blowout event. The risk is not lower for small entities 

and BOEMRE cannot compromise the safety of offshore personnel and the environment 

for any entity including small businesses. Offshore drilling is highly technical and can be 

hazardous; any delay in the implementation of Safety Measures Rule may increase the 

risk of OCS drilling operations. 

The regulatory provisions do not require significant equipment or capital upgrades and 

can be met in short order. The rulemaking is an interim final rule and companies drilling 

on the OCS are required to conform with the regulatory provisions immediately. The 

compliance costs are mostly the increased time to conduct drilling operations. Thus, any 

additional time provided to comply with the rule would not result in cost savings in the 

form of reduced short-term cash flow expenditures that might be expected if the rule 

required the installation of capital equipment. 

BOEMRE is continuing to review other safety measures that may be appropriate for 

rulemaking in the near future, as well as measures that will require further study, whether 

through DOI-led strike teams, inter-agency workgroups, or other means. BOEMRE 

determined that there is good cause for publishing the interim final rule without prior 

notice and comment based on its findings, consistent with preliminary information that is 

available as a result of investigations into the Deepwater Horizon event, that certain 

equipment, systems, and improved practices are immediately necessary for the safety of 

offshore oil and gas drilling operations on the OCS, and that these improved drilling 

practices are either not addressed or not sufficiently detailed by current regulations. 

Alternative 2, Testing Requirements 

BOEMRE considered if the required testing for the two most expensive items (subsea 

ROV intervention and negative pressure test) could be performed in an alternative 

manner. Because of the failings and lessons learned from the BP Deepwater Horizon 

event, BOEMRE does not believe that alternative testing is a viable option. No 

alternative testing methods have been identified that will provide the same assurance of 

reliability. 

The subsea ROV intervention test upon installation of the BOP stack is required to 

demonstrate that the rams can be closed as required under realistic subsea conditions. 

The BOP ROV function test occurs upon installation on the sea floor and is in addition to 

the “stump” tests conducted prior to subsea installation. The only alternative to the 

subsea tests would be to only conduct the “stump test.” BOEMRE does not believe that 

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the stump test provides the same reliability as the subsea test which is under the actual 

conditions required if the BOP rams needed to be employed. 

The new requirement to perform a negative pressure test after the intermediate and 

production casing strings are installed is necessary to verify that no fluids are entering the 

well and the cement is sealing the wellbore. The test is only required upon cementing 

each intermediate or production casing; BOEMRE is not aware of other testing methods 

that can provide the same level of assurance as this test. 

Alternative 3, Paperwork Consolidation 

BOEMRE did not identify any provisions of the rule that could provide efficiencies 

through consolidation or other streamlining. Some of the regulatory provisions apply to 

different Subparts and are necessarily duplicated. Most reporting requirements are 

dependent on drilling activity and closely related to the number of wells drilled or 

Application for Permit to Drill/Application for Permit to Modify (APDs/APMs) 

submitted. No efficiencies would be expected through further simplification or 

consolidation. 

Alternative 4, Use Performance Rather than Design Standards 

The provisions in the interim final rule are generally prescriptive design standards for 

well design (cementing and casing), testing drilling equipment, and certifying the well’s 

integrity. BOEMRE has not identified equivalent performance standards that can provide 

the same level of reliability and well integrity and that can be implemented as quickly as 

the provisions in this rule. 

At the same time, the regulatory provision for dual mechanical barriers to prevent flow in 

the event of a failure in the casing cement does provide some flexibility to the 

prescriptive regulatory approach employed here. In effect, BOEMRE provides a design 

choice to use dual float valves, or one float valve and a mechanical barrier. 

The BOEMRE is carefully evaluating how to integrate performance based systems into 

our regulatory regime. This includes the SEMS (Safety Environmental Management 

Systems) and the Safety Case. The SEMS rule was published on October 15, 2010 (75 

FR 63610) and BOEMRE is considering improvements to that regulation. The Safety 

Case approach to risk management championed by the International Association of 

Drilling Contractors (IADC) is also receiving careful consideration and study by 

BOEMRE. 

Implementation of a performance based solution requires long lead times and careful 

strategic and tactical implementation. Because of the immediate need to address well 

design, testing and reliability issues, BOEMRE is relying on prescriptive standards in the 

Safety Measures Rule. 

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Departures to the provisions in the Safety Measures Rule can be approved under the 

current regulations if the alternative procedures afford an equal or greater degree of 

protection, safety, or performance. Departures are discussed in the next section. 

Alternative 5, Exemptions from Rule Requirements 

One alternative is to exempt small businesses from the requirements of this interim final 

rule. The “exemption” or “no action” alternative was not adopted by BOEMRE for the 

interim final rule because of the overriding need to reduce the chance of a catastrophic 

blowout event. The risk is not lower for small entities and BOEMRE cannot compromise 

the safety of offshore personnel and the environment for any entity including small 

businesses. Offshore drilling is highly technical and can be hazardous; any delay may 

increase the risk of OCS drilling operations. 

BOEMRE can approve departures to existing regulations when the departure would 

assure the continued safety of drilling operations. In 30 CFR 250.105 Departures means: 

Approvals granted by the appropriate MMS representative for operating 

requirements/procedures other than those specified in the regulations found in 

this part. These requirements/procedures may be necessary to control a well; 

properly develop a lease; conserve natural resources; or protect life, property, or 

the marine, coastal, or human environment.

There are several general and drilling specific regulatory provisions that identify the 

availability of departures. Those regulatory citations are: 

30 CRR Subpart A, General Information, Special Approvals 

§ 250.142 How do I receive approval for departures? We may approve 

departures to the operating requirements. You may apply for a departure by 

writing to the District Manager or Regional Supervisor. 

30 CFR Subpart D, Oil and Gas Drilling Operations, General Requirements 

§ 250.409 May I obtain departures from these drilling requirements? The 

District Manager may approve departures from the drilling requirements specified 

in this subpart. You may apply for a departure from drilling requirements by 

writing to the District Manager. You should identify and discuss the departure 

you are requesting in your APD see §250.414(h)). 

§ 250.414 What must my drilling prognosis include? 

(h) A list and description of all requests for using alternative procedures or 

departures from the requirements of this subpart in one place in the APD. You 

must explain how the alternative procedures afford an equal or greater degree of 

protection, safety, or performance, or why you need the departures; 

Although not a specific provision of the Safety Measures Rule, departures to the 

requirements in this rulemaking will be considered and may be approved if the alternative 

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15 

proposed method does not compromise safety and environmental protection. These 

provisions are available to both large and small companies. 

Questions for Comment to Inform the Regulatory Flexibility Analysis 

1. Please provide comment on any or all of the provisions in the interim final rule as they 

impact small entities with regard to 

 The impact of the provision(s) including any benefits and costs. 

 What other alternatives, if any, BOEMRE should consider, as well as the costs 

and benefits of those alternatives, paying specific attention to the effect of the rule 

on small entities in light of the above analysis. 

 Magnitudes and types of costs needed to “implement and comply” with the rule 

including expenditures of time and money for equipment upgrades, employee 

training, rig time, information collection and recordkeeping. 

2. Please describe ways in which the rule could be modified to reduce any costs or 

burdens for small entities consistent with the recommendations in the Drilling Safety 

Measures Report or other industry working group recommendations in response to the BP 

Deepwater Horizon event. 

3. Please identify all relevant Federal rules that may duplicate, overlap, or conflict with 

the proposed rule. 

 Instructions for offering comments are provided at the beginning section of this IRFA.