Oil and Gas Management: Interior's Bureau of Safety and Environmental Enforcement Restructuring Has Not Addressed Long-Standing Oversight Deficiencies
Released: 2016-03-11T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico resulting in 11 deaths, serious injuries, and the largest marine oil spill in U.S. history. In response, in May 2010, Interior reorganized offshore oil and gas management activities—energy development, revenue collection, and regulatory oversight—into separate bureaus. In October 2011, Interior created BSEE to manage regulatory oversight. Since then, BSEE has undertaken reform efforts but has not fully addressed deficiencies in its investigative, environmental compliance, and enforcement capabilities identified by investigations after the Deepwater Horizon incident. In October 2013, BSEE initiated an organizational restructuring to address continuing oversight deficiencies. GAO was asked to review BSEE's efforts to enhance its oversight capabilities.

This report examines the extent to which BSEE's ongoing restructuring has enhanced its capabilities for (1) investigations, (2) environmental compliance, and (3) enforcement. GAO reviewed laws, regulations, and policies, related to BSEE's restructuring and oversight activities. GAO also interviewed BSEE officials and industry representatives.

section_title: What GAO Found
paragraphs: The Department of the Interior's (Interior) Bureau of Safety and Environmental Enforcement's (BSEE) ongoing restructuring has made limited progress in enhancing the bureau's investigative capabilities. BSEE continues to rely on pre- Deepwater Horizon incident policies and procedures. Specifically, BSEE has not completed a policy outlining investigative responsibilities or updated procedures for investigating incidents—among the goals of BSEE's restructuring, according to restructuring planning documents, and consistent with federal standards for internal control. The use of outdated investigative policies and procedures is a long-standing deficiency. Post- Deepwater Horizon incident investigations found that Interior's policies and procedures did not include requirements for planning investigations, gathering and documenting evidence, and ensuring quality control and determined that their continued use posed a risk to the effectiveness of bureau investigations. Without completing and updating its investigative policies and procedures, BSEE continues to face this risk.

BSEE's ongoing restructuring of its environmental compliance program reverses actions taken to address post- Deepwater Horizon incident concerns, and risks weakening the bureau's environmental compliance oversight capabilities. In 2011, in response to two post- Deepwater Horizon incident investigations that found that BSEE's predecessor's focus on oil and gas development might have been at the expense of protecting the environment, BSEE created an environmental oversight division with region-based staff reporting directly to the headquarters-based division chief instead of regional management. This reporting structure was to help ensure that environmental issues received appropriate weight and consideration within the bureau. Under the restructuring, since February 2015, field-based environmental compliance staff again report to their regional director. BSEE's rationale for this action is unclear, as it was not included in the bureau's restructuring planning documentation or analysis as part of restructuring planning. Under federal standards for internal control, management is to assess the risks faced from external and internal sources and decide what actions to take to mitigate them. Without assessing the risk of reversing this reporting structure, it is not clear that BSEE will have reasonable assurance that environmental issues are receiving the appropriate weight and consideration as called for by post- Deepwater Horizon incident investigations.

BSEE's ongoing restructuring has made limited progress in enhancing its enforcement capabilities. In particular, BSEE has not developed procedures with criteria to guide the use of its enforcement tools—such as warnings and fines—which are among the goals of BSEE's restructuring, according to planning documents, and consistent with federal standards for internal control. BSEE restructuring plans state that the current lack of criteria results in inconsistent actions and creates uncertainty for operators regarding BSEE's oversight approach and expectations. The absence of enforcement criteria is a long-standing deficiency. For example, post- Deepwater Horizon incident investigations recommended an assessment of enforcement tools and how to employ them to deter safety and environmental violations. Without developing procedures with defined criteria for taking enforcement actions, BSEE continues to face risks to the effectiveness of its enforcement capabilities.

section_title: What GAO Recommends
paragraphs: GAO recommends, among other things, that BSEE (1) complete and update its investigative policies and procedures, (2) conduct and document a risk analysis of the regional-based reporting structure, and (3) develop procedures for enforcement actions. Interior neither agreed nor disagreed with GAO's recommendations.

section_title: Letter
paragraphs: On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf  of Mexico, resulting in 11 deaths, serious injuries, and the largest marine  oil spill in the history of the United States. The Deepwater Horizon  incident raised questions about the Department of the Interior’s (Interior)  oversight of offshore oil and gas activities in the Gulf of Mexico and led to  investigations by Interior’s Office of Inspector General (IG) and Interior’s  Outer Continental Shelf (OCS) Safety Oversight Board. These  investigations identified risks to Interior’s oversight of offshore oil and gas  development, including oversight of its investigations, environmental  compliance, and enforcement capabilities. For example, a December  2010 IG report identified organizational, procedural, and regulatory risks  that impede the effectiveness of Interior’s investigative capability.  Additionally, a September 2010 OCS Safety Oversight Board report found  that Interior’s emphasis on promoting the development of federal offshore  oil and gas resources might have preempted its responsibility to protect  the environment. The same report also identified weaknesses in  Interior’s enforcement program, including its use of warnings, fines, and  sanctions to compel operator compliance with safety and environmental  regulations.

In response to the Deepwater Horizon incident, Interior initiated a number  of policy reforms intended to strengthen its oversight of offshore oil and  gas production on the OCS. On May 19, 2010, Interior reorganized the  Minerals Management Service (MMS)—the agency responsible for  managing oil and gas activities in federal waters—to improve the  management, oversight, and accountability of activities on the OCS. As  an interim step, Interior renamed MMS the Bureau of Ocean Energy,  Management, Regulation and Enforcement (BOEMRE), and separated  major functions of offshore oil and gas management by making BOEMRE  responsible for offshore oil and gas management and the Office of  Natural Resources Revenue responsible for revenue collections. On  October 1, 2011, Interior completed the reorganization of MMS by  splitting BOEMRE into the Bureau of Ocean Energy Management  (BOEM), which is responsible for leasing and resource management, and  the Bureau of Safety and Environmental Enforcement (BSEE), which is  responsible for reviewing drilling permits, inspecting offshore drilling rigs  and production platforms, and developing regulations and standards for  offshore drilling.

Since its inception in 2011, BSEE has undertaken several efforts to  reform its oversight capabilities. Specifically, in February 2012, BSEE  announced that it planned to issue a regulation to strengthen its  investigations and enforcement authority, among other things, but  changed this plan in May 2013, citing other regulatory changes as higher  priorities. Additionally, BSEE contracted with a consultant in April 2012 to  assess its oversight approach and again in April 2013 to develop tools for  streamlining enforcement actions. However, BSEE did not take any  specific actions in response to the consultant’s assessment or implement  the tools it developed for BSEE’s adoption.

In October 2013, BSEE initiated an organizational restructuring of its  investigations, environmental compliance, and enforcement capabilities.  BSEE’s restructuring goals are to establish new national programs for  each of these capabilities, and develop policies and procedures for each  of these programs. BSEE’s restructuring effort remains ongoing.

Offshore incidents subsequent to the Deepwater Horizon incident  highlight the continued importance of BSEE’s role in overseeing offshore  oil and gas activities. For example, BSEE investigated a November 2012  explosion that occurred onboard a production platform in the Gulf of  Mexico that resulted in the deaths of three workers, serious injuries to  others, and the discharge of pollutants into the Gulf of Mexico. As a  result, BSEE issued 40 violations to four companies involved in the  operation of the platform. Additionally, in December 2012, the mobile  offshore drilling unit Kulluk separated from its tow line in 20-foot seas and  grounded ashore in the Gulf of Alaska. The incident resulted in minor  injuries and no environmental damage, but demonstrated the challenges  of operating in the Arctic environment and the importance of a robust  oversight program in the region.

You asked us to review BSEE’s efforts to enhance its oversight  capabilities. This report examines the extent to which BSEE’s ongoing  restructuring has enhanced its capabilities for (1) investigations, (2)  environmental compliance, and (3) enforcement.

To do this work, we reviewed laws, regulations, policies, guidance, and  other documentation related to BSEE’s authorities, activities, and  restructuring effort regarding its investigative, environmental compliance,  and enforcement capabilities since its inception in 2011. We interviewed  BSEE officials representing the bureau’s headquarters leadership as well  as officials responsible for conducting oversight activities in each of the  bureau’s three regions—Gulf of Mexico, Pacific, and Alaska—to  determine the purpose for the ongoing restructuring, as well as how it has  affected the bureau’s oversight activities. We also reviewed interagency  agreements between BSEE and other federal agencies with OCS  responsibilities—BOEM, the Environmental Protection Agency (EPA), and  the U.S. Coast Guard—and interviewed officials representing them to  determine how the agencies coordinate oversight activities. We also met  with representatives of the industry groups that (1) represent all segments  of the domestic oil and gas industry and (2) develop safety and  environmental standards for that industry to obtain their perspectives on  how BSEE’s ongoing restructuring has affected its oversight of offshore  oil and gas development. Their views are not generalizable but provide  illustrative examples. Appendix I provides a more detailed description of  our objectives, scope, and methodology.

We conducted this performance audit from January 2015 to February  2016 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The Outer Continental Shelf Lands Act of 1953, as amended, requires  that the Secretary of the Interior conduct an investigation and issue a  report on deaths, serious injuries, fires, and pollution events that occur as  a result of offshore oil and gas operations. BSEE carries out these  investigations on behalf of the Secretary throughout America’s 1.7 billion  acres of the OCS. Specifically, BSEE’s mission is to promote safety,  protect the environment, and conserve resources offshore through  vigorous regulatory oversight and enforcement. It is responsible for  overseeing offshore operations, which includes the authority to  investigate incidents that occur on the OCS, monitor operator compliance  with environmental stipulations, and take enforcement actions against  operators that violate safety or environmental standards. BSEE has  agreements with other federal agencies, including EPA, regarding the  division of offshore oversight responsibilities in overlapping jurisdictions.  BSEE includes headquarters offices in the Washington, D.C., area, as  well as three regional offices—the Gulf of Mexico regional office in New  Orleans, Louisiana; the Pacific regional office in Camarillo, California; and  the Alaska regional office in Anchorage, Alaska—responsible for  oversight of oil and gas activities in the field.

BSEE’s primary investigations responsibility is to determine the causes of  incidents related to oil and gas activities that occur on the OCS and  prepare reports that inform the public and industry on how to prevent  incidents and improve safety and environmental protection. BSEE  regulations require that operators report certain incidents to BSEE and  include stipulations regarding when and how these reports are made,  depending on the severity of the incident. In turn, BSEE can initiate a  district or panel investigation depending on the type of incident reported.  BSEE conducts district investigations in response to incidents such as  injuries, fires, or loss of well control. BSEE conducts panel investigations  when a more in-depth investigation is warranted due to the severity or  technical complexity of an incident, such as a fatality or well blowout.  Panel investigations are typically conducted by a team of individuals  including investigators from BSEE’s Investigations and Review Unit (IRU)  and regional offices, and may include other BSEE and non-BSEE  technical personnel. Interior established the IRU in June 2010 in the  aftermath of the Deepwater Horizon incident to (1) promptly and credibly  respond to allegations or evidence of misconduct, unethical behavior, and  unlawful activities by bureau employees, as well as by members of  industries they regulate; (2) oversee and coordinate the bureau’s internal  auditing, regulatory oversight, and enforcement systems and programs;  and (3) ensure the bureau responds swiftly to emerging issues and crises  on a bureau-wide level and assesses significant incidents, including spills,  accidents, and other crises.

Regarding environmental compliance, in response to post-Deepwater  Horizon incident investigation findings that BOEMRE’s emphasis on  promoting development of federal offshore oil and gas resources might  have preempted its responsibility to protect the environment, BSEE  established an Environmental Enforcement Division. The role of the new  division was to centralize all environmental compliance duties within a  single independent office in headquarters, while maintaining a presence  in each of the three OCS regions. The Environmental Enforcement  Division’s directive is to monitor, verify, enforce, and improve industry’s  compliance with environmental standards during OCS operations. To do  so, it conducts monitoring of ongoing OCS operations, office compliance  verification, field verification, and any necessary inspections, compliance  data collection, impact-determinations, and support of BSEE  investigations.

BSEE’s enforcement capability is composed of an array of tools it can use  to compel operator compliance with safety and environmental standards  including:  Incident of noncompliance (INC): BSEE can issue a notice of an  incident of noncompliance in response to operator violations of safety  or environmental standards. There are three categories of INCs:

Warning INC: BSEE can issue a warning INC in response to an  area of noncompliance that does not pose an immediate danger to  personnel, the environment, or equipment, but requires the  violator to correct the noncompliance within a reasonable period of  time, usually 14 days.

Component shut-in INC: BSEE can issue a component shut-in  INC in response to a specific violation of a statute, regulation,  lease, plan, permit, or order that is determined to be part of an  unsafe situation that poses an immediate danger to personnel, the  environment, and/or equipment. Component shut-in INCs include  an operational restriction for a specific piece of equipment or  location when it can be shut in without affecting the overall safety  of the facility or operations.

Facility shut-in INC: BSEE can issue a facility shut-in INC in  response to a specific violation of a statute, regulation, lease,  plan, permit, or order that is determined to be part of an unsafe  situation that poses an immediate danger to personnel, the  environment, and/or equipment. Facility shut-in INCs include an  operational restriction for an entire facility when individual pieces  of equipment or locations cannot be shut in without affecting the  overall safety of the facility.

Civil penalty: BSEE can assess civil penalties in response to (1)  violations uncorrected within the time period granted by BSEE; (2)  violations that may constitute a threat of serious, irreparable, or  immediate harm or damage to life, property, any mineral deposit, or  the marine, coastal, or human environment; (3) violations that cause  serious, irreparable, or immediate harm or damage to life, property,  any mineral deposit, or the marine, coastal, or human environment;  and (4) violations of oil spill financial responsibility requirements. The  daily civil penalty amount ranges from $5,000 to $40,000 per violation,  depending on its severity.

Directed Safety and Environmental Management System audit:  BSEE can direct an audit of an operator’s Safety and Environmental  Management System program in response to any safety or  noncompliance concerns identified during an inspection and  evaluation, or as a result of an incident. Operators must submit the  audit findings, observations, deficiencies identified, any conclusions,  and a corrective action plan to BSEE within 60 days of the audit  completion date. BSEE can also conduct an audit to determine if the  corrective action plan was implemented as reported, as well as if  those corrective actions were effective in closing identified  management system gaps.

Performance improvement plan: BSEE can place an operator on a  performance improvement plan due to serious incidents, poor  performance data, uncorrected deficiencies resulting in a probationary  status, criminal referral, or civil penalties assessed. A performance  improvement plan may result in more inspections or more frequent  inspections, which may result in an increase in INCs issued and civil  penalties assessed. Operators may also be required to provide  increased information, and have operator employees working during  certain activities such as construction and simultaneous operations to  facilitate communications. A performance improvement plan may also  result in a requirement for the operator to improve its Safety and  Environmental Management System program.

Directed suspension: BSEE can direct a suspension for all or any  part of a lease or unit area. This determination may be made in cases  of gross negligence or willful violation of a provision of the lease or  governing statutes and regulations. Based on the level of severity of  the situation, this action may result in suspension of operations,  suspension of production, or loss of permit.

Disqualification referral: BSEE can refer a determination of  unacceptable performance to BOEM—a disqualification referral— which may disapprove or revoke the designation as operator on a  single facility or multiple facilities.

Referral to another agency: BSEE can forward information  associated with potential violations of the Outer Continental Shelf  Lands Act and its regulations, to take enforcement action as  appropriate. This tool includes direct referrals to the Department of  Justice for civil enforcement and to Interior’s IG for consideration of  suspension or debarment or further referral to the Department of  Justice for criminal enforcement.

From 2011 through 2013, BSEE took several actions to reform aspects of  its investigations, environmental compliance, and enforcement  capabilities. In February 2012, BSEE announced that it planned to issue a  regulation to strengthen its investigations and enforcement authority.  The proposed changes would have substantially altered regulations  pertaining to the conduct of incident investigations, as well as provided  the bureau with new enforcement tools, among other things. In May 2013,  BSEE management determined that other regulatory changes were  higher priorities. Prior to this decision, in April 2012, the BSEE contracted  with a consultant to assess its oversight capabilities and make  recommendations within its existing regulatory framework. The consultant  issued a report in October 2012 that recommended BSEE develop a  comprehensive enforcement strategy, define its complement of  enforcement tools, and establish investigation objectives, among other  things. In April 2013, BSEE contracted with the same consultant to  produce several templated enforcement tool documents—including a  performance improvement plan for low-performing operators, a civil  penalty settlement agreement, and an order compelling an operator to  take specific actions on the authority of the BSEE Director. In 2013, as  part of strategic planning efforts, BSEE developed a number of “next- generation” enforcement tools to enhance its ability to compel compliance  with safety and environmental regulations. These tools included  proposals regarding streamlining the collection of civil penalties and use  of “Director’s Orders” to compel specific operator performance. BSEE did  not take any specific actions in response to the consultant’s assessment  or implement the tools it developed for BSEE’s adoption.

In recognition of continued risks to the effectiveness of its oversight of  offshore oil and gas development, BSEE initiated an organizational  restructuring in October 2013 that encompasses its investigations,  environmental compliance, and enforcement capabilities. According to  restructuring planning documents, the guiding principles of this  restructuring are to enhance the consistency, transparency, predictability,  and accountability of BSEE’s oversight activities. Specific goals of this  restructuring include establishing national programs for each of these  capability areas to develop policies and procedures for each of these  programs. Implementation of the restructuring is ongoing.

section_title: BSEE’s Ongoing Restructuring Has Made Limited Progress Enhancing Its Investigative Capabilities
paragraphs: BSEE’s ongoing restructuring has made limited progress since October  2013 in enhancing the bureau’s investigative capabilities. As a result,  BSEE continues to rely on pre-Deepwater Horizon incident policies and  guidance for managing its investigative capabilities and does not have the  capability for analyzing data on incidents that occur on the OCS.  Additionally, the extent to which the bureau’s IRU has enhanced BSEE’s  investigative capability is unclear due to poor information management,  confusion regarding its role, and inconsistent guidance.
subsections: section_title: BSEE’s Investigative Policies and Procedures Have Not Changed Since the Deepwater Horizon Incident, and the Bureau Does Not Have the Capability to Analyze Incident Data
paragraphs: BSEE has not completed a policy identifying investigative responsibilities  under the October 2013 restructuring or updated its existing policies or  procedures for investigating incidents that occur on the OCS since the  Deepwater Horizon incident. Developing policies and procedures are  among the goals of BSEE’s restructuring, according to restructuring  planning documents, and consistent with federal standards for internal  control. Under federal standards for internal control, agencies are to  clearly document internal controls, and the documentation is to appear in  management directives, administrative policies, or operating manuals.  BSEE documents indicate that the bureau planned to complete policies  and procedures in the summer of 2015, but the time frame for  establishing its policy framework has slipped to 2016. As a result, BSEE  continues to rely on pre-Deepwater Horizon incident investigation  guidance—including the 2009 MMS Policy on Accident Investigations, the  2010 MMS Gulf of Mexico Region’s Regional Policy on Accident  Investigations and Offshore Incident Reports, the 2003 Department  Manual Chapter 3 on Incident Investigation and Information Management,  and the 2010 MMS National Accident Investigation Handbook—to  manage district and panel investigations—its primary investigative  responsibility. As part of the restructuring that began in 2013, in October  2015, Interior approved BSEE’s establishment of the Safety and Incident  Investigations Division (SIID)—which according to a memorandum by  BSEE’s Associate Director for Administration will assume the external  review functions of the IRU and be staffed by IRU investigators—to  develop new procedures for conducting investigations. However, BSEE  has not completed a policy outlining what the SIID’s responsibilities will  be or updated procedures to guide its activities.

The use of outdated investigative policies and procedures is a long- standing deficiency in the bureau’s investigative capabilities. For  example, following the Deepwater Horizon incident, Interior’s IG and OCS  Safety Oversight Board reports identified flaws in Interior’s investigation  guidance documents—specifically, that the guidance documents did not  include detailed requirements for planning investigations, gathering and  documenting evidence, and ensuring quality control. Additionally, the IG  report determined that continued use of the guidance posed a risk to the  effectiveness of district and panel investigations. BSEE documentation  defining goals for its ongoing restructuring effort again identified  continued risks to the bureau’s investigative capability, citing inconsistent  investigation practices between district offices, as well as the need for  developing bureau-wide investigative policy, among other things. Without  updating its existing, pre-Deepwater Horizon investigative policies and  procedures, BSEE continues to face risks to the effectiveness of its  investigative capabilities.

Currently, BSEE follows the 2010 MMS Gulf of Mexico Region’s Regional  Policy on Accident Investigations and Offshore Incident Reports to  determine whether and how to investigate offshore incidents. According  to the 2010 MMS National Accident Investigation Handbook, after BSEE  receives a report of an incident occurring on the OCS, the bureau is to  determine the type of investigation, if any, to conduct. However, BSEE  officials told us that the Regional Policy on Accident Investigations and  Offshore Incident Reports provides district officials with broad discretion  to determine the extent to which they investigate many types of incidents,  which can result in inconsistent practices and information collected across  districts. A senior BSEE official also stated that the bureau plans to refine  its policy to include a tiered approach to allocating investigative resources  based on incident severity. Specifically, this official told us that BSEE  wants to increase the level of investigative scrutiny conducted in  response to minor incidents that previously did not trigger BSEE action. In  doing so, BSEE hopes to gain a more complete understanding of the  type, frequency, and causes of incidents occurring on the OCS. However,  this official said that disagreements between headquarters and regional  officials over what the severity thresholds should be have delayed  completion of this policy. In an October 2015 management advisory on  BSEE’s restructuring, Interior’s IG recommended that the bureau should  promptly develop an action plan for the restructuring’s implementation  that should include timelines and responsible officials for major  milestones, such as policy and procedure development and staffing and  training plans.

Even when BSEE has updated its policies and procedures on  investigations, it does not have the capability to aggregate and analyze  the results of those investigations to identify trends in safety and  environmental hazards. In 2009, prior to the Deepwater Horizon incident,  Interior established an Accident Investigation Board (AIB) to review  investigation policies and collect and analyze incident and investigation  information to target safety and environmental compliance efforts.  However, according to BSEE officials, the AIB produced no reports and  ceased to operate after the Deepwater Horizon incident. BSEE officials  told us AIB’s responsibilities were not reinstated following the Deepwater  Horizon incident because management at the time determined the AIB’s  function was unnecessary. However, according to the IG report, the AIB  was a tool to address risks to BSEE investigative capabilities.  Additionally, the 2009 MMS policy establishing the AIB—the Policy on  Accident Investigations—has not been updated. As a result, responsibility  for reviewing investigation policies and collecting and analyzing incident  and investigation information to target safety and environmental  compliance efforts continues to be assigned to the defunct AIB. Senior  BSEE officials told us that management at the time believed it was  sufficient to collect and archive the incident reports without further  synthesis or evaluation. They also stated that they intend to incorporate  this capability into BSEE’s SIID but do not have a plan or time frames for  doing so. A 2013 internal BSEE evaluation determined that the absence  of a central data base for national trend analysis was a lost opportunity to  focus on OCS safety trends. Without a dedicated capability to review  investigation policy and collect and analyze incident and investigative  data, BSEE does not have reasonable assurance that it can identify  trends in safety and environmental hazards that could inform bureau  decisions and enhance safety and environmental oversight.

section_title: The IRU’s Value to BSEE’s Investigative Capabilities Is Unclear
paragraphs: The extent to which the IRU has enhanced BSEE’s investigative  capabilities is unclear due to (1) not using an electronic case  management system, (2) confusion regarding its role, and (3) inconsistent  guidance.

First, the IRU does not store its investigative case files in an electronic  case management system as called for in the 2013 IRU Policies and  Procedures. According to the IRU Policies and Procedures, the Chief of  the IRU is responsible for establishing and maintaining an effective case  management system. In January 2013, BSEE began efforts to identify  criteria for a case management system and issued a contract to acquire  one in July 2014. However, according to BSEE officials, BSEE has not  implemented this system to manage investigations. BSEE officials told us  that the bureau has yet to do so because Interior has not approved its  use, as well as the need to solicit a new contract for technical support.  The Chief of the IRU said that BSEE does not have a time frame or a plan  for resolving these issues and implementing its case management  system. Because it does not have an operational case management  system, the IRU records investigative case numbers in a spreadsheet that  does not contain supporting information on investigative activities—such  as case files documenting interviews and photographic evidence—or  outcomes. Rather, BSEE officials said that individual investigators  maintain hard-copy case files, which the Chief of the IRU also told us are  not always reviewed for completeness or errors as called for by the IRU  Policies and Procedures. Hard-copy case files make it difficult for BSEE  to systematically monitor, review, or evaluate the results of IRU  investigations. Without a plan with milestones for implementing the case  management system for investigations, BSEE will continue to have  difficulty systematically monitoring, reviewing, or evaluating the results of  IRU investigations in a timely manner.

Moreover, confusion regarding the role of the IRU can hamper the  effectiveness of BSEE’s investigative efforts and has raised questions  about whether BSEE has clearly communicated the IRU’s role to the  offshore oil and gas industry. Industry representatives we interviewed  said that BSEE had not clarified the role of the IRU. Under federal  standards for internal control, in addition to internal communications,  agency management should ensure that there are adequate means of  communicating with, and obtaining information from, external  stakeholders that may have a significant impact on the agency achieving  its goals. According to BSEE regulations, the purpose of an  investigation is to prepare a public report that determines the cause or  causes of the incident. However, representatives of industry and an  internal BSEE analysis informed us that the law enforcement  backgrounds of IRU investigators and their apparent focus on potential  criminal wrongdoing rather than the cause or causes of the incident has  led to an industry perception that the IRU is a criminal law enforcement  program. A March 2013 congressional inquiry letter into the extent to  which the IRU functioned as a criminal law enforcement program further  highlights the confusion regarding the IRU’s role in supporting BSEE’s  investigative capability. Further, a 2013 internal BSEE evaluation noted  that industry confusion regarding the IRU and how it could inhibit free and  open communication with BSEE due to a perceived need to consult  attorneys prior to answering IRU questions. Some BSEE officials noted  that, because the perceived criminal focus represents a shift from safety  enhancement and root cause analysis toward an enforcement model, free  and open communication to determine the causes of incidents is  adversely affected, potentially undermining the effectiveness of the IRU’s  investigative capacity. By clearly communicating the purpose of the IRU  across the bureau, as well as to industry operators, BSEE could help  increase the effectiveness of its investigations.

Furthermore, the IRU Policies and Procedures contradict BSEE  investigative policies regarding the assignment of personnel to panel  investigations and coordination with the IG. Specifically, the IRU Policies  and Procedures conflicts with the 2003 Department Manual Chapter 3 on  Incident Investigation and Information Management and the 2010 MMS  National Accident Investigation Handbook regarding which BSEE official  is responsible for assigning panel investigation membership. The  Department Manual Chapter 3 on Incident Investigation and Information  Management and the MMS National Accident Investigation Handbook  indicate that the director of the region in which an incident occurred  assigns panel membership, and the IRU Policies and Procedures  indicates that this is the responsibility of the Chief of the IRU. Under the  federal standards of internal control, agencies are to clearly document  internal controls. While BSEE has documented its policies, they are not  clear, because the IRU Policies and Procedures is not consistent with the  Regional Policy on Accident Investigations and Offshore Incident Reports  and the MMS National Accident Investigation Handbook regarding which  BSEE official is responsible for assigning panel investigation  membership. BSEE officials told us that this inconsistency has resulted in  management disagreements regarding what skillset—technical or  investigative—is more appropriate for managing panel investigations.  According to BSEE officials, continued uncertainty over how panel  leadership is determined—and by extent, managed—could undermine the  effectiveness of ongoing and future panel investigation outcomes. For  example, BSEE officials told us that the IRU has participated in five panel  investigations since August 2013, though all lasted longer than the 8- month target time frame set by the Regional Policy on Accident  Investigations and Offshore Incident Reports. Additionally, the IRU  Policies and Procedures conflicts with the Regional Policy on Accident  Investigations and Offshore Incident Reports regarding the coordination  of referrals of potential criminal wrongdoing. Specifically, the IRU Policies  and Procedures states that the IRU is responsible for coordinating  investigative efforts with the IG, and the Regional Policy on Accident  Investigations and Offshore Incident Reports states that its Office of  Safety Management is responsible for referring cases of suspected  criminal wrongdoing to the IG. Without clear policies and procedures for  assigning panel investigation membership and referring cases of  suspected criminal wrongdoing to the IG, BSEE’s ability to coordinate its  investigative activities and monitor their results is hampered.

section_title: BSEE’s Ongoing Restructuring Risks Weakening Its Environmental Compliance Capabilities
paragraphs: BSEE’s ongoing restructuring of its environmental compliance program  reverses actions taken to address post-Deepwater Horizon concerns,  weakening its oversight of operator compliance with environmental  standards. In addition, the bureau has made limited progress developing  and updating guidance, which are among the goals of the restructuring.  Additionally, BSEE’s restructuring has not addressed staffing shortfalls  that are preventing it from meeting its environmental oversight targets.
subsections: section_title: Restructuring of Environmental Compliance Reverses Actions Taken to Address Post-Deepwater Horizon Concerns
paragraphs: BSEE’s ongoing restructuring of its Environmental Compliance Division  could undermine one of the primary purposes for which its predecessor— the Environmental Enforcement Division—was established. The  predecessor division was established as a national program in 2011 in  response to the findings of the post-Deepwater Horizon incident  investigations. Specifically, in September 2010, the OCS Safety Oversight  Board reported that the focus of BOEMRE—BSEE’s predecessor  bureau—on oil and gas development might have been at the expense of  protecting the environment. The board reported that, according to some  environmental staff, several BOEMRE managers changed or minimized  potential environmental impact findings to expedite offshore oil and gas  development, and that managers believed environmental assessments  should always result in the authorization for development.

The IG and OCS Safety Oversight Board made recommendations to  ensure that environmental concerns were given appropriate weight and  consideration. In response, BOEMRE produced an internal report in  October 2011 to serve as the basis for developing BSEE’s environmental  compliance capabilities. Based on the recommendations of this report  and the OCS Safety Oversight Board, BSEE established an  Environmental Enforcement Division with region-based environmental  staff reporting directly to the headquarters-based division chief instead of  regional management, as had been done prior to the establishment of the  Environmental Enforcement Division, to ensure that the environmental  component of BSEE operated under a separate reporting structure from  the regional BSEE offshore operations. According to this report, the  purpose of the Environmental Enforcement Division’s reporting structure  was to (1) elevate the level of environmental compliance decision making  to that of other bureau programs; (2) strengthen the bureau’s  environmental function; (3) allow for constructive and efficient dialogue  concerning the balancing of leasing and development goals with those of  the bureau’s environmental responsibilities; (4) ensure the environmental  functions had an adequate and appropriate level of decision-making  influence; and (5) improve the bureau’s ability to verify industry  compliance with all environmental laws, regulations, mitigations, and  reporting requirements.

The field-to-headquarters reporting structure of the Environmental  Enforcement Division changed in February 2015, when BSEE’s Deputy  Director issued a memorandum altering it. Under the program’s new  structure, environmental compliance personnel in the field again report to  their regional director, as they did prior to the establishment of the  Environmental Enforcement Division, rather than to the program manager  in headquarters. The rationale for this change is unclear, as it is not  discussed in the bureau’s documentation of key restructuring planning  efforts and decisions. BSEE leadership told us that the bureau delegated  management of field-based environmental compliance personnel to the  regions to be consistent with its proposed national programs for  investigations and enforcement.

Because consideration of this change was not included in the bureau’s  documentation of key restructuring planning efforts and decisions, it is  unclear whether BSEE analyzed why or how to restructure its  environmental compliance capability. For example, BSEE’s September  2014 Implementation Plan—which describes restructuring courses of  action developed during the summer of 2014—does not discuss any  potential changes to the Environmental Enforcement Division.  Additionally, the November 2014 Management Council Action Plan— which documents BSEE leadership agreements regarding how to  implement the restructuring—states that environmental compliance will be  a new program—although the Environmental Enforcement Division  already existed—but also states that the Environmental Enforcement  Division is not part of the restructuring effort and that any improvements  to it will be made within its existing structure. Rather, both plans focus  on the development of three other new national programs— investigations, enforcement, and data stewardship. No analysis or options  for restructuring the Environmental Enforcement Division or creating a  new environmental compliance program—including how to ensure that  BSEE’s environmental compliance capability retains the appropriate  weight and consideration called for by the IG and OCS Safety Oversight  Board—were discussed in either plan. Further, the Chief of the  Environmental Compliance Division—who previously managed the  Environmental Enforcement Division—told us that he did not know why  the program was restructured and that he was unaware of any analysis  being conducted regarding why or how to do so.

BSEE’s decision to return to a region-based model, similar to the pre- Deepwater Horizon incident organization, risks undermining (1) one of the  primary purposes for establishing the division as a national program in  2011 and (2) the actions the bureau took to better ensure that its  responsibility to protect the environment was given appropriate weight  and consideration within the bureau. Some BSEE environmental  compliance officials told us that they believe the new program could  adversely affect the ability of regional environmental compliance  personnel in the Alaska and Pacific regions to leverage the expertise of  subject matter experts—such as ecologists, biologists, and environmental  engineers—located in the Gulf of Mexico region. Specifically, some BSEE  officials said that regional management control over these functions could  inhibit the interregion dialogue that existed when field environmental  compliance program personnel reported directly to headquarters, rather  than to regional leadership.

One of the federal standards for internal control—risk assessment— states that management should assess the risks faced entity-wide and, at  the activity level, from both external and internal sources, and that once  risks have been identified, management should decide what actions  should be taken to mitigate them. Risk identification methods may  include, among other things, consideration of findings from audits and  other assessments. Given the findings and recommendations of the 2010  IG, 2010 OCS Safety Oversight Board, and 2011 BOEMRE reports and  the extent of the environmental effects of the Deepwater Horizon incident,  it is inconsistent with these standards that BSEE did not conduct and  document an analysis of the risks it faces from returning its environmental  compliance capability to a regional-based reporting structure. Without  conducting and documenting a risk analysis of this reporting structure,  including actions to mitigate any risk, it is not clear that BSEE will have  reasonable assurance that environmental issues are receiving the  appropriate weight and consideration as called for by the IG and OCS  Safety Oversight Board reports.

section_title: BSEE Has Made Limited Progress Developing and Updating Its Environmental Compliance Policy and Procedures
paragraphs: BSEE has not completed an environmental compliance policy or  developed procedures for environmental compliance—which are among  the goals of BSEE’s restructuring effort, according to restructuring  planning documents, and consistent with federal standards for internal  control. BSEE documents indicate that the bureau planned to complete its  environmental compliance policy and procedures in the summer of 2015,  but that the time frame for completing its policy framework has slipped to  2016. As part of the ongoing restructuring that began in 2013, in October  2015, Interior approved BSEE’s establishment of an Environmental  Compliance Division to develop national policies and procedures for the  enforcement of environmental rules and promote the consistency of the  bureau’s environmental compliance activities. However, BSEE has not  completed a policy outlining what the Environmental Compliance  Division’s responsibilities will be or updated procedures to guide its  activities.

The absence of standard operating procedures is a long-standing  deficiency in the bureau’s environmental compliance capabilities. In  particular, BSEE’s 2013 and 2014 annual environmental compliance  activity reports note the importance of developing standard operating  procedures to help ensure consistency, future performance comparisons,  and eventual succession planning. BSEE officials told us that many of  their environmental oversight practices are not documented in guidance  but rather reside within the institutional knowledge of environmental  oversight staff and risk being lost if those staff leave the bureau, which  would hamper its ability to effectively conduct environmental oversight.  They also noted that, while BSEE has established some environmental  compliance standard operating procedures for certain activities—such as  agreements with BOEM and draft Endangered Species Act Consultation  Requirements and Marine Mammal Protection Act information sheets— they are not all sufficient, comprehensive, or consistent. In March 2015,  BSEE requested price quotes from consultants for a contract to establish  environmental compliance standard operating procedures that address  lessons learned from the Deepwater Horizon incident, incorporate  regional best practices, and align with regulatory authorities. BSEE  contracted with a consultant in August 2015 to establish these standard  operating procedures and stipulated that they be completed within 12  months of contract issuance. In an October 2015 management advisory  on BSEE’s restructuring, Interior’s IG recommended that the bureau  should promptly develop an action plan for the restructuring’s  implementation that should include timelines and responsible officials for  major milestones, such as policy and procedure development and staffing  and training plans. Until it completes a policy outlining the  responsibilities of the Environmental Compliance Division and standard  operating procedures to guide its activities, BSEE will continue to face a  long-standing deficiency in its environmental compliance capabilities.

Furthermore, BSEE’s policy on monitoring water quality might be  outdated. Specifically, BSEE’s interagency agreements with EPA  regarding the coordination of National Pollutant Discharge Elimination  System permit compliance monitoring date to the 1980s and, according to  BSEE’s annual environmental compliance activity reports, might not  reflect current resources and agency needs. For example, a 1989  agreement between MMS and EPA for the coordination of National  Pollutant Discharge Elimination System permit compliance monitoring in  the Gulf of Mexico stipulates that MMS inspect no more than 50 facilities  per year for EPA and that MMS not conduct water sampling on behalf of  EPA. However, it is unclear whether this level of monitoring is appropriate  30 years later due to changes in drilling practices and technologies.  According to Standards for Internal Control in the Federal Government,  as programs change and as agencies strive to improve operational  processes and implement new technological developments, management  must continually assess and evaluate its internal control to ensure that  the control activities being used are effective and updated when  necessary. By coordinating with EPA to consider the relevance of  existing interagency agreements for monitoring operator compliance with  National Pollutant Discharge Elimination System permits on the OCS and  updating them if necessary to reflect current oversight needs, BSEE  would have better assurance that these agreements reflect current  resources and agency needs. Senior BSEE officials told us that the  bureau has no plans to update its existing interagency agreements with  EPA, and some officials said that a previous headquarters-led effort to  update the agreements was not completed because it did not sufficiently  describe BOEM’s responsibilities for offshore oil and gas development.  Additionally, EPA officials told us that they have discussed updating these  agreements but do not have a plan or timetable for taking action because  of disagreements with BSEE regarding the credentials needed for BSEE  inspectors to conduct water sampling on behalf of EPA.

section_title: BSEE’s Restructuring Has Not Addressed Staffing Shortfalls That Prevent It from Meeting Environmental Oversight Goals
paragraphs: BSEE’s restructuring has not addressed documented staffing shortfalls  that prevent the bureau from meeting its environmental compliance  oversight goals. According to its annual environmental compliance activity  reports, BSEE has not met its goals for monitoring operator compliance  with environmental standards primarily because BSEE does not have  enough staff to accomplish its workload. For example, according to its  fiscal year 2014 annual environmental compliance activity report, the Gulf  of Mexico Region met less than 33 percent of its 100 percent target for  office verification oversight—which includes assessing industry-submitted  documentation—and less than 1 percent of its 10 percent target for facility  verification oversight—which includes conducting on-site inspections of  operator compliance with environmental stipulations.

BSEE’s fiscal year 2014 annual environmental compliance activity report  states that funding was available for additional environmental compliance  positions in the field but that BSEE leadership did not authorize hiring.  Specifically, of 22 funded positions, 8 were not filled at the end of fiscal  year 2014 in the Gulf of Mexico region because the Deputy Director did  not authorize hiring. The need for staff was documented in BSEE’s  fiscal year 2013 and 2014 annual environmental compliance activity  reports as well as in the October 2011 BOEMRE report on which BSEE’s  environmental compliance program is based. All advocate for a higher  staffing level—30, 30, and 27, respectively—than funded. Senior BSEE  officials told us that they did not believe the October 2011 BOEMRE  report was approved by bureau leadership at the time and is, therefore,  not representative of BSEE’s environmental compliance needs. However,  BSEE’s fiscal year 2013 and fiscal year 2014 annual environmental  compliance activity reports indicate that the establishment of the  Environmental Enforcement Division was based on the findings of the  2011 BOEMRE report.

Bureau-wide, BSEE’s Environmental Compliance Division has been  funded for 30 positions since fiscal year 2014, but 9 remained unfilled as  of November 2015. Specifically, in addition to the 8 vacancies in the Gulf  of Mexico region, the Pacific region has been without a permanent  Regional Environmental Officer since 2014. According to BSEE  leadership, the bureau began fiscal year 2013 with $2.8 million in unspent  environmental compliance funds from 2012 and that cumulative excess  funds roll over to each subsequent year. Specifically, they told us that the  bureau had unspent environmental compliance appropriations totaling  approximately $3.8 million at the end of fiscal year 2013 (from a $3.9  million appropriation), $5.5 million at the end of fiscal year 2014 (from an  $8.3 million appropriation), and $7.1 million at the end of fiscal year 2015  (from an $8.3 million appropriation).

According to senior BSEE officials, the bureau has no plans to fill any  vacant environmental compliance positions in the field. Additionally, these  officials told us that BSEE intends to transfer most of its environmental  compliance personnel to headquarters within the next 5 years. In  September 2015, BSEE advertised for a new environmental compliance  position in headquarters. Without developing a plan to address  documented environmental oversight staffing needs, BSEE does not have  reasonable assurance that it could meet its goals for monitoring operator  compliance with environmental standards.

section_title: BSEE’s Ongoing Restructuring Has Made Limited Progress Addressing Long-Standing Deficiencies in Its Enforcement Capabilities
paragraphs: BSEE’s restructuring of its enforcement capabilities has made limited  progress addressing long-standing deficiencies in its effectiveness.  Specifically, BSEE has not completed policies or developed procedures— including defined criteria for the use of its existing enforcement tools—to  guide its enforcement actions. Additionally, BSEE did not comply with a  statutory requirement to review its maximum daily civil penalty.
subsections: section_title: BSEE Has Not Developed Procedures, Including Criteria for Using Its Enforcement Tools
paragraphs: BSEE has not completed an enforcement policy or developed procedures  consistent with federal standards for internal control—including criteria for  enforcement actions against operators that violate safety and  environmental regulations—which are among the goals of BSEE’s  restructuring effort, for all its enforcement tools, according to restructuring  planning documents. BSEE documents indicate that the bureau planned  to complete its policies and procedures in the summer of 2015, but that  the time frame for establishing its policy framework has slipped to 2016.  As part of the ongoing restructuring that began in 2013, in October 2015,  Interior approved the establishment of a Safety Enforcement Division to  develop national enforcement policies and procedures and monitor the  execution and effectiveness of the bureau’s enforcement activities.  However, BSEE has not completed a policy outlining the Safety  Enforcement Division’s responsibilities or developed procedures that  contain criteria for using enforcement tools to guide its enforcement  activities.

The absence of enforcement criteria is a long-standing deficiency in the  bureau’s enforcement capabilities. For example, in 2010, IG and OCS  Safety Oversight Board investigations following the Deepwater Horizon  incident recommended that BSEE—then BOEMRE—assess its  enforcement tools and how to employ them to deter safety and  environmental violations. In October 2012, a consultant BSEE hired to  assess its enforcement strategy found that some BSEE enforcement tools  lacked clear procedures and criteria and, in turn, recommended that  BSEE define its full complement of enforcement tools. BSEE  restructuring planning documents describe the need for consistently  applied enforcement tools so that offshore operators understand the  performance expected, as well as the consequences for violating safety  and environmental standards. These documents also state that the  current lack of criteria results in inconsistent enforcement actions and  creates uncertainty for operators regarding BSEE’s oversight approach  and expectations. Likewise, BSEE officials told us that the absence of  criteria can result in inconsistent enforcement actions taken for similar  infractions across or within regional offices.

Among the enforcement tools BSEE can use to compel operator  compliance with safety and environmental standards are performance  improvement plans. BSEE enforcement officials told us that the use of  performance improvement plans—an enforcement tool to establish  performance targets for low-performing operators—could be a powerful  tool to compel operators to comply with safety and environmental  regulations. BSEE developed a draft standard operating procedure for  implementing performance improvement plans, but the extent to which it  has been implemented is unclear. BSEE leadership told us that the  bureau had implemented the procedure, but did not provide  documentation of its use for developing or executing a performance  improvement plan. Further, the draft standard operating procedure does  not contain specific criteria for the level of performance that would result  in an operator being placed on a performance improvement plan. BSEE  enforcement officials told us that the bureau’s Office of Safety  Management had drafted a policy for using performance improvement  plans but said they were not aware of any final guidance or criteria for  implementing them. They also stated that, without criteria in procedures  for how to use performance improvement plans, they can face challenges  obtaining management approval to implement them.

According to BSEE enforcement officials, recommending that BOEM  disqualify operators from participating in offshore oil and gas development  is the most powerful tool available to remove consistently low-performing  operators from the OCS. However, BSEE has not developed  procedures, including criteria for recommending the disqualification of  operators beyond what is broadly defined in its regulations. For BSEE to  make disqualification recommendations to BOEM, the regulations cite the  following: (1) accidents and their nature; (2) pollution events,  environmental damages, and their nature; (3) incidents of noncompliance;  (4) civil penalties; (5) failure to adhere to OCS lease obligations; or (6)  any other relevant factors as criteria. By providing more detailed  guidance outlining comprehensive criteria for responding to regulatory  violations on the OCS, BSEE could address uncertainty regarding its  approach to enforcing compliance with safety and environmental  standards. The regulations, however, do not specify the conditions that  would trigger disqualification recommendations, and BSEE officials told  us that the bureau has not developed procedures with criteria identifying  the types of accidents or pollution events, for example, that would merit  disqualification. As a result, operators do not know the circumstances  under which BSEE could recommend their disqualification from  participating in offshore oil and gas development. Without procedures and  criteria for all of its enforcement tools, BSEE does not have reasonable  assurance that it can take consistent enforcement actions for operators  who commit similar violations. In an October 2015 management advisory  on BSEE’s restructuring, Interior’s IG recommended that the bureau  should promptly develop an action plan for the restructuring’s  implementation that should include timelines and responsible officials for  major milestones, such as policy and procedure development and staffing  and training plans.

section_title: BSEE Does Not Have a Mechanism to Ensure It Reviews Its Maximum Daily Civil Penalty within the Statutory Time Frame
paragraphs: BSEE does not have a mechanism to ensure that it reviews its maximum  daily civil penalty every 3 years, as required by the Outer Continental  Shelf Lands Act. If a violation causes injury, death, or environmental  damage, or poses a threat to human life or the environment, BSEE is to  consider the violation for civil penalty assessment review. BSEE is to  review the maximum daily civil penalty amount every 3 years and adjust it  to reflect increases in the Consumer Price Index (CPI). As stated by the  Deputy Secretary, Department of the Interior in his May 2010 testimony  before the Senate Committee on Energy and Natural Resources, the  original penalty authority came from the 1978 Lands Act amendments,  and the original maximum fine was $10,000 per day, per violation. In the  1990 Oil Pollution Act, there was an amendment to the Outer Continental  Shelf Lands Act that increased that maximum fine for civil penalties to  $20,000 per day, per violation, and it established the ability to adjust that  penalty upward under the CPI. In 1997, MMS increased the maximum  penalty amount up, under the CPI, to $25,000 a day. In 2003, it was again  increased, because of the CPI, to $30,000 a day. In 2007, it was again  increased to $35,000 per day. In August 2009, MMS did a CPI analysis,  and the CPI had not gone over the threshold—rounding to the nearest  $5,000 increment—to raise the penalty further. BOEMRE again reviewed  the maximum daily civil penalty in October 2010 and increased the  maximum fine from $35,000 to $40,000 in August 2011.

BSEE then did not review the maximum daily civil penalty for nearly 5  years. In February 2015, BSEE’s Deputy Director told us that the bureau  had not reviewed the maximum daily civil penalty since 2010 because  BSEE’s ongoing restructuring effort is a higher priority, but that the  bureau would consider doing so once the restructuring is complete. In  June 2015, we requested documentation of the last time that BSEE  reviewed its maximum daily civil penalty. Subsequently, in June 2015, the  Deputy Director requested that BSEE staff conduct such a review in  response to GAO, according to a December 2015 BSEE memorandum.  Interior’s Office of the Solicitor conducted an analysis in September 2015,  nearly 5 years after the previous analysis was conducted in October  2010. Interior’s Office of the Solicitor compared the 2011 CPI—the time of  the last adjustment—to the 2014 CPI—the time at which BSEE was to  conduct the review based on statutory time frames—and recommended  that BSEE not raise its maximum daily civil penalty because the new  penalty would not exceed the threshold to round up to $45,000. By not  having a mechanism, however, to ensure that it reviews its maximum  daily civil penalty and adjusting it to reflect increases in the CPI within the  statutory time frame, BSEE risks collecting smaller fines from operators  that violated safety and environmental standards than it otherwise could  have, potentially diminishing the effectiveness of issuing civil penalties as  an enforcement tool.

section_title: Conclusions
paragraphs: Since its inception in 2011, BSEE has undertaken several efforts to  reform its oversight capabilities. More than 2 years into its restructuring  effort—and more than 5 years after the Deepwater Horizon incident—the  bureau has not completed the underlying policies and procedures to  facilitate the implementation of its new Safety and Incident Investigation,  Environmental Compliance, and Safety Enforcement Divisions. Without  completing policies and procedures for these capabilities, BSEE  continues to face risks to their effectiveness. Moreover, BSEE continues  to face deficiencies in each of these capabilities that undermine its ability  to effectively oversee offshore oil and gas development.

With regard to investigations, because it does not have a capability to  review investigation policy and collect and analyze incident and  investigative data, BSEE does not have reasonable assurance that it can  identify trends in safety and environmental hazards that could inform  bureau decisions and enhance safety and environmental oversight.  Additionally, without a plan with milestones for implementing the case  management system for investigations, BSEE will continue to have  difficulty systematically monitoring, reviewing, or evaluating the results of  IRU investigations in a timely manner. Further, without clearly  communicating the purpose of the IRU to industry operators, BSEE might  continue to hamper the effectiveness of its investigations. Moreover,  without clear policies and procedures for assigning panel investigation  membership and referring cases of suspected criminal wrongdoing to the  IG, BSEE’s ability to coordinate its investigative activities and monitor  results is hampered.

With regard to environmental compliance, a key post-Deepwater Horizon  incident reform was the establishment of a headquarters-based program  specifically responsible for managing environmental compliance issues.  However, BSEE reverted to a region-based reporting structure without  conducting and documenting a risk analysis, including actions to mitigate  any risk and, thus, it is not clear that BSEE will have reasonable  assurance that environmental issues are receiving the appropriate weight  and consideration as called for by the OCS Safety Oversight Board  report. Additionally, BSEE would have better assurance that its existing  interagency agreements with EPA for monitoring operator compliance  with National Pollutant Discharge Elimination System permits reflect  current resources if it coordinated with the EPA to consider their  relevance and updating them, if necessary, to reflect current oversight  needs. The success of BSEE’s Environmental Compliance Division is  predicated on its ability to conduct oversight of operator activities.  However, without developing a plan to address documented  environmental oversight staffing needs, BSEE does not have reasonable  assurance that it could meet its goals for monitoring operator compliance  with environmental standards.

With regard to enforcement, BSEE’s ability to assess civil penalties is a  key tool for compelling operator compliance with safety and  environmental standards. Without a mechanism to ensure the review of  its maximum daily civil penalty, and adjusting it to reflect increases in the  CPI within the statutory time frame, BSEE risks collecting smaller fines  from operators that violate safety and environmental standards,  potentially diminishing the effectiveness of civil penalties as an  enforcement tool.

section_title: Recommendations for Executive Action
paragraphs: To enhance its ability to effectively oversee offshore oil and gas  development, we recommend that the Secretary of the Interior direct the  Director of the Bureau of Safety and Environmental Enforcement to take  the following nine actions as it continues to implement its restructuring  effort.

To address risks to the effectiveness of its investigations,  environmental compliance, and enforcement capabilities, we  recommend that BSEE complete policies outlining the responsibilities  of its SIID, Environmental Compliance Division, and Safety  Enforcement Division and update and develop procedures to guide  them.

To enhance its investigative capabilities, we recommend that BSEE establish a capability to review investigation policy and collect and  analyze incidents to identify trends in safety and environmental  hazards; develop a plan with milestones for implementing the case  management system for investigations;  clearly communicate the purpose of the IRU, as it will be assumed  by the SIID, to industry operators; and  clarify policies and procedures for assigning panel investigation  membership and referring cases of suspected criminal  wrongdoing to the IG.

To enhance its environmental compliance capabilities, we recommend  conduct and document a risk analysis of the regional-based  reporting structure of the Environmental Compliance Division,  including actions to mitigate any identified risk;  coordinate with the Administrator of the Environmental Protection  Agency to consider the relevance of existing interagency  agreements for monitoring operator compliance with National  Pollutant Discharge Elimination System permits on the OCS and,  if necessary, update them to reflect current oversight needs; and develop a plan to address documented environmental oversight  staffing needs.

To enhance its enforcement capabilities, we recommend that BSEE develop a mechanism to ensure that it reviews the maximum daily  civil penalty and adjust it to reflect increases in the CPI within the  time frame as directed by statute.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Department of the Interior and the  Environmental Protection Agency for review and comment, and both  agencies provided written comments.  In its written comments,  reproduced in appendix II, Interior agreed that additional reforms—such  as documented policies and procedures—are needed to address offshore  oil and gas oversight deficiencies, but Interior neither agreed nor  disagreed with our recommendations. Interior states that BSEE’s current  realignment employs a national program model and that the designated  lead for a national program establishes program strategy, identifies  priorities for resource allocation, and develops and tracks accountability  measures. However, more than 2 years into the restructuring effort, BSEE  did not provide us with evidence that the bureau has made significant  progress toward these functions for its new divisions. We agree that it is a  significant cultural shift to move from a largely decentralized field  organization to one with national-level direction, monitoring, and  accountability. However, Interior’s characterization of BSEE’s  environmental compliance restructuring—which Interior highlights as the  most evident aspect of the cultural shift occurring within BSEE—is of  particular concern. Specifically, Interior states that its initial efforts to  move away from a decentralized field organization responsible for  environmental compliance issues to a reporting chain with regionally- based staff reporting to headquarters-based managers—a step we  viewed as a key post-Deepwater Horizon incident reform—presented  BSEE with challenges that slowed resolution of some oversight  deficiencies. However, BSEE did not provide us with evidence of any  such challenges during our review.  Moreover, BSEE has reverted to a  region-based environmental oversight reporting structure, which runs  counter to the recommendations of the 2010 Inspector General and OCS  Safety Oversights Board reports. Further, because of this action— particularly because the bureau did no provide us with documentation of  its analysis justifying the reason for doing so—it is not clear that BSEE  will have reasonable assurance that environmental issues are receiving  the appropriate weight and consideration as called for in those reports. As  a result, we continue to believe that BSEE should conduct and document  a risk analysis of the regional-based reporting structure of the  Environmental Compliance Division, including actions to mitigate any  identified risk.

In its written comments, reproduced in appendix III, EPA agreed to  coordinate with BSEE and update existing interagency agreements for  compliance monitoring as appropriate. Interior also provided technical  comments that we incorporated into the report, as appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of the Interior, the Administrator  of the Environmental Protection Agency, and other interested parties. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff members have any questions about this report, please  contact me 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 report. GAO staff who made major contributions to  this report are listed in appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To examine the extent to which the Department of the Interior’s Bureau of  Safety and Environmental Enforcement’s (BSEE) ongoing restructuring  has enhanced its capabilities for (1) investigations, (2) environmental  compliance, and (3) enforcement, we reviewed laws, regulations, policies,  and guidance related to BSEE’s authority regarding these capabilities, as  well as its activities in implementing them since the bureau’s inception in  2011. For these capabilities, we reviewed documentation related to  BSEE’s ongoing restructuring, including plans, analyses of restructuring  options, development and implementation schedules, department manual  updates, consultant contracts, and draft policies to determine the intent  and history of restructuring actions leading to BSEE’s current  organizational state. We interviewed BSEE officials representing the  bureau’s headquarters leadership to determine the purpose of the  ongoing restructuring and how they have managed it. We also  interviewed officials responsible for conducting oversight activities in each  of the bureau’s three regions—the Gulf of Mexico, Pacific, and Alaska—to  understand their roles in executing BSEE’s investigative, environmental  compliance, and enforcement missions, as well as their perspectives on  how the restructuring has affected the bureau’s oversight activities to  date.

We reviewed interagency agreements between BSEE and other federal  agencies with responsibilities on the outer continental shelf (OCS) to  determine the frameworks for how they coordinate activities with regards  to their jurisdictional boundaries. Specifically, we reviewed BSEE  agreements with (1) the U.S. Coast Guard regarding incident  investigations, (2) Interior’s Bureau of Ocean Energy Management  regarding environmental oversight, and (3) the Environmental Protection  Agency regarding water quality monitoring. We also interviewed officials  representing these agencies to determine how the agencies coordinate  their oversight activities and the effect, in any, that the restructuring has  had on that coordination. Additionally, we met with representatives from  the American Petroleum Institute—which represents all segments of the  domestic oil and gas industry—and the Center for Offshore Safety— which develops safety and environmental standards for the offshore oil  and gas industry—to obtain their perspectives on how BSEE’s ongoing  restructuring affected its oversight of offshore oil and gas development.  Their views are not generalizable but provide illustrative examples.

We also compared BSEE’s current state, based on information gathered  from bureau documents and interviews with bureau officials, to BSEE’s  regulations and policies, post-Deepwater Horizon incident investigation  reports, and Standards for Internal Control in the Federal Government.

We conducted this performance audit from January 2015 to February  2016 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

section_title: Appendix II: Comments from the Department of the Interior

section_title: Appendix III: Comments from the Environmental Protection Agency

section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Christine Kehr (Assistant  Director), Cindy Gilbert, Alison O’Neill, Matthew D. Tabbert, Kiki  Theodoropoulos, Barbara Timmerman, and Daniel R. Will made  significant contributions to this report.


Question-summary annotations: questions: question: To what extent has the restructuring of BSEE enhanced the bureau's investigative capabilities?
answer: The Department of the Interior's (Interior) Bureau of Safety and Environmental Enforcement's (BSEE) ongoing restructuring has made limited progress in enhancing the bureau's investigative capabilities.
child_questions: question: What progress has BSEE made towards updating its policies?
answer: Specifically, BSEE has not completed a policy outlining investigative responsibilities or updated procedures for investigating incidents—among the goals of BSEE's restructuring, according to restructuring planning documents, and consistent with federal standards for internal control.

question: How are Interior's policies lacking?
answer: Post- Deepwater Horizon incident investigations found that Interior's policies and procedures did not include requirements for planning investigations, gathering and documenting evidence, and ensuring quality control and determined that their continued use posed a risk to the effectiveness of bureau investigations.
child_questions: question: Why must the policies be updated as soon as possible?
answer: Without completing and updating its investigative policies and procedures, BSEE continues to face this risk.

questions: question: How does BSEE's restructuring affect its oversight capabilities?
answer: BSEE's ongoing restructuring of its environmental compliance program reverses actions taken to address post- Deepwater Horizon incident concerns, and risks weakening the bureau's environmental compliance oversight capabilities.

question: Why was the BSSE environmental oversight division created?
answer: In 2011, in response to two post- Deepwater Horizon incident investigations that found that BSEE's predecessor's focus on oil and gas development might have been at the expense of protecting the environment, BSEE created an environmental oversight division with region-based staff reporting directly to the headquarters-based division chief instead of regional management.
child_questions: question: Why was this reporting structure chosen?
answer: This reporting structure was to help ensure that environmental issues received appropriate weight and consideration within the bureau.

question: How would the restructuring affect the reporting structure?
answer: Under the restructuring, since February 2015, field-based environmental compliance staff again report to their regional director.
child_questions: question: Why was the reporting structure changed?
answer: BSEE's rationale for this action is unclear, as it was not included in the bureau's restructuring planning documentation or analysis as part of restructuring planning.

questions: question: To what extent has BSEE's restructuring enhanced its enforcement capabilities?
answer: BSEE's ongoing restructuring has made limited progress in enhancing its enforcement capabilities.

question: How does the lack of criteria decrease BSEE's effectiveness?
answer: BSEE restructuring plans state that the current lack of criteria results in inconsistent actions and creates uncertainty for operators regarding BSEE's oversight approach and expectations.
child_questions: question: To what extent is this a new issue?
answer: The absence of enforcement criteria is a long-standing deficiency.

question: Why is it critical to develop new procedures as soon as possible?
answer: Without developing procedures with defined criteria for taking enforcement actions, BSEE continues to face risks to the effectiveness of its enforcement capabilities.

questions: question: What happened with the Deepwater Horizon drilling rig?
answer: On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico resulting in 11 deaths, serious injuries, and the largest marine oil spill in U.S. history.
child_questions: question: How did Interior respond to this catastrophe?
answer: In response, in May 2010, Interior reorganized offshore oil and gas management activities—energy development, revenue collection, and regulatory oversight—into separate bureaus. In October 2011, Interior created BSEE to manage regulatory oversight.

question: What actions has BSEE taken since then?
answer: Since then, BSEE has undertaken reform efforts but has not fully addressed deficiencies in its investigative, environmental compliance, and enforcement capabilities identified by investigations after the Deepwater Horizon incident.
child_questions: question: How has BSEE addressed its oversight deficiencies?
answer: In October 2013, BSEE initiated an organizational restructuring to address continuing oversight deficiencies.

question: What was GAO asked to review?
answer: GAO was asked to review BSEE's efforts to enhance its oversight capabilities.