Consumer Price Index Adjustments of the Oil Pollution Act of 1990 Limit of Liability for Offshore Facilities, 73832-73841 [2014-29093]

Agencies

• DEPARTMENT OF THE INTERIOR
• Bureau of Ocean Energy Management

[Federal Register Volume 79, Number 239 (Friday, December 12, 2014)]
[Rules and Regulations]
[Pages 73832-73841]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29093]


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DEPARTMENT OF THE INTERIOR

Bureau of Ocean Energy Management

30 CFR Part 553

[Docket ID: BOEM-2012-0076]
RIN 1010-AD87


Consumer Price Index Adjustments of the Oil Pollution Act of 1990 
Limit of Liability for Offshore Facilities

AGENCY: Bureau of Ocean Energy Management (BOEM), Interior.

ACTION: Final rule.

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SUMMARY: The Oil Pollution Act of 1990 (OPA) establishes a 
comprehensive regime for addressing the consequences of oil spills, 
ranging from spill response to compensation for damages to injured 
parties. Other than deepwater ports subject to the Deepwater Port Act 
of 1974, the Bureau of Ocean Energy Management (BOEM) is authorized to 
adjust the limit of liability in OPA for offshore facilities, including 
pipelines. This rule amends BOEM's regulations to add to the 
regulations on Oil Spill Financial Responsibility (OSFR) for offshore 
facilities in order to increase the limit of liability for damages 
caused by the responsible party for an offshore facility from which oil 
is discharged, or which poses the substantial threat of an oil 
discharge, as described in OPA. This rule adjusts the limit of 
liability to reflect the significant increase in the Consumer Price 
Index (CPI) that has taken place since 1990. It also establishes a 
methodology for BOEM to use to periodically adjust the OPA offshore 
facility limit of liability for inflation. BOEM is hereby increasing 
the limit of liability for damages under OPA from $75 million to 
$133.65 million.

DATES: This final rule is effective January 12, 2015.

FOR FURTHER INFORMATION CONTACT: Peter Meffert, Office of Policy, 
Regulations and Analysis (OPRA), Bureau of Ocean Energy Management, 
Department of the Interior, at 381 Elden Street, MS-4050 Herndon, 
Virginia 20170-4817 at (703) 787-1610, or email at 
peter.meffert@boem.gov. Questions related to the limit of liability or 
the adjustment process should be directed to Dr. Marshall Rose, Chief, 
Economics Division, Office of Strategic Resources, Bureau of Ocean 
Energy Management, at 381 Elden Street, MS-4050 Herndon, Virginia 
20170-4817 at (703) 787-1538, or email at marshall.rose@boem.gov.

SUPPLEMENTARY INFORMATION: 

[[Page 73833]]

Introduction

    OPA requires inflation adjustments to the offshore facility limit 
of liability not less than every three years to reflect significant 
increases in the CPI. 33 U.S.C. 2704(d)(4). This requirement is to 
preserve the deterrent effect and ``polluter pays'' principle embodied 
in the OPA Title I liability and compensation provisions.
    On February 24, 2014, BOEM published a proposed rule to increase 
the OPA offshore facility limit of liability to $133.65 million and 
establish the methodology for future inflation adjustments (79 FR 
10056). The rulemaking comment period initially closed on March 26, 
2014. Various groups requested additional time to review and analyze 
the implications of this proposed rule and BOEM extended the comment 
period by an additional 30 days (79 FR 15275) which closed on April 25, 
2014.
    Of the public comments received, all were generally supportive of 
the proposed rule. Also, one offered an alternative CPI adjustment. 
BOEM has posted all comments received in the docket [BOEM-2012-0076] 
for this rulemaking at www.regulations.gov.

Background

    In general, under Title I of OPA, the responsible parties for any 
vessel or facility, including any offshore facility that discharges or 
poses a substantial threat of discharge of oil into or upon navigable 
waters, adjoining shorelines, or the exclusive economic zone, are 
liable for the OPA removal costs and damages that result from such 
incident (as specified in 33 U.S.C. 2702(a) and (b)). Under 33 U.S.C. 
2704(a), however, the total liability of the responsible parties is 
limited (with certain exceptions specified in 33 U.S.C. 2704(c)). In 
instances when the OPA liability limit applies, the Oil Spill Liability 
Trust Fund (OSLTF) is available to compensate claimants for damages in 
excess of the liability limit and to reimburse responsible parties for 
damages that they pay for that are in excess of the liability limit, as 
provided in 33 U.S.C. 2708, 2712(a)(4), and 2713. The OPA at 33 U.S.C. 
2704(a)(3) provides that responsible parties for an offshore facility 
incident are liable for ``the total of all removal costs plus 
$75,000,000.'' The $75 million limit of liability only applies to 
damages covered by OPA.
    To prevent the real value of the amount of liability authorized by 
OPA from declining over time as a result of inflation, and shifting the 
financial risk of oil spill incidents to the OSLTF, OPA (33 U.S.C. 
2704(d)(4), requires that the President adjust the limit of liability'' 
not less than every three years,'' by regulation, to reflect 
significant increases in the CPI. This mandate has been in place since 
1990.
    Executive Order 12777, as amended, delegates the implementation of 
the President's OPA limit of liability inflation adjustment authority, 
dividing the responsibility among several Federal agencies. Among those 
delegations, section 4 of Executive Order 12777 vests the Secretary of 
the Interior (DOI) with authority to adjust the limit of liability for 
``offshore facilities, including associated pipelines, other than 
deepwater ports subject to the [Deepwater Port Act of 1974]'' for 
inflation. Under Secretarial Order 3299, BOEM exercises this authority 
on behalf of DOI. In addition, section 4 of Executive Order 12777, as 
amended and in relevant part, vests in the Secretary of the Department 
in which the Coast Guard is operating the President's authority to 
adjust for inflation the OPA limits of liability for vessels and 
deepwater ports (including associated pipelines), and the statutory 
limit of liability for onshore facilities. This authority has been 
redelegated by the Secretary of Homeland Security to the Coast Guard.

Regulatory History

    On July 1, 2009, following substantial coordination with DOI, the 
Environmental Protection Agency and the Department of Transportation to 
achieve consistent approaches to the inflation adjustment mandate, the 
Coast Guard published an Interim Final Rule With Request For Comments 
(IFR) (74 FR 31357), implementing the first set of regulatory inflation 
adjustments to the limits of liability for vessels and deepwater ports, 
and establishing the methodology the Coast Guard will use for future 
inflation adjustments to the limits of liability for its delegated 
source categories. (See 33 CFR 138.240. See also, Notice of Final 
Rulemaking, 73 FR 54997 (September 24, 2008), and Final Rule, 75 FR 750 
(January 6, 2010)).
    As described in the preamble to the Coast Guard's IFR, DOI and 
other agencies with delegated authority for adjusting the OPA liability 
limits agreed to follow the Coast Guard's inflation adjustment 
methodology. BOEM has coordinated with the Coast Guard on the inflation 
adjustments to the OPA liability limit in this rulemaking.
    BOEM published its proposed rule to increase the OPA offshore 
facility limit of liability on February 24, 2014 (79 FR 10056). The 
comment period closed on April 25, 2014. This final rule increases the 
offshore facility limit of liability for OPA damages to $133.65 million 
and establishes the methodology for future inflation adjustments, which 
generally follows the Coast Guard's approach.

Offshore Facility Limit of Liability

    This rule implements the first mandated adjustment, under 33 U.S.C. 
2704(d)(4), to the OPA limit of liability for damages for offshore 
facilities to reflect significant increases in the CPI. This rule also 
establishes a methodology for making inflation adjustments to the OPA 
limit of liability for offshore facilities. To ensure maximum 
consistency in promulgating rules for CPI adjustments to the OPA limit 
of liability, the approach used by BOEM follows, in most respects, the 
inflation adjustment approach used by the Coast Guard in its 2009 CPI 
rulemaking that adjusted the limits of liability for vessels and 
deepwater ports. That approach, found at 33 CFR part 138, subpart B, 
went through a full notice and comment rulemaking and received no 
adverse comments.
    Offshore facilities are unique among the vessels and facilities 
covered under OPA. The OPA, at 33 U.S.C. 2704(a), assigns unlimited 
liability to the responsible parties for removal costs resulting from 
an offshore facility oil spill incident, and only limits their 
liability for the damages that result from such a spill and that are 
covered by OPA. This rulemaking adjusts the offshore facility limit of 
liability for OPA damages to $133.65 million. Under OPA, the 
responsible parties' liability for removal costs resulting from an 
offshore facility oil spill incident remains unlimited.

Oil Spill Financial Responsibility Requirements Are Not Affected by 
This Rulemaking

    This rulemaking does not affect the level of oil spill financial 
responsibility (OSFR) coverage (found in 33 U.S.C. 2716(c), and 30 CFR 
553.13) that responsible parties must demonstrate for covered offshore 
facilities (COFs) under subparts B through E in the regulations at 30 
CFR part 553.
    The OPA offshore facility limit of liability applies to more 
facilities than are covered by the OSFR requirement. The limit of 
liability for offshore facilities applies to all offshore facilities 
(other than deepwater ports), while OSFR coverage is required only for 
offshore facilities (other than deepwater ports) located seaward of the 
coastline, or in any portion of a bay connected to the sea generally, 
with a worst case oil discharge potential of more than 1,000 barrels 
and meeting other specific

[[Page 73834]]

criteria in the definition of COF found in 30 CFR 553.3.
    The OSFR coverage levels are specified at 33 U.S.C. 2716 and are 
not tied to the offshore facility limit of liability and, therefore, 
are not affected by the inflation adjustments required under OPA at 33 
U.S.C. 2704(d)(4). The OSFR coverage provisions of OPA establish 
minimum and maximum coverage amounts for any activity involving a COF. 
The OSFR coverage amounts are found in OPA at 33 U.S.C. 2716(c) and in 
the regulations at 30 CFR 553.13.
    Unlike the evidence of financial responsibility requirements 
applicable to vessels and deepwater ports, which are administered by 
the Coast Guard and are directly tied to the applicable CPI-adjusted 
limits of liability, OSFR coverage requirements are not directly tied 
to, and their levels do not automatically increase with changes in, the 
offshore facility limit of liability. OPA does not authorize an OSFR 
increase based solely on an increase in the limit of liability for 
offshore facilities occasioned by CPI adjustments. Rather, as stated in 
33 U.S.C. 2716(c)(1)(C), any adjustment to the required OSFR coverage 
amount must be separately ``justified based on the relative 
operational, environmental, human health, and other risks posed by the 
quantity or quality of oil that is explored for, drilled for, produced, 
or transported by the responsible party . . . .''
    BOEM specifically requested comments on any potential OSFR 
insurance underwriter premium increases. We received no comments 
related to OSFR insurance premiums during the proposed rule comment 
period.

Additional Regulatory Changes in 30 CFR Part 553

    Section 553.1 of this rule, consistent with the proposed rule, 
expands the purpose section to include adjusting the limit of 
liability. In section 553.3, the final rule also adds, consistent with 
the proposed rule, the following three new definitions to facilitate 
the implementation of the inflation adjustment process: Annual CPI-U, 
Current Period, and Previous Period. It also adds a new definition for 
Responsible Party, in the context of Subpart G.

Discussion of This Rule

I. Explanation of the CPI Adjustment to the Offshore Facility Limit of 
Liability for Damages

    This rule implements the first adjustment, mandated by 33 U.S.C. 
2704(d)(4), to the OPA limit of liability for damages caused by the 
responsible party for a facility from which oil is discharged, or which 
poses the substantial threat of a discharge from offshore facilities 
other than deepwater ports to reflect significant increases in the CPI. 
This rule also establishes the methodology that BOEM will use to make 
periodic CPI adjustments to the OPA offshore facility limit of 
liability for damages. These provisions are encompassed in a new 30 CFR 
part 553 subpart G.

1. How will BOEM calculate CPI adjustments to the limit of liability 
for offshore facilities?

    BOEM will calculate the new limit of liability for the offshore 
facility source category using the following formula: New limit of 
liability = Previous limit of liability + (Previous limit of liability 
multiplied by the decimal equivalent of the percent change in the CPI 
from the year the previous limit of liability was established, or last 
adjusted by statute or regulation, whichever is later, to the present 
year), then rounded to the closest $100.

2. Which CPI will BOEM use?

    The Bureau of Labor Statistics (BLS) publishes a variety of 
inflation indices, including the ``Consumer Price Index--All Urban 
Consumers, Not Seasonally Adjusted, U.S. City Average, All Items, 1982-
84 = 100,'' also known as ``CPI-U,'' for both monthly and annual 
periods. Consistent with the Coast Guard regulations at 33 CFR 138.240, 
BOEM will use CPI-U values, which may be viewed on the BLS Web site at: 
https://www.bls.gov/cpi/cpifiles/cpiai.txt. For consistency with the 
Coast Guard's limits of liability CPI adjustment rule, BOEM will use 
the annual period CPI-U (hereinafter the ``Annual CPI-U''), rather than 
the monthly period CPI-U.

3. How will BOEM calculate the percent change in the Annual CPI-U?

    Consistent with the Coast Guard's inflation adjustment methodology, 
BOEM will calculate the percent change in the Annual CPI-U using the 
BLS escalation formula described in Fact Sheet 00-1, U.S. Department of 
Labor Program Highlights, ``How to Use the Consumer Price Index for 
Escalation,'' September 2000. This formula provides that: Percent 
change in the Annual CPI-U = [(Annual CPI-U for Current Period--Annual 
CPI-U for Previous Period) / Annual CPI-U for Previous Period] x 100. 
Fact Sheet 00-1 is available from the BLS online at https://www.bls.gov/cpi/cpi1998d.pdf.

4. Which Annual CPI-U ``Previous Period'' and ``Current Period'' will 
BOEM use for its first inflation adjustment to the offshore facility 
limit of liability?

    To maintain the real value of the amount of liability authorized by 
OPA for damages, as contemplated in the original OPA mandate that 
directed the limit of liability be adjusted for the CPI, BOEM will use 
a ``Previous Period'' of 1990, the year OPA was enacted. For the 
``Current Period,'' BOEM will use the most recently published Annual 
CPI-U (see 30 CFR 553.703(a)). The latter is consistent with the Coast 
Guard's OPA limits of liability rule at 33 CFR 138.240 for vessels and 
deep water ports.
    For the calculations in this rule, BOEM has used the 2013 Annual 
CPI-U, published on January 16, 2014. Future updates will proceed on a 
3-year schedule, as provided in 30 CFR 553.703.

5. How has BOEM calculated the adjustment to the limit of liability and 
what is the new limit?

    The following illustrates how BOEM will apply the BLS escalation 
formula to calculate the decimal equivalent of the percent change in 
the Annual CPI-U to adjust the limit of liability for offshore 
facilities. The Annual CPI-U (index base period (1982-84 = 100)) for 
Current Period (2013): 232.957 - Annual CPI-U for Previous Period 
(1990): 130.7 = an index point change: 102.257 / Annual CPI-U for 
Previous Period: 130.7 = 0.782; result multiplied by 100: 0.782 x 100 = 
percent change in the Annual CPI-U of 78.2 percent. Note that the 
cumulative percent change value is rounded to one decimal place as 
provided in Sec.  553.703.
    The ``Current Period'' value for this methodology is the Annual 
CPI-U for the previous calendar year, due to the BLS Annual CPI-U 
publication schedule.
    Applying these values, this final rule adjusts the statutory 
offshore facility limit of liability for OPA damages of $75 million by 
the 78.2 percent increase in the Consumer Price Index Annual (CPI-U) 
that has taken place since 1990, to $133,650,000.

6. How will BOEM calculate the percent change for subsequent inflation 
adjustments to the OPA limit of liability for offshore facilities?

    This rule establishes the adjustment methodology BOEM will use for 
subsequent CPI adjustments to the OPA limit of liability for offshore 
facilities. Key features for the future inflation adjustments to the 
limit of liability include:

[[Page 73835]]

     BOEM plans to publish, through a final rule in the Federal 
Register, the inflation adjustments to the limit of liability for 
offshore facilities every three years, counting from 2014 with this 
rulemaking, provided that the threshold for a significant increase in 
the Annual CPI-U is met. A three percent or more change constitutes the 
significant increase threshold. The current adjustment uses the 2013 
Annual CPI-U for the ``Current Period.''
     BOEM has discretion to adjust the offshore facility limit 
of liability more frequently than every three years, by regulation, to 
reflect significant increases in the CPI.
     If Congress amends the limit of liability for offshore 
facilities, BOEM will calculate the Annual CPI-U change with the 
``Previous Period'' beginning with the year in which Congress amends 
the limit of liability. Otherwise we will calculate the percent change 
in the CPI-U for the next CPI adjustment to the offshore facility limit 
using the 2013 Annual CPI-U (the ``Current Period'' for today's 
adjustment to the limit of liability) as the ``Previous Period'' value.
     BOEM will evaluate whether the cumulative percent change 
in the Annual CPI-U since the last adjustment has exceeded three 
percent no later than 2017 (using the 2016 Annual CPI-U as the 
``Current Period''). If the change is three percent or greater, BOEM 
will publish a final rule in the Federal Register with the new 
inflation-adjusted offshore facility limit of liability. If, by the end 
of the three-year period, the cumulative percent change in the Annual 
CPI-U is less than three percent, BOEM will publish a notice in the 
Federal Register of no inflation adjustment to the limit of liability.
     Following a notice of no inflation adjustment, BOEM will 
evaluate the cumulative percent change in the Annual CPI-U annually and 
adjust the limit based on the cumulative percent change in the Annual 
CPI-U, once the three-percent threshold is reached. After this 
adjustment is made, BOEM will resume its process of conducting a review 
every three years.

7. How will BOEM provide public notice for the offshore facility limit 
of liability adjustments?

    BOEM will publish subsequent CPI or statutory adjustments to the 
offshore facility limit of liability for damages in a final rule in the 
Federal Register. A final rule will provide for timely notice of the 
CPI adjustments and will keep the offshore facility limit of liability 
amount current in BOEM regulations.

II. Additional Changes to 30 CFR Part 553

1. Update to Section 553.1 (What is the purpose of this part?'')

    Consistent with the proposed rule, BOEM is making the following 
changes to 30 CFR part 553, setting forth the limit of liability for 
offshore facilities under OPA.

2. Definition Changes for Terms Found at 30 CFR 553.3 (``How are the 
terms used in this regulation defined?'')

    BOEM is adding the following definitions to 30 CFR 553.3: Annual 
CPI-U, current period, previous period and Responsible party for 
purposes of Subpart G.

Changes Made Between the Proposed Rule and This Final Rule

    The proposed rule would have revised the definition of 
``responsible party'' in the existing regulation at 30 CFR 553.3, which 
addresses the party's responsibilities for COFs under the OSFR program. 
While the existing definition of ``responsible party'' adequately 
addresses the needs of the OSFR program, it does not contemplate the 
broader range of facilities that are covered by the limit of liability 
for offshore facilities under OPA at 33 U.S.C. 2704. In the context of 
OPA liability, a responsible party's liability is not limited to 
damages or removal costs associated with a COF. In this final rule, the 
new definition of ``responsible party'' for the limit of liability for 
offshore facilities in subpart G now makes clear that it also applies 
to all offshore facilities, whether the facilities are COFs (subject to 
the financial responsibility requirements of subparts A through F), or 
not, while the existing definition of ``responsible party'' for OSFR 
remains unchanged.
    Further, BOEM has removed the following sentence from the 
definition of ``responsible party'' that appeared in the notice of 
proposed rulemaking: ``The owner of operating rights in a lease is a 
responsible party with respect to facilities that serve or served an 
area and depth in which it holds operating rights, but not with respect 
to any facility that only serves parts of the lease to which it does 
not hold operating rights.'' A lessee of the area in which the facility 
is located is a responsible party under OPA at sec. 2701(32)(C). The 
definition of ``responsible party'' in both the proposed rule and in 
this final rule includes lessees as responsible parties. BOEM's 
definition of ``lessee'' in its existing regulation at 30 CFR 553.3 
(which is not changed by this final rule) includes a holder of 
operating rights (working interest owner). Therefore, when read 
together, the definition of ``responsible party'' without the described 
sentence and the definition of ``lessee'' hold operating rights owners 
responsible, making this sentence unnecessary. To reinforce this 
connection between the definitions, BOEM has added a phrase in the 
second sentence of the definition of ``responsible party for purposes 
of Subpart G'' to expressly state that a responsible party includes 
lessees ``as defined in this subpart.''

Response to Comments

    BOEM published a proposed rule entitled, ``Consumer Price Index 
Adjustments of the Oil Pollution Act of 1990 Limit of Liability for 
Offshore Facilities'' in the Federal Register on February 24, 2014, 
with a 30 day request for comment period. The comment period was 
extended by an additional 30 days on March 26, 2014. The comment period 
ended on April 25, 2014. BOEM received a number of comment letters from 
interested stakeholders, and carefully considered them prior to 
finalizing the rulemaking.
    Sixteen distinct written comments, eight from organizations and 
eight from individuals, were submitted regarding the proposed rule. Of 
the organizations, BOEM received three comments from industry/trade 
associations, one from a charitable trust, and the four remaining 
comments, submitted on behalf of a total of 17 organizations, were from 
environmental organizations. None of the comments that BOEM received 
expressed any opposition to the proposed increase in the limit of 
liability for offshore facilities.
    One company, ConocoPhillips, supported the rule as proposed; while 
other industry organizations, the Independent Petroleum Association of 
America and the National Ocean Industries Association took no position 
on the proposed rule. The Pew Charitable Trust, the Gulf Restoration 
Network, the Ocean Conservancy, and five of the individual commenters 
supported the rule as proposed.
    The Alaska Wilderness League, the Center for Biological Diversity 
(CBD), the Alaska Inter-Tribal Council, the Citizens' Coalition to Ban 
Toxic Dispersants, Clean Ocean Action, Defenders of Wildlife, Friends 
of the Earth, Greenpeace, Hands Across the Sand, the Natural Resources 
Defense Council, the Northern Alaska Environmental Center, Oasis Earth, 
Ocean Conservation Research, Pacific Environment, and the Surfrider 
Foundation also supported the proposed

[[Page 73836]]

increase, but argued that the amount of increase is too small. The CBD 
suggested an alternative limit of between $20 and $50 billion.
    With one exception, all of the comments expressed support for the 
proposed inflation index and methodology, which BOEM proposed to use to 
adjust the limit of liability on an ongoing basis. BOEM received a 
comment suggesting the Chained CPI-U (C-CPI-U) be used instead of the 
standard CPI-U for adjusting the offshore facility limit of liability. 
The commenter suggested that the C-CPI-U is a ``closer approximation to 
a cost-of-living index'' than the CPI-U.
    Responses to those comments are contained in the table below.

------------------------------------------------------------------------
            Comment received                      BOEM response
------------------------------------------------------------------------
Commenter Tupper suggested that BOEM     That issue is addressed in
 should use a chained Consumer Price      detail at the end of this
 Index (C-CPI-U) instead of the CPI for   Section.
 All Urban Consumers (CPI-U).
Commenter Tupper also suggested that     BOEM's authority to increase
 the update methodology should include    the financial responsibility
 a mechanism for adjusting the limit      requirements is limited to the
 for offshore facilities downward, as     circumstances and amount set
 well as upward, to account for           forth in 33 U.S.C.
 potential deflation, as well as          2716(c)(1)(C).
 inflation.                              The Oil Pollution Act does not
                                          have any provision to allow
                                          for downward revisions in the
                                          limits of liability for
                                          deflation. In addition to the
                                          statutory restriction, BOEM
                                          believes that the limit of
                                          liability is already
                                          potentially too low and that
                                          any downward adjustment would
                                          conflict with the goals of the
                                          statute. For these reasons,
                                          the adjustment formula is not
                                          revised to allow for downward
                                          adjustments in the limit of
                                          liability amount.
The CBD and its co-respondents           BOEM's authority to increase
 suggested that BOEM ``should also        the financial responsibility
 increase the financial responsibility    requirements is limited to the
 requirements to ensure that companies    circumstances and amount set
 in fact have the capability to meet      forth in 33 U.S.C.
 the increased liability requirements''.  2716(c)(1)(C).
Commenter Dobkin suggested that the      Laws related to taxation are
 state and federal tax deductibility of   outside the scope of this rule
 payments made in connection with an      and not within BOEM's
 oil spill be eliminated.                 authority to regulate.
Commenter Commeaux suggested that an     Stop work orders are outside
 automatic stop-work order be issued in   the scope of this rule.
 the event of a spill.
Commenter Commeaux also suggested that   Authority to invoke criminal
 criminal penalties be implemented        penalties against those
 against those responsible for any        responsible for oil spills is
 spill.                                   outside the scope of this rule
                                          and not within BOEM or the
                                          DOI's authority to regulate.
Commenter Commeaux also implied that     Authority to impose or increase
 new or increased civil penalties be      civil penalties against those
 considered against those responsible     responsible for oil spills is
 for any spill.                           outside the scope of this rule
                                          and not within BOEM or the
                                          DOI's authority to regulate.
Commenter Donovan suggested that BOEM    Interpreting the meaning of the
 redefine the meaning of the word         word ``expenditure,'' as used
 ``expenditure'' as used in the context   in 26 U.S.C. 9509(c) (per
 of any oil spill. ``. . . the proper     incident cap on Oil Spill
 definition of the term                   Liability Trust Funds (OSLTF)
 ``expenditure,'' under the OSLTF,        expenditures), is outside the
 means an expenditure that is not         scope of this rule and not
 reimbursed by the responsible party.''   within BOEM or the DOI's
 Mr. Donovan explains why he believes     authority to regulate.
 this change would be appropriate:
 ``The advantage of defining an
 expenditure, under the OSLTF, as ``an
 expenditure that is not reimbursed by
 the responsible party,'' is twofold:
 (a) It eliminates, without the need to
 pass retroactive legislation, the $1
 billion cap which may be paid from the
 OSLTF with respect to any single
 incident and allows the OSLTF to
 maintain a balance of at least $1
 billion for the purpose of paying
 claims for damages resulting from
 other oil spill incidents. As the
 OSLTF pool of $1 billion is depleted
 by payments made to oil spill
 claimants, it is replenished, by
 virtue of subrogation, by
 reimbursements made to the OSLTF by
 the responsible party; and (b) It
 ensures that the cost of a
 catastrophic oil spill incident shall
 be borne by the responsible party, not
 the federal taxpayer''.
------------------------------------------------------------------------

    The CPI-U measures prices of a base basket, which uses a single 
expenditure base period to compute the price change over time; in 
contrast, the C-CPI-U, which the commenter suggested, reflects the 
effect of any substitutions consumers make across item categories in 
response to relative price changes. BOEM is retaining the CPI-U for 
several reasons.
    (a) The adjustment of the limit of liability addresses inflation 
since 1990 when the current offshore facility limit was established. 
The C-CPI-U was first published by Bureau of Labor Statistics (BLS) in 
2002, with a historical series dating back to 1999. The officially 
published C-CPI-U series from BLS does not extend back to 1990. 
Although it may be possible to join the published C-CPI-U with the 
older, non-chained CPI-U series or with data not included in the 
officially published C-CPI-U, such an adjustment would not represent an 
official BLS statistical series. Therefore, to ensure a consistent 
adjustment to reflect inflation, this rule uses the CPI-U.
    (b) The CPI-U was the primary CPI measure at the time of the 
Delaware River Protection Act (DRPA) OPA amendments in 2006 (Pub. L. 
109-241). The DRPA amendments maintained the requirement of three year 
adjustments to ``reflect significant increases in the Consumer price 
Index.'' In addition, the C-CPI-U was available when DRPA amended the 
limits of liability adjustment provision of OPA, 33 U.S.C. 2704(d)(4), 
and Congress could have, but did not, require its use.
    (c) The CPI-U is the most frequently used escalation variable in 
private sector collective bargaining agreements, rental contracts, and 
insurance policies with automatic inflation protection.
    (d) Also, the U.S. Coast Guard uses the CPI-U for the OPA limit of 
liability

[[Page 73837]]

adjustments under its jurisdiction. Based on this and the three 
previous considerations, BOEM has concluded that the C-CPI-U does not 
provide a compelling advantage for more accurate price measurements of 
changes in potential liabilities under this rulemaking.

Summary of Changes to 30 CFR Part 553 by Subpart

Amendments to Subpart A

    Changes to sections 553.1 and 553.3, as described above.

Amendments to Subpart B

    None.

Amendments to Subpart C

    None.

Amendments to Subpart D

    None.

Amendments to Subpart E

    None.

Amendments to Subpart F

    None.

Addition of New Subpart G

    New Subpart, as described above.

Legal and Regulatory Analyses

Presidential Executive Orders

E.O. 12630--Takings Implication Assessment
    According to Executive Order 12630, this final rule does not have 
significant takings implications. The rulemaking is not a governmental 
action capable of interfering with constitutionally protected property 
rights. A Takings Implication Assessment is not required.
E.O. 12866--Regulatory Planning and Review
    The Office of Management and Budget (OMB) has not reviewed this 
rulemaking under section 6(a)(3) of E.O. 12866. BOEM does not believe 
this rulemaking constitutes a ``significant regulatory action'' under 
E.O. 12866 based on the following:
    (1) These provisions simply adjust the offshore facility limit of 
liability for damages by the CPI. This rule will likely not have an 
annual effect of $100 million or more on the economy. It will likely 
also not adversely affect in a material way the economy, productivity, 
competition, jobs, the environment, public health or safety, or State, 
local, or tribal governments or communities. The new offshore facility 
limit of liability increases the pollution liability of offshore 
facility responsible parties and may result in increased costs if 
damages exceed $75 million. If damages from an offshore facility oil 
spill exceed $75 million, the higher limit of liability ($133.65 
million) in this rule will impose greater nominal costs on the 
responsible parties. In constant 1990 dollars, the limit of liability 
for offshore facilities implemented by this final rule is the same as 
established in OPA and preserves the ``polluter pays'' principle. The 
infrequent occurrence of large oil spills from offshore facilities 
suggests that the compliance costs from this increase in the limit of 
liability are likely to be immaterial to the operating costs for 
offshore facility responsible parties over time.
    (2) This final rule would not create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency. 
BOEM has coordinated with the Coast Guard and the Department of Justice 
on this rulemaking.
    (3) This final rule would not alter the budgetary effects of 
entitlements, grants, user fees, or loan programs or the rights or 
obligations of their recipients.
    (4) This final rule does not raise any novel legal or policy 
issues. OPA requires the offshore facility limit of liability to be 
adjusted for inflation not less than every three years to reflect 
significant increases in the CPI.
E.O. 12988--Civil Justice Reform
    This final rule complies with the requirements of E.O. 12988. 
Specifically, this rule:
    (a) Meets the criteria of section 3(a) requiring that all 
regulations be reviewed to eliminate errors and ambiguity and be 
written to minimize litigation; and
    (b) Meets the criteria of section 3(b)(2) requiring that all 
regulations be written in clear language and contain clear legal 
standards.
E.O. 13045--Protection of Children From Environmental Health Risks and 
Safety Risks
    BOEM has analyzed this final rule under E.O. 13045, Protection of 
Children from Environmental Health Risks and Safety Risks. This final 
rule is not an economically significant rule and an analysis of 
environmental health risks is therefore not required. Regardless, this 
is an administrative rule and it does not create any environmental risk 
to health or any risk to safety that may disproportionately affect 
children.
E.O. 13132--Federalism
    Under the criteria in E.O. 13132, this final rule does not have 
federalism implications. This final rule does not have substantial 
direct effects on the relationship between the Federal and State 
governments. This final rule will not affect the role of State and 
local governments with respect to their offshore facility activities. A 
Federalism Assessment is not required.
E.O. 13175--Consultation and Coordination With Indian Tribal 
Governments
    This final rule does not have tribal implications under E.O. 13175, 
Consultation and Coordination with Indian Tribal Governments, because 
it does not have a substantial direct effect on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal Government and Indian tribes. Under the criteria in E.O. 
13175, we evaluated this final rule and determined that it has no 
substantial direct effects on federally recognized Indian tribes.
E.O. 13211--Effects on the Nation's Energy Supply
    BOEM has analyzed this final rule under E.O. 13211, ``Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use.'' BOEM has determined that it is not a 
``significant energy action'' under that order. This final rule is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. The Administrator of the Office of 
Information and Regulatory Affairs has not designated it as a 
significant energy action. Therefore, it does not require a Statement 
of Energy Effects under E.O. 13211.
E.O. 13563--Improving Regulation and Regulatory Review
    E.O. 13563 requires that our regulatory system protect public 
health, welfare, safety, and our environment while promoting economic 
growth, innovation, competitiveness, and job creation. It must be based 
on the best available science. It must allow for public participation 
and an open exchange of ideas. It must promote predictability and 
reduce uncertainty. It must identify and use the best, most innovative 
and least burdensome tools for achieving regulatory ends. It must take 
into account benefits and costs, both quantitative and qualitative. It 
must ensure that regulations are accessible, consistent, written in 
plain language, and easy to understand. It must measure, and seek to 
improve, the actual results of regulatory requirements.

[[Page 73838]]

    This E.O. is supplemental to and reaffirms the principles, 
structures, and definitions governing contemporary regulatory review 
that were established in E.O. 12866. As stated in that E.O., and to the 
extent permitted by law, each agency must, among other things: (1) 
Propose or adopt a regulation only upon a reasoned determination that 
its benefits justify its costs (recognizing that some benefits and 
costs are difficult to quantify); (2) tailor its regulations to impose 
the least burden on society, consistent with obtaining regulatory 
objectives, taking into account, among other things, and to the extent 
practicable, the costs of cumulative regulations; (3) select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive benefits; 
and equity); (4) to the extent feasible, specify performance 
objectives, rather than specifying the behavior or manner of compliance 
that regulated entities must adopt; and (5) identify and assess 
available alternatives to direct regulation, including providing 
economic incentives to encourage the desired behavior, such as user 
fees or marketable permits, or providing information with which choices 
can be made by the public.
    The increased offshore facility limit of liability for damages in 
this rulemaking is required by statute (OPA). This rulemaking does not 
amend the OSFR requirements in 30 CFR part 553. BOEM does not believe 
that OSFR insurance premiums will be significantly impacted by this 
rulemaking. BOEM solicited comments on that issue; however, no comments 
were received. The limit of liability increase is necessary to ensure 
that the deterrent effect and the ``polluter pays'' principle embodied 
in OPA's liability provisions are preserved.

Clarity of this Regulation

    E.O. 12866 (section 1(b)(2)), E.O. 12988 (section 3(b)(1)(B)), and, 
E.O. 13563 (section 1(a)), and the Presidential Memorandum of June 1, 
1998, require that every agency write its rules in plain language. This 
means that, wherever possible, each rule must: (a) Have a logical 
organization; (b) use the active voice to address readers directly; (c) 
use common, everyday words, and clear language, rather than jargon; (d) 
use short sections and sentences; and (e) maximize the use of lists and 
tables.
    With the issuance of the proposed rule, BOEM requested that any 
commenters that believed that it has not met these requirements should 
send their comments to Peter Meffert at Peter.Meffert@boem.gov. To 
better help us revise the final rule, BOEM requested that your comments 
be as specific as possible. For example, BOEM asked whether any of the 
sections or the paragraphs were written unclearly, which sections or 
sentences were too long, what additional sections, lists or tables 
would be useful, etc. No comments were received on this topic. For that 
reason, BOEM has concluded that no changes in the clarity and 
organization of the rule are necessary.

Public Availability of Comments

    All written comments that have been received in the docket [BOEM-
2012-0076] for this rulemaking, including names and addresses of 
respondents, have been posted at www.regulations.gov.

Statutes

Data Quality Act
    In developing this final rule, BOEM did not conduct or use a study, 
experiment, or survey requiring peer review under the Data Quality Act 
(Pub. L. 106-554, app. C Sec.  515, 114 Stat. 2763, 2763A-153 to 154).

National Environmental Policy Act (NEPA) of 1969

    This final rule does not constitute a major Federal action 
significantly affecting the quality of the human environment. BOEM has 
analyzed this final rule under the criteria of NEPA and DOI's 
regulations implementing NEPA. This final rule meets the criteria set 
forth at 43 CFR 46.210(i) for a Departmental Categorical Exclusion in 
that this final rule is ``. . . of an administrative, financial, legal, 
technical, or procedural nature . . .'' BOEM also has analyzed this 
final rule to determine if it involves any of the extraordinary 
circumstances that would require an environmental assessment or an 
environmental impact statement, as set forth in 43 CFR 46.215, and 
concluded that this final rule would not involve any extraordinary 
circumstances.
    Further, this final rule involves congressionally mandated 
regulations and there is no discretion in the agency to be informed by 
NEPA analysis.

National Technology Transfer and Advancement Act (NTTAA)

    The NTTAA, Public Law 104-113 (15 U.S.C. 272 note) directs agencies 
to use voluntary consensus standards in their regulatory activities 
unless the agency provides Congress, through OMB, with an explanation 
of why using these standards would be inconsistent with applicable law 
or otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies.
    This final rule does not require the use of any technical 
specifications or standards and, therefore, the requirement to follow 
voluntary consensus standards does not apply to this rulemaking.

Paperwork Reduction Act (PRA) of 1995

    This rule does not contain new information collection requirements 
that require approval by OMB under the PRA (44 U.S.C. 3501 et seq.). 
OMB has reviewed and approved the information collection requirements 
associated with 30 CFR 553 and assigned OMB Control Number 1010-0106, 
which expires December 31, 2016. BOEM may not conduct or sponsor and 
you are not required to respond to a collection of information unless 
it displays a currently valid OMB control number.

Regulatory Flexibility Act (RFA)

    DOI certifies that this final rule would not have a significant 
economic effect on a substantial number of small entities under the RFA 
(5 U.S.C. 601 et seq.).
    The changes in this final rule will potentially affect all oil and 
gas lessees, operators of leases, holders or rights of use and 
easement, and pipeline right-of-way holders in the OCS and in State 
waters. The changes further may affect any operators of oil and gas 
facilities in other offshore locations, such as navigable rivers and 
lakes; however, the level of damages for inland water offshore facility 
incidents have historically been far below the statutory limit and are 
not likely to exceed the statutory limit of liability. Available 
information indicates that the changes would mainly affect about 170 
active operators and owners on the OCS and State offshore waters. These 
approximately 170 operators and owners provide OSFR coverage for more 
than 7,800 OCS Right-of-Use and Easement (RUE) facilities, pipeline 
Rights-of-Way (ROWs), and leases (both with and without permanent 
facilities). Small lessees, ROW or RUE holders or operators that 
operate under this final rule primarily fall under the Small Business 
Administration's North American Industry Classification System (NAICS) 
codes 211111, Crude Petroleum and Natural Gas Extraction, 213111, 
Drilling Oil and Gas Wells and

[[Page 73839]]

237120, Oil and Gas Pipeline and Related Structures. For these NAICS 
code classifications, a small company is one with fewer than 500 
employees. Based on these criteria, an estimated two-thirds of these 
companies are considered small. This final rule, therefore, will affect 
a substantial number of small entities, but it would not have a 
significant economic effect on those entities, since the OSFR 
thresholds are not being adjusted.
    This final rule could impact certain OCS and other offshore 
operators and owners through negligibly higher insurance premiums. Most 
small entities do not self-insure, but rather share ownership with 
larger companies that provide them with OSFR coverage or else they 
obtain insurance for their OSFR obligations in the private marketplace. 
BOEM does not expect the 78.2 percent increase in the limit of 
liability to cause the OSFR insurance premiums to materially increase 
because of the very low anticipated frequency of claims and because 
each guarantor's or insurer's exposure is limited to the OSFR 
prescribed coverage limit of $35 million or $150 million. Any potential 
increased insurance premium should be relatively insignificant as 
compared to the considerable operational costs and liability risks 
associated with activities on the OCS. This is true for even the 
smallest of OCS and other offshore operators and owners. BOEM welcomed 
specific comments on any expected or potential corresponding OSFR 
premium increases that may occur because of the increased limit of 
liability or for some related reason. No such comments were received. 
For this reason, BOEM believes that its original assessment was correct 
that no such OSFR premium increases will necessarily occur as a result 
of this rulemaking.
    The Small Business and Agriculture Regulatory Enforcement Ombudsman 
and 10 Regional Fairness Boards were established to receive comments 
from small businesses about Federal agency enforcement actions. The 
Ombudsman will annually rate an agency's responsiveness to their 
comments and evaluate the enforcement activities. If you wish to 
comment on the actions of BOEM, call 1-888-734-3247. You may comment to 
the Small Business Administration without fear of retaliation. 
Allegations of discrimination/retaliation filed with the Small Business 
Administration will be investigated for appropriate action.

Small Business Regulatory Enforcement Fairness Act

    Pursuant to section 213(a) of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (Pub. L. 104-121), BOEM wants to 
assist small entities in understanding this final rule so that they can 
better evaluate its effects and participate in the rulemaking. If you 
believe that this final rule will affect your small business, 
organization, or governmental jurisdiction and you have questions 
concerning its provisions or options for compliance, please contact 
Marshall Rose, of the BOEM Economics Division, at the address in the 
Technical Information Section listed above.
    This final rule is not a major rule under the Small Business 
Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This rule will 
not:
     Have an annual effect on the economy of $100 million or 
more;
     cause a major increase in costs or prices for consumers, 
individual industries, Federal, State, or local government agencies, or 
geographic regions; or,
     have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises. The 
requirements of this rule will apply to all entities having oil and gas 
operations offshore, including in State waters.
    Based on the maximum potential worst case oil spill discharge, 
approximately 110 of the 170 companies with covered offshore facilities 
are required to demonstrate OSFR coverage of $70 million or less (see 
30 CFR 553.13). These 110 companies will likely not experience any 
insurance premium increases because of the increased limit of 
liability, since the level of required OSFR is not impacted by the 
offshore limit of liability adjustment to $133.65 million. Another five 
companies must demonstrate OSFR coverage of $105 million. BOEM believes 
that these companies are unlikely to experience increased insurance 
premiums resulting from the increased offshore facility limit of 
liability, just as the few companies demonstrating the $150 million in 
OSFR coverage that are not self-insured or guaranteed are unlikely to 
be affected by this rule.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small businesses. If you wish to 
comment on actions by employees of BOEM, call 1-888-REG-FAIR (1-888-
734-3247).

Unfunded Mandates Reform Act of 1995

    This final rule will not impose an unfunded mandate on State, 
local, or tribal governments, or the private sector, of more than $100 
million per year. The final rule will not have a significant or unique 
effect on State, local, or tribal governments or the private sector. A 
statement containing the information required by the Unfunded Mandates 
Reform Act (2 U.S.C. 1501 et seq.) is not required.

List of Subjects in 30 CFR Part 553

    Administrative practice and procedure, Continental shelf, Economic 
analysis, Environmental impact statements, Environmental protection, 
Financial responsibility, Government contracts, Intergovernmental 
relations, Investigations, OCS, Oil and gas exploration, Oil pollution, 
Liability, Limit of liability, Penalties, Pipelines, Public lands--
mineral resources, Public lands--rights-of-way, Reporting and 
recordkeeping requirements, Surety bonds, Treasury securities.


Janice M. Schneider,
Assistant Secretary--Land and Minerals Management.

    For the reasons stated in the preamble, the Bureau of Ocean Energy 
Management amends 30 CFR part 553 as follows:

PART 553--OIL SPILL FINANCIAL RESPONSIBILITY FOR OFFSHORE 
FACILITIES

0
1. Revise the authority citation for part 553 to read as follows:


    Authority: 33 U.S.C. 2704, 2716; E.O. 12777, as amended.


0
2. Revise Sec.  553.1 to read as follows:


Sec.  553.1  What is the purpose of this part?

    This part establishes the requirements for demonstrating Oil Spill 
Financial Responsibility for covered offshore facilities (COF), sets 
forth the procedures for claims against COF guarantors, and sets forth 
the limit of liability for offshore facilities, as adjusted, under 
Title I of the Oil Pollution Act of 1990, as amended, 33 U.S.C. 2701 et 
seq. (OPA).

0
3. Amend Sec.  553.3 by:
0
a. Adding in alphabetical order the definitions of ``Annual CPI-U,''

[[Page 73840]]

``Current period,'' and ``Previous period;''
0
b. Revising the definition of ``Responsible party'' to read as follows: 
Sec.  553.3 How are the terms used in this regulation defined?


Sec.  553.3  How are the terms used in this regulation defined?

* * * * *
    Annual CPI-U means the annual ``Consumer Price Index-All Urban 
Consumers, Not Seasonally Adjusted, U.S. City Average, All items, 1982 
- 84 = 100,'' published by the U.S. Department of Labor, Bureau of 
Labor Statistics.
* * * * *
    Current period means the year in which the Annual CPI-U was most 
recently published by the U.S. Department of Labor, Bureau of Labor 
Statistics.
* * * * *
    Previous period means the year in which the previous limit of 
liability was established, or last adjusted by statute or regulation, 
whichever is later.
    Responsible party, for purposes of subparts B through F, has the 
following meanings:
    (1) For a COF that is a pipeline, responsible party means any 
person owning or operating the pipeline;
    (2) For a COF that is not a pipeline, responsible party means 
either the lessee or permittee of the area in which the COF is located, 
or the holder of a right-of-use and easement granted under applicable 
State law or the OCSLA (43 U.S.C. 1301-1356) for the area in which the 
COF is located (if the holder is a different person than the lessee or 
permittee). A Federal agency, State, municipality, commission, or 
political subdivision of a State, or any interstate body that as owner 
transfers possession and right to use the property to another person by 
lease, assignment, or permit is not a responsible party; and
    (3) For an abandoned COF, responsible party means any person who 
would have been a responsible party for the COF immediately before 
abandonment.
    Responsible party, for purposes of subpart G, has the meaning in 33 
U.S.C. 2701(32)(C), (E) and (F). This definition includes, as 
applicable, lessees as defined in this subpart, permittees, right-of-
use and easement holders, and pipeline owners and operators.
* * * * *

0
4. Add a new subpart G to part 553 to read as follows:

Subpart G--Limit of Liability for Offshore Facilities

Sec.
553.700 What is the scope of this subpart?
553.701 To which entities does this subpart apply?
553.702 What limit of liability applies to my offshore facility?
553.703 What is the procedure for calculating the limit of liability 
adjustment for inflation?
553.704 How will BOEM publish the offshore facility limit of 
liability adjustment?


Sec.  553.700  What is the scope of this subpart?

    This subpart sets forth the limit of liability for damages for 
offshore facilities under Title I of the Oil Pollution Act of 1990, as 
amended (33 U.S.C. 2701 et seq.) (OPA), as adjusted, under section 
1004(d) of OPA (33 U.S.C. 2704(d)). This subpart also sets forth the 
method for adjusting the limit of liability for damages for offshore 
facilities for inflation, by regulation, under section 1004(d) of OPA 
(33 U.S.C. 2704(d)).


Sec.  553.701  To which entities does this subpart apply?

    This subpart applies to you if you are a responsible party for an 
offshore facility, other than a deepwater port under the Deepwater Port 
Act of 1974 (33 U.S.C. 1501-1524), but including an offshore pipeline, 
or an abandoned offshore facility, including any abandoned offshore 
pipeline, unless your liability is unlimited under OPA 90 (33 U.S.C. 
2704(c)).


Sec.  553.702  What limit of liability applies to my offshore facility?

    Except as provided in 33 U.S.C. 2704(c), the limit of liability 
under OPA for a responsible party for any offshore facility, including 
any offshore pipeline, is the total of all removal costs plus $133.65 
million for damages with respect to each incident.


Sec.  553.703  What is the procedure for calculating the limit of 
liability adjustment for inflation?

    The procedure for calculating limit of liability adjustments for 
inflation is as follows:
    (a) Formula for calculating a cumulative percent change in the 
Annual CPI-U. BOEM calculates the cumulative percent change in the 
Annual CPI-U from the year the limit of liability was established by 
statute, or last adjusted by regulation, whichever is later (i.e., the 
Previous Period), to the year in which the Annual CPI-U is most 
recently published (i.e., the Current Period), using the following 
formula: Percent change in the Annual CPI-U = [(Annual CPI-U for 
Current Period - Annual CPI-U for Previous Period) / Annual CPI-U for 
Previous Period] x 100. This cumulative percent change value is rounded 
to one decimal place.
    (b) Significance threshold.
    (1) A cumulative increase in the Annual CPI-U equal to three 
percent or more constitutes a significant increase in the Consumer 
Price Index within the meaning of 33 U.S.C. 2704(d)(4).
    (2) Not later than every three years from the year the limit of 
liability was last adjusted for inflation, BOEM will evaluate whether 
the cumulative percent change in the Annual CPI-U since that year has 
reached a significance threshold of three percent or greater.
    (3) For any three-year period evaluated under paragraph (b)(2) of 
this section in which the cumulative percent increase in the Annual 
CPI-U is less than three percent, if BOEM has not issued an inflation 
adjustment during that period, BOEM will publish a notice of no 
inflation adjustment to the offshore facility limit of liability for 
damages in the Federal Register.
    (4) Once the three-percent threshold is reached, BOEM will increase 
by final rule the offshore facility limit of liability for damages in 
Sec.  553.702 by an amount equal to the cumulative percent change in 
the Annual CPI-U from the year the limit was established by statute, or 
last adjusted by regulation, whichever is later. After this adjustment 
is made, BOEM will resume its process of conducting a review every 
three years.
    (5) Nothing in this section will prevent BOEM, in BOEM's sole 
discretion, from adjusting the offshore facility limit of liability for 
damages for inflation by regulation issued more frequently than every 
three years.
    (c) Formula for calculating inflation adjustments. BOEM calculates 
adjustments to the offshore facility limit of liability in 30 CFR 
553.702 for inflation using the following formula:

New limit of liability = Previous limit of liability + (Previous limit 
of liability x the decimal equivalent of the percent change in the 
Annual CPI-U calculated under paragraph (a) of this section), then 
rounded to the closest $100.


Sec.  553.704  How will BOEM publish the offshore facility limit of 
liability adjustment?

    BOEM will publish the inflation-adjusted limit of liability, and 
any statutory amendments to that limit of liability in the Federal 
Register, as amendments to Sec.  553.702. Updates to the limit of 
liability under this section are effective on the 90th day after

[[Page 73841]]

publication in the Federal Register of the amendments to Sec.  553.702, 
unless otherwise specified by statute (in the event of a statutory 
amendment to the limit of liability), or in the Federal Register rule 
amending Sec.  553.702.

[FR Doc. 2014-29093 Filed 12-11-14; 8:45 am]
BILLING CODE 4310-MR-P