Consumer Price Index Adjustments of the Oil Pollution Act of 1990 Limit of Liability for Offshore Facilities, 10056-10063 [2014-03738]

Agencies

• DEPARTMENT OF THE INTERIOR
• Bureau of Ocean Energy Management

[Federal Register Volume 79, Number 36 (Monday, February 24, 2014)]
[Proposed Rules]
[Pages 10056-10063]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03738]


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DEPARTMENT OF THE INTERIOR

Bureau of Ocean Energy Management

30 CFR Part 553

[Docket ID: BOEM-2012-0076; MMAA104000]
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, Interior.

ACTION: Proposed rule.

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SUMMARY: The Bureau of Ocean Energy Management (BOEM) is proposing to 
add a new subpart to its regulations on Oil Spill Financial 
Responsibility (OSFR) for Offshore Facilities designed to increase the 
limit of liability for damages applicable to offshore facilities under 
the Oil Pollution Act of 1990 (OPA), to reflect significant increases 
in the Consumer Price Index (CPI) since 1990, and to establish a 
methodology BOEM would use to periodically adjust for inflation the OPA 
offshore facility limit of liability. BOEM proposes to increase the 
limit of liability for damages from $75 million to $133.65 million. OPA 
requires inflation adjustments to the offshore facility limit of 
liability not less than every three years to preserve the deterrent 
effect and ``polluter pays'' principle embodied in the OPA Title I 
liability and compensation provisions. In addition, the Department of 
the Interior has determined that this change would further protect the 
environment by ensuring that any party that causes an oil spill would 
pay an increased amount of any potential damages.
    BOEM is publishing this update to its regulations and is soliciting 
public comments on the method of updates, the clarity of the rule and 
any other pertinent matters. The Department is limiting the rulemaking 
comment period to 30 days since it does not anticipate receiving 
adverse comments on this rulemaking.

DATES: Submit comments by March 26, 2014.

ADDRESSES: You may submit comments on the rulemaking by any of the 
following methods. Please use the Regulation Identifier Number (RIN) 
1010-AD87 as an identifier in your submission.
     Federal eRulemaking Portal: https://www.regulations.gov. In 
the entry entitled, ``Enter Keyword or ID,'' enter BOEM-2012-0076, then 
click search. Follow the instructions to submit public comments and 
view supporting and related materials available for this rulemaking. 
BOEM will post all comments received during the comment period.
     Mail or hand-carry comments to the Department of the 
Interior; Bureau of Ocean Energy Management; Attention: Peter Meffert, 
Office of Policy, Regulations and Analysis (OPRA); 381 Elden Street, 
MS-4001, Herndon, Virginia 20170-4817. Please reference ``Consumer 
Price Index Adjustments of the Oil Pollution Act of 1990 Limit of 
Liability for Offshore Facilities'' in your comments and include your 
name and return address so that we may contact you if we have questions 
regarding your submission.
     Email comments to the Department of the Interior; Bureau 
of Ocean Energy Management; Attention: Peter Meffert, Office of Policy, 
Regulations and Analysis (OPRA) at peter.meffert@boem.gov.
    Public availability of comments:
     Before including your address, phone number, email 
address, or other personal identifying information in your comment, you 
should be aware that your entire comment--including your personal 
identifying information--may be made publicly available at any time. 
While you can ask us in your comment to withhold your personal 
identifying information from public review, we cannot guarantee that we 
will be able to do so.

FOR FURTHER INFORMATION CONTACT: Questions regarding the limit of 
liability established by this proposed rule, or related to the limits 
of liability 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:

Background

    In general, under Title I of OPA, the responsible parties for any 
vessel or facility, including any offshore facility, which discharges, 
or poses a substantial threat of discharge of, oil into or upon United 
States 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

[[Page 10057]]

Liability Trust Fund (OSLTF) is available to compensate responsible 
parties and other claimants for removal costs and damages 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 OPA damages.
    To prevent the real value of the OPA limits of liability 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 limits 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. 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.
    In 2006, following several large oil spill incidents that exceeded 
the statutory limits of liability in 33 U.S.C. 2704(a), Congress 
enacted the Delaware River Protection Act (DRPA) of 2006 (Title VI of 
the Coast Guard and Maritime Transportation Act of 2006, Pub. L. 109-
241, July 11, 2006, 120 Stat. 516). DRPA increased the OPA statutory 
limit of liability for vessels. In addition, section 603 of DRPA 
amended OPA (33 U.S.C. 2704(d)(4)) to read as follows: ``Adjustment to 
reflect consumer price index. The President, by regulations issued not 
later than three years after July 11, 2006, and not less than three 
years thereafter, shall adjust the limits on liability specified in 
subsection (a) to reflect significant increases in the Consumer Price 
Index.'' DRPA thus established a new statutory deadline of 2009 (three 
years after the passage of DRPA) for the President to promulgate the 
first set of regulatory inflation adjustments to the limits of 
liability.

Regulatory History

    On July 1, 2009, following substantial coordination with DOI and 
the other delegated agencies 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 Proposed 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 had originally agreed to follow the Coast Guard's inflation 
adjustment methodology when adjusting the limits of liability under 
their responsibility. After the Coast Guard's 2009 rulemaking was 
completed, DOI and other delegated agencies actively coordinated with 
the Coast Guard on the next set of inflation adjustments to the OPA 
liability limits.

Offshore Facility Limit of Liability

    This proposed rule would implement the first mandated adjustments, 
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 proposed rule would also establish 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 limits of liability, the approach used by BOEM 
in the proposed rule, in most respects, and except as discussed further 
below under ``Discussion of this Proposed Rule,'' follows the inflation 
adjustment approach used by the Coast Guard in its 2009 CPI rulemaking, 
which adjusted the limits of liability for vessels and deepwater ports. 
That approach, found at 33 CFR Part 138, subpart B, went through 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 OPA damages that result from such a spill. The 
statutory offshore facility liability limit for OPA damages is $75 
million. This proposed rulemaking would adjust the offshore facility 
limit of liability for OPA damages to reflect significant increases in 
the CPI. The responsible parties' liability for OPA removal costs 
arising from actions or events associated with an offshore facility oil 
spill incident would remain unlimited.
    This proposed rulemaking would increase the $75 million statutory 
offshore facility limit of liability for OPA damages to $133.65 
million. This increase reflects a 78.2 percent increase in the Consumer 
Price Index--All Urban Consumers (CPI-U) from 1990 through 2013.

Oil Spill Financial Responsibility Requirements Are Not Affected by 
This Rulemaking

    This rulemaking is intended to adjust the OPA offshore facility 
limit of liability for damages to reflect significant increases in the 
CPI. It would 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. For example, 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 with worst case oil discharge potential of more than 1,000 barrels 
and meeting other specific 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 OPA evidence of financial responsibility requirements 
applicable to vessels and deepwater ports, which

[[Page 10058]]

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 may propose various changes to the Oil Spill Financial 
Responsibility regulations in a separate rulemaking. This rulemaking 
makes no proposed changes other than those described above.

Additional Regulatory Changes in 30 CFR Part 553

    In section 553.1, the purpose section would be expanded to include 
adjusting the limit of liability. In section 553.3, three new 
definitions would be added to facilitate the implementation of the 
inflation adjustment process. The three new terms that would be added 
to the regulations are as follows: Annual CPI-U, Current Period, and 
Previous Period.

Discussion of This Proposed Rule

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

    This proposed rule would implement the first adjustment, mandated 
by 33 U.S.C. 2704(d)(4), to the OPA limit of liability for damages for 
offshore facilities other than deepwater ports to reflect significant 
increases in the CPI. This rule would also establish 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 553 subpart G.
    As mentioned in the Regulatory History section, the Department of 
the Interior is, in most respects, following the approach used by the 
Coast Guard in its 2009 CPI adjustments to the limits of liability for 
vessels and deepwater ports. That inflation adjustment methodology, 
found at 33 CFR Part 138, subpart B, went through full notice and 
comment rulemaking, and received no adverse comments. As discussed 
further in item 5, below, the only substantive difference between this 
rulemaking and the Coast Guard's approach is the use of a 1990 
``Previous Period,'' or baseline year, to calculate the percent change 
in the CPI-U. The Coast Guard rulemaking documents explaining the CPI 
adjustment methodology are available in the public docket for their 
rulemaking.
1. How would the Department of the Interior calculate CPI adjustments 
to the limit of liability for offshore facilities?
    We would 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. The only difference in the 
formula description from the Coast Guard regulations is use of ``the 
decimal equivalent'' since a quantity cannot properly be multiplied by 
a percent, but rather, must be multiplied by the decimal equivalent of 
a percent. This difference, however, is not substantive.
2. Which CPI would the Department of the Interior use?
    The Bureau of Labor Statistics (BLS) publishes a variety of 
inflation indices. Consistent with the Coast Guard regulations at 33 
CFR 138.240, BOEM plans to use the ``Consumer Price Index--All Urban 
Consumers, Not Seasonally Adjusted, U.S. City Average, All Items, 1982-
84=100,'' also known as ``CPI-U.'' CPI-U values may be viewed on the 
BLS Web site at: ftp//ftp.bls.gov/pub/special.requests/cpi/cpiai.txt. 
This index is used by the Coast Guard for its CPI adjustments to limits 
of liability, and is the most current and broadest index published by 
BLS. The CPI-U is also commonly relied on in insurance policies and 
other commercial transactions with automatic inflation protection, by 
the media, and by economic analysts.
3. What time interval CPI-U would the Department of the Interior use 
for the adjustments?
    BLS publishes the CPI-U for both monthly and annual periods. For 
consistency with the Coast Guard's limits of liability CPI adjustment 
rule at 33 CFR Part 138, subpart B, and simplicity, BOEM would use the 
annual period CPI-U (hereinafter the ``Annual CPI-U'') rather than the 
monthly period CPI-U.
4. How would the Department of the Interior calculate the percent 
change in the Annual CPI-U?
    Consistent with the Coast Guard's inflation adjustment methodology, 
we would 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.
5. Which Annual CPI-U ``Previous Period'' and ``Current Period'' would 
the Department of the Interior use for its first inflation adjustment 
to the offshore facility limit of liability?
    To maintain the real value of the offshore facility limit of 
liability for damages, as contemplated in the original OPA mandate that 
directed the limits of liability be adjusted for the CPI, we would use 
a ``Previous Period'' of 1990, the year OPA was enacted. For the 
``Current Period'' we would use the most recently published Annual CPI-
U (see 30 CFR 553.73(a)). This approach 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 proposed rulemaking, we have used the 
2013 Annual CPI-U, published on January 16, 2014. Future updates would 
proceed on a 3-year schedule as provided in 30 CFR 553.73.
6. Why is the ``Previous Period'' the Department of the Interior 
proposes to use for offshore facilities different than the ``Previous 
Periods'' used by the Coast Guard for vessels and deepwater ports, 
which are also required to be adjusted in accordance with the CPI?
    The Coast Guard's 2009 CPI rulemaking established two ``Previous 
Period'' dates for the first set of regulatory inflation adjustments to 
the limits of liability for the Coast Guard delegated source 
categories. Specifically, the Coast Guard established a ``Previous 
Period'' date of 2006 to adjust the statutory limits of liability in 33 
U.S.C. 2704(a)(1), (2) and (4) for vessels, onshore facilities and 
deepwater ports other than Louisiana Offshore Oil Port (LOOP) 
facilities. As explained in the Coast Guard rulemaking documents, that 
date was chosen based on the date of enactment

[[Page 10059]]

of the DRPA, July 11, 2006, which was the last date Congress adjusted 
the statutory limits of liability in 33 U.S.C. 2704(a). In addition, 
the Coast Guard established 1995 as the ``Previous Period'' date for 
calculating the first regulatory inflation adjustment to the limit of 
liability for the Louisiana Offshore Oil Port (LOOP). The August 4, 
1995, date was selected based on the date the LOOP deepwater port limit 
of liability was established by regulation (see 60 FR 39849).
    Unlike the Coast Guard's reliance on previous adjustments by 
legislation in 2006 and regulation in 1995 to determine its ``Previous 
Period'' to adjust the limits of liability for vessels and deepwater 
ports other than LOOP facilities, no such adjustments have occurred for 
offshore facilities since OPA's enactment in 1990. In the absence of 
such adjustments, BOEM does not believe it may use a later ``previous 
period'' or baseline, given the clarity of the 1990 statutory mandate. 
Accordingly, BOEM intends to use 1990 as the ``Previous Period'' date 
for this first CPI adjustment to the offshore facility statutory limit 
of liability for damages.
    In addition to the fact that there has been no previous adjustment 
of the limit of liability for offshore facilities, the lessons learned 
from the Deepwater Horizon (DWH) explosion and oil spill support BOEM's 
intention to use the earlier ``Previous Period'' of 1990 in this 
rulemaking. Since the passage of OPA, the DWH offshore facility oil 
spill has resulted in damages exceeding the offshore facility limit of 
liability. The DWH explosion and oil spill demonstrates that, although 
rare, catastrophic offshore facility oil spill incidents causing 
damages in excess of the offshore facility limit of liability can 
occur. The DWH incident, moreover, highlights the potential inadequacy 
of the statutory $75 million-per-incident offshore facility limit of 
liability for damages, and several bills have been proposed in Congress 
to repeal or substantially increase that statutory limit of liability.
    Given the fact that no adjustments to the limit of liability for 
offshore facilities have been made since OPA was first enacted in 1990, 
as well as changes to our collective understanding about the risks of 
offshore drilling occasioned by the DWH explosion and oil spill, 
including the possibility of natural resource and other damages 
exceeding the OPA offshore facility statutory limit of liability, the 
DOI has determined that it is appropriate to implement the most 
protective measures available within its existing statutory 
authorities. Specifically, BOEM believes it is appropriate to recognize 
the cumulative rate of inflation that has occurred since the passage of 
OPA for this first adjustment to the offshore facility limit. For that 
reason, BOEM would use a 1990 ``Previous Period'' in its CPI adjustment 
methodology resulting in a CPI percentage increase through 2013 of 
approximately 78.2 percent (since 1990) versus an increase of 15.6 
percent (since 2006).
7. How would the Department of the Interior calculate the adjustment to 
the limit of liability and what would the new limit be?
    The following illustrates how we plan to 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 [minus] Annual CPI-U for Previous Period 
(1990): 130.7 [equals] an index point change: 102.257 [divided by] 
Annual CPI-U for Previous Period: 130.7 [equals] 0. 782; result 
multiplied by 100: 0.782 x 100 [equals] percent change in the Annual 
CPI-U: 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 will be the 
Annual CPI-U for the previous calendar year, due to the BLS Annual CPI-
U publication schedule.
    Applying these values, BOEM will adjust the statutory offshore 
facility limit of liability for OPA damages of $75 million by the 78.2 
percent increase in the Consumer Price Index (CPI-U) that has taken 
place since 1990, to $133,650,000.
8. How would the Department of the Interior calculate the percent 
change for subsequent inflation adjustments to the OPA limit of 
liability for offshore facilities?
    This rule would also establish the adjustment methodology the DOI 
would use for subsequent CPI adjustments to the OPA limit of liability 
for offshore facilities. We would adopt the same calculation 
methodology found in 33 CFR 138.240 of the Coast Guard regulations 
referenced earlier. Key features for the future inflation adjustments 
to the limit of liability include:
     BOEM plans to publish the inflation adjustments to the 
limit of liability for offshore facilities every three years, beginning 
in 2014, provided that the threshold for a significant increase in the 
Annual CPI-U is met, consistent with the Coast Guard regulations at 33 
CFR 138.240(b). The current adjustment will use the Annual 2013 CPI-U 
``Current Period.''
     The DOI has discretion to adjust the offshore facility 
limit of liability more frequently by regulation than every three years 
to reflect significant increases in the CPI.
     If Congress amends the limit of liability for offshore 
facilities, we would calculate the Annual CPI-U change with the 
``Previous Period'' beginning with the year in which Congress amends 
the limit of liability.
     The DOI would evaluate whether the cumulative percent 
change in the Annual CPI-U since the last ``Current Period'' has 
exceeded three percent in the three years beginning in 2017 (using the 
2016 Annual CPI-U as the ``Current Period''). If the change is greater 
than three percent, a final rule will be published in the Federal 
Register with the new inflation-adjusted offshore facility limit of 
liability. The three percent or more constitutes a significant increase 
threshold. If, following the three-year period, the cumulative percent 
change in the Annual CPI-U is less than three percent, the DOI would 
publish a notice of no inflation adjustment to the limit of liability.
     Following a notice of no inflation adjustment, the DOI 
would 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.
9. How would BOEM provide public notice for the offshore facility limit 
of liability adjustments?
    BOEM plans to publish subsequent CPI or statutory adjustments to 
the offshore facility limit of liability for damages through a final 
rule in the Federal Register. A final rule would provide for timely 
notice of the CPI adjustments and would 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?'')
    The purpose of this section would be revised to reflect the purpose 
of the new Subpart G addressing 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).

[[Page 10060]]

2. Definition changes for terms found at 30 CFR 553.3 (``How are the 
terms used in this regulation defined?'')
    We propose to add definitions to 30 CFR 553.3: Annual CPI-U, 
current period, and previous period. Also, we would replace the 
definition in 30 CFR 553.3 of Responsible party. BOEM is proposing to 
replace the definition of responsible party because the current 
regulatory definition is limited to the responsible party for a COF. 
The proposed definition incorporates the OPA statutory definition and 
clarifies that if operating rights are limited to particular areas or 
depths, so are responsible party obligations.

III. 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 & Regulatory Analyses

Presidential Executive Orders

E.O. 12630--Takings Implication Assessment
    According to Executive Order 12630, the proposed 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 
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 in this rule will impose greater nominal costs on 
the responsible parties. In constant 1990 dollars, the proposed limit 
of liability for offshore facilities 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.
    The proposed provisions do not impact oil spill financial 
responsibility under 30 CFR part 553. Based on the maximum potential 
worst case oil spill discharge, approximately 110 of the 170 companies 
with COFs are required to demonstrate OSFR coverage of $70 million or 
less (see 30 CFR 553.13). These 110 companies should see no insurance 
premium increases because of the increased limit of liability, since 
the level of required OSFR is not impacted by these adjustments to the 
current $75 million limit of liability. Another five companies must 
demonstrate OSFR coverage of $105 million. BOEM believes that these 
companies will not see increased insurance premiums because of the 
increase of the limit of liability to $133.65 million, just as the few 
companies demonstrating the $150 million in OSFR coverage that are not 
self-insured or guaranteed will also likely not be affected by this 
proposed rule. However, because BOEM cannot estimate how much, or if, 
insurance underwriters might increase their premiums for OSFR coverage, 
we welcome specific comments on the impact of an increased limit of 
liability, absent corresponding increases in required OSFR coverage.
    (2) This proposed 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 proposed 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 proposed 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.
E.O. 12988--Civil Justice Reform
    This proposed 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
    We have analyzed this proposed rule under Executive Order 13045, 
Protection of Children from Environmental Health Risks and Safety 
Risks. This proposed rule is not an economically significant rule and 
does not create an environmental risk to health or a risk to safety 
that may disproportionately affect children.
E.O. 13132--Federalism
    Under the criteria in E.O. 13132, this proposed rule does not have 
federalism implications. This proposed rule does not have substantial 
direct effects on the relationship between the Federal and State 
governments. To the extent that State and local governments have a role 
in OCS activities, this proposed rule will not affect that role. A 
Federalism Assessment is not required.
E.O. 13175--Consultation and Coordination With Indian Tribal 
Governments
    This proposed rule does not have tribal implications under 
Executive Order 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 proposed 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
    We have analyzed this proposed rule under Executive Order 13211, 
``Actions

[[Page 10061]]

Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use.'' We have determined that it is not a 
``significant energy action'' under that order. This proposed 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 Executive Order 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.
    This Executive Order is supplemental to and reaffirms the 
principles, structures, and definitions governing contemporary 
regulatory review that were established in Executive Order 12866. As 
stated in that Executive Order, 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. Although BOEM does not 
believe that OSFR insurance premiums will be significantly impacted by 
this rulemaking, it is soliciting comments on that issue. 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 lists and 
tables.
    If you feel that we have not met these requirements, send your 
comments to Peter.Meffert@boem.gov. To better help us revise the 
proposed rule, your comments should be as specific as possible. For 
example, you should tell us the numbers of the sections or paragraphs 
that you think we wrote unclearly, which sections or sentences are too 
long, the sections where you feel lists or tables would be useful, etc.

Public Availability of Comments

    We will post all comments, including names and addresses of 
respondents, at www.regulations.gov. Before including your address, 
phone number, email address, or other personal identifying information 
in your comment, you should be aware that we may make your entire 
comment--including your personal identifying information--publicly 
available at any time. While you can ask us in your comment to withhold 
your personal identifying information from public view, we cannot 
guarantee that we will be able to do so.

Statutes

Data Quality Act

    In developing this proposed rule, we 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 proposed rule would not constitute a major Federal action 
significantly affecting the quality of the human environment. BOEM has 
analyzed this proposed rule under the criteria of the National 
Environmental Policy Act (NEPA) and the Department's regulations 
implementing NEPA. This proposed rule meets the criteria set forth at 
43 CFR 46.210(i) for a Departmental Categorical Exclusion in that this 
proposed rule is ``. . . of an administrative, financial, legal, 
technical, or procedural nature. . . .'' Further, BOEM has analyzed 
this proposed 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 proposed rule would not involve any extraordinary 
circumstances.
    This proposed rule involves congressionally mandated regulations 
designed to protect the environment, specifically regulations 
implementing the requirements of the OPA.

National Technology Transfer and Advancement Act

    The National Technology Transfer and Advancement Act (NTTAA, Pub. 
L. 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 proposed 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 rulemaking does not contain new information collection 
requirements, and a submission under the PRA is not required. 
Therefore, an information collection request is not being submitted

[[Page 10062]]

to OMB for review and approval under the PRA (44 U.S.C. 3501 et seq.). 
The OMB approved the information collection for the 30 CFR 553 
regulations under OMB Control Number 1010-0106.

Regulatory Flexibility Act

    The Department of the Interior certifies that this proposed rule 
would not have a significant economic effect on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.).
    The changes in the proposed rule may potentially affect all oil and 
gas lessees and operators of leases and pipeline right-of-way holders 
in the OCS and in state waters. This could include about 170 active 
operators and owners. 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 proposed rule primarily fall under 
the Small Business Administration's (SBA) North American Industry 
Classification System (NAICS) codes 211111, Crude Petroleum and Natural 
Gas Extraction, 213111, Drilling Oil and Gas Wells and 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 proposed rule, therefore, would 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 proposed rule could impact certain OCS operators and owners 
through negligibly higher insurance premiums or surety levels. 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. 
We do 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. 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 
operators and owners. We welcome 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.
    Your comments are important. 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 evaluate the 
enforcement activities and rate an agency's responsiveness to small 
business. 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), we want to assist 
small entities in understanding this proposed rule so that they can 
better evaluate its effects and participate in the rulemaking. If you 
believe that this proposed rule would 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 
Commenting Section listed above.
    This proposed rule is not a major rule under the Small Business 
Regulatory Enforcement Fairness Act (5 U.S.C. 804(2)). This rule would 
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 on the OCS.
    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 business. If you wish to 
comment on actions by employees of the BOEM, call 1-888-REG-FAIR (1-
888-734-3247).

Unfunded Mandates Reform Act of 1995

    This proposed rule would not impose an unfunded mandate on State, 
local, or tribal governments, or the private sector, of more than $100 
million per year. The proposed 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.

    Dated: February 14, 2014.
Tommy P. Beaudreau,
Principal Deputy Assistant Secretary, Land and Minerals Management.

    For the reasons stated in the preamble, the Bureau of Ocean Energy 
Management, (BOEM) proposes to amend 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, 56 FR 54757, 3 CFR, 
1991 Comp., p. 351, 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) and sets 
forth the procedures for claims against COF guarantors and 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 terms ``Annual CPI-U'' ``Current 
period,'' and ``Previous period;''

[[Page 10063]]

0
b. Revising the definition of ``Responsible party;''
    The changes to read as follows:


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.
* * * * *
    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 has the meaning in 33 U.S.C. 2701(32)(C), (E) and 
(F). This definition includes, as applicable, lessees, permittees, 
right-of-use and easement holders, and pipeline owners and operators. 
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.
* * * * *
0
4. Add 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?

Subpart G--Limit of Liability for Offshore Facilities


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.


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 OPA liability 
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, 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, by final rule BOEM 
will increase 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.
    (5) Nothing in this paragraph (b) 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 Sec.  
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 CPI adjustments to the offshore facility limit of 
liability in Sec.  553.702 through the publication of final rules in 
the Federal Register.

[FR Doc. 2014-03738 Filed 2-21-14; 8:45 am]
BILLING CODE 4310-MR-P