United States v. Black Elk Energy Offshore

Case: 16-30561 Document: 00514180258 Page: 1 Date Filed: 10/03/2017
REVISED SEPTEMBER 29, 2017
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fif h Circuit
FILED
No. 16-30561 September 27, 2017
Lyle W. Cayce
UNITED STATES OF AMERICA, Clerk
Plaintiff - Appellant
v.
DON MOSS; CURTIS DANTIN; GRAND ISLE SHIPYARDS,
INCORPORATED; CHRISTOPHER SRUBAR,
Defendants - Appellees
Appeals from the United States District Court
for the Eastern District of Louisiana
Before JONES, CLEMENT, and ELROD, Circuit Judges.
EDITH H. JONES, Circuit Judge:
A fatal welding accident occurred on an offshore oil platform in the Gulf
of Mexico in November 2012. Three years after that incident, the government
indicted the owner and operator of the platform and several oil platform
contractors, charging criminal violations of the Outer Continental Shelf Lands
Act (OCSLA), 43 U.S.C. §§ 1331, et seq., and the Clean Water Act, 33 U.S.C.
§§ 1251 et seq., as well as involuntary manslaughter. 18 U.S.C. § 1112. The
defendants moved to dismiss. The district court left all of the charges in place
except for the OCSLA charges against the contractor defendants, appellees
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Grand Isle Shipyards, Inc. (GIS), Don Moss, Christopher Srubar, and Curtis
Dantin, which it dismissed for failure to state an offense. Fed. R. Crim. Pro. 12.
The government timely appealed. Because the OCSLA regulations do not
apply to these appellees, the judgment of the district court is AFFIRMED.
BACKGROUND
1. OCSLA and Regulatory Enforcement
Congress enacted OCSLA in 1953, granting the Department of the
Interior authority to promulgate and enforce safety and environmental
regulations on “any holder of a lease or permit under [OCSLA].” 43 U.S.C.
§ 1348(b). For over 60 years, the federal government did not regulate or
prosecute oilfield contractors, as opposed to lessees, permittees, or well
operators, under OCSLA. 1
A month after the 2010 Deepwater Horizon spill, however, the Secretary
of the Department of the Interior reorganized the Minerals Management
System (MMS), tasked with enforcing OCSLA, into three agencies: the Office
of Natural Resources Revenues (ONRR), the Bureau of Ocean Energy
Management (BOEM), and the Bureau of Safety and Environmental
Enforcement (BSEE). See Secretarial Order 3299 (May 19, 2010). The newly-
created BSEE started aggressively enforcing OSCLA and its regulations
against a series of contractors. BSEE announced in a 2011 press release about
enforcement actions, “[t]his is the first time the Department of the Interior has
issued INCs [incidents of non-compliance] directly to a contractor that was not
1 The government conceded there are no reported cases of a successful prosecution of
a contractor under OCSLA, and the only evidence of such a prosecution cited by the
government is a New York Times article about a contractor’s entering a guilty plea in 1988.
2
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the well’s operator.” 2 In 2012, just months before the incident that gave rise
to this case, BSEE issued an internal “Interim Policy Document” opining that
contractors may be liable for civil penalties under OCSLA, although this
document made no mention of criminal liability. See Bureau of Safety and
Environmental Enforcement, IPD No. 12-07, Issuance of an Incident of Non
Compliance (INC) to Contractors (Aug. 15, 2012).
2. The West Delta 32 Lease Block Incident and Indictment
In summer 2010, Black Elk Energy Offshore Operations, LLC obtained
a federal oil and gas lease covering a portion of the Gulf of Mexico known as
the West Delta 32 Lease Block, and operated a three-platform production
facility there. Black Elk contracted with Appellee GIS and Wood Group PSN,
Inc. to provide platform workers. Wood Group also furnished a “Person-in-
Charge” for the platform, Appellee Srubar. Srubar and Wood Group were
responsible for conducting safety inspections and issuing safety permits for
“hot work,” such as welding and grinding, that emits sparks.
In September 2012, Black Elk interrupted its oil and gas production on
West Delta 32 to commission construction projects on the platforms that could
not be performed during production. Compass Engineering and Consulting,
LLC 3 drew up the construction plans, and Compass hired Appellee Moss as an
2 See BSEE, “BSEE Issues Violations Following Investigation Into Deepwater
Horizon,” https://www.bsee.gov/newsroom/latest-news/statements-and-releases/press-
releases/bsee-issues-violations-following, accessed June 22, 2017.
3 Neither Wood Group nor Compass is a party to this appeal.
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independent contractor and onsite inspector to coordinate and manage the
work on the West Delta 32 platform projects.
One project involved installing a divert valve on the Lease Automatic
Custody Transfer (LACT) unit. 4 During this work, someone discovered that
the prefabricated piping necessary to upgrade the LACT unit was missing. A
Black Elk manager decided the piping should be rebuilt. To do that, the crew
was required to perform “hot work” and weld the sump line piping, some of
which lay within 20 feet of the Wet Oil Tank. On November 16, Wood Group
issued a hot work permit to the GIS crew.
A fatal explosion occurred that morning, killing three men, injuring
others, and discharging pollutants into the Gulf of Mexico. The cause of the
explosion is disputed, but the government contends the contractors were
criminally liable because they failed to obtain proper authorization to weld,
failed to conduct appropriate pre-work inspections, and failed to ensure the
construction area was safe for hot work as required by OCSLA safety
regulations.
Criminal indictments were issued three years later against Black Elk,
as the lessee-operator, and the contractor appellees. The second superseding
indictment charged the contractor-appellees with eight counts of violations of
43 U.S.C. § 1350(c) for knowing and willful violations of OCSLA’s enabling
regulations. The indictment charged Black Elk, GIS, Wood Group, Srubar, and
Dantin with five separate counts for failing to perform pre-work inspections on
each of the five days before the incident, in violation of 30 C.F.R.
§§ 250.113(c)(1)(ii) and 250.146(c). It charged all of the defendants with a
4 A LACT unit measures the net volume, as well as the quality, of liquid hydrocarbons,
and provides for the automatic measurement, sampling, and transfer of oil from the lease
location into a pipeline.
4
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single count for failing to perform a pre-work inspection on the actual day of
the incident. It also charged Black Elk, GIS, Moss, and Dantin with failing to
render the hydrocarbons in the sump-line piping and oil tanks inert before
welding on the day of the explosion under 30 C.F.R. §§ 250.113(c)(3) and
250.146(c). Finally, the indictment charged those four parties with failing to
obtain written authorization from the Person-in-Charge before welding the
sump-line piping on the day of the explosion under 30 C.F.R. §§ 250.113(c)(1)(i)
and 250.146(c).
Notably, the indictment also charged Black Elk and GIS with three
counts of involuntary manslaughter, 18 U.S.C. § 1112, and all of the
defendants were charged with one count of violating the Clean Water Act,
33 U.S.C. §§ 1251 et seq., by negligently discharging oil into the Gulf of Mexico.
The district court did not dismiss those counts and they remain pending.
3. District Court Proceedings
The defendants filed several motions to dismiss the charges against
them. The district court issued a written order dismissing the OCSLA charges
against Wood Group, GIS, Moss, and Dantin, and a second written order
dismissing the OCSLA charges against Srubar days later. The district court
analyzed each of the regulatory provisions cited in the indictment and
concluded that none of the OCSLA regulations apply to oilfield contractors.
Central to this analysis, the court pointed out that each of the three specific
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provisions of OCSLA regulations underlying the charged criminal violations 5
imposes requirements addressed to “You.”
Under the OCSLA regulations, “You” is a defined term:
You means a lessee, the owner or holder of operating rights, a
designated operator or agent of the lessee(s), a pipeline right-of-
way holder, or a State lessee granted a right-of-use and easement.
30 C.F.R. § 250.105. 6 The district court held this definition does not include
contractors, subcontractors or service providers. Finding that only Black Elk
is the owner, lessee, or holder of operating rights, and that no other regulatory
provision brought contractors within the ambit of “You,” the district court
dismissed the OCSLA counts against the appellees. The government timely
appealed.
5In relevant part, those provisions read:
30 C.F.R. § 250.113(c)(1)(i): “(c) If you cannot weld in one of the designated
safe-welding areas that you listed in your safe welding plan, you must meet
the following requirements: (1) You may not begin welding until: (i) The
welding supervisor or designated person in charge advises in writing that it is
safe to weld.”
30 C.F.R. § 250.113(c)(1)(ii): “If you cannot weld in one of the designated safe-
welding areas that you listed in your safe welding plan, you must meet the
following requirements: (1) You may not begin welding until: . . . (ii) You and
the designated person in charge inspect the work area and areas below it for
potential fire and explosion hazards.”
30 C.F.R. § 250.113(c)(3): “(c) If you cannot weld in one of the designated safe-
welding areas that you listed in your safe welding plan, you must meet the
following requirements: . . . (3) You may not weld piping, containers, tanks, or
other vessels that have contained a flammable substance unless you have
rendered the contents inert and the designated person in charge has
determined it is safe to weld. This does not apply to approved hot taps.”
6 The Department of the Interior rewrote the OCSLA regulations in the second-person
in 1999 as part of a “plain English” rendering by BSEE’s predecessor MMS that described
regulated parties as “You.” See 63 Fed. Reg. 7335, 7336 (Feb. 13, 1998).
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STANDARD OF REVIEW
The district court’s interpretation of a federal statute is reviewed de
novo, United States v. Kaluza, 780 F.3d 647, 653 (5th Cir. 2015), as is the
district court’s interpretation of a regulation. Anthony v. United States,
520 F.3d 374, 377 (5th Cir. 2008). “In reviewing a challenge to an indictment
alleging that it fails to state an offense, the court is required to take the
allegations of the indictment as true and to determine whether an offense has
been stated.” United States v. Crow, 164 F.3d 229, 234 (5th Cir. 1999).
“This court interprets regulations in the same manner as statutes,
looking first to the regulation’s plain language.” United States v. Fafalios,
817 F.3d 155, 159 (5th Cir. 2016). “[W]here, as here, a regulatory violation
carries criminal penalties, the regulation ‘must be strictly construed and
cannot be enlarged by analogy or expanded beyond the plain meaning of the
words used.’” United States v. CITGO Petroleum Corp., 801 F.3d 477, 482 (5th
Cir. 2015) (quoting United States v. Clark, 412 F.2d 885, 890 (5th Cir. 1969)).
See also Diamond Roofing Co. v. OSHRC, 528 F.2d 645, 649 (5th Cir. 1976) (“If
a violation of a regulation subjects private parties to criminal or civil sanctions,
a regulation cannot be construed to mean what an agency intended but did not
adequately express.”).
DISCUSSION
On appeal, the government relies on four main arguments. First, the
government contends that a plain reading of OCSLA subjects any person,
including contractors and their employees, to criminal penalties for violating
the regulations promulgated under the statute. 43 U.S.C. § 1350(c). Second,
OCSLA regulations govern the appellees’ conduct because they were the
“person[s] actually performing the activit[ies],” and are thus “jointly and
severally responsible” under 30 C.F.R. § 250.146(c). Third, courts have upheld
both civil and criminal penalties imposed under similar statutory and
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regulatory schemes. Fourth, OCSLA’s regulations support civil and criminal
penalties for any person “responsible for a violation” of the regulations.
30 C.F.R. § 250.1402. We discuss each argument in turn.
I.
“Any person who knowingly and willfully” violates “any regulation or
order issued under the authority of this subchapter designed to protect health,
safety, or the environment . . .” may be subject to criminal penalties under
OCSLA. 43 U.S.C. § 1350(c). Because OCSLA defines a “person” to include “a
natural person, an association, a State, a political subdivision of a State, or a
private, public, or municipal corporation,” 43 U.S.C. § 1331(d), the government
contends any contractor, subcontractor, or individual is a “person” under this
penalty provision. Further, the government argues, this plain reading is
reinforced by 43 U.S.C. § 1350(d), which extends criminal liability for
regulatory violations to corporations and “any officer or agent of such
corporation . . . who . . . authorized, ordered, or carried out the proscribed
activity.”
The appellees respond that OCSLA, read as a whole, precludes the
government from criminally prosecuting those who are not holders of OCS
leases or permits. They argue that 43 U.S.C. § 1348 identifies who has
authority to enforce safety and environmental regulations promulgated under
OCSLA: “The Secretary, the Secretary of the Department in which the Coast
Guard is operating, and the Secretary of the Army . . . .” 43 U.S.C. § 1348(a).
The following section, 1348(b), then identifies who must comply with those
regulations: “It shall be the duty of any holder of a lease or permit under this
subchapter . . .” to comply with regulations governing workplace safety and
health for their own employees and those of any “contractor or subcontractor.”
43 U.S.C. § 1348(b) (emphases added). Because section 1348(b) specifically
imposes a duty on lessees and permittees, and equally specifically references
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but does not impose its regulatory duties on contractors and subcontractors,
the latter parties are textually excluded from those duties. It necessarily
follows that 43 U.S.C. § 1350(c) cannot impose criminal penalties on
contractors because they are not the “persons” given a duty to comply. 7
Section 1350(c) instead places criminal exposure squarely on the lessees and
permittees not only for their own misfeasance but for that of the contractors
and subcontractors they hire. The appellees additionally contend that any
regulations that would hold them criminally liable exceed Congress’s explicit
grant of statutory authority. 8
There is much to be said for appellees’ argument given the government’s
failure ever before to seek criminal penalties against a contractor or individual
employees in the sixty-plus year history of the OCSLA. The government’s past
inaction speaks volumes about the scope of its regulatory authority,
particularly when measured against its breathless defense of the policy
importance of these indictments. To resolve this appeal, however, we need not
decide whether OCSLA’s criminal liability provision could extend to
contractors, subcontractors and their employees. If OCSLA regulations in
force at the time of the incident do not apply to the appellees, they cannot be
held criminally liable even if the statute authorizes regulations that could foist
7 That section 1348(b) excludes contractors and subcontractors from direct regulatory
control under OCSLA is reinforced in the provision’s drafting history. When enacting the
provision that became section 1348 in 1977, Congress rejected language that would have
extended the safety and environmental duties it imposed on lessees and permit holders to
render them liable “jointly with any employer or subcontractor . . . .” OCSLA Amendments
of 1977, H.R. 1614, 95th Cong. § 22(b) (1977); OCSLA Amendments of 1977, S.9. 95th Cong.
§ 22(b) (1977).
8 Accord Island Operating Co. v. Jewell, No. 6:16-CV-00145, 2016 WL 7436665 (W.D.
La. Dec. 23, 2016) (“[A] party who is neither a lease-holder nor a permit-holder . . . is not
identified in Section 1348 as having a duty related to environmental and safety standards,
and, thus . . . cannot be subject to a penalty or fine. Consequently, the statute’s plain
language, when read in context, is clear, and does not embrace contractors.”), appeal filed,
No. 17-30440 (5th Cir. May 27, 2017).
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criminal liability upon them. Consequently, we assume arguendo, without
deciding, that section 1350(c) may expose contractors and subcontractors to
criminal liability, and move on to the issue of whether the regulations can
support this criminal indictment.
II.
In its quest to penalize the contractors, the government first runs up
against the regulatory definition of “You,” which does not include contractors.
See 30 C.F.R. § 250.105. The government barely mentions this provision in its
briefing. Instead, the government points to § 250.146(c):
Whenever the regulations in 30 CFR parts 250 through 282 and
30 CFR parts 550 through 582 require the lessee to meet a
requirement or perform an action, the lessee, operator (if one has
been designated), and the person actually performing the activity
to which the requirement applies are jointly and severally
responsible for complying with the regulation.
30 C.F.R. § 250.146(c). The government’s essential argument is that because
the appellees were the “person[s] actually performing the activity to which the
[welding] requirement[s] appl[y],” they are “jointly and severally responsible
for complying with the regulation.” Id. Thus, their knowing and willful failure
to comply with provisions of 30 C.F.R. § 250.113 would be a criminal violation
under OCSLA’s criminal enforcement provision. 43 U.S.C. § 1350(c).
It is a hornbook principle of interpretation that when “two provisions
operate in pari materia,” they “should not be read in isolation,” but must be
construed together. United States v. Onick, 889 F.2d 1425, 1433 (5th Cir. 1989).
See also RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065,
2071 (2012) (referencing “the cardinal rule that, if possible, effect shall be given
to every clause and part of a statute”) (internal quotation omitted). As part of
the same regulatory framework, sections 250.105 and 250.146(c) must be read
together. Section 250.105 unambiguously defines “You” to mean “a lessee, the
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owner or holder of operating rights, a designated operator or agent of the
lessee(s), a pipeline right-of-way holder, or a State lessee granted a right-of-
use and easement.” 30 C.F.R. § 250.105. This definition excludes contractors
and the appellees charged here. Moreover, all of the welding regulations that
form the basis of the criminal indictment reference only “you”—the group of
responsible parties defined in section 250.105. See 30 C.F.R. § 250.113, supra
n.5.
The government’s reliance on § 250.146(c) circumvents the plain
language of this definition of “You.” Further, taken in context, § 250.146(c) is
directed to the same parties encompassed by the definition of “You.”
Section 250.146 begins with the question, “Who is responsible for fulfilling
leasehold obligations?” and is followed by the statement that the government
relies upon: “the lessee, operator (if one has been designated), and the person
actually performing the activity. . . are jointly and severally responsible for
complying with the regulation.” 30 C.F.R. § 250.146(c) (emphasis added). This
provision dictates the obligations of leaseholders and designated operators
rather than the criminal liability of contractors. Its text refers to those parties
who are “jointly and severally responsible,” a term of art reserved for civil
rather than criminal liability. See Joint and Several Liability, Bryan A.
Garner, Garner’s Dictionary of Legal Usage 493 (3d ed. 2011) (referring to joint
and several liability exclusively in terms of civil law); Honeycutt v. United
States, 137 S. Ct. 1626, 1631 (2017) (describing joint and several liability as a
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“creature of tort law”). The government cites no cases demonstrating support
for joint and several criminal liability. 9
Section 250.146(c) therefore provides that even when someone besides
the lessee or operator is “the person actually performing the activity,” the
lessee and designated operator remain “jointly and severally responsible for
complying with the regulation.” Id. Indeed, when the regulation that became
§ 250.146(c) was first proposed, the agency explained it did not intend to
expand regulatory liability to contractors, but to hold operators responsible for
their contractors’ actions:
We would emphasize in Sec. 250.15(d) [now Sec. 250.146(c)] that,
in addition to the lessee and the operator, all persons who conduct
lease activities on behalf of the lessee or operator must also comply
with our regulations. The operator is responsible for the
9 After oral argument in this court, the government cited several cases purporting to
evidence the possibility of joint and several criminal liability, but all of them relate to
criminal conspiracy, RICO, forfeiture, or restitution. Not one of those cases implies, as the
government does here, that criminal liability may be imposed jointly and severally. See, e.g.,
United States v. Edwards, 303 F.3d 606, 643 (5th Cir. 2002) (those in a RICO enterprise are
jointly and several liable for the proceeds of the enterprise); United States v. Quiroz-
Hernandez, 48 F.3d 858, 868 (5th Cir. 1995) (Co-conspirators may “be liable for the
substantive offenses committed by other members of the conspiracy in furtherance of the
common plan.”); United States v. Lindell, 881 F.2d 1313, 1322 (5th Cir. 1989) (holding that
marijuana possession “may be joint among several defendants.”). Even more significant, the
instant case concerns criminal negligence, not conspiracy or RICO charges. A conspiracy by
nature is an agreement to violate the law, or “an agreement between two or more people to
behave in a matter that will automatically constitute an offense by at least one of them,”
Garner’s Dictionary of Legal Usage 175. Joint and several liability means that “the liability
of two or more obligors may be enforced against them all by a joint action or against any of
them by an individual action.” Id. at 493. Joint and several liability may be imposed without
culpability of some of the liable parties, whereas criminal liability requires individual
culpability on the part of each person charged. Forfeiture and restitution concepts are
relevant only as adjuncts to the individual criminal liability of defendants.
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performance of its contractors. [BSEE] will hold the operator
accountable for the contractors’ performance.
63 Fed. Reg. 7335 (Feb.13, 1998) (emphasis added).
The government disputes the district court’s reasoning that this agency
explanation can be read to exclude contractor liability through the interpretive
canon expressio unius est exclusio alterius, because a preamble cannot effect “a
partial repeal . . . by implication” of a “formally enacted” rule. United States v.
Vonn, 535 U.S. 55, 65, 122 S. Ct. 1043, 1050 (2002). We do not misapply the
preamble, but we take it as a formal agency recognition of its authority that is
fully consistent with both the limited definition of “You” in § 250.105 and the
description of “leasehold obligations” in § 250.146(c): lessees cannot escape
responsibility for regulatory compliance by hiring out work to contractors.
Moreover, the drafting history of the definition of “You” undermines the
government’s recently coined interpretation. In 1998, BSEE proposed to
rephrase Part 250 in plain English, replacing the term “lessee” with “You.” A
comment submitted during rulemaking sought to define “You” to include “any
person an MMS order or decision may adversely impact.” Postlease Operations
Safety, 64 Fed. Reg. 72756, 72758 (Dec. 28, 1999). As the appellees note, this
proposed language would have extended the definition of “You” to contractors.
Because complex, overlapping cross-indemnity provisions are an inherent
feature throughout the oil and gas industry, actions taken against lessees could
adversely impact multiple layers of contractors and subcontractors that might
have been swept into this broader proposed definition of “You.” But BSEE
rejected this comment and its proposed language in favor of a definition limited
to lessee/permittee/designated operator responsibility. Id.
Until very recently, public statements by the regulating agencies
confirmed that the regulations do not apply to contractors. In March 2011,
BSEE promulgated a new “Safety and Environmental Management Systems”
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rule designed to respond to the Deepwater Horizon incident and spill. The
agency conducted a public workshop for oil and gas companies and advertised
in bold, fully capitalized, underlined text that “30 CFR 250.105 defines ‘YOU’
. . . This definition DOES NOT include a CONTRACTOR.” Further, when
publishing the final rule, BSEE stated that it “does not regulate contractors;
we regulate operators.” 75 Fed. Reg. 63610, 63616 (Oct. 15, 2010). The
government asserts that these statements were issued in connection with
different rules applicable only to leaseholders and operators, but we are
unpersuaded. The new rule pertains as much to safety and the environment
as the regulations these appellees are charged with violating.
The consistency of over sixty years’ prior administrative practice in
eschewing direct regulatory control over contractors, subcontractors and
individual employees supports the district court’s conclusion that these
regulations do not apply to nor do they potentially criminalize the appellees’
conduct.
III.
In further defense of its expansive reading of § 250.146(c), the
government argues that this court has upheld criminal and civil penalties
before where regulations created duties and “violators” of the regulations were
sanctioned. The government cites two cases for this proposition. See United
States v. Ho, 311 F.3d 589 (5th Cir. 2002) (upholding criminal liability under
Clean Air Act regulations); Floyd S. Pike Elec. Contractor, Inc. v. Occupational
Safety & Health Review Comm’n (Pike), 576 F.2d 72 (5th Cir. 1978) (upholding
civil liability and $800 fine for violating OSHA regulations).
No one disputes that many statutes authorize implementing regulations
and then impose criminal liability on entities or individuals for violating the
regulations. It is not the principle, but its specific application that is at issue
here. The general principle does not answer the question of whether under
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these OCSLA regulations criminal liability extends to these appellees. The
question before us is whether the regulations that are specifically directed at
lessees and permittees also extend penalties to contractors and individuals.
The virtually non-existent past enforcement of OCSLA regulations
against contractors confirms that the regulations were never intended to apply
to the appellees. The government marshals only two pieces of evidence that
OCSLA’s regulations might have been enforced against contractors: a 1988
guilty plea by a contractor reported in the New York Times, and a 1981
memorandum from the Department of the Interior that hypothetically
mentions assessing civil penalties against “diving contractors.” See Dep’t of
the Interior, No. M-36942, 1981 WL 29228, Opinion Letter on Refunds and
Credits Under the Outer Continental Shelf Lands Act (Dec. 15, 1981). The
Solicitor’s Office memorandum concerned royalty payments to lessees, not
criminal liability for contractors.
As the BSEE itself acknowledged, it had not issued civil incidents of non-
compliance against contractors before 2011. See supra n.2. On the contrary,
past civil enforcement actions squarely placed on lessees and operators the
duty to ensure contractors’ compliance with leasehold obligations. See ATP Oil
and Gas Corp., 178 IBLA 88, 97 (Aug. 5, 2009) (“[OCS] lessees and operators
are responsible for ensuring safe and workmanlike operations and
conditions . . . and that includes contractors working on their behalf . . . .”);
Seneca Resources Corp., 167 IBLA 1 (Sept. 15, 2005) (Seneca, as leaseholder,
liable for contractor’s safety violations); Petro Ventures, Inc., 167 IBLA 315
(Dec. 30, 2005) (same).
The government also cites Fruge ex rel. Fruge v. Parker Drilling Co.,
337 F.3d 558 (5th Cir. 2003) to suggest that § 250.146(c) can impose liability
on contractors, but it has misread that case. In Fruge, a worker filed a personal
injury lawsuit against an offshore platform owner and contractors hired by the
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owner and contended that §§ 250.146(a) and (c) imposed strict civil liability
upon the defendants. Fruge rejected the plaintiff’s arguments and ruled that
there was no implied private cause of action for the plaintiff.
The plaintiff did argue that section 250.146(c) “charges that the lessee,
the operator, and the person actually performing the activity ‘are jointly and
severally responsible’ for complying with the offshore [Interior] regulations.”).
Fruge, 337 F.3d at 561. But the court did not incorporate that logic into its
holding. Instead, in characterizing § 250.146(c), this court noted MMS’s then-
official position that “both lessee and the designated operator are required to
bear the non-monetary obligations under the lease as well as any obligations
under the regulations.” Id. at 565 n.4. This characterization is consistent with
the regulation’s definition of “You,” which imposes obligations on lessees and
designated operators but not contractors. The Fruge opinion did not find civil
contractor liability.
Finally, “[t]he government has pointed to no precedent for criminal
liability . . . in circumstances like those presented here.” United States v.
Brennan, 183 F.3d 139, 150 (2d Cir. 1999).
IV.
The government argues that the regulations, reviewed in a broader
context, may result in criminal liability for anyone who fails to comply with
them. The regulations define a “person” as “a natural person, an
association . . . a State, a political subdivision of a State, or a private, public,
or municipal corporation.” 30 C.F.R. § 250.105. They define a “violator” as “a
person responsible for a violation,” and a violation includes “failure to comply
with . . . any regulations issued under the OCSLA.” 30 C.F.R. § 250.1402. That
subpart “explains [the agency’s] civil penalty procedures whenever a lessee,
operator or other person engaged in oil, gas, sulphur or other minerals
operations in the [outer continental shelf] has a violation.” 30 C.F.R.
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§ 250.1400. Thus, the government contends that penalties cannot be limited
to lessees and designated operators or even the definition of “You,” but extend
to any person responsible for a violation. Contractors are persons; contractors
can therefore be violators, the government argues, consequently, contractors
can be criminally liable. 10
This argument ignores the rule that a general provision in a
comprehensive regulatory scheme must yield to more specific, conflicting
provisions. RadLAX, 132 S. Ct. at 2070-71 (“[I]t is a commonplace of statutory
construction that the specific governs the general.”) (internal quotation
omitted). See also Antonin Scalia & Bryan A. Garner, Reading Law:
Interpretation of Legal Texts 183 (2012). The appellees were indicted under
three provisions of 30 C.F.R. § 250.113, all of which are directed at “You,” not
at just any person, and § 250.146(c), which as previously addressed, does not
impose criminal liability beyond the definition of “You.” Because the applicable
regulatory definitions unambiguously exclude contractors, more general
liability provisions do not control. 11
V.
Without actually conceding that its asserted OCSLA enforcement powers
have never before been exercised against contractors and subcontractors, the
government takes the position that the statute and regulations have always
been broad enough to embrace such powers, and the lack of prior use
demonstrates, at most, the exercise of prosecutorial discretion. Consequently,
10But see 30 C.F.R. § 550.105, BOEM regulations, which defines “You” exactly as in
§ 250.105—excluding contractors and subcontractors
11If the arguments on the application of the regulations to contractors were equally
persuasive, the appellees argue the rule of lenity should break the tie. See United States v.
Santos, 553 U.S. 507, 514, 128 S. Ct. 2020, 2025 (2008). But that “venerable rule,” id., is
unnecessary to the resolution of this case. Properly read, the regulations are not ambiguous;
they plainly do not subject contractors to criminal liability.
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contractors and subcontractors always had fair notice of their potential
exposure to civil penalties up to $42,704/day 12 and criminal liability. But
“where, as here, an agency’s announcement of its interpretation is preceded by
a very lengthy period of conspicuous inaction, the potential for unfair surprise
is acute.” Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 158,
132 S. Ct. 2156, 2168 (2012).
In fact, the government points only to events that preceded this incident
by a few months as giving notice to the appellees and the industry. These
include BSEE’s announcement of its citations in connection with the
Deepwater Horizon blowout; indirect references to section 250.146(c) when
announcing other new regulations, see 77 Fed. Reg. 50,856, 50,879 (Aug. 22,
2012); and its publication in August 2012 of Interim Policy Document No. 12-
07 (Aug. 15, 2012), which purports to elucidate principles for enforcing civil
penalties only—not criminal enforcement—against contractors and
subcontractors. The government, however, undercuts reliance on the Interim
Policy Document as it disclaims that the policy statement, which was issued
without notice and comment rulemaking, has any binding force so as to induce
reliance by the regulated entities.
More revealing, in our view, is that when BSEE has promulgated recent
regulations, it has gone out of its way to specifically include contractors and
subcontractors within the regulatory purview. See, e.g., BOEM’s OCS
alternative energy regulation, which expressly includes contractors. 30 C.F.R.
§ 585.112; 79 Fed. Reg. 21,617, 21,621 (Apr. 17, 2014).
If this case involved only civil sanctions against the appellees, the
government would perhaps ask this court to apply Auer deference to its
12 This is the current maximum civil penalty for violating OCSLA per day per
violation. 30 C.F.R. § 250.1403.
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interpretation of the regulations. Auer v. Robbins, 519 U.S. 452, 117 S. Ct. 905
(1997). The government would then have to defend its novel approach against
a series of Supreme Court decisions that have afforded “considerably less
deference” when an agency interpretation conflicts with an earlier,
consistently held view. I.N.S. v. Cardoza-Fonseca, 480 U.S. 421, 446 n.30,
107 S. Ct. 1207, 1221 n.30 (1987). The Court recently reiterated that deference
may be “unwarranted” “when the agency’s interpretation conflicts with a prior
interpretation . . . .” Christopher, 567 U.S. at 155, 132 S. Ct. at 2166 (citation
omitted). “[P]ersuasive weight” is due to an agency’s contemporaneous
construction of applicable law and subsequent consistent interpretation, Watt
v. Alaska, 451 U.S. 259, 272-73, 101 S. Ct. 1673, 1681 (1981), whereas a
“current interpretation, being in conflict with its initial position, is entitled to
considerably less deference.” Id. (citation omitted).
The Court summarized the relevant approach in an oft-cited decision
where it concluded that “[w]e have declined to follow administrative guidelines
in the past where they conflicted with earlier pronouncements of the agency.”
General Elec. Co. v. Gilbert, 429 U.S. 125, 143, 97 S. Ct. 401, 411 (1976)
(citations omitted). The Court overturned an EEOC guideline that, having
been promulgated eight years after the law passed, was “not a
contemporaneous interpretation of Title VII,” and “more importantly, the 1972
guideline flatly contradicts the position which the agency had enunciated at an
earlier date, closer to the enactment of the governing statute.” Id.
The analogy to the present case cannot be missed. BSEE and its
predecessors enforced the regulations here at issue for over sixty years only
against lessees, permittees and designated operators of offshore production
rights. The agency placed responsibility, both civil and potentially criminal,
on the named parties for ensuring compliance with the regulations by all of the
many contractors, subcontractors and individual employees whose efforts are
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necessary to develop the Outer Continental Shelf. The agency explicitly
disclaimed imposing direct regulatory control on the subordinate parties. The
agency’s 2011 about-face “flatly contradicts” the agency’s earlier,
contemporaneous interpretation of the regulations. Its new position is hardly
entitled to deference in the civil context. See Island Operating Co., supra n.8. 13
Worse, this is no civil enforcement proceeding where “only” money is at
stake. “[D]ue process bars courts from applying a novel construction of a
criminal statute to conduct that neither the statute nor any prior judicial
decision has fairly disclosed to be within its scope . . . .” United States v. Lanier,
520 U.S. 259, 266, 117 S. Ct. 1219, 1225 (1997). It was novel for the
government to indict these appellees for violating the welding regulations, the
regulatory duty for which rested on “You,” the lessees, permittees and
designated operators of the West Delta Lease Block 32 facilities. No prior
judicial decision countenanced this action, which is at odds with a half century
of agency policy, and we will not do so now.
CONCLUSION
For the foregoing reasons, the judgment of the district court dismissing
the OCSLA counts of indictment against these appellees is AFFIRMED.
13 In the civil context, there are grave implications of the new policy for contractors,
who heretofore have had no need to price their services according to the regulatory risk; no
ability to engage insurance protection for regulatory violations; no need to personally review
and apply the exact regulations (because they followed the directives of the designated
operator or lessee); and no incentive to impose themselves in the offshore workplace as self-
protection against others’ potential regulatory violations. See generally, John Cossa,
Liability of Owners, Contractors, and Non-operators, 2016 No. 1 Rocky Mt. Min. L.
Inst. Paper No. 6, 6-11 to -13.
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