[Survey Report on the Offshore Civil Penalties Program, Minerals Management Service]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-i-374

Title: Survey Report on the Offshore Civil Penalties Program, Minerals
       Management Service

Date:  March 30, 1999



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U.S. Department of the Interior
Office of Inspector General







SURVEY REPORT


OFFSHORE CIVIL PENALTIES PROGRAM,
MINERALS MANAGEMENT SERVICE


REPORT NO. 99-I-374

MARCH 1999






MEMORANDUM

             TO:  The Secretary

           FROM:  Robert J. Williams
                  Acting Inspector General

SUBJECT SUMMARY:  Final Survey Report - "Offshore Civil
                  Penalties Program, Minerals Management
                  Service" (No. 99-i-374)


Attached for your information is a copy of the
subject final survey report.  The objective of the
survey was to determine whether the Minerals
Management Service, for its civil penalties program,
(1) assessed civil penalties in a fair and
consistent manner, (2) documented the assessment
files to support the reviewing officers' decisions,
and  (3) made civil penalty referrals as
appropriate.

We concluded that since the enactment of the Oil
Pollution Act of 1990, the Service's Gulf of Mexico
Region has developed and implemented a civil
penalties program.  However, we found that reviewing
officers were not adequately documenting their
penalty assessment decisions because case files were
not reviewed by a supervisor to ensure that the
substantial evidence requirements were met.
Undocumented and unsupported assessment decisions
can leave civil penalty decisions vulnerable to
reversal under appeal and lead to inconsistent
penalty assessments, which could also limit the
effectiveness of the  program.  Also, inspectors did
not always make referrals for civil penalties timely
or when appropriate because inspection supervisors
did not ensure that inspectors were thoroughly
knowledgeable of the program and made referrals when
appropriate.  When inspectors do not refer serious
safety violations for civil penalty or do not refer
them in a timely manner, the program is applied
inconsistently and the program's effectiveness in
promoting safe and environmentally sound operations
in the Gulf of Mexico is diminished.  While the
Service identified similar program weaknesses and
initiated some corrective actions as a result of its
internal reviews, we believe that additional
improvements are needed.

In its response, the Service agreed with the
report's four recommendations to address the
deficiencies.  Based on the response, we considered
all four recommendations resolved.

If you have any questions concerning this matter,
please contact me at (202) 208-4252.


Attachment






MARCH 1999                                 C-IN-MOA-001-96-B



                 SURVEY REPORT

Memorandum

     To:  Director, Minerals Management Service

   From:  Robert J. Williams
          Assistant Inspector General for Audits

Subject:  Survey Report on the Offshore
          Civil Penalties Program,
          Minerals Management Service (No. 99-i-374)

INTRODUCTION

This report presents the results of our survey of
the Minerals Management Service's offshore civil
penalties program.  The objective of the survey was
to determine whether (1) civil penalties were
assessed in a fair and consistent manner, (2)
documentation in the assessment files supported the
reviewing officers' decisions, and  (3) civil
penalty referrals were made as appropriate by
inspectors.  In addition, the Service requested that
we review its procedures for referring criminal
cases to the Office of Inspector General.  In that
regard, we plan to issue a separate report on the
referral of criminal cases.

BACKGROUND

The Minerals Management Service comprises two
specialized programs:  the Royalty Management
Program and the Offshore Minerals Management
Program.  All mineral revenue functions are
centralized within the Royalty Management Program,
which collects, accounts for, and distributes
revenues generated from Federal and Indian lands and
the Outer Continental Shelf.  The Service's Offshore
Minerals Management Program conducts leasing
activities for and provides oversight of mineral
operations on the Nation's Outer Continental Shelf.
The headquarters for the Offshore Minerals
Management Program is located in Herndon, Virginia,
and regional offices are located in Anchorage,
Alaska; Camarillo, California; and New Orleans,
Louisiana.  The Offshore Program is responsible for
all phases of offshore oil and gas activity,
including the regulation of  all exploration,
development, and production activities on more than
7,100 active leases.

The goal of the civil penalties program is to
encourage operator compliance with applicable
statutes and regulations to ensure safe and
environmentally sound operations on the Outer
Continental Shelf.  For example, the Service's OCS
(Outer Continental Shelf) Civil/Criminal Penalties
Program Guidebook dated December 1992 states:  "The
penalty assessed for spilling oil must be large
enough to induce the spiller to take steps to
prevent future spills.  Thus the penalty should be
substantial enough to encourage expenditures for
compliance and to discourage further violations."
The 1978 Amendments to the Outer Continental Shelf
Lands Act gave the Service the authority to assess
civil penalties for violations of statutes and
regulations that are designed to help ensure safe
and environmentally sound offshore oil and gas
operations.  However, this authority was limited by
a  provision that required the Service to provide a
period of time to a lessee to correct a violation
before a penalty is imposed.  The Oil Pollution Act
of 1990 (Public Law 101-380) eliminated the
requirement that a correction period should be
provided before penalties could be assessed in cases
where the failure to comply with applicable statutes
and regulations "constituted a threat of serious,
irreparable, or immediate harm or damage to life
(including fish and other aquatic life), property,
any mineral deposit, or the marine, coastal, or
human environment."  The Oil Pollution Act also
increased the maximum amount of civil penalties
assessable from $10,000 per violation per day to
$20,000 per violation for each day of noncompliance
and required the adjustment of the maximum penalty
at least every 3 years to reflect any increases in
the Consumer Price Index.  Accordingly, the Service
increased the maximum civil penalty to $25,000 per
day effective October 7, 1997.

As of September 30, 1997, the Service's Gulf of
Mexico Region had 50 inspectors in four district and
two subdistrict offices in Louisiana and Texas (see
Appendix 1).  These inspectors conducted on-site
inspections of  more than 3,800 platforms and
approximately 15,000 oil and gas wells in the Gulf
of Mexico.  These inspections included monitoring
offshore production and drilling operations and
testing safety and pollution prevention equipment,
which prevents or minimizes the effects of well
blowouts, fires, spillage, and other major
accidents.  When Service inspectors find violations
of the regulations, they issue Incidents of
Noncompliance to the operator of the facility.  The
Service has developed a list of potential Incidents
of Noncompliance that identifies approximately 600
potential violations and has established written
guidelines concerning the regulations, inspection
procedures, and instructions to be used when
noncompliance is noted.  Depending on the severity
of the violation, one of the following three
enforcement orders is issued:  (1) warning the
operator of  the violation and ordering corrective
action, (2) shutting in[1] specific component
equipment until corrective action is taken, or (3)
shutting in the entire facility until required
corrective action is taken.

If an inspector believes that the violation warrants
further review, the inspector is required by the
Civil/Criminal Penalties Program Guidebook to
discuss the violation with the supervisory
inspector.  If the supervisor agrees that a
violation warrants a civil penalty, the potential
civil action is discussed with the district
supervisor.  The district supervisor initiates the
Compliance Review Form, a summary of investigation,
and a recommendation for initiation of civil penalty
proceedings and forwards these and all other
pertinent documentation to the regional supervisor
for approval.  The regional supervisor reviews the
information, and if further action is warranted, he
forwards all of the documentation to the Regional
Director.

Civil penalty cases are formally established when
the Regional Director determines that the evidence
presented warrants a civil penalty and refers the
Compliance Review Form, the Incident of
Noncompliance, and other documents related to the
case to the reviewing officers in the Gulf of Mexico
Regional Office.  The Regional Office has three
reviewing officers, who are responsible for
evaluating the merits of the referrals, determining
whether civil penalties are warranted, and assessing
any subsequent fines.  The amount of a fine is
determined in part through the use of the Service's
Generalized Matrix (see Appendix 2).  One axis of
the matrix has three enforcement codes, one of which
the inspector assigns when the Incident of
Noncompliance is issued.  The other axis has three
categories, one of which is selected by the
reviewing officer based on the seriousness of the
threat or injury to personnel or the environment and
the operator's prior compliance record.  The amount
of the daily fine determined from the matrix is then
multiplied by the number of days the operator was in
violation to arrive at the total amount of the civil
penalty.  The reviewing officers may also consider
mitigating factors when assessing fines, such as
whether the company cooperated in investigating the
violation and whether it is able to pay the fine.
The Service's Generalized Matrix is contained in the
Service's OCS (Outer Continental Shelf)
Civil/Criminal Penalties Program policy document
dated January 1996.  This policy amended the Matrix
contained in the Service's Civil/Criminal Penalties
Program Guidebook dated December 1992.

Since the enactment of the Oil Pollution Act of 1990
through fiscal year 1997 (September 30, 1997), 143
civil penalty case files have been referred to the
reviewing officers in the Gulf of Mexico Regional
Office.  Of the 143 case files, 90 cases involving
penalties have been closed, with fines of
approximately $1.2 million being collected; 17 cases
have been dismissed; 32 cases have not been decided;
and 4 cases have been appealed.  Final assessments
have ranged from less than $1,000 to more than
$70,000.  Our review disclosed that the most common
types of violations approved for civil penalty
assessments involved surface and/or subsurface
safety valves that were bypassed or were
inoperative, emergency shutdown systems that were
malfunctioning, or other safety procedures that were
not followed by the operator.

SCOPE OF SURVEY

Our review was conducted in accordance with the
"Government Auditing Standards," issued by the
Comptroller General of the United States.
Accordingly, we included such tests of records and
other auditing procedures that we considered
necessary under the circumstances.  Audit survey
work was performed at the Service's Offshore
Minerals Management Headquarters Office; the Gulf of
Mexico Regional Office in New Orleans, Louisiana;
and district offices in Texas, Louisiana, and
California.  (the offices visited or contacted are
in Appendix 3).

To accomplish our objective, we reviewed data
related to Incidents of Noncompliance issued  by
inspectors as of the time of our review during
August and September 1997.  We prepared detailed
questionnaires, which were used in our interviews
and discussions with 27 of the 50 field inspectors
and their supervisors at the three district offices
and the one subdistrict office visited.  The data
obtained during these interviews were analyzed and
summarized to support conclusions in the Results of
Survey section of this report.  In addition, of the
90 closed civil penalty case files as of September
30, 1997, we judgmentally selected and reviewed 26
case files in which reviewing officers' final
decisions were made as follows:  1 in 1993, 1 in
1995, 12 in 1996, and 12 in 1997.  These case files
represented 24 different operators that had final
assessments totaling more than $500,000.

As part of our review, we evaluated the system of
internal controls related to civil penalty case
referrals and assessments.  The internal control
weaknesses we found are discussed in the Results of
Survey section of this report.  Our recommendations,
if implemented, should improve the internal controls
in this area.

We also reviewed the Departmental Report on
Accountability for fiscal year 1996, which includes
information required by the Federal Managers'
Financial Integrity Act of 1982, and the Service's
annual assurance statement for fiscal year 1996 to
determine whether any reported weaknesses were
related to the objective and scope of our survey.
Neither the Accountability Report nor the Service's
assurance statement addressed the Service's civil
penalties program.

PRIOR AUDIT COVERAGE

Neither the Office of Inspector General nor the
General Accounting Office has issued any audit
reports during the past 5 years on the Service's
civil penalties program.

RESULTS OF SURVEY

Since the enactment of the Oil Pollution Act of
1990, the Minerals Management Service's Gulf of
Mexico Region has developed and implemented a civil
penalties program.  However, we identified areas
where improvements in the program are needed.
Specifically, reviewing officers were not adequately
documenting their penalty assessment decisions, and
case files were not reviewed by a supervisor to
ensure that the substantial evidence requirements
were met.  The Service's Civil/Criminal Penalties
Program Guidebook requires reviewing officers'
conclusions for assessing civil penalties to be
based upon "evidence in the record."  Undocumented
and unsupported assessment decisions can leave civil
penalty decisions vulnerable to reversal under
appeal and lead to inconsistent penalty assessments,
which could also limit the effectiveness of the
civil penalties program.  In addition, our survey
disclosed that  inspectors did not always make
referrals for civil penalties when appropriate or
make referrals in a timely manner.  The Minerals
Management Service's Civil/Criminal Penalties
Program Guidebook provides guidance for inspectors
and their supervisors to use when they determine
whether to refer a violation for possible civil
penalty and when to make the referral.  However,
inspection supervisors did not ensure that
inspectors were thoroughly knowledgeable of the
civil penalties program and made referrals when
appropriate.  When inspectors do not refer serious
Incidents of Noncompliance for civil penalty or do
not refer them in a timely manner, the program is
applied inconsistently and the program's
effectiveness in promoting safe and environmentally
sound operations in the Gulf of Mexico is
diminished.  While the Service identified similar
program weaknesses and initiated some corrective
actions as a result of its internal reviews, we
believe that additional improvements are needed.

Civil Penalty Assessments

The Service's reviewing officers did not adequately
document case files for civil penalty assessments.
We reviewed 26 of the 90 closed civil penalty case
files that resulted in final assessments and found
that support for the determinations of fines was not
contained in 24 of the case files reviewed.  These
24 case files contained one or more supporting
documentation deficiencies, including case files
that did not support the determination of the
category of the violation (21 cases), the
enforcement code (2 cases), or a difference between
the assessed number of days and the number of days
in the violation period (3 cases).  In addition,
mitigating factors, which the reviewing officers
considered when determining the categories of
violations in the Generalized Matrix (see Appendix
2) and when establishing proposed and final
assessment amounts, were not documented in the case
files.  Finally, reviewing officers made assessments
without properly considering the compliance history
of the operators.

The Service's Civil/Criminal Penalties Guidebook
states:  "The Reviewing Officer's decision shall be
in writing and shall include his/her conclusions and
the basis for these conclusions.  Any decision shall
be based upon evidence in the record."  (Emphasis
added.)  The Service's OCS Civil/Criminal Penalties
Program policy document states that reviewing
officers should consider an operator's compliance
history when determining a violation category in the
Generalized Matrix and when determining assessment
amounts.  District personnel are also required by
the policy document to provide an operator's
compliance history when making referrals for civil
penalties.

Based on our review of 26 case files, we found that
only 5 files contained evidence that the reviewing
officer had considered an operator's compliance
history when determining an assessment. Service
personnel said that reviewing officers did not
consider compliance histories because the districts
were not always including this information with the
referral or the information was incomplete.  Of the
26 case files we reviewed, 6 did not contain any of
the required compliance history, 12 had a partial
history, and 8 had a complete history.  We found
that compliance histories were incomplete because
inspectors preparing referrals relied on incomplete
Incident of Noncompliance files rather than on the
Service's more accurate Technical Information
Management System, which contains operator
compliance histories for all districts in the Gulf
of Mexico.

We believe that the reviewing officers need to
ensure that case files contain written support for
(1) mitigating factors considered, (2) changes in
data, and (3) selection of penalty assessment
category.  For example:

- In February 1995, the New Orleans
District Office referred seven
violations for bypassing safety
equipment for civil penalties.  The
civil penalty case worksheet indicated
that the operator had a poor compliance
record, with at least 46 previous
violations at this facility in the prior
3 years, including 2 for bypassing
safety devices and 5 for polluting
offshore waters.  The District Office's
referral stated that the operator had a
"total disregard for the regulations"
and noted that some of the violations
"created a major threat to the
environment."  The reviewing officer
classified six violations at the
Category I level and one violation at
the Category II level but assessed all
fines at the Category I level (the
categories are defined in Appendix 2).
Category I is designated for violations
that present the least severe potential
threat to human safety and the
environment and for operators who have
an excellent or above average record of
compliance.  Neither the reviewing
officer's final decision nor the case
file identified any mitigating factors
concerning the violations.  Concerning
the decision, the reviewing officer told
us that the violations could have been
classified more severely but were not
because this was the operator's first
civil penalty case.  The reviewing
officer assessed this operator a $50,000
penalty (the maximum amount assessable
for this category was $75,000).  If the
reviewing officer had classified all
seven of the violations at the Category
II level and assessed Category II level
fines based on the operator's poor
compliance history, the maximum fine
assessable would have totaled $110,000.

- In August 1996, the Houma District
Office referred a violation for civil
penalty for an inoperative gas detector
in the mud pit room[2] on a drilling
rig.  The District Office's referral
identified this as a serious violation
that could have resulted in a fire or an
explosion with loss of well control
and/or human life.  The violation period
totaled 8 days, which began the day
drilling commenced, July 30, 1996, and
ended when the violation was identified
and the facility was shut in, August 6,
1996.  The reviewing officer classified
the violation at the Category I level
with an assessed period of 7 days.  The
Service's criteria define a Category I
violation in part as involving a threat
of injury to humans, whereas a Category
II violation involves a threat of
"significant" injury to humans.  The
reviewing officer's final decision and
case file did not identify any
mitigating factors concerning this
violation.  The reviewing officer said,
regarding this violation, that he
recalled several undocumented mitigating
factors, including his belief that the
probability of an accident was very low
because other gas detectors, which could
have possibly detected a gas leak, were
nearby and that a Category II level fine
would therefore have been "excessive."
Concerning the violation period of 8
days versus the assessed period of 7
days, the reviewing officer stated that
the drilling may have actually commenced
on July 31 rather than July 30, but he
did not provide documentation to support
this statement.  The reviewing officer
assessed this operator the minimum
penalty assessable of $35,000 (the
maximum amount assessable for this
category was $70,000).  If the reviewing
officer had classified this violation at
the Category II level based on a threat
of significant injury and assessed an
8-day period, the maximum fine
assessable would have totaled $120,000.

- In August 1996, the Houma District
Office referred a violation for
bypassing a surface safety valve over a
3-day period.  The District's referral
did not identify the operator's previous
violations at this facility but noted
that the operator had an "average"
record of compliance.  However, based on
our review of the Service's files, we
found that the operator had received  81
previous violations at this facility
over the prior 10 years, which we
concluded was a poor compliance history.
The District Office's referral
identified this as a "very serious"
violation and said that "the threat of
immediate danger to life and the
environment existed since the surface
safety valve could not close."  The
reviewing officer classified the
violation at the Category I level.
Neither the reviewing officer's final
decision nor the case file identified
any mitigating factors concerning the
violation.  The reviewing officer said
that this violation was classified in
the least severe category because the
facility was unmanned and that the
probability of an accident and threat
to human safety were therefore low.
However, the reviewing officer also
acknowledged that if an accident had
occurred, the threat to the environment
would be higher at an unmanned facility.
The reviewing officer assessed this
operator a $15,000 penalty (the maximum
amount assessable for this category was
$30,000).  If the reviewing officer had
classified the violation at the Category
II level based on the operator's poor
compliance history and the threat of
significant injury to personnel, the
maximum fine assessable would have
totaled $45,000.

We found that civil penalty assessments were not
adequately documented and supported because
reviewing officers were not specifically required to
document the basis for determining a violations
category in the Generalized Matrix and were not
required to document all mitigating factors
considered when establishing civil penalty
assessments.  We also found that assessments were
made without consideration of an operator's
compliance history because referrals were made
without a compliance history or with a compliance
history that was incomplete.  In addition, the
Service did not require a peer or supervisory review
of civil penalty assessment case files to ensure
that all decisions were well documented and
supported.

As a result of the documentation deficiencies cited,
there was insufficient information for us to
determine whether civil penalties were assessed in a
fair and consistent manner.  Specifically, we could
not determine whether all mitigating factors were
properly considered and whether fines were assessed
at the appropriate level as indicated by the
Generalized  Matrix.  Without complete documentation
supporting the reviewing officers' decisions, there
was no assurance that penalty assessment decisions
were made in accordance with the Code of Federal
Regulations (30 CFR 250.200-.206) or the
requirements in the Service's OCS Civil/Criminal
Penalties Program policy document.

Civil Penalty Referrals

Although not all Incidents of Noncompliance warrant
referral for civil penalty,  the number of referrals
made by Service inspectors for serious violations
has, in some cases, been insignificant when compared
with the number of violations.  For example, in the
8 years (1990-1997) since the civil penalties
program was implemented, 358 Incidents of
Noncompliance were issued for pollution but only 10
were referred for civil penalties; 4,274 Incidents
of Noncompliance were issued for unsafe and
unworkmanlike operations involving the threat of
injury to humans or pollution but only 39 resulted
in civil penalties; and 304 Incidents of
Noncompliance were issued relating to surface or
subsurface safety devices and emergency shut-down
systems that were bypassed or blocked out of service
without a valid reason but only 107 were referred
for civil penalties.  (The number of inspections
reported by district, Incidents of Noncompliance
issued, and civil penalty cases referred to the
Region are in Appendix 1.)

In the original scope of our audit, we intended to
perform a detailed review of Incidents of
Noncompliance to determine which violations merited
civil penalties that were not referred.  However,
based on our  initial review, we found that
Incidents of Noncompliance, including those issued
for violation types which were most often referred,
were not sufficiently documented to make this
determination.  As stated previously, our review
disclosed that the most common types of violations
approved for civil penalty assessment involved
surface and/or subsurface safety valves that were
bypassed or were inoperative, emergency shutdown
systems that were malfunctioning, or other safety
procedures that were not followed by the operator.
We believe that the Service should require
inspectors to document violations sufficiently,
especially of the type that have been most often
referred, to independently determine whether a
referral is warranted and should provide inspectors
necessary training to perform this duty.

We found, based on interviews with 27 inspectors and
supervisory inspectors at the Houma, Lake Jackson,
and New Orleans District Offices and the Corpus
Christi Subdistrict Office, the following
information regarding civil penalty referrals:  11
inspectors disagreed with program policy, stating
that they believed that violations which were
referred by other inspectors did not warrant civil
penalty referral, that program penalties were too
punitive, and that enforcement tools such as
shut-ins were more preferable deterrents than civil
penalties; 15 inspectors cited insufficient training
in the areas of making civil penalty referrals and
properly documenting Incidents of Noncompliance; 8
inspectors cited insufficient policies and
procedures for identifying and referring violations
that warranted civil penalty referrals; and 5
inspectors said that they had to prove that the
violation was knowing and willful in order to refer
a violation for civil penalty.  Three of the 27
inspectors stated that they would not be willing to
make a civil penalty referral, and an additional 7
inspectors, each of whom had at least 15 years of
experience, had never initiated a civil penalty
referral.

The Houma District Office had the most civil penalty
referrals and was the only office visited in which
the District Office engineers prepared Compliance
Review Forms.  Seven of the District Office's nine
inspectors had issued Incidents of Noncompliance
that were referred for civil penalty assessments.
These inspectors said that the Compliance Review
Forms for these referrals were prepared by one of
the District Office engineers so that preparation of
the civil penalty assessment package did not detract
from their inspection responsibilities or require
much of their time.  The inspector usually discussed
the violation with the engineer and obtained any
additional information relative to the violation
that  the engineer requested.  In addition, we found
the Houma District Office generally made referrals
within 3 months of the issuance of the Incident of
Noncompliance.

The Lake Jackson District, including its two
subdistricts, made 20 referrals for civil penalty
assessments (2 at the District Office, 4 at the
Corpus Christi Subdistrict Office, and 14 at the
Lake Charles Subdistrict Office).  At the Lake
Jackson District Office, we found that only one of
six inspectors interviewed supported the civil
penalties program.  The other inspectors, none of
whom made any referrals, indicated that the program
either was an attempt by the Service to generate
additional revenues or was too punitive and that
shutting in facilities could achieve corrective
actions and be more acceptable to industry.  The
supervisory inspector and the District Office
supervisor stated that they did not review all
Incidents of Noncompliance for initiation of civil
penalty proceedings.  The District Office had
submitted only two civil penalty referrals in the
past 8 years, and both of these were prepared by the
same inspector.  We found three operators that had
significant Incidents of Noncompliance issued by the
District Office which were of the type that often
resulted in civil penalty referrals in other
district offices.  Because all three of the
operators had poor records of compliance, we believe
that these violations should have been submitted to
the Regional Office for consideration of civil
penalties. Both the District Office supervisor and
the supervisory inspector said that these violations
should have been considered for civil penalty
referral.  The two inspectors interviewed at the
Corpus Christi Subdistrict Office supported the
civil penalties program, and both inspectors had
made civil penalty referrals.  We did not interview
inspectors at the Lake Charles Subdistrict Office.

The New Orleans District Office was not processing
civil penalty referrals in a timely manner.  The
Service's Civil/Criminal Penalties Program Guidebook
requires that a Compliance Review Form be initiated
within 60 days of the date of the violation or
issuance of the Incident of Noncompliance.  The Gulf
of Mexico Regional Director, in a June 6, 1997,
memorandum, established a formal goal of completing
the Compliance Review Form within 30 days of either
issuing or receiving a reply to an Incident of
Noncompliance.  At the time of our visit to the New
Orleans District Office in September 1997, the
District's civil penalty log identified 12 referrals
initiated during fiscal year 1997, none of which had
been completed and sent to the Regional Supervisor
for review and signature.  Six of these referrals
had been initiated more than 6 months prior to our
visit, and the remaining six had been initiated more
than 3 months prior to our visit.  The District
Office supervisor attributed the backlog to two
inspector positions that had been vacant but that
had been filled only recently and to inspectors who
did not have the training necessary to adequately
prepare and document civil penalty referrals.

As a result of not making all appropriate civil
penalty referrals and not making referrals in a
timely manner, the program was applied
inconsistently and the program's effectiveness in
promoting safe and environmentally sound operations
in the Gulf of Mexico was diminished.

The Service was aware of the need to improve the
civil penalties program.  As of September 1998, the
Service conducted three annual program reviews that
identified needed improvements, including issuing
penalties consistently, providing additional
training, having reviewing officers' case files that
were "complete," and modifying the Technical
Information System to include information on civil
penalty cases.  To improve operations, the Service
prepared a draft revision of the Civil/Criminal
Penalties Guidebook, was modifying the Technical
Information System to include civil penalty case
information, and modified its Generalized Matrix to
clarify the categories which reviewing officers
should use when assessing civil penalties.  In
addition, our review of the criminal referrals
process, which will  be discussed in a separate
report, disclosed that the number of civil penalties
referrals increased by 78 during fiscal year 1998,
with most (58 cases, or 74 percent) of the increased
referrals occurring at the New Orleans District
Office.

Recommendations

We recommend the Director, Minerals Management
Service:

1.  Ensure that reviewing officers document all
conclusions and the bases for the conclusions in
their case files, including the basis for
determining the category of the violation in the
Generalized Matrix, the reasons for any
differences between the violation periods and the
assessment periods, and all determinations
regarding the operator's compliance history.
Also, any mitigating factors that were considered
in arriving at the assessed amounts should be
identified and documented in detail.

2.  Institute supervisory or peer reviews to
ensure that civil penalty assessments are
adequately documented.

3.  Ensure that inspectors receive sufficient
training in determining when violations should be
referred for civil penalties and in sufficiently
documenting the violation on the Incidents of
Noncompliance.

4.  Direct Service managers to provide sufficient
supervision and support to inspectors to ensure
that appropriate violations are referred for
civil penalties.  In that regard, the Service
should consider the Houma District Office's
procedure of having a District engineer prepare
the Compliance Review Form.

Minerals Management Service Response and Office of
Inspector General Reply

In the February 22, 1999, response (Appendix 4) to
the draft report from the Acting Director, Minerals
Management Service,  the Service concurred with all
four recommendations.  Subsequent to the Service's
response, Bureau officials provided us with
additional information.  Based on the response and
additional information provided, we consider
Recommendations 1, 2, and 4 resolved but not
implemented and Recommendation 3 resolved and
implemented.  Accordingly, the three unimplemented
recommendations will be referred to the Assistant
Secretary for Policy, Management and Budget for
tracking of implementation (see Appendix 5).

Recommendation 1.  Concurrence.

In its response, the Service stated that based on
its prior internal reviews, it "revised the
guidelines for assessing civil penalties, stressing
the importance of documenting completely the
rationale for determining the need for, and amount
of, a civil penalty."  In addition, the Service
stated that it held training sessions and  meetings
with all reviewing officers, most recently in
January 1999, "to discuss the need for detailed
documentation" and was "in the process of developing
a computerized information system to provide the
Reviewing Officer with additional information to
support civil penalty assessments."  Subsequent to
the response, Service officials  told us  that  the
computerized system  would be fully implemented by
May 1, 1999.

Recommendation 2.  Concurrence.

In its response, the Service stated that its "new
guidebook for processing civil penalties requires
MMS [Minerals Management Service] Reviewing Officers
to discuss civil penalties with other Reviewing
Officers."  The response further stated, "The new
computerized information system will provide MMS
civil penalty coordinators, supervisors, and
managers online access to each of the civil penalty
case files for review and comment."  In addition,
Service officials subsequently told us that the new
"Guidebook" states that the rationale for
determining the penalty amount "must be included in
the case file" and that the "Guidebook" would be
finalized by May 1, 1999.

Recommendation 3.  Concurrence.

In its response, the Service stated that "a team
consisting of representatives from the Solicitor's
Office, MMS [Minerals Management Service]
Headquarters, and both the Gulf of Mexico and
Pacific Regions, conducted meetings/training
sessions in every MMS District Office " during 1997
and 1998  "to provide information on when and how to
forward violations for civil penalty review."  The
Service further stated that it "will conduct
refresher training sessions on an annual basis."  In
addition, the Service stated that it had "formed a
team," as a result of an internal review, to review
the problem of documenting and issuing Incidences of
Noncompliance and that a final team report would be
issued.  Subsequent to the response, Service
officials told us that in lieu of a report, the
Service incorporated the team's recommendations into
a new National Potential Incidences of Noncompliance
List and Guidelines, which was published and was
posted on the Service's Internet Home Page.

Recommendation 4.  Concurrence.

In its response, the Service stated that at its
January 1999 annual review meeting, it "agreed that
the Regional Supervisor and the District Supervisors
must meet to decide which violations fall under the
MMS [Minerals Management Service] policy outlined in
both the MMS Manual Chapter and Guidebook" and that
the supervisors will meet with the inspectors "`to
ensure that appropriate violations are referred for
civil penalties.'"  In addition, the Service stated
that it "will use the new computerized information
system to monitor violations for civil penalty
review."  Subsequent to the response, Service
officials told us that the first meeting was held in
January 1999 and the official established a
quarterly meeting schedule to discuss violations
which should be referred for civil penalties.

Additional Comments on Audit Report

The Service also provided comments on the audit
report, which we considered and incorporated into
our final report as appropriate. The main issues
involved conduct of the audit survey, the survey's
time period, and lack of recognition of the
Service's internal reviews and subsequent
improvements made.   The specific comments and our
replies are as follows:

Minerals Management Service Comment.  The
Service stated that it was "disappointed with .
. . how the review was conducted."  The Service
further stated that the review was conducted by
two audit teams, "a Headquarters Team and a
Regional Team," but that "no information
gathered by the Headquarters Team was included
in the report."  Additionally, the Service
stated:  "In fact, the Headquarters OIG [Office
of Inspector General] Team stated that since
MMS [Minerals Management Service] was in the
process of making significant changes to
improve the civil penalties program, they would
recommend that the audit focus on the criminal
referral issue.  The Headquarters OIG Team
assured MMS that, at a minimum, the report
would include a summary of the ongoing work MMS
was conducting  to improve the program."

Office of Inspector General Reply.   Our audit
survey was accomplished under the direction of
the Director of Performance Audits;  performed
by a Senior Auditor, an Auditor-in-Charge, and
one staff member from the Lakewood, Colorado,
office; and assisted  by two staff members from
the Arlington, Virginia, office (not a
Headquarters team) during the initial stages of
the survey.  The survey work performed by all
staff was reviewed by the Senior Auditor.
Based on the preliminary survey results,
decisions were made regarding areas to pursue
during the remaining portion of the audit
survey.  We decided to defer the criminal
referral portion of the review until the civil
penalty portion was completed.  We are
completing our review of the criminal referral
process, and, as stated in the Introduction of
this report, the results of that review will be
addressed in a separate report.

Minerals Management Service Comment.   The
Service stated that it "would like stronger
recognition of our efforts to identify and
correct weaknesses in the [civil penalties]
program."  The Service further stated that "the
report does not clearly state, up front, the
period of time [case files through September
30, 1997] the review/investigation covered."
In addition, the Service stated that the survey
report "does not adequately recognize any
improvements  made to the program during 1997 -
1998" as a result of a 1995 and subsequent
reviews.

Office of Inspector General Reply.   The Scope
of Survey section of the report describes the
period of time for our records review, and we
have modified the section to clarify the scope
of our review.  Our selection of the 26
reviewing officers' closed case files consisted
of those with final decisions made as follows:
1 for 1993, 1 for 1995, 12 for 1996, and 12 for
1997.  Thus, 24 of the 26 cases were closed
after the Service's 1995 internal review.  Our
review did not find significant improvements in
documenting reviewing officers' decisions,
since we found one or more supporting
documentation deficiencies in 22 of the 24
post-1995 cases.  Regarding civil penalty
referrals made by the field offices, we did not
find a pattern of increases in the number of
cases referred annually as of September 30,
1997.  Specifically, there were 13 referrals in
1993, 41 in 1994, 13 in 1995, 48 in 1996, and
28 in 1997.  In addition, as part of our review
of the criminal referral process, we noted that
the number of civil penalty referrals by the
Gulf of Mexico Regional Office's field offices
increased by 78 referrals during fiscal year
1998.  However, most (58 cases, or 74 percent)
of the increased referrals occurred at the New
Orleans District Office.  Therefore, we believe
that additional improvements to both
documenting reviewing officers' case files and
referring violations for civil penalties are
needed.

Since the report's recommendations are considered
resolved, no further response to the Office of
Inspector General is required (see Appendix 4).

The legislation, as amended, creating the Office of
Inspector General requires semiannual reporting to
the Congress on all audit reports issued, actions
taken to implement audit recommendations, and
identification of each significant recommendation on
which corrective action has not been taken

We appreciate the assistance of Service personnel in
the conduct of our audit.


**FOOTNOTES**

[1]:To temporarily close down a producing well,
platform, or other production equipment for repair
or maintenance.

[2]:A mud pit room is where the drilling fluid is
stored for circulation  into the drilling bit.  The
drilling fluid may contain poisonous or explosive
gases when it comes up from the bottom of the
drilling hole, so gas detectors are required in the
mudpit room.



                                                       APPENDIX 1


               GULF OF MEXICO REGIONAL OFFICE
                    INSPECTIONS CONDUCTED,
              INCIDENTS OF NONCOMPLIANCE ISSUED,
               AND CIVIL PENALTY CASES REFERRED
                 FOR FISCAL YEARS 1990 TO 1997

             Number                Incidents of         Civil
Inspection     of     Inspections  Noncompliance    Penalty Cases
  Office  Inspectors[1] Conducted     Issued          Referred

Houma District        11    21,777     11,464            58

Lafayette District    13    18,409     11,437            43

Lake Jackson District  6     5,036      1,596             2

Corpus Christi Subdst  3     4,727        539             4

Lake Charles Subdst    5     6,443      3,085            14

New Orleans District  12    17,086      4,267            22
                      --    ------      -----            --
Total                 50    73,478     32,388           143
                      ==    ======     ======           ===

**FOOTNOTES**

[1]:Number of inspectors as of September 30, 1997.



                                                       APPENDIX 2


            MINERALS MANAGEMENT SERVICE'S
          GENERALIZED MATRIX FOR DETERMINING
              CIVIL PENALTY ASSESSMENTS
                    JANUARY 1996[1]
------------------------------------------------------
-----------
|Enforcement Code    |Category I     |Category II  |Category III|
------------------------------------------------------
-----------
|W - Warning         |$1,000 - 10,000|$3,000 -     |$      5,000
-   |
           |                    |               |15,000
           |20,000      |
           ------------------------------------------------------
           -----------
|C - Component       |$3,000 - 10,000|$5,000 -
           |$10,000 -   |
           |Shut-in             |               |15,000
           |20,000      |
           ------------------------------------------------------
           -----------
|S - Facility Shut-in|$5,000 - 10,000|$10,000 - |$15,000 -   |
           |                    |               |15,000
           |20,000      |
           ------------------------------------------------------
           -----------
             ----------------------------------------------------
             --------------------------
|Category I        |Category II             |Category III
|
|Threat of injury to humans.|Threat of significant|Serious injury
                                             to humans or|
       |Threat of harm or    |injury to humans or actual
       |loss of human life.  Injury|
       |damage to the marine |injury involving
       |caused substantial        |
       |or coastal           |incapacitation of less
       than|impairment of a bodily    |
       |environment,         |72 hours. Injury threat
       |function or incapacitation|
       |including mammals,   |involved the potential for
       |over 72 hours (that is,   |
       |fish, and other      |substantial impairment of
       a|lost time accident).  Harm|
       |aquatic life.  Threat|bodily function or unit
       |or damage to the marine or|
       |of pollution         |(that is, lost time
       |coastal environment,      |
       |involving potential  |accident).  Threat to
       |including mammals, fish,  |
       |liquid hydrocarbon   |aquatic life involving
       |and other aquatic life.   |
       |spillage of under 200|numerous individuals or
       |Harm to aquatic life      |
       |barrels over a period|endangered/threatened
       |involved numerous         |
       |of 30 days.  Threat, |species.  Actual pollution
       |individuals or involved   |
       |no damage to any     |under 200 barrels or
       threat|endangered/threatened     |
       |mineral deposit.     |of pollution involving a
       |species, or pollution     |
       |First time offense or|potential liquid
       |caused liquid hydrocarbon |
       |second offense with  |hydrocarbon spillage of
       |spillage of over 200      |
       |lengthy interval     |over 200 barrels over a
       |barrels during a period of|
       |since first offense. |period of 30 days.  Minor
       |30 days. Damage to any    |
       |Excellent/above      |damage to any mineral
       |mineral deposit.          |
       |average record of    |deposit. Second/third
       |Substantial decrease in   |
       |compliance.          |offense for same
       violation.|ultimate recovery.        |
       |                     |Average record of
       |Multiple offender; multiple|
       |                     |compliance.
       |violations.  Poor record of|
       |                     |
       |compliance.               |
       ----------------------------------------------------
       --------------------------

If it is determined that the case warrants the
assessment of a civil penalty, the reviewing officer
considers a variety of factors in establishing the
proposed assessment, including the following:

(1) A determination as to whether the case involved a
threat or actual harm or damage.
(2) Compliance history of the company.
(3) Precedents set by similar cases.
(4) Financial benefit derived by the company from the
violation.
(5) Severity of the violations.
(6) Duration and number of violations.

Once the proposed penalty has been assessed, the
reviewing officer may consider the following mitigating
factors when determining the final assessment:

(1) Company's ability to pay.
(2) Company's willingness to cooperate during the
incident/accident investigation.

**FOOTNOTES**

*Matrix and narrative based on information contained
in OCS (Outer Continental Shelf) Civil/Criminal
Penalties Program policy document, dated January 1996.



                                                       APPENDIX 3


                  MINERALS MANAGEMENT SERVICE
                  OFFICES VISITED OR CONTACTED

        OFFICE                                   LOCATION

National Offices
  Offshore Headquarters Office                Herndon, Virginia

California
  Camarillo District Office*              Camarillo, California

Louisiana
  Gulf of Mexico Regional Office         New Orleans, Louisiana
  Houma District Office                        Bourg, Louisiana
  Lafayette District Office*               Lafayette, Louisiana
  New Orleans District Office            New Orleans, Louisiana

Texas
  Lake Jackson District Office              Lake Jackson, Texas
  Corpus Christi Subdistrict Office       Corpus Christi, Texas


*Contacted only.



                                                       APPENDIX 5


             STATUS OF AUDIT REPORT RECOMMENDATIONS
Finding/Recommendation
   Reference             Status             Action Required

  1, 2, and 4         Resolved; not       No further response to
                      Implemented         the Office of Inspector
                                          General is required.
                                          The recommendations
                                          will be referred to the
                                          Assistant Secretary for
                                          Policy, Management and
                                          Budget for tracking of
                                          information.

     3                Implemented         No further action is
                                          required.




ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

TO THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street,N.W.
Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996



Outside the Continental United States


Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division- Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

Calling:
(703) 235-9221


North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. F'lores Street
Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279