Tengasco, Inc. v. United States Department of the Interior et al

Filing 38

ORDER AND REASONS Granting defendants' 28 Motion for Summary Judgment Denying plaintiff's 25 Motion for Summary Judgment;. Signed by Judge Ivan L.R. Lemelle on 7/14/2015. (ijg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TENGASCO, INC.

CIVIL ACTION

VERSUS

NO. 14-2184

SARAH JEWELL, Secretary of the
United States Department of the
Interior, ET AL.

SECTION "B"(2)

ORDER AND REASONS
Before

the

Court

are

cross-motions

for

summary

judgment

filed by Plaintiff, Tengasco, Inc. and Defendants, the United
States Department of the Interior, and Bureau of Safety and
Environmental Enforcement.1 The parties have filed responses and
replies.2 The cross-motions, set for submission on August 5,
2015,

are

argument.

before
After

the

Court

careful

on

the

consideration

pleadings,
of

the

without

oral

cross-motions,

responses, replies, competent summary judgment evidence, record,
and applicable law, IT IS ORDERED that Defendants' Motion for
Summary

Judgment

is

GRANTED,

Plaintiff's

Motion

for

Summary

Judgment is DENIED, and Plaintiff's suit is DISMISSED.
I.

FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, Tengasco, Inc. (“Tengasco”) challenges a civil

penalty

1
2

assessment

levied

by

the

Bureau

of

Safety

and

Rec. Docs. No. 25, 28.
Rec. Docs. No. 30, 33, 34, 35, 37.

1

Environmental Enforcement (“BSEE”), and affirmed by the Interior
Board of Land Appeals of the U.S. Department of the Interior
(“IBLA” or “Department”).3 Tengasco’s claims challenge a federal
agency action and are based upon the Outer Continental Shelf
Lands Act (OCSLA), 43 U.S.C. § 1331, et seq., the Administrative
Procedure Act (APA), 5 U.S.C. § 551, et seq., and the U.S.
Constitution.4
Tengasco is the lessee and facility operator of a lease on
the outer continental shelf in the Gulf of Mexico, namely, the
High Island Block 176 Platform B.5 On February 23, 2011, BSEE
conducted

an

onsite

inspection

of

the

platform

facility

and

determined that certain prior testing records were not available
at the time for review on the platform.6 These included: (1)
testing records from June 9, 2010 to February 23, 2011 for the
surface controlled subsurface safety valves associated with five
wells on the platform; and, (2) testing records from September
1, 2010 to January 25, 2011 for other production safety devices
on the platform.7
During the time period at issue, Tengasco had contracted
with Rhino Offshore, Ltd., to conduct and document the required

3

Rec. Doc. No. 1.
Rec. Doc. No. 1 at 1.
5
Rec. Doc. No. 25-2 at 1; Rec. Doc. No. 28-4 at 6; A.R. 003.
6
Rec. Doc. No. 25-2 at 1.
7
Rec. Doc. No. 25-2 at 2.
4

2

testing.8

Tengasco

contends

that

undisputed

evidence

in

the

administrative record shows that the required testing was in
fact conducted.9 However, by letter dated October 26, 2011, BSEE
informed Tengasco of its intention to impose 22 separate civil
penalties

totaling

$476,000

resulting

from

the

onsite

inspection.10 BSEE divided the 22 proposed civil penalties into 8
different

categories,

each

of

which

was

associated

with

an

Incident of Non-Compliance (“INC”) that the BSEE field inspector
had issued.
Tengasco

responded

by

letter

dated

November

22,

2011,

requesting a meeting to discuss the proposed civil penalties and
asking for additional time to respond due to difficulties in
obtaining

records

from

Rhino

Offshore.11

Tengasco

filed

a

response and made a presentation to BSEE staff.12 Tengasco also
submitted an affidavit of Randy Walker, a former Rhino employee
who worked as an operator-foreman on the platform from June 1,
2010 through December 21, 2010.13 In his affidavit, Mr. Walker
stated that the required safety tests were in fact conducted,
that he was personally present on the platform during the tests,
and

that

he

completed

and

submitted

the

necessary

forms

to

8

Rec. Doc. No. 25-2 at 2.
Rec. Doc. No. 25-3 at 8.
10
Rec. Doc. No. 25-3 at 9.
11
Rec. Doc. No. 25-3 at 9; A.R. 289-334.
12
Rec. Doc. No. 25-3 at 9; A.R. 289-334.
13
Rec. Doc. No. 25-3 at 9; A.R. 354-358: A.R. 302-05.
9

3

document the completion of the tests.14 Attached to the affidavit
were

recompleted

Tengasco

also

testing

records

submitted

for

flight

the

logs

periods

from

at

two

issue.15

helicopter

companies purportedly showing that Rhino inspectors, including
Mr. Walker, made regular trips to the platform during the period
June 2010 to December 2010. On February 1, 2012, BSEE issued a
subpoena to Rhino for all testing records associated with the
safety

devices

in

question

from

June

2010

through

February

2011.16 In response, Rhino submitted several documents, including
a Safety Compliance Inspection Report for the Platform dated
September 13, 2010.17
On July 20, 2012, the BSEE Reviewing Officer issued its
decision, reducing the number of penalties, for a civil penalty
assessment total of $386,000.18 Tengasco appealed BSEE’s decision
to the IBLA, which issued a final decision on June 23, 2014,
affirming BSEE’s order in full.19 Following the IBLA’s affirmance
of the BSEE decision, Tengasco filed this action for judicial
review

against

defendants,

Sarah

Jewell,

in

her

official

14

Rec. Doc. No. 25-3 at 10.
Rec. Doc. No. 25-3 at 9-10.
16
Rec. Doc. No. 1 at 6.
17
Rec. Doc. No. 1 at 6.
18
Rec. Doc. No. 25-3 at 10. Specifically, “BSEE (i) reduced the testing periods allegedly missed in INC No. P-303
from four to three, thereby reducing the INC No. P-303 penalty from $80,000 to $60,000; (ii) reduced the testing
periods allegedly missed in INC No. P-304 from four to three, thereby reducing the INC No. P-304 penalty from
$40,000 to $30,000; (iii) reduced the testing periods allegedly missed in INC No. P-307 from four to three, thereby
reducing the INC No. P-307 penalty from $100,000 to $75,000; and (iv) reduced the testing periods allegedly
missed in INC No. P-308 from four to three, thereby reducing the INC No. P-308 penalty from $140,000 to
$105,000.”
19
Rec. Doc. No. 25-2 at 4; Tengasco, Inc., 184 IBLA 367 (June 23, 2014).
15

4

capacity as Secretary of the U.S. Department of Interior, and
Brian

Salerno,

in

his

official

capacity

as

Director

of

the

BSEE.20
The parties agreed that this case should be resolved by
dispositive

motions,

and

jointly

proposed

a

“Joint

Case

Management Statement,” providing a briefing schedule whereby the
administrative record would be filed, followed by cross-motions
for

summary

judgment,

and

reply

briefs.21

The

Joint

Case

Management Statement was adopted by the Court.22 Briefing is now
complete and the cross-motions for summary judgment are ripe for
decision.23
II.

LAW & ANALYSIS
a. The Outer Continental Shelf Lands Act
The

Outer

Continental

Shelf

Lands

Act

(OCSLA)

governs

federal offshore oil and gas leasing and declares as national
policy that “the outer Continental Shelf is a vital national
resource reserve held by the Federal Government for the public,

20

Rec. Doc. No. 1 at 3.
Rec. Doc. No. 19.
22
Rec. Doc. No. 21.
23
Rec. Doc. No. 19 at 2:
a. Federal Defendants file administrative record February 6, 2015
b. Plaintiff files opening motion for summary judgment March 20, 2015
c. Federal Defendants file a single cross-motion for summary judgment/opposition brief May 1, 2015
d. Plaintiff files reply brief in support of its motion and in opposition to Federal Defendants’ motion June
5, 2015.
e. Federal Defendants file a single reply brief in support of their cross-motion for summary judgment
July 10, 2015.
The Court notes that Tengasco has filed additional pleadings in this matter. Rec. Docs. No. 33, 34.
21

5

which

should

be

made

available

for

expeditious

and

orderly

development, subject to environmental safe-guards, in a manner
which

is

consistent

with

the

maintenance

of

competition

and

other national needs.” 43 U.S.C. § 1332(3). The OCSLA further
provides that, “operations in the outer Continental Shelf should
be conducted in a safe manner by well-trained personnel using
technology, precautions, and techniques sufficient to prevent or
minimize

the

likelihood

of

blowouts,

loss

of

well

control,

fires, spillages....” 43 U.S.C. § 1332(6).
The OCSLA, 43 U.S.C. § 1350 provides:
(b) Civil penalties; hearing
(1) Except as provided in paragraph (2), if any
person fails to comply with any provision of this
subchapter, or any term of a lease, or permit
issued pursuant to this subchapter, or any
regulation or order issued under this subchapter,
after notice of such failure and expiration of
any reasonable period allowed for corrective
action, such person shall be liable for a civil
penalty of not more than $20,000 for each day of
the continuance of such failure. The Secretary
may assess, collect, and compromise any such
penalty. No penalty shall be assessed until the
person charged with a violation has been given an
opportunity for a hearing...
(2) If a failure described in paragraph (1)
constitutes or 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, a civil penalty may
be assessed without regard to the requirement of
expiration of a period allowed for corrective
action.
6

Pursuant
adopted

to

the

safety

installation,

OCSLA,

the

Department

regulations,

inspection,

and

including
testing

of

of

the

rules
safety

Interior
requiring

decisions

on

OCSLA rigs to minimize the potential for catastrophic events on
the rig. 30 C.F.R. § 250.804 (“Production safety-system testing
and

records”).

The

regulations

provide

that

safety

system

devices shall be successfully inspected and tested by the lessee
at

specified

intervals.

30

C.F.R.

§

250.804

(a)(1)-(12).

Additionally, the “lessee shall maintain records for a period of
2

years

for

each

installed...These
history

of

installation,

each

subsurface

records
device,

removal,

shall

and
show

including

inspection,

surface
the

safety

present

dates

and

testing...”.

device

status

and

details

of

30

C.F.R.

§

250.804(b).
b. The Administrative Procedure Act
The Administrative Procedure Act authorizes judicial review
of final agency action. 5 U.S.C. § 704; see id. § 702 (“A person
suffering a legal wrong because of agency action...is entitled
to

judicial

review

thereof.”).24

Per

the

APA,

5

U.S.C.

§

706(2)(a), federal courts are empowered to “hold unlawful and
set aside agency action, findings, and conclusions” if they fail

24

Agency action is final if it is the consummation of the agency’s decision making process and rights or obligations
have been determined. E.g. Center for Auto Safety v. National Highway Traffic Safety Admin., 452 798, 806 (D.C.
Cir. 2006).

7

to

conform

with

any

of

six

specified

standards.

5

U.S.C.

§

706(2); Marsh v. Oregon, 490 U.S. 360, 375, 109 S.Ct. 1851, 104
L.Ed.2d 377 (1989). Under the APA, the administrative record is
reviewed to determine whether the challenged agency action was
arbitrary or capricious, an abuse of discretion, or otherwise
not in accordance with law, contrary to constitutional right, in
excess of statutory jurisdiction, authority or limitation, or
without procedure required by law, or unsupported by substantial
evidence. 5 U.S.C. § 706(2)(A-E).
Ordinarily,

review

of

administrative

decisions

is

to

be

confined to consideration of the decision of the agency...and of
the evidence on which it was based. Marsh, 490 U.S. at 331;
Federal

Power

Commission

v.

Transcontinental

Gas

Pipe

Line

Corp., 423 U.S. 326, 96 S.Ct. 579, 46 L.Ed.2d 533 (1976). The
focal point for judicial review should be the administrative
record already in existence, not some new record made initially
in the reviewing court. Marsh, 490 U.S. at 331. If the decision
of the agency ‘is not sustainable on the administrative record
made,

then

the...decision

must

be

vacated,

and

the

matter

remanded...for further consideration.’ Federal Power Commission,
423 U.S. at 331.

8

c. Summary Judgment Standard of Review over Final Agency
Decisions
Where

the

Court

is

reviewing

the

decision

of

an

administrative agency, a motion for summary judgment stands in a
somewhat

unusual

light,

in

that

the

administrative

record

provides the complete factual predicate for the Court's review.
As

a

result,

judgment

is

the

movant's

similar

to

his

burden

in

ultimate

prevailing
burden

on

on

summary

the

merits:

preponderance of the evidence. See Butts v. Sec’y of Health and
Human

Services,

706

F.2d

107,

108

(2nd

Cir.

1983).

Summary

judgment is an appropriate procedure for resolving a challenge
to a federal agency's administrative decision when review is
based on the administrative record even though the Court does
not apply the standard of review set forth in Fed. R. Civ. P.
56. Tex. Comm. on Nat. Res. v. Van Winkle, 197 F.Supp.2d 586,
595 (N.D. Tex. 2002)(quoting Fund for Animals v. Babbitt, 903
F.Supp.96, 105 (D. D.C.1995)).
When

reviewing

administrative

agency

decisions,

the

function of the district court is to determine whether as a
matter of law, evidence in the administrative record permitted
the agency to make the decision it did, and summary judgment is
an

appropriate

mechanism

for

deciding

the

legal

question

of

whether an agency could reasonably have found the facts as it
did. Id. (quoting Sierra Club v. Dombeck, 161 F.Supp.2d 1052,
9

1064 (D. Ariz. 2001)). Although an agency’s legal conclusions
are reviewed

de novo, the court’s overall review is “highly

deferential to the administrative agency whose final decision is
being reviewed.” Buffalo Marine Services Inc. v. United States,
663 F.3d 750 (5th Cir. 2011).
d. Arguments of the Parties
Tengasco moves the Court for summary judgment vacating the
final decision of the IBLA affirming the decision of the BSEE,
ordering Tengasco to pay $386,000 in civil penalties for alleged
violations of 30 C.F.R. § 250.804(a). The core of Tengasco’s
challenge

before

the

Court

concerns

the

sufficiency

of

the

administrative record to support the civil penalties imposed.
Tengasco
abuse

of

argues

that

discretion,

“the

IBLA’s

decision

and

unsupported

by

is

arbitrary...an

the

administrative

record,” in violation of the OCSLA, the APA and due process.25
Tengasco

argues

that

the

undisputed

evidence

in

the

administrative record shows that the requisite testing was in
fact

conducted,

that

there

is

no

evidence

that

the

safety

devices and other equipment at issue did not work properly or
presented

25

a

threat

of

any

kind,

and

further

that

the

Rec. Doc. No. 1 at 7; Rec. Doc. No. 25-3 at 8.

10

unavailability of testing records onsite at the platform should
not form the basis for the imposed civil penalties.26
Further, Tengasco argues that neither BSEE nor IBLA gave
any reasons for imposing penalties over $3,000.27 Tengasco urges
the court to set aside the IBLA’s decision with directions for
no penalties to be imposed against Tengasco.28
Tengasco

requests

the

Court

vacate

the

IBLA’s

Alternatively,
decision

and

remand the matter for a redetermination and reduction of any
penalties, to no more than $3,000 per penalty and to no more
than four penalties.29
Defendants contend that Plaintiff was properly fined for
failing to conduct required safety testing in accordance with
the OCSLA.30 Plaintiff’s records were reasonably assessed as not
credible,

and

considering

failed

the

to

evidence

document

the

submitted,

required
BSEE

testing.31

factored

in

In
the

severity of the violations and Plaintiff’s compliance history,
and

ultimately

permitted

within

imposed
each

the

minimum

violation

per-violation

category.32

penalty

According

to

Defendants, this conclusion, and the decision to impose civil

26

Rec. Doc. No. 25-3 at 8.
Rec. Doc. No. 25-3 at 6.
28
Rec. Doc. No. 25 at 1.
29
Rec. Doc. No. 25 at 1.
30
Rec. Doc. No. 28-4 at 4.
31
Rec. Doc. No. 28-4 at 4.
32
Rec. Doc. No. 28-4 at 9.
27

11

penalties

in

their

respective

amounts,

is

supported

by

substantial evidence, was neither arbitrary nor capricious, and
must be upheld.33
Thus,

the

issue

before

the

Court

is

whether

the

civil

penalties levied by the BSEE, and affirmed by the Department,
should

be

overturned

for

findings

that

are

arbitrary,

capricious, or unsupported by substantial evidence on the whole
record, or as an abuse of discretion.
The Arbitrariness Standard
As the U.S. Supreme Court observed in Citizens to Preserve
Overton Park, Inc. v. Volpe, when making the factual inquiry
concerning

whether

capricious,”

the

an

agency

reviewing

court

decision
“must

was

“arbitrary

consider

whether

or
the

decision was based on a consideration of the relevant factors
and whether there has been a clear error of judgment.” 401 U.S.
402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971), overruled on
unrelated grounds by Califano v. Sanders, 430 U.S. 99, 105, 97
S.Ct. 980, 51 L.Ed.2d 192 (1977).
The

U.S.

Supreme

Court

succinctly

reiterated

the

arbitrariness test in National Ass’n v. Defenders of Wildlife:
An agency’s decision will be considered arbitrary only if
it has relied on factors which Congress had not intended it
33

Rec. Doc. No. 28-4 at 4.

12

to consider, entirely failed to consider an important
aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the
agency, or is so implausible that it could not be ascribed
to a difference in view or the product of agency expertise.
551 U.S. 644, 127 S.Ct. 2518, 2529, 168 L.Ed. 2d 467 (2007).
“Before concluding that a decision was arbitrary and capricious,
a

court

must

overlooked

be

very

something

appreciating

the

Caterpillar,

Inc.,

confident
important

significance

evidence.”

factors

and

(7th

erred
Patterson

Cir.

in
v.

If

the

505

seriously

maker

Omnipoint Corp. v. FCC, 78 F.3d 620,632 (D.C. Cir. 1996).
considers

503,

the

decision

see

agency

F.3d

or

the

1995);

the

70

of

that

articulates

a

rational

relationship between the facts found and the choice made, its
decision is not arbitrary or capricious. State of La., ex rel.
Guste v. Verity, 853 F.2d 322, 327 (5th Cir. 1988). The court’s
inquiry

must

“be

searching

and

careful,”

but

“the

ultimate

standard of review is a narrow one.” Id.
The Court is not to weigh the evidence pro and con, and
agency action is to be upheld, if at all, on the basis of the
record before the agency at the time that it made its decision.
Id. at 327 (citing C.A. White Trucking Co. v. United States, 555
F.2d 1260, 1264 (5th Cir. 1977)).

13

The Substantial Evidence Requirement
The “scope of review” provisions of the APA, 5 U.S.C. §
706(2),

are cumulative. Thus, an agency action which is not

arbitrary or capricious, may in another regard be unsupported by
the

required

substantial

evidence.

However,

the

courts

of

appeals have noted on several occasions that the distinction
between the substantial evidence test, 5 U.S.C. § 706(2)(E), and
the

arbitrary

or

capricious

test,

§

706(2)(A),

is

“largely

semantic.” Aircraft Owners and Pilots Ass’n v. FAA, 600 F.2d
965, 971 n.28 (D.C. Cir. 1979);

Pacific Legal Foundation v.

Dep’t of Transp., 593 F.2d 1338, 1343 n. 35 (D.C. Cir. 1979);
American Public Gas Ass’n v. FPC, 567 F.2d 1016, 1028-29 (D.C.
Cir. 1977); see Assoc. Indus. V. Dep’t of Labor, 487 F.2d 342,
349-50 (2nd Cir. 1973).
However, the distinctive function of paragraph (E) is to
require substantial evidence to be found within the record of
closed-record proceedings to which it exclusively applies. K.
Davis, Administrative Law Treatise § 6:13 512 (2d ed. 1978).
“Substantial evidence is more than a scintilla, less than a
preponderance, and is such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.” Hames v.
Heckler, 707 F.2d 162, 164 (5th Cir. 1983).

14

The Abuse of Discretion Standard
Some

discretion

is

unreviewable

and

the

courts

may

not

exercise authority over such decisions if the agency is to have
the intended level of discretion. However, “[i]t is rudimentary
administrative law that discretion as to the substance of the
ultimate

decision

does

not

confer

discretion

to

ignore

the

required procedures of decision-making.” Bennett v. Spear, 520
U.S. 154, 172, 117 S.Ct. 1154, 1166, 137 L.Ed. 2d 281 (1997). A
court might find abuse of discretion when the decision is made
“without

rational

explanation,

or

inexplicably

departs

from

established policies.” Diaz-Resendez v. INS, 960 F.2d 493, 495
(5th Cir. 1992).
e. Analysis
1. Whether the Department’s Decision to Impose Civil
Penalties was arbitrary, capricious, unsupported by
substantial evidence or an abuse of discretion.
First,

Tengasco

argues

this

Court

should

set

aside

the

IBLA’s decision with directions for no penalties to be imposed.
In reviewing the Department’s findings, the Court is guided by
certain basic principles. The findings of the Department are
presumed

to

be

supported

by

competent

evidence,

and

if

so

supported are conclusive. Keele Hair & Scalp Specialists, Inc.
v. FTC, 275 F.2d 18, 21 (5th Cir. 1960).

15

The

relevant

departmental

regulation,

30

C.F.R.

§

250.804(b) provides that:
[t]he lessee shall maintain records for a period of 2
years for each subsurface and surface safety device
installed...These records shall be available for
review by a representative of BSEE. The records shall
show the present status and history of each device,
including dates and details of installation, removal,
inspection, testing...
Any violation of the foregoing which “BSEE determines may
constitute, or 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,” may be reviewed for potential
civil

penalties.

30

C.F.R.

§

250.1404(b)(emphasis

added).

If

such a failure described constitutes or 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, a civil
penalty may be assessed without regard to the requirement of
expiration of a period allowed for corrective action. 43 U.S.C.
§ 1350 (b)(2).
Tengasco
administrative

contends

there

record

showing

is

undisputed

that

the

evidence

required

in

the

testing

was

conducted. “This includes (i) direct evidence in the form of
both

an

affidavit

and

numerous

reports

by

Rhino’s

operator-

foreman who oversaw the required testing and (ii) corroborative
16

evidence

in

the

form

of

helicopter

manifests

confirming

the

visits to the platform for the times at issue.”34
The Department considered the general travel logs, Walker’s
affidavit,

and

reconstructed

test

concluded

that

“affidavits

and

attesting

to

compliance

with

insufficient

to

constitute

result

statements

the

testing

forms;
from

however,

individuals,

requirements

specific,

are

contemporaneous

verification of testing that owners and operators are required
to maintain and produce upon request within the 2-year time
period

under

30

C.F.R.

§

250.804(b).”35

Specifically,

the

Department affirmed the following BSEE findings:
i.

INC No. P-280 ($40,000) – Tengasco failed to provide
testing records for surface controlled subsurface
safety valves (“SCSSV”) safety devices on four wells
for two testing periods (June 9, 2010 – February 23,
2011) in violation of 30 C.F.R. § 250.804(a)(1)(i).36

ii.

INC No. P-283 ($6,000) – Tengasco failed to provide
testing records for SCSSV safety devices being used as
tubing plugs for a fifth well for two testing periods
(June 9, 2010 – February 23, 2011) in violation of 30
C.F.R. § 250.804(a)(1)(iii).37

iii.

INC No. P-303 ($60,000) – Tengasco failed to provide
testing records for all level safety high (“LSH”)
safety devices for the facility for three testing

34

Rec. Doc. No. 25-3 at 8.
Tengasco, Inc., 184 IBLA 367, 380 2014 WL 4261981 (IBLA, June 23, 2014).
36
Each surface-controlled subsurface safety device installed in a well, including such devices in shut-in and
injection wells, shall be testing in place for proper operation when installed or reinstalled and thereafter at
intervals not exceeding 6 months.
37
Each tubing plug installed in a well shall be inspected for leakage by opening the well to possible flow at intervals
not exceeding 6 months.
35

17

periods (September 1, 2010 – February 23, 2011) in
violation of 30 C.F.R. § 250.804(a)(3)(ii).38
iv.

INC. No. P-304 ($30,000) – Tengasco failed to provide
testing records for all level safety low (“LSL”)
safety devices for the facility for three testing
periods (September 1, 2010 – January 25, 2011) in
violation of 30 C.F.R. § 250.804(a)(3)(ii).39

v.

INC. No. P-307 ($75,000) – Tengasco failed to provide
testing records for all surface safety valve (“SSV”)
safety devices for the facility for three testing
periods (September 1, 2010 – January 25, 2011) in
violation of 30 C.F.R. § 250.804(a)(5).40

vi.

INC. No. P-308 ($105,000) – Tengasco failed to provide
testing records for all flow safety valve (“FSV”)
safety devices for the facility for three testing
periods (September 1, 2010 – January 25, 2011) in
violation of 30 C.F.R. § 250.804(a)(6).41

vii.

INC. No. P-314 ($35,000)- Tengasco failed to provide
testing records for all electronic pressure safety
high (“PSH”) safety devices for the facility for one
testing period (September 1, 2010 – January 25, 2011)
in violation of 30 C.F.R. § 250.804(a)(4)(i); and42

viii.

INC No. P-315 ($35,000) – Tengasco failed to provide
testing records for all electronic pressure safety low
(“PSL”) safety devices for the facility for one
testing period (September 1, 2010 – January 25, 2011)
in violation of 30 C.F.R. § 250.804(a)(4)(i).43

38

All LSH controls must be tested at least once each calendar month, but at no time will more than 6 weeks elapse
between tests.
39
All LSL controls must be tested at least once each calendar month, but at no time will more than 6 weeks elapse
between tests.
40
All SSV's and USV's shall be tested for operation and for leakage at least once each calendar month, but at no
time shall more than 6 weeks elapse between tests.
41
All flowline Flow Safety Valves (FSV) shall be checked for leakage at least once each calendar month, but at no
time shall more than 6 weeks elapse between tests.
42
All PSH must be tested at least once every 3 months, but at no time may more than 120 days elapse between
tests.
43
All PSL must be tested at least once every 3 months, but at no time may more than 120 days elapse between
tests.

18

Affidavit, reconstructed reports and travel logs. Tengasco
submitted a February 2012 Affidavit by Randy Walker, a former
Rhino employee, attesting to reconstructed reports relating to
all device testing at issue, based on his personal knowledge of
the events, “his log books and field notes.”44 Tengasco also
submitted the aforementioned reconstructed reports for June 2010
through February 2011.
actual

safety

and

45

Rhino’s subpoena response provided the

compliance

inspection

report

for

September

2010, and BSEE reduced the penalties for four pertinent INCs
accordingly.46

The

record

additionally

contains

helicopter

manifests and flight logs dated from April 11, 2010 to December
24, 2010.47
In moving for summary judgment, Tengasco bears the burden
of proof in establishing by a preponderance of the evidence that
the required testing was conducted. The regulations provide that
safety system devices shall be successfully inspected and tested
by the lessee at specified periods. 30 C.F.R. § 250.804(a)(1)(12). Additionally, the “lessee shall maintain records for a
period of 2 years for each subsurface and surface safety device
installed...These
history

of

each

records
device,

shall

show

including

the

present

dates

and

status

and

details

of

44

A.R. 354 (Affidavit of Randy Walker).
A.R. 360-465 (Safety and Compliance Inspection Report).
46
A.R. 551-72, 598.
47
A.R. 118-168.
45

19

installation,

removal,

inspection,

testing....”

30

C.F.

R.

§

250.804(b).
Tengasco attempts to distinguish the underlying violations
from those properly subject to civil penalties by arguing that,
at worst, the company violated only the rule at 30 C.F.R. §
250.804(b),

which

requires

the

recordation

and

retention

of

testing. As the IBLA noted, “§§ 250.804(a) and (b) are part of
the same regulation and must be read together. A violation of §
250.804(b) must be analyzed in conjunction with § 250.804(a). A
lessee may be charged a civil penalty for not testing a safety
device

if

it

cannot

show

documentation

to

satisfy

§

250.804(b).”48
First, although Tengasco contends the record evidence is
undisputed,

Tengasco

fails

to

point

to

any

specific

record

documenting the “present status” of each safety device for the
periods at issue, as required by 30 C.F.R. § 250.804(b). The
BSEEE

and

IBLA

concluded

that

because

these

reports

were

prepared by Mr. Walker at a much later date, they failed to
satisfy the “contemporaneous verification of testing” required
by 30 C.F.R. § 250.804(b).49 The travel logs themselves fail to
document

48
49

any

testing.

According

to

Walker,

these

post-hoc

Tengasco, Inc., 184 IBLA at 380. Otherwise, § 250.804(a) would be unenforceable.
A.R. 611 (Reviewing Officer’s Final Decision); Tengasco, Inc., 184 IBLA at 380.

20

reports were based upon his log books and field notes; however,
these items are not contained in the record.50
Moreover, with respect to June, July and August 2010, BSEE
already

possessed

actual

safety

and

compliance

reports

from

prior regulatory interactions. Specifically, BSEE observed that
the

“July

document

2010

report

states

respectfully,

and

they

for

the

were

adjusted

to

pipeline

tested
55

and

PSH

and

PSL

sensor

at

234

and

73

psi,

25

psi,

respectfully.51

However, the “recompleted” documentation for July 2010 shows no
such

adjustment.52

Tengasco

acknowledges

the

discrepancy;

however, responds that this single example only relates to two
of the eight INCS at issue.53
Tengasco

argues

that

the

documents

it

provided

satisfy

BSEE’s standards.54 To support its claim, Tengasco relies on Blue
Dolphin,
ineffective

where

BSEE’s

evidence

“when

predecessor
not

supported

declared
by

affidavits

corroborative

or

50

Tengasco argues that regulations do not impose any such requirement to attach the field notes and logs, and
further, that the BSEE reviewing officer failed to subpoena these documents. However, the regulations impose a
duty upon Tengasco to maintain and produce records for the devices at issue. Although BSEE could have
subpoenaed these documents, BSEE is under no obligation to do so. BSEE exercised its subpoena authority to gain
compliance from an uncooperative party, Rhino Offshores, which is not the case with regard to Mr. Walker.
Tengasco had ample opportunity to obtain and submit this supporting documentation.
51
A.R. 598 (BSEE Reviewing Officer’s Final Decision); Rec. Doc. 37 at 10 (Exhibit A, noting forty-seven (47)
additional inconsistencies between original and reconstructed reports).
52
A.R. 598 (BSEE Reviewing Officer’s Final Decision).
53
A.R. 181. In an e-mail, Norman Ackermann, of Prime 8 Offshore, LLC, Tengasco’s new contractor, informs the
BSEE: “I asked Randy if the numbers changed in his readings and as I understand his reply, there was virtually no
changes in the readings...Oct 2010 BSEE: on the Flowline page the pressures Randy wrote down were in the wrong
’’
columns. Such as found and adjusted too [sic]. On the 10 Williams line the FSV and SDV operation/Auto should be
N/A’s.”
54
Rec. Doc. 23 at 3.

21

contemporaneous
affidavit

that

documentation,
was

accepted

direct
evidence

indirect.”55

or
in

that

case

was

The
an

affidavit supported with copies of the original tally sheet of
the tests.56 BSSE does not have to show that the testing was not
done, instead the burden for providing testing documentation is
on the lessee for the two year period set out in 30 C.F.R. §
250.804(b).57

Here,

though

neither

side

disputes

that

the

helicopter logs provided by Tengasco show Mr. Walker was flown
to the platform on purported dates of testing, they do not rise
to the level of the evidence that was accepted in Blue Dolphin.
The helicopter records do not corroborate whether the tests were
conducted,

or

whether

the

devices

met

safety

standards

required.58 Furthermore the documents reproduced by Mr. Walker
are not contemporaneous or corroborative evidence because they
were drafted much later than the initial tests were conducted.
Tengasco’s

statements

about

the

disparity

in

penalties

assessed in Blue Dolphin compared to the current case are also
incorrect.59
$205,200,

The

before

penalties
being

in

reduced

Blue
to

Dolphin
$61,600

were
by

the

originally
Reviewing

55

Blue Dolphin, 166 IBLA at 135.
Id. at 135 n.1.
57
Id. at 137.
58
Blue Dolphin, 166 IBLA at 137. Without the requirement that documents be kept during the two-year period it
would be virtually impossible for MMS to enforce the testing requirements of 30 CFR 250.804(a) in the absence of
an express admission by the lessee that the testing was not completed. Thus, affidavits and statements from
individuals, which state that the testing was completed, are insufficient to provide documentation of the testing
within the two-year time period provided in the regulations.
59
Rec. Doc. 33 at 2 f.1.
56

22

Officer upon receiving additional tubing inspection reports.60
Blue

Dolphin

remaining

paid

$24,000.

$37,600

in

Therefore,

fines,

and

only

Tengasco’s

claim

appealed
that

the

similar

violations resulted in higher penalties in this case than those
imposed in Blue Dolphin is mistaken.
Additionally, Tengasco claims to be statutorily entitled to
an

opportunity

to

correct

any

violation

and

thus

avoid

the

penalty. Tengasco urges that a violation of a record-keeping
requirement, which does not create a threat of harm, precludes
the

imposition

correct

the

of

a

civil

violation.

As

penalty

absent

discussed,

an

Tengasco

opportunity

to

appears

be

to

operating under the impression that it is being penalized for
failing

to

promptly

provide

the

necessary

records

upon

inspection. The Court notes however, that over the course of
more than a year, BSEE cooperated with Tengasco in its attempts
to submit additional records.61 More importantly, and as further
discussed below, the BSEE’s final order states that INCs were
being issued for violations of 30 C.F.R. § 250.804(a)’s testing
requirements

and

that

the

testing

violations

“subjected

60

Blue Dolphin, 166 IBLA at 133. Reviewing officer examined information Blue Dolphin supplied and revised her
assessment based on the additional documentation of the plug report inspections, but not the affidavits and
statements.
61
See e.g. A.R. 181; 226-28.

23

personnel, environment, and equipment to a threat of serious
and/or immediate injury or damage.”62
Under departmental regulations, BSEE determines whether the
underlying violation is of the type to which a civil penalty
could attach and whether a civil penalty should be assessed in a
particular instance. 30 C.F.R. §§ 250.1400 - 250.1409. When as
here, a determination is left to the discretion of the agency,
the general rule is that the decision should be upheld if there
is a reasonable explanation for the agency’s decision and a
demonstration

that

a

rational

connection

exists

between

its

findings and the choice it makes. State of La., ex rel. Guste v.
Verity, 853 F.2d at 327.
The Court’s role is not to weigh the evidence pro and con;
but

rather,

to

determine

whether

there

exists

a

rational

relationship between the facts and the conclusions made. BSEE,
having

considered

all

of

the

foregoing,

ultimately

concluded

that: (1) the reports at issue were not credible, and (2) those
reports

and

the

travel

logs

both

failed

to

document

the

requisite testing in accordance with 30 C.F.R. § 250.804(b).
Mindful of the narrow scope of review, the Court concludes that,
based on the administrative record, Defendants considered the
relevant

factors,

and

provided

a

rational

explanation

for

concluding that Tengasco’s records failed to evince compliance
62

A.R. 593-96.

24

with

30

C.F.R.

§

250.804(a).

In

sum,

the

Court

concludes

Defendants’ decision to impose civil penalties in this case was
not

arbitrary

or

capricious,

an

abuse

of

discretion,

or

otherwise unsupported by substantial evidence.
2. Whether the Department’s Decision to Impose Civil
Penalties in the Amount of $376,000 was arbitrary,
capricious, unsupported by substantial evidence or
an abuse of discretion.
Second, Tengasco argues in the alternative, that this Court
should vacate the IBLA’s decision and remand the matter for a
redetermination and reduction of any penalties, to no more than
$3,000 per penalty and no more than four penalties.63 BSEE has
the authority to enact civil penalty procedures applicable to
“whenever a lessee, operator or other person engaged in oil,
gas,

sulphur

or

other

minerals

operations

in

the

OCS

has

a

violation.” 30 C.F.R. § 250.1400. The safety system devices that
should be inspected, and the intervals at which they should be
tested, are laid out in statute.64 30 C.F.R. § 250.804. Any lessee
who

fails

to

comply

with

any

provision,

term

of

a

lease,

license, or permit, after notice of such failure and expiration
of any reasonable period allowed for corrective action, will be
liable for a civil penalty.65

63

Rec. Doc. No. 25-3 at 6.
Safety system devices shall be successfully inspected and tested by the lessee at the interval specified below or
more frequently if operating conditions warrant.
65
Secretary may assess, collect, and compromise any such penalty.
64

25

An agency’s selection of penalties to effect its policies
is an act peculiarly within its institutional powers, therefore
the courts review of it is limited. Newell Recycling Co. v. U.S.
E.P.A., 231 F.3d 204, 208 (5th Cir. 2000); see Martex Farms,
S.E. v. U.S. E.P.A., 559 F.3d 29, 33-4 (1st Cir. 2009); see also
Pepperell Associates v. U.S. E.P.A., 246 F.3d 15, 29-30 (1st
Cir.

2001).

The

agency’s

penalty

determination

is

given

significant deference, and will not be overturned unless it is
arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law. Newell Recycling Co., 231 F.3d at 208.
Tengasco first challenges the civil penalties imposed on
the

basis

that

both

the

BSEE’s

and

the

IDLA’s

decisions

constituted an abuse of discretion because they failed to give
any reason for the disparate amounts imposed for the penalties,
and the record lacks any explanation for why any penalty above
the $3,000 minimum was levied.
BSEE’s
assessed

decision

follows

Assessment

in

the

Table.66

regards

guidelines

The

agency’s

to

the

shown

amount

in

the

calculations

of

penalties

Civil
and

Penalty

enforcement

codes are laid out in the Civil Penalty Worksheet.67 The Table is
further broken down into three categories A, B, and C, based on

66
67

A.R. 264.
A.R. 258-63.

26

the harm or threat that the violation posed.68 In this case all
violations were in the A category.69 The violations are further
broken down, based on severity, into Enforcement Codes W, C, or
S, which reflect warning, component shut-in, or facility shut-in
respectively.70 One INC was assigned a “W” enforcement code while
the remaining seven were given “C” enforcement codes.71 A “W”
enforcement code is given when the situation poses no immediate
danger to personnel or equipment.72 A “C” enforcement code is
given for a specific piece of equipment or location, when it is
determined to be part of an unsafe situation or it poses an
immediate danger to personnel or other equipment, and it can be
shut-in without affecting the overall safety of the facility.73
BSEE

breaks

down

each

violation

in

the

Civil

Penalty

Worksheet, and lists the number of devices, number of intervals,
and which categories and incidents of noncompliance existed.74
For Category “A” violations with a “W” enforcement code, the
range of penalties is $3,000-35,000 with a starting assessment
point of $10,000.75 One violation was assigned this rating, and
68

A.R. 264.
A.R. 264. (Category A is given for: threat of injury, harm or damage to the marine or coastal environment, threat
of population, or threat of damage to any mineral deposit or property).
70
A.R. 264.
71
A.R. 258.
72
See BSEE National Office Potential Incident of Noncompliance (PINC) List, available at
http://www.bsee.gov/Inspection-and-Enforcement/Enforcement-Programs/Potential-Incident-of-Noncompliance--PINC/
73
Id.
74
A.R. 258-263.
75
A.R. 264.
69

27

was

assessed

the

minimum

amount,

$3,000,

due

in

part

from

mitigating factors such as Tengasco having no “closed and final”
violations and a history of only two INC’s in the prior two
years.76 The remaining seven INC’s were assigned Category “A”
enforcement

code

“C”

violations.77

This

classification

has

a

starting point of $15,000, with the minimum being $5,000 and the
maximum being $35,000.78 From this BSEE once again adjusted all
the

penalties

downward

to

the

minimum

possible

charge

of

$5,000.79 What follows is a breakdown of the revised penalties
assessed against Tengasco:
I.

INC No. P-280 ($40,000) — Four devices at the Category
A, Noncompliance C minimum fine of $5,000 for two
intervals.

II.

INC No. P-283 ($6,000) — Category A, Noncompliance W
minimum fine of $3,000 for two intervals.

III. INC No. P-303 ($60,000) — Four devices at the Category
A, Noncompliance C minimum fine of $5,000 for three
intervals (reduced from four).
IV.

INC. No. P-304 ($30,000) — Two devices at the Category
A, Noncompliance C minimum fine of $5,000 for three
intervals (reduced from four).

V.

INC. No. P-307 ($75,000) — Five devices at the
Category A, Noncompliance C minimum fine of $5,000 for
three intervals (reduced from four).

VI.

INC. No. P-308 ($105,000) — Eighteen devices at the
Category A, Noncompliance C minimum fine of $5,000 for

76

A.R. 212-13, 209.
A.R. 258.
78
A.R. 264.
79
A.R. 598.
77

28

three intervals (reduced from four, and per interval
fine capped at $35,000).
VII. INC. No. P-314 ($35,000) — Eight devices at the
Category A, Noncompliance C minimum fine of $5,000 for
one interval (per interval fine capped at $35,000).
VIII.

INC. No. P-315 ($35,000) — Eight devices at the
Category A, Noncompliance C minimum fine of $5,000 for
one interval (per interval fine capped at $35,000).

While
injury

Tengasco

occurred,

is

BSEE

correct

in

assessed

asserting

seven

of

that

the

no

actual

violations

as

enforcement code “C” which subjects them to the higher mandatory
minimum of $5,000. Only one of the violations was eligible to
receive

a

$3,000

minimum

fine.

After

applying

mitigating

factors, such as Tengasco’s prior record of compliance, BSEE
applied the minimum penalty to all eight charges multiplied by
the testing intervals.80 However, BSEE determined that in seven
instances,

the

threat

personnel

evidence

to
in

the

testing
or

record

violations

constituted

equipment.

BSEE

to

show

both

has
its

an

immediate

provided
reasoning

ample
behind

imposing the penalties and the amounts assessed.
Next,

Tengasco

challenges

BSEE’s

decision

to

assess

penalties based on the number of devices that Tengasco allegedly

80

See BSEE National Office Potential Incident of Noncompliance (PINC) List, available at
http://www.bsee.gov/Inspection-and-Enforcement/Enforcement-Programs/Potential-Incident-of-Noncompliance--PINC/

29

failed to test per period.81 Tengasco claims it should only be
penalized once per testing period, rather than multiple times,
because

“if

failure

to

a

violation

keep

proper

occurred
records

in
of

this

case,

testing

it

the

than

rather

was

the

failure to actually test the devices.”82 As previously discussed,
BSEE

is

keeping,

not
BSEE

penalizing
is

Tengasco

penalizing

for

Tengasco

violations
for

lack

of

of

record-

verifiable

testing.83
The

regulations

laid

out

in

statute

require

periodic

testing for each device. 30 C.F.R. § 250.804. BSEE asserts that
“[t]he plain meaning of the regulation is that each failure to
test each device as required in each time period constitutes a
single, separate violation.”84 When there is a gap left in the
administration of a congressionally created program by Congress,
either

implicitly

administrative

or

explicitly,

agencies

reading

deference

of

the

is

statue.

given
See

to

the

Chevron,

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837, 843 (1984). The question for the Court is whether the
agency’s answer is based on a permissible construction of the
statute. Id. In this case BSEE applies the violation to every
device that was not tested, for each time period, assessing a

81

Rec. Doc. 25-3 at 17-8.
Rec. Doc. 25-3 at 17-8.
83
Rec. Doc. 28-5 at 19-20.
84
Tengasco, Inc., 184 IBLA 367, 381 (2014).
82

30

penalty

for

each

one

individually.85

Nothing

in

the

statute

reflects a reading contrary to BSEE’s own interpretation and
implementation of the rules.
Lastly, Tengasco argues the penalty amount should have been
reduced

based

Inspection

on

the

Report.

September
Where

2010

Safety

Congress

has

and

Compliance

entrusted

an

administrative agency with the responsibility of selecting the
means of achieving the statutory policy “the relation of remedy
to policy is peculiarly a matter for administrative competence.”
Butz

v.

Glover

Livestock

Commission

Co.,

411

U.S.

182,

185

(1973); quoting American Power Co. v. SEC, 329 U.S. 90, 112, 67
S.

Ct.

133,

146

(1946).

Tengasco

claims

that

because

the

September 2010 report states that SCSSV testing occurred on June
14, 2010, and the helicopter logs confirm that June 14 was the
“Date of inspection” for the platform, this shows that the tests
were done for that interval.86 The Court has discussed at length
and dismissed this final argument, on the basis that the reports
fail to satisfy the 30 C.F.R. § 250.804(b) testing requirement.

III.

CONCLUSION
In moving for summary judgment, Tengasco has not carried

its
85
86

burden.

For

the

reasons

set

forth

above,

the

court

AR. 258-263.
Rec. Doc. 25-3, at 18.

31

determines that Defendants' decision to impose civil penalties
in the

amount of $386,000.00

for failure to provide testing

records required by law, was not arbitrary, capricious, an abuse
of discretion, or an abuse of due process. The court finds that
based on the above, there remain no genuine issues of material
fact. The court therefore grants Defendants' Motion for Summary
Judgment

and

upholds

the

Defendants'

imposition

of

civil

penalties.
As the court has considered the cross-motions for summary
judgment

in

tandem,

and

granted

Defendants'

summary

judgment

motion, granting Plaintiff's cross-motion for summary judgment,
which was also considered, would be totally inconsistent with
the court's analysis. Accordingly, the court denies Plaintiff's
Motion

for

Summary

Judgment.

Plaintiff's

case

is

dismissed.

Final judgment will issue by separate document as required by
Fed. R. Civ. P. 58.
New Orleans, Louisiana, this 14th day of July, 2015.

____________________________
UNITED STATES DISTRICT JUDGE

32