Dynamic_Positioning_Requirement_for_MODUs_and_Other_Vessels_Conducting_Outer_Continental_Shelf_Activities_-_Preliminary_Regulatory_Analysis_and_Initial_Regulatory_Flexibility_Analysis

Dynamic Positioning Requirements for MODUs and Other Vessels Conducting Outer Continental Shelf Activities

Preliminary Regulatory Analysis and Initial Regulatory Flexibility Analysis

Notice of Proposed Rulemaking

33 CFR Parts 140 and 14346 CFR Parts 2, 61, and 62

USCG-2014-0063RIN 1625-AC16

September 2014

Prepared by:

United States Coast GuardOffice of Standards Evaluation and DevelopmentStandards Evaluation and Analysis DivisionUnited States Coast Guard HeadquartersWashington, DC

DRAFT REGULATORY ANALYSIS: DO NOT CITE, QUOTE OR DISTRIBUTE

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Table of Contents

Executive Summary ..................................................................................................................... xi1) Introduction .............................................................................................................................31

1.1 Need for Federal Regulatory Action................................................................................... 361.2 Regulatory Alternatives ...................................................................................................... 371.3 Assumptions: Wages.......................................................................................................... 371.4 Assumptions: Value of Life and Injuries ........................................................................... 391.5 Overview of Regulatory Analysis and Requirements......................................................... 39

2) Affected Population .................................................................................................................403) Discussion of Costs...................................................................................................................47

3.1 Changes to 33 CFR part 140 -- Dynamic Positioning Systems .......................................... 473.2 Costs for 33 CFR 140.315 (d)............................................................................................. 543.3 Costs for 33 CFR 140.320 .................................................................................................. 583.4 Costs for 33 CFR 140.335 (b) (2) & (3) / 46 CFR 62.40-15 and 62.40-20 ........................ 613.5 Costs for 33 CFR 140.335 (b) (4) & (c) (d) / 46 CFR 62.40-25......................................... 633.6 Costs for 33 CFR 140.335 (h)............................................................................................. 653.7 Costs for 46 CFR 61.50-4 (b) ............................................................................................. 733.8 Costs for 33 CFR 140.335 (i).............................................................................................. 763.9 Costs for 33 CFR 140.335 (j) & (k).................................................................................... 823.10 Costs for 33 CFR 140.340 (b) (1) / 46 CFR 62.40-5 (b) (1)............................................. 843.11 Costs for 33 CFR 140.340 (b) (1) / 46 CFR 62.40-5 (b) (2)............................................. 873.12 Costs for 33 CFR 140.345 ................................................................................................ 893.13 Changes to 33 CFR part 143 – Design and Equipment .................................................... 903.14 Changes to 33 CFR part 146 – Operations ....................................................................... 913.15 Changes to 46 CFR part 61 – Periodic Tests and Inspections .......................................... 923.16 Costs for 46 CFR 61.50-3 ................................................................................................. 953.17 Costs for 46 CFR 61.50-4 ................................................................................................. 983.18 Costs for 46 CFR 61.50-5, 61.50-10 & 61.50-15 ............................................................. 993.19 Changes to 46 CFR part 62 -- Vital System Automation ............................................... 1023.19 Costs for 46 CFR 62.20-2 (c).......................................................................................... 1053.20 Costs for 46 CFR 62.25-40 ............................................................................................. 1083.21 Costs for 46 CFR 62.40-3, 62.40-5, 62.40-15, 62.40-20, and 62.40-25 ......................... 1093.22 Total Industry Costs for NPRM...................................................................................... 1103.23 Total Government Costs for NPRM ............................................................................... 1123.24 Total Cost for NPRM...................................................................................................... 114

4) Discussion of Benefits ............................................................................................................1154.1 Frequency of DP Incidents................................................................................................ 1164.2 Causes of DP Incidents Addressed by Proposed Rule...................................................... 1174.3 Consequences of DP Incidents.......................................................................................... 1194.4 Beneficial Impact of Proposed Rule ................................................................................. 1214.5 Potential Avoided Damage Benefits of DPS Proposed Rule............................................ 134

5) Comparison of Costs and Benefits .......................................................................................1546) Discussion of Alternatives .....................................................................................................158

6.1 Proposed Alternative......................................................................................................... 1616.2 Alternative 2: Grandfather all existing non-drilling DP vessels....................................... 162


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6.3 Alternative 3: No Grandfathering and No Phase-in Period ............................................. 1686.4 Alternative 4: Proposed Alternative Plus Additional DP Manning Requirements For Non-Drilling Vessels with New or Upgraded DP Systems ............................................................ 1726.5 Alternative 5: Alternative 3 Plus Additional DP Manning Requirements........................ 175

7) Initial Regulatory Flexibility Analysis.................................................................................1777.1 Description of the reasons why action by the agency is being considered....................... 1777.2 Succinct statement of the objectives of, and legal basis for, the proposed rule................ 1787.3 Description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply.......................................................................................................... 1797.4 A description of the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; ...................................................................................................................... 1827.5 An identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the proposed rule. ............................................................ 1947.6 A description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities. .................................................................................... 194

8) Collection of Information......................................................................................................1959) Appendices .............................................................................................................................201


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List of Tables

Table ES-1: Phase-in Schedule for Vessels (except MODUs) with Existing DP Systems .......... xiiFigure ES-1: Example of a WSOC .............................................................................................. xivTable ES-2: Summary of Expected Costs of Provisions ............................................................. xviTable ES-3: Total Marginalized and Annualized Industry Costs for NPRM by Requirement . xviiiTable ES-4: Total Industry Cost of NPRM ................................................................................. xixTable ES-5: Total Cost of NPRM................................................................................................. xxTable ES-6: Potential Monetary Consequences At Risk that Could Result From a DP Loss of Position ........................................................................................................................................ xxiTable ES-7: Total 10-year Avoided Damages from Rule.......................................................... xxiiiTable ES-8: Comparison of Annualized Benefits and Costs to Industry and Government....... xxivTable ES-9: Expand DP Systems in OCS NPRM, Breakeven Analysis ................................... xxivTable ES-10: Comparison of Costs and Avoided Damages of Alternatives .............................. xxvTable ES-11: Comparison of Cost-Effectiveness of Alternatives ............................................. xxviTable ES-17: Revenue Impacts for Small Entities Affected by NPRM .................................. xxviiiTable 1-1: Dynamic Positioning Requirements based on Vessel Type........................................ 32Table 1-2: Summary of Wage Rates Used in the Analysis........................................................... 38Table 2-1: Phase in Schedule for Operational Requirements for Vessels (except MODUs) with existing DP systems ...................................................................................................................... 41Table 2-2: Summary of Affected Population................................................................................ 42Table 2-3 Summary of Affected Population by Requirement ...................................................... 44Table 3-1: Changes to 33 CFR part 140 -- Dynamic Positioning Systems .................................. 49Table 3-2: New Workers Entering the Industry............................................................................ 55Table 3-3: Derivation of Cost of Proof of Training Requirement ................................................ 55Table 3-4: Industry Cost of Proof of Training Requirement ........................................................ 56Table 3-5: Government Cost of Proof of Training Requirement.................................................. 57Table 3-6: Annual Industry Cost to Employ a Master as Required by 140.320........................... 59Table 3-7: Annual Industry Cost to Hire a Navigational Watch as Required by 140.320 ........... 59Table 3-8: Industry Cost of DP System Manning Requirements ................................................ 59Table 3-9: Industry Cost of FMEA and FMEA Test Proving Document..................................... 62Table 3-10: Derivation of Cost to Develop CAMO and ASOC/WSOC ...................................... 64Table 3-11: Industry Cost to Develop CAMO and ASOC/WSOC............................................... 64Table 3-12: Industry Undiscounted Cost to Report DP System Incidents.................................... 66Table 3-13: Industry Cost to Report DPS Incidents .................................................................... 67Table 3-14: Total Number of DP Investigations by Vessel Type................................................. 68Table 3-15: Industry Undiscounted Cost to Conduct DP Investigations by Vessel Type ............ 69Table 3-16: Industry Undiscounted Cost to Write and Submit DP Investigation Summaries byVessel Type................................................................................................................................... 71Table 3-17: Industry Cost to Investigate DP System Incidents .................................................... 72Table 3-18: Industry Cost to Submit Annual DP Investigation Report ........................................ 74Table 3-19: Government Cost to Review Annual DP Investigation Reports ............................... 75Table 3-20: Frequency of Emergency Disconnects Occurring While Using DP ......................... 77Table 3-21: Frequency of a Serious Marine Incident Occurring While Using DP....................... 77Table 3-22: Industry Undiscounted Cost to Report Emergency Disconnects While Using DP... 78Table 3-23: Industry Undiscounted Cost to Report Serious Marine Incidents While Using DP . 79


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Table 3-24: Industry Cost to Report Emergency Disconnects and Serious Marine Incidents While Using DP....................................................................................................................................... 80Table 3-25: Government Cost to Record Reported Emergency Disconnects and Serious Marine Incidents While Using DP ............................................................................................................ 81Table 3-26 Industry Cost to Obtain DPVAD................................................................................ 83Table 3-27: Return on Capital Difference of a DP-1 crewboat and a DP-2 crewboat................. 85Table 3-28: Industry Cost of Removing DP-1 Crewboats from the Fleet .................................... 86Table 3-29: Derivation of DP-2 Class Notation Cost ................................................................... 87Table 3-30: Industry Cost for DP Notation................................................................................... 88Table 3-31 Changes to 33 CFR part 143 -- Design and Equipment ............................................. 90Table 3-32 Changes to 33 CFR part 146 -- Operations ................................................................ 91Table 3-33: Changes to 46 CFR part 61 -- Periodic Tests and Inspections.................................. 92Table 3-34: Derivation of Cost to Apply for DPSAO Approval .................................................. 96Table 3-35: Industry Cost for DPSAO Application...................................................................... 96Table 3-36: Government Cost for DPSAO Application............................................................... 97Table 3-37: Industry Cost for Initial, Periodic, and Annual Survey Requirement ..................... 100Table 3-38: Government Cost for Initial, Periodic, and Annual Survey Requirement............... 101Table 3-39: Changes to 46 CFR part 62 -- Vital System Automation........................................ 102Table 3-40: Derivation of Cost of DP system Plan and Annual Survey Document Requirement..................................................................................................................................................... 105Table 3-41: Industry Cost of DP System Plan ............................................................................ 106Table 3-42: Hours by Component to Review a DP system Plan ................................................ 107Table 3-43: Government Cost of DP system Plan ...................................................................... 108Table 3-44: Total Industry Cost of NPRM ................................................................................. 110Table 3-45: Total Marginal and Annualized Industry Costs for NPRM .................................... 111(by Requirement) ........................................................................................................................ 111Table 3-46: Total Government Cost of Rulemaking .................................................................. 112Table 3-47: Total Marginal and Annualized Government Costs for NPRM.............................. 113(by Requirement) ........................................................................................................................ 113Table 3-48: Total Cost of NPRM................................................................................................ 114Figure 4-1: Rate of DP Failures per Vessel ................................................................................ 116Figure 4-2: Causes of DP system Incidents ................................................................................ 117Table 4-1: Potential Monetary Consequences At Risk that Could Result From a DP System Loss of Position ................................................................................................................................... 119Figure 4-3: Example of a WSOC................................................................................................ 123Table 4-2: Description of Benefits of the NPRM ....................................................................... 125Table 4-3: Percentage of Non-Drilling Vessel DP Incidents that Result in Vessel Damages.... 134Table 4-4: Percentage of Drilling Vessel DP Incidents that Result in Vessel Damages ............ 135Table 4-5: Total Number of OSV DP Incidents With and Without Damages, Pre-Rule Implementation ........................................................................................................................... 136Table 4-6: Total Number of Crewboat DP Incidents With and Without Damages, Pre-Rule Implementation ........................................................................................................................... 137Table 4-7: Total Number of MODU DP Incidents With and Without Damages, Pre-Rule Implementation ........................................................................................................................... 138Table 4-8: Total Damages Resulting from DP Incidents to Noncompliant OSVs and Crewboats, Pre-Rule Implementation ............................................................................................................ 140


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Table 4-9: Total Damages Resulting from DP Incidents to Noncompliant Drilling Vessels, Pre-Rule Implementation................................................................................................................... 141Table 4-10: Total Number of OSV DP Incidents With and Without Damages, Post-Rule Implementation ........................................................................................................................... 143Table 4-11: Total Number of Crewboat DP Incidents With and Without Damages, Post-Rule Implementation ........................................................................................................................... 144Table 4-12: Total Number of MODUs DP Incidents With and Without Damages, Post-Rule Implementation ........................................................................................................................... 145Table 4-13: Total Damages Resulting from DP Incidents to Noncompliant OSVs and Crewboats, Post-Rule Implementation .......................................................................................................... 146Table 4-14: Total Damages Resulting from DP Incidents to Noncompliant Drilling Vessels, Post-Rule Implementation................................................................................................................... 147Table 4-15: Cumulative Total Cost From DP Incidents to Noncompliant Vessels - Pre- and Post-Rule ............................................................................................................................................. 149Figure 4-4: Comparison of Cumulative Total Cost from DP Incidents Pre- and Post-Rule....... 150Table 4-16: Cumulative 10-year Avoided Damages from Rule (per Year)................................ 151Table 4-17: Total 10-year Avoided Damages from Rule ........................................................... 152Table 5-1: Cumulative Net Present Value from Rule................................................................. 155Figure 5-1: Comparison of Cumulative Net Present Values – Baseline vs. NPRM................... 156Table 5-2: Comparison of Annualized Avoided Damages and Costs to Industry and Government..................................................................................................................................................... 156Table 5-3: Expand DP Systems in OCS NPRM, Breakeven Analysis ....................................... 157Table 6-1: Comparison of Alternatives....................................................................................... 159Table 6-2: Comparison of the Risk of Fatality Addressed by Alternative ................................. 161Table 6-3: Summary of Affected Population in Alternative 2.................................................... 163Table 6-4: Total Cost of Alternative 2........................................................................................ 164Table 6-5: Total 10-year and Annualized Avoided Damages of Alternative 2 .......................... 166Table 6-6: Total Cost of Alternative 3........................................................................................ 168Table 6-7: Total 10-year and Annualized Avoided Damages of Alternative 3 .......................... 170Table 6-8: Industry Cost to Hire a DPO as Required by Alternative 4 ...................................... 173Table 6-9: Total Cost of Alternative 4........................................................................................ 174Table 6-10: Total Cost of Alternative 5...................................................................................... 175Table 7-1: Standard Size of Revenue of Entities Affected by NPRM........................................ 179Table 7-2: Size of Entities Affected (MODUs) ......................................................................... 180Table 7-3: Size of Phased-in Entities Affected (OSVs of at least 500 GT ITC) ........................ 180Table 7-4: Size of Entities Affected (OSVs under 500 GT ITC) ............................................... 181Table 7-5: Size of Entities Affected by NPRM (Crewboats)................................................................................................................................. 181Table 7-6: NPRM First-year Cost............................................................................................... 183Table 7-7: NPRM First-Year Revenue Impact to Small Entities ............................................... 184(OSVs of at least 500 GT ITC) ................................................................................................... 184Table 7-8: NPRM Annual Cost................................................................................................... 185Table 7-9: NPRM First-year Cost............................................................................................... 186Table 7-10: NPRM First-Year Revenue Impact to Small Entities (OSVs under 500 GT ITC) . 187Table 7-11: NPRM Annual Cost................................................................................................. 188Table 7-12: NPRM First-year Cost............................................................................................. 190


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Table 7-13: NPRM First-year Cost............................................................................................. 191Table 7-14: NPRM First-Year Revenue Impact to Small Entities (Crewboats)......................... 192Table 7-15: NPRM Annual Cost................................................................................................. 193Table 7-16: NPRM Annual Revenue Impact to Small Entities (Crewboats) ............................. 194Table 8-1: Summary of Industry Burden from Collection of Information ................................. 197Table 8-2: Summary of Government Burden Estimates............................................................. 199


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Acronym List

The ActCFR

The Coast Guard Authorization Act of 2010 (Pub. L. 111-281)Code of Federal Regulations

CNGCOIDHS

Compressed natural gasCertificate of InspectionU.S. Department of Homeland Security

DPODPOQDP SYSTEMFMEAFRGRT

GT ITC

IBC Code

ICLL

Dynamic positioning operatorDynamic positioning operator, qualifiedDynamic positioning systemFailure Modes and Effects AnalysisFederal RegisterGross register tons as measured under 46 U.S.C. 14502, Regulatory Measurement SystemGross tonnage as measured under 46 U.S.C. 14302, Convention Measurement SystemInternational Code for the Construction and Equipment of Ships Carrying Dangerous Chemicals in BulkInternational Convention on Load Lines, 1966, as amended

IECIECEx

IMCAIMOLNGMISLEMSMS

International Electrotechnical CommissionIEC System for Certification to Standards Relating to Equipment for use in Explosive AtmospheresInternational Marine Contractors AssociationInternational Maritime OrganizationLiquefied natural gasMarine Information Safety and Law Enforcement SystemMarine Safety Management System

MTSNAICS

Marine Technology SocietyNorth American Industry Classification System

NEC National Electric CodeNFPAOCS

National Fire Protection AssociationOuter Continental Shelf

OCMIOICNWOMB

Officer in Charge, Marine Inspection Officer in charge of the navigational watch Office of Management and Budget

OSVSTCW

Offshore Supply VesselInternational Convention of Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended

STCW CodeSOLASRA

Seafarers’ Training, Certification, and Watchkeeping CodeInternational Convention for the Safety of Life at Sea, 1974, as amendedRegulatory Analysis

SBA Small Business AdministrationUSCG United States Coast Guard


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Executive Summary

Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The Coast Guard does not expect the costs of this rulemaking to exceed the threshold of economic significance (i.e., the rulemaking will not have an annual affect on the economy of $100 million or more in any year). Additionally, this NPRM has been designated a “non-significant regulatory action” under section 3(f) of Executive Order 12866. Accordingly, the rule has not been reviewed by the Office of Management and Budget. However, a preliminaryRegulatory Analysis (RA) has been undertaken, which provides supporting documentation for the regulatory evaluation in the preamble of the Dynamic Positioning Requirements for MODUs and Other Vessels Conducting Outer Continental Shelf Activities [USCG-XXXX-XXXX]. We did not attempt to replicate precisely the regulatory language of the proposed rule in this RA; the regulatory text of an effective rule, not the text of this RA would be legally binding.

As the oil and gas industry move farther and farther offshore and into deeper waters, Mobile Offshore Drilling Units (MODUs) and other vessels engaged in Outer Continental Shelf (OCS)operations including Offshore Supply Vessels (OSV’s) face an increasing challenge to maintain position. In particular, since environmental conditions are more extreme and increased water depth makes conventional mooring no longer feasible, these vessels increasingly use dynamic positioning (DP) systems to maintain position when conducting drilling and/or support functions including personnel transfer, dive support and other critical operations. These systems typically involve multiple sensors (position-sensing, environmental monitoring, etc.), a computer to process these data, connections to propulsion and maneuvering control systems, and a user interface to enable operators to set commands, monitor system performance and potentially step in when systems are not working properly. Costs for such systems range from $350,000 to $408,000 per vessel depending on requirements of the vessel and its operation. When properly designed and operated within design limits, DP systems provide industry with an ability to safely maintain position, using these rapidly evolving, computerized systems to stay within meters of their desired location even in the face of wind, wave and current forces. However, these systems are not immune from failures, and because MODUs and other vessels in this industry performhigh hazard industrial missions including conducting personnel transfers and handling large quantities of oil and hazardous material, a resultant loss of position could result in an incidentthat leads to a catastrophic loss of life or spillage of hazardous substances.

During interactions with industry at National Advisory Committees, DP conferences, and industry training seminars in DP design and operations, industry expressed the need for a uniform DP standard from the United States as a Coastal State. Additionally, the Coast Guard has identified the lack of DP standards as allowing a potentially catastrophic risk to go unmitigated. In response, the Coast Guard has developed this NPRM which would provide MODUs and other vessels that conduct OCS activities while using a DP system on the U.S. OCS a uniform standard that addresses design, construction, and operation of DP systems. This


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standard would aid owners and operators in safely meeting energy market demands and pursuingoffshore energy ventures that are farther offshore and in deeper waters.

To minimize the costs of new standards, the Coast Guard has based its requirements on established guidelines used by today’s DP industry, specifically International Maritime Organization (IMO) Maritime Safety Committee (MSC) Circular 645 and the Marine Technology Society’s (MTS) DP Operations Guide. These standards complement each other, with IMO MSC Circular 645 providing for the adequate design of such systems and the MTS DP Operations Guide providing standards to ensure that they are operated properly. The Coast Guard has also limited the application of the DP system design and operations standards to existing and new MODUs and new vessels, other than MODUs, that conduct OCS activitieswhile using a DP system. Existing non-drilling vessels that conduct OCS activities while using a DP system are “grandfathered” from being required to comply with the most costly design requirements, and are provided a phase-in period to comply with the operational DP requirements. This phase-in period was designed to provide industry with some flexibility in enacting these requirements, while still providing for vessel and personnel safety. Table ES-1 summarizes this phase-in schedule.

Table ES-1: Phase-in Schedule for Vessels (except MODUs) with Existing DP Systems

Tonnage of Non-drilling VesselDate Requirements

Effective

At least 1,900 GT ITC Date of FR + 3 years

At least 900 GT ITC Date of FR + 6 years

Greater than 500 GT ITC Date of FR + 9 years

Design Standards and Classification

The IMO standards incorporated currently divide DP equipment systems into three classifications: equipment class 1 (DP-1), equipment class 2 (DP-2), and equipment class 3 (DP-3).1 These classes primarily diverge in their level of reliability, with DP-1 classed systems offering the least reliability, and DP-2 and DP-3 classed systems offering increasing amounts of reliability. This reliability is achieved through redundancy of critical components such as computer systems, wind sensors, vertical reference units, gyrocompasses, bus bars, generators, and thrusters used to maintain positioning of the vessel.

In a DP-1 classed system, the failure of a single component would likely result in a DP systemfailure, which in turn would likely lead to a loss of position and potentially to a mishap involving catastrophic loss of life, property damage, and/or environmental pollution. Conversely, a DP-2 system is designed to reduce the threat of a loss of position in the event of a single “active

1 IMO MSC/Circ.645


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component” equipment failure (e.g. position reference systems, generators, electrical distribution components, control computers, or thrusters) by providing for redundancy in these “active components” thereby increasing reliability. This increased reliability is further ensured through failure analysis and testing. DP-3 systems, which achieve physical independence by segregating system components into separate locations with fire and watertight boundaries, are designed to further reduce the threat of a loss of position occurring if a fire or flooding was to remove an entire compartment, such as the vessel’s engine room. While this rule imposes no carriage requirements, nor does it require use of DP, it does require that DP used in certain critical situations (e.g., transfer of personnel and/or hazardous materials) meet DP-2 requirements to ensure that a single failure of a primary component does not lead to catastrophic consequences.

The IMO MSC Circular better enables a MODU or other vessel to perform its industrial mission because the DP system is more fault-tolerant and fault-resistant, and has greater capability to maintain position after a worst-case failure. A fault tolerant system is designed to continue to function without interruption following an error or failure of a subsystem or component within the system, and is achieved through multiple design approaches based on the level of performance required for the industrial mission of the vessel. The design limits of such systems reduce the risk of a loss of position by reducing reliance upon the human element.

Operations

The Marine Technology Society’s DP Operations Guide complements the design standards by focusing on the safe operation of these systems, provides guidance on how to successfully develop and implement operational measures and decision support tools. Specifically, the rule incorporates MTS requirements for Activity Specific Operating Criteria/Well Specific Operating Criteria (ASOC/WSOG) and Critical Activity Mode of Operations (CAMO) to operate a DP system within its design limits. The WSOC/ASOC are visual decision support tools that provide DPOs/DPOQs an easy to use tool to summarize limits to safe operating conditions and indicatewhen DP operators must take corrective action, such as disconnecting a well pipe because of the potential or actual loss of position. The goal of this tool is to prevent a loss of position and potential costly consequences by making it easier to DP operators to respond correctly in the event of an emergency. Figure ES-1 contains an example of a WSOC.

Based on industry experience, use of MTS DP operations guidance can reduce incidents of DP incidents. According to data provided during industry roundtables, prior to adoption of MTS guidance, a fleet experienced 6 DP position loss incidents in 6 months (a rate of 1 per month). After adoption, the fleet experienced 5 DP position loss incidents in 8 years (a rate of 0.05 per month, which is a reduction of 95 percent). Based on evaluations of theses five loss events, fourcould have been avoided if the WSOC had been followed.


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Figure ES-1: Example of a WSOC

Manning and Training

To ensure that operators and crews of MODUs and other vessels that use dynamic positioning to maintain position while operating on the U.S. OCS are properly manned, have an in-depth knowledge of the DP system, are able to constantly and consistently monitor it, and take manual control of the system when appropriate, the proposed rule contains minimum manning and training requirements. These training requirements mandate that an operator have a thorough knowledge of the CAMO and either the ASOC, or WSOC, and must be familiar with the vessel’s FMEA. These provisions would reduce the likelihood that vessel and personnel casualties occur because of operator fatigue or inexperience using the system.

Reporting

The proposed rule contains requirements that owners/operators report DP system incidents involving a reactive change from “green” to “yellow” and “green” to “red” as defined by the ASOC or WSOC and an annual summary report of the DP investigations which followed these incidents. Reporting DP incidents (green to red) and near misses (green to yellow) will assist Coast Guard in understanding the frequency, causes and potential consequences of DP incidentsin order to better ensure safety for this evolving technology.


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In general, this notice of proposed rulemaking would:

• Increase vessel safety and protection of persons and the maritime environment through the use of design and operational standards that prevent a loss of position by a vessel conducting Critical OCS activities while using a DP system.

• Ensure compliance with established standards through mandatory vessel surveys that would test DP systems and the Failure Modes and Effects Analysis (FMEA).

• Increase accountability by requiring vessel owners and operators to document system designs and operating procedures.

• Increase the understanding of why DP systems fail by requiring vessel owners and operators to describe when and why a DP incident occurred.

The Coast Guard estimates that 679 vessels with existing DP systems would be affected by this rule (583 OSVs, 43 crewboats, and 53 MODUs). Using historical population data, we forecast that over the 10-year period of this analysis, 322 future OSVs (which include OSVs less than 6,000 GT ITC and OSVs of at least 6,000 GT ITC), 57 future MODUs, and 20 future crewboats would be affected by this NPRM.

We then use price and industry cost estimates to develop the potential costs for each provision in this rule. Table ES-2 summarizes the expected cost per requirement per vessels. As can be seen, only four provisions have costs in excess of $10 thousand per vessel; requirements for the six foreign flagged MODU’s currently sailing without maritime master or crew to fill these critical positions when underway on DP ($1.194 million per vessel), requirements for all vessels using DP for certain critical operations to have the higher reliability DP-2 that is not susceptible to the failure of a single component ($876 thousand per vessel), requirements that these DP-2 systems are able to be certified by classification societies as meeting DP-2 standards ($64 thousand per vessel) and requirements that the potential failures of the installed systems be understood by the vessel crew through analysis and testing ($275 thousand per vessel).


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Table ES-2: Summary of Expected Costs of Provisions(per Vessel)

Requirement

Industry Cost

Government Cost

(per vessel) (per vessel)

1. 33 CFR 140.315 (d): all applicable vessels must make available a copy of a DPO's or DPOQ's certificate of completion of DP training courses. (repeating).

$114.40 $60.00

2. 33 CFR 140.320 (a): all applicable vessels must have a master and the minimum number of mates while the vessel is underway.

$1,193,920.00 $0.00

3. 46 CFR 62.40-15 and 62.40-20: all applicable vessels must develop and maintain a FMEA and FMEA test proving document.

$275,000.00 $0.00

4. 33 CFR 140.335: all applicable vessels must develop and maintain CAMOand a WSOC or an ASOC, respectively.

$9,120.00 $0.00

5. 33 CFR 140.335 (h): all applicable vessels must report a dynamic positioning incident to the DPSAO that conducted the vessel’s DP surveys (repeating).

$177.89 $0.00

6. 33 CFR 140.335 (h): all applicable vessels must conduct a DP investigation following a dynamic positioning incident and submit a summary of the investigation to the DPSAO that conducted the vessel’s DP surveys (repeating).

$2,236.19 $0.00

7. 46 CFR 61.50-4 (b): all applicable vessels must complete an annual report that contains a summary of each DP incident investigation that was conducted during that year and submit the report to the OCSNCOE (repeating).

$169.10 $150.00

8. 33 CFR 140.335 (i): all applicable vessels must report to the cognizant OCMI DP incidents that involve an emergency disconnect or serious marine incident (repeating).

$47.67 $25.00

9. 33 CFR 140.335 (k): all applicable vessels must receiving a DPVAD prior to conducting Critical OCS activities while using DP.

$10.25 $0.00

10. 46 CFR 62.40-5 (b): all applicable vessels must have at a minimum a DP-2 system

$876,237.00 $0.00

11. 46 CFR 62.40-5 (b): all applicable vessels must obtain a DP-2 class notation.

$64,250.00 $0.00

12. 46 CFR 61.50-3: all applicable DP assurance providers must seek approval from the U.S. Coast Guard prior to conducting DP surveys, tests, inspections, and plan reviews.

$1,235.10 $600.00

13. 46 CFR 61.50-2: all applicable vessels are required to report the time, date, and location of initial, periodic, and annual surveys to the OCMI. (repeating).

$4.10 $607.50

14. 33 CFR 140.345 and 46 CFR 62.20-2: all applicable vessels are required to submit the DP System Plan to the MSC.

$25.60 $2,700.00

*Dollar figures are in 2013 terms.


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The proposed alternative would not require existing OSVs and crewboats to comply with system and class requirements in provisions 10, 11, and 14 from Table ES-2, and would phase-in the operational and reporting provisions 3 through 9 according to the schedule summarized in Table ES-1. This will minimize the expected costs incurred by owners and operators of existing non-drilling vessels.

Table ES-3 breaks down the total discounted costs and the annualized costs to industry by requirement.


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Table ES-3: Total Marginalized and Annualized Industry Costs for NPRM by Requirement

Requirement10-Year Cost Annualized

Undiscounted 7% 3% 7% 3%Minimum DP Manning RequirementsCost to Provide Proof of Training (Table 3-4) $467,996 $332,365 $400,855 $47,321 $46,992Cost to Comply with DP Manning Requirements2 (Table 3-8) $71,635,200 $50,313,567 $61,106,279 $7,163,520 $7,163,520

Total $72,103,196 $50,645,932 $61,507,133 $7,210,841 $7,210,512Intermediate DP System RequirementsCost to Complete FMEA and FMEA Proving Test Document (Table 3-9) $111,100,000 $74,383,054 $92,903,263 $10,590,474 $10,891,097Cost to Develop CAMO and ASOC or WSOC (Table 3-11) $4,208,880 $2,858,478 $3,540,664 $406,983 $415,074Cost to Report DP Status Changes from Green to Red or Yellow (Table 3-13) $905,587 $565,296 $734,721 $80,485 $86,132Cost to Conduct DP Incident Investigations (Table 3-17) $6,591,592 $4,081,179 $5,329,997 $581,068 $624,838Cost to Submit Annual DP Incident Investigation Report (Table 3-18) $860,550 $537,146 $698,162 $76,478 $81,846Cost to Report Emergency Disconnect and Serious Marine Incidents (Table 3-24) $28,791 $18,548 $23,667 $2,641 $2,774Cost to Obtain a DPVAD (Table 3-26) $14,719 $9,594 $12,159 $1,366 $1,425Cost to Report DP Surveys (Table 3-37) $20,865 $13,024 $16,928 $1,854 $1,984

Total $123,730,983 $82,466,319 $103,259,560 $11,741,349 $12,105,171Standard DP System RequirementsCost to Obtain DP-2 System Equipment3 (Table 3-28) $2,628,711 $2,299,523 $2,478,534 $327,400 $290,560Cost to Obtain DP-2 Class Notation (Table 3-30) $10,472,750 $7,119,161 $8,803,142 $1,013,608 $1,031,997

Total $13,101,461 $9,418,684 $11,281,676 $1,341,009 $1,322,557Enhanced DP System Requirements

Cost to Submit DP System Plans (Table 3-41) $4,096 $3,222 $3,670 $459 $430

Total $4,096 $3,222 $3,670 $459 $430

2 Costs are only incurred by six foreign-flagged MODUs.

3 We forecast that costs would only be incurred by 1 future crewboat in the first three years following the effective date of a final rule.


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Table ES-4 summarizes the 10-year present value costs that are expected to be incurred by industry as a result of this rule.

Table ES-4: Total Industry Cost of NPRM(per Year)

Year Undiscounted CostsDiscounted Costs

7% 3%

1 $13,295,128 $11,612,479 $12,531,933

2 $13,583,758 $11,864,581 $12,803,995

3 $10,900,925 $8,898,402 $9,975,891

4 $44,460,494 $33,918,698 $39,502,573

5 $12,960,131 $9,240,394 $11,179,523

6 $12,958,982 $8,635,117 $10,852,943

7 $40,540,725 $25,246,726 $32,963,320

8 $15,177,650 $8,833,530 $11,981,377

9 $15,965,539 $8,684,195 $12,236,256

10 $29,112,460 $14,799,299 $21,662,405

Total $208,955,792 $141,733,422 $175,690,215

Annualized $20,179,651 $20,596,253

* Numbers may not add due to rounding.


The first year undiscounted cost of this rule is $13,295,128. The highest undiscounted cost is expected in Year 4 at $44,460,494. Over the 10-year period of our analysis, annual costs are not expected to exceed the $100,000,000 threshold in the first or any subsequent year.

The 10-year present value cost of this rule to industry is $141,733,422 discounted at a rate of 7 percent, and $175,690,215 discounted at a rate of 3 percent. The annualized cost is estimated at $20,179,651 at a 7 percent discount rate and $20,596,253 discounted at a 3 percent discount rate.

We expect government will incur labor costs to review a vessel’s compliance with the provisions in this rule. The Coast Guard estimates that the 10-year present value cost to government is $2,935,991 discounted at 7 percent, and $3,744,096 discounted at 3 percent. Annualized government costs are expected to be $418,019 at a 7 percent discount rate, and $438,922 at a 3 percent discount rate.

The combined 10 –year present value cost of this rule to industry and government is estimated at $144,669,412at a 7 percent discount rate, and $179,434,311 at a 3 percent discount rate. The annualized costs are expected to be $20,597,670 discounted at 7 percent and $21,035,175discounted at 3 percent.

Table ES-5 summarizes the combined 10-year present value costs to industry and government as a result of this rule.


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Table ES-5: Total Cost of NPRM (per Year)


7% 3%

1 $13,581,195 $11,879,832 $12,809,668

2 $13,736,938 $11,998,374 $12,948,382

3 $11,066,145 $9,033,271 $10,127,091

4 $44,843,194 $34,210,658 $39,842,597

5 $13,369,939 $9,532,582 $11,533,027

6 $13,395,049 $8,925,687 $11,218,143

7 $41,148,868 $25,625,447 $33,457,795

8 $15,822,770 $9,208,996 $12,490,640

9 $16,649,124 $9,056,020 $12,760,167

10 $29,897,840 $15,198,546 $22,246,801

Total $213,511,062 $144,669,412 $179,434,311

Annualized $20,597,670 $21,035,175




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Benefits

The primary goal of this NPRM is to reduce the occurrence of incidents of DP systems and to mitigate the impacts of incidents if they occur. While DP system incidents can be resolved through the DPO or DPOQ manually taking control of the system, inaction or delayed action can have potentially catastrophic consequences. If left unchecked, a DP incident could result in a loss of position or propulsion, a short circuit of the electrical equipment, and/or an emergency disconnect. These events could result in loss of life, injury, major property damage to the vessel and/or any surrounding vessels and facilities, lost revenue as a result of any downtime caused by damages, and/or environmental damage as a result of released oil or other chemicals. While casualty histories are limited with this emerging technology, existing data show that the potential for catastrophes exists. Table ES-6 monetizes these potential consequences.

Table ES-6: Potential Monetary Consequences At Risk that Could Result From a DP Loss of Position4

Consequence Category Range of Potential Consequences

Property Damage from Collision $ 5 million to $ 1 billion

Environmental Pollution $ 5 million to $500 million

Riser Lost on Seabed $7 million to $70 million

Pipe Bent or Buckled $ 3 million to $ 30 million

Downtime from Production Up to $500 thousand per day rate

Loss of Life $ 9.1 million per statistical life5

The collision of the logistics OSV Samudra Suraksha with a drilling platform illustrates the types and potential magnitude of worst case consequences that could result from an OSV loss of position. In July, 2005, the Samudra Suraksha was transferring personnel off the coast of India when the vessel experienced a loss of position6 and the vessel collided with a platform, severing a gas riser in the process. Although an emergency shut-off of the gas riser was initiated, a sufficient amount of gas was released, resulting in an explosion and massive fire. Twenty-two crewmen lost their lives or went missing as a result of the explosion, which, when monetized at $9,100,000, amounts to $200,200,000. We use the fatalities lost as a reasonable worst case scenario of the potential consequences at risk from a loss of position and resulting collision between vessels or platforms. The incident also had environmental damage, property damage and loss of production impacts.

4 Global Maritime, Chris Jenman. “Dynamic Positioning & Thruster Assisted Mooring”, accessed at: http://www.lmalloyds.com/CMDownload.aspx?ContentKey=f4599810-6043-4af0-bd66-437564aacad6&ContentItemKey=68a88ec5-64d1-48c9-8627-060ea6a856de

5Value of a statistical life is currently measured at $9.1 million. Guidance on Treatment of the Economic Value of a Statistical Life,” prepared for the U.S. Department of Transportation, April 2013. Available at: http://www.dot.gov/sites/dot.dev/files/docs/DOT%202013%20Signed%20VSL%20Memo.pdf

6 The vessel was equipped with DP but was not operating under DP at the time of the loss of position.


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Table ES-6 and the incident involving the logistics OSV Samudra Suraksha highlight the catastrophic potential of DP failures. This NPRM seeks to reduce this risk by diminishing the likelihood that a DP system incident would occur and mitigating the consequences of any such occurrence should one occur. The following discussion elaborates upon the functional benefits of the proposed rule by element.

Through examining publicly available International Marine Contractors Association(IMCA) reports from 2004-2010, we estimate that 1.45 DP incidents occur per vessel every year.7 Using this figure, the Coast Guard estimates the number of DP incidents that are expected to occur given the forecasted population figures. Based on conversations with members of industry, we then estimate the rate of DP incidents that are expected to occur after publication of this proposed rule. According to data provided during the industry roundtables, DP incidents can be reduced by 95 percent after adopting the MTS DP Operations guidance. 8 If we assume that the vessels were experiencing the industry average number of incidents per year, 1.45, prior to adopting the MTS guidance, then a 95 percent reduction in DP incidents would equate to vessels experiencing only 0.0725 DP incidents per year following adoption of the MTS guidance.

We expect that the reduction in the occurrence of DP incidents would result in benefits including avoided damages of $115,849,378 discounted at 7 percent and $146,288,861 discounted at 3 percent over the 10-year period of our analysis. The annualized benefits are estimated to be $16,494,345 discounted at a 7 percent rate and $17,149,517 discounted at a 3 percent rate. These estimates would accrue from a reduction in the frequency of DP incidents, which would reduce vessel downtime, possible property damage, and the possibility of lost well control. They do not reflect the potential reduction in the number of injuries or fatalities that would likely occur after implementation of this proposed rule.

Table ES-7 summarizes the total avoided damages that would accrue to industry after issuing the proposed rule. It is important to note that, because of phase-in requirements, most of the non-drilling population would not benefit from the rule until year 10.

7International Marine Contractors Association. “Dynamic Positioning Station Keeping Incidents.” Documents from 2004-2010.

8 This reduction is based on a decrease in the frequency of DP position-loss incidents, from a frequency of six DP position-loss incidents in 6 months prior to adoption of the MTS DP Operations guidance, to five position-loss incidents in 8 years following the adoption of the guidance.


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Table ES-7: Total 10-year Avoided Damages from Rule

Time Period

Undiscounted Discounted Annualized

Non-Drilling Vessels

Drilling Vessels

Total 7% 3% 7% 3%

Total Damages from DP Incidents prior to DPS Rule

$105,234,662 $126,218,084 $231,452,746 $157,200,830 $194,581,898 $22,381,862 $22,810,935

Total Damages from DP Incidents after DPS Rule

$51,101,224 $3,746,191 $54,847,415 $41,351,452 $48,293,037 $5,887,517 $5,661,417

Estimated Reduced Damages Post-Rule

$54,133,438 $122,471,893 $176,605,331 $115,849,378 $146,288,861 $16,494,345 $17,149,517




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The total annualized avoided damage to vessels resulting from this rulemaking are expected to be insufficient (by themselves) to exceed costs at a 7 percent discount rate, as shown in Table ES-8.

Table ES-8: Comparison of Annualized Benefits and Costs to Industry and Government(7% Discount Rate)

Rule Annualized Cost Annualized BenefitsAnnualized Net

Benefits

DPS NPRM $20,597,670 $16,494,345 ($4,219,059)



In order to calculate the number of fatalities that would need to be prevented per year in order for this rulemaking to be cost neutral, the Coast Guard uses the value of a statistical life (VSL) to monetize the loss of a life. 9 Using the VSL to monetize the value of fatalities and fatalities prevented, the proposed rule would need to prevent 0.5 fatalities per year from occurring during the 10-year period for net benefits to equal the net cost of this rulemaking.

Table ES-9 summarizes this breakeven analysis.

Table ES-9: Expand DP Systems in OCS NPRM, Breakeven Analysis

(7 percent, Annualized)

Proposed Rule RequirementAnnualized

Net Cost

Fatalities Prevented to Breakeven

Total for Proposed Rule Requirements ($4,219,059) 0.46

The consequences of a loss of position while using DP can be high. In order to put this breakeven analysis in perspective, we consider and compare the impacts of two events to illustrate potential worst case scenarios that could result from a DP-caused loss of position. First, as an example of the fatalities that could result from a loss of position and subsequent collision, we use the Samudra Suraksha incident as a reasonable worst case scenario. In order for this rulemaking’s benefits to equal its costs, one worst case event on the magnitude of the Samudra Suraksha, which resulted in 22 fatalities, would need to be prevented approximately every 48 years to breakeven.10

A loss of position and collision could result in a catastrophic oil spill if a MODU is involved and

9 “Guidance on Treatment of the Economic Value of a Statistical Life,” prepared for the U.S. Department of Transportation, April 2013. http://www.dot.gov/sites/dot.dev/files/docs/VSL%20Guidance%202013.pdf10 We acknowledge that the SAMUDRA SURAKSHA incident would not be avoided or its consequences mitigated as a result of this proposed

rule since it involved a foreign flag vessel operating in foreign waters.


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the blowout preventer does not engage or fails (as was the case during the Deepwater Horizon). The Deepwater Horizon oil spill illustrates the potential environmental damage that could result from an oil spill from an uncontrolled well. The Deepwater Horizon incident resulted in an estimated 4.9 million barrels of oil spilled. To date, the responsible party has spent $14 billion on cleanup costs alone. This estimate of cleanup costs does not include additional restoration costs under the Natural Resource Damage Assessment process or other liabilities or settlements.11 Assuming a $14 billion cleanup cost for a reasonable worst case catastrophic oil spill, the proposed rule would have to prevent one such event every 1,000 years to breakeven.

Alternatives

When developing this proposed alternative, the Coast Guard considered a wide range of vessels and provisions that could be part of this rule. The Coast Guard considered the following alternatives:

Proposed Alternative (NPRM) Alternative 2: Grandfathering all existing non-drilling DP vessels Alternative 3: No Grandfathering and no phase-in period Alternative 4: Proposed Alternative Plus Additional DP manning requirements

for non-drilling vessels with new or upgraded DP systems Alternative 5: Alternative 3 Plus Additional DP manning requirements

A comparison of the costs and avoided damages of each alternative is summarized in Table ES-10.

Table ES-10: Comparison of Costs and Avoided Damages of Alternatives

ProposalAnnualized Cost

(7% Discount Rate)

Annualized Benefits

(7% Discount Rate)

Annualized Net Cost

(7% Discount Rate)

Number of Fatalities Needed to be Prevented per Year to Breakeven

Proposed Alternative $20,597,670 $16,494,345 ($4,219,059) 1 fatalities per year

Alternative 2 $13,307,230 $13,688,325 ($265,983) 0 fatalities per year

Alternative 3 $25,718,386 $21,699,818 ($4,896,965) 1 fatalities per year



* Net Cost does not include avoided fatalities or other benefits of this rule.



11“Active Shoreline Cleanup Operations from Deepwater Horizon Accident End”, press release from BP, 15 April 2014, available at:

http://www.bp.com/en/global/corporate/press/press-releases/active-shoreline-cleanup-operations-dwh-accident-end.html


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Although Table ES-10 shows that Alternative 2, which would grandfather all existing non-drilling vessels from having to comply with this rule, minimizes net costs, it reduces the risk of a loss of life and lost down time the least out of all of the alternatives. This is because fewer vessels would benefit from the proposed requirements, and thus, the probability of a DP failure, which could result in a fatality, would remain at its current rate for a majority of the population of non-drilling vessels.

In Table ES-11, we summarize the risk of fatality addressed and the cost to address that risk in each of the alternatives.

Table ES-11: Comparison of Cost-Effectiveness of Alternatives

Proposal

Total Crew Subject to

Risk of Fatality-Baseline

(A)

Crew withRisk of Fatality

Addressed(B)

Percentage of Potential

Fatality Risk Addressed

(B/A)

Annualized Cost(7% Interest Rate)

(C)

Cost Per Fatality Risk Addressed

(C/B)

Proposed Alternative 5,119 4,675 91% $20,179,651 $4,316.50

Alternative 2 5,119 2,623 51% $13,072,297 $4,983.72

Alternative 3 5,119 5,119 100% $24,990,468 $4,881.90

Alternative 4 5,119 4,675 91% $137,090,199 $29,324.11

Alternative 5 5,119 5,119 100% $624,381,615 $121,973.36



Table ES-11 shows the cost to reduce the risk of a fatality occurring while a vessel is utilizing DP is minimized under the proposed alternative.

Because of the frequency of DP related incidents, as well as the severe consequences that could occur as the result of an incident, the Coast Guard decided that the benefits that would be gained through requiring compliance from existing non-drilling DP vessels such as OSVs and crewboats (particularly the life safety considerations) would outweigh any additional costs that would be incurred by industry.

In order to minimize the impact on existing OSVs and crewboats, the Coast Guard developed the proposed alternative, which uses a phase-in schedule to provide existing non-drilling vessels with some flexibility in meeting the provisions of this proposed alternative. Further, the Coast Guard decided to grandfather existing non-drilling vessels from being required to comply with the most costly provisions in this rule–the provisions that would require a vessel using DP to use a DP-2 system or higher and obtain a DP-2 or higher class notation.

Through providing flexibility to existing OSVs and crewboats, the proposed alternative minimizes costs, without sacrificing benefits that could accrue from a larger population of vessels.


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Impact on Small Entities

This RA includes an Initial Regulatory Flexibility Analysis (IRFA) that considers the impacts ofthe rulemaking on small entities, including businesses.

Under the Regulatory Flexibility Act (5 U.S.C. 601 – 612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises of small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and government jurisdictions with populations of less than 50,000. We did not find any drilling or non-drilling vessels owned by governments or non-profits.

Through this analysis, we have determined that there are no existing MODUs that are owned or operated by entities below the small business standards set by the Small Business Administration (SBA). We further determine that 40 percent of existing OSVs of at least 500 GT ITC, 42 percent of existing OSVs under 500 GT ITC, and 37 percent of existing crewboats are owned or operated by entities below the SBA small business standards.12

Through our analysis, we estimate that there are 14 owners and operators of existing OSVs of at least 500 GT ITC that use DPS defined as small by the SBA threshold. The annual revenue stream of the entities affected by this rule that are defined as small is within a range of $630,000 to $51,834,000.

Similarly, we then examined revenue data for owners and operators of OSVs under 500 GT ITC. Although these owners would incur some cost as a result of this rule, existing vessels in this group would be grandfathered from the most costly provisions. During the first year ofimplementation, we estimate that all OSVs under 500 GT ITC would incur a cost less than 0.1 percent of their annual revenue stream.

Lastly, we examined the revenue streams of owners and operators of crewboats that use DPS on the U.S. OCS. Like OSVs under 500 GT ITC, these vessels would be grandfathered from having to comply with the most costly provisions in this rule. During the first-year of implementation,we estimate that 33 percent of these 3 owners or operators would incur a cost under 1 percent of their annual revenue stream. The remaining 67 percent would incur costs under 3 percent of their annual revenue stream.

Table ES-17 summarizes our findings.

12 We have separated our analysis of OSVs into OSVs of at least 500 GT ITC and OSVs under 500 GT ITC in order to account for the phase-in schedule which would exempt OSVs of less than 500 GT ITC from many DP requirements.


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Revenue Impact Range

Impact from First Year Costs

CrewboatsOSVs under 500

GT ITCOSVs of at least

500 GT ITC

Expected Cost per Vessel $4,381.23 $54.88 $77,778.88

0% < Impact < 1% 33% 100% 7%

1% < Impact < 3% 67% 0% 21%

3% < Impact < 5% 0% 0% 29%

5% < Impact < 10% 0% 0% 7%

Above 10% 0% 0% 36%

Table ES-17: Revenue Impacts for Small Entities Affected by NPRM


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OMB A-4 ACCOUNTING STATEMENT

While this proposed rule is not expected to exceed the threshold for economic significance nor has it been classified as significant under section 3(f) of Executive Order 12866, Regulatory Planning and Review, we have prepared a preliminary accounting statement showing the classification of impacts associated with the rulemaking.


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Agency/Program Office: U.S. Coast Guard

Rule Title: Dynamic Positioning Requirements for MODUs and Other Vessels Conducting Outer Continental Shelf Activities

RIN#: RIN 1625-XXXX

Date: February 2013

Category Primary Estimate Minimum Estimate High Estimate Source

Benefits

Annualized monetized benefits ($ Mil)

$16,494,345 7% 7% 7%RA

$17,149,517 3% 3% 3%

Annualized quantified, but unmonetized, benefits

None RA

Unquantifiable Benefits

Reduced risk of fatalities and injuries

RAReduced risk of subsea spill

Greater transparency on why DP systems fail

Costs*

Annualized monetized costs ($ Mil)

$20,597,670 7% 7% 7% RA

$21,035,175 3% 3% 3% RA

Annualized quantified, but unmonetized, costs

None

Qualitative (un-quantified) costs

None

Transfers

Annualized monetized transfers: “on budget”

None

From whom to whom?

Annualized monetized transfers: “off-budget”

None

From whom to whom?

Miscellaneous Analyses/Category

Effects on State, local, and/or tribal governments

None

Effects on small businessesWe expect the rulemaking to impact small businesses owning OSVs under 500 GT ITC and crewboats.

RA

Effects on wages Not determined

Effects on growth Not determined

Note : Discount rate appears to the right of the estimates.* Includes both costs to industry and government

1) Introduction

This Regulatory Analysis (RA) provides an assessment of the impacts to industry from proposed changes detailed in the Dynamic Positioning Requirements for MODUs and Other Vessels Conducting Outer Continental Shelf Activities NPRM. We did not attempt to replicate preciselythe regulatory language of the proposed rule in this RA; the regulatory text, not the text of this RA, would be legally binding.

In the NPRM, the Coast Guard proposes to establish minimum safety standards based uponInternational Maritime Organization MSC/Circ.645 and Marine Technology Society (MTS) guidance for Dynamic Positioning (DP) systems used by vessels to conduct Outer Continental Shelf (OCS) activities. Establishing minimum standards for DP systems used to conduct OCS activities is necessary to improve the safety of people and property engaged in such operations. This proposed rule would decrease the risk of a loss of position by a dynamically positioned MODU or other vessel that could result in catastrophic loss of life, pollution and/or other damages. Table 1-1 outlines the requirements proposed in this rulemaking, delineating applicability by vessel type and whether the vessel is an existing or new build.

Table 1-1: Dynamic Positioning Requirements based on Vessel Type

Requirement

CrewboatOffshore Supply

Vessel less than 6,000 GT ITC

Offshore Supply Vessel of at least 6,000 GT ITC

MODU

ExistingNew Build

ExistingNew Build

Existing New BuildExisting and New

Build

33 CFR 140.315 (d): all applicable vessels must make available a copy of a DPO's or DPOQ's certificate of completion of DP training courses.

Yes Yes Yes Yes Yes Yes Yes

33 CFR 140.320 (a): all applicable vessels must have a master and the minimum number of mates while the vessel is underway.

Yes Yes Yes Yes Yes Yes Yes

46 CFR 62.40-15 and 62.40-20: all applicable vessels must develop and maintain a FMEA and FMEA test proving document.

Phased-in Yes Phased-in Yes Phased-in Yes Yes

33 CFR 140.335: all applicable vessels must develop and maintain CAMO and a WSOC or an ASOC, respectively.


33 CFR 140.335 (h): all applicable vessels must report a dynamic positioning incident to the DPSAO that conducted the vessel’s DP surveys, and conduct a DP investigation.



33

46 CFR 61.50-4 (b): all applicable vessels must complete an annual report that contains a summary of each DP incident investigation that was conducted during that year and submit the report to the OCSNCOE.


33 CFR 140.335 (i): all applicable vessels must report to the cognizant OCMI DP incidents that involve an emergency disconnect or serious marine incident.


33 CFR 140.335 (k) : all applicable vessels must meet DP survey and plan review requirements prior to receiving a DPVAD.


46 CFR 62.40-5 (b): all applicable vessels must have at a minimum a DP-2 system

No Yes No Yes No Yes Yes

46 CFR 62.40-5 (b): all applicable vessels must obtain a DP-2 class notation.

No Yes No Yes No Yes Yes

46 CFR 61.50-2: all applicable vessels are required to report the time, date, and location of initial, periodic, and annual surveys to the OCMI.


33 CFR 140.345 and 46 CFR 62.20-2: all applicable vessels are required to submit the DP System Plan to the MSC.

No No No No No Yes Yes

*Phase-in requirements are applicable if the vessel is of at least 500 GT ITC

For further discussion regarding the development of these changes, see the preamble “Background and Purpose” section of the NPRM and Request for Comment publication.

As the oil and gas industry move farther and farther offshore and into deeper waters, Mobile Offshore Drilling Units (MODUs) and other vessels engaged in Outer Continental Shelf (OCS) operations including Offshore Supply Vessels (OSV’s) face an increasing challenge to maintain position. In particular, since environmental conditions are more extreme and increased water depth makes conventional mooring no longer feasible, these vessels increasingly use dynamic positioning (DP) systems to maintain position when conducting drilling and/or support functions including personnel transfer, dive support and other critical operations. These systems typically involve multiple sensors (position-sensing, environmental monitoring, etc.), a computer to process these data, connections to propulsion and maneuvering control systems, and a user interface to enable operators to set commands, monitor system performance and potentially step in when systems are not working properly. Costs for such systems range from $350,000 to $408,000 per vessel depending on requirements of the vessel and its operation. When properly designed and operated within design limits, DP systems provide industry with an ability to safely maintain position, using these rapidly evolving, computerized systems to stay within meters of their desired location even in the face of wind, wave and current forces. However, these systems are not immune from failures, and because MODUs and other vessels in this industry perform high hazard industrial missions including conducting personnel transfers and handling large quantities of oil and hazardous material, a resultant loss of position could result in an incident that leads to a catastrophic loss of life or spillage of hazardous substances.

During interactions with industry at National Advisory Committees, DP conferences, and industry training seminars in DP design and operations, industry expressed the need for a uniform DP standard from the United States as a Coastal State. Additionally, the Coast Guard has identified the lack of DP standards as allowing a potentially catastrophic risk to go unmitigated. In response, the Coast Guard has developed this rulemaking which would provide MODUs and other vessels that conduct OCS activities while using a DP system on the U.S. OCS a uniform standard that addresses design, construction, and operation of DP systems. This standard would aid owners and operators in safely meeting energy market demands and pursuingoffshore energy ventures that are farther offshore and in deeper waters.

To minimize the costs associated with new standards, the Coast Guard has based requirements on established guidelines widely used by today’s DP industry, specifically IMO MSC Circ. 645 and certain requirements in the Marine Technology Society’s DP Operations Guide. These standards complement each other, with IMO MSC Circular 645 providing for the adequate design of such systems and the MTS DP Operations Guide providing standards to ensure that they are operated properly. The Coast Guard has also limited the application of the DP systemdesign and operations standards to existing and new MODUs and only other vessels that conduct OCS activities while using a new or upgraded DP system. Existing non-drilling vessels that conduct OCS activities while using a DP system are “grandfathered” from being required to comply with the most costly design requirements, and are provided a phase-in period to comply with the operational DP requirements. This phase-in period was designed to provide industry with some flexibility in enacting these requirements, while still providing for vessel and personnel safety. The smallest non-drilling vessels, those less than 500 tons, are exempt from


35

both the design and operational requirements and will incur minimal costs for reporting and documentation.


The IMO currently divides DP equipment systems into three classifications: equipment class 1 (DP-1), equipment class 2 (DP-2), and equipment class 3 (DP-3). These classes primarily diverge in their level of reliability, with DP-1 classed systems offering the least reliability, and DP-2 and DP-3 classed systems offering increasing amounts of reliability. This reliability is achieved through redundancy of critical components such as computer systems, wind sensors, vertical reference units, gyrocompasses, bus bars, generators, and thrusters used to maintain positioning of the vessel.

Under a DP-1 system, the failure of a single component would likely result in a DP systemincident, which could lead to a loss of position and consequences that could include catastrophic loss of life, pollution, and/or property damage. Conversely, a DP-2 system is designed to reduce the threat of a loss of position in the event of a single “active component” equipment failure (e.g. position reference systems, generators, electrical distribution components, control computers, or thrusters) because of the increased reliability achieved by the “active component” equipment redundancy. This increased reliability is further ensured through failure analysis and testing. DP-3 systems, which achieve physical independence by segregating system components into separate locations with fire and watertight boundaries, are designed to further reduce the threat of a loss of position occurring if a fire or flooding was to remove an entire compartment, such as the vessel’s engine room. While this rule imposes no carriage requirements, nor does it require use of DP, it does require that DP used in certain critical situations (e.g., transfer of personnel and/or hazardous materials) meet DP-2 requirements to ensure that a single failure of a primary component does not lead to catastrophic consequences.

The IMO MSC/Circ. 645 better enables a MODU or other vessel to perform its industrial mission because the DP system is more fault-tolerant and fault-resistant, and has greater capability to maintain position after a worst-case failure. A fault tolerant system is designed tocontinue to function without interruption following an error or failure of a subsystem or component within the system, and is achieved through multiple design approaches based on the level of performance required for the industrial mission of the vessel. The design limits of such systems reduce the risk of a loss of position by reducing reliance upon the human element.

Operations

The Marine Technology Society’s DP Operations Guide complements the design standards and classification by focusing on the safe operation of these systems, provides guidance on how to successfully develop and implement operational measures and decision support tools. Specifically, the rule incorporates MTS requirements for Activity Specific Operating Criteria/Well Specific Operating Criteria (ASOC/WSOC) and Critical Activity Mode of Operations (CAMO) to operate a DP system within its design limits. The WSOC/ASOC are visual decision support tools that provide DPOs/DPOQs an easy to use tool to summarize limits to safe operating conditions and indicate when DP operators must take corrective action, such as


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disconnecting a well pipe because of the potential or actual loss of position. The goal of this tool is to prevent a loss of position and potential costly consequences by making it easier to DP operators to respond correctly in the event of an emergency.

Manning and Training

To ensure that operators and crews of MODUs and other vessels that use dynamic positioning to maintain position while operating on the U.S. OCS are properly manned, have an in-depth knowledge of the DP system, are able to constantly and consistently monitor it, and take manual control of the system when appropriate, the proposed rule contains minimum manning and training requirements. These training requirements mandate that an operator have a thorough knowledge of the CAMO and either the ASOC, or WSOC, and must be familiar with the vessel’s FMEA. These provisions would reduce the likelihood that vessel and personnel casualties occur because of operator fatigue or inexperience using the system.

Reporting

The proposed rule contains requirements that owners/operators report DP system incidents involving a reactive change from “green” to “red” as defined by the ASOC or WSOC and anannual summary report of “green” to “yellow” and “green” to “red” changes. Reporting DP incidents (green to red) and near misses (green to yellow) will assist Coast Guard in understanding the frequency, causes and potential consequences of DP incidents in order to better ensure safety for this evolving technology.

In general, this NPRM would:

Increase vessel safety and protection of persons and the maritime environment through the use of design and operational standards that prevent a loss of position by a MODU or other vessel conducting Critical OCS activities while using a DP system.

Ensure compliance with regulations through mandatory surveys that would test theDP systems and FMEAs of MODUs and other vessels.

Increase accountability by requiring MODU and other vessel owners and operators to document system designs and operating procedures.

Increase understanding of why DP systems fail by requiring MODU and other vessel owners and operators to describe when and why a DP incident occurred.

1.1 Need for Federal Regulatory Action

Agencies take regulatory action for various reasons, one of which is the failure of markets to reach socially optimal outcomes. The market failures prompting this proposed rule result from the absence of economic incentives that promote an optimal outcome.

The absence of economic incentives that promote an optimal outcome results in a negative externality. A negative externality is an adverse by-product of a transaction not accounted for within the transaction. In this case, MODUs and other vessels that use DP to engage in OCS


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activities that operate with lower safety standards may cause harm or increased risk of harm tohuman safety and the environment. The cost of these lower safety standards (increased risk) isnot completely borne by the OSV or MODU owners, so they are external to the business decisions of these owners. The crew, which may face increased risk from lower safety standards, may not have any say in safety-related decisions. Since the crew may be adversely affected by business decisions which it may not be able to mitigate through increasing its price (labor cost), it absorbs the cost of the externality (increased risk from lower safety standards) which is a market failure. Oil spills that result from OSV or MODU accidents also impose an externality in the form of environmental damage and clean-up costs that are similarly not borne directly by the OSV and MODU owners.

1.2 Regulatory Alternatives

The Coast Guard considered the following alternatives:

Proposed Alternative (NPRM) Alternative 2: Grandfathering all existing non-drilling DP vessels Alternative 3: No grandfathering and no phase-in period Alternative 4: Proposed Alternative plus Additional DP manning requirements

for non-drilling vessels with new or upgraded DP systems Alternative 5: Alternative 3 plus Additional DP manning requirements

When comparing alternatives, the Coast Guard looked at the results of a cost-benefit and cost-effectiveness analysis for several different levels of vessel population compliance. In selecting the proposed alternative, we chose the alternative that provided industry with the most flexibility without limiting the effectiveness of the proposed rule. The proposed alternative would provide risk reduction at the lowest net cost.

1.3 Assumptions: Wages

To account for the opportunity cost to industry of complying with new Coast Guard requirements concerning DP systems, the Coast Guard uses an average wage rate estimated by a Coast Guard subject matter expert from the Eighth District or data presented by The Bureau of Labor Statistics (BLS).

According to an Officer-in-Charge, Marine Inspector (OCMI) of the Eighth District, a captain, master, or owner/operator of a DP operated vessel has an average daily wage of $850. It is expected that a captain, master, or owner/operator would work 8 hours per day. The Coast Guard calculated that the loaded hourly wage of a captain, master, or owner/operator is $143. 13

In addition, a mate or navigational watch on a DP operated vessel has an average daily wage of $500, according to an OCMI of the Eighth District. It is expected that a mate would also work 8

13 The median income listed by BLS for a captain or master is $39 unloaded. Based on input from District personnel, a captain or master of a vessel with DP would require a higher level of expertise and experience than other vessels and would be paid a higher wage.


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hours per day. Using a load factor of 1.42, the Coast Guard calculated that the loaded hourly wage of a navigational watch is $89. 14

In order to calculate the loaded hourly wage for technical ship engineers, the Coast Guard uses the BLS’ 2012 median hourly wage for “Ship Engineers”. The Coast Guard then applied a load factor of 1.42 to the median hourly wage to calculate a loaded hourly wage of $57 for ship engineers.

Furthermore, we use the BLS’ mean hourly wage for “Transportation Inspectors” to calculate the hourly loaded wage of a DP surveyor from an organization highly qualified in DP assurance. Using the same approach, the Coast Guard calculates a loaded hourly wage of $41 for a DP surveyor.

The Coast Guard has also included the loaded wage rate used by government employees who would be affected by this rulemaking.15

Table 1-2 summarizes the wage rates used throughout the regulatory analysis.

Table 1-2: Summary of Wage Rates Used in the Analysis

Personnel Category Loaded Wages Source

Captains/Master/Owners $143.00 Coast Guard subject matter expert from Eighth District

Mate/Navigational Watch $89.00 Coast Guard subject matter expert from Eighth District

Ship Engineers $57.00 BLS, Occupational Employment and Wages, May 2013, 53-5031

Ship Engineers, accessed at http://www.bls.gov/oes/2013/May/oes535031.htm

DPSAO Surveyor $41.00 BLS, Occupational Employment and Wages, May 2013, 53-6051

Transportation Inspectors, accessed at http://www.bls.gov/oes/2013/May/oes536051.htm

OCMI $75.00 Commandant Instruction 7310.1O (O-3 in Government Rate)

* Loaded wages are rounded to the nearest dollar.*Dollar figures are in 2013 terms.

14 BLS, Employer Costs for Employee Compensation, 2nd Quarter 2014, Private Industry, Wages/Salaries: $20.55 per hour, Cost of Benefits: $8.68 per hour, Ratio: $8.68/$20.55=.42, Load Factor: 1.42. http://www.bls.gov/news.release/pdf/ecec.pdf15 DHS, Coast Guard Reimbursable Standard Rates, COMDTINST 7310.1O http://www.uscg.mil/directives/ci/7000-7999/CI_7310_1N.pdf


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1.4 Assumptions: Value of Life and Injuries

To monetize the value of fatalities and fatalities prevented, we use the concept of “value of statistical life” (VSL), which is commonly used in safety analyses. The VSL does not represent the dollar value of a person’s life, but the amount society would be willing to pay to reduce the probability of death. We currently use a value of $9.1 million as an estimate of VSL.16

1.5 Overview of Regulatory Analysis and Requirements

This RA presents the initial examination of costs, benefits, and other impacts of this proposed rule. It also contains an analysis of the potential impacts on small businesses. Section 2 of this RA describes the derivation of the affected population. Section 3 summarizes the cost estimatesto industry. Section 4 discusses benefits of the NPRM. Section 5 analyzes regulatory alternatives. Section 6 presents the Small Business Analysis, and Section 7 presents the Collection of Information.

16 “Guidance on Treatment of the Economic Value of a Statistical Life,” prepared for the U.S. Department of Transportation, April 2013. http://www.dot.gov/sites/dot.dev/files/docs/VSL%20Guidance%202013.pdf


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2) Affected Population

When developing this rulemaking, the Coast Guard pursued the most cost-effective alternative, in order to adequately provide for vessel and personnel safety. Further, this alternative considered a vessel’s risk profile and current levels of compliance with standard industry practices among existing vessels when determining which vessels should comply with each provision and the time in which they should comply, with lower risk vessels exempted from requirements and/or given extended time to comply as compared to higher risk vessels.

Vessels affected by this rule can be considered in one of two categories; drilling and non-drilling vessels. For the former, the impacted vessels (typically referred to as mobile offshore-drilling units, or MODUs) present high risk given not only the potentially catastrophic consequences of a DP failure, but also because MODUs operate in DP mode for longer periods of time. Furthermore, it was determined through examining each affected MODU’s vessel specification sheet, as well as through conversations with members from industry, that all existing MODUs are already operating with a DP-2 system or higher, and that approximately 90 percent of existing MODUs would be compliant with all of the provisions in this rule even in the absence of a rule. Given this, the Coast Guard is proposing that all existing MODUs must comply with this rule in its entirety immediately upon issuance of a final rule, with the 10 percent that are not compliant incurring additional costs.

However, through similar research and conversations with members of industry, it was determined that a significant portion of the existing population of non-drilling vessels that use DP systems on the U.S. OCS would not be in compliance with any rulemaking that required all vessels that have a DP system to be equipped with a DP-2 system or higher. Of existing non-drilling vessels that use a DP system on the U.S. OCS, only 60 percent of existing OSVs and 70 percent of existing crewboats would be in compliance with this equipment requirement. Therefore, in order to minimize this rules burden on industry, the Coast Guard decided to exempt existing non-drilling vessels from this requirement. Instead, the Coast Guard would only require existing non-drilling vessels to comply—immediately upon issuance of a final rule–with the training and manning requirements. Additionally, the Coast Guard would require non-drilling vessels of at least 500 GT ITC to meet DP operational design requirements according to a phase in-period detailed in Table 2-1.


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Table 2-1: Phase in Schedule for Operational Requirements for Vessels (except MODUs) with existing DP systems17

Tonnage of Non-Drilling VesselDate Requirements

Effective

At least 1,900 GT ITC Date of FR + 3 years

At least 900 GT ITC Date of FR + 6 years

Greater than 500 GT ITC Date of FR + 9 years

This phase-in schedule was chosen for existing non-drilling vessels of at least 500 GTC ITC, because the Coast Guard believes that a vessel’s size is a major determinant of the vessel’s riskprofile – a loss of position could result in more significant consequences for larger vessels, on average, than smaller vessels. Therefore, larger non-drilling vessels would be required to comply with the DP operational requirements at an earlier date than smaller non-drilling vessels. The smallest category of non-drilling vessels (less than 500 GTC ITC) are exempt from the operational requirements.

Table 2-2 summarizes the population of drilling and non-drilling vessels that would be affected by this rulemaking.

17 All existing MODUs would need to comply with the requirements in this proposed rule by the effective date of the final rule.

Table 2-2: Summary of Affected Population

Year

Future OSVs Less Than

6,000 GT ITC

Existing OSVs Less Than

6,000 GT ITC18

Phased-in OSVs Less

Than 6,000 GT ITC19

Future OSVs of at least

6,000 GT ITC20

Existing OSVs of at least 6,000

GT ITC

Phased-in OSVs of at

least 6,000 GT ITC

Future MODUs

Existing MODUs

Future Crewboats

Existing Crewboats

Base - 563 - - 20 - - 53 - 43

1 22 - 0 5 - 0 6 - 3 -

2 46 - 0 10 - 0 14 - 6 -

3 54 - 0 15 - 0 20 - 10 -

4 77 - 224 20 - 20 27 - 12 -

5 102 - 0 25 - 0 33 - 14 -

6 128 - 0 30 - 0 38 - 15 -

7 159 - 183 35 - 0 43 - 16 -

8 195 - 0 40 - 0 48 - 17 -

9 233 - 0 45 - 0 53 - 18 -

10 272 - 85 50 - 0 57 - 20 -

18 The existing population of OSVs under 6,000 GT ITC includes 492 vessels of at least 500 GT ITC but less than 6,000 GT ITC that use DP systems, and 71 vessels under 500 GT ITC.19Through interviews with private owners and operators of OSVs, the Coast Guard determined that 50 percent of the existing fleet of OSVs of at least 500 GT ITC but under 6,000 GT ITC that use DP systems would not be compliant with the phase-in requirements.20 We forecast that 4 U.S.-flagged OSVs of at least 6,000 GT ITC and 1 foreign-flagged OSV of at least 6,000 GT ITC would be built per year.

This rulemaking would affect approximately 583 existing OSVs (460 U.S.-flagged), 53 existing MODUs (2 U.S.-flagged), and 43 existing crewboats (42 U.S.-flagged). The number of existing OSVs, MODUs, and crewboats that would be affected by this rulemaking was derived from the Coast Guard’s Marine Information Safety and Law Enforcement System (MISLE) database. Using historical population data, we then forecasted the population growth that would occur during the following 10 years after issuance of a final rule. We estimate that during the 10-year period of our study, an additional 322 future OSVs (which include OSVs less than 6,000 GT ITC and OSVs of at least 6,000 GT ITC), 57 future MODUs, and 20 future crewboats would be built. This future population of OSVs, MODUs, and crewboats was forecasted using a regression model based on vessel growth occurring from 1975 through 2014.21

Table 2-3 provides a summary of the annual number of vessels, broken down my subtype, affected by the provisions in this rule.

21 See Appendix A for vessel population growth models.

Table 2-3 Summary of Affected Population by Requirement

Provision Vessel TypeYear

1 2 3 4 5 6 7 8 9 10

Minimum DP System Requirements

Section 3.2 - 33 CFR 140.320 (d) (DP Training Requirements) 22

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 610 639 652 680 710 741 777 818 861 905

Crewboats 46 49 53 55 57 58 59 60 61 63

Section 3.3 - 33 CFR 140.325 (DP Manning Requirements) 23

MODUs 6 6 6 6 6 6 6 6 6 6

OSVs 0 0 0 0 0 0 0 0 0 0

Crewboats 0 0 0 0 0 0 0 0 0 0

Intermediate DP System Requirements

Section 3.4 - 33 CFR 140.335 (b) (2) (Develop a FMEA) 24

MODUs 0 0 0 0 0 0 0 0 0 0

OSVs 12 13 5 124 13 13 108 18 20 64

Crewboats 2 2 2 1 1 1 1 1 1 2

Section 3.5 - 33 CFR 140.335 (b) (4) (Develop a CAMO and ASOC/WSOC) 25MODUs 18 2 2 2 2 2 2 2 2 1

OSVs 15 16 8 137 16 16 111 21 23 67

22 The affected population for this requirement would be required to make available 8 DPO/DPOQ training certificate prior to conducting OCS activities, and then 3.112 DPO’s/DPOQ’s training certificates in subsequent years. It is estimated that 3.112 training certificates would need to be made available in later years in order to account for personnel turnover, which the Coast Guard assumes would be at a rate of 38.9%. This turnover rate was calculated in the BLS’s Job Openings and Labor Turnover Survey for 2012: http://www.bls.gov/jlt/.

23 After examining applicable vessel’s Minimum Safe Manning Certificate, the Coast Guard has determined that only 6 Liberian flagged MODUs would not comply with the provisions described inSection 3.3 of this analysis. After reviewing proposals for the construction of new MODUs, the Coast Guard has determined that all new MODUs would comply with the Manning requirements.

24 Through interviews with private MODU owners, it was determined that all existing and future MODUs would comply with these requirements. However, through interviews with OSV and crewboat owners, it was estimated that 50 percent of future OSVs, excluding OSVs of at least 6,000 GT ITC who are expected to comply, and crewboats would not have developed a FMEA or FMEA test proving document in the absence of this rule.

25 Through interviews with private MODU owners, it was determined that all existing and future MODUs would have developed a WSOC in the absence of this rule, while only 70 percent of existing and future MODUs would have developed a CAMO. Through interviews with OSV and crewboat owners, it was estimated that 50 percent of future OSVs, including OSVs of at least 6,000 GT ITC who are expected to comply, and future crewboats would not have developed a CAMO or ASOC in the absence of this rule.


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Crewboats 2 2 2 1 1 1 1 1 1 2

Section 3.6 - 33 CFR 140.335 (h) (Report DP Incidents) 26

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 27 56 69 341 371 402 621 662 705 834

Crewboats 3 6 10 12 14 15 16 17 18 21

Section 3.6 - 33 CFR 140.335 (h) (Conduct DP Investigations)

MODUs 0 0 0 0 0 0 0 0 0 0

OSVs 15 29 36 172 187 202 312 332 355 418

Crewboats 3 6 10 12 14 15 16 17 18 21

Section 3.6 - 33 CFR 140.335 (h) (Submit DP Investigation Reports)

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 27 56 69 341 371 402 621 662 705 834

Crewboats 3 6 10 12 14 15 16 17 18 21

Section 3.7 - 46 CFR 61.50-4 (b) (Submit Annual DP Investigation Reports)

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 27 56 69 341 371 402 621 662 705 834

Crewboats 3 6 10 12 14 15 16 17 18 21

Section 3.8 - 33 CFR 140.335 (j) (Report Emergency Disconnects) 27

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 0 0 0 0 0 0 0 0 0 0

Crewboats 0 0 0 0 0 0 0 0 0 0

Section 3.8 - 33 CFR 140.335 (j) (Report Serious Marine Incidents) 28

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 27 56 69 341 371 402 621 662 705 834

Crewboats 3 6 10 12 14 15 16 17 18 21

26 Using IMCA data on reported DP incidents, the Coast Guard estimates that a vessel would experience 2.90 DP status changes from green to red or yellow per year.

27 Using IMCA data, the Coast Guard estimates that a MODU using DP would need to initiate an emergency disconnect 19 percent of the time it experienced a DP status change from green to red (at a rate of 1.45 times a year).

28 Using IMCA data, the Coast Guard estimates that a vessel using DP would have a serious marine incident 5 percent of the time it experienced a DP status change from green to red (at a rate of 1.45 times a year).


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Section 3.9 - 33 CFR 140.335 (k) (Receive a DPVAD) 29

MODUs 59 8 6 7 6 64 13 11 12 10

OSVs 27 29 13 272 30 58 248 54 315 159

Crewboats 3 3 4 2 2 4 4 5 3 5

Section 3.18 - 33 CFR 140.335 (k) (Report DP Surveys)

MODUs 59 67 73 80 86 91 96 101 106 110

OSVs 27 56 69 341 371 402 621 662 705 834

Crewboats 3 6 10 12 14 15 16 17 18 21

Standard DP System Requirements

Section 3.10 - 46 CFR 62.40-5 (b) (Install a DP-2 System) 30

MODUs 0 0 0 0 0 0 0 0 0 0

OSVs 0 0 0 0 0 0 0 0 0 0

Crewboats 1 1 1 0 0 0 0 0 0 0

Section 3.11 - 46 CFR 62.40-5 (b) (Receive DP-2 Class Notation) 31

MODUs 0 0 0 0 0 0 0 0 0 0

OSVs 12 13 5 12 13 13 16 18 20 21

Crewboats 3 3 4 2 2 1 1 1 1 2

Enhanced DP System Requirements

Section 3.19 - 46 CFR 62.20-2 (b) (Submit DP System Plans)

MODUs 59 8 6 7 6 5 5 5 5 4

OSVs 5 5 5 5 5 5 5 5 5 5

Crewboats 0 0 0 0 0 0 0 0 0 0

29 A DPVAD would need required to be renewed every 5 years.

30 Through interviews with private MODU and OSVs owners, it was determined that all future MODUs and OSVs would be built with a DP- 2 system. However, all crewboats are not expected to be under compliance with this requirement. The Coast Guard estimates that 1 crewboat would install a DP-2 system in order to comply with this rule during the first three years following issuance of a final rule. In later years, all new crewboats are already expected to be built with a DP-2 system even in the absence of this rule.

31 Through interviews with private MODU owners, it was determined that all existing and future MODUs would comply with these requirements. However, through interviews with OSV and crewboat owners, it was estimated that 50 percent of future OSVs, excluding OSVs of at least 6,000 GT ITC who are expected to comply, and all future crewboats would not have obtained a DP-2 class notation in the absence of this rule.

3) Discussion of Costs

This section describes the cost impacts to industry associated with provisions set forth in this proposed rulemaking.

The offshore energy market has experienced increased demand for high endurance operations required by deepwater exploration far offshore. “Since the first major deepwater leasing boom in 1995 and 1996, a sustained and robust expansion of deepwater drilling activity has occurred, largely enabled by major advances drilling technology. By 2009, 80 percent of offshore oil production and 45 percent of natural gas production occurred in water depths in excess of 1,000 feet, and industry had drilled nearly 4,000 wells to those depths.”32 Accordingly, this trend necessitated industry to replace traditional mooring techniques with computer systems (DPS) that are designed to maintain a vessel’s position using a position referencing system.

Although Coast Guard regulations have not kept pace with this new technological development, industry has developed the IMO MSC/Cir.645 and MTS guidelines for DP operation in order to ensure that their vessels operated at acceptable levels of safety. Based on input from industry representatives, all major oil companies active in the OCS have adopted, or are adopting, the MTS DP Operation Guidelines. Oil companies recognize the high risk environment that DP vessels operate in and the potential catastrophic consequences of a DP failure. To minimize the risk of failures, industry has identified that DP operational standards are needed, and that the MTS DP Operation Guidelines fills this need. As a result, new builds are being built to these standards in order to compete for work. Additionally, vessels desiring to compete for work on the international market already must comply with these standards.

Therefore, by integrating these standards and guidelines into this rule, we expect the impact on industry to be significantly reduced, particularly as compared to the potential for a Coast Guard unique solution.

3.1 Changes to 33 CFR part 140 -- Dynamic Positioning Systems

In part 140, the Coast Guard developed regulations that would address the design, technical, and operational aspects of foreign and domestic vessels that utilize DP systems in U.S. waters and over the U.S. OCS. Many of these requirements are based on existing international convention standards established for vessels that utilize DP systems as described in the IMO MSC/Circ.645 and the MTS DP Operation Guidelines, which based on discussions with industry, we estimate that 90 percent of existing MODUs and 50 percent of existing OSVs and crewboats would comply with in the absence of this rule. Furthermore, we expect that all future MODUs and 50 percent of future OSVs and crewboats would comply with provisions in IMO MSC/Circ.645 and MTS DP Operation Guidelines in the absence of this rule. However, one divergence from existing standards is that the Coast Guard would require all existing MODUs, and all future

32 Department of the Interior. “Increased Safety Measures for Energy Development on the Outer Continental Shelf.” May 27, 2010.


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OSVs, crewboats, and MODUs that perform DP while conducting critical operations on the U.S. OCS to operate with DP-2 systems or higher, if the MODU or other vessel installs a DP system on or after issuance of an effective rule.

Table 3-1 summarizes these changes and their impacts, which are described in further detail subsequently.

Table 3-1: Changes to 33 CFR part 140 -- Dynamic Positioning Systems

Subject Baseline Deviation Cost Impact

140.300 Applicability Requires MODUs, and other vessels that use a DP system to meet the minimum DP standard requirements of this rule.

No cost as this is administrative in nature.

140.305 Definitions Adds new definitions for a DPO, DPOQ, and DP System.

No cost as this is administrative in nature.

140.310 DP System Personnel Requirements Requires all vessels that use a DP system to conduct OCS activities to have a DPO or DPOQ that is properly trained and has no other responsibilities outside of DP.

No net cost. This provision incorporates international standards understood to be used given industry practice and desire to compete in international markets. 33

140.315 DP System Training Requirements Defines the minimum training requirements that all DPOs and DPOQ must have before operating DP system.

The training requirements of this section incorporate international standards understood to be used given industry practice and desire to compete in international markets, and therefore will not result in any net cost to industry.

Requires owners or operators to make available their DPO's/DPOQ's course completion certificates for DP training during an inspection.

Cost for making available the completion certificates for DPOs/DPOQs detailed below. The Coast Guard estimates that it would cost an owners or operators $14.30 per DPO/DPOQ certificate, and $7.50 for government personnel to review the certificate (see Tables 3-3 and 3-5 for more detail).

33 International Marine Contractors Association, “The Training and Experience of Key DP Personnel.” IMCA M 117 Rev.1 Feb 2006. http://www.imca-int.com/media/73073/imcam117.pdf


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140.320 DP System Manning Requirements Defines the minimum manning requirements that all MODUs must adhere to while using DP to conduct OCS activities.

Cost to hire two masters and/or six navigational watches depending on their current staffing level detailed below. The Coast Guard estimates that it would cost an owner or operator $416,416 to comply with the master requirements and $777,504 to comply with the navigational watch requirements (see Table 3-6 and Table 3-7 for more detail).

140.325 DP System Operating Requirements Requires all vessels that use a DP system to conduct OCS activities meet the DP Operation Standards in paragraph 4.4 IMO MSC/Circ. 645

No net cost. This provision incorporates international standards understood to be used given industry practice and desire to compete in international markets.

140.330 Minimum Design Standards and Testing

Requires all vessels that use a DP system to conduct OCS activities meet the DP Design Standards in paragraph 3.4.1 of IMO MSC/Circ. 645 as well as the provisions in 33 CFR 140.310 - 140.325.

No net cost. This provision incorporates international standards understood to be used given industry practice and desire to compete in international markets. 34

140.335 Intermediate DP system requirements In addition to meeting the minimum DP requirements, all MODUs and new other vessels that use DP while engaging in Critical OSC Activities must also meet certain standards included in the MTS DP Operation Guidelines. Additionally, existing vessels, other than MODUs, of at least 500 GT ITC must meet these standards by the date specified in Table 2-1 of this RA. This requires all applicable vessels and MODUs to conduct a FMEA and to maintain a CAMO, as well as either an ASOC or WSOC respectively.

Costs would be accrued by vessels that conduct critical OCS activities, but have not developed a FMEA or CAMO. The Coast Guard estimates that it would cost $275,000 to develop a FMEA and FMEA test proving document, and $4,560 to create a CAMO (see Table 3-9 and Table 3-10 for more detail).

34 International Marine Contractors Association. http://www.imca-int.com/marine-division/dynamic-positioning.aspx


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All MODUs and new non-drilling vessels must report a DP system incident to the DPSAO that conducted the vessel's initial DP survey when the vessel's DP status changes from green to yellow or red. Additionally, existing non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must start reporting DP system incidents to the DPSAO by the date specified in Table 2-1.

The provision requiring vessels to report DP system incidents would result in a cost to industry detailed below. The Coast Guard estimates that it would cost an owner or operator $61.34 to report an incident to a DPSAO (see Table 3-12 for more detail).

All drilling vessels and new non-drilling vessels must conduct a DP investigation following a DP incident. Additionally, existing, non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must start conducting DP investigations by the date specified in Table 2-1.

The Coast Guard estimates that it would cost an owner or operator $570.00 per DP incident to conduct a DP investigation (see Table 3-15 for more detail).

All drilling vessels and new non-drilling vessels must submit a copy of the DP investigation report to the DPSAO that conducted the vessel's initial DP survey. This report must include the cause of the DP incident, and whether the cause was addressed in the vessel's FMEA, WSOC/ASOC, and CAMO. Additionally, existing non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must comply with this requirement by the date specified in Table 2-1.

The Coast Guard estimates that it would cost $201.10per DP incident for an owner or operator to submit a copy of the DP investigation report to the DPSAO (see Table 3-16 for more detail).

DPSAOs must submit an annual report to the Coast Guard OCSNCOE summarizing each DP investigation that occurred during that year, and whether it is satisfied with the owner or operators response.

Costs would be incurred by industry to create an annual DP incident investigation report. It is expected that it would cost $169.10 to create this report (see Table 3-18 for more detail). Additionally, the Coast Guard has estimated that it would cost $150 for the OCSNCOE to review the report (see Table 3-19 for more detail).


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All MODUs and new non-drilling vessels must report a DP system incident that results in an emergency disconnect or serious marine incident to the cognizant OCMI. Additionally, existing non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must comply with this requirement by the date specified in Table 2-1.

The Coast Guard estimates that it would cost an owner or operator $47.67 per emergency disconnect or serious marine incident to report the event to the Coast Guard (see Tables 3-22 and 3-23 for more detail). Additionally, the Coast Guard estimated that it would cost $25.00 per report for the OCMI to review it (see Table 3-25).

All MODUs and new non-drilling vessels must receive a DPVAD prior to conducting Critical OCS Activities on the U.S. OCS. Additionally, existing non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must comply with this requirement by the date specified in Table 2-1.

Costs would be incurred by industry to complete this form documenting compliance with the DP requirements found in this provision. It is expected that it would cost the DPSAO $10.25 to complete this document, which is expected to then be passed on to vessel owners and operators (see Table 3-26 for more detail).


53

140.340 Standard DP system requirements Requires all drilling vessels that use a DP system to conduct Critical OCS Activities and all non-drilling that use a new DP system to conduct Critical OSC Activities meet the DP Operation Standards in IMO MSC/Circ. 645 and certain requirements in the MTS DP Operation Guidelines (i.e. – FMEA, CAMO, and WSOC/ASOC requirements).

Costs would be accrued by new vessels that conduct Critical OCS Activities using DP systems, but would not otherwise use a DP system classed 2 or higher in the absence of this rule. Costs are expected to accrue from the need for additional equipment, as well as potential mechanical and structural improvements to the vessel detailed below. The Coast Guard estimates that it would cost an additional $876,237 to procure a DP-2 vessel instead of a DP-1 vessel (see Table 3-27 for more detail). 35

Requires all drilling vessels that use a DP system to conduct Critical OCS Activities and all non-drilling that use a new DP system to conduct Critical OSC Activities to obtain DP notation equivalent to DP equipment class 2 or higher from an authorized classification society.

Costs would be accrued by new vessels that conduct Critical OCS Activities using DP systems, but do not have a DP-2 class notation. The Coast Guard estimates that it would cost $64,250 to get classed (see Table 3-29 for more detail). 36

140.345 Enhanced DP system requirements All drilling vessels and applicable non-drilling vessels must receive a DPVAD from the DPSAO that conducted the vessel’s initial, annual, and periodic DP surveys. In addition, all drilling vessels and non-drilling vessels of at least 6,000 GT ITC must also have had the vessel’s DP system plan reviewed by the DPSAO prior to receiving the DPVAD.

The Coast Guard estimates that it would cost an owner or operator $25.60 to have a DPSAO gather and submit a vessel's DP system plan to the Coast Guard. The cost of this requirement will be discussed in more detail in Section 3.19 of this report.

35 Although the owner or operator has the option to not conduct Critical OSC activities or not use DP while conducting Critical OCS activities, the Coast Guard does not anticipate these to be likely alternatives, since these alternatives would effectively remove the vessel from being considered for future work from contractors. Therefore, the Coast Guard believes that the preferred option will be purchasing a DP-2 crewboat instead of a DP-1 crewboat.

36 Through examining vessel specification sheets and through conversations with members of industry, it was determined that all existing and future MODUs would meet this requirement even in theabsence of a final rule. However, only 50 percent of future OSVs are expected to be classed DP-2 in the absence of this rule.

Section 140.310 sets the DP system personnel requirements for MODUs or other vessel that uses DP to conduct OCS activities. This provision requires that all vessels utilizing DP systems to conduct OCS activities must have a DPO operating the DP system or directly supervising a DPOQ operating the DP systems. Additionally, an applicable MODU or other vessel must have, at a minimum, an appropriate number of DPOs and DPOQs to meet the rest hour requirements found in 46 CFR 15.1111. Furthermore, this section defines the role of a DPO or DPOQ, and sets requirements that DPOs and DPOQs must adhere to while performing their duties. As these requirements are either current industry practices or existing Coast Guard requirements, the DPO/DPOQ provisions found in this section would not result in additional costs to industry.

3.2 Costs for 33 CFR 140.315 (d)

Section 33 CFR 140.320 requires MODUs and other vessels that use DP systems to conduct OCS activities have a DPO or DPOQ who satisfies the training requirements defined in this section. With the exception of § 140.315 (d), which requires owners and operators provide, within 48 hours of request, proof of their DPO’s and DPOQ’s training to the requesting authority, all other training requirements listed in this section are taken from the IMCA’s “The Training and Experience of Key DP Personnel” and the IMO MSC/Cir.645. These weredeveloped by/in partnership with industry, and based on conversation with industry, we assess that all applicable vessels are already in compliance with these requirements in order to compete for work in the international marketplace.

The proposed requirement in § 140.315 (d) would affect current DPOs and DPOQs, as well as new DPOs and DPOQs that join the workforce because of either worker turnover or fillingpositions on new vessels entering the industry. The Coast Guard assesses that there will be “at least 8 operators under contract per vessel; with at least 4 operators onboard the DP vessel at all times (2 operators per shift, with each shift lasting 12 hours)”37, so that during the first year of this requirement owners and operators would be required to make available 5,720 DPOs and DPOQs (8 per vessel X 715 vessels—which includes OSVs, MODUs, and crewboats listed in Table 2-2) certificates of completion of the required training to the Coast Guard. In subsequent years, owners and operators would be required to have available certificates of completion of new DPOs and DPOQs that have joined the workforce—these new workers would be needed to fill new positions as a result of vessel population growth, and to replace trained DPOs and DPOQs that have left the workforce. Because the position is still relatively new, there have not been any studies undertaken to specify a turnover rate – as such the Coast Guard has used the BLS’ “Job Openings and Labor Turnover Surveys” average annual turnover rate for the transportation industry (38.9 percent38) to calculate the number of new DPOs and DPOQs needed to replace the existing workers.

37 Bluewater Energy Services. “Ultimate Dynamic Positioning Project Proposal” http://www.marin.nl/web/file?uuid=78788b8d-e5ec-4bef-a371-25c145b53e7f&owner=d071387c-1f1c-4311-a24b-259d508f6142 pg. 13

38 Bureau of Labor Statistics. “Job Openings and Labor Turnover Surveys” http://www.bls.gov/jlt/


55

Table 3-2 displays the number of DPOs and DPOQs that would be required to have a copy of their proof of training available during an inspection.

Table 3-2: New Workers Entering the Industry(per Year)

Year

New Workers

Because of Worker

Turnover(A)

New Workers Because of Vessel

Population Increase

(B)

Total New Workers(A + B)

Cost per Worker

(C)

Total Cost for New Workers(A + B) x (C)

1 0 5,720 5,720 $14.30 $81,796

2 2,225 320 2,545 $14.30 $36,394

3 2,350 184 2,534 $14.30 $36,236

4 2,421 296 2,717 $14.30 $38,853

5 2,536 304 2,840 $14.30 $40,612

6 2,655 296 2,951 $14.30 $42,199

7 2,770 336 3,106 $14.30 $44,416

8 2,900 376 3,276 $14.30 $46,847

9 3,047 392 3,439 $14.30 $49,178

10 3,199 400 3,599 $14.30 $51,466



The Coast Guard estimates that it would take an owner or operator 6 minutes to prepare a DPO’s or DPOQ’s proof of training certificate for shipment. Table 3-3 displays the derivation of the cost per DPO/DPOQ to act in compliance with this requirement.

Table 3-3: Derivation of Cost of Proof of Training Requirement

RequirementHours to Prepare

(A)

Hourly Wage(B)

Total Cost(A x B)

Cost per DPO/DPOQ 0.1 $143.00 $14.30


Based on these assumptions, the total 10-year present value cost of this requirement to industry is $332,365 at 7 percent and $400,855 at 3 percent. The 10-year annualized costs are $47,321 at 7 percent and $46,992 at 3 percent. Table 3-4 summarizes the total cost to industry as a result of this requirement.


56

Table 3-4: Industry Cost of Proof of Training Requirement(per Year)

Year Undiscounted

Costs

Discounted Costs

7% 3%

1 $81,796 $76,445 $79,414

2 $36,394 $31,787 $34,304

3 $36,236 $29,580 $33,161

4 $38,853 $29,641 $34,520

5 $40,612 $28,956 $35,032

6 $42,199 $28,119 $35,341

7 $44,416 $27,660 $36,114

8 $46,847 $27,265 $36,981

9 $49,178 $26,749 $37,691

10 $51,466 $26,163 $38,295

Total $467,996 $332,365 $400,855

Annualized $47,321 $46,992



This requirement would also impact government, as government employees would now have to review DPO/DPOQ training certificates during an inspection. This review would be conducted by a uniformed Coast Guard personnel, usually at an O-3 grade, with an average loaded wage of $75 per hour.39 According to Coast Guard subject matter experts, this review would take an official 6 minutes to complete. The total government cost for review of the certificate of training is thus $7.50 per certificate.40

The total 10-year discounted cost of this requirement to government is $174,317 at 7 percent and $210,238 at 3 percent. Table 3-5 summarizes these costs to government.

39 See Chapter 1 for a more complete description on loaded hourly wages.

40 Total government cost per review of training certificate: (0.1 hours X $75/hour).


57

Table 3-5: Government Cost of Proof of Training Requirement(per Year)

Year

Number of Training

Certificates to Review

(A)

Government Cost per Review

(B)

Undiscounted Costs

(A X B)

Discounted Costs

7% 3%

1 5,720 $7.50 $42,900 $40,093 $41,650

2 2,545 $7.50 $19,088 $16,672 $17,992

3 2,534 $7.50 $19,005 $15,514 $17,392

4 2,717 $7.50 $20,378 $15,546 $18,105

5 2,840 $7.50 $21,300 $15,187 $18,374

6 2,951 $7.50 $22,133 $14,748 $18,536

7 3,106 $7.50 $23,295 $14,507 $18,941

8 3,276 $7.50 $24,570 $14,300 $19,396

9 3,439 $7.50 $25,793 $14,029 $19,768

10 3,599 $7.50 $26,993 $13,722 $20,085

Total - - $245,453 $174,317 $210,238

Annualized $24,819 $24,646




58

3.3 Costs for 33 CFR 140.320

Section 140.320 further discusses manning requirements applicable to MODUs that use DP to conduct OCS activities. The Coast Guard would require all applicable vessels to be under the command of a master and navigational watch while the vessel is using a DP system to conduct OCS activities. This is consistent with requirements for all other vessels underway. A MODU must have, at a minimum, an appropriate number of masters and navigational watches to meet the hours of rest requirements in Regulation VIII/1 of the STCW and Section A-VIII/1 of the “Seafarers’ Training, Certification and Watchkeeping Code.”

After examining Minimum Safe Manning Certificates from existing MODUs, the Coast Guard has determined that 6 OCS MODUs would not meet the requirements found in this section. These 6 MODUs are all owned by a single entity and are flagged by Liberia, which considers these MODUs non-self-propelled and therefore not required to operate with a Master and navigational watch. However, this rulemaking would require the owners or operators of these MODUs to hire, at a minimum, an appropriate number of masters and navigational watches to comply with the hours of rest requirements in STCW in order to continue to operate on the U.S. OCS.

The Coast Guard expects that each of these 6 MODUs would need to hire 2 new masters and 6new navigational watches in order to comply with the hours of rest requirements in STCW. The Coast Guard assumes that these positions would operate under current industry practices: a master and navigational watch would work a 28-day on/off schedule, with each work day consisting of an 8 hour shift; the master would then be on call for the remainder of the day, while 3 navigational watches would rotate 8 hour shifts throughout the day. It is also expected that 2masters and 6 navigational watches would alternate 28-day on/off rotations throughout the year in order to keep that MODU operational year round. As a result, one crew, which consists of 3 navigational watches and 1 master, would work 7 rotations per year, while the other group wouldwork 6 rotations per year. As noted in Chapter 1, the average loaded hourly wage of a master is $143, while the average loaded hourly wage of a mate/navigational watch is $89.

Tables 3-6 and 3-7 display the derivation of the annual cost incurred by industry in order to comply with this provision.


59

Table 3-6: Annual Industry Cost to Employ a Master as Required by 140.320

RequirementWage

(per hour)(A)

Load factor

(B)

Loaded Wage

(per hour)(A x B) =

C

Hours(per

shift)(D)

Days (per

rotation)(E)

Rotations(per year)

(F)

Total Cost (per year)(C x D x E

x F)

Cost per Master $106.00 1.42 $143.00 8 28 13 $416,416

Number of Firms Affected 6 $2,498,496

Total Cost Per Year $2,498,496


* Dollar figures are in 2013 terms.

Table 3-7: Annual Industry Cost to Hire a Navigational Watch as Required by 140.320

RequirementWage

(per hour)(A)

Load factor

(B)

Loaded Wage

(per hour)(A x B) =

C

Hours(per

shift)(D)

Days (per

rotation)(E)

Rotations(per year)

(F)

Total Cost (per year)(C x D x E

x F)

Cost per Navigational Watch

$63.00 1.42 $89.00 8 28 13 $259,168

Employees per firm 3 $777,504

Number of Firms Affected 6 $4,665,024

Total $4,665,024



Industry reports do not indicate the construction of any new, Liberian-flagged OCS MODU,owned by this entity, and therefore, it is expected that all future MODUs would be under compliance with this provision. Therefore, the total 10-year cost of this requirement would be fully borne by the 6 existing MODUs not in compliance with section 140.320 of this rule.

The total 10-year present value cost of this provision is $50,313,567 discounted at 7 percent, and $61,106,279 discounted at 3 percent. The annualized cost of this requirement is $7,163,520discounted at both 7 percent and 3 percent.

Table 3-8 summarizes the total cost to industry as a result of the requirements found in section 140.320.

Table 3-8: Industry Cost of DP System Manning Requirements(per year)


60

Year

Number of

Affected Vessels

(A)

Cost to Comply with

Minimum Master

Requirement(B)

Cost to Comply with Minimum Navigational

Watch Requirement

(C)

Undiscounted Costs

A x (B+C)

Discounted Costs

7% 3%

1 6 $416,416 $777,504 $7,163,520 $6,694,879 $6,954,874

2 6 $416,416 $777,504 $7,163,520 $6,256,896 $6,752,305

3 6 $416,416 $777,504 $7,163,520 $5,847,566 $6,555,636

4 6 $416,416 $777,504 $7,163,520 $5,465,015 $6,364,695

5 6 $416,416 $777,504 $7,163,520 $5,107,491 $6,179,315

6 6 $416,416 $777,504 $7,163,520 $4,773,356 $5,999,335

7 6 $416,416 $777,504 $7,163,520 $4,461,080 $5,824,597

8 6 $416,416 $777,504 $7,163,520 $4,169,234 $5,654,949

9 6 $416,416 $777,504 $7,163,520 $3,896,480 $5,490,242

10 6 $416,416 $777,504 $7,163,520 $3,641,570 $5,330,332

Total - - - $71,635,200 $50,313,567 $61,106,279

Annualized $7,163,520 $7,163,520



The Coast Guard does not expect the federal government to incur any additional costs as a result of this requirement.


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3.4 Costs for 33 CFR 140.335 (b) (2) & (3) / 46 CFR 62.40-15 and 62.40-20

In addition to the operation requirements found in 33 CFR 140.325, § 140.335 (b) (2) & (3) would require MODUs and other non-drilling vessels that use a DP system to conduct Critical OCS activities on the U.S. OCS to develop and maintain a FMEA and FMEA test proving document. Existing non-drilling vessels of at least 500 GT ITC that use a DP system while conducting Critical OCS activities must also develop and maintain a FMEA and FMEA test proving document by the time specified in the phase-in schedule as summarized in Table 2-1 of this RA. Existing MODUs, future MODUs, and future non-drilling vessels must comply with these sections immediately following the issuance of a final rule.

Through interviews with the MTS and owners and operators from private entities, the Coast Guard estimates that it would cost $275,000 to complete and maintain a FMEA and FMEA proving test document per vessel.41 Although development of a FMEA is costly, it is essential for understanding how the DP system might fail and for creating and maintaining a vessel’s CAMOand ASOC or WSOC.

Through interviews with MODU owners, the Coast Guard has determined that all MODUs are, or would be, compliant with the requirements in these sections prior to the effective date of this final rule. However, interviews with OSV and crewboat owners indicated that approximately 50 percent of the existing population would not be compliant with this requirement in the absence of this rule. Further, owners and operators of OSVs and crewboats indicated that a similar percentage of future OSVs under 6,000 GT ITC and crewboats would also not be in compliance with these requirements in the absence of a rule. It is expected that future OSVs of at least 6,000 GT ITC would be compliant with these requirements even in the absence of a rule.

The Coast Guard estimates that the total 10-year present value cost to industry as a result of this provision is expected to be $74,383,054 at a 7 percent discount rate and $92,903,263 at a 3 percent discount rate. The 10-year annualized cost is $10,590,474 discounted at a 7 percent rate and $10,891,097 discounted at 3 percent rate.

Table 3-9 summarizes the 10-year present value cost of this requirement.

41 The total cost of conducting a FMEA was calculated using the midpoint from the range of costs provided by industry: the lowest estimate was $50,000, while the highest estimate was $500,000.


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Table 3-9: Industry Cost of FMEA and FMEA Test Proving Document(per Year)

Year

Affected Number of

Vessels(A)

Cost per FMEA and FMEA test

proving document(B)

Undiscounted Cost( A x B)

Discounted Cost

7% 3%

1 14 $275,000.00 $3,850,000 $3,598,131 $3,737,864

2 15 $275,000.00 $4,125,000 $3,602,935 $3,888,208

3 7 $275,000.00 $1,925,000 $1,571,373 $1,761,648

4 125 $275,000.00 $34,375,000 $26,224,523 $30,541,742

5 14 $275,000.00 $3,850,000 $2,744,997 $3,321,044

6 14 $275,000.00 $3,850,000 $2,565,418 $3,224,314

7 109 $275,000.00 $29,975,000 $18,666,924 $24,372,418

8 19 $275,000.00 $5,225,000 $3,040,998 $4,124,663

9 21 $275,000.00 $5,775,000 $3,141,217 $4,426,057

10 66 $275,000.00 $18,150,000 $9,226,540 $13,505,305

Total - - $111,100,000 $74,383,054 $92,903,263

Annualized $10,590,474 $10,891,097




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3.5 Costs for 33 CFR 140.335 (b) (4) & (c) (d) / 46 CFR 62.40-25

Section 140.335 sets additional DP operating requirements for MODUs and other non-drilling vessels that use a DP system to conduct Critical OCS activities on the U.S. OCS. Existing non-drilling vessels of at least 500 GT ITC that use a DP system while conducting Critical OCS activities must also comply with the additional operating requirements by the time specified in the phase-in schedule as summarized in Table 2-1 of this RA. Existing MODUs, and future MODUs and non-drilling vessels must comply with these sections immediately following the issuance of a final rule.

One item, added to the minimum DP operating standards found in § 140.325, is that § 140.335 would require vessels to create and maintain a Critical Activity Mode (CAMO), which wouldprovide solutions to all possible DP system failures. The CAMO ensures that a DP vessel is operating within its design limits and reduces the likelihood of a DP incident. The CAMO sets out the required equipment configurations and operational standards necessary for the vessel to meet its maximum level of redundancy, functionality, and operation so that no single fault will exceed worst case failure. In addition to requiring this plan, the Coast Guard would also requirevessels to create Activity Specific Operational Criteria (ASOC) and Well Specific Operational Criteria (WSOC), which are outlined in the MTS DP Operation Guidelines. The ASOC and WSOC complements a vessel’s CAMO by setting operational, environmental, and equipment performance limits considered necessary for safe DP operations by providing DPO/DPOQs with a rapid response checklist often used to facilitate correct responses to emergencies. An ASOC or WSOC must be created for all possible OCS activities or operations that a MODU or other vessel performs.

The Coast Guard considered developing its own DP operating standards, but ultimately decided to use the standards in IMO MSC/Cir.645 and MTS DP Operations Guide in order to provide industry with flexibility and to minimize cost. Through interviews with private vessel owners and operators, the Coast Guard has determined that most of affected population has already adopted these standards in order to secure contracts in international markets. However, through discussions with industry, the Coast Guard has determined that 30 percent of MODUs would not have developed a CAMO and 50 percent of OSVs and crewboats would not have developed a CAMO or ASOC in the absence of this rulemaking. Through interviews with MODU owners and operators, it was determined that all existing and future MODUs would have developed WSOC in the absence of any rule in order to secure contracts in international markets.

Although a CAMO and a WSOC/ASOC are separate documents, it is expected that these documents would be developed simultaneously. Through the aforementioned interviews, it is anticipated that it would take a team of 2 technical ship engineers 80 hours per vessel to develop a CAMO and ASOC/WSOC. The Coast Guard assumes an hourly loaded wage of $57 per hour for a ship engineer.42

42 See Chapter 1 for a more complete description of derivation of loaded hourly wages.


64

The total cost to develop a CAMO and ASOC or WSOC is expected to be $9,120. Table 3-10 shows the derivation of this cost, and Table 3-11 summarizes the total 10-year present value cost to industry as a result of this requirement.

Table 3-10: Derivation of Cost to Develop CAMO and ASOC/WSOC (per Vessel)

RequirementNumber of Engineers

Hours to Prepare

Hourly Wage

Total Cost

CAMO 2 40 $59.00 $4,560.00

ASOC/WSOC 2 40 $59.00 $4,560.00

Total 4 80 - $9,120.00


Table 3-11: Industry Cost to Develop CAMO and ASOC/WSOC(per Year)

Year

Affected Number of OSVS and crewboats

(A)

Affected Number of

MODUs(B)

Cost per CAMO

( C )

Cost per ASOC

(D)

Undiscounted Cost

(A x (C + D)) + (B x C)

Discounted Cost

7% 3%

1 17 18 $4,560 $4,560 $237,120 $221,607 $230,214

2 18 2 $4,560 $4,560 $173,280 $151,349 $163,333

3 10 2 $4,560 $4,560 $100,320 $81,891 $91,807

4 138 2 $4,560 $4,560 $1,267,680 $967,107 $1,126,317

5 17 2 $4,560 $4,560 $164,160 $117,044 $141,606

6 17 2 $4,560 $4,560 $164,160 $109,387 $137,481

7 112 2 $4,560 $4,560 $1,030,560 $641,781 $837,940

8 22 2 $4,560 $4,560 $209,760 $122,082 $165,586

9 24 2 $4,560 $4,560 $228,000 $124,017 $174,743

10 69 1 $4,560 $4,560 $633,840 $322,212 $471,636

Total - - - - $4,208,880 $2,858,478 $3,540,664

Annualized $406,983 $415,074



The total 10-year present value cost of this requirement to industry is expected to be $2,858,478discounted at a 7 percent rate and $3,540,664 discounted at a 3 percent discount rate. The 10-year annualized cost is $406,983 at 7 percent and $415,074 at 3 percent.


65

3.6 Costs for 33 CFR 140.335 (h)

§ 140.335 augments the IMO and MTS standards by requiring that drilling vessels that use DP while conducting Critical OCS activities and non-drilling vessels that use a DP system installed on or after the effective date of a final rule while conducting Critical OCS activities to contact the Dynamic Positioning System Assurance Organization (DPSAO) that conducted the DP surveys required under 46 CFR 61.50 whenever there is a DP incident in which the DP status goes from “green” to “yellow” or from “green” to “red”, as determined by the vessel’s ASOC/WSOC. After a DP incident has been reported to the DPSAO, the owner or operator of the vessel must then conduct an investigation to ascertain whether the DP incident was addressed by the vessel’s FMEA, WSOC or ASOC, and CAMO.43 This assures the Coast Guard that operations have resumed only after safety and environmental concerns have been addressed.

In order to better understand how many DP system incidents occur per year (and because neither the Coast Guard, nor the IMO or MTS currently require vessels that use DP systems to report incidents), the Coast Guard reviewed documents compiled by the International Marine Contractors Association (IMCA), which is an international trade association that represents offshore, marine, and underwater engineering companies. We reviewed the IMCA’s 2004 through 2010 documents (which is the last document currently available) to determine the average number of DP incidents, which we calculate to an average of 1.45 self-reported incidents per reporting vessel per year.44 However, since IMCA describes a DP failure as an incident in which the DP system status changes from “green” to “red”, an adjustment was needed to this rate in order to account for this provision also requiring vessels to report and investigate DP incidents involving status changes from “green” to “yellow”. The Coast Guard assumes that DP status changes from “green” to “yellow” happen at the same rate as status changes from “green” to “red”, and therefore doubles IMCA’s DP incident rate in order to project the number of DP incidents that vessel owners and operators would be required to report and investigate.45

The Coast Guard used the adjusted IMCA’s self-reported incidents per vessel per year rate to forecast the number of DP system incidents that would occur during the 10-year period of our analysis. The Coast Guard estimates that it would take an owner or operator 20 minutes to report an incidentto a DPSAO – which is expected to be done through email, and that it would take an employee from the DPSAO an additional 20 minutes to read and respond to this report. The Coast Guard assumes that the cost incurred by the DPSAO would be passed on to owners and operators through the form of the DPSAO charging higher prices for its services. We estimate that the labor cost for each report is $61.33.46 Table 3-12 summarizes our forecast of the costs that would be incurred by industry as a result of being required to report DP incidents.

43 These requirements are also required – by the phase-in date specified in Table 2-1 of this RA - of existing non-drilling vessels of at least 500 GT ITC that conduct Critical OCS activities.

44 Please see the docket for the 2004 through 2010 IMCA reports.

45 We ask for feedback on this assumption.46 Total Cost per incident report: (20 minutes X $143.00/hour) for owner/operator to report DP incident + (20 minutes X $41.00/hour) for DPSAO to read and respond to report.


66

Table 3-12: Industry Undiscounted Cost to Report DP System Incidents(per Year)

Year

Failures per vessel per year

(A)

Number of Vessels

(B)

Number of Failures by Year

Reporting Cost Per Failure

( C )

Total Cost Per Year to Report

Failures(A x B x C)

1 2.90 89 259 $61.33 $15,885

2 2.90 129 374 $61.33 $22,939

3 2.90 152 442 $61.33 $27,109

4 2.90 433 1,256 $61.33 $77,035

5 2.90 471 1,368 $61.33 $83,904

6 2.90 508 1,474 $61.33 $90,405

7 2.90 733 2,126 $61.33 $130,395

8 2.90 780 2,262 $61.33 $138,736

9 2.90 829 2,405 $61.33 $147,507

10 2.90 965 2,799 $61.33 $171,672



The total 10-year discounted cost of this requirement to industry is $565,296 at 7 percent and $734,721 at 3 percent. The 10-year annualized costs are $80,485 at 7 percent and $86,132 at 3 percent.

Table 3-13 summarizes the total cost to industry as a result of this reporting requirement.


67

Table 3-13: Industry Cost to Report DPS Incidents(per Year)

Year Undiscounted Costs

Discounted Costs

7% 3%

1 $15,885 $14,846 $15,423

2 $22,939 $20,036 $21,622

3 $27,109 $22,129 $24,809

4 $77,035 $58,769 $68,444

5 $83,904 $59,822 $72,376

6 $90,405 $60,241 $75,713

7 $130,395 $81,203 $106,023

8 $138,736 $80,746 $109,519

9 $147,507 $80,234 $113,052

10 $171,672 $87,269 $127,740

Total $905,587 $565,296 $734,721

Annualized $80,485 $86,132



After reporting a DP incident to the DPSAO, the owner or operator must then conduct an investigation to ascertain whether the DP incident was addressed by the vessel’s FMEA, WSOC or ASOC, and CAMO.

As an investigation would be required for all reported DP incidents, the Coast Guard assumes that a vessel using DP would conduct approximately 2.90 investigations per year. Table 3-14 summarizes the total number of DP investigations per year that would need to be conducted as a result of this provision.

Table 3-14: Total Number of DP Investigations by Vessel Type(per Year)

Year

DP Failures per Vessel per Year

(A)

Number of OSVs

Affected(B)

Number of DP Investigations by OSV

Owners/Operators(A x B)

Number of MODUs Affected

(C)

Number of DP Investigations by MODU

Owners/Operators(A x C)

Number of Crewboats

Affected(D)

Number of DP Investigations by

Crewboat Owners/Operators

(A x D)

1 2.90 27 79 59 171 3 9

2 2.90 56 162 67 195 6 17

3 2.90 69 201 73 212 10 29

4 2.90 341 989 80 232 12 35

5 2.90 371 1,077 86 250 14 41

6 2.90 402 1,166 91 264 15 44

7 2.90 621 1,801 96 279 16 46

8 2.90 662 1,920 101 293 17 49

9 2.90 705 2,045 106 308 18 52

10 2.90 834 2,419 110 319 21 61


Through roundtable discussions with owners and operators of drilling and non-drilling vessels that use DP while conducting Critical OCS activities, it was determined that all existing MODUsand 50 percent of existing OSVs currently conduct DP investigations following a DP incident; however, owners and operators of existing crewboats indicated that DP investigations are not currently conducted following a DP incident.47 Accordingly, the Coast Guard estimates that additional costs would only be incurred by approximately half of all OSVs owners and operators and all owners and operators of crewboats in order to comply with this provision. The remaining vessel owners and operators would already comply with this requirement, and therefore, would not incur additional costs as a result of this provision.

The Coast Guard estimates that it would take 10 hours on average for a ship engineer employed by the owner or operator to conduct a DP incident investigation. It is assumed that the ship engineer would have a loaded hourly wage of $57.48 The total cost per investigation is expected to be $570.49 Table 3-15 summarizes the total undiscounted cost per year to industry as a result of industry being required to conduct an investigation for all reported DP incidents.

Table 3-15: Industry Undiscounted Cost to Conduct DP Investigations by Vessel Type50

(per Year)

Year

Cost per DP Failure

Investigation(A)

Total Cost to OSV Owners and Operators

(B)

Total Cost to MODU

Owners and Operators

(C)

Total Cost to Crewboat


(D)

Total Cost to Industry

(B + C + D)

1 $570.00 $25,650 $0 $5,130 $30,780

2 $570.00 $47,880 $0 $9,690 $57,570

3 $570.00 $59,280 $0 $16,530 $75,810

4 $570.00 $284,430 $0 $19,950 $304,380

5 $570.00 $309,510 $0 $23,370 $332,880

6 $570.00 $334,020 $0 $25,080 $359,100

7 $570.00 $515,850 $0 $26,220 $542,070

8 $570.00 $548,910 $0 $27,930 $576,840

9 $570.00 $587,100 $0 $29,640 $616,740

10 $570.00 $691,410 $0 $34,770 $726,180



47 We assume that future drilling and non-drilling vessels that use DP while conducting Critical OCS activities would have similar compliance rates in the absence of a final rule.


49 The total cost per conducting an investigation: (10 hours X $57/hour).

50 Total cost to conduct DP investigation: (Column A X 1-Compliance Rate X Number of Vessels Affected as listed in Table 3-14).


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In addition to conducting an investigation, this provision would also require owners and operators to submit an investigation summary to the DPSAO explaining the cause of the DP failure and whether the incident was addressed by the vessel’s FMEA, ASOC/WSOC, and CAMO. As owners and operators were not required to report DP incidents prior to this rule, it is unlikely that any existing or future vessels would be under compliance with this requirement in the absence of a rule. Therefore, the Coast Guard estimates that this provision would result in new costs for all owners and operators of vessels using DP to conduct Critical OCS activities.

The Coast Guard estimates that it would take a ship engineer 2 additional hours to write a DP investigation summary and then submit it to the DPSAO. It is assumed that the ship engineer would have a loaded hourly wage of $57, and that it would cost $5.10 to ship this report.51

Additionally, we estimate that it would take a DPSAO employee 2 hours on average to read through the report and respond if necessary. It is assumed that a DPSAO employee would have a loaded hourly wage of $41, and that the cost incurred by the DPSAO to review and respond as needed to a DP investigation report would be passed on to the owner or operator through the form of higher prices.52 As a result, the Coast Guard estimates that it would cost an owner or operator an additional $201.10 per investigation to comply with this reporting requirement.53

The total undiscounted cost to industry, by vessel type, to write and submit a DP investigation summary to the DPSAO is summarized in Table 3-16.

51 United States Postal Service – Priority Mail: Commercial Base for a Flat Rate Legal Sized Envelope or Padded 12.5 x 9.5 Sized Envelope https://www.usps.com/business/priority-mail-for-business.htm


53 The total cost per writing and submitting an investigation summary: (((2 hours X $57/hour) + $5.10) + (2 hours X $41/hour)).


71

Table 3-16: Industry Undiscounted Cost to Write and Submit DP Investigation Summaries by Vessel Type54

(per Year)

Year

Cost per DP Failure

Investigation(A)

Total Cost to OSV Owners and Operators

(B)

Total Cost to MODU Owners and Operators

(C)

Total Cost to Crewboat


(D)

Total Cost to Industry

(B + C + D)

1 $201.10 $15,887 $34,388 $1,810 $52,085

2 $201.10 $32,578 $39,215 $3,419 $75,211

3 $201.10 $40,421 $42,633 $5,832 $88,886

4 $201.10 $198,888 $46,655 $7,039 $252,582

5 $201.10 $216,585 $50,275 $8,245 $275,105

6 $201.10 $234,483 $53,090 $8,848 $296,421

7 $201.10 $362,181 $56,107 $9,251 $427,539

8 $201.10 $386,112 $58,922 $9,854 $454,888

9 $201.10 $411,250 $61,939 $10,457 $483,646

10 $201.10 $486,461 $64,151 $12,267 $562,879



To find the total 10-year present value cost to industry as a result of these DP investigation requirements, we add the total cost columns from Tables 3-15 and 3-16. As a result, we estimate that the total 10-present value cost to industry is $4,081,179 at a 7 percent discount rate and $5,329,997 at a 3 percent discount rate to comply with the DP investigation requirements in this NPRM. The 10-year annualized cost is $581,068 at a 7 percent rate and $624,838 at a 3 percent rate. Table 3-17 summarizes our estimates.

54 Total cost to write and submit DP investigation summaries: (Column A X Number of Vessels Affected as listed in Table 3-14).


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Table 3-17: Industry Cost to Investigate DP System Incidents(per Year)


Discounted Costs

7% 3%

1 $82,865 $77,444 $80,451

2 $132,781 $115,976 $125,159

3 $164,696 $134,441 $150,720

4 $556,962 $424,903 $494,853

5 $607,985 $433,485 $524,453

6 $655,521 $436,802 $548,989

7 $969,609 $603,824 $788,381

8 $1,031,728 $600,475 $814,456

9 $1,100,386 $598,537 $843,354

10 $1,289,059 $655,292 $959,181

Total $6,591,592 $4,081,179 $5,329,997

Annualized $581,068 $624,838



The Coast Guard does not expect additional costs to government as a result of either the reporting or investigating requirements.


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3.7 Costs for 46 CFR 61.50-4 (b)

In 33 CFR 61.50-4 (b), the Coast Guard would require the DPSAO to submit an annual report to the Coast Guard’s Outer Continental Shelf National Center of Expertise (OCSNCOE) summarizing the results from each vessel’s DP incident investigation reports submitted to the DPSAO throughout the year. This annual report must include whether the DPSAO is satisfied that the cause of DP incidents experienced by the reporting vessel were addressed by the vessel’s FMEA, ASOC, and CAMO, and if the cause was not addressed, whether updates have been made to the vessel’s FMEA, ASOC, and CAMO to address the cause of the DP incidents.

The Coast Guard assumes that it would take a DPSAO surveyor an additional 4 hours to complete the annual report, and that the DPSAO surveyor would have a loaded hourly rate of $41.55 The Coast Guard further estimates that it would cost $5.10 to ship this report.56

The total cost for a DPSAO to complete an annual DP incident investigation report is expected to be $169.10 per year.57 The Coast Guard assumes that the cost incurred by the DPSAO would be passed on to owners and operators through the form of higher prices charged by the DPSAO for its services. Table 3-18 summarizes the 10-year present value cost to owners and operators as a result of this requirement.


56 United States Postal Service – Priority Mail: Commercial Base for a Flat Rate Legal Sized Envelope or Padded 12.5 x 9.5 Sized Envelope https://www.usps.com/business/priority-mail-for-business.htm

57 The total cost per annual report: ((4 hours X $41/hr.) + $5.10)


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Table 3-18: Industry Cost to Submit Annual DP Investigation Report(per Year)

Year Number of

Vessels(A)

Cost per Annual Report

(B)

Undiscounted Costs

(A x B)

Discounted Costs

7% 3%

1 89 $169.10 $15,050 $14,065 $14,612

2 129 $169.10 $21,814 $19,053 $20,562

3 152 $169.10 $25,703 $20,981 $23,522

4 433 $169.10 $73,220 $55,859 $65,055

5 471 $169.10 $79,646 $56,787 $68,703

6 508 $169.10 $85,903 $57,241 $71,942

7 733 $169.10 $123,950 $77,190 $100,783

8 780 $169.10 $131,898 $76,766 $104,121

9 829 $169.10 $140,184 $76,251 $107,439

10 965 $169.10 $163,182 $82,953 $121,422

Total - - $860,550 $537,146 $698,162

Annualized $76,478 $81,846



The total 10-year present value cost to industry as a result of this requirement is $537,146discounted at a 7 percent rate and $698,162 discounted at a 3 percent rate. The 10-year annualized cost is $76,478 at a 7 percent rate and $81,846 at a 3 percent rate.

It is expected that the OCSNCOE would choose to review all DP incidents investigation reports on an annual basis. The Coast Guard assesses a loaded hourly wage of $75 for an OCSNCOE reviewer, and that it would take 2 hours on average to review the report. The total cost to review a DP incident investigation report is estimated at $150.58

The 10-year present value cost to government as a result of this review is expected to be $476,475 discounted at a 7 percent rate and $619,304 discounted at a 3 percent rate. Table 3-19summarizes these costs.

58 The total cost to government to review a DP failure investigation report is derived from: (2 hours X $75/hour).


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Table 3-19: Government Cost to Review Annual DP Investigation Reports(per Year)

Year Number of

Vessels(A)

Cost per Annual Report

(B)

Undiscounted Costs

(A x B)

Discounted Costs

7% 3%

1 89 $150.00 $13,350 $12,477 $12,961

2 129 $150.00 $19,350 $16,901 $18,239

3 152 $150.00 $22,800 $18,612 $20,865

4 433 $150.00 $64,950 $49,550 $57,707

5 471 $150.00 $70,650 $50,372 $60,943

6 508 $150.00 $76,200 $50,775 $63,816

7 733 $150.00 $109,950 $68,471 $89,399

8 780 $150.00 $117,000 $68,095 $92,361

9 829 $150.00 $124,350 $67,638 $95,304

10 965 $150.00 $144,750 $73,584 $107,708

Total - - $763,350 $476,475 $619,304

Annualized $67,839 $72,601




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3.8 Costs for 33 CFR 140.335 (i)

In the event that a severe incident (i.e. - an emergency disconnect from a well or a serious marine incident as defined by 46 CFR 4.03-2) occurs following a DP incident in which the DP system experiences a reactive change in status from green to red, § 140.335 (i) requires the owner or operator of the MODU or other vessel to notify the cognizant OCMI of the incident, after addressing the resultant safety concerns.

As owners and operators are currently not required to report DP incident in any capacity, we estimate that this provision would result in new costs to all applicable vessel owners and operators. The Coast Guard estimates that it would take an owner or operator 20 minutes to notify the cognizant OCMI by email of an emergency disconnect or serious marine incident occurring following a DP incident in which the DP status changed from green to red. Assuming that an owner or operator has a loaded hourly wage of $143 per hour, we estimate that the cost to comply with this requirement would be $47.67 per emergency disconnect or serious marine incident following a DP incident.59

To calculate the cost to comply with this requirement though, we also needed to determine the frequency that emergency disconnects and serious marine incidents occur following a DP incident. Because neither the Coast Guard, nor the IMO or MTS currently require vessels that use DP systems to report incident, we once again turned to reports published by IMCA to better understand the frequency of such events occurring. Tables 3-20 and 3-21 summarize the findingsreported in IMCA’s annual “Dynamic Positioning: Station Keeping Incidents” reports from 2004-2010.

59 Cost per reported DP-related Emergency Disconnect or Serious Marine Incident = (20 minutes X $143/hour).


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Table 3-20: Frequency of Emergency Disconnects Occurring While Using DP

(per Year)

Year

Number of Reported

Emergency Disconnects

Number of Reported DP Incidents by

MODUs

Frequency of a MODU Initiating an Emergency

Disconnect per DP Incident

2004 2 13 0.15

2005 2 15 0.13

2006 1 9 0.11

2007 1 15 0.07

2008 3 30 0.10

2009 3 7 0.43

2010 2 6 0.33

Average 2 13.6 0.19

Source: IMCA Reports from 2004-2010

Table 3-21: Frequency of a Serious Marine Incident Occurring While Using DP

(per Year)

Year

Number of Reported DP Incidents that

Resulted in Damages

Number of Reported DP

Incidents

Frequency of a Serious Marine Time Incident

Occurring per DP Incident

2004 2 34 0.06

2005 4 36 0.11

2006 2 59 0.03

2007 3 67 0.04

2008 5 102 0.05

2009 3 75 0.04

2010 1 56 0.02

Average 2.9 61.3 0.05

Source: IMCA Reports from 2004-2010


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Using IMCA’s findings, we estimate that the average percentage of DP incident reported per year, from 2004 to 2010, that resulted in an emergency disconnect or serious marine incident is19 percent and 5 percent, respectfully. With this information in hand, as well as the rate at which a DP system status changes from green to red, 1.45, we then calculated the expected total number of DP incidents that would result in an emergency disconnect or serious marine incident per year by extrapolating these figures across our forecasted affected population.60 Tables 3-22 and 3-23 summarize our findings, as well as the undiscounted cost per year to industry as a result of this requirement.

Table 3-22: Industry Undiscounted Cost to Report Emergency Disconnects While Using DP(per Year)

Year

Number of MODUs Affected

(A)

Number of DP

Incidents Per MODU

(B)

Frequency of Initiating an Emergency

Disconnect per DP Incident

(C)

Total Number of Emergency Disconnects

while using DP(A x B x C)

Reporting Cost per

Emergency Disconnect

(D)

Total Cost to Report


(A x B x C x D)

1 59 1.45 0.19 16 $47.67 $763

2 67 1.45 0.19 18 $47.67 $858

3 73 1.45 0.19 20 $47.67 $953

4 80 1.45 0.19 22 $47.67 $1,049

5 86 1.45 0.19 24 $47.67 $1,144

6 91 1.45 0.19 25 $47.67 $1,192

7 96 1.45 0.19 26 $47.67 $1,239

8 101 1.45 0.19 28 $47.67 $1,335

9 106 1.45 0.19 29 $47.67 $1,382

10 110 1.45 0.19 30 $47.67 $1,430



60 We limit the number of emergency disconnects that would occur per year to only our forecasted MODU population, because only MODUs would ever need to initiate an emergency disconnect following a DP incident.


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Table 3-23: Industry Undiscounted Cost to Report Serious Marine Incidents While Using DP

(per Year)

Year

Number of Vessels

Affected(A)

Number of DP

Incidents Per Vessel

(B)

Frequency of a Serious Marine

Incident Occurring per

DP Incident(C)

Total Number of Serious

Marine Incidents while

using DP(A x B x C)

Reporting Cost per Emergency

Disconnect(D)

Total Cost to Report


(A x B x C x D)

1 89 1.45 0.05 6 $47.67 $286

2 129 1.45 0.05 9 $47.67 $429

3 152 1.45 0.05 11 $47.67 $524

4 433 1.45 0.05 31 $47.67 $1,478

5 471 1.45 0.05 33 $47.67 $1,573

6 508 1.45 0.05 36 $47.67 $1,716

7 733 1.45 0.05 54 $47.67 $2,574

8 780 1.45 0.05 56 $47.67 $2,669

9 829 1.45 0.05 60 $47.67 $2,860

10 965 1.45 0.05 70 $47.67 $3,337



To find the total 10-year present value cost to industry as a result of the requirements in §140.335 (i), we combine the total, undiscounted cost columns from Tables 3-22 and 3-23. Based on this calculation, we estimate that the total 10-year present value cost to industry is $18,548 at a 7 percent discount rate and $23,667 at a 3 percent discount rate to comply with this provision. The 10-year annualized cost is $2,641 at a 7 percent rate and $2,774 at a 3 percent rate. Table 3-24 summarizes our estimates.


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Table 3-24: Industry Cost to Report Emergency Disconnects and Serious Marine Incidents While Using DP

(per Year)


Discounted Costs

7% 3%

1 $1,049 $980 $1,018

2 $1,287 $1,124 $1,213

3 $1,478 $1,206 $1,352

4 $2,526 $1,927 $2,245

5 $2,717 $1,937 $2,344

6 $2,908 $1,938 $2,435

7 $3,813 $2,375 $3,101

8 $4,004 $2,330 $3,161

9 $4,242 $2,308 $3,251

10 $4,767 $2,423 $3,547

Total $28,791 $18,548 $23,667

Annualized $2,641 $2,774



This requirement would also impact government, as government employees would now have to review reports of DP incidents that resulted in an emergency disconnect or serious marine incident. The Coast Guard assesses a loaded hourly wage of $75 for an OCSNCOE reviewer, and that it would take 20 minutes on average to review each report. The total government cost is therefore estimated at $25.00 per reported incident.61

The total 10-year discounted cost of this requirement to government is $9,728 at 7 percent and $12,413 at 3 percent. Table 3-25 summarizes these costs to government.

61 Total government cost per review of reported incident: (20 minutes X $75/hour).


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Table 3-25: Government Cost to Record Reported Emergency Disconnects and Serious Marine Incidents While Using DP

(per Year)


Discounted Costs

7% 3%

1 $550 $514 $534

2 $675 $590 $636

3 $775 $633 $709

4 $1,325 $1,011 $1,177

5 $1,425 $1,016 $1,229

6 $1,525 $1,016 $1,277

7 $2,000 $1,245 $1,626

8 $2,100 $1,222 $1,658

9 $2,225 $1,210 $1,705

10 $2,500 $1,271 $1,860

Total $15,100 $9,728 $12,413





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3.9 Costs for 33 CFR 140.335 (j) & (k)

In § 140.335 (j) & (k), the Coast Guard would require MODUs that conduct Critical OCS activities in U.S. OCS while using a DP system and non-drilling vessels that conduct Critical OCS activities in U.S. OCS while using a DP system installed on or after the effective date of a final rule to obtain a Dynamic Positioning Verification Acceptance Document (DPVAD) prior to conducting Critical OCS activities on the U.S. OCS. Further, existing non-drilling vessels who are phased-in to the DP operational requirements must receive a DPVAD prior to the date specified in Table 2-1 of this RA.

A DPVAD would be issued by the DPSAO that completed the vessel’s survey requirements found in 46 CFR 61.50-2, and would be valid for 5 years. In addition to having completed the survey requirements, MODUs and non-drilling vessels of at least 6,000 GT ITC that have installed a DP system on or after the effective date of a final rule must also have had their DP system plan reviewed by the DPSAO prior to receiving the DPVAD. The costs that would be incurred by industry as a result of being required to have their surveys and system plans reviewed by a DPSAO will be discussed later in this report.62

As the DPVAD would be issued by the same DPSAO that reviewed the vessel’s DP system plan and conducted the vessel’s DP surveys, the Coast Guard expects that it would only take an additional 15 minutes for a DPSAO surveyor to complete this document and that the DPSAOsurveyor would have a loaded hourly rate of $41.63 The Coast Guard assumes that the cost incurred by the DPSAO would be passed on to owners and operators through the form of higher prices charged for its services. As a result, we estimate that it would cost an owner or operator $10.25 to comply with this provision.64

Table 3-26 summarizes the expected costs to industry as a result of being required to obtain a DPVAD.

62 See Tables 3-37 and 3-40, respectfully.


64 The total cost per issuing a DPVAD: (0.25 hours X $41/hr.)


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Table 3-26 Industry Cost to Obtain DPVAD(per Year)

Year

Number of

MODUs Affected

(A)

Number of New Non-

Drilling Vessels

Affected(B)

Number of

Existing Non-

Drilling Vessels

Affected(C)

Incremental Cost to

Obtain a DPVAD

(D)

Undiscounted Costs

(A + B + C) x D

Discounted Costs

7% 3%

1 59 30 0 $10.25 $912 $853 $886

2 8 32 0 $10.25 $410 $358 $386

3 6 17 0 $10.25 $236 $192 $216

4 7 30 244 $10.25 $2,880 $2,197 $2,559

5 6 32 0 $10.25 $390 $278 $336

6 64 62 0 $10.25 $1,292 $861 $1,082

7 13 69 183 $10.25 $2,716 $1,692 $2,209

8 11 59 0 $10.25 $718 $418 $566

9 12 74 244 $10.25 $3,383 $1,840 $2,592

10 10 78 86 $10.25 $1,784 $907 $1,327

Total - - - - $14,719 $9,594 $12,159




The 10-year present value cost of being required to obtain a DPVAD to industry is expected to be $9,594 discounted at 7 percent and $12,159 discounted at 3 percent. The 10-year annualized costs are $1,366 at 7 percent and $1,425 at 3 percent rate.

Since this document would be issued by a DPSAO, there is not expected to be a cost incurred bygovernment as a result of this provision.


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3.10 Costs for 33 CFR 140.340 (b) (1) / 46 CFR 62.40-5 (b) (1)

In addition to meeting the minimum DP design requirements in 33 CFR 140.330, 140.340 requires drilling vessels that conduct Critical OCS activities and all other vessels that conduct Critical OCS activities and install a DP system on or after issuance of the effective rule to install a DP-2 or higher system. The Coast Guard’s research indicates that not all existing non-drilling vessels that conduct Critical OCS activities have installed a DP-2 system or higher. Because of the mechanical and structural demands associated with DP-2 systems or higher that are not feasible to satisfy in older vessels, the Coast Guard proposes to make the existing population of OSVs and crewboats exempt from the DP-2 equipment requirements of this rulemaking. These mechanical and structural demands include additional dynamic positioning computers, thrusters and propellers, wind sensors, gyroscopes, and other electrical equipment that are not feasible to install on smaller vessels.

Through reviews of vessel specification sheets and interviews with industry leaders though, the Coast Guard was able to determine that all active, in-service mobile offshore drilling units operating in the U.S. OCS are currently utilizing DP equipment class 2 (DP-2) systems or higher.

Furthermore, offshore oil and gas entities are starting to require that all new, contracted OSVs be equipped with DP-2 systems or higher, with: “some oil companies already requesting DP-3 vessels or DP-2 vessels that are easily upgradeable to DP-3.”65 However, research indicates that this same request is not yet made of new, contracted crewboats. Using historical population data on crewboats constructed with DP systems, the Coast Guard was able to confirm that of the 43 existing crewboats operating in the U.S. OCS with known DP Equipment capabilities, 30 percent were built with a DP-1 system, compared with 70 percent of crewboats built with DP-2 system. This data was then used with our forecast on the number of future crewboats that will be built during the years 2015-2024 that are expected to use DP, to determine the expected number of crewboats that would need to upgrade their DP system from a DP-1 system to a DP-2 system. The Coast Guard forecasts that 1 DP-1 crewboats would be built in 2015, 2016, and 2017 in the absence of this proposed rule.

This proposed rule would no longer permit the use of future66 DP-1 crewboats in DP mode while conducting Critical Operations in the U.S. OCS. As a result, crewboat owners and operators who had previously planned on purchasing a new DP-1 equipped crewboat built after the effective date will now instead be limited to operating without DP during Critical OCS activities or purchasing a DP-2 equipped crewboat. Because of the nature of the industry, it is unlikely that an owner or operator would choose to forgo purchasing a DP equipped crewboat, and therefore we assume this rule would add new costs to purchase a vessel with a DP-2 system. In addition to the cost differential between the price of DP-1 and DP-2 system, the cost of this rulemaking would

65 Perla, Guido F. “Trends in OSV Design,” Guido Perla & Associates, Inc. November, 2010

65 Tollefsen, Sveinung. “DP systems in the OSV Industry,” May 2010. http://dspace.mit.edu/bitstream/handle/1721.1/64580/727052552.pdf?sequence=166 Built after the effective date of the final rule.


85

also include the difference in the vessel price of a DP-1 crewboat and that of a DP-2 crewboat. Because vessels must have multiple propulsion thrusters in order to meet the single failure criteria required of Class 2 systems, smaller crewboats will not have enough space to convert their equipment to a DP-2 system. Therefore, a larger-sized crewboat would need to be purchased to accommodate this requirement.

Because of the variation in crewboats’ design, including width, height, and other specifications, the Coast Guard did not attempt to calculate the capital cost differential between DP-1 equipped crewboats and DP-2 equipped crewboats. Instead, given traditional for funding capital investments, the Coast Guard uses the difference between the average day rate of a DP-1 crewboat and that of a DP-2 crewboat to account for the increased capital cost of purchasing a DP-2 crewboat instead of a DP-1 crewboat. The derivation of the yearly cost differential between a DP-1 and DP-2 crewboat is shown in Table 3-27.

Table 3-27: Return on Capital Difference of a DP-1 crewboat and a DP-2 crewboat67

Crewboat Type Day Rate68

Contract Period (Days) Total Cost per year69

DP-1 $1,966.47 360 $661,616

DP-2 $4,570.84 360 $1,537,853

Difference $2,604.37 - $876,237



We estimate that 3 crewboats would be impacted by this provision during the 10-year time of our study at a cost of $876,237 per vessel.70

Based on these assumptions, the total 10-year present value cost of this requirement to industry is $2,299,523 at 7 percent and $2,478,534 at 3 percent. The 10-year annualized costs are $327,400at a 7 percent discount rate and $290,560 at a 3 percent discount rate.

Table 3-28 summarizes the total cost to industry as a result of this requirement.

67 The Coast Guard assumes an average contract period of 360 days, and a 7 percent return on investment rate. A 7 percent return on investment rate was used to remain consistent with the discount rate used throughout this report.

68 “Dynamic Positioning Systems Research” prepared for the U.S. Coast Guard, August 2012.

69 Total Yearly Capital Cost: (Day Rate x Contract Period)/(1.07)

70 See Table 2-3 and Appendix for details


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Table 3-28: Industry Cost of Removing DP-1 Crewboats from the Fleet


7% 3%

1 $876,237 $818,913 $850,716

2 $876,237 $765,339 $825,937

3 $876,237 $715,270 $801,881

4 $0 $0 $0

5 $0 $0 $0

6 $0 $0 $0

7 $0 $0 $0

8 $0 $0 $0

9 $0 $0 $0

10 $0 $0 $0

Total $2,628,711 $2,299,523 $2,478,534

Annualized $327,400 $290,560




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3.11 Costs for 33 CFR 140.340 (b) (1) / 46 CFR 62.40-5 (b) (2)

In addition to requiring that all MODUs that use DP to conduct Critical OCS activities and all other vessels that install a DP system on or after issuance of an effective rule must use a DP-2 or higher system, 46 CFR 62.40-5 would also require all vessels conducting Critical OCS activitiesto obtain a DP notation equivalent to Equipment Class 2 or 3 of IMO MSC/Circ.645 from a classification society possessing DP system rules aligned with IMO MSC/Circ.645. The Coast Guard developed this provision in order to ensure that all DP-2 systems used in Critical OCS activities meet the redundancy requirements specified in IMO MSC/Circ.645 by requiring independent third-party verification. The proposed requirements would ensure that DP vessels have the equipment necessary to prevent a single fault resulting in a DP failure by requiring them to get classed by an organization possessing DP systems rules aligned with IMO MSC/Circ.645.

Through interviews with classification societies possessing DP system rules aligned with IMO MSC/Circ.645, the Coast Guard estimates that it would cost a vessel $64,250 to obtain a DP-2 class notation. It is expected that a classification society would review the DP system design plans, conduct a DP survey, and test the DP equipment prior to issuing a DP class notation.

Table 3-29 explains the derivation of cost per vessel to obtain a DP-2 class notation.

Table 3-29: Derivation of DP-2 Class Notation Cost

Requirement Cost

System Design Review $37,75071

DP Survey $11,50072

DP Equipment $15,00073

Total Cost $64,250



Additionally, the Coast Guard examined vessel specification sheets and conducted interviews with MODU, OSV, and crewboat owners to determine the percentage of applicable vessels that would be compliant with this provision in the absence of any rule. Through this research, the Coast Guard has determined that all MODUs are, or would be, compliant with this requirement prior to the effective date of this final rule. However, it was determined that approximately 50 percent of the existing population of DP OSVs and 100 percent of crewboats have not obtained a

71 The cost for a classification society to review a vessel’s DP system design plan was calculated using the midpoint from the range of costs provided by industry: the lowest estimate was $35,250, while the highest estimate was $40,250.

72 The cost for a classification society to conduct a DP survey was calculated using the midpoint from the range of costs provided by industry: the lowest estimate was $9,000, while the highest estimate was $14,000.

73 The cost for a classification society to test a vessel’s DP equipment was calculated using the midpoint from the range of costs provided by industry: the lowest estimate was $12,500, while the highest estimate was $17,500.


88

DP-2 class notation. OSV and crewboat owners and operators further indicated that it is likely that a similar percentage of future OSVs and crewboats that use DP would also not be in compliance with this requirement in the absence of a rule. However, all future OSVs of at least6,000 GT ITC are expected to be compliant with this requirement even in the absence of a rule. Table 3-30 summarizes the 10-year present value cost of requiring all existing and future MODUs, as well as all other vessels with a new or upgraded DP system, that use DP while conducting Critical OCS activities to obtain a DP-2 class notation.

Table 3-30: Industry Cost for DP Notation(per Year)

Year

Affected Number

of Vessels

Cost per DP

NotationUndiscounted Cost

Discounted Cost

7% 3%

1 15 $64,250.00 $963,750 $900,701 $935,680

2 16 $64,250.00 $1,028,000 $897,895 $968,989

3 9 $64,250.00 $578,250 $472,024 $529,181

4 14 $64,250.00 $899,500 $686,224 $799,194

5 15 $64,250.00 $963,750 $687,140 $831,339

6 14 $64,250.00 $899,500 $599,375 $753,317

7 17 $64,250.00 $1,092,250 $680,198 $888,099

8 19 $64,250.00 $1,220,750 $710,488 $963,671

9 21 $64,250.00 $1,349,250 $733,903 $1,034,088

10 23 $64,250.00 $1,477,750 $751,213 $1,099,585

Total - - $10,472,750 $7,119,161 $8,803,142

Annualized $1,013,608 $1,031,997



The total 10-year present value cost to industry as a result of this requirement is expected to be $7,119,161 at a 7 percent discount rate and $8,803,142 at a 3 percent discount rate. The 10-year annualized cost is $1,013,608 at a 7 percent rate and $1,031,997 at 3 percent rate.


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3.12 Costs for 33 CFR 140.345

In addition to meeting the minimum and standard DP requirements in 33 CFR 140.330 and 140.340, 140.345 provides additional requirements for drilling vessels that conduct Critical OCS activities and all other non-drilling vessels of at least 6,000 GT ITC that conduct Critical OCS activities. In § 140.345, owners and operators of drilling vessels and non-drilling vessels of at least 6,000 GT ITC that use a DP system while conducting Critical OCS activities would be required to have the DP surveys required by 46 CFR 61.50 completed and their vessel’s DP system plan approved by the DPSAO prior to conducting critical activities on the U.S. OCS. The costs that would be incurred as a result of these requirements, however, will be discussed later in this report (sections 3.18 and 3.20, respectfully).


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3.13 Changes to 33 CFR part 143 – Design and Equipment

Table 3-31 Changes to 33 CFR part 143 -- Design and Equipment


143.15 Lights and warning devices

Requires MODUs and non-drilling vessels that use DP to maintain station to display the lights and shapes for “restricted in her ability to maneuver” as defined under Rule 3 of the International Regulations for Preventing Collisions at Sea 1972.

This requirement is not expected to result in new costs for owners and operators of MODUs and non-drilling vessels, since these vessels are already required by international regulations to display lights and shapes when they are underway.

In 33 CFR part 143, the Coast Guard proposes to amend § 143.15. The amended section would require MODUs and non-drilling vessels that use a DP system to maintain station to display the lights and shapes for “restricted in her ability to move” as defined under Rule 3 of the International Regulations for Preventing Collisions at Sea 1972. As this provision is already required by international code, it is not expected to result in additional costs for owners or operators.


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3.14 Changes to 33 CFR part 146 – Operations

Table 3-32 Changes to 33 CFR part 146 -- Operations


146.405 Safety and Security notice of arrival for vessels arriving at a place on the OCS

Requires foreign-flagged MODUs, that use a DP system, and non-drilling vessels, that use a DP system installed on or after the effective date of a final rule, to provide the vessel’s DPVAD along with its Notice of Arrival (NOA) to the National Vessel Movement Center (NVMC).

This requirement is not expected to result in new costs for owners and operators of foreign-flagged MODUs and non-drilling vessels, since these vessels are already required by existingregulation to submit a NOA to the NVMC, and the cost of obtaining a DPVAD was discussed previously in this report (section 3.9).

In 33 CFR part 146, the Coast Guard proposes to amend § 146.40. The amended section would require owners and operators of foreign-flagged MODUs and non-drilling vessels that use a DP system to maintain station to provide the vessel’s DPVAD along with the Notice of Arrival (NOA) to the National Vessel Movement Center (NVMC) upon arriving at a place on the U.S. OCS. Because the costs associated with obtaining a DPVAD have already been discussed in this RA, as well as foreign-flagged vessels already being required under existing regulations to submit a NOA to the NVMC upon arrival in the U.S. OCS, we estimate that this amendment to part 146 would not result in new costs to either industry or the government.

3.15 Changes to 46 CFR part 61 – Periodic Tests and Inspections

Table 3-33: Changes to 46 CFR part 61 -- Periodic Tests and Inspections


61.03-1 Incorporation by Reference Provides new locations for obtaining all approved materials.

No cost, as this incorporates industry standard.

61.50-1 Applicability Sets applicability for46 CFR part 61 to all MODUs that use a DP system to conduct Critical OCS activities, and all other vessels of at least 6,000 GT ITC that use a DP system installed on or after issuance of an effective rule to conduct Critical OCS activities to complete DP surveys conducted by DPSAO and accepted by the Coast Guard. Additionally, existing, non-drilling vessels of at least 500 GT ITC that use DP to conduct Critical OCS Activities must also comply with the provisions in this part by the date specified in Table 2-1.

No direct cost, as this is administrative in nature. See provisions below for indirect costs associated with this provision.

61.50-2 Surveys All applicable drilling and non-drilling vessels must complete DP surveys conducted by DPSAO.

No incremental cost to have a DPSAO conduct a vessel survey, as it is understood that this is industry practice in order to compete in international markets.

Additionally, owners and operators would be required to have the DPSAO conducting the survey notify the OMCI at least 30 days prior to the survey.

The Coast Guard estimates that it would cost owners and operators $4.10 per vessel to have the DPSAO notify the OCMI on the time and location of a DP survey (see Section 3.18). Additionally, the Coast Guard estimates that it would cost government $607.50 to attend a DP survey (See Section 3.18).


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61-50.3 Acceptance of dynamic positioning system assurance organizations

Creates specifications that dynamic positioning system assurance organizations (DPSAOs) must meet in order to receive approval from the Coast Guard Outer Continental Shelf National Center of Expertise (OCSNCOE) to conduct DP surveys, FMEA testing, and plan reviews.

The Coast Guard estimates that it would cost $1,235.10 for a DPSAO to show in writing that it meets the requirements of a highly qualified DP system assurance organization whose DP system rules align with IMO MSC/Circ. 645. This cost will be discussed in Table 3-34. Further, the Coast Guard estimates that it would cost $600 for the government to review and approve of a DPSAO application. This cost will be discussed in Table 3-36.

61.50-4 Oversight of dynamic positioning system assurance organizations

DPSAOs must submit an annual report to the Coast Guard OCSNCOE summarizing each DP investigation that occurred during that year, and whether it is satisfied with the owner or operators response.

Costs would be incurred by industry to create an annual DP failure investigation report. It is expected that it would cost $169.10 to create this report (see Table 3-18 for more detail). Additionally, the Coast Guard has estimated that it would cost $150 for the OCSNCOE to review the report (see Table 3-19 for more detail).


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61.50-1, 61.50-5, 61.50-10, 61.50-15 Initial, Periodic, and Annual Surveys of DP system

Requires all applicable vessels listed in 46 CFR 61.50-2 have surveys conducted by a DPSAO in order to ensure compliance with DP system requirements. Additionally, these sections require that the DPSAO conducting the survey must report to the Coast Guard the location and time of the survey at least 30 days prior to the survey.

The Coast Guard expects that industry would already be compliant with a majority of the requirements in these sections, as it is expected to be used given industry practice and desire to compete in international markets.

The Coast Guard estimates that it would cost owners and operators $4.10 to have the DPSAO notify the OCMI on the time and location of a DP survey (see Section 3.18). As this requirement is expected to be done over the phone or through email, there is not expected to be a shipping cost associated with compliance. Additionally, the Coast Guard estimates that it would cost government $607.50 to attend a DP survey. These costs will be detailed below in Section 3.18.

In part 61, the Coast Guard sets testing requirements for vessels that utilize DP systems while conducting Critical OCS activities. Because DP systems are essential to preventing a loss of position or propulsion in deep water drilling, it is crucial to ensure that they are fully operational at all times in order to maintain safe work practices. Therefore, the Coast Guard would codify testing practices found in the IMO MSC/Cir.645, and recommend practices found in the MTS DP Operation Guidelines. Section 61.03-1 incorporates by reference DP system survey standards set forth by the IMO and the MTS.

Section 61.50-2 requires all MODUs that use a DP system to conduct Critical OCS activities and all non-drilling vessels that conduct Critical OCS activities while using a DP system installed on or after the effective date of a final rule to complete DP system surveys initially, periodically, and annually prior to publication of a final rule. Additionally non-drilling vessels of at least 500 GT ITC that conduct Critical OCS activities while using a DP system installed before the effective date of a final rule must complete DP system surveys initially, periodically, and annually by the date specified in Table 2-1 of this RA. These surveys would be required to have been conducted by a Coast Guard approved DPSAO. Further, the DPSAO conducting the surveymust notify the Coast Guard, at least 30 days prior to the survey, of the location and time of the survey. The costs that would be incurred by industry and government as a result of these requirements will be discussed in greater detail in section 3.18.

3.16 Costs for 46 CFR 61.50-3

In § 61.50-3, the Coast Guard sets minimum qualification standards that highly qualified organizations must meet in order to be accepted by the Coast Guard Outer Continental Shelf National Center of Expertise (OCSNCOE) as a Coast Guard approved DPSAO. A DPSAO must show in writing that it possesses DP system rules aligned with IMO MSC/Circ. 645, and meets the criteria listed in this section. A Coast Guard subject matter expert expects that 4 DPSAO would apply for approval during the first year of this analysis, with an additional DPSAOapplying each subsequent year. Furthermore, the Coast Guard assesses that it would take a surveyor from the DPSAO 30 hours to demonstrate in writing that it meets the Coast Guard’s minimum qualification standards to be a DPSAO. Along with the opportunity cost of demonstrating the society’s or organization’s qualifications, the DPSAO would also have to pay a shipping fee to submit the document to the Coast Guard. The Coast Guard assumes that this shipping fee would cost approximately $5.10.74 The Coast Guard further assumes that the loaded hourly wage of the person completing the application would be $41.00.75

Table 3-34 provides the derivation of the total cost per DPSAO to apply for approval by OCSNCOE.

74 United States Postal Service – Priority Mail: Commercial Base for a Flat Rate Legal Sized Envelope or Padded 12.5 x 9.5 Sized Envelope https://www.usps.com/business/priority-mail-for-business.htm75 See Chapter 1 for a more complete description of derivation of loaded hourly wages.


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Table 3-34: Derivation of Cost to Apply for DPSAO Approval

Affected Party Hours to Prepare Hourly Wage Shipping Cost Total Cost

DPSAO 30 $41.00 $5.10 $1,235.10

The total 10-year discounted cost of this requirement to industry is $12,138 at a 7 percentdiscount rate and $14,133 at a 3 percent discount rate. Table 3-35 summarizes the 10-year cost of this requirement to industry.

Table 3-35: Industry Cost for DPSAO Application(per Year)

Year Number of

Affected Vessels

Cost to Apply for DP Assurance Authorization

Undiscounted Costs

Discounted Costs

7% 3%

1 4 $1,235.10 $4,940 $4,617 $4,797

2 1 $1,235.10 $1,235 $1,079 $1,164

3 1 $1,235.10 $1,235 $1,008 $1,130

4 1 $1,235.10 $1,235 $942 $1,097

5 1 $1,235.10 $1,235 $881 $1,065

6 1 $1,235.10 $1,235 $823 $1,034

7 1 $1,235.10 $1,235 $769 $1,004

8 1 $1,235.10 $1,235 $719 $975

9 1 $1,235.10 $1,235 $672 $947

10 1 $1,235.10 $1,235 $628 $919

Total - - $16,056 $12,138 $14,133




The requirements in § 61.50-3 would also result in new costs for government. Upon receiving a DPSAO’s application, a Coast Guard official would review the application and then reach a decision on whether the applicant met the qualifications. This government official would inform the DPSAO on whether or not their application has been approved. According to a Coast Guard subject matter expert, it is expected that it would take 8 hours to review the application and reach a conclusion. The Coast Guard assumes a loaded hourly wage of $75.00.76



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Table 3-36 summarizes the 10-year total cost of the requirements in § 61.50-3 to the government.

Table 3-36: Government Cost for DPSAO Application

Year Number of

Affected Vessels

Cost to Review DP Assurance

Application

Undiscounted Costs

Discounted Costs

7% 3%

1 4 $600 $2,400 $2,243 $2,330

2 1 $600 $600 $524 $566

3 1 $600 $600 $490 $549

4 1 $600 $600 $458 $533

5 1 $600 $600 $428 $518

6 1 $600 $600 $400 $502

7 1 $600 $600 $374 $488

8 1 $600 $600 $349 $474

9 1 $600 $600 $326 $460

10 1 $600 $600 $305 $446

Total - - $7,800 $5,896 $6,866

Annualized $840 $805



The total 10-year discounted cost of this requirement to government is $5,896 at a 7 percent discount rate and $6,866 at a 3 percent discount rate. This cost is expected to increase if additional DPSAOs seek Coast Guard approval.


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3.17 Costs for 46 CFR 61.50-4

In § 61.50-4, the Coast Guard would require DPSAOs to submit an annual report to the Coast Guard OCSNCOE that contains each DP investigation summary reported to it under 33 CFR 140.335 (h). This report assures the Coast Guard that DPSAOs are complying with the requirements necessary of an authorized DP assurance organization, as well as that owners and operators are not resuming operations until only after safety and environmental concerns have been addressed.

The costs to comply with this requirement have already been accounted for and discussed in this Section 3.7 of this report.


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3.18 Costs for 46 CFR 61.50-5, 61.50-10 & 61.50-15

Survey requirements found in §§ 61.50-5, 61.50-10, and 61.50-15 would require all MODUs that use a DP system to conduct Critical OCS activities and all non-drilling vessels that use a DP system installed on or after issuance of an effective rule to conduct Critical OCS activities to complete surveys preformed by DPSAO at various intervals in time. Furthermore, non-drilling vessels of at least 500 GT ITC that conduct Critical OCS activities while using a DP system installed before the effected date of a final rule must meet these survey requirements by the date specified in Table 2-1.

After speaking with representatives from contracting entities, it was determined that this process is already part of the vetting process for contracts. These requirements would call for these surveys to occur initially (performed after completion of installation of DP system), periodically (performed at intervals not exceeding 5 years), and annually (performed within 3 months before or after each anniversary date of the initial survey). The Coast Guard considered developing a new standard in lieu of using the IMO MSC/Cir.645 and the MTS “DP systems Guide”, but rejected this alternative because of wide industry use of the IMO’s circular and industry guidelines, thereby minimizing the cost to meet our regulatory objectives.

One new requirement, found in all three of the above survey sections, is a requirement that the DPSAO conducting the surveys must inform the Coast Guard, at least 30 days in advance, of when these surveys will occur in order to allow an OCMI the opportunity to attend. This requirement can be fulfilled by phone, and is estimated to take approximately 6 minutes per phone call according to Coast Guard subject matter experts. It is further assumed that an OMCI would choose to attend these surveys. The Coast Guard estimates that the total annual cost for an employee of the DPSAO to notify the Coast Guard of when an initial or annual survey would occur is $4.10 per vessel.77 The Coast Guard assumes that this cost incurred by the DPSAOwould be passed on to owners and operators through the form of higher prices charged by the DPSAO for its services.

The total 10-year discounted cost of this requirement to industry is $13,024 at 7 percent and $16,928 at 3 percent. The 10-year annualized costs are $1,854 at 7 percent and $1,984 at 3 percent.

Table 3-37 summarizes the total cost (initial and annual survey costs) to industry as a result of this requirement.

77 Total annual cost to report survey: (0.1 hour X $41/hour). An employee of a DPSAO would be required to report an initial survey and annual survey for each vessel.


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Table 3-37: Industry Cost for Initial, Periodic, and Annual Survey Requirement(per Year)

Year Number of

Initial Surveys78

Undiscounted Cost of Initial

Surveys(A)

Number of Annual Surveys

Undiscounted Cost of Annual

Surveys(B)

Total Undiscounted

Cost(A + B)

Discounted Cost

7% 3%

1 89 $365 0 $0 $365 $341 $354

2 40 $164 89 $365 $529 $462 $499

3 23 $94 129 $529 $623 $509 $570

4 281 $1,152 152 $623 $1,775 $1,354 $1,577

5 38 $156 433 $1,775 $1,931 $1,377 $1,666

6 37 $152 471 $1,931 $2,083 $1,388 $1,744

7 225 $923 508 $2,083 $3,005 $1,872 $2,444

8 47 $193 733 $3,005 $3,198 $1,861 $2,525

9 49 $201 780 $3,198 $3,399 $1,849 $2,605

10 136 $558 829 $3,399 $3,957 $2,011 $2,944

Total - - - - $20,865 $13,024 $16,928




This requirement would also result in costs to government; there would be a small cost associated with recording when and where the initial and annual surveys would occur, and another for attending the survey. Although these surveys would be conducted by a surveyor from the DPSAO, a civilian or uniformed Coast Guard official would likely attend all initial and annual surveys in order to oversee the survey, which would take an average of 8 hours to conduct.79 Civilian surveyors are assumed to be GS-11 positions, while uniformed Coast Guard surveyors are assumed to be E-6 grades. These positions would also be responsible for recording when the initial and annual survey will take place. Based on the Commandant Instruction (COMDTINST) 7310.1O, the average wage for these positions is $75 per hour.80

It is assumed that it would take 6 minutes to record the time and location of the DP survey. The cost incurred by government to record and attend a survey is $607.50.81

78 Please refer to Table 2-3 for a breakdown of the affected population by vessel type.

79 Travel time is not included in the estimate.

80 See Chapter 1 for a more complete description of derivation of loaded hourly wages.81 Government cost to record and attend survey: (0.1 hours X $75.00/ hour to record time and location of survey) + (8 hours X $75.00/hour to attend and oversee survey)


101

The total 10-year discounted cost of this requirement to government, which includes initial, periodic, and annual surveys, is $1,929,724 at 7 percent and $2,508,182 at 3 percent. The 10-year annualized costs are $274,749 at 7 percent and $294,035 at 3 percent.

Table 3-38 summarizes the total cost (initial and annual survey costs) to government as a result of this requirement.

Table 3-38: Government Cost for Initial, Periodic, and Annual Survey Requirement(per Year)

Year Number of Initial Surveys

Undiscounted Cost of Initial

Surveys(A)

Number of

Annual Surveys

Undiscounted Cost of Annual Surveys

(B)

Total Undiscounted

Cost(A + B)

Discounted Cost

7% 3%

1 89 $54,068 0 $0 $54,068 $50,530 $52,493

2 40 $24,300 89 $54,068 $78,368 $68,449 $73,869

3 23 $13,973 129 $78,368 $92,340 $75,377 $84,504

4 281 $170,708 152 $92,340 $263,048 $200,678 $233,714

5 38 $23,085 433 $263,048 $286,133 $204,009 $246,820

6 37 $22,478 471 $286,133 $308,610 $205,640 $258,456

7 225 $136,688 508 $308,610 $445,298 $277,309 $362,068

8 47 $28,553 733 $445,298 $473,850 $275,785 $374,062

9 49 $29,768 780 $473,850 $503,618 $273,935 $385,981

10 136 $82,620 829 $503,618 $586,238 $298,013 $436,216

Total - - - - $3,091,568 $1,929,724 $2,508,182

Annualized $274,749 $294,035




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3.19 Changes to 46 CFR part 62 -- Vital System Automation

Table 3-39: Changes to 46 CFR part 62 -- Vital System Automation


62.05-1 Incorporation by Reference Provides new locations for obtaining all approved materials.

No cost, as this incorporates industry standard.

62.10-1 Definitions Provides definitions for new terms associated with this proposed rulemaking

No cost, since adding new definitions is an administrative action.

62.20-2 Required Plans for DP systems Requires all MODUs that conduct Critical OCS activitiesand all other vessels of at least 6,000 GT ITC that have installed a DP system on or after issuance of an effective rule to submit to a DPSAO a DP system plan.

No additional cost to create and maintain these plans or to submit the plan to DPSAO, as this incorporates international standards understood to be used given industry practice and desire to compete in international markets.

Requires the DPSAO to submit a copy of the approved DP system plan, to the commanding officer of the MSC.

The Coast Guard estimates that it would cost an owner or operator $25.60 to have a DPSAO gather and submit a vessel's DP system plan to the Coast Guard (see Table 3-40).

We estimatethat it would costthe government $2,700 to review a DP system plan (see Table 3-43).

62.25-40 Environmental Design Standards on OCS Units

Incorporates IEC environmental standards into Title 46

No cost, as this incorporates international standards expected to be used given industry practice and desire to compete in international markets.


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62.40-3, 62.40-5 Design Standards for DP systems on OCS

Requires all vessels that use a DP system to conduct Critical OCS activities meet the DP Operation Standards in IMO MSC/Circ. 645 and certain requirements the MTS DP Operation Guidelines (i.e.-FMEA, CAMO, and ASOC/WSOC requirements). Requires all applicable vessels to obtain DP notation equivalent to equipment class 2 or higher from an authorized classification society.

There would be costs incurred to vessels that conduct Critical OCS activities using DP systems, but do not currently use a DP system classed 2 or higher. In addition, the cost ofequipment upgrades to a DP system classed 2 or higher could also require mechanical and structural improvements to the vessel. The costs incurred as a result of these provisions have been discussed previously in Sections 3.10 and 3.11 of this RA.

Further, all applicable vessels must maintain a FMEA that demonstrates compliance with the applicable provisions of IMO MSC/Circ.645for DP equipment class 2 or higher.

There would be a cost to industry to develop and maintain a FMEA if the vessel did not currently comply with this requirement. This cost has been discussed previously in Table 3-9.

62.40-15, 62.40-20 FMEA and FMEA proving test documents

Requires owners or operators to create and maintain a vessel's FMEA and FMEA test proving document.

The Coast Guard estimates thatit would cost an owner or operator $275,000 to create and maintain a vessel's FMEA and FMEA test proving document. These costs have been discussed previously in reportable 3-9.

62.40-25 Critical Activity Mode of Operation (CAMO)

Requires owners or operators to develop and maintain a CAMO.

The Coast Guard estimates that it would cost an owner or operator $4,560 to create and maintain a vessel's CAMO. This cost has been discussed previously in report in Table 3-11.


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In part 62, the Coast Guard would require all MODUs that use DP to conduct Critical OCS activities, as well as all other vessels of at least 6,000 GT ITC that have installed a new DP system on or after issuance of an effective rule and conduct Critical OCS activities to submit DP system plans, diagrams, and manuals to the Coast Guard for technical plan review. Further, part 62 would require all vessels that meet the above requirement to also incorporate IEC 60092-504 environmental standards. Finally, this section would set design and operating standards for MODUs and other vessels that use DP systems to conduct OCS activities.

Section 62.05-1 would incorporate by reference DP system standards set forth by the IMO and the MTS, while § 62.10-1 defines new terms that would be used in association with DP systemutilization.

Section 62.20-2 would require the owners or operators of all MODUs that use DP systems to conduct Critical OCS activities and all other vessels of at least 6,000 GT ITC that have installed a DP system on or after issuance of an effective rule to submit a vessel’s DP system plan to the DPSAO that conducted the vessel’s initial survey. This DP system plan must include all components and locations of DP system equipment on the vessel. The Coast Guard considered developing its own DP system vessel plan standards to replace the standards set by the IMO MSC/Cir.645 and the MTS “DP Operations Guide”, but rejected this alternative because of wide industry use of the IMO’s circular and MTS guidelines, thereby minimizing the cost. Instead, this proposal would not result in any additional costs to owners or operators, as this requirement is already practiced by industry.


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3.19 Costs for 46 CFR 62.20-2 (c)

§ 62.20-2 (c) complements the industry standards by requiring that the DPSAO that has approved of the vessel’s DP system plan submit to the Marine Safety Center (MSC) a copy of the approved plans.

The Coast Guard estimates that it would take a DPSAO surveyor 30 minutes to compile and submit the approved DP system plan to the MSC. The Coast Guard uses a loaded hourly wage of $41.00 in order to account for the DPSAO surveyor’s opportunity cost to comply with this requirement.82 A DP system plan would only be required to be submitted once. In the first year, 59 MODUs and 5 OSVs of at least 6,000 GT ITC would be required to submit DP system plans to the MSC. In subsequent years, all new MODUs and new OSVs of at least 6,000 GT ITCwould be required to submit DP system plans.

Table 3-40 displays the derivation of the cost to submit a DP system plan to the commanding officer of the Marine Safety Center (MSC), and in subsequent years the Annual Survey Document.

Table 3-40: Derivation of Cost of DP system Plan and Annual Survey Document Requirement(Per Vessel)

Requirement Hours to Prepare Hourly Wage Shipping Cost83 Total Cost84

DP System Plan 0.5 $41.00 $5.10 $25.60



The total 10-year discounted cost of this requirement to industry is $3,222 at 7 percent and $3,670 at 3 percent. The 10-year annualized cost is $459 at 7 percent and $430 at 3 percent.

Table 3-41 summarizes the total cost of this requirement to industry.



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Table 3-41: Industry Cost of DP System Plan (per Year)

Year

Affected Number of

Vessels for DP System Plan

Requirement85

(A)

Cost per DP System Plan

(B)

Undiscounted Cost

(A x B)

Discounted Cost

7% 3%

1 64 $25.60 $1,638 $1,531 $1,591

2 13 $25.60 $333 $291 $314

3 11 $25.60 $282 $230 $258

4 12 $25.60 $307 $234 $273

5 11 $25.60 $282 $201 $243

6 10 $25.60 $256 $171 $214

7 10 $25.60 $256 $159 $208

8 10 $25.60 $256 $149 $202

9 10 $25.60 $256 $139 $196

10 9 $25.60 $230 $117 $171

Total - - $4,096 $3,222 $3,670

Annualized $459 $430

*Numbers may not add due to rounding *Dollar figures are in 2013 terms

According to Coast Guard subject matter experts, it would take a Coast Guard engineer approximately 3 to 6 hours to review each individual requirement of the plan, for an average total of 36 hours per DP system plan.

Table 3-42 lists each component of the DP system plan that would be reviewed, along with the expected time it would take to review each component.

85 The Coast Guard would require only MODUs and other vessels of at least 6,000 GT ITC to submit a DP system plan to the Marine Safety Center.


107

Table 3-42: Hours by Component to Review a DP system Plan

Requirement Hours

System Description, including block diagram and functional relationships of components 3.00

Specifications of Position Reference and Environmental Monitoring Sensors or Systems 3.00

Location of Thrusters and Control System Components 3.00

Details of DP System Monitoring and Alarm System and Interconnection Between Systems 3.00

DP System FMEA Proving Test Documents and Annual Survey Documents 6.00

Critical Activity Mode of Operation 6.00

Designer or Manufacturer Self-Certification of DP System Control Equipment to Environmental Design Standards

6.00

Authorized Classification Society Approvals and Completion of Trials and Performance Tests 6.00

Total 36.00

The review of the DP system plans and the annual survey documents would be conducted by a Coast Guard engineer at an O-3 grade, which, based on Commandant Instruction (COMDTINST) 7310.1O Coast Guard Reimbursable Standard Rates, would lead to an average loaded wage of $75 per hour.86 The cost per DP systems plan review to government would be $2,700.87

The 10-year discounted cost of this requirement to government is $339,849 based on a 7-percent discount rate and $387,093 based on a 3-percent discount rate. The annualized cost is $48,387 at a 7-percent discount rate and $45,379 at a 3-percent discount rate.

Table 3-43 summarizes these costs to government as a result of this requirement.


87 Total government cost per DP systems plan review: (36 hours X $75/hour).


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Table 3-43: Government Cost of DP system Plan (per Year)

Year

Affected Number of Vessels for DP System

Plan Requirement

(A)

Cost per DP System Plan

(B)

Undiscounted Cost

(A x B)

Discounted Cost

7% 3%

1 64 $2,700 $172,800 $161,495 $167,767

2 13 $2,700 $35,100 $30,658 $33,085

3 11 $2,700 $29,700 $24,244 $27,180

4 12 $2,700 $32,400 $24,718 $28,787

5 11 $2,700 $29,700 $21,176 $25,619

6 10 $2,700 $27,000 $17,991 $22,612

7 10 $2,700 $27,000 $16,814 $21,953

8 10 $2,700 $27,000 $15,714 $21,314

9 10 $2,700 $27,000 $14,686 $20,693

10 9 $2,700 $24,300 $12,353 $18,081

Total - - $432,000 $339,849 $387,093

Annualized $48,387 $45,379

3.20 Costs for 46 CFR 62.25-40

Environmental requirements are defined in § 62.25-40 and follow environmental standards set forth by Clause 5 of IEC 60092-504. Because these requirements are already integrated in current industry practices, they would not add a new burden to industry.


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3.21 Costs for 46 CFR 62.40-3, 62.40-5, 62.40-15, 62.40-20, and 62.40-25

Sections 62.40-3 and 62.40-5 provide additional proposed requirements for MODUs and other vessels utilizing DP systems on the U.S. OCS. Section 62.40-3 requires all applicable vessels to meet the minimum DP system requirements found earlier in part 62, as well as the requirements found in paragraph 3.4.1 of IMO MSC/Circ. 645. Section 62.40-5 requires all MODUs that use a DP system to conduct Critical OCS activities and all other vessels that use a DP system installed after issuance of an effective rule to conduct Critical OCS activities, to meet the provisions of IMO MSC/Circ. 645 and the provisions of the applicable MTS DP Operation Guidelines relevant to Equipment Class 2 or 3. It further requires all applicable vessels to obtain a DP notation equivalent to Equipment Class 2 or 3 of IMO MSC/Circ. 645 from an authorized classification society possessing DP system rules aligned with IMO MSC/Circ. 645. These requirements have been discussed previously in this report, and therefore, will not require further analysis.

Sections 62.40-15, 62.40-20, and 62.40-25 would require all MODUs and other vessels that conduct Critical OCS activities while using a DP system to complete and maintain a FMEA and CAMO. An existing or future MODU and all other future non-drilling vessels (OSVs and crewboats) that use DP would be required to comply with the requirements prior to or on the effective date of a final rule. All non-drilling vessels of at least 500 GT ITC with an existing DP system would be required to comply with these requirements prior to the time specified in Table 2-1 of this RA. The costs to develop and maintain these documents have been discussed earlier in this report, and therefore, will not require further analysis.


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3.22 Total Industry Costs for NPRM

Table 3-44 summarizes the 10-year discounted present value cost to industry, which is estimated to be $141,733,422 at 7 percent and $175,690,215 at 3 percent. Annualized costs would be $20,179,651 at 7 percent and $20,596,253 at 3 percent. Table 3-45 summarizes the total discounted costs and the annualized costs to industry by requirement.

Table 3-44: Total Industry Cost of NPRM(per Year)


7% 3%

1 $13,295,128 $11,612,479 $12,531,933

2 $13,583,758 $11,864,581 $12,803,995

3 $10,900,925 $8,898,402 $9,975,891

4 $44,460,494 $33,918,698 $39,502,573

5 $12,960,131 $9,240,394 $11,179,523

6 $12,958,982 $8,635,117 $10,852,943

7 $40,540,725 $25,246,726 $32,963,320

8 $15,177,650 $8,833,530 $11,981,377

9 $15,965,539 $8,684,195 $12,236,256

10 $29,112,460 $14,799,299 $21,662,405

Total $208,955,792 $141,733,422 $175,690,215

Annualized $20,179,651 $20,596,253



Table 3-45: Total Marginal and Annualized Industry Costs for NPRM(by Requirement)


Undiscounted 7% 3% 7% 3%Minimum DP Manning RequirementsCost to Provide Proof of Training (Table 3-4) $467,996 $332,365 $400,855 $47,321 $46,992Cost to Comply with DP Manning Requirements88 (Table 3-8) $71,635,200 $50,313,567 $61,106,279 $7,163,520 $7,163,520

Total $72,103,196 $50,645,932 $61,507,133 $7,210,841 $7,210,512Intermediate DP System RequirementsCost to Complete FMEA and FMEA Proving Test Document (Table 3-9) $111,100,000 $74,383,054 $92,903,263 $10,590,474 $10,891,097Cost to Develop CAMO and ASOC or WSOC (Table 3-11) $4,208,880 $2,858,478 $3,540,664 $406,983 $415,074Cost to Report DP Status Changes from Green to Red or Yellow (Table 3-13) $905,587 $565,296 $734,721 $80,485 $86,132Cost to Conduct DP Incident Investigations (Table 3-17) $6,591,592 $4,081,179 $5,329,997 $581,068 $624,838Cost to Submit Annual DP Incident Investigation Report (Table 3-18) $860,550 $537,146 $698,162 $76,478 $81,846Cost to Report Emergency Disconnect and Serious Marine Incidents (Table 3-24) $28,791 $18,548 $23,667 $2,641 $2,774Cost to Obtain a DPVAD (Table 3-26) $14,719 $9,594 $12,159 $1,366 $1,425Cost to Report DP Surveys (Table 3-37) $20,865 $13,024 $16,928 $1,854 $1,984

Total $123,730,983 $82,466,319 $103,259,560 $11,741,349 $12,105,171Standard DP System RequirementsCost to Obtain DP-2 System Equipment89 (Table 3-28) $2,628,711 $2,299,523 $2,478,534 $327,400 $290,560Cost to Obtain DP-2 Class Notation (Table 3-30) $10,472,750 $7,119,161 $8,803,142 $1,013,608 $1,031,997

Total $13,101,461 $9,418,684 $11,281,676 $1,341,009 $1,322,557Enhanced DP System Requirements

Cost to Submit DP System Plans (Table 3-41) $4,096 $3,222 $3,670 $459 $430

Total $4,096 $3,222 $3,670 $459 $430

88 Costs are only incurred by six foreign-flagged MODUs.

89 We forecast that costs would only be incurred by 1 future crewboat in the first three years following the effective date of a final rule.

3.23 Total Government Costs for NPRM

Table 3-46 summarizes the 10-year discounted cost to government, which is estimated at $2,935,991 at 7 percent and $3,744,096 at 3 percent. Annualized costs would be $418,019discounted at 7 percent and $438,922 discounted at 3 percent.

Table 3-46: Total Government Cost of Rulemaking (per Year)


7% 3%

1 $286,068 $267,353 $277,735

2 $153,180 $133,793 $144,387

3 $165,220 $134,869 $151,200

4 $382,700 $291,960 $340,024

5 $409,808 $292,187 $353,504

6 $436,068 $290,570 $365,200

7 $608,143 $378,721 $494,476

8 $645,120 $375,466 $509,264

9 $683,585 $371,825 $523,911

10 $785,380 $399,247 $584,396

Total $4,555,270 $2,935,991 $3,744,096

Annualized $418,019 $438,922



Table 3-47 summarizes the total discounted costs and the annualized costs to government by requirement.

Table 3-47: Total Marginal and Annualized Government Costs for NPRM(by Requirement)


Undiscounted 7% 3% 7% 3%

Minimum DP Manning Requirements

Cost to Review Proof of Training (Table 3-5) $245,453 $174,317 $210,238 $24,819 $24,646

Total $245,453 $174,317 $210,238 $24,819 $24,646

Intermediate DP System Requirements

Cost to Review Annual DP Incident Investigation Report (Table 3-19) $763,350 $476,475 $619,304 $67,839 $72,601

Cost to Review Emergency Disconnect and Serious Marine Incidents(Table 3-25)

$15,100 $9,728 $12,413 $1,385 $1,455

Cost to Record and Attend DP Surveys (Table 3-38) $3,091,568 $1,929,724 $2,508,182 $274,749 $294,035

Total $3,870,018 $2,415,928 $3,139,899 $343,974 $368,092

Standard DP System Requirements

No Cost to Government - - - - -

Total $0 $0 $0 $0 $0

Enhanced DP System Requirements

Cost to Review DP System Plans (Table 3-43) $432,000 $339,849 $387,093 $48,387 $45,379

Total $432,000 $339,849 $387,093 $48,387 $45,379

Other Requirements

Cost to Review DPSAO Applications (Table 3-36) $7,800 $5,523 $6,866 $786 $805

Total $7,800 $5,523 $6,866 $786 $805

3.24 Total Cost for NPRM

Table 3-48 summarizes the total costs of this rulemaking to industry and the Federal government for the 10-year period of analysis (combining Tables 3-44 and 3-46). The costs were discounted at 3 and 7 percent as set forth by guidance in the Office of Management and Budget’s Circular A-4.

Table 3-48: Total Cost of NPRM (per Year)


7% 3%

1 $13,581,195 $11,879,832 $12,809,668

2 $13,736,938 $11,998,374 $12,948,382

3 $11,066,145 $9,033,271 $10,127,091

4 $44,843,194 $34,210,658 $39,842,597

5 $13,369,939 $9,532,582 $11,533,027

6 $13,395,049 $8,925,687 $11,218,143

7 $41,148,868 $25,625,447 $33,457,795

8 $15,822,770 $9,208,996 $12,490,640

9 $16,649,124 $9,056,020 $12,760,167

10 $29,897,840 $15,198,546 $22,246,801

Total $213,511,062 $144,669,412 $179,434,311

Annualized $20,597,670 $21,035,175



The 10-year discounted cost to industry and government of this rulemaking is $144,669,412based on a 7 percent discount rate and $179,434,311 based on a 3 percent discount rate. The annualized cost of this rulemaking is $20,597,670 at 7 percent and $21,035,175 at 3 percent.


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4) Discussion of Benefits

As the offshore drilling industry moves farther offshore, maintaining vessel position and height becomes an increasingly more difficult task especially as water depth precludes mooring. The vessel’s position and height depend on understanding many variables, such as the speed and direction of waves and the wind, all of which can be very irregular at distances farther offshore.DP systems not only remove this uncertainty, they are also able to predict future changes in wave speed and direction based on current conditions.

However, despite of this advanced technology (and in cases, because of this technology) a loss of position can still occur while operating under DP. Due to the high-risk environment that OSVs and MODUs work in, such a loss of position could result in catastrophic consequences. Property damage, environmental damages, and human casualties could occur in the event of a loss of position or propulsion.

This proposed rule would require all OSVs and crewboats that install or upgrade a new DP system to conduct Critical OCS activities, and all existing and future MODUs that utilize DP systems while conducting Critical OCS activities on the U.S. OCS to use DP-2 or higher systems. Requiring DP-2 removes the potential for a single failure (e.g., bus tie, propulsor) to initiate a chain of events leading to catastrophic loss of life, spill and/or economic damages.

In addition, this rulemaking provides other guidance on design and operation standards for all DP vessels. The development of decision support tools such as CAMOs and ASOC/WSOC would provide DPOs and DPOQs with a summarized and easy to understand guide on the limits to safe operating conditions, which will help DPOs and DPOQs react quicker to prevent or mitigate a loss of position while operating DP systems. Finally, this rulemaking would require all MODUs using DP systems to conduct OCS activities to have a master under command while the vessel is using DP.

Furthermore, by requiring that owners and operators of vessels utilizing DP systems as well as requiring owners and operators to examine DP incidents and submit documents describing the time, location, and reason for why a system incident occurred. This will enable the industry andthe Coast Guard to better understand the causes of these incidents and, in time, develop programs to prevent these same incidents from occurring again in the future. Additionally, this information can provide assistance to manufactures and operators of DP systems in order to contribute to more efficient and safer DP systems and practices in the future.


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4.1 Frequency of DP Incidents

The primary goal of this NPRM is to reduce the occurrence of incident of DP systems and to mitigate the impacts of failures if they occur. At this time, the Coast Guard does not have a comprehensive source of information on DP failures, as vessels currently do not have to report DP failures to the Coast Guard. A provision of this NPRM seeks to gather such data.

To better understand how many DP system incidents occur per year, the Coast Guard reviewed reports from the International Marine Contractors Association (IMCA), which collects and reports incidents of DP incidents provided on a voluntary basis by its members. From 2004 and2010, the IMCA lists 429 reported DP system incidents. However, this figure likely underestimates the number of DP system incidents that occurred because members of the IMCA were not required to report incidents during that time period. As a result of this potential under-reporting, we use the average rate per year at which DP system incidents occurred per vessel during that same time period instead of the average number of DP incidents reported per year, since the rate is less likely to be influenced by the number of vessels reporting. Figure 4-1 displays the trend in the number of DP failures reported to the IMCA from 2004 through 2010.

Figure 4-1: Rate of DP Failures per Vessel

Although reporting to the IMCA is voluntary, and therefore likely underestimates the true DP incident rate, the IMCA data show that the rate of DP system incidents has remained relatively stable throughout the 7-year period studied, even as the number of vessels reporting hasincreased.90 This suggests that DP system incidents occur on a relatively consistent basis (between 1 to 2 times per vessel per year).

90 Because this information was voluntarily provided to the IMCA, the reporting population may not be a true representative of the population as a whole. However, as the IMCA is the only organization that currently collects this data, it is the best data available at this time.

23

29

41

4964

4641

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009 2010

DP

Incid

en

t Rate

pe

r Ve

ssel

Nu

mb

er

of

Re

po

rtin

g V

ess

els

Number of Reporting Vessels DP Incident Rate per Vessel


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4.2 Causes of DP Incidents Addressed by Proposed Rule

Additionally, the IMCA’s 2008 report says that: “the majority of vessels reporting incidents are DP- 2,” which suggests that although DP-2 system significantly reduce the probability of a DP system failure from occurring, without additional support tools, DP system incidents still occur at a relatively common rate.91 The IMCA’s report then categorizes the cause of each DP systemincident that was reported as the fault of either: environmental force, power/thrust equipment, DP equipment, or operator error. Figure 4-2 summarizes the categories as a percentage of the total number of DP system incidents that occurred from 2004 through 2010 (429 total).

Figure 4-2: Causes of DP system Incidents

Although Figure 4-2 shows that only 13% of all DP system incidents are directly linked to operator error, nearly 94% could have been mitigated by attention to human factors –environmental faults could have been reduced through the development of a well defined ASOC or WSOC; power/thrust faults could have been mitigated through the development of a properly defined CAMO; DP system faults could have been reduced through the development of a well defined ASOC or WSOC; and operator faults could have been diminished through DPOs and DPOQs becoming more familiar and experienced with a vessel’s ASOC/WSOC.92

With regard to the non-human, factor- related elements of this regulation, DP system incidents resulting from power generation or thrust faults could have been mitigated through the redundancy provided by DP-2, and by developing and maintaining a vessel’s CAMO. A CAMO

91 International Marine Contractors Association. “Dynamic Positioning Station Keeping Incidents: Incidents reported for 2008 (DP system 19)”. Pg. 2

EnvironmentalForce

(5%)

Electrical(11%)

Power Generation

(14%)

Thrusters(14%)

Equipment: Power/ThrustFault

39%

References(25%)

DP Computer

(16%)

Equipment: DPFault

41%

OperatorError

(11%)

Loss of Position Causes(Total # = 429)


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would: “identify the equipment configuration and methods of operation that ensure the vessel meets its maximum level of redundancy, functionality and operation and that no single fault will exceed the identified worst case failure.”93 Additionally, a CAMO would define the most robust configuration for the vessel’s: power plant set up, thrusters, power management, etc.; thereby diminishing the likelihood that an incident could occur as a result of human negligence in designing the vessel’s operating systems.

Furthermore, the development and maintenance of an ASOC or WSOC could reduce the probability that a DP system incident occurs as a result of a DP reference or DP computer fault. The ASOC/WSOC would define, among other things, “maximum environmental operating conditions, maximum offsets permissible from the set point position, position reference systems, and auxiliary systems performance limits and failures.” 94 These guidelines would program the DP computer to signal to the DPO or DPOQ to cease operations whenever the vessel diverged from the maximum limits set in the ASOC/WSOC.

Third, the probability that an operator error will occur can be reduced by ensuring that all DPOs and DPOQs are properly trained and experienced. This training would include familiarization with the vessel’s ASOC or WSOC, which would provide DPO’s and DPOQ’s specific guidance based on that vessel’s design.

93 International Marine Contractors Association. “Guidance on Operational Activity Planning”. November 2012. Pg. 9 94 IMCA. “Guidance on Operational Activity Planning”. November 2012. Pg. 11


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4.3 Consequences of DP Incidents

Although most DP system incidents are correctly identified and resolved through the DPO or DPOQ manually taking control of the system, inaction or delayed action can have catastrophic consequences. If left unchecked, a DP incident could result in a loss of position or propulsion, and/or an emergency disconnect. These events could result in major property damage to the vessel itself and/or any surrounding vessels and facilities, lost revenue as a result of any downtime caused by damages, injury or loss of life, and/or environmental damage as a result of released oil or other chemicals. At a minimum, the vessel will be delayed from accomplishing its mission while tests and surveys are done and operations re-established.

Table 4-1 presents the range of potential consequences at risk in the event of a DP loss of position or propulsion on a MODU, OSV, or crewboat.

Table 4-1: Potential Monetary Consequences At Risk that Could Result From a DP SystemLoss of Position95

Consequence Category Range of Potential Consequences

Property Damage from Collision $ 5 million to $ 1 billion

Environmental Pollution $ 5 million to $500 million

Riser Lost on Seabed $7 million to $70 million

Pipe Bent or Buckled $ 3 million to $ 30 million

Downtime from Production Up to $500 thousand per day

Loss of Life $ 9.1 million per statistical life96

In addition to the range of monetary losses provided above, the Coast Guard also examined three recent incidents involving OSVs, two related to DP incidents: the 2010 incident involving the Discoverer Clear Leader, the 2005 incident involving the Samudra Suraksha, and the 2012 incident involving the Bibby Topaz. While two of these events did not occur in U.S. waters, similar events are possible in the U.S. OCS.

In April, 2010, the MODU Discoverer Clear Leader experienced a DP system incident that resulted in a loss of position while conducting well control operations in the U.S. OCS. During the incident, the DPO was able to initiate a cease operations response, however, an emergency disconnect was required. Although the vessel’s blow-out preventer was able to prevent a spill that could potentially have been on the magnitude of the Deepwater Horizon incident, the subsea gear of the MODU suffered damages as a result of the MODU’s loss of position. The Coast

95 Global Maritime, Chris Jenman. “Dynamic Positioning & Thruster Assisted Mooring”, accessed at: http://www.lmalloyds.com/CMDownload.aspx?ContentKey=f4599810-6043-4af0-bd66-437564aacad6&ContentItemKey=68a88ec5-64d1-48c9-8627-060ea6a856de

96Value of a statistical life is currently measured at $9.1 million. Guidance on Treatment of the Economic Value of a Statistical Life,” prepared for the U.S. Department of Transportation, April 2013. Available at: http://www.dot.gov/sites/dot.dev/files/docs/DOT%202013%20Signed%20VSL%20Memo.pdf


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Guard’s MISLE database lists property damages of $760,000 as a result of this incident. Further, the vessel experienced a loss of revenue while the vessel’s operations were suspended.

In September 2012, a DP incident involving the construction OSV Bibby Topaz, occurred off the coast of Scotland. During dive support activities, the Bibby Topaz suffered a DP system failure that resulted in a loss of position. At the time of the incident, 3 divers were in the water and while the vessel experienced a loss of position, the umbilical cord of one of the divers was severed. The diver was unable to return to the diving bell and had to instead rely on his standby air tank for almost 40 minutes. When the rescue team found the diver, he was unconscious, although the team was able revive him. While this incident did not result in any fatalities, the vessel’s loss of position put 3 divers’ lives at risk. The VSL of the lives that could have been lost as a result of this incident is $27,300,000. Although this incident did not take place in US waters, dive support activities while operating under DP are regularly conducted in the US OCS, with similar consequences at risk.

Neither of these incidents captures fully the potential worst case consequences possible from a loss of position that results from a collision under power of a MODU, OSV or crewboat. The collision of the logistics OSV Samudra Suraksha with a drilling platform illustrates the types and potential magnitude of the worst case consequences that could result from an OSV loss of position. In July, 2005, the Samudra Suraksha was transferring personnel off the coast of India when the vessel experienced a loss of position97 and the vessel collided with a platform, severinga gas riser in the process. Although an emergency shut-off of the gas riser was initiated, a sufficient amount of gas was released, resulting in an explosion and massive fire. Twenty-two crewmen lost their lives or went missing as a result of the explosion, which, when monetized at $9,100,000, amounts to $200,200,000. We use the fatalities lost as a reasonable worst case scenario of the potential consequences at risk from a loss of position and resulting collision between vessels or platforms. The incident also had environmental damage, property damage and loss of production impacts.

Table 4-1 and the subsequent examples demonstrate that a loss of position resulting from a DP incident could cause significant damages, including fatalities, injuries, environmental damage, property damage and lost productivity.

97 The vessel was equipped with DP but was not operating under DP at the time of the loss of position.


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4.4 Beneficial Impact of Proposed Rule

The requirements in this NPRM would diminish both the likelihood that a DP system incident would occur and mitigate the consequences of any such occurrence.


The design standards and classification requirements for new DP systems in the proposed rule provide the foundation for safety, ensuring that components are less likely to fail and that system incidents are not automatic should a component failure occur. Specifically, requiring that all MODUs and new non-drilling vessels (OSVs and crewboats) meet DP-2 standards ensures that DP systems would continue to operate if one component of the system fails.

According to IMCA’s “Dynamic Positioning Station Keeping Incidents” reports from 2004 through 2010, there was an average of 1.45 self-reported incidents per reporting vessel per year.98 The IMCA report goes on to state that “the majority of vessels reporting incidents are DP-2.”99 Assuming DP systems are operational 360 days per year, the probability that a DP-2 equipped vessel experiences a system incident is 0.00403 per day on average.100

If we assume that each component of the DP system is independent from the other (meaning that one component failing does not affect the likelihood that the other component fails) and that both components have the same probability of failing, then we can use the rate at a which a DP-2 equipped vessel incident occurs in order to calculate the rate at which a DP-1 equipped vessel fails. Given these assumptions, we calculate that a DP component fails with a probability of 0.0635 per day.101 This implies that a DP-2 system reduces the probability that a DP system incident failure occurs by 93.7 percent on average from the probability that a DP-1 system fails.102

Furthermore, mandating that MODUs and other vessels over 6,000 GT ITC that conduct Critical OCS Activities with new DP Systems incorporate applicable provisions of the IMO MSC/Circ. 645 for DP equipment 2 or higher would aid in the design of a fault tolerant, fault resistant DPvessel that is suitable for the vessel’s industrial mission. A fault tolerant system is designed tocontinue to function without interruption following an error or failure of a subsystem or component within the system, and is achieved through multiple design approaches based on the level of performance required for the industrial mission of the vessel. The design limits of such systems reduce the risk of a loss of position by reducing reliance upon the human element.

98 International Marine Contractors Association. Dynamic Positioning Station Keeping Incidents. Author’s Calculation using 2004-2010 reports.

99 International Marine Contractors Association. Dynamic Positioning Station Keeping Incidents: Incidents reported for 2008 (DP system 19). Pg. 2100 Pr(�� − 2��) =

1.45��360��

101 ��(��) = Pr(��) � Pr(��). If we assume that the probability that either component fails is independent

and identically distributed, then ��(��) = Pr(��)�andPr(Afails) = �Pr(ComponentAandBfail)

102 %∆ in Probability of DPS incident = (�.��.��)

�.��


122

Classification, plan review and certification requirements supplements the basic design requirements by providing for independent assurance that reliability and redundancy requirements are met, particularly for higher risk vessels.

Operations

Having the redundancy and other measures provided by vessel design requirements would do little to ensure safety without similar operational provisions. To ensure that the safety goals embodied in the design standards are achieved, the proposed rule also addresses how a DP system is operated. The proposal incorporates the MTS DP Operation Guidelines by reference and specifically requires development of several elements of the MTS guide, namely the CAMO and the WSOC/ASOC. The MTS guide consolidates industry best practices into one standard to address the safe operations of DP systems.

The MTS DP Operation Guideline is becoming increasingly adopted by industry. Based on input from industry representatives, all major oil companies active in the OCS have adopted, or are adopting, the MTS DP Operation Guidelines. Oil companies recognize the high risk environment that DP vessels operate in and the potential catastrophic consequences of a DP incident. To minimize the risk of incidents, industry has identified that DP operational standards are needed, and that the MTS DP Operation Guidelines fills this need. Industry would also achieve operational benefits from the adoption of the MTS operations guidance as it promotes a common process across the entire DP vessel population.

Operational benefits include:

Improving efficiency through reducing the probability that a DP incident occurs Specifying and communicating safe operational limits Easily understood by operators across drilling and non-drilling DP vessels Common terminology and understanding across different types of drilling and

non-drilling DP vessels

Other offshore vessels, such as logistic and supply vessels and crewboats, operate in close proximity to high risk activities such as drilling, and therefore, it is critical that these vessels also follow DP best practices to minimize the risk of a loss of position that could potentially have costly consequences. As a result, oil companies are increasingly specifying use of the MTSoperations guidance in contracts with other types of offshore vessels that interact with MODUs. Greater adoption of MTS guidance is expected across the industry as contracts are renewed with the specification that offshore vessels that interact with MODUs use the MTS DP Operation Guidelines. The requirements of the proposed rule will accelerate the adoption of DP operations best practices.

Two elements of the MTS operations guidance are specifically required by the proposed regulation: the CAMO and WSOC/ASOC. The WSOC/ASOC are visual decision support toolsthat provide DPOs/DPOQs an easy to use tool to summarize limits to safe operating conditions and indicate when DP operators must take corrective action, such as disconnecting a well pipe


123

because of the potential or actual loss of position. The goal of using WSOC/ASOC is to enhance operator performance in emergency/near-emergency situations and thus prevent a loss of position and potential costly consequences. Figure 4-3 contains an example of a WSOC.

Figure 4-3: Example of a WSOC

Based on industry experience, use of MTS DP Operation Guidelines can reduce incidents of DP incidents. According to one oil company representative, prior to adoption of MTS guidance, the company’s fleet experienced 6 DP position loss incidents in 6 months (a rate of 1 per month). After adoption, the fleet experienced 5 DP position loss incidents in 8 years (a rate of 0.05 per month, which is a reduction of 95 percent). Based on their evaluations of these five loss events, four could have been avoided if the WSOC had been properly followed. Manning and Training

To ensure that operators and crews of MODUs and other vessels that use dynamic positioning to maintain position while operating on the U.S. OCS are properly manned, have an in-depth knowledge of the DP system, be able to constantly and consistently monitor it, and take manual control of the system when appropriate, the proposed rule contains minimum manning and training requirements. These training requirements mandate that an operator have a thorough knowledge of the CAMO and either the ASOC, or WSOC, and must be familiar with the vessel’s FMEA. These provisions would reduce the likelihood that vessel and personnel casualties occur because of operator fatigue or inexperience using the system, complementing the WSOC/ASOC.


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Reporting

The proposed rule contains requirements that owners/operators report DP system incidents involving a reactive change from “green” to “yellow” and “green” to “red” as defined by the ASOC or WSOC. After the owner/operator has conducted a DP investigation following a DP system incident, this proposed rule requires that an annual summary report from the investigations be submitted to the Coast Guard OCSNCOE. Additionally, this NPRM also requires owners/operators to report more severe incidents (i.e. an emergency disconnect and/or a serious marine incident) that occur following a DP system incident directly to the cognizant OCMI. Reporting DP incidents and near misses will assist Coast Guard in understanding the frequency, causes and potential consequences of DP incidents in order to assist future efforts to improve safety and to ensure that operations can resume safely.

Table 4-2 provides greater detail on how each NPRM provision supports one of the four above categories:

Design Standards and Classification, Operations, Manning and Training, and Reporting.


125

Table 4-2: Description of Benefits of the NPRM

Key Provision

Des

ign

Sta

nd

ard

s &

C

lass

ific

ati

on

Op

era

tio

ns

Ma

nn

ing

& T

rain

ing

Rep

ort

ing

Description How Provision Reduces Risk

33 CFR Part 140 - Navigation and Navigable Waters

140.310 DP system Personnel Requirements

Requires all vessels that use a DP system to conduct OCS activities to have a DPO or DPOQ who is properly trained and has no other responsibilities outside of DP.

Codifies industry standards that each DPO and DPOQ must follow while performing duties, which reduces the likelihood of casualties occurring from operator fatigue, inattention or inexperience.

140.315 Minimum DP system Training Requirements

Defines the minimum training requirements that each DPO and DPOQ must have before operating a DP system

Codifies industry standards that each DPO and DPOQ must follow while performing duties, which reduces the likelihood of casualties occurring from inexperience.

Requires owners or operators to make available their DPO's or DPOQ's course completion certificates for DP training.

Enables compliance verification for this critical area to ensure that each DPO and DPOQ has received the proper training and has the necessary experience required to correctly operate a DP system in routine and emergency operations.

140.320 DP system Manning Requirements

Defines the minimum manning requirements to which all MODUs must adhere while using DP to conduct OCS activities.

Codifies industry standards that each DPO and DPOQ must follow while performing duties. Ensures that each DPO and DPOQ is sufficiently rested and prepared to handle the challenges of operating a DP system. Ensures that each DPO or DPOQ is in direct communication with a licensed master and navigational watch at all times while a MODU is using dynamic positioning to conduct OCS activities, enabling correct actions for routine and emergency situations and thus reduce the likelihood of casualties occurring from personnel miscommunication.


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140.325 Operations

Requires all vessels that use a DP system to conduct OCS activities to meet the DP Operation Standards in paragraph 4.4 IMO MSC/Circ. 645

Provides a uniform operating standard to which all flagged DP vessels must adhere. This would reduce the probability of operator faults occurring as a result of a lack of familiarity or experience with a DP operating system.

140.330 Minimum Design Standards and Testing

Requires all vessels that use a DP system to conduct OCS activities to meet the DP Design Standards in paragraph 3.4.1 of IMO MSC/Circ. 645.

Provides design standards to ensure a fault tolerant, fault resistant DP vessel that minimizes risk of loss of position if one component fails.

140.335 IntermediateDP system requirements

Requires all applicable vessels to conduct vessel surveys and maintain a FMEA, FMEA proving test document, and a CAMO.

Ensures that specifics of system design, construction and operation are developed and tested to ensure that redundancy is actually achieved and systems function as intended.

In addition to meeting the minimum DP Operating Requirements, all MODUs and applicable non-drilling vessels must also meet certain standards included in MTS DP Operation Guidelines. This requires all applicable vessels and MODUs to maintain a CAMO and ASOC or WSOC, respectively.

Ensures that all vessels and MODUs have well documented course-of-action and DP incident emergency response plans for all OCS activities. Reduces the probability that significant casualties or property damage could occur, since the DP system would be programmed, following rigorous testing during the FMEA, to recognize maximum environmental conditions, maximum offsets permissible from the set position, position reference systems, and auxiliary systems.

All applicable vessels must report a DP system status change from green to red or yellow to a DPSAO.

Provides Coast Guard officials with information on how often DP station-keeping incidents occur and why, and enables the Coast Guard to ensure that operations can be resumed safely.

All applicable vessels must a conduct a DP investigation whenever the DP status changes from green to yellow or red and submit a summary from the investigation to the DPSAO indicating whether the cause of the DP incident was addressed in the vessel’s FMEA, CAMO, and ASOC/WSOC.

Ensures that FMEAs, CAMOs, and ASOC/WSOCare updated based on casualties to prevent similar DP incidents from occurring in the future. This would reduce the probability that significant casualties or property damage could occur in the future.


127

All applicable vessels must have the DPSAO complete an annual DP incidentinvestigation report. This report would be reviewed annually by the OCSNCOE.

Provides Coast Guard officials with information on how and why DP failures occur. This information provides valuable feedback to ensure that future such incidents do not occur, which would reduce the probability of significant casualties or property damage from occurring in the future.

All applicable vessels must report a DP incident that resulted in an emergency disconnect and/or serious marine incident to the cognizant OCMI.

Ensures that the Coast Guard is notified immediately of DP incidents that result in catastrophic damages and/or injuries and fatalities. This would allow the Coast Guard to take immediate action if a serious event occurred, and to ensure that operations are not resumed until the cause of the incident has been addressed.

Creates a new document, a DPVAD, which would be issued by DPSAO to MODUs and applicable non-drilling vessels that use a DP system while conducting Critical OCS activities. This document would be issued after the vessel has completed its DP surveys.

Ensures safe design and operation for all vessels that use a DP system while conducting Critical OCS activities. Ensures that FMEA and CAMO are developed and maintained, which would reduce the likelihood of significant casualties or property damage from occurring in the future.

140.340 Standard DP system requirements

Requires all applicable vessels to obtain DP notation equivalent to Equipment Class 2 or higher from an authorized classification society.

Reduces probability of a DP system failure occurring by adding second component that would be required to fail before system failure.

140.345 Enhanced DP system requirements

In addition to meeting the design and operating requirements found in 140.335and 140.340, all MODUs and new non-drilling vessels of at least 6,000 GT ITCmust also submit, and have approved, the vessel's design and operating plans by the DPSAO that conducted the vessel's initial survey.

Provides increased assuredness of safe design and operation for all vessels that use a DP system to conduct Critical OCS Activities by requiring independent third party verification of design and planned operations. Ensures that FMEA and CAMO are developed and maintained, which would reduce the likelihood of significant casualties or property damage from occurring in the future.


128

140.350 Operational Control

Permits the cognizant OCMI to suspend an applicable vessel from using DP, if the vessel is found to be not in compliance with the requirements in this part.

Ensures safe design and operation for all vessels that use a DP system while conducting Critical OCS activities. This will reduce the likelihood of significant casualties or property damage from occurring in the future.

46 CFR Part 61 - Periodic Tests and Inspections

61.50-2 Surveys

Requires all MODUs and applicable non-drilling vessels that use a DP system whileconducting Critical OCS Activities, to complete DP surveys conducted by aDPSAO.

Ensures safe design and operation for all vessels that use a DP system to conduct Critical OCS Activities by requiring independent evaluation of systems. Periodic surveys ensure that FMEA and CAMO are maintained, which would reduce the likelihood of significant casualties or property damage from occurring in the future

Requires the DPSAO conducting the vessel’s DP survey to notify the OMCI at least 30 days prior to the survey.

Allows Coast Guard officials the opportunity to participate in DP system surveys providing government oversight and quality control for third parties. The Coast Guards presence will verify and complement the findings of a third-party surveyor, thereby ensuring that DP system equipment is operational and properly maintained, which would reduce the likelihood of a loss of position occurring in the future.


129

61-50.3 Acceptance of dynamic positioning system assurance organizations

Creates specifications that DPSAO must meet in order to receive approval from the Coast Guard Outer Continental Shelf National Center of Expertise (OCSNCOE) to conduct DP surveys, FMEA testing, and plan reviews.

Ensures that DPSAOs are highly qualified at conducting a FMEA, testing a vessel's CAMO and ASOC/WSOC, and conducting DP failure investigations. This would reduce the likelihood that significant casualties or property damage occur because of a poorly created CAMO or ASOC/WSOC.

61.50-4 Oversight of dynamic positioning system assurance organizations

All applicable vessels must have the DPSAO complete an annual DP failure investigation report. This report would be reviewed annually by the OCSNCOE.

Provides Coast Guard officials with information on how and why DP failures occur. This information provides valuable feedback to ensure that future such incidents do not occur, which would reduce the probability of significant casualties or property damage from occurring in the future. Further, this information would allow the Coast Guard to determine whether the DPSAO is still under compliance with the requirements necessary of an authorized DPSAO specified in 61.50-3.

61.50-5, 61.50-10, 61.50-15 Initial, Periodic, and Annual Surveys of DP system

Requires all vessels that use a DP system to conduct Critical OCS Activities to have surveys to ensure compliance with DP system requirements. Additionally, these sections require that the authorized DP assurance organization conducting the survey notify the Coast Guard on the location and time of the survey.

Ensures safe design and operation for all vessels that use a DP system to conduct Critical OCS Activities. Tests a vessel’s FMEA and CAMO to ensure that they are developed and maintained, which would reduce the likelihood of significant casualties or property damage from occurring in the future.

Allows Coast Guard officials the opportunity to participate in DP system surveys. The Coast Guards presence will verify and complement the findings of a third-party surveyor, thereby ensuring that DP system equipment is operational and properly maintained, which would reduce the likelihood of a loss of position occurring in the future.


130

46 CFR Part 62 - Vital System Automation

62.20-2 Required Plans for DP systems

Requires all MODUs that conduct Critical OCS Activities and all other vessels of at least 6,000 GT ITC that have installed a DP system on or after the effective date of this final rule to submit a DP system plan to assurance DPSAO.

Ensures safe design for all vessels that use a DP system to conduct Critical OCS Activities by requiring that systems be verified by independent third party, which would reduce the probability of significant casualties or property damage. Classification, plan review and certification requirements serves as a fundamental building block for safe DP operations by ensuring a minimum level of reliability for a DP system verified by a qualified third party, particularly for higher risk vessels.

Requires the DPSAO to submit a copy of the approved DP system plan to the commanding officer of the Marine Safety Center.

The Coast Guard’s oversight would verify and complement the findings of a third-party surveyor, thereby ensuring that DP system equipment is operational and properly maintained, which would reduce the likelihood of a loss of position occurring in the future. It would further provide for government oversight

62.25-40 Environmental Design Standards on OCS Units

Incorporates IEC environmental standards into Title 46

Reduces the risk of pollution or a subsea spill by ensuring that design of DP system equipment meet environmental standards.

62.40-3, and 62.40-5 Design Standards for DP systems on OCS

Requires all vessels that use a DP system to conduct Critical OCS Activities to meet the DP Operation Standards in IMO MSC/Circ. 645 and certain requirements in the MTS DP Operation Guidelines. Requires all applicable vessels to obtain DP notation equivalent to Equipment Class 2 or higher from an authorized classification society.

Reduces probability of a DP system failure occurring, because a DP-2 system must maintain position at all times, excluding incidents involving the loss of a compartment.

All applicable vessels must maintain a FMEA that demonstrates compliance with the applicable provisions of IMO MSC/Circ. 645 for DP equipment class 2 or higher.

Ensures that all vessels and MODUs meet their maximum level of redundancy, functionality, and operation, and that no single fault would exceed the identified worst-case failure. This would reduce the likelihood of significant casualties or property damage, since the DP system would alert the DPO or DPOQ before a worst-case failure occurs.


131

62.40-15, 62.40-20 FMEA and FMEA proving test documents

Requires vessel owners or operators to create and maintain a vessel's FMEA and FMEA test proving document.

Ensures that each vessels' and MODUs' DP system failure modes are assessed and tested to ensure that limits are understood and in compliance with regulations

62.40-25 Critical Activity Mode of Operation (CAMO)

Requires owners or operators to develop and maintain a CAMO.

Ensures that all vessels and MODUs meet their maximum level of redundancy, functionality, and operation and that no single fault would exceed the identified worst-case failure. This would reduce the likelihood of significant casualties or property damage, since the DP system would alert the DPO or DPOQ before a worst-case failure occurs.


132

Case Studies

Case Study: Bibby Topaz Loss of Position During Dive Support

Description: In September 2012, the Bibby Topaz was supporting dive activities in the Huntingdon oil field off Scotland in about 300 feet of water. Due to a problem with the dynamic positioning system, the vessel lost position and drifted approximately 785 feet from its original position. The umbilical cord of one of the divers was severed, cutting off his air supply, hot water and communication. The diver reverted to his standby breathing gas supply. The diver was recovered about 40 minutes later, unconscious and hypothermic. The diver was revived and warmed and has recovered.

According to an investigation of the incident, the configuration of the DP system communication network (dual data bus communications network) can allow a single fault to cause failure of the DP system (even if the system is designated as IMO class 2). Discussion: Both the FMEA and ASOC could address the issue identified in the investigation. When conducting a FMEA, all components of the DP system, including the communication medium, would be tested to prevent a single fault from causing a DP system failure. An ASOC provides a guide on how to respond to a DP system failure to prevent or mitigate a loss of position. In the case of the Bibby Topaz, a diver fatality was averted by the diver recovery efforts after the DP failure and loss of position. However, this incident demonstrates how DP failures can imperil divers and other support personnel. Furthermore, only small changes in the Bibby Topaz case would have resulted in fatalities to one or more divers.


133

Case Study: Discoverer Clear Leader

Description: In April 2010, the MODU Discoverer Clear Leader was connected to a well and was operating using dynamic positioning. The DP system was utilizing 4 references to calculate and maintain position: two DGPS and two acoustic positioning. To determine position, a DP system weights the 4 references using programmed algorithms based on accuracy of the reference and other factors. Both DGPS experienced insufficient satellite coverage to provide high precision accuracy and both defaulted to lower resolution mode. Due to a software failure, the precision of the DGPS was misrepresented by the DP System. The DP system continued to give the DGPS locations the highest weight, leading the computer to believe that it was in the wrong spot. When the DP system tried to correct this apparent discrepancy, the vessel’s thrusters engaged to maintain the erroneous position. The loss of position led to a drive-off covering 100 feet in 135 seconds, requiring an emergency disconnect using the BOP. The drive-off created a 9 degree deflection in the well head as the vessel was not able to disconnect in sufficient time to avoid damage. The damage to subsea equipment totaled about $760,000 with additional lossesof revenue of $500,000 per day. Discussion: The loss of position of the Discoverer Clear Leader illustrates the need for developing and following DP system operating guidelines such as the WSOC and the CAMO. A WSOC specifies the safe operating limits of a DP system and describes conditions that may require monitoring or taking action. In this case, the availability of position references and the weighting by the DP system of the two DGPS references may have warranted increased alertness and scrutiny by the DP operator (e.g., “Yellow Alert”). Also, the activation of the thrusters may have alerted the DP operator of potential problems. Once the vessel began to lose position, the WSOC includes actions to take when “Red Alert” is activated and emergency disconnect is needed. Training and manning could also improve responsiveness in emergency situations. In this case, the emergency disconnect was successful, albeit with some damage to the subsea equipment. If the emergency disconnect had been unsuccessful, potential consequences would have included oil spill and loss of life.


134

4.5 Potential Avoided Damage Benefits of DPS Proposed Rule

Because DP is an emerging technology and there are no existing requirements for reporting DP incidents, we have few casualty reports of uncertain quality, constraining our ability to conduct a casualty review. However, we attempt to quantify the potential benefits that are expected to result from the requirements in this NPRM using information that we have gathered from various segments of industry. The following sections describe the methodology used to calculate the estimated benefits to industry that would result from the proposed rule. These benefits focus on damages only, and not on fatalities, injuries or environmental damage given the limitations in data noted.

According to IMCA documents, DP incidents occur at a relatively common rate (approximately 1 to 2 per vessel per year). Based on IMCA documents from 2004 through 2010, we estimate that 1.45 DP incidents occur per vessel every year.103 Using this figure, the Coast Guard estimates the number of DP incidents that are expected to occur to vessels that are not fully compliant with the provisions in this rule.

Next, we calculate the number of DP incidents that resulted in damages using incident briefs provided in the 2004 through 2010 IMCA reports. The average percentage of incidents that resulted in vessel damages from 2004 through 2010 was 6 percent for non-drilling vessels and 6.3 percent for drilling vessels. Tables 4-3 and 4-4 summarize the percentage of DP incidents that resulted in vessel damage.

Table 4-3: Percentage of Non-Drilling Vessel DP Incidents that Result in Vessel Damages

YearIncidents

with Damages

Total IncidentsPercent of

Incidents with Damages

2004 2 21 9.5%

2005 2 21 9.5%

2006 2 50 4.0%

2007 3 52 5.8%

2008 4 72 5.6%

2009 2 68 2.9%

2010 1 50 2.0%

Average 2 48 6.0%

103 International Marine Contractors Association. “Dynamic Positioning Station Keeping Incidents.” Documents from 2004-2010.


135

Table 4-4: Percentage of Drilling Vessel DP Incidents that Result in Vessel Damages

YearIncidents with

DamagesTotal Incidents

Percent of Incidents with

Damages

2004 0 13 0.0%

2005 2 15 13.3%

2006 0 9 0.0%

2007 0 15 0.0%

2008 1 30 3.3%

2009 1 7 14.3%

2010 0 6 0.0%

Average 1 14 4.0%

Using the average percentage of incidents that result in vessel damage and the total number of incidents forecasted to occur during the 10-year period of our study, we then calculate the total cost that would occur to industry as a result of DP incidents. From this methodology, we estimate that over the 10-year period of our analysis non-drilling vessels (OSVs and crewboats) that are not fully compliant would experience 5,797 DP incidents, and non-compliant drilling vessels (MODUs) would experience 378 DP incidents.

Table 4-5, 4-6, and 4-7 below summarizes these projections, as well as our forecast on the number of DP incidents that would result in damages and those that would not.104

104 Through speaking with members of industry, we estimate that 50 percent of existing OSVs, 70 percent of existing MODUs, and 50 percent of existing crewboats would be compliant with all of the provisions in this rule, even in the absence of a rule. These vessels therefore, are not included in this analysis.


136

Table 4-5: Total Number of OSV DP Incidents With and Without Damages, Pre-Rule Implementation

(per Year)

YearNoncompliant

OSVs

Total Number of Incidents at Pre-Rule

DP Failure Rate105

Number of Incidents with Damages106

Number of Incidents without Damages107

1 307 444 26 418

2 321 465 29 436

3 328 476 30 446

4 342 496 30 466

5 357 517 32 485

6 372 539 33 506

7 390 565 35 530

8 410 594 36 558

9 433 627 38 589

10 453 656 40 616

Total 3,713 5,379 329 5,050

105 Pre-rule DP incident rate is assumed to be 1.45 DP incidents per year per vessel.

106 ��ℎ�� = ��6%

107��ℎ�� = �� − ��ℎ��


137

Table 4-6: Total Number of Crewboat DP Incidents With and Without Damages, Pre-Rule Implementation

(per Year)

YearNoncompliant

Crewboats

Total Number of Incidents at Pre-Rule DP Incident Rate108

Number of Incidentswith Damages109


1 24 35 2 33

2 25 36 2 34

3 27 39 2 37

4 28 41 3 38

5 29 42 3 39

6 30 44 3 41

7 30 44 3 41

8 31 45 3 42

9 31 45 3 42

10 32 47 3 44

Total 287 418 27 391


109 ��ℎ�� = ��6%

110��ℎ�� = �� − ��ℎ��


138

Table 4-7: Total Number of MODU DP Incidents With and Without Damages, Pre-Rule Implementation

(per Year)

YearNoncompliant

MODUs

Total Number of Incidents at Pre-Rule DP Incident Rate111

Number of Incidentswith Damages112


1 18 26 1 25

2 20 29 1 28

3 22 32 1 31

4 24 35 1 34

5 26 38 2 36

6 27 39 2 37

7 29 42 2 40

8 30 43 2 41

9 32 46 2 44

10 33 48 2 46

Total 261 378 16 362

We estimate that non-drilling vessels would experience 384 DP incidents that result in damages during the 10-year period of our analysis, and that drilling vessels would experience 16 DP incidents that result in damages during that same time-frame.

According to the MTS “Reliability and Risk Analysis,” for DP failures that result in damages, “the average failure cost for drilling is estimated to be $2 million, which includes rig downtime, possible damage, the possibility of a fishing job, and even the remote possibility of lost well control.”114 We note that this cost does not take into account the possibility of injuries or loss of


112 ��ℎ�� = ��4%

113��ℎ�� = �� − ��ℎ��

114 Marine Technology Society. “Reliability and Risk Analysis,” Dynamic Positioning Conference. October 21-22, 1997. Page 29.


139

life that could result from DP failures, and, therefore, is likely an underestimate. The Coast Guard then adjusts this estimate to $2,902,891 in order to account for inflation that occurred between 1997 and 2013.115 For non-drilling vessels, the Coast Guard estimates that the cost per DP incident that results in damages is $132,991.116 We calculated this figure by estimating the percentage difference between day rates for non-drilling vessels and drilling vessels, and then multiplying that percentage by the inflation adjusted total damages provided in the MTS “Reliability and Risk Analysis.”117

For DP incidents that do not result in damages, we calculate the cost to investigate the incident, as well as the lost revenue that would occur while the investigation was taking place. Through conversations with industry, it was determined that it would take an engineer 10 hours on average to investigate a DP incident, at an hourly loaded wage of $57.118 Further, the Coast Guard estimates that a non-drilling vessel would lose $10,070 of revenue per DP incident that does not result in any damages, and a drilling vessel would lose $219,794 of revenue per DP incident that does not result in any damages.119 This lost revenue would occur as a result of operations having to be stopped while the engineer conducts the DP incident investigation.

We then calculate the total 10-year cost of DP failures to non-drilling and drilling vessels that are not 100 percent compliant with the provisions in this rule using IMCA’s average DP incident rate and rate of DP incidents that result in damages. The 10-year discounted cost of DP incidents to non-drilling vessels is $72,162,011 based on a 7-percent discount rate and $88,829,830 based on a 3 percent discount rate. The annualized cost to non-drilling vessels is $10,274,247 at a 7 percent discount rate and $10,413,566 at a 3-percent discount rate. The 10-year cost of DP failures to drilling vessels is $85,038,819 discounted at 7 percent and $105,752,068 discounted at 3 percent. The annualized cost to drilling vessels is $12,107,615 at a 7 percent discount rate and $12,397,369 at a 3 percent discount rate.

Tables 4-8 and 4-9 summarize the 10-year cost to industry as a result of DP incidents if this proposed rule was not implemented.

115 Inflation Adjustment Calculation = > 2013 value =��

��. The average annual CPI-U data was obtained from the BLS at

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.

116 Calculation used => ��

��x $2,902,891

117 Day rate for non-drilling vessel = $23,818. “Dynamic Positioning System Research Task Order,” by Rolling Bay, LLC August 2012. The day rate for drilling vessels = $527,506. Author’s calculation using contractual records posted publically by MODU Owners and Operators.

118 BLS, Occupational Employment and Wages, May 2013, 53-5021 Ship Engineers, accessed at http://www.bls.gov/oes/2013/may/oes535031.htm

119 Revenue lost as a result of DP failure investigation = > ��

��


140

Table 4-8: Total Damages Resulting from DP Incidents to Noncompliant OSVs and Crewboats, Pre-Rule Implementation(per Year)

Year

Total Number

of Incidents

120

Number of Incidents

with Damages

Number of

Incidentswithout

Damages

Cost per Incidents

with Damages121

Cost per Incidentswithout

Damages122

Total Cost with

Damages

Total Cost without

Damages123Total Cost

Discounted Benefits

7% 3%

1 479 28 451 $132,991 $10,639.53 $3,723,762 $4,798,429 $8,522,190 $7,964,664 $8,273,971

2 501 31 470 $132,991 $10,639.53 $4,122,736 $5,000,580 $9,123,316 $7,968,658 $8,599,600

3 515 32 483 $132,991 $10,639.53 $4,255,728 $5,138,894 $9,394,621 $7,668,810 $8,597,409

4 537 33 504 $132,991 $10,639.53 $4,388,719 $5,362,324 $9,751,043 $7,439,024 $8,663,676

5 559 35 524 $132,991 $10,639.53 $4,654,702 $5,575,115 $10,229,817 $7,293,718 $8,824,330

6 583 36 547 $132,991 $10,639.53 $4,787,694 $5,819,824 $10,607,517 $7,068,237 $8,883,629

7 609 38 571 $132,991 $10,639.53 $5,053,676 $6,075,173 $11,128,849 $6,930,488 $9,048,773

8 639 39 600 $132,991 $10,639.53 $5,186,668 $6,383,719 $11,570,387 $6,734,071 $9,133,770

9 672 41 631 $132,991 $10,639.53 $5,452,651 $6,713,545 $12,166,196 $6,617,604 $9,324,376

10 703 43 660 $132,991 $10,639.53 $5,718,634 $7,022,091 $12,740,725 $6,476,739 $9,480,296

Total 5,797 356 5,441 - - $47,344,969 $57,889,693 $105,234,662 $72,162,011 $88,829,830

Annualized $10,274,247 $10,413,566



120 Number of incidents = > ��(��2004 − 2010)�� − ��

121 Cost per incidents with Damages = > ��

��ℎ��

122 Cost per incidents without damages = >��

�� +(10ℎ��. ��ℎ��)

123 Total cost for non-drilling incidents without damages = > ��

��ℎ��


141

Table 4-9: Total Damages Resulting from DP Incidents to Noncompliant Drilling Vessels, Pre-Rule Implementation(per Year)

Year

Total Number

of Incidents

124

Number of

Incidentswith

Damages

Number of

Incidentswithout

Damages

Cost per Incidents

with Damages125

Cost per Incidentswithout

Damages126

Total Cost with

Damages

Total Cost without

DamagesTotal Cost

Discounted Benefits

7% 3%

1 26 1 25 $2,902,891 $220,364.17 $2,902,891 $5,509,104 $8,411,995 $7,861,678 $8,166,986

2 29 1 28 $2,902,891 $220,364.17 $2,902,891 $6,170,197 $9,073,088 $7,924,786 $8,552,255

3 32 1 31 $2,902,891 $220,364.17 $2,902,891 $6,831,289 $9,734,180 $7,945,991 $8,908,154

4 35 1 34 $2,902,891 $220,364.17 $2,902,891 $7,492,382 $10,395,273 $7,930,504 $9,236,065

5 38 2 36 $2,902,891 $220,364.17 $5,805,782 $7,933,110 $13,738,892 $9,795,640 $11,851,289

6 39 2 37 $2,902,891 $220,364.17 $5,805,782 $8,153,474 $13,959,256 $9,301,642 $11,690,657

7 42 2 40 $2,902,891 $220,364.17 $5,805,782 $8,814,567 $14,620,349 $9,104,818 $11,887,681

8 43 2 41 $2,902,891 $220,364.17 $5,805,782 $9,034,931 $14,840,713 $8,637,430 $11,715,396

9 46 2 44 $2,902,891 $220,364.17 $5,805,782 $9,696,023 $15,501,805 $8,431,955 $11,880,843

10 48 2 46 $2,902,891 $220,364.17 $5,805,782 $10,136,752 $15,942,534 $8,104,376 $11,862,742

Total 378 16 362 - - $46,446,255 $79,771,828 $126,218,084 $85,038,819 $105,752,068

Annualized $12,107,615 $12,397,369



124 Number of incidents = > ��(��2004 − 2010)��

125 Cost per incident with damages figure derived from MTS “Reliability and Risk Analysis,” Dynamic Positioning Conference. October 21-22, 1997. Page 29. Then adjusted for inflation = > 2013 value

=��

��

126 Cost per incident with damages = > ��′��

�� +(10ℎ��. �� ′�ℎ��)


142

Based on conversations with members of industry, we then estimate the rate of DP incidents that are expected to occur after publication of this proposed rule. According to data provided during the industry roundtables, DP incidents can be reduced by 95 percent after adopting the MTS DP Operations guidance.127 If we assume that the vessels were experiencing the industry average number of incidents per year, 1.45, prior to adopting the MTS guidance, then a 95 percent reduction in DP incidents would equate to vessels experiencing only 0.0725 DP incidents per year following adoption of the MTS guidance. Using this figure, the Coast Guard then calculates the total number of DP incidents that would occur during the 10-year period of our analysis to vessels that would benefit from this rule. We continue to use IMCA’s DP incident rate (1.45 incidents per vessel per year) to calculate the total number of DP incidents that would occur during the 10-year period of our analysis to vessels that would not benefit from this rule.128

Using the summation of these two estimates, we then estimate that non-drilling vessels would experience 2,871 DP incidents and drilling vessels would experience 17 DP incidents if compliance of this rule was required to conduct critical activities on the U.S. OCS while using DPS. This represents a reduction in DP incidents of 2,926 for non-drilling vessels (OSVs and crewboats) and 361 for drilling vessels (MODUs) over the 10-year period of our analysis.

Tables 4-10, 4-11, and 4-12 summarize the number of projected DP incidents that non-drilling and drilling vessels would experience, along with the number of DP incidents that would result in damages after implantation of the requirements in this rule during the 10-year period of our analysis.

127 This reduction is based on a decrease in the frequency of DP position-loss incidents, from a frequency of six DP position-loss incidents in 6 months prior to adoption of the MTS DP Operations guidance, to five position-loss incidents in 8 years following the adoption of the guidance.

128 Because of the phase-in process, 292 existing OSVs and 22 existing crewboats would not benefit from this rule during the first 3 years after implementation. After the phase-in process is complete, 35 existing OSVs (under 500 GT ITC) and all 21 existing crewboats would still not receive the benefits from this rule.


143

Table 4-10: Total Number of OSV DP Incidents With and Without Damages, Post-Rule Implementation

(per Year)

YearOSVs Not Affected

By Rule129

OSVs Affected By

Rule

Total Number of Incidents at

Pre-Rule DP

IncidentRate130

Total Number of Incidents at Post-Rule DP

Incident Rate131

Total Number of Incidents

Number of Incidents

with Damages132

Number of Incidentswithout

Damages133

1 292 15 423 0 423 25 398

2 292 29 423 3 426 25 401

3 292 36 423 4 427 25 402

4 170 172 246 13 259 15 244

5 170 187 246 14 260 15 245

6 170 202 246 15 261 15 246

7 78 312 112 23 135 8 127

8 78 332 112 24 136 8 128

9 78 355 112 26 138 8 130

10 35 418 50 31 81 4 77

Total 1,655 2,058 2,393 153 2,546 148 2,398

129 These vessels would not be required to comply with the requirements in this rule, and therefore, would not receive any of the benefits that would accrue from it.

130 Pre-rule DP incidents rate is assumed to be 1.45 DP incidents per year per vessel.

131 Post-rule DP incidents rate is estimated to be 0.0725 DP incidents per year per vessel. See above for derivation of this rate.

132 ��ℎ�� = ��6%

133 ��ℎ�� = �� − ��ℎ��


144

Table 4-11: Total Number of Crewboat DP Incidents With and Without Damages, Post-Rule Implementation

(per Year)

Year

Crewboats Not

Affected By Rule134

Crewboats Affected By

Rule

Total Number of Incidents at Pre-Rule DP

Incident Rate135

Total Number of Incidents at Post-Rule

DP Incident Rate136


Number of Incidents

with Damages137

Number of Incidents without

Damages138

1 22 2 32 0 32 2 30

2 22 3 32 0 32 2 30

3 22 5 32 0 32 2 30

4 22 6 32 0 32 2 30

5 22 7 32 1 33 2 31

6 22 8 32 1 33 2 31

7 22 8 32 1 33 2 31

8 22 9 32 1 33 2 31

9 22 9 32 1 33 2 31

10 21 11 31 1 32 2 30

Total 219 68 319 6 325 20 305

134 These vessels would not be required to comply with the requirements in this rule, and therefore, would not receive any of the benefits that would accrue from it.

135 Pre-rule DP incident rate is assumed to be 1.45 DP incident per year per vessel.

136 Post-rule DP incident rate is estimated to be 0.0725 DP incident per year per vessel. See above for derivation of this rate.137 ��ℎ�� = ��6%

138��ℎ�� = �� − ��ℎ��


145

Table 4-12: Total Number of MODUs DP Incidents With and Without Damages, Post-Rule Implementation

(per Year)

Year

MODUs Not

Affected By Rule

MODUs Affected By

Rule

Total Number of Incidents at

Pre-Rule DP Incident

Rate

Total Number of Incidents at Post-Rule DP

Incident Rate139


Number of Incidents

with Damages140

Number of Incidentswithout

Damages141

1 0 18 0 1 1 0 1

2 0 20 0 1 1 0 1

3 0 22 0 1 1 0 1

4 0 24 0 2 2 0 2

5 0 26 0 2 2 0 2

6 0 27 0 2 2 0 2

7 0 29 0 2 2 0 2

8 0 30 0 2 2 0 2

9 0 32 0 2 2 0 2

10 0 33 0 2 2 0 2

Total 0 261 0 17 17 0 17

Using the same methodology from above, we then estimate the total cost of DP incidents after implementation of this rule. We assume that the average percentage of DP incidents that result in damages remains the same.

Tables 4-13, and 4-14 summarize the 10-year cost to industry as a result of DP incidents if compliance of this rule was required to conduct critical OCS activities while using DP.

139 Post-rule DP incident rate is estimated to be 0.0725 DP incidents per year per vessel. See above for derivation of this rate.

140 ��ℎ�� = ��4%

141��ℎ�� = �� − ��ℎ��


146

Table 4-13: Total Damages Resulting from DP Incidents to Noncompliant OSVs and Crewboats, Post-Rule Implementation(per Year)

Year

Total Number

of Incidents

142

Number of

Incidents with

Damages143

Number of

Incidentswithout

Damages

Cost per Incidents

with Damages

144

Cost per Incidents without

Damages145

Total Cost with

Damages

Total Cost without

Damages146Total Cost

Discounted Benefits

7% 3%

1 455 27 428 $132,991 $10,639.53 $3,590,770 $4,553,720 $8,144,490 $7,611,673 $7,907,272

2 458 27 431 $132,991 $10,639.53 $3,590,770 $4,585,638 $8,176,408 $7,141,592 $7,707,049

3 459 27 432 $132,991 $10,639.53 $3,590,770 $4,596,278 $8,187,048 $6,683,070 $7,492,309

4 291 17 274 $132,991 $10,639.53 $2,260,855 $2,915,232 $5,176,087 $3,948,812 $4,598,886

5 293 17 276 $132,991 $10,639.53 $2,260,855 $2,936,511 $5,197,366 $3,705,650 $4,483,294

6 294 17 277 $132,991 $10,639.53 $2,260,855 $2,947,150 $5,208,006 $3,470,314 $4,361,623

7 168 10 158 $132,991 $10,639.53 $1,329,915 $1,681,046 $3,010,961 $1,875,075 $2,448,187

8 169 10 159 $132,991 $10,639.53 $1,329,915 $1,691,686 $3,021,600 $1,758,599 $2,385,279

9 171 10 161 $132,991 $10,639.53 $1,329,915 $1,712,965 $3,042,879 $1,655,125 $2,332,114

10 113 6 107 $132,991 $10,639.53 $797,949 $1,138,430 $1,936,379 $984,357 $1,440,848

Total 2,871 168 2,703 - - $22,342,570 $28,758,655 $51,101,224 $38,834,266 $45,156,859

Annualized $5,529,126 $5,293,762

* Numbers may not add due to rounding.*Dollar figures are in 2013 terms.

142 Number of incidents = >

�� − ��ℎ�� +

(��ℎ��)143 Number of incidents with damages = > �� − ��ℎ��144 Cost per incident with Damages = >

��

��ℎ��

145 Cost per incident without damages = >��′��

�� +(10ℎ��. �� ′�ℎ��)

146 Total cost for non-drilling incidents without damages = > ��

��ℎ��


147

Table 4-14: Total Damages Resulting from DP Incidents to Noncompliant Drilling Vessels, Post-Rule Implementation(per Year)

Year

Total Number

of Incidents

147

Number of Incidents

with Damages

148

Number of

Incidentswithout

Damages

Cost per Incident

with Damages149

Cost per Incidentwithout

Damages150

Total Cost with Damages

Total Cost without

DamagesTotal Cost

Discounted Benefits

7% 3%

1 1 0 1 $2,902,891 $220,364.17 $0 $220,364 $220,364 $205,948 $213,946

2 1 0 1 $2,902,891 $220,364.17 $0 $220,364 $220,364 $192,475 $207,714

3 1 0 1 $2,902,891 $220,364.17 $0 $220,364 $220,364 $179,883 $201,664

4 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $336,230 $391,581

5 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $314,233 $380,176

6 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $293,676 $369,103

7 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $274,463 $358,352

8 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $256,508 $347,915

9 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $239,727 $337,782

10 2 0 2 $2,902,891 $220,364.17 $0 $440,728 $440,728 $224,044 $327,943

Total 17 0 17 - - $0 $3,746,191 $3,746,191 $2,517,186 $3,136,177

Annualized $358,391 $367,656



147 Number of incidents = > ��(��2004 − 2010)��

148 Number of incidents with damages = > �� − ��ℎ��

149 Cost per incident with damages figure derived from MTS “Reliability and Risk Analysis,” Dynamic Positioning Conference. October 21-22, 1997. Page 29. Then adjusted for inflation = > 2013 value

=��

��

150 Cost per incident with damages = > ��′��

�� +(10ℎ��. �� ′�ℎ��)


148

The total 10-year cost of DP incidents to non-compliant OSVs and crewboats (non-drilling vessels) after issuance of this proposed rule is estimated to be $38,834,266 based on a 7 percent discount rate and $45,156,859 based on a 3 percent discount rate. The annualized cost to non-drilling vessels is $5,529,126 at a 7 percent discount rate and $5,293,762 at a 3-percent discount rate. The 10-year cost of DP failures to non-compliant drilling vessels after implementing the proposed rule is estimated to be $2,517,186 discounted at 7 percent and $3,136,177 discounted at 3 percent. The annualized cost to drilling vessels is $358,391 at a 7 percent discount rate and $367,656 at a 3 percent discount rate.

Table 4-15 compares the cumulative aggregate cost from DP failures to non-compliant drilling and non-drilling vessels pre- and post-implementation of this NPRM. Figure 4-4 supplements Table 4-15, by providing a graphical representation of difference between the cumulative total costs from DP failures pre- and post-rule at a 7 percent discount rate.


149

Table 4-15: Cumulative Total Cost From DP Incidents to Noncompliant Vessels - Pre- and Post-Rule(per Year)

Year

Undiscounted 7% 3%

Cumulative Pre-Rule Cost From DP

Failures

Cumulative Post-Rule Cost From

DP Failures

Cumulative Pre-Rule Cost From DP Failures

Cumulative Post-Rule Cost From

DP Failures

Cumulative Pre-Rule Cost From DP Failures

Cumulative Post-Rule Cost From DP Failures

1 $16,934,186 $8,364,854 $15,826,342 $7,817,621 $16,440,957 $8,121,217

2 $35,130,589 $16,761,626 $31,719,785 $15,151,687 $33,592,813 $16,035,981

3 $54,259,391 $25,169,039 $47,334,586 $22,014,639 $51,098,376 $23,729,954

4 $74,405,707 $30,785,854 $62,704,113 $26,299,681 $68,998,116 $28,720,422

5 $98,374,415 $36,423,948 $79,793,471 $30,319,564 $89,673,735 $33,583,891

6 $122,941,189 $42,072,682 $96,163,350 $34,083,554 $110,248,021 $38,314,617

7 $148,690,387 $45,524,371 $112,198,656 $36,233,093 $131,184,475 $41,121,156

8 $175,101,486 $48,986,700 $127,570,157 $38,248,200 $152,033,641 $43,854,351

9 $202,769,487 $52,470,308 $142,619,716 $40,143,052 $173,238,860 $46,524,246

10 $231,452,746 $54,847,415 $157,200,830 $41,351,452 $194,581,898 $48,293,037

Total $231,452,746 $54,847,415 $157,200,830 $41,351,452 $194,581,898 $48,293,037

Annualized $22,381,862 $5,887,517 $22,810,935 $5,661,417




150

Figure 4-4: Comparison of Cumulative Total Cost from DP Incidents Pre- and Post-Rule(7 percent Discount Rate)

As showcased in Figure 4-4, at a 7 percent discount rate, the cumulative cost from DP incidentsto non-drilling and drilling vessels is significantly lower after implementation of the requirements in this NPRM.

To estimate how significantly lower total costs to non-compliant drilling and non-drilling vessels are after implementation of the requirements in NPRM, we take the difference of total costs of DP failures to non-drilling and drilling vessels pre- and post-implementation of the proposed rule. This difference provides us with an estimate for the total benefits that would accrue to vessels using DP on the U.S. OCS as a result of issuing this rule.

Tables 4-16 and 4-17 summarize the cumulative and total benefits, respectfully, that would result from this rule.

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

1 2 3 4 5 6 7 8 9 10

Year

Baseline (Pre-Rule)

Post-Rule


151

Table 4-16: Cumulative 10-year Avoided Damages from Rule151

(per Year)

Year Undiscounted 7% 3%

1 $8,569,332$8,008,721 $8,319,739

2 $18,368,963 $16,568,099 $17,556,832

3 $29,090,352 $25,319,946 $27,368,422

4 $43,619,853 $36,404,432 $40,277,695

5 $61,950,467 $49,473,907 $56,089,844

6 $80,868,507 $62,079,796 $71,933,404

7 $103,166,015 $75,965,563 $90,063,319

8 $126,114,786 $89,321,957 $108,179,291

9 $150,299,179 $102,476,664 $126,714,614

10 $176,605,331 $115,849,378 $146,288,861

Total $176,605,331 $115,849,378 $146,288,861

Annualized $16,494,345 $17,149,517

151 Avoided Damages listed in this table were calculated by taking the difference of cumulative post-rule costs from the cumulative pre-rule costs listed in Table 4-15.


152

Table 4-17: Total 10-year Avoided Damages from Rule

Time Period

Undiscounted Benefits Discounted Benefits Annualized Benefits


Drilling Vessels

Total 7% 3% 7% 3%


$105,234,662 $126,218,084 $231,452,746 $157,200,830 $194,581,898 $22,381,862 $22,810,935


$51,101,224 $3,746,191 $54,847,415 $41,351,452 $48,293,037 $5,887,517 $5,661,417

Estimated Benefits from Requiring MTS Guidance

$54,133,438 $122,471,893 $176,605,331 $115,849,378 $146,288,861 $16,494,345 $17,149,517




153

The Coast Guard estimates that this rule would result in total avoided damages of $115,849,378discounted at 7 percent and $146,288,861 discounted at 3 percent over the 10-year period of our analysis to non-drilling and drilling vessels that use DPS while conducting critical activities on the U.S. OCS. The annualized benefits are estimated to be $16,494,345 discounted at a 7 percent rate and $17,149,517 discounted at a 3 percent rate. These estimates do not include the value of potential injuries or fatalities that would likely be prevented as a result of implementation of this rule. Therefore, these benefits are likely an underestimate.


154

5) Comparison of Costs and Benefits

The total cost of this rulemaking to industry and government for the analyzed 10-year period is estimated at $144,669,412 discounted at 7 percent and $179,434,311 discounted at 3 percent. The annualized cost to industry and government during this 10-year period is $20,597,670discounted at 7 percent and $21,035,175 discounted at 3 percent.

The Coast Guard also estimates that the total avoided damages from this rulemaking to industry for the analyzed 10-year period is $115,849,378 discounted at 7 percent and $146,288,861discounted at 3 percent. The annualized avoided damages to industry during this 10-year period are $16,494,345 discounted at 7 percent and $17,149,517 discounted at 3 percent. These avoided damages would accrue from a reduction in the frequency of DP incidents, which would reduce vessel downtime, possible property damage, and the possibility of lost well control.

Table 5-1 summarizes the net present value that would accrue as a result of the publication of this proposed rule. Figure 5-1 then compares the cumulative net present value, using a 7 percent discount rate, as a result of the publication of this proposed rule to the net present value of not requiring the provisions in this NPRM (i.e., the baseline).152

152 The 10-year baseline was created using the cumulative cost from DP incidents that would be incurred by non-compliant drilling and non-drilling vessels if the provisions in this NPRM were not required. This data can be found in Table 4-15 under the column heading: Cumulative Pre-Rule Cost from DP Incidents, discounted at 7 percent.


155

Table 5-1: Cumulative Net Present Value from Rule(per Year)

Discounted Costs Discounted Benefits Net Present Value

Year 7% 3% 7% 3% 7% 3%

1 $11,879,832 $12,809,668 $8,008,721 $8,319,739 ($4,683,985) ($4,865,887)

2 $23,878,206 $25,758,050 $16,568,099 $17,556,832 ($8,122,981) ($8,577,177)

3 $32,911,477 $35,885,141 $25,319,946 $27,368,422 ($8,404,405) ($8,892,677)

4 $67,122,135 $75,727,738 $36,404,432 $40,277,695 ($31,530,576) ($35,826,001)

5 $76,654,716 $87,260,764 $49,473,907 $56,089,844 ($27,993,683) ($31,546,879)

6 $85,580,403 $98,478,907 $62,079,796 $71,933,404 ($24,313,481) ($26,921,461)

7 $111,205,850 $131,936,702 $75,965,563 $90,063,319 ($36,053,161) ($42,249,341)

8 $120,414,846 $144,427,343 $89,321,957 $108,179,291 ($31,905,763) ($36,624,010)

9 $129,470,866 $157,187,510 $102,476,664 $126,714,614 ($27,807,076) ($30,848,853)

10 $144,669,412 $179,434,311 $115,849,378 $146,288,861 ($29,632,908) ($33,521,407)

Total $144,669,412 $179,434,311 $115,849,378 $146,288,861 ($29,632,908) ($33,521,407)

Annualized $20,597,670 $21,035,175 $16,494,345 $17,149,517 $4,219,059 $3,929,732

* Discounted Benefits do not include avoided fatalities.




156

Figure 5-1: Comparison of Cumulative Net Present Values – Baseline vs. NPRM(7% Discount Rate)

As a result of the implementation of the requirements found in this NPRM, we estimate that the annualized net present value from this NPRM, a net cost, is $4,219,059. Table 5-2 summarizes this finding.

Table 5-2: Comparison of Annualized Avoided Damages and Costs to Industry and Government

(7% Discount Rate)

Rule Annualized Cost Annualized Benefits Annualized Net Cost

DPS NPRM$20,597,670

$16,494,345 ($4,219,059)



Although we calculate that this NPRM would not result in net benefits, our estimate does not include benefits that would accrue to society from fatalities prevented. It is likely then, that we have underestimated the total benefits that would result from this proposed rule. Unfortunately, because of data limitations, we are unable to calculate the number of fatalities that would be prevented as a result of requiring the provisions in this rule. Instead, we estimate the number of fatalities that would need to be prevented per year in order for this rulemaking to be cost neutral, by using the value of a statistical life (VSL). 153 Using the VSL to monetize the value of fatalities

153 “Guidance on Treatment of the Economic Value of a Statistical Life,” prepared for the U.S. Department of Transportation, April 2013. http://www.dot.gov/sites/dot.dev/files/docs/VSL%20Guidance%202013.pdf

($180,000,000)

($160,000,000)

($140,000,000)

($120,000,000)

($100,000,000)

($80,000,000)

($60,000,000)

($40,000,000)

($20,000,000)

$01 2 3 4 5 6 7 8 9 10

Year

Baseline (Pre-Rule)

NPRM


157

and fatalities prevented, the proposed rule would need to prevent 0.5 fatalities per year from occurring during the 10-year period for net benefits to equal the net cost of this rulemaking.

Table 5-3: Expand DP Systems in OCS NPRM, Breakeven Analysis

(7 percent, Annualized)

Proposed Rule RequirementAnnualized

Net Cost

Fatalities Prevented to Breakeven154

Total for Proposed Rule Requirements ($4,219,059) 0.46

The consequences of a loss of position while using DP can be high. In order to put this breakeven analysis in perspective, we consider and compare the impacts of two events to illustrate potential worst case scenarios that could result from a DP-caused loss of position. First, as an example of the fatalities that could result from a loss of position and subsequent collision, we use the Samudra Suraksha incident as a reasonable worst case scenario. In order for this rulemaking’s benefits to equal its costs, one worst case event on the magnitude of the Samudra Suraksha, which resulted in 22 fatalities, would need to be prevented approximately every 48 years to breakeven.155

A loss of position and collision could result in a catastrophic oil spill if a MODU is involved and the blowout preventer does not engage or fails (as was the case during the Deepwater Horizon). The Deepwater Horizon oil spill illustrates the potential environmental damage that could result from an oil spill from an uncontrolled well. The Deepwater Horizon incident resulted in an estimated 4.9 million barrels of oil spilled. To date, the responsible party has spent $14 billion on cleanup costs alone. This estimate of cleanup costs does not include additional restoration costs under the Natural Resource Damage Assessment process or other liabilities or settlements.156 Assuming a $14 billion cleanup cost for a reasonable worst case catastrophic oil spill, the proposed rule would have to prevent one such event every 1,000 years to breakeven.

154 Fatalities Prevented to Breakeven = Annualized Net Cost/VSL, where VSL = $9.1 million.

155 We acknowledge that the SAMUDRA SURAKSHA incident would not be avoided or its consequences mitigated as a result of this proposed

rule since it involved a foreign flag vessel operating in foreign waters.

156“Active Shoreline Cleanup Operations from Deepwater Horizon Accident End”, press release from BP, 15 April 2014, available at:

http://www.bp.com/en/global/corporate/press/press-releases/active-shoreline-cleanup-operations-dwh-accident-end.html


158

6) Discussion of Alternatives

When creating this proposed rule, the Coast Guard considered several alternatives. These included several iterations of different populations for vessels other than MODUs that would be required to comply with the requirements in this rule. In the following sections, we examine how the cost of the proposal would change based on the different vessel populations defined in the alternatives. The Coast Guard considered the following alternatives:

Proposed Alternative (NPRM) Alternative 2: Grandfathering all existing non-drilling DP vessels Alternative 3: No Grandfathering and No Phase-in Period Alternative 4: Proposed Alternative Plus Additional DP Manning Requirements

for non-drilling vessels with new or upgraded DP systems Alternative 5: Alternative 3 Plus Additional DP Manning Requirements

Because of the frequency of DP related incidents, as well as the severe consequences that could occur as the result of an incident, the Coast Guard decided that the benefits that would be gained through requiring compliance from existing OSVs and crewboats would outweigh any additional costs that would be incurred by industry.

In order to minimize the impact on existing OSVs and crewboats, the Coast Guard developed the proposed alternative, which uses a phase-in schedule to provide existing non-drilling vessels with some flexibility in meeting the provisions of this proposed alternative. Further, the Coast Guard decided to grandfather existing non-drilling vessels from being required to comply with the most costly provisions in this rule–the provisions that would require a vessel using DP to use a DP-2 system or higher and obtain a DP-2 or high class notation.


Table 6-1 summarizes the alternatives considered. The costs and benefits displayed are for both total 10-year costs and benefits and the annualized cost and benefits discounted at a 7 percent annual rate. Because the net benefits do not include the potential reduction in the number of injuries or fatalities that are likely to occur after issuance of a final rule, Table 6-1 also includes the number of fatalities that would need to be prevented for the costs of this rule to equal the benefits.


159

Table 6-1: Comparison of Alternatives

Proposal

Annualized Cost

(7% Discount Rate)

Annualized Benefits

(7% Discount Rate)

Annualized Net Cost

(7% Discount Rate)

Number of Fatalities Needed

to be Prevented per Year to Breakeven

Impact of Alternative

Proposed Alternative $20,597,670 $16,494,345 ($4,219,059) 1 fatalities per year

Offers protection for 91% of crew from risk of DP failure

Mitigates risk for 462 vessels Reduces costs by allowing continued use

of existing DP-1 systems as long as they meet good operational practices

Minimizes burden by allowing phase-in of operational requirements based on risk.

Alternative 2 $13,307,230 $13,688,325 ($265,983) 0 fatalities per year


Mitigates risk for 205 vessels Minimizes burden by grandfathering non-

drilling vessels that have installed a DP system prior to the effective date of a final rule.



Mitigates risk for 528 vessels Requires non-drilling vessels that have

installed a DP system prior to the effective date of a final rule to comply with all operational requirements before issuance of final rule.


160



Mitigates risk for 462 vessels Minimizes burden by allowing phase-in

of operational requirements based on risk. Requires additional manning

requirements for new builds that industry is unlikely to meet on its own.



Mitigates risk for 528 vessels Requires non-drilling vessels that have

installed a DP system prior to the effective date of a final rule to comply with all operational requirements before issuance of final rule.

Requires additional manning requirements for all vessels using DP that industry is unlikely to meet on its own.

* Net Cost does not include avoided fatalities or other benefits of this rule.




161

Although Table 6-1 shows that Alternative 2, which would grandfather all existing non-drilling vessels from having to comply with this rule, minimizes net costs, Alternative 2 would reduce the risk of a fatality the least out of all of the alternatives. This is because fewer vessels would benefit from the proposed requirements, and thus the probability of a DP failure, which could result in a fatality, would remain largely at its current rate. Furthermore, given the catastrophic damage potential of DP-related incidents from non-drilling vessels, the additional costs are relatively small. In Table 6-2, we summarize the risk of fatality addressed and the cost to address that risk in each of the alternatives.

Table 6-2: Comparison of the Risk of Fatality Addressed by Alternative

Proposal

Total Crew

Subject to Risk of

Fatality-Baseline

(A)

Crew with Risk of Fatality

Addressed(B)

Percentage of

Potential Fatality

Risk Addressed

(B/A)

Annualized Cost(7% Interest Rate)

(C)

Cost Per Fatality Risk Addressed

(C/B)

Proposed Alternative 5,119 4,675 91% $20,179,651 $4,316.50

Alternative 2 5,119 2,623 51% $13,072,297 $4,983.72

Alternative 3 5,119 5,119 100% $24,990,468 $4,881.90

Alternative 4 5,119 4,675 91% $137,090,199 $29,324.11

Alternative 5 5,119 5,119 100% $624,381,615 $121,973.36



Table 6-2 shows the cost to reduce the risk of a fatality occurring while a vessel is utilizing DP is minimized under the proposed alternative.157

6.1 Proposed Alternative

The analysis for this alternative is discussed in detail previously in this RA.

157 To estimate this cost, we first derive the total number of crew members working onboard vessels which currently do not comply with this proposed rule in its entirety. Next, we calculate the number of crew members working onboard vessels which would benefit from the provisions in each of the alternatives listed above. (Please refer to Tables 4-10 through 4-12 of this RA for the number of vessels that would be affected by this rule.) The cost to address this risk is then estimated by dividing the annualized cost of each alternative by the number of crew members expected to be onboard vessels which would benefit from the provisions in each of the alternatives.


162

6.2 Alternative 2: Grandfather all existing non-drilling DP vessels

For this alternative, the Coast Guard would grandfather all non-drilling vessels with existing DP systems from being required to comply with the DP requirements in the proposed alternative. As a result, this alternative would provide industry with the greatest amount of flexibility in meeting the requirements in the proposed alternative, because it would only require future OSVs and crewboats to comply with the provisions in this rule, in addition to still requiring MODUs with existing and future DP systems to comply immediately with the provisions in the proposed alternative. This approach was created after taking into account the increased risk profile of MODUs, as well as current industry practices. Through conversations with owners and operators of MODUs, the Coast Guard determined that at least 90 percent of the existing population of drilling vessels would already be compliant with the most costly provisions in this rule. Because most of the population of existing MODUs would comply with the requirements in the proposed alternative even in the absence of a rule, as well as the higher risk profile of MODUs, the Coast Guard elected not to grandfather in MODUs with existing DP systems as outlined in this alternative.

Table 6-3 summarizes the affected population of this alternative.


163

Table 6-3: Summary of Affected Population in Alternative 2

Year

Future OSVs Less Than

6,000 GT ITC

Existing OSVs Less

Than 6,000 GT

ITC158

Phased-in OSVs Less

Than 6,000 GT

ITC159

Future OSVs of at least 6,000 GT ITC160

Existing OSVs of at least

6,000 GT ITC

Phased-in OSVs of at least

6,000 GT ITC

Future MODUs

Existing MODUs

Future Crewboats

Existing Crewboats

Base - 0 - - 0 - - 53 - 0

1 22 - - 5 - - 6 - 3 -

2 46 - - 10 - - 14 - 6 -

3 54 - - 15 - - 20 - 10 -

4 77 - - 20 - - 27 - 12 -

5 102 - - 25 - - 33 - 14 -

6 128 - - 30 - - 38 - 15 -

7 159 - - 35 - - 43 - 16 -

8 195 - - 40 - - 48 - 17 -

9 233 - - 45 - - 53 - 18 -

10 272 - - 50 - - 57 - 20 -

158 The existing population of OSVs under 6,000 GT ITC includes 492 vessels of at least 500 GT ITC but less than 6,000 GT ITC that use DP systems, and 71 vessels under 500 GT ITC.159Through interviews with private owners and operators of OSVs, the Coast Guard determined that 50 percent of the existing fleet of OSVs of at least 500 GT ITC but under 6,000 GT ITC that use DP systems would not be compliant with the phase-in requirements.160 We forecast that 4 U.S.-flagged OSVs of at least 6,000 GT ITC and 1 foreign-flagged OSV of at least 6,000 GT ITC would be built per year.


164

Through removing non-drilling vessels with existing DP Systems from the applicable vessels in this rulemaking, the overall cost of this alternative is expected to be less than the cost of the proposed alternative. This reduction in expected costs is attributed mainly to no longer requiring OSVs and crewboats with existing DP systems to conduct a FMEA. It is estimated that 50 percent of all existing vessels, other than MODUs, that use DP on the U.S. OCS would not have conducted a FMEA in the absence of this rule. If existing non-drilling vessels that use DP were not required to conduct a FMEA, then it is expected that the 10-year present value cost of this provision would decrease by $45,403,768 at a discount rate of 7 percent.161

Overall, if vessels other than a MODU that use an existing DP system were not required to comply with the DP requirements in this rule, than the total cost of this alternative rule would be $93,464,416 discounted at 7 percent and $114,979,088 discounted at 3 percent. The annualized cost of this alternative rule would be $13,307,230 at 7 percent and $13,479,057 at 3 percent.

Table 6-4 summarizes the total costs of this alternative.

Table 6-4: Total Cost of Alternative 2(per Year)


7% 3%

1 $13,472,021 $11,782,179 $12,705,699

2 $13,694,472 $11,961,282 $12,908,353

3 $11,023,657 $8,998,588 $10,088,208

4 $12,269,678 $9,360,478 $10,901,450

5 $12,711,563 $9,063,169 $10,965,106

6 $12,736,652 $8,486,969 $10,666,746

7 $13,886,962 $8,648,102 $11,291,371

8 $14,701,779 $8,556,569 $11,605,720

9 $15,525,632 $8,444,915 $11,899,104

10 $16,056,214 $8,162,165 $11,947,331

Total $136,078,630 $93,464,416 $114,979,088

Annualized $13,307,230 $13,479,057



161 The 10-year present value cost of requiring vessels to conduct a FMEA in the proposed alternative is $86,945,903. The 10-year present value cost of requiring vessels to conduct a FMEA in this alternative is $41,542,135. The difference is $45,403,768.


165

However, this alternative would remove a foundational component of the safety system, needed to ensure that potential failures are understood, planned for and mitigated. As a result, total avoided damages are expected to be less, since existing OSVs would no longer be required to comply, in its entirety, with this rule by the phase-in date specified in Table 2-1 of this RA. After removing these 268 existing OSVs who would no longer benefit from the provisions in this rule, total avoided damages that are expected to accrue to industry are estimated to decrease to $96,141,065 discounted at a 7 percent rate and $120,305,523 discounted at a 3 percent discount rate. Annualized benefits are expected to decrease to $13,688,325 discounted at a 7 percent rate and $14,103,477 discounted at a 3 percent rate.

Table 6-5 describes the total and annualized benefits that are expected to accrue to industry under this alternative.


166

Table 6-5: Total 10-year and Annualized Avoided Damages of Alternative 2

Time Period



Drilling Vessels

Total 7% 3% 7% 3%


$105,234,662 $126,218,084 $231,452,746 $157,200,830 $194,581,898 $22,381,862 $22,810,935


$83,434,464 $3,746,191 $87,180,654 $61,059,766 $74,276,375 $8,693,537 $8,707,457

Estimated Damages Reduced $21,800,198 $122,471,893 $144,272,091 $96,141,065 $120,305,523 $13,688,325 $14,103,477




167

Although the annualized net cost of this alternative is less than that of the proposed alternative, $265,983 compared to $4,219,059, this net cost does not account for the cost to society of a loss of life that could occur during a DP failure. Because this alternative grandfathers 268 OSVs that would have been phased-in in the proposed alternative, more crew members’ lives are at risk under this alternative. The number of crew members at risk under the proposed alternative and alternative 2 was calculated using the average crew size of each vessel typed affected under this rule multiplied by the number of each vessel type that would benefit from the rule. The average crew size of each vessel type was derived from Coast Guard’s MISLE database.162 For the proposed alternative, we estimate that 4,675 crew members would benefit from the provisions in alternative 1.163 Using the same approach, we calculate that only 2,623 crew members would be less at risk of a fatality under alternative 2, from a baseline of 5,119, which equates to roughly 44percent more crew members being at risk of a fatality under this alternative compared to alternative 1.164 Further, the cost to reduce the risk of a fatality per crew member as a result of a DP failure is $4,984 in alternative 2, compared to $4,317 per crew member in alternative 1.165

Therefore, we rejected this alternative because of the higher cost to reduce the risk of fatality per crew member.

This alternative was considered because of the large proportion of OSVs and crewboats with existing DP Systems that would not be compliant with the most costly DP provisions in this rule. However, because of the high risk potential of DP related incidents, the Coast Guard decided that benefits that would be gained through requiring compliance from existing OSVs and crewboats would outweigh the additional costs that would be incurred by industry.

162 According to MISLE, the average crew size for the entire population of OSVs is 8, for crewboats 4, and for MODUs 39. The average crew size for OSVs over 500 GT ITC is 9.

163 Crew members who would benefit under the proposed rule = > (�161��8�� +�257��9�� +

�33��39�� + (11��4��)

164 Crew members who would benefit under the alternative 2 = > (�161��8�� + �33��39�� +

(10��4��)

165 Costtoreduceriskpercrewmember =��

��


168

6.3 Alternative 3: No Grandfathering and No Phase-in Period

For this alternative, the Coast Guard would require all non-drilling vessels with existing DP Systems to comply with the requirements in this rule immediately following issuance of a final rule. This alternative would affect the same number of existing OSVs and crewboats as in proposed alternative, but would not permit existing vessels to phase-in DP requirements.

The Coast Guard estimates that that 54.1 percent of existing OSVs and 16.1 percent of existing crewboats that operate in the U.S. OCS use a DP system. We estimate that the total number of existing vessels, other than MODUs, impacted by this alternative would be 626 (563 OSVs less than 6,000 GT ITC, 20 OSVs of at least 6,000 GT ITC, and 43 crewboats).

The total 10-year present value cost of this alternative rule would be $180,635,184 at a 7 percent discount rate and $210,672,709 at a 3 percent discount rate. The annualized cost of this alternative is $25,718,386 at a 7 percent rate and $24,697,268 at a 3 percent rate.

Table 6-6 summarizes the 10-year present value cost of this alternative.



7% 3%

1 $101,667,799 $88,847,145 $95,853,182

2 $15,353,445 $13,410,294 $14,472,095

3 $12,682,652 $10,352,822 $11,606,424

4 $13,928,651 $10,626,101 $12,375,426

5 $14,370,537 $10,245,994 $12,396,151

6 $14,402,064 $9,596,703 $12,061,502

7 $15,545,935 $9,681,227 $12,640,268

8 $16,360,753 $9,522,107 $12,915,329

9 $17,184,606 $9,347,287 $13,170,569

10 $17,715,187 $9,005,503 $13,181,763

Total $239,211,630 $180,635,184 $210,672,709

Annualized $25,718,386 $24,697,268



We also calculated the total and annualized avoided damages that would accrue to industry if we adopted this alternative. We estimated that if the entire existing population of OSVs and crewboats were required to comply with the provisions in the proposed alternative, the total 10-year present value avoided damages that would result from this alternative would be $152,410,439 discounted at a 7 percent rate and $188,645,183 discounted at a 3 percent discount


169

rate. The annualized avoided damages of this alternative are $21,699,818 at a 7 percent discount rate and $22,114,970 at a 3 percent discount rate.

Table 6-7 summarizes the total and annualized avoided damages that would accrue to industry if this alternative was adopted.


170

Table 6-7: Total 10-year and Annualized Avoided Damages of Alternative 3

Time Period



Drilling Vessels

Total 7% 3% 7% 3%


$105,234,662 $126,218,084 $231,452,746 $157,200,830 $194,581,898 $22,381,862 $22,810,935


$3,319,534 $3,746,191 $7,065,725 $4,790,391 $5,936,715 $682,044 $695,964

Estimated Damages Reduced $101,915,128 $122,471,893 $224,387,021 $152,410,439 $188,645,183 $21,699,818 $22,114,970




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This alternative is expected to result in a net cost of $4,896,965 annualized at 7 percent, which is almost $600,000 more per year than the proposed rule.

In addition, although the crew of all existing noncompliant vessels would benefit from the reduced risk of death, the cost to reduce this risk per crew member is greater than the cost to reduce the risk per crew member in the proposed alternative ($4,882 in this alternative compared to $4,317 in the proposed alternative).

Therefore, we rejected this alternative because of the greater net loss that would be incurred by industry, as well as the higher cost to reduce the risk of fatality per crew member.


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6.4 Alternative 4: Proposed Alternative Plus Additional DP Manning Requirements For Non-Drilling Vessels with New or Upgraded DP Systems

In this alternative, the Coast Guard would create additional manning requirements that vessels, other than a MODU, with a new or upgraded DP System would be required to comply with in addition to the requirements in the proposed alternative. Under this alternative, all vessels, other than a MODU, with a new or upgraded DP System would be required to have a DPO or DPOQ who has no other responsibilities other than operating the DP System.

Through interviews with owners and operators, it was determined that all existing and future OSVs and crewboats would not be compliant with this provision in the absence of this rule. The current model for OSVs and crewboats that use a DP System in the U.S. OCS is to have a navigation watch act as both a mate and as a DPO. Under this alternative, a DPO could no longer also serve as a navigational watch. Because industry is not expected to by compliant with this provision in the absence of this rule, the Coast Guard expects that this additional requirement would result in a large cost to industry in addition to the costs described in the proposed alternative.

According to a Coast Guard subject matter expert, a DPO or DPOQ would work 12 hours per day and 14 days per rotation. The Coast Guard assumes that a vessel would operate year round to maximize revenue, and therefore, we estimated that an OSV or crewboat owner would need to hire, at a minimum, 4 new DPOs/DPOQs to meet the requirements in this alternative and the manning requirements in STCW. Further, according to an OCMI from the Eighth District, a DPO/DPOQ would have an average loaded wage of $89.00. The annual cost per vessel is estimated at $777,504.

Table 6-8 summarizes the annual cost to comply with the additional manning requirements in this alternative.


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Table 6-8: Industry Cost to Hire a DPO as Required by Alternative 4

RequirementWage

(per hour)(A)

Load factor

(B)

Loaded Wage(per

hour)(A x B) =

C

Hours(per shift)

(D)

Days (per

rotation)(E)

Rotations(per year)

(F)

Total Cost (per year)

(C x D x E x F)

Cost per Navigational Watch

$63.00 1.42 $89.00 12 14 13 $194,376

Employees per firm 4 $777,504

Total $777,504

* Numbers may not add due to rounding.*Dollar figures are in 2013 terms.

The total 10-year present value cost of this alternative rule would be $965,800,184 at a 7 percent discount rate and $1,247,252,500 at a 3 percent discount rate. The annualized cost of this alternative is $137,508,218 at a 7 percent rate and $146,216,042 at a 3 percent rate.

Table 6-9 summarizes the total present value cost of this alternative.


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7% 3%

1 $36,906,315 $32,252,895 $34,795,831

2 $61,942,186 $54,102,704 $58,386,451

3 $72,488,961 $59,172,585 $66,337,668

4 $129,591,130 $98,864,452 $115,140,040

5 $122,998,003 $87,695,876 $106,099,158

6 $147,903,241 $98,554,175 $123,866,636

7 $204,424,708 $127,305,434 $166,215,995

8 $211,753,778 $123,242,626 $167,160,387

9 $246,790,308 $134,237,576 $189,144,221

10 $295,804,208 $150,371,860 $220,106,111

Total $1,530,602,838 $965,800,184 $1,247,252,500

Annualized $137,508,218 $146,216,042



We considered this alternative because of the potential that significant consequences could occur from a DP failure that was the result of human negligence. However, the costs that would be incurred by industry as a result of this alternative are much larger than the potential benefits from the additional manning requirements. As a result, the Coast Guard has rejected this alternative.


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6.5 Alternative 5: Alternative 3 Plus Additional DP Manning Requirements

In this alternative, the Coast Guard would require existing vessels with a DP System to meet the manning requirements in Alternative 4, in addition to meeting the requirements in Alternative 3. Under this alternative, all vessels, other than a MODU, with an existing or new DP Systemwould be required to have a DPO or DPOQ who has no other responsibilities other than operating the DP System, as well as to comply with the requirements in the proposed rule on or before issuance of a final rule. Further, all MODUs with an existing or new DP System would be required to comply with the provisions in the proposed alternative rule.

The Coast Guard estimates that that 54.1 percent of existing OSVs and 16.1 percent of existing crewboats that operate in the U.S. OCS use a DP System. We estimate that the total number of existing vessels, other than MODUs, impacted by this alternative would be 626 (563 OSVs less than 6,000 GT ITC, 20 OSVs of at least 6,000 GT ITC, and 43 crewboats).

Table 6-10 summarizes the total present value cost of Alternative 5.



7% 3%

1 $611,710,423 $534,338,126 $576,617,273

2 $550,276,197 $480,632,542 $518,688,093

3 $560,822,972 $457,798,602 $513,232,466

4 $585,394,091 $446,594,349 $520,115,068

5 $610,716,105 $435,432,142 $526,809,077

6 $635,627,760 $423,545,615 $532,328,242

7 $665,539,279 $414,464,414 $541,144,338

8 $699,009,265 $406,829,756 $551,804,368

9 $734,043,294 $399,270,916 $562,583,063

10 $770,339,059 $391,601,316 $573,204,606

Total $6,423,478,446 $4,390,507,778 $5,416,526,593

Annualized $625,109,533 $634,982,157



The total 10-year present value cost of this alternative rule would be $4,390,507,778 at a 7 percent discount rate and $5,416,526,593 at a 3 percent discount rate. The annualized cost of this alternative is $625,109,533 at a 7 percent rate and $634,982,157 at a 3 percent rate.

The Coast Guard rejected this alternative because of the significant increase in costs that would be incurred by industry as a result of requiring existing DP vessels, other than MODUs, to also


176

comply with the additional manning requirements. The benefits that would result from this provision would not be justified by the large increase in the cost of requiring that provision.


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7) Initial Regulatory Flexibility Analysis

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612), the Coast Guard prepared this Initial Regulatory Flexibility Analysis (IRFA) that examines the impacts of the Interim Rule on small entities (5 U.S.C. 601 et seq.). Coast Guard recognizes that an IRFA is not required for an Interim Rule. Due to the anticipated impacts on small businesses, Coast Guard is including an analysis of the Interim Rule requirements for informational purposes.

A small entity may be: A small independent business, defined as any independently owned and operated

business not dominant in its field that qualifies as a small business per the Small Business Act (5 U.S.C. 632);

A small not-for-profit organization; and A small governmental jurisdiction (locality with fewer than 50,000 people).

An IRFA addresses the following:

1) a description of the reasons why action by the agency is being considered;

2) a succinct statement of the objectives of, and legal basis for, the proposed rule;

3) a description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply;

4) a description of the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record;

5) an identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the proposed rule.

6) a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities.

7.1 Description of the reasons why action by the agency is being considered

Agencies take regulatory action for various reasons, one of which is the failure of markets to reach socially optimal outcomes. The market failures prompting this proposed rule result from the absence of economic incentives that promote an optimal outcome.

The absence of economic incentives that promote an optimal outcome results in a negative externality. A negative externality is an adverse by-product of a transaction not accounted for


178

within the transaction. In this case, MODUs and other vessels that use DP to engage in OCS activities that operate with lower safety standards may cause harm or increased risk of harm tohuman safety and the environment. The cost of these lower safety standards (increased risk) isnot completely borne by the OSV or MODU owners, so they are external to the business decisions of these owners. The crew, which may face increased risk from lower safety standards, may not have any say in safety-related decisions. Since the crew may be adversely affected by business decisions which it may not be able to mitigate through increasing its price (labor cost), it absorbs the cost of the externality (increased risk from lower safety standards) which is a market failure. Oil spills that result from OSV or MODU accidents also impose an externality in the form of environmental damage and clean-up costs that are not borne directly by the OSV and MODU owners.

7.2 Succinct statement of the objectives of, and legal basis for, the proposed rule

Establishing these minimum standards is necessary to improve the safety of people and property involved in such operations, and the protection of the environment in which they operate. This proposed rule would decrease the risk of a loss of position by a dynamically-positioned MODU or other vessel that could result in a fire, explosion, or subsea spill, and supports the Coast Guard’s strategic goals of maritime security and protection of natural resources.

Several sections of the Outer Continental Shelf Lands Act (43 U.S.C. 1331 – 1356a,) provide “the Secretary of the Department in which the Coast Guard is operating” with rulemaking authority. The Secretary’s authority under all these sections is delegated to the Coast Guard through Department of Homeland Security Delegation No. 0170.1, paragraph II(90).

43 U.S.C. 1333(d)(1) gives the Secretary “authority to promulgate and enforce such reasonable regulations with respect to lights and other warning devices, safety equipment, and other matters relating to the promotion of safety of life and property on the artificial islands, installations, and other devices referred to in subsection (a) of this section or on the waters adjacent thereto, as [the Secretary] may deem necessary.” The Coast Guard interprets section 1333(d)(1) as conferring authority to regulate any OCS vessel or facility (collectively referred to as “OCS unit”) attached to the OCS seabed or engaged in OCS activity to support such a unit.166

Section 1347(c) requires promulgation of “regulations or standards applying to unregulated hazardous working conditions related to activities on the outer Continental Shelf when... such regulations or standards are [determined to be] necessary” and authorizes the modification “from time to time” of “any regulations, interim or final, dealing with hazardous working conditions on the Outer Continental Shelf.” Section 1348(c) requires promulgation of regulations for onsite scheduled or unscheduled inspections of OCS facilities “to assure compliance with... environmental or safety regulations.” Additionally, section 1356 calls for regulations requiring, with limited exceptions, all OCS units to be manned by U.S. citizens or resident aliens and to

166OCS activity is defined in 33 CFR 140.10 to mean “any offshore activity associated with exploration for, or development or production of,

the minerals of the Outer Continental Shelf.”


179

comply with “such minimum standards of design, construction, alteration, and repair” as the Secretary or the Secretary of the Interior establishes.

7.3 Description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply

Through review of the Coast Guard’s MISLE database, as well as comparing owners’ annual revenues to the small business threshold, as defined by the Small Business Administration, wedetermined the number of small entities within drilling and non-drilling owners that would be affected by this rule. We did not find any drilling or non-drilling vessels owned by governments or non-profits.

Table 7-1 provides the SBA’s revenue thresholds for the entities that are affected by this rulemaking. These standards were used in our analysis in order to determine which entities should be defined as small.

Through this analysis, we have determined that all existing MODUs, 60 percent of all existing OSVs of at least 500 GT ITC, 58 percent of all existing OSVs under 500 GT ITC, and 63 percent of all existing crewboats are above these small business standards. 167

167 We have separated our analysis of OSVs into OSVs of at least 500 GT ITC and OSVs under 500 GT ITC in order to account for the phase-in schedule which would only require OSVs of at least 500 GT ITC to meet more stringent DP requirements.

Table 7-1: Standard Size of Revenue of Entities Affected by NPRM

NAICS Code

Description of NAICS GroupStandard Size of Revenue

213112Support Activities for Oil and Gas Operations

$7,000,000

487210 Water Transportation Excursion $7,000,000

488330 Navigation Services to Shipping $35,000,000

488390Other Support Activities for Water Transportation

$35,000,000

522220 Sales Financing $7,000,000

532411Commercial Air, Rail, and Water Transportation Equipment Rentals and Leasing

$7,000,000

541990All Other Professional Scientific and Technical Services

$14,000,000


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The following tables summarize our findings.

Table 7-2: Size of Entities Affected (MODUs)

Number of Owners Number of Vessels

Entities with Data - Above Threshold 2 4

Entities with Data - Below Threshold 0 0

Total Small Entities 0 0

Total 2 4

Percentage of Small Entities 0.0% 0.0%

The annual revenue for MODU owners affected by this rule is within a range of $875,000,000 to$3,000,000,000. Our results indicate that all drilling vessels using DPS and currently operating in the U.S. OCS are above the small business standards presented in Table 7-1.

Next, we examined publicly available revenue data for owners and operators of OSVs of at least 500 GT ITC that use DPS while operating on the U.S. OCS. These vessels would be required to comply with a majority of the provisions of this rule by the date specified in Table 2-1 of this RA. Table 7-3 summarizes our analysis on owners and operators of OSVs of at least 500 GT ITC.

Table 7-3: Size of Phased-in Entities Affected(OSVs of at least 500 GT ITC)





Total 35 457

Percentage of Entities 40% 12%

Through our analysis, we estimate that approximately 40 percent of owners and operators of existing OSVs of at least 500 GT ITC that use DPS are defined as small by the SBA threshold. The annual revenue stream of the entities affected by this rule that are defined as small is within a range of $630,000 to $51,834,000.

We then examined revenue data for owners and operators of OSVs under 500 GT ITC. Although these owners would incur some cost as a result of this rule, existing vessels in this group would be grandfathered from the most costly provisions.

Table 7-4 describes the results of our analysis on the revenue streams of owners and operators of OSVs under 500 GT ITC.


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Table 7-4: Size of Entities Affected(OSVs under 500 GT ITC)





Total 14 48

Percentage of Small Entities 42% 32%

Using annual revenue data from public databases, we estimate that approximately 42 percent of the owners of vessels under 500 GT ITC are small entities. The annual revenues for owners, defined as small entities, range from $565,000 to $3,750,000. The median revenue per small entity owner is $3,109,500, while the mean revenue is $2,556,965.

Lastly, we examined the revenue streams of owners and operators of crewboats that use DPS on the U.S. OCS.

Table 7-5 summarizes our findings.

Using annual revenue data from public databases, we estimate that approximately 47 percent of the owners of crewboats are small entities. The annual revenues for crewboat owners, defined as small entities range from $162,000 to $2,200,000. The median revenue per small entity owner is $1,081,000, while the mean revenue is $1,147,667. Like OSVs under 500 GT ITC however, these vessels would be grandfathered from having to comply with the most costly provisions in this rule.

Table 7-5: Size of Entities Affected by NPRM (Crewboats)





Total Entities 8 36

Percentage of Small Entities 27% 16%


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7.4 A description of the projected reporting, recordkeeping and other compliance requirements of the proposed rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record;

In general, this proposed rule would require owners and operators of a vessel that uses DP on the U.S. OCS to:

Make available upon request a copy of a DPO/DPOQ’s certificate of completion of DP training courses to the OCMI;

Use DP-2 or higher systems if conducting critical OCS activities168; Receive a DP-2 class notation; Conduct a FMEA; Develop and maintain a CAMO and ASOC/WSOC; Report DP System incidents to an authorized DP assurance organization; Conduct DP failure investigations whenever the DP System status changes from

green to yellow or red; Report Serious Marine Incidents that result from a DP incident to the OCMI; Submit a copy of a DP incident investigation report to the OCMI annually; Report the time and location of a DP survey to the OCMI at least 30 days prior to

the survey; and Submit a copy of the vessel’s DP System plan if the vessel is a MODU or of at

least 6,000 GT ITC.

Our research indicates that all MODUs and OSVs that plan on using DPS on the U.S. OCS will be built with a DP-2 system even in the absence of this rule. Further, all existing MODUs that use DP on the U.S. OCS already are operating with DP-2 or higher systems. Lastly, because existing OSVs and crewboats would be grandfathered from having to comply with this requirement, we anticipate that only 1 future crewboat owners per year could potentially incur this cost. Therefore, this provision is expected to have a minimal impact on industry as a whole.

In order to determine the impact of this rule on an individual owner or operator, we calculated the expected cost for the vessel categories examined above to comply with all applicable provisions.

Expected Cost to a MODU

Because all drilling (MODU) owners and operators are above the small business threshold and the expected cost to these owners and operators is estimated to be well below their annual revenue streams, we instead begin our analysis with the expected cost to owners and operators of OSVs of at least 500 GT ITC.

168 Or choose to not operate with DP.


183

Expected Cost to an OSV of at least 500 GT ITC

We estimate that the total first-year cost of this NPRM to noncompliant owners and operators of existing OSVs of at least 500 GT ITC is $286,835 per vessel. Table 7-6 summarizes the cost per provision to these noncompliant vessels.

Table 7-6: NPRM First-year Cost(per Existing Noncompliant OSV of at least 500 GT ITC)

Requirement First Year Cost

Make Available DPO/DPOQ Training Certificates $114.40

Replace DP-1 Crewboats $0.00

Cost to receive DP-2 Class Notation $0.00

Conduct a FMEA $275,000.00

Develop a CAMO and ASOC $9,120.00

Report DP System Incidents $177.87

Conduct DP Incident Investigation And Write Report $2,236.19

Report Serious Marine Incidents Resulting from DP Incident $3.46

Submit Annual DP Incident Investigation Report $169.10

Obtain DPVAD $10.25

Report DP Surveys $4.10

Submit DP Systems Plan $0.00

Total $285,835.36



After a review of the Coast Guard’s MISLE database as well as vessel profiles that are publicly available on company websites, we estimate that roughly 50 percent of existing OSVs that would be phased-in to the DP requirements of this rule would incur this entire cost. We estimate that the remaining owners and operators of existing OSVs affected by this rule would incur a cost of $1,062.36 per vessel.169

Additionally, through conversations with members of industry, we expect that 50 percent of future OSVs of at least 500 GT ITC would also incur the full cost displayed in Table 7-6. Like the existing population, the rest are expected to incur a cost of $1,062.

169 These vessels are expected to already comply with the FMEA, CAMO and ASOC, and DP Investigation requirements.


184

We then use the population estimates in Table 2-2 of this RA to calculate the expected first-year cost to an owner or operator of an OSV of at least 500 GT ITC.

Using the expected value formula:

�� − �� =

(�247�� $286,835� +�265�� $1,062�

+(418��$0) +�12�� $286,835�

+�17�� $1,062�)/(959��)

we estimate that the expected average first-year cost as a result of this rule to owners and operators of OSVs of at least 500 GT ITC is $77,778.88.

Using this expected average first-year cost, we then estimate the first-year revenue impact to the 14 small entities that we identified in Table 7-3. During the first-year of implementation, we estimate that 57 percent of these 14 owners or operators would incur a cost under 5 percent of their annual revenue stream. The remaining owners would incur costs under 25 percent of their annual revenue stream.

Table 7-7: NPRM First-Year Revenue Impact to Small Entities(OSVs of at least 500 GT ITC)

Revenue Impact Range Impact from First Year Costs

Expected Cost per Vessel $77,778.88

0% < Impact < 1% 7%

1% < Impact < 3% 21%

3% < Impact < 5% 29%

5% < Impact < 10% 7%

Above 10% 36%



This rule is also expected to have reoccurring costs. We estimate that the annual cost to owners and operators of OSVs of at least 500 GT ITC that meet none of the applicable provisions is $2,573.

Table 7-8 summarizes the reoccurring costs incurred by an owner or operator of a vessel that would not comply with any of the applicable provisions of this rule.


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Table 7-8: NPRM Annual Cost(per Noncompliant OSV of at least 500 GT ITC)

RequirementFirst Year

Cost




Conduct a FMEA $0.00

Develop a CAMO and ASOC $0.00





Obtain DPVAD $0.00



Total $2,633.61



We estimate that all owners or operators of OSVs of at least 500 GT ITC would incur this cost following the first year.

Using these total costs, we then estimate the expected annual cost to an owner or operator of an OSV of at least 500 GT ITC.

�� =

(514��$2,634) +(418��$0) +(29��$2,634)

959��

The estimated expected annual cost incurred by owners and operators of OSVs of at least 500 GT ITC is $1,485.70. This expected cost is estimated to be less than 0.1% of the annual revenue of the two entities identified as small.


186

Expected Cost to an OSV under 500 GT ITC

During development of the phase-in schedule summarized in Table 2-1 of this RA, the Coast Guard realized that the risk profile of OSVs less than 500 GT ITC that use DP on the U.S. OCS was much smaller than the risk profile of larger sized vessels that use DP. As a result, the Coast Guard decided to not only grandfather these smaller existing vessels from being required to use DP-2 or higher systems, but also from being required to comply with the FMEA, CAMO, ASOC, and DP failure and incident reporting requirements.

We estimate that because of these less stringent requirements, the total first-year cost of this NPRM to noncompliant owners and operators of existing OSVs under 500 GT ITC is $114 per vessel. Table 7-6 summarizes the cost per provision to these noncompliant vessels.

Table 7-9: NPRM First-year Cost(per Existing Noncompliant OSV under 500 GT ITC)








Conduct DP Incident Investigation And Write Report $0.00



Obtain DPVAD $0.00



Total $114.40



It is expected that none of the existing population of OSVs under 500 GT ITC that use DP would be in compliance with the requirement that all DPOs and DPOQs submit a copy of their certificate of completion from their DP training course to the Coast Guard. As such, the entire population of OSVs under 500 GT ITC that use DP would incur a cost of $114.40 in the first year.

Using the same methodology as before, we estimate the expected average cost to these owners and operators per vessel using the following equation:


187

�� − �� =

(71��$114) +(77��$0)

478��

We estimate that the expected average first-year cost to owners and operators is $54.88 per vessel. Using this expected cost, we then analyze the expected impact on owners and operators identified as small by Table 7-4 above. During the first year of implementation, we estimate thatall OSVs under 500 GT ITC would incur a cost less than 0.1 percent of their annual revenue stream.

Table 7-10 summarizes the revenue impact that this NPRM would have on the existingpopulation of small entities owning or operating OSVs less than 500 GT ITC.

Table 7-10: NPRM First-Year Revenue Impact to Small Entities(OSVs under 500 GT ITC)


Expected Cost per Vessel $54.88

0% < Impact < 1% 100%

1% < Impact < 3% 0%

3% < Impact < 5% 0%

5% < Impact < 10% 0%

Above 10% 0%



In subsequent years, vessel owners and operators of OSVs less than 500 GT ITC are expected to have costs slightly less than those estimated in Table 7-9 as a result of this rule. It is estimated that in later years, owners and operators of OSVs under 500 GT ITC that use DP would incur a cost of $21.35 annually.

Table 7-11 summarizes the reoccurring costs that these owners and operators can expect if this rule is implemented.


188

Table 7-11: NPRM Annual Cost(per Existing Noncompliant OSV under 500 GT ITC)


Cost








Report Serious Marine Incidents Resulting from DP Incidents $0.00


Obtain DPVAD $0.00



Total $44.50



Again, it is expected that all owners or operators of existing OSVs less than 500 GT ITC that use DP would incur the full annual cost listed in Table 7-11.

Using these estimated annual costs, we then calculate the expected annual cost to an owner or operator of an OSV under 500 GT ITC.

�� =

(71��$21) +(77��$0)

148��

The estimated expected annual cost incurred by owners and operators of OSVs of at least 500 GT ITC is $21.35. The distribution of the revenue impact to small entities as a result of this expected annual cost is estimated to be the same as the distribution of the revenue impact as a result of expected first-year costs. Therefore, the impact for all owners and operators of OSVs less than 500 GT ITC is estimated to be less than 0.1 percent of their annual revenue streams.


189

Expected Cost to a Crewboat

Although existing crewboats that use DP while conducting critical OSC operations on the U.S. OCS would be grandfathered from having to comply with most costly requirements in this rule (replacing a DP-1 system with a DP-2 or higher system, conducting a FMEA, and developing and maintaining a CAMO and ASOC), future crewboats would not be granted this luxury.

In order to comply with the DP equipment provision, it is likely that an owner or operator who had planned to build a crewboat with a DP-1 system to conduct critical OCS activities would instead need to purchase a larger vessel in order to meet the greater mechanical and structural demands of a DP-2 system.170 We estimate then that this requirement would cost an owner or operator $876,237 in order to meet compliance.171 It is unlikely however that a small entity would choose to pay this cost up-front. Instead, we assume that an owner or operator would finance the cost of this purchase over 10 years. We estimate that the annual mortgage payment would be $124,756 to finance this cost over 10 years at a 7-percent interest rate. We considered that less favorable financing terms, such as shorter loan durations or higher mortgage rates, would be possible. In those cases, the annual cost would be higher.

Table 7-12 summarizes, by requirement, the first-year cost to owners or operators of future crewboats that did not meet any of the applicable provisions in this rule.

170 Although the owner or operator has the option to not conduct Critical OSC activities or not use DP while conducting Critical OCS activities, the Coast Guard does not anticipate these to be likely alternatives, since these alternatives would effectively remove the vessel from being considered for future work from contractors. Therefore, the Coast Guard believes that the preferred option will be purchasing a DP-2 crewboat instead of a DP-1 crewboat.171 See Table 3-9 of this RA for more detail on this cost.


190

Table 7-12: NPRM First-year Cost(per Future Noncompliant Crewboat)



Replace DP-1 Crewboats $124,756.44

Cost to receive DP-2 Class Notation $64,250.00

Conduct a FMEA $275,000.00

Develop a CAMO and ASOC $9,120.00





Obtain DPVAD $10.25



Total $475,841.80



Table 7-12 shows that the estimated first-year cost to owners and operators of future crewboats that would not meet any of the requirements in this rule is, after financing, is $475,841.80 per vessel.

However, this cost would only be incurred by a small percentage of owners that would have built a DP-1 crewboat in the absence of this rule. In addition to these owners, we estimate that there will be some owners who would incur a smaller cost, because they are expected to build crewboats with DP-2 systems even in the absence of this rule. Finally, we expect that there willbe some owners who would choose not to build a crewboat with DP, and therefore, would not incur costs from this rule.172

In addition to new builds, owners and operators of existing crewboats that use DPS would also incur a cost to comply with the reporting requirements of this rule. Using publicly available data on vessel specifics we estimate that of existing vessels that use DP, 30 percent use

172Through statistical analysis, we estimate that 1 crewboats per year would incur the full cost listed in Table 28 in the first three years following

issuance of a final rule.


191

DP-1 systems, with the remainder using DP-2 systems.173 Further, there are 224 crewboats currently operating in U.S. waters that do not use DP systems.

We estimate that this rule would result in a first-year cost of $114.40 per vessel to owners or operators of existing crewboats that use DPS, as they would be grandfathered from being required to comply with most of the requirements in this rule.

Table 7-13 summarizes this estimated cost.

Table 7-13: NPRM First-year Cost(per Existing Crewboat)











Obtain DPVAD $0.00



Total $114.40



Although the first-year cost to owners and operators for future builds is estimated to be large, this cost will be borne by only a small percentage of crewboat owners and operators. Because we assume, for simplicity, that these owners and operators already own or operate crewboats that are in operation today, we calculate the expected first-year cost to the existing 8 crewboat owners and operators in business today.

Using the expected value formula:

173 These percentages are based on a review of all existing crewboats’ vessel specifics, 13 crewboats list DP-1 systems, 30 list DP-2 systems, and 224 list no DP system.


192

�� =

((��$��)�(��$�)�(��$��,��)�(��$��,��)

��

we estimate that the expected average first-year cost to crewboat owners or operators is $4,381.23 as a result of this rule.

Using this expected average first-year cost, we then estimate the first-year revenue impact to the 3 small entities identified in Table 7-5. During the first-year of implementation, we estimate that33 percent of these owners or operators would incur a cost under 1 percent of their annual revenue stream. The other owners would incur costs under 3 percent of their annual revenue stream.

Table 7-14 summarizes the revenue impact that this NPRM would have on the existingpopulation of small crewboat owners.

Table 7-14: NPRM First-Year Revenue Impact to Small Entities(Crewboats)


Expected Cost per Vessel $4,381.23

0% < Impact < 1% 33%

1% < Impact < 3% 67%

3% < Impact < 5% 0%

5% < Impact < 10% 0%

Above 10% 0%



In subsequent years, we expect that the annual cost to comply with this NRPM would decrease significantly for owners and operators of newly built crewboats and slightly for owners and operators of existing crewboat.

Table 7-15 summarizes the annual cost to an owner or operator of a new crewboat that would not have met the design standards of this rule.


193

Table 7-15: NPRM Annual Cost

(per Future Noncompliant Crewboat)


Cost


Replace DP-1 Crewboats $124,756.44








Obtain DPVAD $0.00



Total $127,391.65



For future builds that would meet the DP design standards even in the absence of this rule, the estimated annual cost to owners or operators is $2,635.21. Lastly, we estimate that owners and operators of existing crewboats that use DP would incur an annual cost of $44.50.

Using the same distribution as used above, we calculate the expected annual cost per vessel to a crewboat owner or operator.

�� =

((43��$45) +(224��$0)+ (2��$2,635) +(1��$127,392)

270��

We estimate that the expected annual cost to crewboat owners or operators is $498.43 per vessel as a result of this rule.

Table 7-16 summarizes the reoccurring annual revenue impact that this NPRM would have on the small entities identified in Table 7-5.


194

Table 7-16: NPRM Annual Revenue Impact to Small Entities(Crewboats)

Revenue Impact Range Impact from Annual Costs

Expected Cost per Vessel $498.43

0% < Impact < 1% 100%

1% < Impact < 3% 0%

3% < Impact < 5% 0%

5% < Impact < 10% 0%

Above 10% 0%



After the first-year of implementation, all crewboat owners who are defined as small entities would incur a cost less than 0.01 percent of their revenue stream annually.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment to the Docket Management Facility at the address under ADDRESSES.

7.5 An identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the proposed rule.

There are no relevant Federal rules that may duplicate, overlap, or conflict with the NPRM.

7.6 A description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities.

Because of the frequency of DP related incidents, as well as the severe consequences that could occur as the result of an incident, the Coast Guard decided that the benefits that would be gained through requiring compliance from existing OSVs and crewboats would outweigh any additional costs that would be incurred by industry.

In order to minimize the impact on existing OSVs and crewboats, the Coast Guard developed the proposed alternative, which uses a phase-in schedule to provide existing non-drilling vessels with some flexibility in meeting the provisions of this proposed alternative. Further, the Coast Guard decided to grandfather existing non-drilling vessels from being required to comply with the most costly provisions in this rule–the provisions that would require a vessel using DP to use a DP-2 system or higher and obtain a DP-2 or high class notation.



195

8) Collection of Information

This proposed rule would call for a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). As defined in 5 CFR 1320.3(c), "collection of information" comprises reporting, recordkeeping, monitoring, posting, labeling, and other, similar actions. The title and description of the information collections, a description of those who must collect the information, and an estimate of the total annual burden follow. The estimate covers the time for reviewing instructions, searching existing sources of data, gathering and maintaining the data needed, and completing and reviewing the collection.

TITLE: Requirements for MODUs and Other Vessels Conducting Outer Continental Activities with Dynamic Positioning Systems

OMB CONTROL NUMBER: 1625-NEW

SUMMARY OF THE COLLECTION OF INFORMATION:

Title 33 CFR Sections 140.315, 140.335, and Title 46 CFR 61.50-4, 61.50-3, 61.50-2, and 62.20-2 of this proposed rule have COI requirements for vessel owners and operators, and authorized DP assurance providers. Section 140.315 would require owners and operators to provide the Coast Guard proof of the training records for their DPOs and DPOQs within 48 hours of a request. Section 140.335 (i) would require a vessel owner or operator to report to the cognizant OCMI a DP incident that results in either an emergency disconnect or a serious marine incident as defined by 46 CFR 4.03-2. In § 61.50-4, the Coast Guard would require an authorized DP assurance provider to submit a DP incident investigation report annually to OCSNCOE if the vessel is a MODU, has installed a DP system on or after the effective date of a final rule, or is greater than 500 GT ITC and uses a DP system installed prior to the effective date of a final rule. Section 61.50-3 would require a prospective DP assurance organization to submit an application to the OCSNCOE prior to being recognized by the Coast Guard as an authorized DPSAO. Sections 61.50-2 would require the DPSAO conducting a vessel’s DP survey to notify the cognizant OCMI of the time and location of a DP initial and annual survey at least 30 days prior to when the survey would take place. Finally, § 62.20-2 would require an DPSAO to submit a copy of the DP system plan for each MODU or other vessel of at least 6,000 GT ITC that uses a DP System to conduct Critical OCS activities.

NEED FOR INFORMATION: The Coast Guard is requesting this information to determine whether a vessel satisfies the new regulatory requirements for vessel designs and operations, DP surveys, and DPO and DPOQ training. Furthermore, this information is required to gain a better understanding on why DP system incidents occur.

PROPOSED USE OF INFORMATION: The Coast Guard would use this information to determine whether a vessel satisfies the new regulatory requirements for vessel designs and operations, DP surveys, and DPO and DPOQ training. This information also would be used to better understand why DP System incidents occur.


196

DESCRIPTION OF THE RESPONDENTS: The respondents would be vessel owners and operators, ship engineers, as well as authorized DP assurance providers of U.S. and foreign OSVs and MODUs that operate on the U.S. OCS.

NUMBER OF RESPONDENTS: This proposed rule, if promulgated, would have 719 respondents in the first year after the effective date of a final rule.174 Over the course of the three-year collection period, there would be 782 respondents.175

FREQUENCY OF RESPONSE: The number of responses per year of this proposed rule will vary by requirement. Owners and operators must provide proof of training for each DPO and DPOQ employed (the Coast Guard expects eight training certificates would need to be made available during the first year and three training certificates, on average, in subsequent years, to account for a worker turnover rate of 38.9 percent per year).176 Owners and operators would have to report DP incidents that resulted in an emergency disconnect or serious marine incident to the cognizant OCMI, which we estimate would occur at a rate of 0.19 and 0.05 per vessel per year. An authorized DP assurance provider would need to submit an application to the OCSNCOE in order to an authorized DP assurance organization. Additionally, the DPSAO would need to submit a summary per vessel of DP incident investigations conducted throughout the year annually. A DPSAO would also be required to submit a vessel’s DP system plan once. Finally, an authorized DPSAO would need to report the time and location of an initial DP survey once per vessel, as well as report the time and location of annual DP surveys once per year per vessel starting in year two.

BURDEN OF RESPONSE: The burden per response for each regulatory requirement varies. Details are shown in Table 8-1 for the burden to industry, and in Table 8-2 for the burden to the Government.

174 This is calculated from the sum of the projected affected population figures listed earlier in this analysis (610 OSVs, 59 MODUs, 46 crewboats, and 4 DPSAOs).175 This is calculated from the sum of the projected affected population figures at the end of the three year collection period of the analysis (652OSVs, 73 MODUs, 53 crewboats, and 6 DPSAOs).176 These numbers are based on the assumption that each entity will need eight DPOs or DPOQs on staff.


197

Table 8-1: Summary of Industry Burden from Collection of Information

PRA ItemTotal Annual No. of

Responses

Avg. Burden per Response

(in hours)

Total Annual Burden

(in hours)

Make Available Certificates of Training Completion for DPOs/DPOQs Year 1 [140.315 (d)] 5,720 0.1 572.0



Submit Annual DP Failure Investigation Report to OCMI Year 1 [61.50-4 (b)] 89 4.0 356.0



Report DP Failures that Result in Emergency Disconnects to OCMI Year 1 [140.335 (j)] 16 0.3 5.3



Report DP Failures that Result in Serious Marine Incidents to OCMI Year 1 [140.335 (j)] 6 0.3 2.0



Submit DPSAO Application to OCSNCOE Year 1 [61.50-3] 4 30.0 120.0



Report Initial Surveys to OCMI Year 1 [61.50-2] 89 0.1 8.9



Report Annual Surveys to OCMI Year 1 [61.50-2] - 0.1 -

Report Annual Surveys to OCMI Year 2 [61.50-2] 89 0.1 8.9

Report Annual Surveys to OCMI Year 3 [61.50-2] 129 0.1 12.9

Submit DP System Plans to MSC Year 1 [62.20-2] 64 0.5 32.0




198

Total: Year 1 5,988 - 1,096

Total: Future Years 5,725 - 1,751

Total 11,713 - 2,848


199

Table 8-2: Summary of Government Burden Estimates

PRA ItemTotal Annual No. of

Responses

Avg. Burden per Response(in hours)

Total Annual Burden

(in hours)

Review Certificates of Training Completion for DPOs/DPOQs Year 1 [140.315 (d)] 5,720 0.1 572.0



Review Annual DP Failure Investigation Report Year 1 [140.335 (i)] 89 2.0 178.0



Review DP Failures that Result in Emergency Disconnects Year 1 [140.335 (j)] 16 0.3 5.3



Review DP Failures that Result in Serious Marine Incidents Year 1 [140.335 (j)] 6 0.3 2.0



Review DPSAO Applications Year 1 [61.50-3] 4 8.0 32.0



Record when Initial Surveys will Occur Year 1 [61.50-2] 89 0.1 8.9



Attend Initial Surveys Year 1 [61.50-2] 89 8.0 712.0



Record when Annual Surveys will Occur Year 1 [61.50-2] - 0.1 -

Record when Annual Surveys will Occur Year 2 [61.50-2] 89 0.1 8.9

Record when Annual Surveys will Occur Year 3 [61.50-2] 129 0.1 12.9


200

Attend Annual Surveys Year 1 [61.50-2] - 8.0 -

Attend Annual Surveys Year 2 [61.50-2] 89 8.0 712.0

Attend Annual Surveys Year 3 [61.50-2] 129 8.0 1,032.0

Review DP Systems Plans Year 1 [62.20-2] 64 36.0 2,304.0

Review DP Systems Plans Year 2 [62.20-2] 13 36.0 468.0

Review DP Systems Plans Year 3 [62.20-2] 11 36.0 396.0

Total: Year 1 6,077 - 3,814

Total: Future Years 6,006 - 4,245

Total 12,083 - 8,060

ESTIMATE OF TOTAL ANNUAL BURDEN: This proposed rule will have a first-year burden on industry of 1,096 hours. The average annual burden on industry of this proposed rule is 876 hours. The average annual burden for the Government is 2,687 hours.


201

9) Appendices


202

Appendix A: Population Growth Models

1 Data and Model

1.1 Data

To forecast the future population of MODUs and their support vessels (OSVs and crewboats) that utilize dynamic positioning systems while operating in the U.S. OCS, we conduct time-series regressions of newly constructed vessels equipped with DP operating in U.S. Waters against the quantity of crude oil extracted from the U.S. OCS, the price of crude oil and natural gas, fees associated with drilling offshore, as well as a number of other explanatory variables that affect the supply of these vessels.

1.1.1 Dependent Variable

As our measure for the population of MODUs and their support vessels that use DP in the U.S. OCS, we use the annual number of newly constructed vessels of each type that are equipped with dynamic positioning. We use the number of newly constructed vessels as our dependant variable instead of the total number of vessels utilizing DP, in order to avoid mischaracterizing the number of vessels built each year. Because we do not require vessel owners and operators to report when the vessel is decommissioned, we do not have data on the exact year a vessel is retired from service. This could lead to potential issues when forecasting the number of vessels expected to be built in future years, as we would be unable to determine what portion of the change in the total population of vessels was attributed to new builds, and what portion was the result of vessels leaving the fleet.

Additionally, the average age of each vessel type equipped with DP does not indicate that we should be concerned that we did not account for vessel turnover in our model, as these vessel types’ average ages are considerably younger than their counterparts without DP, whose average ages are well beyond the 10-year period used in our forecast.

Our research, which we gathered from examining publically available Company Shareholder Reports and vessel specification sheets, indicates that the first OSV operating in the U.S. OCS that was equipped with DP was constructed in 1975, but that it was not until around the late 1990s that the number of OSVs being built with this technology took off. As dynamic positioning became more accepted and widely used, the technology started to be utilized by MODUs and crewboats as well, with the first of these vessel types being equipped with DPS starting to appear in 1998 and 1999, respectfully. Table 1 provides the summary statistics from our research by vessel type.


203

Table 1: Summary Statistics by Vessel Type

Vessel TypeExisting

(as of 2014)Equipped with DP-1

Equipped with DP-2

Equipped with DP-3

Average Age (without DP)

Average Age (with DP)

MODU 100 0 24 29 32 4

OSV 1,078 184 341 9 28 10

Crewboat 267 13 30 0 23 7

1.1.2 Quantity of Crude Oil Produced Offshore

We believe that a major factor in determining the number of drilling vessels and their support vessels being built per year for operation in the U.S. OCS depends heavily on the amount of crude oil expected to be produced offshore in U.S. Waters. We expect that as the quantity of crude oil produced increases, more drilling vessels and support vessels would be built per year. However, because these vessels take anywhere from one to three years to be built, we believe that owners and operators would base their decision on whether to build a new vessel on the previous year’s production level. We therefore add a one year lag to our model.

We use the annual amount of crude oil produced in the U.S. OCS from 1981 through 2014 as reported by the U.S. Energy Information Administration (EIA). Additionally, we decided to use the EIA’s projections for crude oil produced in the U.S. OCS from 2015 through 2024.

1.1.3 Price of Crude Oil and Natural Gas

Another component owners and operators consider when deciding whether to construct a new vessel is the potential profits. We expect that when the price of crude oil increases, oil producing companies view the exploration and extraction of offshore oil more attractively. Oil companies would then contract with owners and operators of MODUs and their support vessels for their services, and as a result, more offshore drilling and support vessels would be built per year.

We use data reported by EIA for the average annual price of crude oil and natural gas from 1997 through 2014. Again, we use the EIA’s projections for the future prices of these commodities from 2015 through 2024.

1.1.4 Offshore Leasing Indicators

Further impacting the decision making of oil producing companies is the U.S. Government’s imposed fees for leasing offshore tracts. As the price to obtain, rent, and extract oil in the U.S. OCS increases, producing oil offshore in U.S. Waters becomes less profitable, and consequently less attractive. In response to these, we expect that oil producing companies would contract less with owners and operators of MODUs and their support vessels, which would result in less drilling and non-drilling vessels being constructed per year for operations in the U.S. OCS.

We use data from the Bureau of Ocean Energy Management for the values of the royalty fee associated with the offshore production of crude oil and natural gas, the minimum bid accepted by the U.S. Government for an offshore tract, and the rental price charged for the lease.


204

1.1.5 Other Explanatory Variables

Other factors likely to affect the supply of MODUs, OSVs, and crewboats operating in the U.S. OCS are the U.S. population and the U.S. GDP.

As the U.S. population increases, there will be a greater demand for energy. In response, we expect that there would be more offshore drilling activity in the U.S. OCS, and thus a greater need for MODUs and their support vessels. This pressure would result in an increase in the supply of drilling vessels and non-drilling vessels operating in the U.S. OCS.

There is more uncertainty over what effect an increase in the U.S. GDP would have on the supply of MODUs, OSVs, and crewboats. Despite the nation becoming wealthier, which generally correlates with greater spending, demand from consumers for carbon producing forms of energy may decrease as the result of a greater sense of responsibility to protect the environment, as well as, increases in technology that promotes energy efficiency and greater use of renewable energies. Therefore, because of these contrasting responses, it is less clear what the net effect of an increase in GDP will have on the supply of offshore vessels.

We use historical U.S. population data and U.S. GDP data calculated by the EIA for the years 1949 to 2014. Additionally, we use the EIA’s projections of these variables for the years 2015 through 2024.

Lastly, we have included a dummy variable for the year 2010 to represent the Deepwater Horizon spill. This spill resulted in a one-year moratorium of offshore drilling in the U.S. OCS, and as a result, the construction of new MODUs, OSVs, and crewboats was limited during that year.

1.2 Model

To forecast the future population of MODUs, OSVs, and crewboats that operate in the U.S. OCS while using dynamic positioning systems, we run an ordinary least-squares (OLS), time-series regression.

However, prior to running our OLS model, we first performed some tests on the data, namely testing for trending data and highly persistent data.

Many economic time series have a common tendency of growing over time. “Ignoring the fact that two sequences are trending in the same or opposite directions can lead us to falsely conclude that changes in one variable are actually caused by changes in another variable. In many cases, two time series processes appear to be correlated only because they are both trending over time for reasons related to other unobserved factors.”177 Therefore, to avoid mischaracterizing the true effects of the explanatory variables on the construction of new vessels using DP, we first calculate the correlation between the data and time to see if there are any obvious time trends.

177 Wooldridge, Jeffrey. “Introductory Econometrics: A Modern Approach.” Pg. 363


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Table 2 Correlation of Variables with Time

Correlation

Newly Constructed MODUs with DP 0.79

Newly Constructed OSVs with DP 0.75

Newly Constructed Crewboats with DP 0.00

Quantity of Crude Oil Produced Offshore 0.89

U.S. Population 1.00

U.S. GDP (Lagged One Year) 0.98

Price of Natural Gas at Henry Hub 0.24

Price of Crude Oil at West Texas Intermediate 0.95

Price of Crude Oil at Brent Spot 0.94

Royalty Fee for Offshore Production 0.69

Rental Price for Offshore Tract Lease 0.94

Minimum Bid for Offshore Tract Lease 0.38

Table 2 shows that there is a strong correlation between many of the variables used in our model and time – which indicates that the data may be trending, and therefore, to ensure that we are estimating the true effect of the control variables on the dependent variable, we detrend each variable by regressing it on time. We then use the residual (what is left of the variable not explained by time) as the clean series in our model.

Another common problem with economic time series is that it often can be highly persistent –i.e., values from previous years are highly correlated to present-day values. If untreated, a regression equation can lead to very misleading results.

To test for high persistence amongst our data, we performed the Dickey-Fuller test. Our findings suggest that all of our variables suffer from a unit-root, which could cause spurious results if left untreated. To prevent miscalculating the results from our regression, we first differenced the variables. This will result in our estimates for the dependent variable taking the form: ∆��, and not ��.

2 Results and Graphs

2.1 Results

The relationship between the number of DP MODUs, OSVs, and crewboats constructed per year and the explanatory variables used in our model are shown in Table 2.


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Table 2 Linear Regression Models

Newly Constructed

MODUs with DP

Newly Constructed

OSVs with DP

Newly Constructed Crewboats with DP

Newly Constructed MODUs with DP - 10.13033 (2.58) -0.1498959 (3.98)

Newly Constructed OSVs with DP - - 0.4350564 (0.43)

Quantity of Crude Oil Produced Offshore (Lagged One Year)

-4.87E-06 (11.11) 9.80E-06 (0.50) 2.38E-06 (0.39)

U.S. Population 1.41E-06 (15.58) -6.13E-06 (0.96) -1.14E-06 (0.81)

U.S. GDP (Lagged One Year) -3.95E-12 (12.97) 4.22E-11 (2.32) 3.34E-12 (0.94)

Price of Natural Gas at Henry Hub 0.0052342 (0.08) -0.4611336 (0.52) 0.7465069 (3.27)

Price of Crude Oil at West Texas Intermediate 0.6316762 (49.87) -6.044304 (2.53) -0.3689901 (0.54)

Price of Crude Oil at Brent Spot -0.6706045 (56.26) 5.965796 (2.38) 0.1715937 (0.23)

Royalty Fee for Offshore Production 51.24973 (10.74) -257.441 (1.27) 96.53432 (1.66)

Rental Price for Offshore Tract Lease 0.0386668 (0.31) -1.157335 (1.16) 1.326849 (2.62)

Minimum Bid for Offshore Tract Lease 0.1855339 (45.49) -1.937468 (2.85) -0.0392588 (0.19)

BP Oil Spill Dummy 1.429249 (4.03) -12.46573 (2.30) 1.846832 (0.49)

Constant -2.55844 (9.27) 8.057647 (0.70) 4.704835 (1.63)

Observations 29 29 29

R2 0.9941 0.9748 0.7908

Absolute Value of t-ratios in parentheses

All Variables have been first differenced and detrended

Prior to predicting the number of DP MODUs, OSVs, and crewboats that will be built per year based on the regression coefficients listed above, we need to perform one final transformation of the data: integrating our predicted results to the first order. This transformation is needed as a result of differencing the series. As a result of this differencing, the predictions from the regression results are the changes in the dependent variable from one year to the next, and not the value for that year. To correct for this, we use the equation:

�� = �� + ∆��

Through performing this transformation, we now have obtained the forecasted number of DP MODUs, OSVs, and crewboats expected to be built per year for operation in the U.S. OCS.

2.2 Graphs

The following figures plot the historical number of drilling (MODUs) and non-drilling (OSVs and crewboats) vessels built per year with dynamic positioning systems against our model’s predictions. Also included is the confidence interval for our forecasts.


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Fig. 1 Forecasted Number of Newly Constructed MODUs with Dynamic Positioning Systems

Fig. 2 Forecasted Number of Newly Constructed OSVs with Dynamic Positioning Systems

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Fig. 3 Forecasted Number of Newly Constructed Crewboats with Dynamic Positioning Systems

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Appendix B: Sensitivity Analysis

In 2013, the Coast Guard held roundtable discussions (and subsequent emails verifying the authenticity of the information disclosed during these discussions) on the current and future compliancy rates of vessels affected by our proposed rule and the effectiveness rate of adoptingthe provisions in our rule for non-compliant vessels. In the Cost and Benefits Chapter of this report, we calculate what the costs to industry would be to adopt the provisions in this rule assuming that the compliancy rate reported during the roundtable discussions is accurate, as well as the benefits that would accrue to non-compliant vessels from adopting the provisions in this rule assuming that the effectiveness rate reported is also accurate. In this appendix, we present what the effect on the overall cost of this rule would be if we change these assumptions. Additionally, we present a worst case scenario - which assumes that there is no compliancy with the provisions in this rule among existing or future non-drilling vessels and that the rule has an effectiveness rate of 0, and a best case scenario – which assumes that all existing and future non-drilling vessels will be fully compliant with the provisions in this rule and that the rule has a 100 percent effectiveness rate (i.e., reducing DP incidents to zero).

1 Voluntary Compliance Rates

We first present what-if scenarios which show what would happen to the cumulative net present cost of this rule if the compliancy rates used in our cost model for existing and future non-drilling vessels (OSVs and crewboats) to the provisions in this rule were not aligned with reality. Table 1 summarizes our findings.

Table 1 Sensitivity Analysis on our Compliancy Rate Assumption for Non-Drilling Vessels

Year

Cumulative Net Present Value (7 Percent Discount Rate)

Proposed Rule

Compliancy Rates

No Compliancy

(0%, 0%, 0%)

All Vessels Compliant

(100%, 100%, 100%)

Progressive Compliancy

Rates (100%, 50%,

25%)


Rates (75%, 50%,

25%)


Rates (50%, 25%,

0%)

1 ($4,683,985) ($7,727,856) ($549,415) ($3,625,796) ($4,370,592) ($6,013,696)

2 ($8,122,981) ($14,392,142) ($297,799) ($5,899,327) ($7,586,891) ($10,849,318)

3 ($8,404,405) ($15,290,629) $391,483 ($6,335,754) ($8,267,241) ($11,587,402)

4 ($31,530,576) ($62,423,168) $1,764,954 ($6,926,081) ($20,372,621) ($35,542,322)

5 ($27,993,683) ($58,893,457) $5,385,516 ($4,863,152) ($17,821,259) ($32,993,640)

6 ($24,313,481) ($54,729,470) $8,915,656 ($2,524,224) ($14,989,010) ($29,909,181)

7 ($36,053,161) ($81,291,000) $12,385,021 ($15,517,763) ($27,601,859) ($49,750,207)

8 ($31,905,763) ($76,182,962) $15,707,283 ($12,483,685) ($24,298,977) ($45,737,989)

9 ($27,807,076) ($70,826,335) $19,122,063 ($9,234,893) ($20,779,539) ($41,631,915)

10 ($29,632,908) ($77,103,819) $22,387,651 ($14,892,469) ($26,083,924) ($49,008,734)

Total ($29,632,908) ($77,103,819) $22,387,651 ($14,892,469) ($26,083,924) ($49,008,734)

Annualized $4,219,059 $10,977,849 $3,187,498 $2,120,353 $3,713,764 $6,977,741 *Compliancy Rates in Parentheses are for non-drilling vessels of at least 1,900 GT ITC, of at least 900 GT ITC, and of at least 500 GT ITC, respectfully


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As Table 1 shows, the annualized net present value of this rule ranges from an annualized net benefit to society of $3.187 million (full compliancy) to an annualized net cost to society of$10.978 million (no compliancy), discounted at 7 percent, when only our assumption on the compliancy rates of existing and future non-drilling vessels are changed.

2 Effectiveness Rate of Rule

We next performed a sensitivity analysis on the effectiveness rate of our rule. Table 2 summarizes what would happen to the annualized net present cost as a result of this rule if the effectiveness rate of this rule was anywhere from 0 percent (i.e., there was no change in the number of DP incidents experienced by vessels after complying with the provisions in this rule) to 100 percent effective (i.e., vessels would no longer experience a DP incident).

Table 2 Sensitivity Analysis on our Effectiveness Rate Assumption

Effectiveness RateAnnualized Net Present Value

7% 3%

0% $20,658,833 $21,028,004

10% $19,399,519 $19,713,413

20% $17,921,226 $18,185,989

30% $16,133,945 $16,329,090

40% $14,498,892 $14,598,889

50% $10,081,618 $10,048,242

60% $8,673,437 $8,586,715

70% $7,456,176 $7,306,674

80% $6,267,483 $6,065,494

90% $4,796,647 $4,529,274

95% $4,219,059 $3,929,732

100% $3,673,490 $3,357,610

Assuming all of the other assumptions made in this report are correct, the annualized net present cost as a result of this rule would range from $3.673 million (100 percent effective) to $20.659million (0 percent effective), discounted at 7 percent, depending on the effectiveness of our rule in reducing the frequency of DP incidents.

3 Worst-Case and Best-Case Scenarios

We end our sensitivity analysis by considering what would happen in the unlikely scenario that existing and future non-drilling vessels would not voluntarily comply with any of the provisions in this rule and that the effectiveness of the rule was zero (worst-case scenario), as well as what would happen in the equally unlikely event that existing and future non-drilling vessels already comply with all of the provisions in this rule and that the rule’s provisions are 100 percent effective in reducing DP incidents (best-case scenario). Table 3 summarizes our findings of these scenarios compared to the cumulative net present cost presented earlier in this report.


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Table 3 Sensitivity Analysis on the Worst-Case and Best-Case Scenarios

YearNet Present Value (7%)

Best-Case NPRM Worst-Case

1 ($343,467) ($4,683,985) ($16,134,311)

2 $100,623 ($8,122,981) ($31,980,601)

3 $969,789 ($8,404,405) ($42,290,992)

4 $2,679,489 ($31,530,576) ($103,856,187)

5 $6,614,284 ($27,993,683) ($116,714,727)

6 $10,438,100 ($24,313,481) ($128,577,316)

7 $14,181,929 ($36,053,161) ($173,811,687)

8 $17,760,699 ($31,905,763) ($186,927,151)

9 $21,415,205 ($27,807,076) ($199,652,987)

10 $24,904,837 ($29,632,908) ($224,722,552)

Total $24,904,837 ($29,632,908) ($224,722,552)

Annualized $3,545,888 $4,219,059 $31,995,436


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Appendix C: Summary of Industry Costs

Requirement

Industry Cost

Government Cost

(per vessel) (per vessel)

1. 33 CFR 140.315 (d): all applicable vessels must make available a copy of a DPO's or DPOQ's certificate of completion of DP training courses. (repeating).

$114.40 $60.00

2. 33 CFR 140.320 (a): all applicable vessels must have a master and the minimum number of mates while the vessel is underway.

$1,193,920.00 $0.00

3. 46 CFR 62.40-15 and 62.40-20: all applicable vessels must develop and maintain a FMEA and FMEA test proving document.

$275,000.00 $0.00

4. 33 CFR 140.335: all applicable vessels must develop and maintain CAMOand a WSOC or an ASOC, respectively.

$9,120.00 $0.00

5. 33 CFR 140.335 (h): all applicable vessels must report a dynamic positioning incident to the DPSAO that conducted the vessel’s DP surveys (repeating).

$177.89 $0.00

6. 33 CFR 140.335 (h): all applicable vessels must conduct a DP investigation following a dynamic positioning incident and submit a summary of the investigation to the DPSAO that conducted the vessel’s DP surveys (repeating).

$2,236.19 $0.00

7. 46 CFR 61.50-4 (b): all applicable vessels must complete an annual report that contains a summary of each DP incident investigation that was conducted during that year and submit the report to the OCSNCOE (repeating).

$169.10 $150.00

8. 33 CFR 140.335 (i): all applicable vessels must report to the cognizant OCMI DP incidents that involve an emergency disconnect or serious marine incident (repeating).

$47.67 $25.00

9. 33 CFR 140.335 (k): all applicable vessels must receiving a DPVAD prior to conducting Critical OCS activities while using DP.

$10.25 $0.00

10. 46 CFR 62.40-5 (b): all applicable vessels must have at a minimum a DP-2 system

$876,237.00 $0.00

11. 46 CFR 62.40-5 (b): all applicable vessels must obtain a DP-2 class notation.

$64,250.00 $0.00

12. 46 CFR 61.50-3: all applicable DP assurance providers must seek approval from the U.S. Coast Guard prior to conducting DP surveys, tests, inspections, and plan reviews.

$1,235.10 $600.00

13. 46 CFR 61.50-2: all applicable vessels are required to report the time, date, and location of initial, periodic, and annual surveys to the OCMI. (repeating).

$4.10 $607.50

14. 33 CFR 140.345 and 46 CFR 62.20-2: all applicable vessels are required to submit the DP System Plan to the MSC.

$25.60 $2,700.00


Dynamic_Positioning_Requirement_for_MODUs_and_Other_Vessels_Conducting_Outer_Continental_Shelf_Activities_-_Preliminary_Regulatory_Analysis_and_Initial_Regulatory_Flexibility_Analysis

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