Significantly extended liability stipulations are among the new rules on offshore drilling that the European Commission has proposed in a new legislative proposal that was triggered by the 2010 Gulf of Mexico oil spill.
The Commission this week proposed new safety standards for offshore oil and gas activities in the EU, setting out comprehensive, “harmonised” EU-wide requirements on the safety of offshore oil and gas operations. With the proposed Regulation the Commission intends to reduce the risk of an offshore oil and gas accident happening in EU waters and beyond, and to limit the environmental damage caused by such an accident by improving response measures.
Today, over 90% of oil and over 60% of gas produced in the EU and Norway come from offshore operations. Currently there are over 1000 offshore oil or gas installations in operation in EU waters. Most production is from the North Sea region and most of the oil comes from the UK and Norway, however interest is rising throughout a number of Member States, such as the Netherlands, Denmark, Germany or Ireland.
The situation as it stands today is that offshore industry in the different Member States operates to different environmental, health and safety standards. This is due to the fact that presently EU legislation does not cover all aspects of the offshore oil and gas industry and national legislation present considerable disparities between Member States.
Following risk assessments carried out in 2010 the Commission found that there is a significant risk of severe accidents occurring in EU waters and the existing fragmented regulatory framework does not provide for an effective emergency response in case an accident does take place. The proposed new rules aim to tackle the problems identified. The Commission also proposes amending EU rules on environmental liability to extend such rules to marine waters within the proposed Regulation.
The Commission identifies four specific objectives for the proposed Regulation:
(1) Ensure a consistent use of best practices for major hazards control by oil and gas industry offshore operations potentially affecting EU waters or shores,
(2) Implement best regulatory practices in all European jurisdictions with offshore oil and gas activities,
(3) Strengthen EU’s preparedness and response capacity to deal with emergencies and
(4) Improve and clarify existing EU liability and compensation provisions.
The proposal covers all activities related to exploring for, producing or processing of oil and gas offshore. This includes transport of oil and gas through offshore infrastructure connected to an installation or subsea installation.
The new rules cover the waters of Member States including their exclusive economic zones (up to 370 km form the coast) and on their continental shelves within the meaning of the United Nations Convention on the Law of the Sea (UNCLOS).
As regards licensing, authorities in the Member State are required under the proposed rules to make sure that only operators with sufficient technical and financial capacities necessary to control the safety of offshore activities and environmental protection are allowed to explore for and produce oil and gas in EU waters.
Authorisations for offshore oil and gas activities are given pursuant to the Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons. Authorisations for offshore oil and gas exploration operations and for production operations have to be granted separately.
Conditions for Operating Offshore Installations
The following documents have to be submitted to the competent national authority by the operator of a production or non-production installation:
(1) In the case of a planned production installation, a design notification,
(2) A Major Hazard Report,
(3) An internal emergency response plan and
(4) An overview of the operator’s major accident prevention policy.
Major Hazard Report
Operators have to organise their activities around a best practice model, prepare a Major Hazard Report for their installation before exploration/production begins, containing an emergency response plan, and submit it to the competent national authority for assessment.
Emergency Response Plan
Companies will prepare emergency response plans based on their rig or platform risk assessments and keep resources at hand to be able to put them into operation when necessary. Member States will also take account of these plans when compiling national emergency plans which will be periodically tested by the industry and national authorities.
According to the rules proposed by the Commission the technical solutions presented by the operator which are critical for safety on the installation need to be verified by an independent third party before, and periodically after, the installation starts into operation.
Independent competent national authorities will be responsible for the safety of installations. Accordingly, these will assess the provisions for safety, environmental protection and emergency preparedness of rigs and platforms and the operations conducted on them.
If an operator is found not to respect the minimum standards set, the competent national authority will take enforcement action which may lead to penalties and, if not complied with, the operator may have to stop his drilling or production operations.
Under the proposed Regulation information is expected to be made available to citizens about the standards of performance of the industry and the activities of the national competent authorities which will be published on their respective websites.
Under the new set of rules oil and gas companies will be fully liable for environmental damages caused to the protected marine species and natural habitat. As regards damage to waters, the proposal would extend the current application of the Environmental Liability Directive (ELD) 2004/35/EC to cover all marine waters under Member State territorial jurisdiction. The geographical zone would be extended to cover all EU marine waters including the exclusive economic zone (up to 370 km form the coast) and the continental shelf where the coastal Member State exercises jurisdiction.
The Commission will work closely with its international partners to promote the implementation of highest safety standards across the world.
EU Offshore Authorities Group
The Commission will set up an EU Offshore Authorities Group composed of representatives from the competent authorities responsible for offshore oil and gas activities in the EU Member States. Offshore inspectors of Member States are thus expected to work closely together to ensure effective sharing of best practices and contribute to developing and improving safety standards.
The proposal also includes 6 Annexes providing detailed information on the following topics:
(1) Public participation linked to authorisations under Directive 94/22/EC,
(2) Requirements on documents related to consenting procedure,
(3) Provisions by competent authorities for regulation of major hazards operations,
(4) Provisions for prevention of major accidents
(5) Requirements related to emergency preparedness and response and
(6) Sharing of information and transparency.
The proposal will now be sent to the European Parliament and Council for examination according to the ordinary legislative procedure. The proposal will be discussed by the EU institution throughout 2012.