Memorandum submitted by ClientEarth
INTERNATIONAL AND EU REGULATION OF OIL RIGS
AND OTHER OFFSHORE ACTIVITIES ANALYSIS AND PROPOSALS FOR REFORM
The regulation of offshore installations, including
oil rigs, is seriously lacking at EU level and internationally.
In the wake of the Deepwater Horizon disaster, and criticism of
regulatory failings in the US, attention in the EU has focussed
in on the question of whether a similar catastrophe could take
place in European waters, and how its consequences might be dealt
with. This question will only become more forceful as the drive
for "energy security" pushes exploration efforts further
into environmentally hazardous and sensitive territory. ClientEarth
has looked closely at the state of regulation in Europe and the
following paper examines where the main failures lie, and suggests
what action is needed by way of legal reform to guard as closely
as possible against another devastating offshore incident.
Many EU laws controlling the operation of other
dangerous activities, such as chemicals facilities, mining and
transportation of oil by sea expressly exclude coverage of offshore
drilling. Some (though not all) of the international conventions
related to oil pollution also apply to oil rig pollution, but
even then their implementation is not always reliable, enforcement
mechanisms may be weak, and different rules exist for different
regions. Many important aspects of oil rig regulation, or of deep
sea exploration more generally, are not covered by international
conventions at all. For example, there are no international rules
on liability and financial security in relation to these types
of activities (as those which exist are limited to very restricted
circumstances when oil pollution arises from ships or tankers).
Earlier this year, in the aftermath of Deepwater
Horizon, ClientEarth produced a legal background paper analysing
the main rules governing the operation of offshore oil rigs in
the EU, pointing out the significant weaknesses and gaps. Since
then, momentum has grown in the EU and amongst certain Member
States for a comprehensive regulatory reform. Energy Commissioner
Oettinger gave his support to an EU wide moratorium on deepwater
drilling on 14 July 2010, announcing at the same time that the
Commission would be conducting an analysis of the situation during
the summer, with a view to putting its proposals before the European
Parliament and Council of Ministers in September.
ClientEarth fully supports Commissioner Oettinger's
call for an immediate moratorium until the causes of the Deepwater
Horizon accident can be established and the regulatory regime
internationally and in the EU strengthened as much as possible
so as to avoid a repeat of that catastrophe.
Since the publication of our original report,
we have conducted further work on some of the legal issues raised
by offshore drilling, whether for oil, gas or other mineral extraction,
or other seabed projects such as carbon capture and storage. The
following updated paper incorporates the previous analysis, plus
additional material. We have organised the analysis into a number
of thematic areas covering the different aspects of the regulatory
landscape, examining what regulation already exists and what more
is needed under each heading:
1. Rights to drill in territorial waters.
2. Pollution preventionsafety standards
3. Emergency planning and accident response.
4. Research, monitoring and information sharing.
5. Impact and environmental assessments.
6. Liability, compensation and financial security.
The various legal instruments reviewed each
deal with one or more of these areas in combination, so there
is some overlap in the discussion between the above headings.
A comprehensive new regulatory package is now
needed that not only amends existing EU legislation where this
is appropriate, but also introduces legislation to fill dangerous
voids in the current regime.
This new framework needs to extend to operational
drilling projects, exploratory drilling, and the period after
wells have been decommissioned. The opportunity should not be
missed to ensure that all sea-bed drilling is carried out in a
safe and properly managed fashionbe it drilling for oil,
other minerals, or carbon capture and storage projects.
ClientEarth's key recommendations for measures
to be adopted in the new framework are summarised as follows.
1. The EU Hydrocarbons Directive should require
that licences for offshore hydrocarbon exploration and exploitation
may only be issued where appropriate environmental protections
(and financial guarantees) are in place.
2. A package of measures equivalent to the Seveso
II, Erika and Third Maritime Safety packages is required for offshore
installations. This new legislation should require:
Major accident prevention policies;
Safety reports covering specified information;
Emergency response plans at operator
and Member State level;
Systematic inspection of installations
according to designated criteria; and
Information exchange between Member States
and with the Commission.
3. An EU level agency should exist to undertake
functions in connection with these measures, to provide support
to Member State authorities and to the Commission in ensuring
full implementation and enforcement. The European Maritime Safety
Agency is a clear candidate for this role, and its capacity should
be extended, with appropriate resources, to cover offshore installations
in addition to its current tasks in relation to shipping.
4. The current review of the Environmental Impact
Assessment Directive should result in amendments improving the
application of impact assessments to offshore projects. These
amendments should ensure EIAs are mandatory for the full range
of seabed exploitation projects (in exploratory, operational,
and decommissioned phases), improve the quality of EIAs, introduce
specific guidelines for the content and evaluation of EIAs in
the offshore drilling industry, impose special requirements for
EIAs for hyper-hazardous activities, and improve the implementation
of rules on transboundary EIAs.
5. A new liability regime is essential, tailored
to the particular risks presented by offshore activities including
oil rigs, carbon capture and storage projects, and all other seabed
development. The Environmental Liability Directive in its current
state represents a general system of environmental liability in
the EU but is badly under-equipped to respond to the kind of damage
which could result from an offshore pollution incident. The gap
should be filled by a framework employing a broad definition of
environmental damage, and capable of imposing strict liability
on all potentially responsible parties.
6. The definition of environmental damage in
the new liability regime should be comprehensive enough to cover
damage to the global climatea clear risk where seabed drilling
and hydrocarbon pollution incidents are concerned.
7. A mandatory collective compensation scheme
or other system of financial security is required as a key element
of the liability regime.
8. The Marine Strategy Framework Directive should
be amended so that its ambit extends to activities on the continental
shelves which could affect marine waters in the exclusive economic
zones, and so that consequences from marine accidents involving
offshore installations cannot be used by EU Member States as a
justification for failure to meet the 2020 target of good environmental
status in marine waters.
9. Rules on company transparency need to be much
more rigorous, with clear requirements regarding the nature and
extent of environmental disclosures which companies are required
to make. Current activity on this issue within the European Commission
must be prioritised.
10. A resolution should be passed at the September
OSPAR ministerial meeting to extend the OSPAR Convention to cover
emergency response measures, liability and financial guarantees.
Implementation of the OSPAR and Barcelona Conventions must be
improved, including via action by the EU institutions, as these
conventions represent binding EU law.
EU REGULATORY FRAMEWORK
1. Rights to drill in territorial waters:
The UN Convention on the Law of the Sea and the EU Hydrocarbons
Basic rights and obligations governing oil rigs
are set out in the UN Convention on the Law of the Sea 1982 (UNCLOS),
which gives coastal states the exclusive right to authorise and
regulate drilling and oil exploration in their exclusive economic
zones and on the continental shelf (Articles 56, 60 and 81). In
respect of "the Area", ie the seabed, ocean floor and
subsoil beyond the limits of national jurisdiction, natural resources
are the common heritage of mankind and no State or person may
claim sovereignty over them (Articles 136 and 137 of UNCLOS).
In the EU, the key legislation is the Hydrocarbons
Directive (Directive 94/22/EC). This specifically acknowledges
the sovereignty of Member States over the hydrocarbon resources
on their territories, ie that Member States retain the right to
determine the areas within their territories to be made available
for exploration and production of hydrocarbons (see Article 2(1)).
The primary aim of the Hydrocarbons Directive is to impose rules
ensuring non-discrimination in the allocation by Member States
of prospecting licences, encouraging competition, and safeguarding
the internal market. It is also intended to improve security of
Member States are permitted, under Article 6(2),
to impose conditions and requirements on hydrocarbon exploration/production
activities which they have authorised, including for reasons of
environmental protection, the protection of biological resources,
or the safety of installations and of workers. While this Directive
therefore maintains the option for Member States to impose safety
and environmental conditions on the operation of oil rigs (whether
offshore or onshore) it imposes no incentive or obligation to
As noted, Member States have retained sovereignty
over their hydrocarbon resources and how to exploit them. This
is enshrined in the Treaty (Article 194 TFEU). However, the Treaties
also enshrine the principle of ensuring a high level of protection
and improvement of the quality of the environment. According to
the principle of subsidiarity, EU legislation in areas of shared
competence (which include environment, energy and public health,
Article 4(2) TFEU) is justified (and required) if the relevant
objectives cannot be sufficiently achieved by the Member States
acting alone or at regional level, and are better achieved at
Union level by reason of their scale and effects (Article 5(3)
TEU). Avoiding and dealing with an offshore oil spill is a prime
example of such an action. The Treaty even envisages that measures
may be taken in the area of the environment, by special legislative
procedure, which may significantly affect a Member State's choice
between different energy sources and the structure of its energy
supply (Article 192(2)(c) TFEU). Member States' right to determine
the conditions for exploiting their energy resources as stated
in Article 194 TFEU is without prejudice to Article 192(2)(c).
The Hydrocarbons Directive should be amended
to the effect that Member States must impose adequate environmental
conditions, or at least that Member State licensing authorities
must be satisfied that the operator has taken appropriate measures
in this regard, including through having in place emergency plans,
and adequate financing to cover potential liabilities.
If, as ClientEarth recommends, a comprehensive
legislative package is introduced containing detailed specifications
for oil rig safety standards, accident prevention measures, emergency
planning, liability and compensation mechanisms, this should be
cross referenced in the Hydrocarbons Directive so that Member
States may not issue licences unless the competent authorities
are satisfied that the measures contained in that instrument are/will
be complied with.
2. Safety standards and inspectionspollution
There are various international conventions
and EU laws which contain obligations to take steps to prevent
pollution and manage the risk of accidents concerning oil rigs
or other activities in the marine environment.
The UN Convention on the Law of the Sea 1982
This contains environmental protection obligations
regarding the marine environment (see Part XII, Article 192),
including in relation to pollution from "installations and
devices used in exploration or exploitation of the natural resources
of the seabed and subsoil" and "other installations
operating in the marine environment" (see Articles
194 and 208). There is an obligation to take pollution prevention
measures in respect of activities in the Area, with particular
attention to be paid to activities such as drilling, and the operation
of offshore installations (Article 145).
UNCLOS therefore imposes international law duties
on its parties to prevent pollution, including from oil platforms.
It is binding international law, but relies on national and regional
rules and cooperation to be put in place to achieve its goals.
As a legal instrument in itself, it contains little in the way
of sanctions against any country which fails to fulfil the duties
it sets out. Therefore, it is necessary to examine EU and other
regional rules (and national laws) intended to give effect to
the aims of UNCLOS, to determine the status of the UNCLOS provisions
targeted at preventing oil rig accidents.
The OSPAR Convention
A crucial international convention from a European
point of view is the OSPAR Convention 1992. This applies in the
North East Atlantic and obliges its Contracting Parties to "take
all possible steps" to prevent and eliminate marine pollution
and to "take necessary measures" to protect the maritime
area against adverse effects caused by human activities, in order
to safeguard human health and conserve marine ecosystems.
The OSPAR Convention has 16 Contracting Parties
including Iceland, Norway, Portugal and Spain, as well as the
EU. It is implemented in the EU in the form of Decision 98/249/EC,
but as the EU is a Party to the Convention, it forms an integral
part of EU law in any event and is thus binding on all EU Member
States (in relation to their activities in the North East Atlantic)
and not just those which have individually signed it (see Article
Pollution from offshore sources is specifically
dealt with by the OSPAR Convention in Article 5 and Annex III
(though it should be noted that "offshore sources" is
defined by reference to hydrocarbon related activities only, not
other seabed drilling such as carbon capture and storage or other
mineral mining). Annex III contains the detail of the obligations.
Article 3 of Annex III prohibits the dumping of waste from offshore
installations, Article 4 requires the strict regulation by national
authorities of the offshore use of substances "which may
affect the maritime area", and Article 9 requires Contracting
Parties to issue instructions regarding the inspection of installations
and reporting of incidents. The conditions under which oil rigs
themselves can be decommissioned and abandoned by the operators
is addressed, and dumping without permission is prohibited.
Article 7 of Annex III imposes an obligation
on the Contracting Parties to:
"take appropriate measures, both individually
and within the relevant international organisations, to prevent
and eliminate pollution resulting from the abandonment of offshore
installations in the maritime area caused by accidents. In the
absence of relevant guidance from such international organisations,
the measures taken by individual Contracting Parties should be
based on Guidelines as the Commission may adopt. " (Emphasis
The OSPAR Commission's Offshore Oil and Gas
work stream has developed a number of further detailed Recommendations
for this sector, tackling topics such as the disposal of disused
offshore installations, the disposal of materials resulting from
offshore hydrocarbon exploration, environmental management systems
in the offshore industry, and screening of chemicals proposed
for use offshore.
The OSPAR Convention expressly applies the precautionary
and polluter pays principles and the use of best available techniques
and best environmental practice (Article 2(2), Annex I, Article
2(1)). Similarly to Article 193 of the Treaty on the Functioning
of the European Union, the OSPAR Convention allows Contracting
Parties to take more stringent measures in relation to pollution
prevention and elimination, or with respect to the protection
of the maritime area against the adverse effects of human activities
The OSPAR Offshore Oil and Gas Industry Strategy
from 2003 applies all of these principles, as well as the principle
of sustainable development and an integrated ecosystem approach.
It aims to develop programmes and measures to reduce marine pollution
from the oil and gas industry, and to:
"promote the development and implementation
by the offshore industry of environmental management mechanisms,
including elements for auditing and reporting, which are designed
to achieve both continuous improvement in environmental performance
and the environmental goals" and "promote the
joint development of environmental best practice guidelines for
offshore activities for the purpose of giving effect to the principle
of sustainable development. "
The OSPAR Convention does not contain any provision
for certain other important areas including emergency response
planning, nor does it set down any rules in relation to clean-up
and liability once an accident has occurred (see below).
While it is binding law, and contains strong
objectives, OSPAR relies on national governments and the EU institutions
to put into effect its key requirements. The extent to which this
is done in practice can be variable. As an international convention
OSPAR lacks enforcement mechanisms generally. However, as binding
EU law its provisions are directly applicable in all Member States
and can and should be enforced by the EU institutions.
In addition, every OSPAR measure (such as Recommendations of the
OSPAR Commission on all OSPAR's major work streams, including
Offshore Oil and Gas) has an implementation reporting and assessment
procedure. This should assist the OSPAR Commission and working
groups in identifying where measures are still lacking, and more
action by Contracting Parties is needed.
The 20 to 24 September 2010 will see a key meeting
of the parties to the OSPAR Convention in Bergen, Norway, where
Ministers from the Contracting Parties will discuss topics including
a status report on the health of the North East Atlantic environment,
and actions for improving the protection of marine biodiversity
such as the creation of protected areas. The status report will
cover an examination of the impacts of activities in the region
including offshore drilling. The Belgian Presidency of the EU
has pushed for deep sea drilling to be highlighted in the ministerial
declaration that will follow the September meeting. It remains
to be seen whether this will gain the backing of other OSPAR parties.
New provisions on offshore installations and activities adopted
under the auspices of OSPAR would bind the EU plus Iceland and
Norway, so could be of great benefit.
The Barcelona Convention
The 1976 Convention for the protection of the
Mediterranean Sea Against Pollution (the Barcelona Convention)
(as amended) mirrors several of the provisions of the OSPAR Convention
but applies instead to the Mediterranean Sea area.
The Barcelona Convention, like the OSPAR Convention,
applies the precautionary and polluter pays principles (Article
4(3)), and requires the use of best available techniques and best
environmental practices (Article 4(4)). One of the types of pollution
specifically addressed in the Barcelona Convention is pollution
resulting from exploration and exploitation of the continental
shelf and the seabed and its subsoil. Article 7 requires parties
to the Convention to
"take all appropriate measures to prevent,
abate, combat and to the fullest possible extent eliminate pollution
of the Mediterranean Sea Area resulting from exploration and exploitation
of the continental shelf and the seabed and its subsoil. "
The Barcelona Convention has a number of protocols
which contain detailed measures for protecting the Mediterranean
from specific types of pollution.
The Hazardous Wastes Protocol covers "waste
oils/water, hydrocarbons/water mixtures" and emulsions within
the definition of hazardous waste in addition to "mineral
oils unfit for their originally intended use", and requires
parties to "take all appropriate measures to reduce to a
minimum, and where possible eliminate, the generation of hazardous
wastes" (Article 5(2)).
A protocol setting out provisions for protecting
the Mediterranean from pollution resulting from exploration and
exploitation of the continental shelf and the seabed and subsoil
was drawn up in 1994 but has not entered into force as it still
needs to be ratified by one further party. The only EU Member
State to have ratified this Protocol is Cyprus, and the EU has
as yet neither signed nor ratified it.
The EU is a party to the Barcelona Convention
(along with 21 countries which border the Mediterranean Sea).
This means the Barcelona Convention is a binding part of EU law
(see again Article 216(2) TFEU), though the various Member State
parties differ in their levels of activity in response to it.
Although the Hazardous Wastes Protocol is in
force, it has not been ratified by the EU. Among the EU Member
States therefore, only Malta is bound by this Protocol as the
only Member State to have ratified it individually.
Some strong objectives on pollution prevention
and safety standards exist at international level. In particular,
Annex III of the OSPAR Convention requires Contracting Parties
to take appropriate measures to prevent pollution from oil rigs.
These requirements are binding requirements of EU law and must
be implemented. However, the Convention lacks enforcement mechanisms,
and more EU enforcement action is needed.
The September OSPAR conference should resolve
to build on the Convention in the wake of the Deepwater Horizon
disaster. It should review current implementation practices and
put pressure on any Parties not fulfilling any of their existing
obligations to do so.
Similarly, the Barcelona Convention requires
Contracting Parties to minimise pollution resulting from seabed
exploration and exploitation, and to cooperate in dealing with
any pollution incidents in the Mediterranean Sea. These are binding
provisions of EU law, but again there may be issues over full
Although detailed Protocols regulating seabed
activities and hazardous wastes have been drawn up they have not
been ratified by the EU and are not binding on all EU Member States.
In addition, the international conventions which
currently exist are limited in their territorial extent. Stronger
and more consistent regulation is therefore needed.
The Marine Strategy Framework Directive
The Marine Strategy Framework Directive (MSFD)
(Directive 2008/56/EC) is worth noting in this section for its
provisions dealing with environmental protection requirements
in marine waters, for example by setting the requirement for Member
States to achieve "good environmental status" in their
marine waters by 2020.
The MSFD is intended to pursue good environmental
status in EU marine waters including by phasing out pollution
so that it presents no significant impacts on or risks to marine
biodiversity and ecosystems. It incorporates a number of steps
towards achieving good environmental status (assessed according
to prescribed criteria), by 2020. There are certain grounds on
which Member States can ask to be exempted from this deadline.
One major weakness of MSFD is that there is
no compliance mechanism. Member States cannot be challenged for
a failure to achieve good environmental status by 2020. In addition
the MSFD only applies within exclusive economic zones and does
not extend onto the continental shelf. Any drilling outside the
relevant exclusive economic zone could not be regulated by a programme
of measures under the MSFD as it currently stands.
Article 13 of the MSFD should be amended to state
that the programmes of measures adopted under the MSFD should
include measures applying to all sea-bed activities licensed by
the Member States that take place on the continental shelf, outside
their marine waters, and which could affect the environmental
status of the marine waters within the exclusive economic zone.
It should not be acceptable under the MSFD for
an oil or other deep sea/seabed related accident to be accepted
as a derogation from the obligation to achieve good environmental
(i) The International Convention on
Oil Pollution Preparedness, Response and Cooperation 1990, the
Barcelona Convention and other international conventions
Under international law, the key convention
dealing with this area of regulation is the International Convention
on Oil Pollution Preparedness, Response and Cooperation 1990,
(the OPRC Convention). This agreement seeks to introduce measures
to prepare for and respond to oil pollution incidents, including
from oil rigs, by requiring coordinated and approved oil pollution
emergency plans (to be prepared by the operator), as well as national
contingency plans (to be prepared by government authorities),
and by introducing reporting and information sharing and international
cooperation requirements in relation to spills.
The EU is not a signatory to this Convention,
but the majority of its Member States are. Compliance with the
Convention is mainly through regional seas agreements, such as
the Helsinki Convention, the Barcelona Convention and the Bonn
and Lisbon Agreements. However, there is great disparity between
EU Member States (and regions) in the level of activity and effectiveness
of the relevant regional seas conventions and the implementation
of the OPRC Convention.
In addition, the OPRC Convention is concerned
only with accident planning and responseit does not extend
to issues of liability and compensation.
The Barcelona Convention also has a specific
protocol on this issue. The Prevention and Emergency Protocol
sets out how parties to the Convention should respond in the event
of a pollution incident including an oil spill from either a ship
or an offshore installation, and it stipulates which state party
should be responsible for bearing the costs associated with cleaning
up pollution incidents within their jurisdiction (Article 13(2)).
It also requires parties to the Convention to ensure that operators
of offshore installations in their jurisdiction have contingency
plans for combating any pollution incidents (Article 11(5)).
The EU is one of only seven Convention Parties
to have ratified the Prevention and Emergency Protocol. This means
that although only three Member States have ratified the Protocol
individually, it is nonetheless a binding part of EU law and all
EU Member States must implement its provisions when operating
in the Mediterranean Sea area.
Note: The International Convention Relating
to Intervention on the High Seas in Cases of Oil Pollution Casualties
1969 also gives coastal states the right to take necessary measures
on the high seas to prevent, mitigate or eliminate danger to its
coastline or related interest from oil pollution or threat of
oil pollution. There are also a number of other international
conventions connected to safety, training etc. (For example, The
Convention on Safety of Life at Sea 1974, the COLREG Convention
1972 on preventing collisions at sea and the STCW Convention 1978
on standards of training, certification etc). However, these conventions
are not of such direct relevance in relation to the matter at
the heart of this paper, incidents involving offshore installations.
The OPRC Convention imposes emergency planning
rules on operators of oil rigs, but it is not general EU law and
its implementation is disparate. It does not cover other deep
sea/seabed activities not connected to oil pollution. OSPAR does
not provide for emergency planning processes or for clean up responsibilities
and the allocation of liability. Neither does it provide for insurance
or financial guarantees in relation to accidents. The Barcelona
Convention contains emergency planning requirements, but is limited
in its coverage to the Mediterranean.
To ensure that accident response plans are comprehensive
across the EUcrucial given the transboundary nature of
offshore pollutionimproved implementation/compliance and
EU wide requirements are needed.
(ii) EU safety, emergency planning
and accident response: the Seveso II Directive, the Erika packages
As a consequence of the Piper Alpha disaster
in 1988, there are now a number of EU Directives that aim to protect
workers on oil rigs and that consequently impose safety procedures
and safety measures in relation to oil rigs (see for example Directive
89/391/EC and Directive 92/91/EC). However, they prescribe only
very basic safety measures, and do not provide for environmental
The Seveso II Directive (Directive 96/82/EC
on the control of major-accident hazards involving dangerous substances)
imposes rules requiring operators of facilities handling dangerous
substances to put in place major accident prevention policies,
management systems and procedures. It includes notification and
information requirements and rules on safety reports, emergency
plans and even land-use planning with respect to the location
of facilities handling dangerous substances (Articles 6-14). These
measures are all aimed at safeguarding a high level of protection
for "man and the environment" (see Article 7). However,
the Seveso II Directive specifically does not apply to off-shore
exploration or exploitation of minerals, including hydrocarbons
(see Article 4(f)). It is therefore of no application at all in
the context of oil rigs. Similarly, the Mining Waste Directive
(Directive 2006/21/EC), which also contains provision for major
accident planning (see Article 6) does not apply to oil rigs.
Seveso II contains a number of crucial elements
which should clearly apply to off-shore installations including
oil rigs just as they are applied to other installations handling
high risk substances. The recitals to Seveso II list several important
features concerning the context of the legislation, which apply
with equal force in the context of offshore oil drilling: for
example, reference to the transboundary nature of accident impacts,
the potential role of management failures in causing catastrophes,
the need to harmonise inspection standards, and to give the public
access to safety records. The extension of the Seveso II Directive
to cover oil rig regulation in addition is an option worthy of
However, it should be noted that simply removing
the exclusion in Article 4(f) would not provide a complete solution
to the oil rig problem. Seveso II is a Directive designed to deal
with a particular type of situation, ie scenarios where dangerous
substances are present in significant quantities over specified
thresholds. This may not always be the case for off-shore drilling
(consider exploratory drilling or decommissioned rigs for example),
and while Seveso II's coverage extends to the anticipated presence
of dangerous substances, is needlessly ambiguous. Seveso II deals
with major accidents, while in contrast, a comprehensive system
of regulation for oil platforms should also aim to address issues
such as the incipient oil well leakage which occurs during "normal"
operation and the possibility of leaks after rigs have been decommissioned.
It applies to "establishments under the control of the operator"which
again, in the context of a platform drilling beneath the seabed,
is not an appropriate wording. It covers land use planning but
not the parallel of taking into account accident risks during
oil field licensing processes.
In summary, to use Seveso II as a vehicle for
regulation of oil rigs (and other deep sea/seabed activities)
would require a major overhaul of the Directive, and it may be
more appropriate to deal with offshore drilling via separate legislation
covering, in parallel, the features of the Seveso II Directive.
On top of these Seveso II equivalents, other
elements are necessary to the regulation of oil rigs, which Seveso
II does not deal with, for example the allocation of liability
for accidents and compensation mechanisms. These are discussed
in the following sections.
Finally, on the question of health and safety
regulation, it should be noted that question marks currently exist
over the capacity of Member State inspection authorities to ensure
that even the basic worker protection standards contained in current
EU legislation are properly adhered to. For example, in the UK,
the Health and Safety Executive (tasked with oil rig inspection
duties) is under resourced in terms of a sufficient number of
properly qualified personnel to carry out this function. It therefore
relies to a significant extent on the industry to "self-regulate",
providing information on risk management procedures and accident
records, which the HSE itself may not have the capacity to verify
independently. The possibility of augmenting Member States' inspection
capacities via an EU level agency with responsibility for oil
rig safety is returned to below.
The Erika packages (I and II) and the Third Maritime
After the Prestige and Erika tanker oil spills
off the French and Spanish coasts, the EU passed a number of measures
aimed at preventing future accidents of this nature, including
(but not limited to):
Measures linked to port state control
(Directive 95/21/EC and Directive 2009/16/EC), ship inspections,
safety standards and flag state requirements (Directive 94/57/EC,
2001/105/EC, Directive 2009/21/EC, Regulation 391/09/EC and Directive
2009/15/EC), ship generated waste (Directive 2002/59) and on banning
single-hull oil tankers (Regulation 417/2002/EC).
Measures to increase transparency in
relation to the availability of information on ship safety, EU
vessel traffic monitoring and information systems (Directive 2002/59/EC),
and an EU maritime safety structure (Regulation 2099/02/EC).
Rules on traffic monitoring, accident
investigation, and liability of carriers of passengers by sea
in the event of an accident (Regulation 392/09/EC).
Mandatory requirements for ship-owners
to insure against damage to third parties caused by their ships
where such damage is not covered by the LLMC Convention (but not
the oil pollution conventions mentioned above) (Directive 2009/20/EC).
The measures introduced in the Erika packages
and the Third Maritime Safety Package are aimed at oil pollution
from ships. They do not address potential oil rig accidents or
indeed other forms of deep sea/seabed activities.
A key issue for consideration in this context
is the role of the European Maritime Safety Agency (EMSA) (establishedagain
in response to Erikaby Regulation 1406/2002/EC, and carrying
out a number of key functions in respect of the implementation
and enforcement of the measures described above). At the moment,
EMSA's mandate specifically refers to ships, and it does not play
any role either in relation to the inspection of oil rigs or other,
non-shipping related offshore activities, or in relation to any
oil pollution preparedness measures specifically aimed at offshore
installations. It should be considered whether EMSA's role can,
and should be extended in this direction.
EMSA currently has various responsibilities
and areas of experience which might place it well to take on a
similar role in relation to oil rigs/other offshore installations.
Inspection tasksEMSA has responsibilities
for ensuring that EU legislation concerning ship safety and port
control is properly implemented by the Member State authorities
responsible for upholding it within their jurisdictions. For this
purpose EMSA may undertake visits to Member State authorities.
Its role may be seen as "controlling the controllers".
EMSA provides training for seafarers
on safety issues, and also provides training for Member State
EMSA provides support to Member States
in investigating serious "maritime accidents". It also
maintains a database on accidents, with the aim of making it easier
to identify trends and manage risks.
EMSA has access to qualified engineers
and a fleet of vessels for the purpose of assisting with clean
up of spills from oil tankers, and a satellite system ("CleanSeaNet")
capable of detecting and tracking spills regardless of their source.
Part of EMSA's pollution incident response function is to facilitate
cooperation between Member States.
EMSA performs research and maintains
databases of information on safety and technical issues, disseminating
information on best practice.
EMSA has the experience and technical capabilities
to respond to oil spills whatever the source, and indeed has provided
assistance in the case of Deepwater Horizon. All of these tasks
could be extended into the realm of oil rigs and regulation of
other deep sea/seabed activities, and potentially be of enormous
assistance to Member State authorities.
Consideration should also be given to whether
EMSA could, with appropriate funding, go even further and take
on a fully independent role eg in respect of the investigation
of accidents or the inspection of installations.
EMSA's future mandate is currently under review
in any event, plus in addition the Commission is working on a
feasibility study regarding a European Coastguard service. The
potential role of either or both in relation to oil rigs should
be a feature of this work. Extra funding will be needed.
In EU law, more rigorous and detailed safety
policies and management systems are required for oil rigs, as
is a harmonised system of inspections. This could potentially
be achieved by extending the provisions of the Seveso II Directive
to oil rigs, which it currently excludes, but would be better
be done by introducing a separate package of legislation covering
the same elements as Seveso II to fill the current regulatory
gap, including in particular requirements for:
operators of offshore installations to
have a major accident prevention policy,
operators to produce safety reports covering
operators and Member State authorities
to draw up emergency plans, review, revise and update these,
systematic inspection of installations
by Member State authorities according to designated criteria (which
should be specific to offshore installations), and production
of reports on these inspections, and
information provision and exchange between
the Commission and Member States.
Measures passed as a response to the Erika and
Prestige disasters do not consider potential accidents caused
by oil rigs. Off-shore installations need to be controlled and
regulated in a similar way to ships.
EMSA's role should be extended to cover offshore
installations including oil rigs. It should have enhanced and
independent powers of inspection and enforcement. With appropriate
resources, EMSA would be well placed to play a central role in
any package of accident response measures.
(i) International law: UNCLOS, OSPAR
UNCLOS imposes on its Contracting Parties duties
of monitoring and international cooperation (Article 197ff).
The OSPAR Commission monitors the development
of North Sea offshore oil and gas installations and maintains
an inventory of details such as location, size, type and operational
phase. The OSPAR Convention requires its Contracting Parties to
provide various items of information to the OSPAR Commission,
which collates this and publishes it on an annual basis. This
includes information on emissions and discharges from offshore
installations, including substances used in drilling operations,
and accidental spills. OSPAR's work also extends to projects reviewing
the impacts of carbon capture and storage operations. As noted
above OSPAR countries are obliged in addition to report on the
implementation and effectiveness of Recommendations of the OSPAR
The OSPAR Convention also contains a general
obligation on its Parties to cooperate in regular monitoring and
assessment of the marine environment. Quality Status Reports are
produced on a 10 to 20 year time frame. This assessment and reporting
includes the effects of human activities in the North Sea, including
the impacts of the offshore oil and gas industry.
The Barcelona Convention likewise contains commitments
on monitoring pollution in the Mediterranean area, and on sharing
scientific and technical knowledge (see Articles 10 and 11).
In Europe, the most systematic collection and
dissemination of data relating to safety and environmental impacts
of offshore installations is carried out under the OSPAR Convention.
This is valuable, but only has relevance to the North East Atlantic
region. Similarly, research and monitoring of pollution including
from offshore sources is carried out under the auspices of the
Barcelona Convention, but only in respect of the Mediterranean.
There is a need for a Europe-wide co-ordination of these activities,
building on the work that is already on-going, ensuring consistent
standards and sharing results, expertise and best practice across
the regions (to include the North East Atlantic, Mediterranean
plus the Baltic and Black Sea).
(ii) EU measures: the Seveso II Directive,
Erika packages and EMSA
The EU measures described in the previous section,
ie the Seveso II Directive and the Erika/Prestige and Third Maritime
Safety packages touch on research, monitoring and information
exchange in relation to the sectors which they cover. For example,
Seveso II requires that prescribed information about safety at
the installations it regulates is compiled, reviewed every three
years, proactively disseminated to the public and exchanged with
other Member States. After major accidents, Seveso II requires
operators and Member State authorities to collect specified information
so that a full analysis can be performed of the "technical,
managerial and organisational" aspects of the incident and
recommendations made. Article 19 of Seveso II states as follows:
"Member States and the Commission shall
exchange information on the experience acquired with regard to
the prevention of major accidents and the limitation of their
consequences. This information shall concern, in particular, the
functioning of the measures provided for in this Directive.
As noted above, EMSA is tasked with maintaining
a maritime accident database collating information on the causes
and consequences of shipping related accidents. It is developing
systems for harmonising the approaches taken by different Member
States to investigating maritime accidents and dealing with data
on shipping safety standards. One of EMSA's key roles is organising
workshops, training sessions and expert discussions to facilitate
the exchange of information between Member States, and the European
The second "Erika Package" of EU legislation
put in place monitoring systems to track and report on ships carrying
None of these monitoring and information systems
apply to offshore installations or accidents involving oil rigs
or other types of deep sea/seabed activities, and there is no
equivalent centralised EU system.
Within the EU, there are several systems in place
for carrying out research, monitoring activity and sharing information
in the realm of shipping, and EMSA plays a central role, but no
equivalent exists for offshore installations. An equivalent framework
is needed. Once again, EMSA's remit should be extended so it can
carry out similar functions in relation to oil rigs and other
forms of deep sea/seabed activities. This role could include liaising
with the OSPAR and Barcelona Convention bodies to leverage the
research and information sharing experiences already developed
in the regions with which they deal.
5. IMPACT AND
(i) International law: UNCLOS, the
Espoo Convention 2001 and the Kiev Protocol 2003
UNCLOS imposes on its Contracting Parties duties
of monitoring and environmental assessment (Articles 204 and 205).
The Espoo Convention (Convention on Environmental
Impact Assessment in a Transboundary Context 2001) requires its
Parties to "take all appropriate and effective measures to
prevent, reduce and control significant adverse transboundary
environmental impact from proposed activities" (Article 2(1)).
The Convention requires that transboundary environmental impact
assessments are carried out where significant adverse impacts
are likely to result from a proposed activity, and the responsibility
falls on the "Party of Origin", ie the party in whose
jurisdiction the activity in question is going to take place.
Appendix I of the Espoo Convention lists offshore
hydrocarbon production as an activity with potential to cause
significant adverse impacts, but not other possible deepsea/seabed
activities, for example in relation to carbon capture and storage
An oil spill from an offshore rig affecting
more than one country would constitute a "transboundary impact"
with a significant "impact" on the environment (including
the marine environment).
Importantly, the environmental and human health
impacts which Parties to the Espoo Convention are required to
prevent by taking relevant measures, are defined very broadly,
and are not restricted to specific elements of the environment
(as is the case, for example, with the EU Environmental Liability
Directive, as explained further below). However, countries vary
in their interpretation of whether adverse impacts are "likely".
Guidance produced by UNECE on the Convention recommends that assessments
are performed for projects whenever there is even a low likelihood
of significant transboundary impacts,
but this is not a requirement of the Convention itself.
The Kiev Protocol on Strategic Environmental
Assessment 2003 is intended to support the Espoo Convention by
ensuring that individual Parties integrate environmental assessment
into their more general plans and programmes at an early stage,
thereby helping to lay the groundwork for sustainable development.
The Kiev Protocol entered into force in June 2010.
The EU is a signatory to both the Espoo Convention
and the Kiev Protocol, which makes them integral parts of EU law
and immediately binding on EU Member States (see above). The EU
rules on EIAs and SEAs (described in the next section) do incorporate
transboundary requirements, but there are question marks over
how well transboundary EIAs are operating in practice. In addition
to improving procedures under the EU Directives, guidance at EU
level on when a project may be expected to have transboundary
effects would be useful.
The application of the Espoo Convention and the
effectiveness of transboundary environmental impact assessments
within the EU appears to vary considerably and could be improved
by EU wide guidance on when transboundary consultations should
be carried out. It should be the case that transboundary EIAs
are mandatory for offshore drilling, given the strong potential
for a spill in the marine environment to have effects on more
than one Member State. It may be necessary to amend EU legislation
in these areas to ensure that international rules on transboundary
assessments are properly incorporated.
(ii) EU Environmental Assessment Rules
Oil rigs are subject to requirements under various
EU rules on environmental assessments, such as:
The Environmental Impact Assessment (EIA)
Directive (Directive 85/337/EC as amended by Directive 97/11/EC):
commercial petroleum extraction projects of more than 500 tonnes
of oil a day are subject to mandatory environmental impact assessment
(as they are Annex 1 projects);
The SEA Directive (Directive 2001/42/EC)
under Article 3(2)(a); and
Appropriate assessments under Article
6(3) of the Habitats Directive (Directive 92/43/EEC), which applies
to any plan or project that may have significant effects on sites
protected under that Directive.
The EIA Directive is currently under review
and a number of issues arise in relation to its application to
offshore installations which should be built in to this process
with a view to making necessary improvements.
Some of the issues arising in the context of
the EIA review include:
Ensuring that exploratory drilling for
oil or for any other resources or any other reasons is covered
by the requirement for an EIA in every case. Currently an EIA
is required under Annex I of the Directive for "Extraction
of petroleum and natural gas for commercial purposes where the
amount extracted exceeds 500 tonnes per day
". It is
conceivable that this could result in no mandatory EIA requirement
for exploratory drilling projects, drilling for research purposes
or other sea bed drilling activities not related to hydrocarbon
extraction, which may not actually result in an oil rig producing
more than 500 tonnes per day but may nevertheless pose serious
The quality of EIAs in some cases is
a serious issue. There is currently no system for ensuring that
those responsible for carrying out impact assessments perform
this work to an appropriate standard, using reliable information
and analyses; such as a system for accreditation of consultants,
or for independent review. The Commission's current review of
the EIA Directive already highlights the potential use of guidelines
on specific issues to be taken into account in preparing EIAs
for particular sectors.
Current experience as detailed in the
Commission's EIA review shows that transboundary EIAs are hampered
by practical issues including differing standards, guidelines,
timetables and language difficulties cross-border.
The definition of environmental impacts
for the purposes of the EIA Directive is broad. However, climate
impacts may not be considered, and there may be a need to refer
expressly to these (liability for climate damage is discussed
in more detail in the next section of this paper).
In the case of exploratory drilling for
sea-bed oil, it may be the case that the risks of a particular
project do not fully emerge, or change in nature, as the drilling
progresses. There should be a requirement that any material change
to the information in an EIA which comes to light after a project
has been consented be notified to the competent authorities.
In the EU, specific rules exist in relation to
environmental impact and strategic environmental assessments.
In relation to oil rigs, the implementation of the EIA, SEA and
Habitats Directives (as well as the Espoo Convention) needs to
be monitored to ensure assessments are properly carried out and
all provisions relating to environmental impact assessments are
being applied consistently throughout the EU.
The current review of the EIA and any potential
recast should address the following points:
All sea-bed drilling and deepwater activities
should require environmental impact assessment. The EIA Directive
should be amended so that any sea bed drilling, or at least any
sea bed drilling beyond a certain depth, is included in Annex
I. This would enable coverage of carbon capture and storage activities,
as well as any exploratory drilling which could otherwise be in
danger of falling through the gaps.
EIAs must be carried out to a satisfactory
quality level. Key suggestions for improving quality includeaccreditation
of consultants, independence requirements for consultants, independent
external review of EIAs, and guidelines on specific issues aimed
at both the author of the EIA (ie what information should be covered)
and the decision makers (how to weigh and assess the information).
The suggestion that sector specific guidelines
are employed should definitely be built into the updated EIA Directive
in respect of offshore installations. The guidelines should ensure
that all of the potential consequences of an accident involving
deep sea/seabed activities or installations, including oil rigs,
are fully covered and assessed as accurately as possible, building
on scientific/technical knowledge gained from previous accidents
including Deepwater Horizon. A centralised database on oil rig
and other relevant accidents (maintained by EMSA for example)
would be of assistance to this end. All impacts and potential
impacts need to be properly explored, including accident impacts,
leaks following decommissioning or blocking of a drilling site,
and oil leaks during "normal" operation.
New requirements should be made for EIAs
for "hyper-hazardous" activities (such as deep water
drilling) coupled with a prohibition on Member States' authorities
granting development consent where the EIA reveals that risks
cannot effectively be mitigated, or where technology to perform
the activity safely does not exist.
The EIA Directive's procedures for transboundary
impact assessments need to be improved, with procedural requirements
EIAs should be required to take into
account climate damage caused by oil rigs either during the course
of normal operation or in the case of an accident resulting in
large discharges of greenhouse gasses.
(i) International conventions on maritime
liability and compensation for oil pollution
With the exception of the OSPAR and Barcelona
Conventions, which state the "polluter pays principle"
but do not go on to provide details as to how this should operate
in practice, the "polluter pays" principle is not expressly
applied in international law, and in particular no liability or
compensation frameworks exist under international law with respect
to the consequences of an accident involving pollution from an
offshore installation. Commitments in the Barcelona Convention
(Article 12) to develop detailed provisions for determining liability
and compensation have not yet been adopted.
International conventions dealing with liability
in relation to oil pollution (and for that matter, other forms
of pollution) arising from shipping, or with the limitation of
liability for maritime claims, do not apply to pollution arising
as a result of accidents on oil rigs or other offshore installations.
They are restricted in their application to pollution incidents
caused by ships. Therefore, none of the following conventions
would apply to an oil rig accident:
The Convention on Limitation of Liability
for Maritime Claims (LLMC) 1976.
The International Convention on Civil
Liability for Oil Pollution Damage (CLC) 1992.
The International Convention on the Establishment
of an International Fund for Compensation for Oil Pollution Damage
(the Fund Convention) 1992.
The International Convention on Civil
Liability for Bunker Oil Pollution Damage (the Bunkers Convention)
The International Convention on Liability
and Compensation for Damage in Connection with the Carriage of
Hazardous and Noxious Substances by Sea (the HNS Convention) 1996.
The above instruments set out various systems
for assigning liability for the consequences of spills to ship
owners and operators, liability limits, funds to which ship operators
contribute and which provide readily accessible compensation up
to maximum limits, and mandatory insurance requirements.
(ii) Compensation and financial security
in the EU
Plans to introduce a number of collective compensation
schemes, or a fund providing a financial guarantee for civil liability,
and to establish a wider principle of liability on the part of
carriers and cargo owners were introduced under the Erika and
Third Maritime Safety packages but never realised. The proposal
included an EU level fund to top up the maximum compensation levels
available under the various international conventions (described
above) in the case of an oil spill from a tanker. Provisions for
financial guarantees have been incorporated to a limited extent
into the Mining Waste Directive but only in relation to the period
after the mine closes (eg after decommissioning) and for land
rehabilitation (in Article 14). However, in any case, neither
the Mining Waste Directive nor the liability and insurance rules
of the Erika and Third Maritime Safety packages extend to operators
of offshore installations.
The Environmental Liability Directive (discussed
in detail below) does not contain provisions for guarantees of
financial security, or (as a general liability framework) collective
compensation mechanisms for particular sectors.
As matters stand therefore, nothing exists under
EU law in terms of a compensation fund, automatic liability or
mandatory insurance or other financial security requirements for
oil rig/offshore installation operators. As seen in the previous
section, there is no framework under international law either
which would cover this gap.
As such, it is essential that consideration
be given to a new EU mechanism requiring either contribution to
a collective compensation scheme, and/or other types of financial
security, including insurance, to provide for the costs of remedying
environmental damage. Precedents such as the IOPC Funds for ship
based oil pollution, and the EU rules on ship pollution liability
are available. Other sectors, such as waste, have related requirementsfor
example the Landfill Directive (Directive 1999/31/EC) provides
that Member State authorities may not issue landfill permits unless
satisfied that adequate provision has been made by way of financial
security to cover operations including after-care of a landfill
site. Voluntary industry schemes already existfour of the
major oil companies have instigated a scheme of their own following
the Deepwater Horizon disaster, to deal with accident response.
OPOL, involving operators on the UK continental shelf, is an industry
funded arrangement guaranteeing compensation up to a certain level,
including in the event that the operator responsible cannot pay.
However, arrangements need to be mandatory and contributions must
be calculated to cover the realistic costs. Clearly, detailed
consideration will need to be given to what the appropriate contributions
and compensation limits need to be, in view of the maximum costs
of the Deepwater Horizon clean up and in consultation with industry,
regulators, and observers.
International conventions on liability and compensation
for oil and other pollution only apply to ships, not to oil rigs
or other offshore activities. Therefore they will not provide
any funds or compensation in relation to an oil spill caused by
an oil rig or any other environmental damage caused by any deep
Given the potentially enormous quantities of
oil which could be released by an oil rig accident, for example,
as compared to a tanker accident, the absence of an equivalent
framework for compensation and liability covering oil rigs (and
increasingly also other types of deep sea/seabed activities) is
a gross imbalance.
No system exists at EU level to fill this gap.
The Environmental Liability Directive (see below), contains no
requirements relating to compulsory financial security or insurance
requirements for operators undertaking Annex III dangerous activities.
Neither does any other EU law. This is a crucial feature of any
comprehensive liability regime, as without guarantees that funds
will be available in the event they are needed, liability will
be a pyrrhic victory.
Drawing from the international conventions listed
above, and considering what is necessary in the context of offshore
drilling, the following elements should be covered in a liability
and funding framework:
An agreed system assigning liability
in the event of a pollution incident involving an offshore installation
to the party or parties responsible. This should entail all potentially
responsible parties on a joint and several basis. Liability should
be strict (see also comments in the following section).
A fund, to which compulsory payments
must be made as a condition of being granted operating licences
for offshore activities. This fund would guarantee resources for
clean-up operations and compensation payments for personal injury,
property and other environmental damage (broadly defined), up
to set limits. Research is needed on the basis of the costs of
previous spills in order to decide what the appropriate payments
and limits should be, and there should be widespread public consultation
on that issue.
In the event that the party responsible
for the pollution is unable to pay, for example in case of insolvency,
the fund should be available to meet costs.
Financial security conditions should
extend to the period after a well is decommissioned, for example
by requiring bonds or funds regarding potential future liabilities.
Consideration should also be given to
whether insurance is an appropriate vehicle for financial security.
The system should apply to any entity
which wanted to undertake offshore drilling or any other type
of offshore activity in the deep sea/seabed for any purpose including
oil, gas, other deep sea minerals, CCS and including exploratory
The Hydrocarbons Directive should be
amended so the Member States may not issue licenses for off-shore
drilling unless the operator can demonstrate it has emergency
funds and/or insurance for environmental damage in place up to
a sufficient minimum level.
(iii) Liability in the EU: The Environmental
The key piece of liability legislation relevant
at EU level is the Environmental Liability Directive. As seen
above, at international level, virtually no framework exists for
regulating liability with respect to oil rigs or other deep sea/seabed
activities. Likewise, no formal compensation structure exists
at either EU or international level as far as such activities
are concerned, though there is precedent in the form of oil tanker
regulation, and voluntary industry agreements.
The Environmental Liability Directive (ELDDirective
2004/35/EC) establishes rules that implement the polluter pays
principle by making "operators" carrying out certain
"dangerous" activities (see below) automatically, and
regardless of fault, responsible for preventing and remedying
significant damage to water (defined by reference to the Water
Framework Directive (Directive 2000/60/EC)), soil (if there is
a risk to human health) and biodiversity (certain habitats and
species protected under the Habitats Directive (Directive 92/43/EC)).
It also imposes fault-based liability in relation biodiversity
damage only (as just defined) as regards all "occupational
activities" (not just certain "dangerous" ones).
The ELD applies in Member States' exclusive
economic zones. Crucially however, the ELD does not cover any
category of marine water damage.
Out of the damage categories covered by the
ELD, only biodiversity damage could be a relevant consideration
in relation to an oil rig accident, and only where the incident
caused serious damage to a protected species or habitat. To trigger
liability under the ELD, such damage would need to have a significant
adverse effect on species or habitats protected under the Wild
Birds Directive (Directive 2009/147/EC), or Habitats Directive
(Directive 92/43/EC), as regards their reaching or maintaining
favourable conservation status (see Article 2(1)(a) of the ELD).
Annex III of the ELD lists a number of activities
which are perceived as dangerous (and regulated as such under
EU law), or which involve dangerous substances. Thus, it includes
the management of extractive waste pursuant to the Mining Waste
Directive, but also the:
"7. [m]anufacture, use, storage, processing,
filling, release into the environment and onsite transport of:
(a) Dangerous substances as defined in Article
2(2) of Council Directive 67/548/EEC
Annex I of Directive 1272/2008/EC, replacing
the Annex I of the abovementioned Directive 67/548/EEC, lists
the substances referred to in Article 2(2) of Directive 67/548/EEC
(which still applies today). Hydrocarbons and crude oil are included.
Under the same Directive 1272/2008/EC, the definition of "manufacture"
includes the "production or extraction of substances in the
natural state" (Article 2(14)).
The drilling and extraction of crude oil is
therefore covered by Annex III of the ELD, and any damage caused
by such activity which caused significant adverse effects to any
such sites or species protected under EU law would trigger strict
liability on the part of the operator under the ELD.
In cases where liability is established under
the ELD, the rules require that the damage must be reinstated
and/or complementary and compensatory remedial measures might
also be required (see Article 6 and Annex II of the ELD). Both
the operator and the competent authority are under a duty to take
action, with costs incurred by a competent authority being recoverable
from the operator (see Articles 5, 6, 7 and 11 ELD). There are
also requirements relating to the prevention of damage where there
is an imminent threat of it occurring (Article 5).
However, major problems exist with the application
of the ELD generally and some of these problems are particularly
pertinent in respect of oil rig accidents (or accidents relating
to other deep sea/seabed activities).
Firstly, the ELD covers only specific types
of environmental damage, and not damage to biodiversity, water
or soil in general. Namely, as already explained, it relates only
to areas of environmental protection in relation to which the
EU has made specific rules (eg water status and protected species
and habitats). However, other types of environmental damage including
damage to habitats, species and ecosystem services outside of
the framework of special EU protection would not be covered by
the ELD. This stands in stark contrast to other, generally applicable
directives, such as the EIA and SEA Directives and, importantly,
the Mining Waste Directive, which apply much more broadly to risks
to "the environment" in general (see for example Article
4(1) of the Mining Waste Directive).
Oil pollution from an oil rig accident could
have widespread environmental effects which would not be captured
by the ELD as it currently stands. Against this background it
should be noted that the EU Natura 2000 network of protected sites
under Directives 79/409/EEC and Directive 92/43/EEC has not yet
been fully designated in the marine zone, which has knock-on effects
for the coverage provided by the ELD.
Secondly, the damage thresholds that trigger
liability under the ELD are set at a very high level, which is
incredibly difficult to establish (the ELD has been in force since
2007 and has been applied very infrequently). On the other hand,
the Mining Waste Directive (which has aims very closely connected
to those of the ELD and is listed in Annex III of the ELDsee
further below), sets a much lower damage threshold in its general
requirements: danger to human health, harm to the environment,
in particular risks to water, air, soil, and fauna and flora (Article
Thirdly, as already explained, the ELD introduces
two different liability regimes (Article 3(1)). In relation to
activities listed in Annex III of the Directive, it imposes strict
liability. In relation to other "occupational activities"
(essentially, all other commercial or business activities), liability
for biodiversity damage is fault based, and there is no liability
at all in relation to water and soil damage.
It is questionable whether the Annex III definition
is robust enough to capture exploratory drilling activities, and
other types of sea-bed drilling not entailing the extraction of
hydrocarbons, plus activities in connection with sealing and decommissioning
a drilling site once its use was at an end.
If the ELD were extended to apply to marine
water damage, then it would be important that strict liability
rules extended to this category of damage for all occupational
activities, not just Annex III activities.
It should also be noted that the ELD does not
apply to environmental damage arising from incidents in relation
to which certain international oil (and other) pollution liability
conventions (listed in the above section on compensation funds
and financial security) are triggered. However, these conventions
are restricted in their application to oil (and other) pollution
from ship sources, not from oil rigs.
The Environmental Liability Directive applies
to oil pollution caused by oil rig accidents in very limited circumstances,
namely where significant damage is caused to biodiversity with
protected status under EU law. As the extraction of crude oil
falls within the list of dangerous activities in Annex III of
the ELD, strict liability (ie liability regardless of fault such
as negligence) would attach to the operator of the oil rig in
However, this is the extent of the ability of
the ELD to respond to environmental damage caused by an oil rig
accident. Environmental damage as a general concept is not covered.
Damage to marine waters per se, independent of any particular
biodiversity damage, is not covered, unlike inland water damage.
Damage to the global climate is highly unlikely to be captured.
In effect, damage categories under the ELD are extremely narrow,
and damage thresholds are extremely high.
The ELD is scheduled to be reviewed in 2013-14
(see Article 18), and its current weaknesses should be remedied
at this opportunity. With adequate amendments, the ELD could provide
an effective solution to regulating liability for oil rig pollution
and other deep sea/seabed incidents. However, if this cannot be
achieved, it is essential that separate legislation is passed
in parallel to the ELD to address these types of activities specifically.
Liability regimes specific to particular activities are necessary
where the risk profile of those activities demands it, as in the
case of seabed drilling.
The following points should be addressed in such
legislation (as well as being considered more broadly in the wider
Damage thresholds need to be materially
lower than those in the current ELD. The ELD, and any specific
oil-related (or deep sea/seabed activity related) liability legislation,
should contain wide-ranging definitions of "environmental
damage" as do the EIA and Mining Waste Directives. The definition
should be broad enough to include damage to the global climate.
There must be strict liability coverage
for all seabed activities, including phases of a project before
the "production or extraction of substances" has actually
commenced. There must be coverage for activities in relation to
sealing and decommissioning of a site as well as its operation.
As concerns the ELD, Annex III should be extended to cover all
of the potentially environmentally damaging activities listed
in the annexes to the EIA and SEA Directives.
Liability for offshore pollution must
be capable of attaching to all potentially responsible parties
on a joint and several basis (not only to the owner or "operator"
of the oil rig or other installation). Any one potentially responsible
party must be capable of being found liable for the maximum costs
of clean-up and compensation. The designation of liability as
between joint venture partners, subcontractors, and so on, should
be allocated by those parties between themselves without prejudice
to the position of clean up operations and victims of environmental
The 30 year temporal limitation under
the ELD needs to be reviewed, and such a limit is certainly inappropriate
in the context of specific regulation addressing liability in
the case of offshore drilling. Capped wells may leak decades after
they go out of use. At the moment there is no system assigning
liability for oil spilt from a decommissioned well which has been
abandoned by its original operator. The regulation of sea-bed
drilling should reflect the regime for (for instance) waste as
set out in the Landfill Directive, where the responsibilities
of the site operator during an after-care period are acknowledged.
Operators should remain liable for drilling sites after closure.
Mandatory financial security provisions
are required to complement the liability regimesee the
(iv) Liability for climate damage
In addition to the problems described above
for dealing effectively with liability in general, no mechanism
currently exists, either at EU level or internationally, for dealing
with liability for the damage to the global climate which could
result from a marine disaster. In addition to oil spill fires,
including controlled burns such as those deployed in response
to the Deepwater Horizon incident, such damage could result from
methane or other greenhouse gas emissions released by sea bed
drilling. Climate damage constitutes a special kind of damage,
which, because it may not necessarily result in local damage to
habitats or humans, or protected species, runs a very high risk
of falling through the cracks of liability regimes such as the
Environmental Liability Directive. As well as their physical consequences,
large releases of climate forcing emissions pose an additional
problem in that they risk pushing legally binding carbon budgets
and emissions trajectories out of line. A method therefore needs
to be found for accounting for such accidental releases in frameworks
such as the EU Emissions Trading Scheme.
The issue of liability for climate damage has
arisen in the context of carbon capture and storage (CCS), and
legislation regulating this sector does at least acknowledge and
attempt to deal with the issue. Where leakage occurs from CCS
sites, there will be (1) strict liability under the ELD where
local damage also results, (2) financial liability, to buy carbon
credits under the EU ETS to cover the amount of the leak, and
(3) liability in tort where there is property or health damage
to a third party.
There are serious failings with this approach.
Firstly, as we have seen, the scope of the ELD is very limited
and it is easy to envisage a situation where a climate damaging
release of gasses would have no immediate effect on an EU protected
site or species, so that the ELD would not apply. Secondly, a
requirement to buy carbon credits is not a penalty in itself.
It simply limits liability for climate damage to the current carbon
price. In addition, the quantity of gasses released may be impossible
to quantify, and the solution is limited to carbon dioxide, ignoring
other climate forcing emissions such as sea-bed methane. Finally,
tort liability would only arise where the leaked gasses caused
personal injury, damage to private property or economic loss,
so again, does not respond to the full range of environmental
The EU liability regime needs to be capable of
capturing significant damage to the global climate, whether this
results from CCS activities or any other marine activities including
offshore oil drilling. As already discussed in the context of
the ELD, definitions of "damage" in the environmental
liability regime should be as comprehensive as possible, but in
any event should cover damage to the global climate. A liability
system designed specifically to address offshore/seabed activities
should encompass legal obligations to take corrective measures
where accidental releases of greenhouse gasses occur. Corrective
measures may often involve domestic offsets. A mechanism also
needs to be found to incorporate estimations of these significant
additional emissions into greenhouse gas reporting frameworks
and account for them in carbon budgeting.
The Directive on geological storage of carbon
dioxide (Directive 2009/31/EC) was an example of a missed opportunity
to install a fit for purpose liability regime able to cope with
the risks represented by a particular sector, with the result
that CCS activities will currently proceed under a limited liability
framework. The picture for CCS could be remedied by a new regime
covering oil rigs, but extending to all seabed drilling projects
7. COMPANY TRANSPARENCY
Company transparency is a vital aspect of ensuring
that individual companies properly manage the environmental risks
associated with their activities. The Deepwater Horizon disaster
and related market losses have demonstrated the potential vulnerability
of investments in companies operating in sectors with high environmental
risks, where companies have not taken sufficient precautions to
guard against such risks.
Currently, there is no system of environmental
reporting requirements within international accounting frameworks,
such as the International Financial Reporting Standards. Many
companies produce corporate social and environmental responsibility
reports, but frequently on a voluntary basis (depending on national
requirements) and these vary widely in terms of their coverage
and quality because no global standard exists. The Global Reporting
Initiative (GRI), an organisation established in alliance with
the United Nations Environment Programme and consisting of a network
of businesses and NGOs, has developed a set of Sustainability
Reporting Guidelines to promote a standardised approach to reporting
of (amongst other issues) companies' environmental performance.
A Sector Supplement to the Guidelines is being developed for the
oil and gas industry which will cover, amongst other items, reporting
of emergency preparedness and response measures taken by oil and
gas companies. However, the GRI Guidelines are currently subscribed
to on a voluntary basis only.
The GRI has recently collaborated with the Prince's
Accounting for Sustainability Project to set up an International
Integrated Reporting Committee (IIRC) to develop a globally accepted
framework for sustainability accounting. Importantly the IIRC
will include input from standard setting bodies such as the International
Accounting Standards Board. While such international accounting
standards are not mandatory as such, compliance with them is generally
required for the signing-off by auditors of the accounts of public
companies, so that incorporation into these standards of suitably
rigorous environmental reporting requirements could have significant
EU law contains some basic requirements for
reporting by companies on environmental issues. The main piece
of legislation on this topic is the Accounts Modernisation Directive
(Directive 2003/51/EC). This amended the Fourth Council Directive
on the annual accounts of certain types of companies (Directive
78/660/EEC) to include the following provision:
"To the extent necessary for an understanding
of the company's development, performance or position, the analysis
[to be included in the annual report] shall include both financial
and, where appropriate, non-financial key performance indicators
relevant to the particular business, including information relating
to environmental and employee matters;"
Commission Recommendation 2001/453/EC (on the
recognition, measurement and disclosure of environmental issues
in the annual reports of companies) led up to the adoption of
the Accounts Modernisation Directive and contained detailed discussion
of what the Commission considered to be appropriate for company
disclosure in relation to environmental issues. The Recommendation
set out guidelines for how environmental liabilities and environmental
expenditure should be recognised and measured in company reporting
and on the sort of environmental disclosures companies should
make, for example information on energy performance energy, materials
and water use, emissions and waste disposal. However, the Recommendation
has no legal force.
The Commission has in recent months undertaken
a series of workshops and discussions with stakeholders on the
subject of improving company reporting of environmental issues.
No legislative proposal has yet emerged from this process.
Various international accounting standards have
been adopted as EU law (see Regulation 1606/2002 and Commission
Regulation 1126/2008), so that companies traded on regulated markets
within any of the Member States must prepare their annual accounts
and reports in accordance with them. Incorporation of environmental
reporting requirements into such international standards, via
the work of the IIRC for example, could lead to such measures
being adopted as EU law and becoming legally binding in EU Member
Enhanced mandatory disclosure on environmental
issues and corporate governance is essential to ensure improvements
in environmental practices. Voluntary environmental reporting
standards exist internationally, but there is currently no framework
with legally binding effect. Systematic environmental reporting
requirements should be built into international accounting standards,
and these should be incorporated into EU law.
The current EU rules on environmental disclosure
are not sufficiently stringent. The Commission should bring forward,
as a priority, its initiative to enhance company environmental,
social and governance disclosure, and a rigorous, mandatory and
enforced framework for disclosure on these matters.
47 See, for example, case 104/81 Hauptzollamt Mainz
v Kaupferberg, explaining the duty of EU institutions, as
well as Member States, to ensure compliance with the obligations
arising from international agreements. Back
Note this does not extend to a comprehensive system for assigning
ultimate liability for pollution damage and/or a compensation
system-discussed further below. Back
Note this is a requirement of the international OPRC Convention,
but as discussed below, implementation of this is patchy in Europe
and an EU law requirement would be beneficial in ensuring all
Member States' procedures were in line. Back