Appendix One: Government Response
Introduction
In the light of the wide ranging nature of the Committee's
report, this is a joint response which includes contributions
from the Department of Energy & Climate Change, the Health
& Safety Executive, the Foreign and Commonwealth Office and
the Department for Business Innovation & Skills.
The US incident and subsequent oil spill was a tragic
event and it is vital that the industry and Governments all around
the world learn lessons from it to try to ensure that such an
event will never happen again. The UK Government has already taken
an number of actions (such as increasing the number of environmental
inspectors and inspections to mobile rigs) to further bolster
the already robust UK regulatory regime, and welcomes the Committee's
report.
The US National Commission on the BP Deepwater Horizon
Oil Spill and Offshore Drilling also delivered its final report
on 11 January 2011. This is a substantial document, both in its
scope and in the careful detail of its analysis and recommendations.
Alongside the Committee's recommendations, it is being considered
carefully by DECC, HSE, and all other relevant bodies within Government,
to identify the implications from this incident for the regulation
of deepwater drilling in the UK.
That consideration, together with any further information
emerging from ongoing investigations in the US, will now inform
the full review of the UK's oil & gas offshore regulatory
regime, under independent chairmanship, which was announced by
the Secretary of State for Energy & Climate Change last year.
The review is being carried through by DECC, the Health and Safety
Executive and the Maritime and Coastguard Agency, and is based
on the full life cycle of an offshore development, thus ensuring
that all activities are covered. It will report later this year.
The Government's responses to the Committee's conclusions
and recommendations are set out below. In some cases, it has not
been possible to give a definitive response at present. Some issues
are still under consideration in the ongoing regulatory review
- copies of the final report from this review will of course be
sent to the Committee once completed. And the resolution of some
issues will depend on the outcome of discussions with our European
or other international partners, or will be influenced by the
ongoing investigations in the US.
Committee Conclusions/Recommendations and Government
Response
1. In the light of recent drilling activity in
the waters around the Falkland Islands, we asked witnesses from
OSPRAG and Oil and Gas UK whether the UK regulatory regime applied
to drilling in that area. There was a lack of clarity over responsibility
for drilling and oil response in the Falkland Islands. We recommend
that the Government clarify what regulatory regimes apply to drilling
and oil spill response in the Falkland Islands and who is responsible
for enforcing them. (Paragraph 22)
Policy on hydrocarbons development in Falkland Islands
waters is primarily a matter for the Falkland Islands Government
(FIG). FIG has its own robust regulatory regime in place, covering
offshore hydrocarbons exploration and any potential production.
The Foreign Secretary retains some constitutional and other legal
safeguards related to hydrocarbons work such as the final consent
for production licences. These safeguards ensure that the United
Kingdom complies with its international obligations and fulfils
its responsibilities to the Islands.
FIG and the oil companies have been working
with British Geological Survey (BGS), HSE, DECC and the FCO to
ensure all exploratory drilling adheres to international standards
of practice. FIG has its own environmental and health & safety
regulations in place, modelled closely on UK regulations in many
aspects including provision for oil spill contingencies, but taking
into account the South Atlantic environment. As FIG mentioned
in their 13 January letter to the Committee, they are very keen
to learn from the tragedy that occurred in the Gulf of Mexico
and will seek to implement any recommendations resulting from
any subsequent inquiry.
2. Oil company boards lack members with environmental
experience. The industry should take steps to remedy this and
the Government should encourage them to do so. (Paragraph 30)
Under Section 172 of the Companies Act 2006, all
directors are required to have regard to factors which reflect
wider expectations of responsible business behaviour in promoting
the success of the company (on the basis that they will not be
able to promote long-term sustainable success unless they do so).
The list of factors to which they must have regard includes 'the
impact of the company's operations on the community and the environment';
The UK Corporate Governance Code (which is owned
by the Financial Reporting Council) includes the following Principles:
- Every company should be headed
by an effective board which is collectively responsible for the
long-term success of the company.
- The board and its committees should have the
appropriate balance of skills, experience, independence and knowledge
of the company to enable them to discharge their respective duties
and responsibilities effectively.
The Listing Rules require listed companies to apply
the Principles and report to shareholders on how they have done
so.
Looking specifically at the oil and gas industry
it should be noted in any case that many board members, along
with oil industry and business experience, will already have some
degree of environmental and safety experience via previous work
within the industry. In the UK the industry has a good track record
post-Piper Alpha in relation to both environmental and safety
issues, but we would expect those in the industry to review their
boards taking full consideration of the Companies Act and their
obligations to have regard to the impact of company operations
on the community and the environment.
In addition all offshore operators have to demonstrate,
as part of the DECC oil & gas licensing process, that they
have an environmental professional appointed to deal with relevant
legislation and issues, and that the appointed person has a direct
line of contact to senior management staff.
3. We conclude that the UK has high offshore regulatory
standards, as exemplified by the Safety Case Regime that was set
up in response to the Piper Alpha tragedy in 1998. The UK regulatory
framework is based on flexible, goal-setting principles that are
superior to those under which the Deepwater Horizon operated.
(Paragraph 34)
4. Nevertheless, despite the high regulatory
standards in the UK we are concerned that the offshore oil and
gas industry is responding to disasters, rather than anticipating
worst-case scenarios and planning for high-consequence, low-probability
events.(Paragraph 35)
From a safety perspective, the UK's current offshore
legislation already requires industry to identify and assess its
major hazard risks and to put appropriate controls in place to
ensure the safety of the offshore workforce. HSE already challenges
industry to ensure that such assessments have been completed when
it assesses a safety case and tests an operator's understanding
of these assessments and implementation of its controls while
inspecting offshore installations. Indeed, the primary purpose
of the safety case regime is to demonstrate that the operator
has identified, controlled and mitigated the risk of catastrophic
events.
HSE's Key Programme 3 report, published in 2007,
highlighted that the offshore industry had too much of a focus
on occupational safety, with less emphasis on major hazard risks.
The subsequent Key Programme 3 Review, which was published in
2009, highlighted a positive industry response to the earlier
findings, with clear evidence of improvements. However, in the
light of the Committee's concerns, HSE will work with industry
and the unions (via the Offshore Industry Advisory Committee[1])
to identify whether any additional steps are necessary to build
on these improvements. For example, consideration will be given
to the need for additional industry guidance or training, or increased
supervision by industry, of this aspect of the safety management
system.
From an environmental perspective, operators are
required to detail their response strategy in the event of a worst-case
oil spill, irrespective of the mitigation measures in place to
prevent such an occurrence. The Oil Pollution Emergency Plan (OPEP)
must detail the actions that will be taken in the event of a spill,
to both control the release and respond to any spilled oil.
5. It is imperative that there is someone offshore
who has the authority to bring a halt to drilling operations at
any time, without recourse to onshore management. We urge the
Government to seek assurances from industry that the prime duty
of the people with whom this responsibility rests is the safety
of personnel and the protection of the environment. (Paragraph
38)
Government already requires offshore operators to
put clear lines of communications in place, including there being
someone offshore who has the unilateral authority to bring a halt
to drilling operations at any time. HSE checks that such requirements
are in place during inspections. UK offshore legislation also
clearly places the Offshore Installation Manager, who is always
on the platform, as having final control of activities on offshore
installations. HSE will seek further assurances from industry,
via the Oil Industry Advisory Committee, that safety of personnel
remains the prime consideration. HSE will also encourage industry
to look for opportunities to test that the communication approaches
adopted are effective, perhaps during emergency drills and broader
offshore scenario exercises.
This is also one of the areas that DECC looks at
during pre-drill inspections, to make sure that the Offshore Installation
Manager and/or drilling supervisors have the authority to shut-in.
In all cases it has been confirmed that they have the appropriate
authority.
6. Given that the failure of the single blind-shear
ram to fire on the Deepwater Horizon's blowout preventer seems
to have been one of the main causes of the blowout of the Macondo
well, we recommend that the Health and Safety Executive specifically
examine the case for prescribing that blowout preventers on the
UK Continental Shelf are equipped with two blind shear rams. (Paragraph
45)
HSE currently assesses the suitability of blowout
preventers and associated well control equipment through the safety
case and well operations notification process. Both of these are
statutory requirements under the Safety Case Regulations.
Since the Gulf of Mexico incident, Government and
OSPRAG, (the Oil Spill Prevention and Response Advisory Group[2])
have been strongly focused on the blowout preventer lessons from
the Gulf of Mexico. HSE has asked OSPRAG, and in particular the
Well Life Cycle Practices Forum (which was established by OSPRAG
in their interim report), to help it assess the case for prescribing
that blowout preventers on the UKCS are equipped with two blind
shear rams. A full consideration of this issue, which will include
exploring the implications that such a step might have for the
strengths that a goal setting regime brings, will however have
to take account of the outcome, currently expected in the summer,
of the ongoing investigation conducted by the US Marine Board.
More generally, HSE's work in the offshore regulatory
review will consider the scope to enhance the UK regulatory framework
to assure further the adequacy and reliability of safety critical
equipment.
7.
While the flexibility of the UK safety regulation regime appears
to have worked well, we recommend that for fail-safe devices such
as the blowout preventer the Government should adopt minimum,
prescriptive safety standards or demonstrate that these would
not be a cost-effective, last-resort against disasters. (Paragraph
52)
As noted above, HSE is reviewing this issue in depth,
including any implications for the regulatory review.
8. We believe that the Government must ensure
that the UK offshore inspection regime could not allow simple
failures—such as a battery with insufficient charge—to
go unchecked. (Paragraph 55)
The regulatory regime provides the safety goals to
be achieved and HSE monitors this through the process of assessment
and sample inspection. It is industry's responsibility to ensure
that such simple failures do not occur. They are in control of
installations 24 hours a day, and are the only ones in a position
to continuously monitor the safe operation of equipment. Existing
UK safety legislation also requires regular independent verification
(by verification/certification bodies such as Lloyds), that such
items of safety critical equipment are capable of meeting defined
performance standards. This verification system, which is currently
unique to the UK, is also subject to assessment scrutiny during
the Safety Case acceptance process and subsequent inspection by
HSE. HSE has developed a specific inspection tool for well control
equipment contained in the verification schemes and will be conducting
these inspections in 2011.
In the light of what happened in the Gulf of Mexico,
Government is challenging the industry and its verification bodies
(via the Offshore Industry Advisory Committee) to identify, and
implement, any additional measures that can be taken to ensure
that such simple failures cannot happen. HSE will use the regulatory
review as a vehicle to consider whether the current regulatory
regime can be refined to improve oversight of industry's performance.
9. Whilst there is a risk of conflicts of interests
affecting the judgement of independent competent persons who assess
the design of wells we have had no evidence of such conflicts
presented to us. (Paragraph 60)
HSE has in place an inspection programme of Well
Examination Schemes that are required by Regulation 18 of the
Offshore Installations and Wells (Design and Construction etc)
Regulations 1996. A key part of this inspection programme is to
ensure the examiners independence is assured and that he does
not come under undue pressure from the well operator when making
his assessment of well design etc.
HSE's inspections have found some evidence that a
few well operators did not demonstrate the required level of independence
of their examiners (as detailed below in an extract from our published
inspection findings - Well examination schemes - commonly observed
weaknesses SPC/TECH/OSD/43) but there was no evidence that there
was a conflict of interest that would affect the judgment of the
well examiner. Furthermore, there was no evidence that the judgement
of the well examiners had been compromised.
However, appropriate levels of independence were
subsequently put in place by these well operators. The extract
also further emphasises how important the independence of the
examiner is:
"Interpretative guidance to the regulations,
published by HSE, explains the degree of independence that well
examiners must have from those responsible for the design construction
and operation of the well. The guidance explains that the well
examiner must be independent and separate from the immediate line
management of the work that he is examining. Although it is permissible
for the well examiner to be an employee of the well operator's
organisation, it is imperative that he has a high degree of impartiality
and independence from pressures from the well-operator, especially
of a financial nature. Promotion, pay and reward systems must
not be allowed to compromise his judgment. Some duty holders fail
to achieve the level of independence required, usually by appointing
a well examiner that has some line responsibility for the design
and construction of the well. Few duty holders carry out audits
of their schemes to ensure that a suitable level of independence
exists"
HSE did find, again as detailed in our published
findings that:
"There must be clear guidance on the resolution
of disputes between the well examiner and the well operator. The
person with overall responsibility for the scheme should have
the delegated authority to allow him to resolve disputes."
10. We find some conflict in the reports from
the HSE about bullying and harassment on rigs and the assurances
of the industry that sincere whistleblowers will be heard and
protected. We recommend that the Government should discuss with
the industry and unions what further steps are needed to prevent
safety representatives from being or feeling intimidated into
not reporting a hazard, potential or otherwise. (Paragraph 66)
The improvement of safety culture offshore in this
area has been a key activity for Government over the last 12 months.
This has included an offshore inspection project, and working
with industry and unions in the Workforce Involvement Group of
the Offshore Industry Advisory Committee to identify additional
measures that can be taken to address the issue, including encouraging
safety representatives to report hazards and play an informed
role in major hazard identification, prevention and mitigation
and considering what, if any, changes are needed to the Offshore
Installations (Safety Representatives and Safety Committees) Regulations
1989. The inspection project is expected to report by spring
2011. In addition, HSE is encouraging the Unions and Industry
to continue to monitor the application of the Not Required Back
Guidelines. Government expects that these guidelines will create
the necessary workforce confidence to allow them to speak up for
safety, in the knowledge that in doing so they will be fairly
treated.
Offshore personnel can also contact HSE direct if
concerns they have raised with their employers / safety case duty
holders etc. have not been addressed to their satisfaction. The
contact details can be found on notice boards on all offshore
installations. HSE's Offshore Division's policy is to investigate
all such complaints brought to its attention.
11. It is important and necessary that the offshore
safety culture is cascaded throughout the supply chain, from existing
contractors at all levels, through to new-entrants on to the UK
Continental Shelf. (Paragraph 68)
Safety culture has always been a key theme of Government's
work with the offshore sector. HSE will continue this work through
the Offshore Industry Advisory Committee's Worker Involvement
Group and the Step Change initiative. This will include promulgating
the findings of the inspection project on safety culture to all
those working on the UK Continental Shelf. HSE will also continue
to develop its Worker Involvement website, to ensure that employers
and workers can have easy access to key information. HSE will
also continue to inspect such activities, actively discussing
issues with safety representatives, and will take enforcement
action on such issues when appropriate.
12. There is both risk and the advantage of competition
where global oil and gas companies operate to different standards
when working in different regulatory regimes. We recommend that
the Government monitor any changes in the US regulatory regime
to see if—in the light of the response to the Deepwater
Horizon incident—the US establishes a new gold-standard
of regulation, as the UK and Norway did after the Piper Alpha
tragedy. We would urge the Government to work with regulators
in other offshore oil and gas provinces to ensure that the highest
standards of safety can be achieved globally through an exchange
of best practice lessons. (Paragraph 72)
The regulatory system in the Gulf of Mexico at the
time of the Macondo incident was of course very different from
that which we maintain in the UK and is employed in the North
Sea in general. It is worth noting that the report of the US National
Commission recommends the adoption in the US of a risk-based performance
approach similar to the safety case approach in the North Sea.
But we will of course be looking at what the US does.
As it stands, the Government is continuing to liaise
with oil industry regulators in other countries, including the
US, to ensure that best practice is disseminated across the industry
and high regulatory standards can be adopted across the globe.
In particular DECC is very active in the G20 Global Environmental
and Marine Protection Workgroup whose remit is to share best practices
to protect the marine environment, prevent accidents related to
offshore exploration and development, as well as transportation,
and deal with their consequences.
Government already works very closely with other
offshore safety regulators via the International Regulators Forum
(IRF - which includes the U.S.) and the North Sea Offshore Authorities
Forum (NSOAF) sharing common lessons and approaches. In particular,
HSE is chair of the IRF committee planning an extraordinary "summit"
this coming autumn to provide a global opportunity to learn Deepwater
Horizon lessons. HSE also has annual bilateral meetings with the
main countries engaged in North Sea oil and gas extraction (Norway,
Denmark, and Holland) to share experience and best practice.
13. The Bly Report—BP's internal investigation
into the Deepwater Horizon incident—does not contain a root-cause
analysis of the events that led to the blowout of the Macondo
well, the loss of 11 men on the Deepwater Horizon, and the release
of 4.9 million barrels of oil into the Gulf of Mexico. We urge
the Government not to rely extensively on the Bly Report, given
the controversy surrounding the responsibility for the incident
and the design of the Macondo well, but rather to consider its
conclusions in parallel with the observations of other companies
involved with the incident, and with the recommendations of US
agencies investigating the incident (Paragraph 78)
Government fully appreciates that the Bly report
is but one report arising out of the US as a result of Deepwater
Horizon. We are monitoring all relevant reports, and note that
the US Chemical Safety Board report will probably not be published
until 2012. HSE and DECC will work with OSPRAG, other regulators
and the individual companies involved to consider all the lessons
from the Gulf of Mexico incident. We have carefully reviewed all
reports relating to the incident, not just the Bly Report, and
will continue to do so.
14. We believe that the environmental impacts
of a sub-sea well blowout need to be understood and taken into
account when a drilling licence is issued in the UK. We urge the
Government to ensure that the licensing regime takes full account
of high consequence, low probability events. (Paragraph 79)
Before a consent to drill is granted by DECC, operators
are required to provide an environmental assessment which includes
an assessment of the potential impact of the worst-case scenario
of an uncontrolled release resulting in failure of all containment
barriers, irrespective of the extremely low risk of such an occurrence.
Where the release could be subsea, and the water depth is such
that this could affect the behaviour of the spilled oil, this
must be taken into consideration in the impact assessment. We
have already learned a lot about the behaviour of a deepwater
release at the seabed, and this is being fed into the impact assessments
and spill modelling being undertaken by applicants. And the on-going
monitoring in the Gulf of Mexico will enable us to refine our
understanding. The operator's Environmental Impact Assessment
must be accepted by DECC before they will issue the necessary
environmental approvals to allow the drilling operations to proceed.
15. We recommend that as part of the drilling-licence
process, the Government require companies to consider their responses
to high-consequences, low-probability events—such as a blowout.
The Government should not automatically accept claims that companies
have mitigated away the risk of such worst-case scenarios. We
urge the Government to introduce this requirement as drilling
ventures into increasingly extreme environments. (Paragraph 81)
Operators are already required to detail their response
strategy in the event of a worst-case oil spill, irrespective
of the mitigation measures in place to prevent such an occurrence.
The Oil Pollution Emergency Plan (OPEP) must detail the actions
that will be taken in the event of a spill, to both control the
release and respond to any spilled oil.
DECC consult with specialist advisers (such as the
Joint Nature Conservation Committee) and the Maritime and Coastguard
Agency, as the UK competent body for counter pollution response
at sea, before approving the OPEP. DECC also work in conjunction
with the HSE and will not issue drilling consents unless the HSE
have confirmed that they are satisfied with the proposed well
design and construction.
16. Given the high costs of the incident in the
Gulf of Mexico, we believe that the OPOL (Offshore Pollution Liability
Association) limit of $250 million is insufficient. We are concerned
that the OPOL provisions only cover direct damage and also that
the precise definition of "direct damage" is unclear.
While membership of OPOL remains voluntary—despite it being
a pre-requisite for a licence—its voluntary nature weakens
its legality and the control and deployment of its funds. We believe
this lack of legal control will allow polluters to claim that
damages to biodiversity and ecosystems are indirect, and therefore
do not qualify for compensation. (Paragraph 90)
Alongside the Committee's comments we note that the
US National Commission report highlights the importance of ensuring
adequate liability arrangements are in place to better protect
victims and provide appropriate incentives to industry.
Some of the recommendations in this area address
particular circumstances in the US, including a limit on the liability
of drilling operators. There is no such limit in the UK - the
liability of companies for the consequences of their actions is
subject to no statutory restriction. We believe that the existence
of the OPOL liability pool provides a globally unique, and very
substantial, assurance that victims would be adequately protected.
However, we note the Committee's recommendations,
and can confirm that this is a matter being actively pursued by
DECC as a member of OSPRAG. OSPRAG's work programme includes re-assessment
of the implications for liabilities. This is also, of course,
an area in which the European Commission and other international
bodies have proposed further work. We will therefore continue
to work with industry and with international partners to see how
further improvements could be made.
On damage to biodiversity and ecosystems, see response
below to Recommendation 23.
17. We conclude there needs to be clarity on the
identity and hierarchy of liable parties to ensure that the Government,
and hence the taxpayer, do not have to pay for the consequences
of offshore incidents. We conclude that any lack of clarity on
liability will inhibit the payment of compensation to those affected
by an offshore incident. We recommend that it should be a requirement
of the licensing process that the licensee prove their ability
to pay for the consequences of any incident that could occur.
We recognise that these measures could add to the cost of investing
in new UK oil and gas production and urge the Treasury to reflect
this when considering incentives to such investments. (Paragraph
91)
We consider that the OPOL arrangements already provide
a clear route for those who may have suffered loss as a result
of any offshore oil spill to secure compensation, and for public
authorities which may have had to undertake remedial measures
to be reimbursed. And it is already the case that applicants for
licensees are required to demonstrate that arrangements in place
to cover any liabilities which may result from operations under
the licence. Nevertheless this is an area that is being reviewed
by DECC and OSPRAG to see what improvements can be made.
Fiscal change is considered on the individual merits
of each case (such as the case for the field allowance, which
was made in respect of small, or qualifying technically challenged,
new field developments), supported by necessary evidence that
the tax regime is impeding the economic production of oil and
gas.
18. We recommend that the Government consider
whether compulsory third-party insurance should become a necessary
requirement for small exploration and production companies. (Paragraph
93)
We will be considering the requirement for insurance
as part of our review.
19. We acknowledge that oil spill response plans
often share procedures for dealing with oil spills. There is some
concern that in the past this may have led to a culture of copying-and-pasting
rather than the production of site-specific plans which recognise
the drilling environment and the risk of high-consequence, low-probability
events. We recommend the Government re-examine oil spill response
plans to ensure that this is not the case. (Paragraph 101)
OPEPs submitted to Government are site specific,
but there are some elements of commonality in relation to response
strategies, given they must all feed into the National Contingency
Plan. All OPEPs are carefully reviewed and DECC would reject a
document if the text was not site-specific and/or inappropriate
to the risk associated with a particular operation.
20. We recommend that the Government draw up clear
guidelines on the sub-sea use of dispersants in tackling oil spills,
based on the best available evidence of both their effectiveness
and their environmental impact. We also recommend the Government
monitor the effects of sub-sea dispersants in the Gulf of Mexico
to inform these guidelines. (Paragraph 108)
The potential use and effects and regulation of subsea
dispersants is currently being investigated by the Marine Management
Organisation (who administer the testing and approval of products
for the UK), Marine Scotland (who approve the use of products
in Scottish waters) and industry, through an OSPRAG work group.
The group have instigated a review group to identify the gaps
in our current knowledge and to determine how these might be addressed.
This will take account of Gulf of Mexico monitoring and the outcome
of the review will be taken into consideration in the development
of Government policy and guidance.
21. We recognise that the UK's oil spill response
system is robust and rightly focuses on prevention, followed by
containment and then clean-up. We welcome the development of new
capping and containment systems capable of dealing with a sub-sea
blowout. However, we feel that the absence of these devices before
the Macondo incident is indicative of the industry's and the regulator's
flawed approach to high-consequence, low-probability events. Prevention
is better than cure, and we recommend once again the Government
recognise that in its regulatory regime these systems are not
a substitute for fully functioning blowout preventers. (Paragraph
111)
Government agrees that prevention is better than
cure, and this principle has contributed to the development of
the UK's regulatory system. The Offshore Installations (Safety
Case) Regulations 2005 require operators or owners of an offshore
installation to prepare a safety case providing evidence that
all major accident risks have been evaluated and measures taken
to control risks. Furthermore, the Offshore Installations and
Wells (Design and Construction, etc) Regulations 1996 set out
the requirements for the integrity of installations and the safety
of offshore and onshore wells.
These must be submitted to HSE for acceptance before
a rig drills in UK waters. Presently HSE assesses the suitability
of blowout preventers and associated well control equipment through
the safety case and well operations notification process. In addition
UK safety legislation requires regular independent verification
(by verification/certification bodies such as Lloyds), that such
items of safety critical equipment are capable of meeting defined
performance standards. This verification system, which is unique
to the UK, is subject to assessment scrutiny during the Safety
Case acceptance process and subsequent inspection by HSE. Through
these layers of regulations, the UK aims to ensure that safety
is designed into the system before it becomes operational.
22. There are serious doubts about the ability
of oil spill response equipment to function in the harsh environment
of the open Atlantic in the West of Shetland. We recommend that
the Government ensures that any capping, containment and cleanup
systems are designed to take full account of the harsh and challenging
environment West of Shetland. (Paragraph 117)
A capping device was developed by Chevron for the
current UK deepwater drilling programme to the west of Shetland,
which is located in the Aberdeen area and will be available for
all wells drilled using the contracted drilling vessel and subsea
equipment. The device is designed to be deployable from any vessel
with adequate position-keeping, lifting and ROV (remotely-operated
vehicle) capability, irrespective of the location of the well,
although it is obviously accepted that weather and sea state can
impose limitations on any marine operations.
Operators are therefore required to develop a flexible
response strategy that covers treating any oil spill, capping
the well and the worst-case scenario of drilling a relief well.
With regard to the treatment of any spill, operators also recognise
that there are operational limitations for surface oil containment
systems, and therefore include the options of dispersant treatment
and straightforward surveillance, as there may be situations where
natural dispersion is the only option under the prevailing weather
conditions, supplemented by other measures in more sheltered waters.
In addition to the measures in place in relation
to the current drilling operations west of Shetland, the work
of OSPRAG is driving forward improvements to the UK's capacity
to prevent or capture oil leaking from an uncontrolled well. This
capability has been improved with the arrival last October of
two containment devices developed in response to the Gulf of Mexico
incident.
OSPRAG is also developing a purpose-built well
capping device for more widespread UK offshore use. Agreement
has been reached on a design considered to be the most appropriate
to accommodate conditions typically found in the UK, and specifically
to the west of Shetland. Construction and initial testing of this
universal capping device should be completed this summer.
23. We conclude that—as it stands—the
EU Environmental Liability Directive is
unlikely to bring to account those responsible
for environmental damage caused by an offshore incident such as
happened in the Gulf of Mexico. We recommend that the Government
works with the EU to ensure a new directive is drawn up that follows
the polluter-pays principle and unambiguously identifies who is
responsible for the remediation of any environmental damage. (Paragraph
122)
The European Commission has indicated in its Communication
on the safety of offshore oil and gas activities that it proposes
further work on the Environmental Liability Directive, including
the issue of coverage of damage to biodiversity and ecosystems.
The UK looks forward to exploring these issues with our European
partners.
However, it is an important objective for the UK
to encourage smaller companies to exploit development prospects
which may no longer present attractive investment opportunities
from the perspective of large multinationals. It is of course
essential that responsibility is identified unambiguously. However
we need to ensure that any new requirements for financial security
instruments are framed in such a way that offshore development
does not become restricted to a handful of the best-resourced
international companies. We will wish these discussions to take
full account of the appropriate roles
of risk-sharing mechanisms including insurance.
24. We utterly reject calls for increased regulatory
oversight from the European
Commission. We recommend that EU countries without
a North Sea coastline
should not be involved with discussions on regulation
of the offshore industry on the UK Continental Shelf. (Paragraph
127)
Government believes that there is value in the sharing
of information and levelling up standards in Member States to
ensure best practice. However, the UK has a mature offshore regulatory
regime which we would not want to be weakened, and - like the
Select Committee - we are concerned about any legislative proposals
from the EU that would diminish the effectiveness of our own and
others (e.g. Norway, Denmark and Netherlands) robust regimes.
In particular, action at EU level should not be targeted on:
- Member States' licensing or
specific regulatory decisions;
- Placing requirements, rather than high level
principles, on national regulators;
- Any proposals that effectively lower UK regulatory
standards;
- Additional regulatory burdens at the time of
granting the initial licence; and
- Any obligatory EU regulation, or control, of
national regulators.
25. We conclude that a moratorium on offshore
drilling in the UK Continental Shelf would cause drilling rigs
and expertise to migrate to other parts of the globe. A moratorium
on deepwater drilling would decrease the UK's security of supply
and increase the UK's reliance upon imports of oil and gas. A
moratorium could also harm the economies of communities in Scotland
who rely upon the UK offshore oil and gas industry as well as
the wider British economy to which the industry makes a major
contribution. There is insufficient evidence of danger to support
such a moratorium. We conclude that there should not be a moratorium
on deepwater drilling in the UK Continental Shelf. (Paragraph
138)
Government welcomes the Committee's conclusion that
there should not be a moratorium on offshore drilling in the UKCS.
Deepwater oil and gas resources account for around 17% of remaining
UK hydrocarbon reserves and stand to make a very valuable contribution
to the UK economy and UK energy security over the coming decades
as we make the transition to a lower carbon economy. Nevertheless,
we will continue to work with all interested parties to ensure
that our regime - already the toughest in the world - continues
to ensure that all the risks are managed in the most effective
way.
1 The Offshore Industry Advisory Committee (OIAC) is
a tripartite committee. OIAC includes members representing employers,
employees, unions, trade associations and other government departments
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2
Oil & Gas UK established the Oil Spill Prevention and Response
Advisory Group (OSPRAG) to provide a focal point for the
sector's review of the industry's practices in the UK, in
advance of the conclusion of investigations into the Gulf of Mexico
incident. OSPRAG is formed of senior representatives from all
sides of the industry, the relevant regulatory authorities (DECC,
HSE and the Maritime and Coastguard Agency) and trade unions.
Representatives from DECC, HSE and MCA participate in both OSPRAG
and its associated specialist review groups. Back
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