UK Deepwater Drilling-Implications of the Gulf of Mexico Oil Spill: Government Response to the Committee's Second Report of Session 2010-11 - Energy and Climate Change Contents

Appendix One: Government Response


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  Back

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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