1 Safety of offshore
oil and gas activities
| (33316)
16175/11
+ ADDs 1-4
COM(11) 688
| Draft Regulation on the safety of offshore oil and gas prospection, exploration and production activities
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| Legal base | Article 192 TFEU; co-decision; QMV
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| Document originated | 27 October 2011
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| Deposited in Parliament | 10 November 2011
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| Department | Energy & Climate Change
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| Basis of consideration | EM of 24 November 2011
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| Previous Committee Report | None, but see footnote
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| Discussion in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee A
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Background
1.1 Following the explosion of the Deepwater Horizon drilling
rig last year, the Commission launched an urgent assessment of
the safety of offshore activities in European waters, together
with a review of the applicable legislation. As a result, a Communication[1]
in October 2010 identified a number of areas where it considered
action was needed to maintain appropriate safety and environmental
standards. In particular, it said that the aim should be to ensure
that the best practices which currently exist should become the
norm throughout the EU, and it set out ways in which that goal
could be achieved.
1.2 The Communication noted that the situation in
Europe is largely determined by national legislation, as EU measures
either do not cover relevant aspects or provide only performance
minima, and that national regimes vary as between Member States,
thereby slowing down a coordinated response to accidents. It said
that the Commission will work
towards an overhauled and more coherent legal framework for offshore
exploration and production activities in Europe, its preference
being a single new piece of specific legislation to govern offshore
oil and gas activities (possibly supported by guidelines). It
then looked at a number of ways in which "state of the art"
operations might be achieved. These included responsible licensing
(involving EU-wide obligations for safety, health and environmental
performance, risk management and independent verification, backed
up by an unequivocal liability regime and adequate financial security
instruments to cover major incidents); achieving high operational
safety (with uniform and rigorously enforced criteria covering
financial and technical capability, the protection of worker health
and safety, the integrity of installations, a high level of environmental
protection, and the prevention of accidents); ensuring that offshore
operators are under strict liability, not only for damage caused
to protected species and natural habitats, but to all marine areas
under the jurisdiction of Member States; ensuring that industry
gives unequivocal priority to safety and sustainability, through
investment in prevention, accident response and oil recovery;
and the need for public authorities to set a correct regulatory
framework for offshore activities, and ensure full compliance,
based on the best practices already available and reinforced at
EU level.
1.3 The Communication also looked at ways of reinforcing
the EU's intervention capacity where a serious accident occurs
off a Member State's shores. It stressed the need to be able to
call on all available capacities, including those of industry
and other Member States, and that the EU's Monitoring and Information
Centre can, if needed, quickly mobilise the oil recovery capacity
of the European Maritime Safety Agency. In addition, it said that
work is under way to strengthen the overall EU disaster prevention
and response capacity, and to seek synergies with actions taken
by the industry, though it stressed the importance of information
on the state of the water column and sea bottom (which is not
fully available on an EU-wide basis).
1.4 In addition, the Communication looked at offshore
safety outside EU waters, highlighting the need to pay close attention
to areas adjacent to its territory. It therefore suggested that
the EU should seek a regulatory framework and industry supervision
in neighbouring European waters which provide equally high levels
of protection, and that the potential of regional conventions
should be explored. It added that European oil and gas companies
need to maintain state of the art safety and environmental practices
regardless of where they operate, and that the coverage and enforcement
of international law in this area is uneven and incomplete, with
financial liability for oil and gas pollution from offshore installations
not being covered by any international convention, with the EU
being well placed to take a key role in strengthening existing
rules globally.
1.5 As we noted in our Report of 10 November 2010,
the Government said that oil and gas are still a major UK resource,
that the UK has had decades of experience in regulating the offshore
regime, that consequently it now has a robust, proven, national
regime. It would therefore have to consider very carefully any
Commission proposals for changing the licensing or consenting
of offshore activities, since it was not convinced that there
would be added value from another layer of regulation. It also
expressed concern at possible subsidiarity issues.
1.6 We concluded that the document dealt with a highly
topical subject, with substantial, political, economic and environmental
ramifications. In view of this, and the major UK interest at stake,
we said it would be helpful if the various issues were to be aired
more fully at that stage, and we therefore recommended the document
for debate in European Committee A.[2]
The current document
1.7 The Commission has now followed up its earlier
Communication by putting forward this draft Regulation. In doing
so, it observes that the EU has no sector specific legislation
for oil and gas, but that there is a broader acquis, which
applies (often only partially) to the sector, and that the proposal
complements various other pieces of EU legislation, dealing notably
with environmental liability; environmental impact assessment;
waste; health and safety of workers; major hazards; authorisations
for hydrocarbon prospection, exploration and production; and emergency
responses.
1.8 The Commission says that the Regulation would
pursue four specific objectives, namely to:
- ensure a consistent use of
best practices for major hazard control by oil and gas industry
offshore operations potentially affecting Union waters or shores;
- implement best regulatory practices in all European
jurisdictions with offshore oil and gas activities;
- strengthen the EU's preparedness and response
capacity to deal with emergencies potentially affecting Union
citizens, economy or environment; and
- improve and clarify existing EU liability and
compensation provisions.
1.9 In particular, it proposes that:
- authorisations for offshore
oil and gas activities should be granted in accordance with the
procedures established under Directive 94/22/EC,[3]
and would need to take into account the risks related to the location
concerned and the applicant's technical and financial capacity,
particularly as regards liability for environmental damage;
- an operator would be obliged to carry out offshore
oil and gas activities on the basis of a systematic assessment
of the likelihood of hazardous events and their consequences;
to take suitable measures to prevent major accidents from offshore
operations, and to limit their consequences for human health and
the environment; and to prevent serious disruption of oil and
gas production;
- an installation would not be able commence or
continue operations without a Major Hazards Report having been
accepted by the competent authority which Member States would
have to establish (along with the resources need to assess these
Reports, and to perform inspections, conduct investigations, and
take enforcement action);
- in addition to a Major Hazard Report, an operator
would have to submit to the competent authority a design notification,
an internal emergency response plan to contain a major accident
within an installation, and an overview of its major accident
prevention policy: these would be subject to independent third
party verification, and, if a competent authority considers that
the measures proposed to prevent or mitigate major accident at
an installation are seriously deficient, it must prohibit its
operation;
- an operator must suspend the operation of an
installation if there is an immediate danger to human health and
the environment, and notify the competent authority;
- Member States would have to prepare external
emergency plans covering all installations within their jurisdiction,
in cooperation with relevant operators and to align these with
internal plans, and Member States in the same geographical area
would be required to achieve a high level of compatibility for
equipment and expertise.
- if a Member State considers that an operation
could have a significantly adverse impact on the waters of another
Member State, it must provide that State with all relevant information:
and, if an operator notifies it of a major accident, it must take
all necessary measures, in cooperation with other Member States
and the European Maritime Safety Agency, to prevent escalation
and mitigate the consequences;
- operators and competent authorities would have
a duty to share, and make publicly available, in a form to be
determined by the Commission information relating to unintended
releases, loss of well control, failure of a main safety component,
significant loss of structural integrity, any accident which is
fatal or causes serious injuries to 5 or more people, any evacuation
of non-essential personnel, and any major accident to the environment.
1.10 The proposal would also give the Commission
the power to adopt delegated acts to adapt the detailed requirements
set out in the various annexes, and to set out more detailed requirements
regarding the content on a Major Hazard Report, third party verification,
and the prevention of major hazards.
The Government's view
1.11 In his Explanatory Memorandum of 24 November
2011, the Minister of State at the Department for Energy &
Climate Change (Mr Charles Hendry) reiterates many of the comments
he made on last year's Communication. He recalls that oil and
gas are still a major UK resource, and that, although some 40
billion barrels of oil equivalent (boe) have been produced so
far, there are perhaps 20 billion boe, or more, left to produce,
with the overall deepwater oil and gas resource potential being
estimated at around 3 to 3.5 billion boe (some 15-17.5% of UK
total resources). He adds that the UK has had decades of experience
in regulating the offshore regime, including the lessons learned
from the Piper Alpha incident over 20 years ago, and that those
lessons resulted in a dramatic improvement in the regulatory system
in the UK and more generally in Europe.
1.12 The Minister says that these proposals are largely
based on existing UK and Norwegian experience, and hence there
is much which the Government can support, including a number of
welcome suggestions on the sharing of information and the levelling
up of standards in some Member States to ensure best practice.
However, he notes that, with the UK having a robust, proven, national
regime, the Government would have to consider very carefully any
proposals for changing the licensing or consenting of offshore
activities, and he again says that it is not convinced that there
would be added value from another layer of regulation.
1.13 The Minister adds that he has particular concerns
that the Commission has proposed a Regulation rather than a Directive,
as this may mean having to repeal UK legislation in the event
of duplication, and could potentially put UK operators at a competitive
disadvantage until a new system is in place whilst industry redrafted
its existing internal procedures and the Government made legislative
and guidance changes. He is also concerned that there may be a
possible duplication of existing international data-sharing and
reporting requirements, which would be costly and time-consuming
without any substantive benefit, and in particular, he says that
the UK should retain its existing regulatory structure, rather
than introduce the proposed competent authorities.
1.14 The Minister says that an Impact Assessment
is under preparation, and will be circulated shortly.
Other correspondence
1.15 We have also received a letter of 7 December
2011 from the Chairman of the Energy and Climate Change Committee,
drawing attention to his Committee's Report[4]
of 6 January 2011 on the implications for UK deepwater drilling
of the Gulf of Mexico oil spill, pointing out that this rejected
calls for increased regulatory oversight by the Commission, and
stressing the need for the Government to be as robust as possible
in minimising any negative impact on the UK regulatory framework.
In addition, he has drawn to our attention representations which
his Committee has received on the current Commission proposal
from BP, Chevron, DONG Energy and Total E & P UK, which stress
the effectiveness of the UK regime, the potential dangers of any
alteration creating instability, the prime need to improve the
situation in those Member States with a lower standard, the extent
to which a Regulation could require a re-writing of current UK
safety rules, and the extent to which the proposal would confer
on the Commission delegated powers to introduce regulatory requirements.
1.16 In addition, the Energy and Climate Change Committee
received representation from Oil & Gas UK, which represents
over 180 members of the UK offshore oil and gas industry from
across the entire supply chain, and that body has also written
directly to us. It says that it is still in the process of analysing
the draft Regulation so as to be able to more fully understand
its ultimate impact on the UK offshore industry, but that its
initial analysis has already confirmed that the proposal raises
very many serious issues and concerns. Its overriding concern
is that there could be a seriously detrimental impact on the safety
of the UK industry and those working offshore, and in particular
it fears that the proposal risks undermining the current UK offshore
safety regulatory regime and the high safety standards this drives
because:
- it is too broad in scope, going
beyond well control incidents, upon which the Commission justifies
its proposals;
- it is too quick in its proposed implementation,
giving insufficient time to consider as to how the existing UK
offshore safety regulatory regime interfaces with the Regulation,
potentially bringing uncertainty, confusion and, possibly, a hiatus
of certain operations;
- it gives insufficient time for existing operators
to comply (as little as three months in some instances) and hence
is not conducive to safe operations;
- it confers far too much new regulatory control
on the EU, with the potential for further prescriptive intervention.
The organisation also believes that the proposal
represents a fundamental shift away from regulation at the national
level, towards a more centralised pan-EU approach, which would
give the EU significant control over the exploitation of the UK's
oil and gas resource, running contrary to the principles of the
Lisbon Treaty which enshrine the right of Member States to determine
the conditions for the exploitation of their own energy resources.
1.17 Oil & Gas UK says that it fully supports
the aim to improve offshore safety across all EU waters, but is
concerned that, if this draft Regulation is implemented, it will
prove inimical to that objective, its strong belief being that
the Commission would best assist the achievement of that goal
through the introduction of a well worded Directive rather than
a Regulation. It concludes by saying that it is also reviewing
the Impact Assessment published by the Commission in connection
with this proposed Regulation, and that its first reading of this
leads it to believe that the Commission's analysis maybe incorrect
both from a risk and a cost perspective. Amongst other things,
it does not seem to take into account the technical and procedural
developments over the last ten years or more, including the considerable
work of UK regulators, industry and trade unions in the areas
of oil spill prevention, intervention and response in light of
the Macondo incident in the Gulf of Mexico.
Conclusion
1.18 As we have noted, the Communication last
year in which the Commission set out its thinking in this area
was debated in European Committee A on 22 March 2011, and, to
that extent, a good number of the issues which are raised by this
proposal were aired then. We have therefore considered whether
or not to recommend a further debate after such a short interval,
and we have concluded that we should do so.
1.19 In the first place, the situation in Brussels
has evolved insofar as we are now faced, not with a Communication,
but with a specific legislative proposal, and moreover one in
the form of a draft Regulation which would have direct effect.
Secondly, this development reinforces many of the fears expressed
during the previous debate about the extent to which it could
lead to the Commission assuming competence in an area where the
responsibility (and relevant expertise) should continue to rest
principally with Member States, especially in the case of the
UK, which has built up many years of experience in this area.
In particular, we note that, during the debate, the Government
gave assurances to the European Committee that it would resist
any attempt to erode the UK's competence, and we think it would
be helpful for the House to have a further look at whether, and
how, that objective can be achieved in the light of the measures
contained in this proposal.
1 (32060) 14798/10: see HC 428-vii (2010-11), chapter
1 (10 November 2010). Back
2
That debate took place on 22 March 2011. See Gen Co Debs,
European Committee A, cols. 3-26. Back
3
This sets out the conditions for granting and using authorisations
for the prospection, exploration and production of hydrocarbons. Back
4
Second Report from the Energy and Climate Change Committee, 2010-11,
UK Deepwater Drilling - Implications of the Gulf of Mexico
Oil Spill, HC 450. Back
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