Safety of Offshore Oil and Gas Operations: ITRE Parliamentary Committee Vote on the Proposed Regulation (European Union)

The Industry and Energy Committee (ITRE) of the European Parliament voted on 9 October 2012 on the Commission's proposal for a regulation on safety of ofsshore oil and gas prospection, exploration and production activities (COM(2011) 688 final, dated 27.10.2011). 

Objective of the proposal

This Commission's proposal aims to answer several concerns: increasing level of activities offshore; the scale of recent accidents which occurred offshore, and in particular in reaction to the accident in the Gulf of Mexico (Deepwater Horizon accident, USA, in 2010 (11 people killed); and before that Montara, Australia in 2009; Usumacinta, Mexico in 2007 (22 killed) as referred to by the Commission). A gap analysis was realised just after the Deepwater Horizon accident followed by the adoption of a Communication "Facing the challenge of the safety of offshore oil and gas activities" (COM(2010 560 final). 

Based on these assessments, the Commission estimates that there is a "disparity between the increasing complexity of operations and the inadequacies in the current risk-management practices" (context of the proposal). In particular, the Commission pointed out "disparities and fragmentation amongst Member States' laws and practices applying to offshore activities (e.g. licensing, liability provisions, equipment safety standards, public transparency and information sharing) [reflecting] the virtual absence of international law instruments and gaps in relevant European law." (context of the proposal).

One can add that the regulation framework  has evolved based on different needs, where countries with extended offshore oil and gas activities have developed extensive rules and practices around safety, while other countries have not. Countries interested in developing new discoveries offshore may therefore not have a sufficient level of regulatory framework regarding risk management and safety performance. This argues for at least a level playing field. The challenge is to secure this level playing field while not threaten the good practices already in place in countries with extended offshore activities, such as the UK, the Netherlands and - not least - Norway which will have to apply the proposal through its incorporation into the EEA Agreement.

Content of the Commission's proposal

The proposal is structured around four objectives:

1. ensure a consistent use of best practices for major hazards control by oil and gas companies offshore;

2. implement best regulatory practices in all European jurisdictions with offshore activities;

3. strengthen Union's preparedness and response capacity to deal with emergencies potentially effecting citizens, economy and environment;

4. improve and clarify existing Union liability and compensation provisions.

The legal basis for the proposal is Article 192 TFEU (Environment) for the elements related to environmental protection, and Article 194 (Energy) for the elements related to the effects on Union's security of energy supply and the functioning of the internal energy market.

The Commission's proposal defines a series of tasks for: 

* the operator: organise activities based on best practice model; prepare major hazards report (MHR) and submit it ti the competent authority for assessment; notification of well operation to the regulator; independent verification of the safety elements; internal emergency response plans; proof of compliance with offshore safety standards.

* the Member States: licensing authorities (see Oil Licensing Directive) assess the safety, environmental performance and financial capacity in case of failures of applicants when assessing attribution of exploration licenses; establishment of competent authorities for supervision of safety, environmental protection and emergency preparedness; publication of information on their offshore sector; preparation of external emergency response plans "in collaboration with adjacent Member States".

* the Commission: establishment of an EU Offshore Authorities Group (this has been already done; see Commission Decision 2012(C 18/07) of 19 January 2012 on setting up of the European Union Offshore Oil and Gas Authorities Group (OJEU C 18, 21.1.2012, pp.8-10); amendment to the Environmental Liability Directive 2004/35/EC.

In its vote on 9 October 2012, the ITRE Committee (see press release here, and list of proposed amendments here) was in favour of the following approach

- a directive instead of a regulation. This topic has been highly debated between Member States. A directive is deemed to allow preserving the existing good practices already in place in the Member States, in consequently in better accordance with the principle of subsidiarity.

- require that the applicant to a drilling license prove its ability to remedy a potential damage within the scope of its application (with evidence of "adequate financial security" to cover liabilities deriving from their drilling activities). Drilling will only be permitted after that the competent authorities have deemed the financial security to be "valid and effective".

- submission by the drilling companies of a special hazards report (type of installation, potential major hazards, workers protection measures, etc.).

- submission of an internal emergency plan for the operator, and of an external emergency response plan by the Member States for all offshore drilling installations within their jurisdiction;

- stronger involvement of the European Maritime Safety Agency (EMSA) in the prevention of accidents. (See amendments to Art. 8)

- Some of the definitions have also been subject to amendments, with some consequences for the share of responsibilities for the operators/drilling conmpanies.

Legislative procedure

The proposal will now be submitted to the vote of the European Parliament in plenary session, 1st reading, which is scheduled for 11 December 2012. The Council will continue examining the proposal in parallel. The Council hold a first debate in November 2011.