EU to Regulate Offshore Drilling

EU countries and oil and gas companies will soon have to comply with EU-wide rules on offshore drilling. The new rules will govern licensing, specific environmental and health and safety requirements, supervision and control, and disaster-related issues such as liability and available funding and preparedness for response.

Until now there has been no EU-wide regime covering offshore drilling, which has been up to the Member States to regulate. The European Commission now wants to impose an EU-wide regime to strengthen regulation and supervision in this area as well as “harmonise” it across the EU. It will do this either with new EU legislative measures or by extending existing EU laws.

Legislative proposals to that effect will come before summer 2011. The Commission outlined what it is considering in a policy paper presented this past week. EU Issue Tracker takes a look at what is coming.

Licensing

The Commission proposes that the EU should define all the important requirements relating to the licensing of hydrocarbon production and exploration so that there are at least some basic common criteria underpinning this kind of licensing. This would break with contemporary conventions which gives the Member states the right to define this. Specifically, these important requirements would include:

• For each operation conducted a ‘safety case’ and related safety and health documentation (i.e. outlining how to deal with severe situations) would have to be presented.
• The operator would have to prove that it has the technical capacity to take all the necessary actions so as to prevent and act in the case of a critical situation. 
• It would also have to be proven that, in the case of a critical situation, the operator could deal with the financial repercussion of any unforeseen event (this could include the possible usage of risk-coverage instruments or insurances schemes).

An impact assessment will be conducted on this and will serve as the background for these proposals.

Standards and requirements

It is mentioned in the communication that there is a lack of EU legislation covering offshore installations and several aspects relating to them, such as inspection, pollution control, management of individual installations and accident prevention. The Commission makes clear that any future legislative proposal would thus either increase the scope of current EU legislation so as to include offshore drilling or a separate instrument that would address these issues.

The Commission also makes clear that it will:
• Review the framework for health and safety (something that will be done after the completion of the investigation into the oil spill in the Gulf of Mexico). This would also include looking at any possible need to amend Directive 92/91/EEC on the minimum protection of workers in the mineral-extracting industries through drilling. 
• The Commission urges both operators and licensing authorities in Member States to review the design of current laws and practices within this area. Depending on the outcome of such a review, the Commission might embark on yet further legislative changes to improve coherence within the EU.
• The Commission will look into the possibility of extending the scope of current EU product safety legislation in order to include equipment that is being used in mobile offshore sites. 
• The Commission will also spur on efforts relating to the development of important technical standards.

Liability

Another important way to ensure that environmental damages do not occur is to make certain that there are clear rules on liability and the responsibility to clean up after an accident has occurred. Therefore the Commission will:
• Propose changes to the Environmental Liability Directive so as to encompass any environmental damage to all marine waters (which is based on the definition mentioned in the Martine Strategy Framework Directive).
• Once again think about including a requirement for mandatory financial security, which will include a review of financial ceilings, and their sufficiency, for responsible parties.
• Produce a guidance document that will focus on the applicability of the Waste Framework Directive in relation to oil spills. 

Industry’s role

The Communication makes clear that industry bears the greatest responsibility when it comes to the safety of their operations. The Commission therefore calls on the industry to:
• Help in setting the necessary standards for the industry and to propose self-regulatory measures. 
• Present, before the end of this year, joint industry roadmaps and individual action plans outlining the nature, timing, resources and content that is needed to put into force intended measures. 
• Start creating a consortium that would aim to develop and establish sites in Europe that could be called upon if there were to be any accidents.

Public oversight

The Commission makes clear that it sees public authorities playing a pivotal role in creating a regulatory framework for offshore drilling. The Commission will therefore work together with Member States to:
• Come up with best practices that would be applied to inspections, licensing and compliance monitoring. Such practices will be based on already existing best practices that are being applied in Member States. 
• Create a voluntary consultation/reporting mechanism in relation to the licensing of offshore operations deemed complex. This would allow for greater expert scrutiny. 
• Disseminate updated information to the general public in regard to safety measures, contingency plans, risk management and business specific statistics on important safety variables. This will be done together with industry and other stakeholders.
• Create a framework that will allow for independent assessments of the performance of Member States’ regulators. 
The Precautionary Principle

The Commission states that, although any suspension of oil drilling operations is up to the Member States themselves, Member States should nonetheless exercise precaution when it comes to granting new licenses to new gas or oil exploration projects. They should also review whether a complete suspension of such licensing should be enforced until the investigation of the oil spill in the Gulf of Mexico has been finalized and the European offshore safety regimes have been reviewed. 

Strengthening the EU’s capability to intervene in offshore accidents

The Communication outlines different aides that Member states should be able to get help from in the case of an offshore accident. It is pointed out that the EU Civil Protection Mechanism can provide help to Member States that find themselves in such a situation. Specifically the Commission:
• Will present in 2010 a communication with the aim of creating an improved EU disaster emergency system. That communication would focus in particular on relief assistance and improving EU tools relating to humanitarian and civil protection. 
• Will try to improve the availability of emergency response capacities. This would be done by ensuring that relevant tools are available in the relevant regions within the EU, that cooperation between the EU, industry and Member States takes place and that there will be further improvements to existing tools used by the EU Civil Protection Mechanism and the European Maritime Safety Agency.
• Calls on Member States to implement the provisions outlined in the ‘Marine Knowledge 2020’ initiative regarding the improvement of emergency responses by establishing a uniform framework that would allow for the sharing of information on the state of the sea bottom and water column.

Cooperation with countries outside the EU

Due to the fact that oil spills know no boundaries, the communication makes clear that there is a need for greater cooperation with non–EU states that conduct offshore drilling in adjacent areas to the EU. The Commission hence states that it will:
• Further engage with the EU’s neighbors in regard to the safety of offshore drilling. This will be done so as to create channels for emergency information, allowing for the sharing of information relating to production and exploration, ensuring high levels of prevention and safety promotion and creating different types of enforcement measures (including inspections of installations). 
• Engage in trying to create regional fora that would include countries around the Mediterranean, Baltic and Black seas. 
• Promote activities within the framework of already existing protocols and conventions.

International obligations of European industry

The communication states that since a growing number of European oil and gas corporations are operating outside the EU it is important that they are committed to the usage of best practices wherever they operate. The Commission thus asks Member States to adopt binding laws on corporations that have their headquarters within the EU so as to ensure that they adhere to European standards independent of where in the world they are operating.

Global responsibility

The communication elucidates the current loopholes and problems that exist in international law (relating to such things as emergency planning and prevention). The Commission therefore states that a global initiative relating to offshore safety, driven by the EU, will be initiated and that it will call for a meeting in 2011 during which best practices and global standards will be discussed. 

Next steps

The European Parliament and the Council will provide their thoughts on this Communication in due course and consultations with stakeholders and Member states will be carried out. The concrete legislative and/or non-legislative proposals will be made before summer 2011. According to Günther Oettinger, Commissioner for Energy, the proposals are likely to come as a single legislative package although he said during the press conference when the communication was launched that he could conceive of some of the proposals being proposed separately in case they were deemed to be more contentious than other parts of the legislative package.