On Tuesday the European Parliament adopted a non-legislative Resolution concerning the safety of offshore oil and gas activities. The Resolution follows the European Commission's communication of October 2010: "Facing the challenge of the safety of offshore oil and gas activities" (see our e-bulletin dated 6 January 2011). The Resolution seeks to influence draft legislation that the Commission is expected to propose this autumn.

The Resolution supports many of the measures proposed in the Commission communication and calls for additional regulation in other specific areas. It rejects an EU-wide moratorium on new deep-sea drilling, which the Commission had considered in the wake of the Macondo incident, as a disproportionate reaction and recommends that any suspension of activities should be at the discretion of the relevant Member States, but states that new drilling should only be permitted where the operator has prepared a site-specific emergency plan and has sufficient funds in place to cover the cost of any environmental damage caused. It also stops short of supporting a ban on operations in the Arctic advocated by Green MEPs but backs efforts to establish a special regime to cover such operations.

Introduction

The Resolution acknowledges that the issuing of licences and other authorisations for the exploration and exploitation of oil and gas resources is a prerogative of the Member States but advocates that licensing procedures should conform with certain common EU criteria. It calls for consideration of a range of EU legislative changes as well as greater EU-level co-ordination of contingency planning and disaster response.

Proposed EU-wide conditions for licensing and consent to drill

The Resolution notes a distinction between licensing and consent to drill and advocates regulatory hold points between the two.

Pre-licensing

The Parliament calls for operators to be under an obligation to demonstrate prior to licensing and throughout exploration, operation and decommissioning that they have adequate financial capacity (through mandatory industry mutual schemes, mandatory insurance or a mixed scheme) to secure remediation of any environmental damage caused by their activities, including high-impact, low-probability incidents. The Resolution recognises the merit of communal funds such as the Offshore Pollution Liability Association (OPOL) in the North Sea and calls for such funds to be established in other EU sea areas and for operator membership to be made mandatory with contributions based on site-specific risk and contingency plans.

Pre-drilling

Support is given to the discussion in the Commission's communication on making site-specific "safety case" requirements a condition for the grant of consent to drill across the EU.

The Resolution advocates the development and use of site-specific contingency plans and a requirement that approval of these should be mandatory prior to operations commencing. The plans should identify potential hazards, assess sources and effects of pollution and outline an incident response strategy. The European Parliament's call for an extension of the scope of the EIA Directive is discussed below.

EU legislative proposals

A number of the key legislative changes advocated in the Resolution are set out below.

Safety

The Resolution calls for the Commission to consider either: (i) separate specific legislation extending the principles in the existing Seveso II and proposed Seveso III Directives on major accident hazards to offshore oil and gas activities; or (ii) an extension of the scope proposed for the Seveso III Directive to include all phases of offshore exploration for oil and gas reserves up to decommissioning of wells.

The Parliament also welcomes the Commission's intention to review the 1992 EU Directive on minimum health and safety requirements for workers in mineral extraction industries through drilling, to avoid disparities between protection given to onshore and offshore workers. It also calls for engagement with unions and workers, including contractors and sub-contractors, on safety issues and for the setting of common EU safety standards and training requirements to be considered.

Increased EIA requirements

The Resolution calls for the Environmental Impact Assessment (EIA) Directive to be extended to cover all offshore projects phases (exploratory and operational). It appears to advocate that an EIA should be required as a condition of obtaining consent to drill rather than being required prior to grant of the exploration licence itself. The Resolution is unclear on whether the proposal is for all offshore drilling activity to be listed in Annex I to the EIA Directive (mandatory EIA) or Annex II (screening is mandatory but a full EIA is only required if there are potentially significant effects on the environment).

The Parliament also calls for specific requirements to be set for EIAs relating to deep water or otherwise complex wells, underwater pipelines and projects involving "challenging drilling conditions". It further advocates that the EIA Directive be amended to require EIA procedures to be carried out by experts who are independent of the client.

Scope of the Environmental Liability Directive

The Parliament supports the proposal in the Commission's communication to extend the Environmental Liability Directive to all EU marine waters. The Resolution also calls for the imposition of strict liability for all damage caused to those waters and biodiversity supported by them, and for the damage thresholds at which strict liability is triggered to be lowered.

Scope of the Industrial Emissions Directive

The Resolution proposes consideration be given to extending the Industrial Emissions Directive to include offshore oil and gas activities as part of the 2011 scope review, and that Best Available Techniques for these activities be defined by the European IPPC Bureau.

Extra-territoriality

While recognising that enforcement issues could arise as a result of requiring EU-based companies to adhere to EU standards for their global operations, the Resolution calls for the Commission to examine what mechanisms might be appropriate to ensure this occurs. It indicates support for Member States taking global incidents into account when awarding licences.

Information sharing and EU-level co-ordination

The Parliament does not consider that a single EU regulator for offshore operations would bring enough benefits to justify the demand on the "scarce regulatory resources" of Member States, but supports the Commission's suggestion for a greater role for the European Maritime Safety Agency with respect to response co-ordination in the event of an incident. It also advocates the creation of an EU Civil Protection Force based on the existing EU Civil Protection Mechanism.

The Resolution also supports regional initiatives, advocating or welcoming initiatives to establish inter-national authority forums for other EU seas similar to that already existing for the North Sea. It calls for national authorities to collate, share and publicise information collected from incident reporting on a lessons-learned basis (with due regard to commercial sensitivities).

Industry reaction and next steps

Oil & Gas UK released a statement welcoming the Parliament's rejection of calls for a moratorium, stating that "there is no place for a moratorium in UK waters as the UK oil and gas industry operates under a fully robust and fit-for-purpose regulatory regime, with almost 7,000 wells having been drilled successfully over the last twenty years". Oil & Gas UK also welcomed the Parliament's endorsement of the site-specific safety case approach in line with existing UK regulation.

However, there are still concerns over the Commission's intentions and legislative proposals amid press reports that the Energy Commissioner, Gunther Oettinger, remains in favour of a moratorium on deepwater drilling. In July he was reported as saying:

"Any responsible government would at present practically freeze new permits for drilling with extreme parameters and conditions. This can mean a de facto moratorium on new drills until the causes of the accident are known and corrective measures are taken for such frontier operations as the ones carried out by the Deepwater Horizon."