It is rare to find an issue on which regulators, industry associations and trade unions are in total agreement but the EU’s proposed regulation of the offshore industry is one of them (see our earlier Law-Now here). At an Oil & Gas UK conference held earlier this month to discuss the proposal there was a very clear acceptance that the industry could not be complacent and had to strive for continuous improvement in offshore safety but an equally clear belief that the best way to achieve such improvement was by continued co-operation and collaboration between all of the stakeholders rather than an additional layer of regulation from Brussels. The rapid and effective action taken through OSPRAG to respond to the Macondo incident was cited as evidence of the effectiveness of such a collaborative approach.
It was noted that 90% of EU/EEA oil and gas production is in the UK, Norway, the Netherlands and Denmark – all countries with offshore safety regimes which the EU admits are of the highest quality – indeed, the UK regime appears to have been used by the EU as a model for its proposal. Given this, and the fact that many member states have no prospect of ever having an offshore industry, both Oil & Gas UK and the OLF, the Norwegian oil and gas operators’ association, queried whether the introduction of legislation was necessary or proportionate. There has also been considerable criticism of the impact assessment presented by the Commission to justify its proposal which after analysis by GE Noble Denton and DNV is considered to be fundamentally flawed in its estimates as to the potential benefits of the proposal and of the costs of implementation. It is understood that the Commission has commissioned an independent review of the various impact assessments now put forward.
If EU legislation is required to bring practice in developing oil and gas regions up to the very high standards demonstrated by these established regimes then there was unanimous objection to the choice of a Regulation rather than a Directive to do so. DECC, the HSE, Oil & Gas UK and the UNITE union were all united on this and further support came from representatives of the industry in Norway and the Netherlands and Ireland, all of whom agreed this could be a backward step for safety. The main objections to the choice of a Regulation as the legal form are:
- the impact on existing legislation which will need to be repealed or amended to be consistent with the new Regulation – this could take considerable time (the HSE suggested up to 5 years!) whereas it was suggested that a directive could be implemented much more quickly (although some changes to the existing regulatory regime would still be required, they would be fewer and less dramatic;
- the potential impact of distracting inspectors and other officials over a period of months or years who should be getting on with applying the rules rather than drafting new regulations and guidance;
- the impact of the transfer of legislative competence to Brussels – while the Commission would not be enforcing the Regulation directly, arguments over its interpretation would need to go to the European court and any changes to the regime would need to be agreed at Brussels level, with reduced flexibility for local approaches and solutions,
- too much reliance by Commission on "delegated acts" contained in the appendices to the draft Regulation (these are the Brussels equivalent of secondary legislation which the Commission can amend more easily in future – the DECC/HSE view is that this should not be used for anything fundamental to the new regime).
On Friday, Commissioner Oettinger gave the Energy Council (the Energy Ministers of the Member States) an update on progress on draft legislation. DECC’s statement indicates that perhaps the Commission is listening. Charles Hendry said:
"Whilst the UK supports any measure which will improve EU standards in this area, we do have concerns over the proposal for a regulation rather than a directive. I therefore welcome the flexibility on this issue which Commissioner Oettinger has signalled today and look forward to working with him and others under the Cypriot Presidency to secure effective and enforceable legislation."
Apart from the fundamental issue of its legal form, there is much in the draft proposal which is uncontroversial – mirroring as it does the existing UK legal regime of safety cases, independent verification and well consents. A number of the more novel aspects of the Commission’s proposal also have merit including a closer relationship between offshore safety and environmental regulation (HSE and DECC are already looking at this), common data reporting formats and greater transparency, more sharing of major incident investigation findings, and greater co-operation between EU offshore regulators to bring less developed areas up to the highest standards. However if the proposal does go forward, some of its detail will need to be clarified.
The next key point in the legislative process is the first vote of the responsible committee of the European Parliament, currently expected on 9th October, followed by a plenary vote in November. The industry will be watching closely to see if the Commission really has started listening.