Greater duties are to be imposed on officers for breaches of Australian petroleum safety laws as BP supervisors face imprisonment in the US for their role in the Macondo disaster.

Background

In April 2010, the Deepwater Horizon oil rig blew out resulting in the deaths of 11 workers and spilling oil into the Gulf of Mexico for a number of months. The incident created the largest environmental disaster in US history. Recently BP agreed to plead guilty to 14 criminal charges, including manslaughter and pay US$4.5 billion in fines and other payments.

Significantly, BP’s two top-ranking supervisors on board the Deepwater Horizon at the time of the incident have also been charged with manslaughter. Messrs Kaluza and Vidrine are alleged to have been negligent in their oversight of the safety tests being conducted on the Macondo well on the night of the blow out and failure to tell onshore engineers of problems with the drilling operation.

Another former Executive, Mr Rainey, has been charged with obstruction of justice for falsifying information about how the flow rate of oil was calculated. All three individuals face significant potential jail terms.

According to the US Department of Justice, Messrs Kaluza and Vidrine “observed clear indications that the Macondo well was not secure and that oil and gas were flowing into the well”, and then “chose not to take obvious and appropriate steps to prevent the blowout”. The Assistant Attorney General for the Criminal Division of the Department of Justice said:

Make no mistake: While the Company is guilty, individuals committed these crimes”.

Last week, all three BP executives pleaded not guilty to the charges. The trial for Messrs Kaluza and Vidrine is scheduled to start on 4 February 2013, while Mr Rainey’s trial is scheduled for 28 January 2013.

Proposed duty of due diligence on company officers under Australian petroleum safety laws

This focus on the role and responsibility of senior decision makers at BP is consistent with the direction of Australian safety laws. Historically, personal liability has not been imposed on individuals for contraventions by a company of Australian petroleum safety laws. However, at the recent AMPLA conference in Brisbane, Martin Ferguson, Minister for Energy and Resources, announced the Commonwealth government’s intention to introduce legislation next year imposing a due diligence duty on officers involved in offshore petroleum operations.

It is expected that these changes will be adopted by the States and Territories in accordance with the National Partnership Agreement to Deliver a Seamless National Economy, and will therefore apply to officers of petroleum companies operating in State and Territory waters.

What will the new duty involve?

The proposed due diligence duty follows the introduction of a similar duty on ‘officers’ of a business or undertaking under the harmonised model work health and safety laws. The duty requires an officer to ensure that a person conducting a business or undertaking complies with all of its health and safety obligations.

Key features of the duty are that:

  • it is positive, continuous and ongoing;
  • it is imposed on a potentially broad class of people who make, or participate in making, decisions that affect the whole (or a substantial part) of the business or undertaking. Therefore it does not only apply to directors; and
  • due diligence will include taking reasonable steps to do a wide range of things, including having a sound understanding of health and safety matters and risks of the business, and ensuring that there are adequate resources and processes available and implemented to manage these risks.

What does this mean for you?

This is an important development in petroleum safety, which will require petroleum companies to take a number of proactive steps, including training for officers and ensuring systems and processes meet the requirements.