UK: Commons Committee Publishes Report on Deepwater Drilling

Last Updated: 11 January 2011
Article by Jan Burgess, Thomas Herd and Claire Kent

The House of Commons Energy and Climate Change Committee last week published a report entitled "UK Deepwater Drilling – Implications of the Gulf of Mexico Oil Spill". The report comes almost 6 months after an inquiry was set up to examine a range of issues following the Gulf of Mexico incident in April last year which resulted in the death of 11 workers and a very major oil spill.

The controversial call by European Commissioner Guenther Oettinger for a moratorium on deepwater drilling, and the positive and negative impacts this could have, was one of the issues that the Committee sought evidence on in its enquiry. The conclusion of the Committee is that there should not be a moratorium on offshore drilling in the UKCS, one reason being that such a moratorium would cause drilling rigs and expertise to migrate to other parts of the world. Another disadvantage highlighted is that a moratorium would decrease the UK's security of supply and increase the UK's reliance upon imports of oil and gas. According to the Committee's report, "there is insufficient evidence of danger" to support a moratorium.

However, whilst the Committee clearly recognises the effect that a moratorium would have on areas such as the West of Shetland, where deepwater drilling is currently a major focus and which is estimated to hold around 20% of the UK's remaining oil and gas reserves, it expresses "serious doubts" about the ability of oil spill response equipment to function in the "harsh environment of the open Atlantic" in that area. As a consequence, the Report recommends that the Government ensures that any capping, containment and clean-up systems are designed to take full account of the environmental challenges in the West of Shetland.

A number of other significant recommendations are made in the Report including:

  • Minimum safety standards: For fail-safe devices, the Government should adopt minimum, prescriptive safety standards. The Committee specifically recommends that the HSE examines the case for prescribing that blowout preventers on the UKCS are equipped with two "blind shear rams"(the device which failed on the Macondo well in the Gulf of Mexico spill), rather than one. Whilst recognising that the UK has high offshore regulatory standards, the Committee also recommends that the Government monitors any changes in the US regulatory regime to see if, in light of the response to the Gulf of Mexico spill, a "new gold-standard of regulation" is established.
  • Emergency response: The Committee recognises that it is essential that there is someone offshore who has the authority to bring a halt to drilling operations at any time, without recourse to onshore management. It recommends that the Government should seek assurances from industry that the prime duty of the people with whom this responsibility rests is the safety of personnel and the protection of the environment. The Committee also expresses concern over the "sharing" of Oil Pollution Emergency Plans (OPEPs), which it states could have led to a culture of "copying-and-pasting" in the past rather than production of site-specific plans. The recommendation is that the Government re-examines oil spill response plans to ensure that this is not the case.
  • Licensing regime: The Government should ensure that the licensing regime takes full account of high consequence, low probability events, such as the environmental impacts of a sub-sea blow-out, and should not automatically accept claims that companies have mitigated away the risk of such worse-case scenarios. Companies should, as part of the licensing process, be required to consider their responses to such events, especially as drilling ventures into increasingly extreme environments.
  • Liability: The Committee believes that the Offshore Pollution Liability Association Limited (OPOL)'s current limit of $250 million is insufficient to cover the costs of dealing with a blowout in the UKCS and that the voluntary nature of the scheme weakens its force. It therefore recommends that it should be a requirement of the licensing process that the licensee prove their ability to pay for the consequences of any incident that could occur. The Committee also recommends that Government consider whether compulsory third-party insurance should be required for small E & P companies.

The Committee in its report also states that it "utterly rejects" calls for increased regulatory oversight from the European Commission and it recommends that "EU countries without a North Sea coastline should not be involved with discussions on regulation of the offshore industry on the UK Continental Shelf". This comment comes after Malcolm Webb, Chief Executive of Oil and Gas UK disputed the need for EU oversight, as reported in our Law Now on the European Commission's Communication envisaging EU safety legislation for oil platforms. To view this Law-Now, please click here. However, the Committee does open the door to EU involvement in a different context, calling for the Government to work with the EU to ensure a new directive is drawn up that follows the polluter pays principle and unambiguously identifies who is responsible for the remediation of any environmental damage.

It will be interesting to observe the extent to which the Committee's recommendations are implemented by the Government and HSE, and the pace of such implementation. It is envisaged that the Government will be keen to act quickly upon any recommendations aimed at improving the already high standard of safety of operations in the UKCS.

To view the full Committee's full report, please click here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 10/01/2011.

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