A Global Oil Stain - Cleaning Up International Conventions for Liability and Compensation for Oil Exploration/Production

• Author: Jacqueline M Allen
• Position: Jacqueline Allen is currently completing her LLB at Queensland University of Technology. The author wishes to express thanks to Kate Lewins and Michael White for their assistance with this paper
• Pages: 90-107

(2011) 25 A&NZ Mar LJ

A GLOBAL OIL STAIN – CLEANING UP INTERNATIONAL CONVENTIONS FOR

LIABILITY AND COMPENSATION FOR OIL EXPLORATION/PRODUCTION

Jac que line Alle n∗

In April 2010, the world watched helplessly as oil spilled into the cool blue waters off the Gulf of Mexico causing

the largest oil spill in United States histo ry. But unlike past catastrophic oil pollution incidents caused by oil tankers,

this incident was ca used by a well blowout and subsequent explosion o n an oil rig. 1

This incident was mor e ruinous

than past tanker incidents due to the very characte ristics of a well spill which are much longer in durati on and

magnitude. On the Deepwater Horizon 11 crew lost their lives a nd when fire caused the Deepwater Horizon to sink

it left a well gushing at the sea floor which took 84 days to cap.

Prior to this and closer to home, in August 2009, the Montara Wellhead Platform, located 650 kilometres west of

Darwin , had an ‘uncontrolled release of hydrocarbons’ that subsequently led to a fire in November 2009.2 Luckily

there were no injuries at Montara, however oil pollution contaminated 70 000 square kilometres of ocean and it took

over 10 weeks to cap the gushing oil on the sea floor.3

Given the large amount of oil proj ects off the Australian coast it is both hard to fathom and necessary to consider

what the consequences might be for an oil rig blowout4

for Australian marine life, tourism, and fishing industries

that rely on clean, unp olluted waters.

Existing international conventions for oil sp ills are from an earlier era when oil rigs were not considered a

significant risk for oil spills and environmental damage. Now that technology has increased the capability of oil rigs

to drill to new depths and venture further o ut from coastlines, this paper conte nds that a compulso ry international

convention is required to cover insurance, liability for clean-up and compensation for parties affected by

consequential environmental damage. Whilst oil spills fro m oil rigs may be a rare occurrence they have the potential

to be of such a vast duration and magnitude that is imperative the Australian and international community learn the

lessons from Montara and Deepwater Horizon – because these devastating spills could happen anywhere.

Firstly, this paper will examine the internatio nal conventions pertaining to oil pollutio n with particular emphasis on

the conventions which cover liability and compensation fo r oil pollution. Secondly this paper will examine and

compare the responses of both Australia and the United States after their recent oil spills arising from oil rigs;

particularly how these two countries coordinate clean-up and liability/compensation. This paper will conclude with

arguments for an inte rnational conventio n and recommendat ions for both Austral ia and the internatio nal community

to address the omission of oil rigs from conventions pertaining to oil pollution liabilit y and compensation.

1 Inte rnatio nal Co nve ntions for Oil Spills

The United Nations Convention on Law of the Sea (‘UNCLOS’) is t he overarching conve ntion stating the basic

rights and obligations of coastal states to authorise and regulate oil exploration and production in their respective

Exclusive Economic Zones (‘EEZ’) and on their continental shelf. 5

∗ Jacqueline Allen is currently completing her LLB at Queensland University of Technology. The author wishes to express thanks to Kate

Lewins and Michael White for their assistance with this paper.

UNCLOS gives coastal states the right to impose

1 Technical term for the Deepwater Horizon was a ‘mobile offshore drilling unit’; for the purposes of thi s paper and ease of the reader the term

‘oil rig’ will be used to cover: all offshore platforms, units, and structures, fixed or mobile, which are concerned with oil and gas exploration,

exploitation and production at sea.

2 Department of Resourc es, Energy and Tourism, Government Response to the Offshore Petroleum Safety Regulations Inquiry (June 2009) and

Review of the National Offshore Petroleum Safety Authority Operational Activities (March 2009), September 2010

<http://www.ret.gov.au/resources/ Documents/Offshore%20Petroleum%20Safet y/GovtResponse-NOPSAReviewSept2010 .pdf> at 10 October

2010, 30; Coogee Resources, PTTEP Australasia Timor Sea Operations Background Information

<http://www.coogeeresources.com.au/uploads/PTTEP_Fact%20Sheet_operations_and_company_Dec_2009.pdf>.

3 Montara Well Head Platform Uncontrolled Hydroc arbon Release Terms of Reference; Montara Commission of Inquiry, ‘Report of the Montara

Commission of Inquiry’, June 2010, 38.

4 In the context of this paper, blowout refers to unintentional and/or uncontrolled release of hydrocarbons – likely due to mecha nical failure.

5 United Nations Convention on the Law of the Sea, opened for signature 10 December 1982, 1833 UNTS 3 (entered into force 16 November

1994) (UNCLOS) arts 56, 60, 81 193.

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A g lo b al oil sta in: inte rnationa l c o nve ntio n s for liability and c om pe nsation fo r o il e xp lo ra tio n

(2011) 25 A&NZ Mar LJ

measures to protect the marine environment and to reduce, prevent or control pollution from devices including oil

rigs.6

Australia ratified UNCLOS in 1994.

The international community has come close to having a Convention rela ting to oil rigs and pollution liability and a

draft Convention was discussed as recentl y as 2004. The process began in 1977 when Comité Maritime International

was requested by the International Maritime Organisation (‘IMO’) to prepare a draft convention relating to oil rigs

and pollution.7 The first draft was titled t he Draft Convention on Offshore Mobile Craft 1977 and was known as the

‘Rio Draft’.8 The C onvention was revised further in 1994 and titl ed the Draft Convention on Offshore Mobile Craft

1994 (‘Sydney Draft’),9 however, the Convention had deficiencies and a working group was established to develop a

more comprehensive Convention.10 Unfortuna tely there was dominant opposition from the Inter national Association

of Drilling Contractors and the United States Maritime Law Association who challenged the need for a

comprehensive international treaty for oil rigs. 11 In October 1999, the IMO Legal Committee confirmed that its

future work would i nclude a draft convent ion on offshore mobi le craft however the topic would be give n a low

priority due to the lack of expressed government interest and more urgent matters.12 After much debate, the IMO

took it off its long-term working plan in 2001. CMI followed suit, also removing it from their agenda.13

Despite opposition and work officially ceasing by CMI and IMO, a CMI working group and the Canadian Maritime

Law Association developed the Draft Convention on Offshore Units, Artificial Islands and Related Structures Used

in the Exploration for and Exploitation of Petroleum and Seabed Mineral Resources 2001 (‘Canadian Draft’).14

The

Canadian Draft was published and discussed at the CMI Conference in Vancouver in 20 04 and had overall support

despite continued strong opposition from the United States and it was agreed to continue to work towards improving

this document. The Canadian Draft is a comprehensive document covering many aspects of oil rigs including

liability for pollution damage arising from offshor e activities and is a possible starting point for any future

international Conventions that may be developed to include oil rigs.

In the wake of both t he Deepwater Horizon and Montara incidents, the IMO Legal Committee have expressed in

principle support for inclusion of a new item on the Committee’s agenda to consider ‘liabilit y and compensation

issues connected with transboundary pollution damage resulting from offshore oil exploration and exploitation’. 15 It

is debatable whether the IMO is the right organisation to carry this issue forward or whether the International

Seabed Authority (ISA), United Nations Environment Programme (UNEP) or other UN bodies pertaining to the

Law of the Sea might be more appropriate.16

Governments worldwide have so far been reluctant to have a global regulatory regime to cover oil rigs; however the

Deepwater Horizon disaster may alter this view.

6 UNCLOS pt XII, s 1, art 194, s 5208, arts 60, 80.

7 Mikhail Kashubsky, ‘Marine Pollution from the Offshore Oil and Gas Industry: Review of Major Conventions and Russian Law (Part 1)’ (2006)

151 Maritime Studies 1, 5.

8 CMI Documentation 1977 vol I, 28 ; vol III, 124.

9 Draft Convention on Offshore Mobile Craft 1977, (not in force) (‘Rio Draft’); Draft Convention on Offsho re Mobile Craft 1994, (not in force)

(‘Sydney Draft’).

10 Michael White ‘Offshore Craft and Structures: A Proposed International Convention’ (1999) 18 Australian Mining and Petroleum Law Journal

21, 22.

11 Nigel H Frawley, William M Sharpe and John L Joy, ‘The Origins of the CMLA Draft Convention on Offshore Units, Artificial Islands and

Related Structures Used in the Exploration for and Exploitation of Petroleum and Seabed Min eral Resources’, CMI Newsletter, no 1, 2004, 2;

Michael White, ‘Offshore Oil & Gas Catastrophes: Montara Spill and Australian Offshore Oil and Gas Regulatory Laws’ (Paper presented at

International Law, Litigation and Arbitration Conference, Federal Court Sydney, 6 May 2011) 16.

12 John Joy and William Sharpe, ‘Report of the Offshore Subcommittee’ (paper presented at the Canadian Maritime Law Association 2000

Annual General Meeting, Halifax).

13 Kashubsky, above n 7.

14 The CMI working group, the CMI International Working Group on Offshore Craft and Related Structures was established after th e CMI

Conference in Sydney, Australia in October 1994. The Canadian Maritime Law Association working group is titled the: Offshore Subcommittee.

15 Report of the Legal Committee on its Ninety-Seventh Session (LEG 97/15 1 December 2010) [1410]; Report of the Legal Committee on its

Ninety-Eighth Session (LEG 98/13/1 18 February 2011); Michael White, ‘Offshore Oil & Gas Catastrophes: Montara Spill and Australian

Offshore Oil and Gas Regulatory Laws’ (Paper presented at International Law, Litigation and Arbitration Conference, Federal Court Sydney, 6

May 2011) 16.

16 Nicholas Gaskell, ‘Offshore Oil and Gas Catastrophes: Compensation for Offshore Pollution from Ships: Problems and Solutions’ (Paper

presented at International Law, Litigation and Arbitration Conference, Federal Court Sydney, 6 May 20 11) 17; IMO traditionally has dealt with

ships.

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