Recent Changes to the Commonwealth Offshore Petroleum Legislation: Strengthening Environmental Liability, Compliance and Enforcement Provisions

Author:Alex Wawryk
Position:B.Ec (Hons), LL.B (Hons), PhD (Law), Senior Lecturer, University of Adelaide, Barrister and Solicitor of the Supreme Court of South Australia
Pages:49-68
 
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(2013) 27 ANZ Mar LJ
RECENT CHANGES TO THE COMMONWEALTH OFFSHORE PETROLEUM
LEGISLATION: STRENGTHENING ENVIRONMENTAL LIABILITY, COMPLIANCE
AND ENFORCEMENT PROVISIONS
Ale xand ra Waw ryk*
A robust regulatory system is required to protect the environment from oil spills arising from offshore oil
installations. The Montara oil spill in 2009 exposed significant failings in Australia’s offshore petroleum
regulatory system, including a lack of enforcement mechanisms to ensure compliance with the relevant
legislation. This article examines recent changes made to the Commonwealth’s offshore petroleum legislation,
which should improve the range of tools available to the industry regulator to both prevent and respond to
adverse incidents. However, it is argued that the offshore regulatory system in general still suffers from a
fragmentation of laws between the Commonwealth and States, and that despite the improvements introduced by
the amendments, the offshore regime still does not adequately address issues of liability for loss and damage
suffered by third parties.
1 Intro duction
Ensuring the integrity of oil and/or gas wells and preventing the escape of petroleum and other fluids into the
marine environment is a fundamental responsibility of companies involved in offshore petroleum exploration
and production. Blowouts from offshore oil wells can have major and long lasting effects, including the loss of
human life, the pollution of marine and shoreline ecosystems, and substantial commercial losses to the
companies directly involved and third parties affected by the spill.1
The explosion of the Piper Alpha oil rig off the coast of the United Kingdom on 6 July 1988 caused 167 deaths
and significant oil pollution.2 In 2009, the blowout at the Montara wellhead platform off the Northern Territory
caused Australia’s third largest oil spill and was the worst of its kind in Australia’s offshore petroleum industry
history, with oil and gas flowing unabated into the Timor Sea for a period of just over 10 weeks.3 The damage
from the escaped oil resulted in a $40 million spill cleanup bill, paid in full by the operator, PTT Exploration
and Production Australasia (Ashmore Cartier) Pty Ltd (‘PTTEP’), although the Department of Resources,
Energy and Tourism (‘DRET) estimates the total cost to PTTEP was in excess of $230 million.4 In 2010, the
infamous blowout of the deepwater Macondo well in the Gulf of Mexico and the explosion of the Deepwater
Horizon rig led to the deaths o f 11 workers, with payment for individual compensation claims and cleanup costs
by the transnational oil company British Petroleum (BP’) totalling $12.7 billion as o f 31 October 2013.5
In May 2013, BP referred a proposal to the Australian Commonwealth Environment Minister to drill for oil in
the Great Australian Bight, approximately 400 km west of Port Lincoln and 300 km southwest of Ceduna, in the
offshore area of South Australia.6 The proposed drilling area is located in Commonwealth waters on the
continental slope and abyssal plain of the Great Australian Bight, with water depths ranging between
approximately 1,000 and 2,500 m. Wells will be drilled using a mobile offshore drilling unit (MODU), either
dynamically positioned, moored with anchors, or a combination of the two.7 According to the documentation
submitted by BP, there are 18 listed threatened species that may occur within the proposed drilling area, and 23
migratory species that may occur within or adjacent to the proposed area, including birds, whales, and one
dolphin and shark species.8 The exploration permits overlap with the Great Australian Bight Commonwealth
* B.Ec (Hons), LL.B (Hons), PhD (Law), Senior Lecturer, University of Adelaide, Barrister and Solicitor of the Supreme Court of Sou th
Australia.
1 David Borthwick, Report of the Montara Commission of Inquiry (June 2010), 5.
2 The Hon Lord Cullen, British Parliament, The Public Inquiry into the Piper Alpha Disaster, Vols 1 and 2 (1990).
3 Borthwick, above n 1, 5.
4 Squires, M, Department of Resources, Energy and Tourism, ‘Implementing the Government Response to the Montara Inquiry’ (Paper
presented at Spillcon, Cairns, Queensland, April 2013, , 19 June 2013. In August 2012, PTTEP pleaded
guilty to four breaches of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (‘OPGGSA’), including three occupational
health and safety (OHS) breaches, and was fined $510,000 under the penalty regime applicable at the time.
5 British Petroleum, Gulf of Mexico Oil Spill, Claims and Other Payments, Public Report - 10/31/2013,1,
http://www.bp.com/content/dam/bp/pdf/gulf-of-mexico/Public-Report-October-2013.pdf>, 10 July 2013.
6 British Petroleum, ‘Great Australian Bight Exploration Drilling Program’ (Referral of Proposed Action under the Environment Protection
and Biodiversity Conservation A ct 1999 (Cth), (2013/6883), 13 May 2013, p://www.environment.gov.au>, 10 July 2013.
7 Ibid 1.
8 Ibid 14-27.
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Re ce nt C hang e s to C om mo nwe alth Offshore Pe tro le um Leg isla tio n
(2013) 27 ANZ Mar LJ
Marine Reserve, largely in the Multiple Use Zone, which allows oil and gas activities subject to approval by the
Director of National Parks.9
Although there have been significant improvements in deepwater drilling technology since the Deepwater
Horizon explosion, in particular the development of new well capping devices and containment devices,10 the
prospect of significant harm from an adverse incident remains a real possibility. BP has submitted that the
proposed drilling program is not a controlled activity requiring assessment under the Environment Protection
and Biodiversity Conservation Act 1999 (Cth) (‘EPBC Act’), as it will not be likely to have a significant impact
on a matter of national environmental significance. However, given the scepticism regarding BP’s
environmental credentials since Deepwater Horizon incident in the US in 2010, and concern over the unique
importance of the marine environment of the Great Australian Bight,11 the federal Environment Minister may
well determine that the proposed drilling program requires assessment and approval under the EPBC Act.
While the proposal may be assessed under the EPBC Act, the regulation of petroleum activities occurs under the
relevant offshore petroleum legislation. To protect the environment, a robust regulatory system is required, with
a range of enforcement mechanisms to ensure compliance with the legislation. Significant failings in Australia’s
regulatory system were exposed by the Montara i ncident. Thus, following the Report of the Commission of
Inquiry into the Montara oil spill,12 and the Government’s Final Response to the Report,13 the Commonwealth
Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (‘OPGGSA’), was amended in 2010 and 2011,
with major changes to the regulatory regime effected through the Offshore Petroleum and Greenhouse Gas
Storage Amendment (National Regulator) Act 2011 (Cth).
The federal government also undertook its own internal legislative review of offshore petroleum, the Offshore
Petroleum and Marine Environment Legislative Review, which concluded in June 2012. Unfortunately, the
results have not been made available to the general public. However, Explanatory Memoranda to Acts passed in
2013, which cite from the findings of the Legislative Review, make it clear there are significant shortcomings in
the OPGGSA’s compliance and enforcement regime14 To strengthen that regime, the Commonwealth Parliament
enacted the Offshore Petroleum and Greenhouse Gas (Significant Incidents Directions) Act 2012 (Cth), the
Offshore Petroleum and Greenhouse Gas Storage Amendment (Compliance Measures) Act 2013 (Cth)
(‘Compliance Measures Act’) and the Offshore Petroleum and Greenhouse Gas Storage Amendment
(Compliance Measures No. 2) Act 2013 (Cth) (‘Compliance Measures No. 2 Act’). While some of the
amendments introduced by the two Compliance Measures Acts have come into effect, most will not come into
force unless and until general legislation concerning the regulatory powers of government agencies is enacted,
namely the Regulatory Powers (Standard Provisions) Bill 2013 (Cth). This is expected to be in late 2013.
In this article I examine the major changes proposed by the Compliance Measures Acts, including new
provisions regarding liability for environmental cleanup and restoration in the event of an oil spill, cost
recovery, and financial assurance, new penalties, and expanded powers available to the Regulator. The focus of
this article will be on environmental laws and management, and not the health and safety provisions. In Part 2, I
set out the constitutional and legislative background under which offshore petroleum development takes place in
Australia, to provide the necessary context in which to examine the recent amendments. In Part 3, I describe the
compliance and enforcement mechanisms that exist under the OPGGSA prior to the 2013 amendments coming
9 Ibid 28.
10 For example, the well capping device developed by the UK Oil Spill Prevention and Response Advisory Group (‘OSPRAG’). See
OSPRAG, Strengthening UK Prevention and Response: Final Report (September 2011) 6,
andgasuk.co.uk/cmsfiles/modules/publications/pdfs/EN022.pdf>, 30 October 2012. The Australian industry’s response to
the Deepwater Horizon incident is taking place within that of the International Oil and Gas Producers Association (‘OGP’). As part of its
Subsea Well Response Project, the OGP developed a subsea incident response package of well capping equipm ent and a Subsea First
Response Toolkit (‘SFRT’) for global u se. An industry consortium is funding a project to develop an Australian SFRT by th e end of 2013, in
partnership with the global SFRT, and compatible with it. The SFRT will provide specialised equipment in Australia for immediate use at
the start of a subsea well control event, namely equipment to clean around the wellhead, enable intervention and prepare for relief well
drilling and installation of a capping device: Australian Petroleum Production and Exploration Association (‘APPEA’), Subsea and Well
Integrity, .appea.com.au/safety-environment/315-2/>, 10 July 2013.
11 See for example, Conservation Council of Sou th Australia, Key Concerns about BP Oil Exploration in the Great Australian Bight (GAB),
rg.au/coast-and-marine-home/1059-key-concerns-about-bp-oil-exploration-in-the-great-australian-bight-
gab.html>, 10 July 2013. BP’s documentation for referral under the EPBC Act recognises that some ‘stakeholders’ may view the proposal
‘in the context of the 2010 Deepwater Horizon accident’, before going on to justify its improved procedures/corporate culture: British
Petroleum, above n 6, 33.
12 Borthwick, above n 1,
13 Commonwealth of Australia, Final Government Response to the Report of the Montara Commission of Inquiry (2011).
14 See the Explanatory Memo randums to the Offshore Petroleum an d Greenhouse Gas Storage Amendment (Com pliance Measures) Bill
2013 (Cth) and Offshore Petroleum and Greenhouse Gas Storage Amendment (Compliance Measures No. 2) Bill 2013 (Cth), discussed in
Part 4 below.
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