The Regulation of Marine Pollution arising from Offshore Oil and Gas Facilities - an Evaluation of the Adequacy of Current Regulatory Regimes and the Responsibility of States to Implement a New Liability Regime

Author:Shane Bosma
Position:LLB (Hons), BA, Postgrad Dip (Finance), Postgrad Dip (Maritime Law), MBA, MIB, LLM (Maritime Law). This paper was initially submitted as a dissertation in partial satisfaction of the requirements for the London Metropolitan University/Lloyds Academy Master of Laws (Maritime Law) programme. The author acknowledges the excellent referencing...
(2012) 26 A&NZ Mar LJ
Sha ne Bosma
1 Introduction
The recent large scale pollution events arising fr om the explosion and s inking of the Deepwater Horizon oil rig
on the Macondo well blowout in the Gulf of Mexico on 20 April 2010 and the separate explosion on the
Montara wellhead platform in the Timor Sea on 21 August 2009 have thrown into sharp relief the legal
framework regulating offshore oil and gas facilities and gove rning oil spill liability from such facilities.1
The enormity of the stakes involved with any oil po llution caused by offshore oil and gas facilities is self-
evident from the sheer magnitude of each of the Macondo and Montara incidents a nd the size and complexity of
the legal claims that have arisen from each of these incidents.
Following the explos ion and sinking of the Deepwater Horizon oil rig at the Macondo field in the Gulf of
Mexico on 20 April 2010, eleven people tragically lost their lives and a total estimated 4.9 million barrels of oil
spilled into the environment until the well was effectively killed five months later on 1 9 September 2010,
making it the world’s worst release of oil ever. 2 Literally hundreds of lawsuits have been commenced against the
operator of the field, BP, and integrated i nto the one case3 before the US District Court in Ne w Orleans.4 BP has
also commenced legal proceedings against each of Hallibu rton, the well services contractor, Transocean, the
Deepwater Horizon’s owner and operator, and Camer on International, the manufacturer o f the blowout
preventer, seeking recovery of USD40.9 billion set aside last year by BP for the spill-related costs it has
incurred.5 BP’s joint ve nture partners in t he Macondo field, Anadarko and Mitsui, also commenced legal action
against BP for alleged breaches of the joint operating agreement governing their relationship, adding yet a
further layer of co mplexity to the already complicated framework of legal proceedings arising from the
In a similar incident following the explosion on the Montara wellhead platform on 21 August 2009, oil spilled
into the Timor Sea and continued leaking until 3 November 2009 (in total 74 da ys), making it one of Australia’s
worst ever oil spills and gi ving rise to a AUD2.4 b illion compensation cla im by the Indonesian gove rnment
against the Thai-owned oil company, PTTEP.7
LLB (Hons), BA, Postgrad Dip (Finance), Postgrad Dip (Maritime Law), MBA, MIB, LLM (Maritime Law). This pa per was initially
submitted as a dissertation in partial satisfaction of the requirements for the London Metropolitan University/Lloyds Academy Master of
Laws (Maritime Law) progr amme. The author acknowledges the exc ellent referencing assistance of Ms Bianca Kabel, the invaluable
support and guidance of Ms Susan Hawker, Course Director, and the time and effort of Ms Harma Bosma and Mrs Vanessa Krunic in
reviewing and commenting upon the earlier and final drafts of this paper. The text rep resents the law as atAugust 2011.
PTTEP has not accepted the claim on the basis that no verifiable
scientific evidencehad been presented to the company to support the Indonesian government’s claim for
1 Nathan Richardson, ‘Deepwater Horizon and the Patchwork of Oil Spill Liability Law’ (2010) Resources for the Future
g/rff/documents/RFF-BCK-Richardson-OilLiability.pdf> at 10 December 2010 ; N Butterly, ‘Oil industry shake-up in
Montara report’, The Western Australian ( online), 23 November 2010.
.> at 10 December 2010. .
2Harry Weber, ‘Blown-out BP well fi nally killed at bottom of Gulf’, Associated Press (Yahoo News Company) (online), 19 October 2010 19/ap_on_bi_ge/us_gulf_oil_spi ll> at 12 December 2010; Campbell Robertson, Gulf Spill Is the
Largest of Its Kind, Scientists Say’, The New York Times (onli ne)> at 12
December 2010.
3Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010 M DL-2179, (US District Court, Eastern District of
Louisiana (New Orlean s), 2010).
4 Noah Brenner, ‘Pair sue BP over tragedy’ Upstream (Singapore) 22 April 2011, 10.
5 Guy Chazan, ‘BP sues Gulf of Mexico Partners for USD40bn’ The Australian (online), 2011> at 25 April 2011.
6 Brenner, above n 4, 10.
7WA oil spill 'one of Australia's worst', ABC News (online), 24 August 2009.
http://www.webcitation .org/5l3RrgF24>; Paige Taylor, Jakarta ‘wrong’ on spill damage’ The Australian (online), 11 November 2010, 5951388832>.
Re g ulation o f Marine Po llutio n Arising from O ffsho re Oil and Gas Fa cilitie s
(2012) 26 A&NZ Mar LJ
compensation, highlighting the inherent evidentiar y difficulties associated with such claims. 8 The East Timorese
government has also separately said that it will be seeking compensation fro m each of the Australian
government and PTTEP for damage caused by the spill to East Timor’s environment.9
The objectives of the research underta ken in this article are essentially as follows:
1. To provide a brief synopsis of the extant legal obligations of States under e xisting international law in
relation to the regulation of marine oil pollution from offshore o il facilities;
2. To critically analyse the sufficiency and adequacy of the current liability regime as a means of ensuring
environmental accountability and recoverability of claims in connection with marine oil pollution
arising from offshore facilities;
3. To use the outcome of thi s analysis as a basis to examine and determine whether coastal States are
potentially liable for any failure to fulfill a responsibility to pr operly regulate against the risk of marine
pollution from offshore installations and to provide an adequate means of compensation for any claims
arising from such pollution; and
4. To consider whether there may be a more suitable alternative regime to provide a satisfactory and
adequate vehicle for transnational environmental accountability for marine pollution damage arising
from offshore facil ities.
The current status of any international civil liability regime applying to marine po llution from offshore facilities
will be considered and, in order to illustrate the position as it applies in the world’s main offshore oil-producing
regions, the regional liability regimes that currentl y apply in the European North Sea, the Gulf of Mexico,
Australasia and West Africa will be examined. An overview will also be performed of the licensing regulatio ns
that apply in sample countries from each of the European North Sea, the Gulf of Mexico, Australasia and West
Africa regions in o rder to assess the exte nt to which the risk of marine pollution damage from offshore facilities
and the financial capacity of operators to meet any pollution liabilit y is being proactively regulated and
monitored by the regulatory authorities in those countries.
Relevant to the consideration of the responsibility of operators of offshore facilit ies involving multiple joint
venture parties and o f contractors provid ing offshore oilfiel d services, an analysis will be undertaken o f the
pollution liability requirements under the standard forms of joint op erating agreements and drilling and wel l
services contracts that typically apply in these regions and govern the obligations owed by operators and their
contractors with respect to the joint venture operations.
Ultimately, any civil liability will sound in claims being prese nted to the insurance i ndustry for payment.
Accordingly, in ord er to form a view as to the exte nt to which any such clai ms may be recovered from
insurance, the policy terms of the most immediately rele vant liability policies will be examined, namely the
international group of P&I Clubs and the industry standard wording for operator’s extra expense and pollution
liability insurance. Available ins urance industry da ta and statistics maintained by the internatio nal group of P&I
Clubs and the major global brokerage houses will also be analysed to assess the amounts of liability insurance
cover that, subject to policy terms, may be gene rally available to respond to any marine pollution arising from
offshore facilities.
The responsibility of States for the sufficiency and ad equacy of the current marine oil pollution liability regime
within these regional legislative frameworks will then be examined as a function of:
1. The value of claims typically arising from pollution caused by offshore units, focusing in particular on
the anticipated claims arising from the recent Deep Horizon and Montara incidents;
2. The difficulties asso ciated with pursuing c laims and success fully establishing liability in connection
with pollution arising from offshore units; and
8 PTTEP Australasia, ‘PTTEPAA does not accept compensation claim’ (Media Release, 2 September 2010)> at 17 May 2011.
9 ABC News, ‘East Timor wants compo for oil spill fallout’, ABC News (online), 5 November 2009 es/2009/11/05/2734579.htm>.

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