Financial Liability For All Offshore Oil and Gas Operators

A provisional deal on proposed legislation for the safety of offshore oil and gas operations has been agreed between MEPs and Council negotiators. Before oil and gas firms could get a licence to drill, the directive would require them to submit major hazard reports and emergency response plans and prove their ability to remedy any environmental damage caused.

“Europelearned its lessons from the Deepwater Horizon catastrophe and wants to reduce the risks of offshore oil and gas drilling to a minimum. Especially now that several member states are exploring new drilling operations, we need an efficient legislative framework. The previous directive is nearly 20 years old and does not guarantee the safety of offshore drilling operations in an adequate manner,” says Ivo Belet (EPP, BE), who led the negotiations.

“This agreement ensures an EU legal framework that will help us to prevent offshore accidents in our seas and ensure rapid intervention which will limit potential damage”, says Energy Committee Chair Amalia Sartori (EPP, IT).

All operators would need to ensure they have access to “sufficient physical, human and financial resources to minimise and rectify the impact of a major accident”. No licence would be granted unless the applicant has provided evidence that “adequate provision has been or will be made to cover liabilities potentially deriving from its offshore oil and gas operations”.

In particular, when assessing the applicant’s technical and financial capability, due account would be taken of their ability, including any financial security, to cover liabilities. These would include “liability for potential economic damage where such liability is provided for by national law”.

Drilling companies would be required to submit to the national authorities a special report, describing the drilling installation, potential major hazards and special arrangements to protect workers, before starting operations. EU Member states would require operators to prepare a document setting out their “corporate major accident prevention policy” which would guarantee inter alia an open reporting culture for incidents, consultation with elected safety representatives and protection for whistleblowers.

Companies would also have to provide an internal emergency plan, giving a full description of the equipment and resources available, action to be taken in the event of an accident and all arrangements made to limit risks and give the authorities early warning.

At the same time, EU member states would have to prepare external emergency response plans covering all offshore drilling installations within their jurisdiction. These plans would specify the role and financial obligations of drilling companies as well as the roles of relevant authorities and emergency response teams.

Although the Commission’s initial proposal referred to a “regulation” (which would be directly binding upon all member states), negotiators for Parliament and the Council agreed to recommend adopting a directive (which lays down ends, but leaves means to member states) instead, in order to avoid redrafting existing equivalent national laws.

Member states with offshore waters that have no offshore oil and gas operations under their jurisdiction, and landlocked countries with companies registered in their territories would need to apply only a limited number of this directive’s provisions. Member states would have two years to transpose the directive into their national laws.

The provisionally agreed text which still needs to be adopted formally by COREPER will be put to an Energy Committee vote, probably in March, and then a plenary one in May (provisional timetable).

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