ENERGY LAW

Environmental Regulation in exploration, production and decommissioningDr Tina Hunter

Reader in Energy Law, University of Aberdeen; andAssociate, Aberdeen University Centre for Energy LawJUS271A Energy LawRegulatory areasSTAGES OF PRODUCTIONACCESS PETROLEUM EXPLOITATIONLCSEXPLORATION AND DEVELOPMENT(L2)or PRODUCTION: SAFETY IN EXPLORATION AND PRODUCTION (L3)PSCPRODUCTION: REGULATING WELLS IN EXPLORATION AND PRODUCTION (L4)(L1)PRODUCTION:ENVIRONMENTAL REGULATION IN EXPLORATION, PRODUCTION DECOMMISSIONING (L5)Liability Scope of liability important

The fish! Importance of fishing and fisheries need and right of protection

The fish! Importance of fishing and fisheries need and right of protection

Section 10-1SPILL RESPONSE8Two pronged approachStop the leak!!! Well kill response!Oil spill response to clean up the oil

Well Response

Need to formulate responsewell killInterventory drillingAIM Stop flow of oil, gas or fluid

Norwegian spill response Private industry preparedness offshore oil industry Norwegian Pollution Control Authority is the regulatory agency for the preparedness Operating companies are responsible for the activity NOFO (Norwegian Clean Seas Organisation for OperatingCompanies) provide the spill response resources. Municipal preparedness In each municipality Organised into 34 inter-municipal preparedness regions Governmental preparedness Norwegian Coastal Administration are the responsible authority for government preparedness.

Norway response

Norway response

Decommissioning

BackgroundFor the fist 10 years of Norwegian Oil rig life, decommissioning was not an issueAs rigs got older and fields came to the end of their life, there was a need to address the issue of decommissioning Methods of disposal for platforms, pipelines and cables must take into account safety and cost aspects, and last but not least, environmental considerations.Types of installationsThe installations on the continental shelf vary so widely that it is difficult to find one decommissioning option that is suitable for all of them. Floating Platforms Steel platforms Concrete gravity platformsFPSOsIt is not appropriate to use the same solution for large concrete platforms as for mobile floating installations. Number of InstallationsOver 6500 offshore installations worldwide, with a combined removal cost of over US$20 billionRange from shallow fixed water installations to deep water tension leg platforms In all, there are about 490 floating and fixed installations in the North Sea and North East Atlantic, and many will stop producing in the next few years Over next 10-20 years, it is expected that 15-25 installations are expected to be removed annually in EuropeRepresents 150-200 thousand tonnes of steel CS bordering Norway and the states of the EC contain 600 offshore O & G platforms, 400 subsea structures and 600 subsea wellheadsDecommissioningDecommissioning of platforms and other installations on the continental shelf is difficult, due to sheer size. A platform can be divided into the topsides and footings, and these vary a great deal in size. Structure type: The solutions chosen vary depending on whether is steel installations, concrete installations, pipelines, cables or piles of drill cuttings.Options for Decommissioning(i) Leave in place.(ii) Partial removal, with alternatives: (a) emplacement/toppling on site, (b) carry to shore for recycling or disposal as waste, (c) deepwater disposal, (de) artificial reefs, and (e) re-use/other uses.(iii) Total removal, with alternatives: (a) carry to shore for recycling or disposal as waste, (b) deepwater disposal, (c) artificial reefs, and (d) re-use/other uses.International Regulation of Decommissioning International conventions and standards influence the way decommissioning is carried out and solutions chosen for final disposal of offshore installations The OSPAR Convention 1992 is central to decommissioning in the North Atlantic region(Entered into force in 1998). Protects NE Atlantic and is main law governing the discharge of offshore drilling waste in these watersAmongst other things, it provides a framework for the disposal of disused installations, enduring that the sea should not be used for waste disposal 24OSPARThe Convention for the Protection of the Marine Environment of the North-East Atlantic (known as the "OSPAR Convention") is the basis for national laws governing the discharge of offshore drilling wastes in the waters of the OSPAR signatory states: Belgium, Denmark (including, for these purposes, the self-governing province of the Faroe Islands), Finland, France, Germany, Iceland, Ireland, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom of Great Britain and Northern Ireland. OSPAR regulations thus cover all the oil-producing coastal states of Western Europe. The European Community is also a signatory, as are Luxembourg and Switzerland.At present it is legal to discharge WBM cuttings in the offshore waters of the OSPAR signatory countries, provided the oil content is less than 1% by weight and the material has passed tests to show that it will bio-degrade over a specified time and will not bio-accumulate.The OSPAR operating principles for regulating offshore discharges (See: OSPAR. 1996. PARCOM Decision 96/3 on a Harmonized Mandatory Control System for the Use and Reduction of the Discharge of Offshore Chemicals. Oslo.) take account of the persistence, toxicity or other noxious properties and tendency to bio-accumulation of the chemicals in drilling wastes. "These criteria," OSPAR states, "are not necessarily of equal importance for a particular substance or group of substances, and other factors, such as the location and quantities of the discharge, may need to be considered."Annex A of the Paris Convention says:Part IThe following substances are included in this Part.i) because they are not readily degradable or rendered harmless by natural processes; andii) because they may either:a. give rise to dangerous accumulation of harmful material in the food chain, orb. endanger the welfare of living organisms causing undesirable changes in the marine eco-systems, orc. interfere seriously with the harvesting of sea foods or with other legitimate uses of the sea; andd. because it is considered that pollution by these substances necessitates urgent action:Organohalogen compounds and substances which may form such compounds in the marine environment, excluding those which are biologically harmless, or which are rapidly converted in the sea into substances which are biologically harmless.

Mercury and mercury compounds.

Cadmium and cadmium compounds.

Persistent synthetic materials which may float, remain in suspension or sink, and which may seriously interfere with any legitimate use of the sea.

Persistent oils and hydrocarbons of petroleum origin. Part IIThe following substances are included in this Part because, although exhibiting similar characteristics to the substances in Part I and requiring strict control, they seem less noxious or are more readily rendered harmless by natural processes:a. Organic compounds of phosphorous, silicon and tin, and substances which may form such compounds in the marine environment, excluding those which are biologically harmless, or which are rapidly converted in the sea into substances which are biologically harmless.b. Elemental phosphorus.c. Non-persistent oils and hydrocarbons of petroleum origin.d. The following elements and compounds: Arsenic, Lead, Chromium, Nickel, Copper, Zince. Substances which have been agreed by the Commission as having a deleterious effect on the taste and/or smell of products derived from the marine environment for human consumption (OSPAR. 2000. Draft Measures Proposed by the OSPAR Working Group on Sea-based Activities (SEBA), February 2000. Annex 12: List of Substances/Compounds Liable to Cause Taint. OSPAR. Amsterdam. [Printed as Appendix 11 to this report]). The OSPAR convention was opened for signature on 22 September 1992 and came into force on 25 March 1998. It replaced the former Oslo and Paris Conventions, but decisions, recommendations and all other agreements adopted under those conventions continue to apply, unless and until they are terminated by new measures adopted under the 1992 OSPAR Convention. The OSPAR Commission Secretariat in London has supplied this brief account of the history and functions of the organisation: The grounding of the Torrey Canyon in 1967, and subsequent release of 117,000 tonnes of oil with disastrous consequences for the environment... stimulated the signature, in 1969, of the Agreement for Cooperation in Dealing with Pollution of the North Sea by Oil (the "Bonn Agreement"). The next important development in the growing general awareness of the dangers of pollution of the seas and oceans came with the agreement and signature of the Convention for the Prevention of Marine Pollution by Dumping from Ships and Aircraft (the "Oslo Convention"). Again, as often is the case, it had taken a concrete example to remind the countries concerned that the unlimited deliberate dumping of (industrial) waste into the sea could lead to an unacceptable situation. This example was provided by a Dutch ship, the Stella Maris which, having sailed from the port of Rotterdam on 16 July 1971 to dump chlorinated waste in the North Sea, was obliged to return to port on 25 July (without carrying out her mission) because of the combined weight of public opinion and of the Governments of several countries. In February 1972, within eight months of this event, the Oslo Convention was signed, and it entered into force in 1974. It was also felt necessary at this time to draw up a similar document, dealing not with the prevention of marine pollution by dumping, but instead with the prevention of marine pollution by discharges of dangerous substances from land-based sources, water-courses or pipelines. Negotiations on this topic resulted in the completion of the Convention for the Prevention of Marine Pollution from Land-Based Sources (the "Paris Convention") which was opened for signature in June 1974 and which entered into force in 1978.The Oslo and Paris CommissionsThe Oslo Commission was established to administer the Oslo Convention. Initially, the Commission's task was to regulate and control the dumping at sea of industrial wastes, sewage sludge and dredged material and the incineration at sea of liquid industrial wastes. The dumping of industrial wastes and sewage sludge and incineration at sea have now been phased out.The Paris Commission was established to administer the Paris Convention. The Commission regulated and controlled inputs of substances and energy to the sea from landbased sources (via the atmosphere, rivers, or direct discharges) and also from offshore platforms. The Commission was involved in a thorough review of the use and manufacture of various substances in order to establish the best environmental practice or best available techniques to prevent pollution...The OSPAR ConventionA meeting of the Oslo and Paris Commissions at Ministerial level was held in Paris on 21-22 September 1992 (MMC 1992). This meeting was attended by Ministers responsible for the marine environment of the 14 signatory states to the Oslo and Paris Conventions, by Switzerland and by a representative of the Commission of the European Communities.The most important outcome of this Ministerial meeting was the adoption of a new Convention for the Protection of the Marine Environment of the North-East Atlantic (the "OSPAR Convention"), together with a Final Declaration and an Action Plan to guide the future work of the Commissions.Although the OSPAR Convention did not finally enter into force until early 1998, for all practical purposes, the Oslo and Paris Commissions have worked as one entity since MMC 1992.The new Convention, drafted to merge and modernise the Oslo and Paris Conventions, consists of a series of provisions and, amongst other things: a. requires the application of: i. the precautionary principle; ii. the polluter pays principle; iii. best available techniques (BAT) and best environmental practice (BEP), including clean technology; b. provides for the Commission established by the OSPAR Convention to adopt binding decisions; c. provides for the participation of observers, including non-governmental organisations, in the work of the Commission;d. establishes rights of access to information about the maritime area of the Convention. Contained within the OSPAR Convention, as adopted in 1992, are a series of Annexes which deal with the following specific areas:Annex I: Prevention and elimination of pollution from land-based sources;

Annex II: Prevention and elimination of pollution by dumping or incineration;

Annex III: Prevention and elimination of pollution from offshore sources; and

Annex IV: Assessment of the quality of the marine environment. The Convention also allows the adoption of additional annexes to protect the maritime area of the Convention, and the first new annex was adopted by the 1998 Ministerial Meeting of the OSPAR Commission (MMC 1998). This Annex V contains provisions with regard to the protection and conservation of the ecosystems and biological diversity of the maritime area. The Annex will enter into force once it has been ratified by at least seven Contracting Parties.As a result of these agreements, the oil-producing states of Western Europe in effect work as a single country for the purposes of controlling offshore waste disposal, although the detailed implementation of the OSPAR regulations is still governed by national laws and European Union directives (with the exception of Norway, which is not an EU member but has, in general, stricter environmental regulations).

OSPAR: http://www.ospar.org/eng/html/welcome.html instrument guiding international cooperation on the protection of the marine environment of the North-East Atlantic. It combined and up-dated the 1972 Oslo Convention on dumping waste at sea and the 1974 Paris Convention on land-based sources of marine pollution Contained within the OSPAR Convention, as adopted in 1992, are a series of Annexes which deal with the following specific areas:Annex I: Prevention and elimination of pollution from land-based sources;Annex II: Prevention and elimination of pollution by dumping or incineration; Annex III: Prevention and elimination of pollution from offshore sources; and Annex IV: Assessment of the quality of the marine environment

OSPAR ContinuedAs a result of OSPAR, the oil-producing states of Western Europe in effect work as a single country for the purposes of controlling offshore waste disposal,the detailed implementation of the OSPAR regulations is still governed by national laws and European Union Directives This includes Norway, which although is not an EU member it is an EEA country and therefore bound.In addition, Norway has very strict environmental regulations

MARPOL 73/78International Convention for the Prevention of Pollution from Ships Note is pollution from ships not passive installations Essentially ship pollution protocol119 countries signatories, including Australia The stated object is: To preserve the marine environment through the complete elimination of pollution by oil and other harmful substances and the minimization of accidental discharge of such substances UNCLOSa60 (3) any installations or structures which are abandoned or disused are to be removed to ensure safety of navigationTakes into account any generally accepted international standards established in this regard, and have due regard to fishing, protection of the marine environment and the rights and duties of other states

IMO Guidelines Guidelines and Standards for the Removal of Offshore Installation and Structures on the Continental Shelf and in the EEZ (ref to a60 UNCLOS)Are required to be removed when no longer serving primary purpose or a subsequent new useException: where non-removal or partial removal is indicated Decision to retain on the CS will be decided on a case-by-case basis, considering the following:Potential effect in the safety of surface or subsurface navigation, or other uses of the sea;Rate of deterioration of the material and its present/possible future effect on marine environment;Potential effect on the marine , including living resources;The risk that the material will shift from its position at some time in the future ;Cost, technical feasibility and risk of injury to personnel associated with the removal of the installation or structure;Determination of a new use or other reasonable justification for allowing the installationIMO Standards for removal of installationsStanding in less than 75m of water and less than 4,000 tonnes in air, excluding deck and superstructure, should be entirely removedAll structures placed on seabed after Jan 1998 in less than 100m water and less than 4,000 tones should be entirely removedAll others over these may be wholly or partially kept in place if meet the considerations for exceptions (previous slide)From Jan 1998 no installation or structure should be places on CS or in EEZ unless design and construction of installation or structure is such that entire removal upon abandonment is feasibleApply to existing and future structures Norwegian Regulatory contextChapter 5 of the Petroleum Act deals with the cessation of petroleum activities. It states that the licensee is responsible for submitting a decommissioning plan before the use of an offshore installation is terminated permanently The oil companies must pay the costs of decommissioning, but also there is a requirement of the state to meet a certain proportion of these costs. Chapter 6: Decommissioning Plan requirementsDecommissioning planDisposal as part of planImpact assessment of planPlan should give short account of relevant disposal alternatives and envisaged effects to the environment and to other commercial activities

Norwegian Environmental lawPollution Control Act applies, and application outlined in S 3 general provisions relating to the scope of the Act, and S4 Application of the Act to activity on the continental shelf Is a typical enabling act - details are outlined in discharge permits and regulations issued by the pollution control authorities. Established for the purpose of preventing and reducing harm and nuisance from pollution. This is reflected in the main rule of the Act, (pollution is forbidden unless it is specifically permitted by law, regulations or individual permits.

OptionsLeave in place (less than 10 000 tonnes)Reuse as a hotel?Make an artificial reefWind farmRelay stationRemove and deposit in deeper water Dismantle and dispose onshore or reuse

Det Norske Veritas Norwegian company established in 1864. DNV is an independent foundation. Its objectives are "Safeguarding life, property, and the environment" and is a leading provider of services for managing risk.Commissioned by Norwegian Pollution Control Authority to review options for the disposal of oil and gas installations Concluded that reuse and recycling are the environmentally preferable options 34Other Activities MMS and NPD cooperate closely to assist Russia in offshore oil and gas legislative, economic, and environmental reform. The multilateral effort seeks to improve Russias offshore oil and gas operations by revising its safety and environmental regulatory regime to be more consistent with western standards. Norway participates with MMS and other Arctic countries in the Arctic Council. The Council is a high level policy forum that addresses environmental and other non-military issues of concern to arctic nations. Participates in a joint government-industry study--"Dented and Corroded Pipelines"--Det Norske Veritas, Oslo, Norway--The objective is to develop methods to assess effects of dents and corrosion of pipelines. Cooperates in a joint government-industry study, "Reliability of Corroded Pipelines"--Det Norske Veritas, Oslo, Norway--The objective is to develop reliability methods for the assessment of pipeline corrosion considering the uncertainty associated with inspection methods. Participates in a joint government-industry study, "Design Procedures for Deep-Water Anchors"--Det Norske Veritas, Oslo, Norway--The objective is to develop better techniques for determining anchoring systems for deep-water floating production systems. Environmental impact of Oil RigsThe deposition of oil and gas installations and pipelines at sea can create problems related to debris, while dismantling them may cause occupational health problems for workersExample in Australia- Fuel tanks and CancerOther issues that have been identified are waste disposal problems that may arise if installations are brought ashore for dismantling, effects of the chemicals in the installations if they are dumped at sea, and reductions in resource use if metals are recycled Brent Spar

Brent SparOil storage and tanker loading buoy, operated by Shell UKBy 1991 outlived usefulness, so needed disposingissue of public concern in 1995, when the British Govt supported Shells application for disposal in deep Atlantic waters (sink!) (other choices included onshore dismantling)Greenpeace called for boycott of Shell globallyShell abandoned plans for deep water disposal, even though continued to claim was the safest optionBrent Spar ContinuedGreenpeaces reputation when it acknowledged that sampling errors had led to a substantial over-estimate of the oil remaining in the storage tanks. Following Shells decision to pursue only on-shore disposal options, Brent Spar was given temporary moorings in a Norsk fjordIn Jan 1998 Shell announced would use much of the main steel structure in the construction of new harbour facilities in Stavanger.

Although Shell and the offshore industry consider that Brent Spar did not set a precedent for future disposal, OSPAR signatories have since agreed that oil facilities should be removed

Ecofisk

Decommissioning of EkofiskDecommissioning plan by PhillipsRemove under provisions under OSPAR Norsk govt not allow anything elseTwo stage decommissioning planValue 1.1 billion USDHuge project total of 34 installations, including flare stacks, incl 25 main structures plus 25 local pipelines of varying diametersMostly trenched except fro free ends near platforms Stage 1: on 15 installations + topside talen onshore for recycling or reuseStage 2 2015 another 14 installations removed and taken onshore for recycling Ekofisk Today

Tax Treatment of Decommissioning Not deduction as cost paid direct to company by Norsk govtWant to avoid distortions in the companys finance hereby reducing distortions that wuld impact on recovery rate System of tax treatment for all fields is a cost sharing rule State has been receiving 78% tax off fields.. Thus pays around 2/3 of cost of removal

Disposal and FisheriesDecommissioning and disposal of rigs has a huge impact on fisheries areasMay have significant economic consequences Pipelines if left insitu can damage demersal trawl gearSignificant part of Norsk economy - $3.4 billion, and sustainable Several issues that need to be considered in the analysis of decommissioning and the effects on fishing Fish stock pollutionFish Stock enhancement effect heat and other positive effects of installationStock concentration effect gravitate to feedstock tht gather around installations?Fishing Access and obsolete installations especially pipelines Environmental/social issuesEnvironmental degradation, particularly in third world nations Ogoni people: Shell in Nigeria Deep concerns about widespread and severe environmental damage in the River Delta region on account of oil exploration and other operations of the Shell Petroleum Development Company of Nigeria (SPDC) continue. Situation of human rights in Nigeria, Report submitted by the Special Rapporteur of the Commission on Human Rights, Mr. Soli Jehangir Sorabjee, pursuant to Commission resolution 1997/53Contamination of the Equatorial Amazon by Chevron Texacothe ExxonMobil led Chad-Cameroon pipeline, universally condemned for its negative impact on the environment, corporate governance and human rights. Ecuador Oil Rights or Human Rights? (2006) Amnesty International USA http://www.amnestyusa.org/business/ecuador.html at 4 December 2006.

45Company. A common consequence in the exploitation of oil resources is the abuse of the rights of the citizens of state by the State, the exploration companies, or both. Recent examples of human rights abuse by oil majors in petroleum exploration and production includes:the actions of Shell Oil Company in the Niger Delta. Shell has received international criticism including criticism from the influential Sierra Club, for its operations in Nigeria. In 1995 Ogoni environmental activist Ken Saro-Wiwa, and eight other members of the Ogoni ethnic minority were executed by the Nigerian State for their campaign against Shell Oil. The United Nations also recorded their concern for environmental pollution in the Niger Delta region:Deep concerns about widespread and severe environmental damage in the River Delta region on account of oil exploration and other operations of the Shell Petroleum Development Company of Nigeria (SPDC) continue. contamination of the Ecuadorian Amazon by ChevronTexaco, and the ExxonMobil led Chad-Cameroon pipeline, which was universally condemned by political parties, national governments and NGOs for the projects negative impact on the environment, corporate governance and human rights. This pipeline threatens thousands of local and indigenous people in Chad and Cameroon, and the oil companies involved have a history of serios environmental degradation and tolerance to human rights abuse.For example, the corruption and exploitation that has occurred in Nigeria for decades at the hands of both Companies and th Government. This has resulted in villager militancy between the oil companies, the government and nearby villages about employment, infrastructure, corruption, and worker entitlements: see British Nostage Killed in Nigeria Rescue Shell in nigeria Sierra Club, Human Rights and the Environment: Nigeria Ken Saro-Wiwa and the Ogoni (1999) http://www.sierraclub.org/human-rights/nigeria/ at 3 December 2006.Situation of human rights in Nigeria, Report submitted by the Special Rapporteur of the Commission on Human Rights, Mr. Soli Jehangir Sorabjee, pursuant to Commission resolution 1997/53 Ecuador Oil Rights or Human Rights? (2006) Amnesty International USA http://www.amnestyusa.org/business/ecuador.html at 4 December 2006.Human Rights Watch, Corporations and Human Rights (1999) http://www.hrw.org/wr2k/Issues-03.htm at 4 December 2006.Sierra Club and Amnesty Internatinal, Environmentalists Under Fire: 10 Urgent Cases of Human Rights Abuse (2000) http://www.sierraclub.org/human-rights/amnesty/report.pdf at 2 December 2006, 6.

Not allBP in Baku-ceyhan pipeline guarantees from govts that would comply with ethical conductStatoil in texas re workers relations

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