February 1, 2013

Safety in offshore operations – how far will the EU go?

The fallout from the Macondo oil spill is significant and continues to develop. One important aspect of that fallout is the increasing scrutiny that the offshore industry is coming under from regulators. The EU is a key regulator for the industry, with the North Sea and its 1,000+ installations within its remit, together with smaller numbers of installations in the Mediterranean and the Black and Baltic Seas.

As a key regulator, the EU decided it had to react to Macondo, and be seen to react decisively within its own sphere of influence. It published a communication in 2010 and followed up with a draft Regulation “on safety of offshore oil and gas prospection, exploration and production activities” in late 2011. Whilst generally supportive – and very complimentary about the North Sea in particular (where it found that “the risk-based regulatory framework is considered amongst the very best in the world”) – the EU is concerned that there is no uniformity of approach throughout the EU. By its draft Regulation, the EU has demonstrated its determination to legislate to fill that perceived gap.

Since its publication, the draft Regulation has been a source of controversy. Its critics argue that it is “inappropriate and totally unnecessary” (see here) because it will override the regulatory system in place in the North Sea (which the EU admires) and be of marginal relevance to the rest of the EU (where no more than 10% of offshore activity takes place). The quality and clarity of the drafting is also criticised.

Part of the difficulty stems from the EU’s choice of legislative tool. A Regulation is the strongest form of EU legislation because it becomes part of every Member State’s national law immediately and in its entirety. Any provisions of national law which contradict a Regulation are automatically overridden.

By contrast, Directives are addressed to each Member State and specify end results that must be achieved. It is left to national governments to decide how to achieve those end results and national laws are amended to do so. A number of industry commentators support a directive on offshore safety precisely for this reason:

  1. The North Sea’s regulatory systems would be sufficient as they stand and would require little, if any, amendment; and
  2. The rest of Europe in relation to which the EU expresses a degree of concern, would be provided with an EU baseline which may or may not require some amendment of national laws.

There are signs that the EU is beginning to listen. At the end of 2012, the European Parliament’s Industry, Research & Energy Committee voted in favour of a directive instead of a regulation. However, it remains unclear whether the draft Regulation will ultimately be implemented, or amended and translated into a directive. The effect of that decision may well be profound.

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