Alyn Addresses Energy Symposium

16 March 2012

Representing Scotland in Brussels: Offshore Oil and Gas Safety Regulation

SNP MEP and member of the European Parliament's Energy Committee, Alyn Smith, represented Scotland at the EU Energy Symposium in Brussels.

The European Energy Symposium 2012 brings together decision makers from the European Commission and the European Parliament with industry experts from the oil, gas, electricity and renewables sectors, trade associations, interest groups and specialists.

SPEECH TO EUROPEAN ENERGY SYMPOSIUM 2012

15 March 2012 Scotland House, Brussels

“Scotland, the EU and Offshore Safety Regulation”

Ladies, Gentlemen, I'm delighted to be there this afternoon, forgive me I was not able to be here for your morning sessions, but I've had someone in the room all day, I started today with breakfast meetings in Strasbourg, am here in Brussels presently (I think!) and am heading back to the airport for meetings in Edinburgh this evening!  I would love to say that's an unusual day but I'm afraid it is par for the course!

But I wanted to be here today to support your conference, as Energy, in all its forms, is a top priority for Scotland in our European relations.  We have hit the energy jackpot, with centuries of experience in coal, decades in hydro, oil and gas, resources which will all continue well into the future, and be augmented by our future technologies in renewables, wave, wind, tidal, biomass, you name it we're it.  We'll need to sell that energy somewhere, we have a disproportionately massive stake in seeing our energy markets work, and our standards be world leading.  We don't call ourselves Europe's powerhouse for nothing!

By way of my own bona fides, I'm a corporate lawyer to trade, sat on the Industry Research and Energy Committee of the Parliament from 2004-2009, and rejoined the committee at Hogmanay, New Year just past for the latter half of this mandate.  Personally, I grew up in the Middle East, where it is safe to say Oil and Gas have had something of an influence.  I'm an MEP for the National Party of Scotland, we're majority government in Scotland, and within the European Parliament we sit with the European Greens where we fit very comfortably, working together where we agree - which is most things - voting differently where not.

Of course, Oil and Gas, especially offshore, has had a troubled few years.  Today's discussion focuses on the Post Macondo landscape after the Gulf of Mexico disaster.  I'll give you a skite over the background to the issue in and around Parliament, our SNP approach to the prospect of EU regulation and where I think things might go.

By way of wider background, and to illuminate to you where Scotland is coming from on this discussion, it is worth reminding you if you had forgotten, or letting you know, if not, about the impact the Piper Alpha disaster had on Scotland, where 167 out of 229 people lost their lives in an explosion in July 1988.  At a time when the North Sea was the great hope of the nation, having seen a lot of industrial decline, the event was a national trauma.  Virtually everybody in Scotland, myself included, knew personally someone who worked or still does work in the North Sea.  This event was a national trauma, and remains etched in our national psyche.  So while I would not for a second downplay the importance of the Gulf of Mexico disaster, we will hear no lectures from nobody on the need for high standards in the North Sea, we've learned, and applied, bitter lessons.

So we're sensitive, and we take this seriously.  The Macondo event has raised this issue up a lot of political agendas, and that is to be welcomed, so long as that political attention is reasonable and proportionate, and to be fair in the main it has been.

In September 2011 the European Parliament voted on the safety of offshore oil and gas activities.  A proposed amendment threatened to bring the industry to a standstill with a call for no further authorisations of offshore oil and gas drilling and exploration activities until further reforms have been made to the sector.  The amendment was convincingly rejected by the Parliament by 558 votes to 94, and the final report was adopted by a massive majority of 602 votes in favour and only 64 against.

The European Commission (EC) has formulated new legislative proposals for offshore safety (in relation to the protection of both people and the environment) and associated issues.  The draft regulation “on safety of offshore oil and gas prospection, exploration and production activities” was published on 27 October 2011 as a “comprehensive new blueprint” for regulation of the industry.  I'll come on to that shortly.

The proposal has not been discussed in ITRE since the publication in October, although there is a provisional rapporteur, Ivo Belet, a sensible Flemish Christian Democrat.  The draft is presently nowhere near Parliament, but in preparation for its arrival there currently is a turf war between ENVI and ITRE about who should be lead committee.  My prediction would be that it will be ITRE lead with an opinion from ENVI, and probably a few others.

The Draft Regulation

I'm conscious I'm sharing a platform with real technical experts so I'll just give you the headlines of the regulation. 

Licensing

The licensing authority in the Member States will have to make sure that only operators with proven technical and financial capacities necessary to ensure the safety of offshore activities and environmental protection are allowed to explore for, and produce oil and gas in EU waters. Public participation is foreseen in licensing.

Obligatory ex ante emergency planning

Companies will have to prepare a Major Hazard Report for their installation, containing a risk assessment and an emergency response plan before exploration or production begins. These plans will need to be submitted to national authorities who will give a go-ahead.

Independent verifiers

The technical solutions presented by the operator that are critical for safety on the installation need to be verified by an independent third party prior to and periodically after the installation is taken into operation.

Inspections

Independent national competent authorities responsible for the safety of installations will verify the provisions for safety, environmental protection and emergency preparedness of rigs and platforms and the operations conducted on them. If companies do not respect the minimum standards, Member States will take enforcement actions and/or impose penalties; ultimately, operators will have to stop the drilling or production operations.

Transparency

Comparable information will be made available to citizens about the standards of performance of the industry and the activities of the national competent authorities. This will be published on their websites.

Emergency Response

Companies will prepare emergency response plans based on their rig or platform risk assessments and keep resources at hand to be able to put them into operation when necessary. Member States will likewise take full account of these plans when they compile national emergency plans. The plans will be periodically tested by the industry and national authorities.

Liability

Oil and gas companies will be fully liable for environmental damages caused to the protected marine species and natural habitats. For damage to waters, the geographical zone will be extended to cover all EU marine waters including the exclusive economic zone (about 370 km from the coast) and the continental shelf where the coastal Member State exercises jurisdiction. For water damage, the present EU legal framework for environmental liability is restricted to territorial waters (about 22 km offshore). 

International

The Commission will work with its international partners to promote the implementation of the highest safety standards across the world.

EU Offshore Authorities Group

Offshore inspectors of Member States will work together to ensure effective sharing of best practices and contribute to developing and improving safety standards.

Our Position:

The UK government has been pretty hostile to these proposals, to be fair the UK government is pretty hostile to everything right now!  I make light of that, but it is not helping anyone, not least the professional and hard working civil servants, make a serious case on serious issue when our Prime Minister is more interested in the view of his backbenchers than serious people here.

Likewise, some industry voices have been a bit hostile without necessarily getting into the detail, and it looks a bit "we don't like regulation".

We need to be realistic.  Look at a map of Northern Europe.  There's two states with a financial benefit from the North Sea Oil and Gas, there's umpteen more with a potential disaster washing across their shores with no upside.  Look wider, nigh on a dozen other EU states have smaller or new exploratory extractive sectors - and the standards are pretty patchy, we know because it is often Scottish companies engaged with them.  Look wider still, how are things being run in Libya right now?  How are things in Nigeria at the moment?

If we can set an EU framework that builds on our best practice, and builds on our expertise then we can set a gold standard worldwide.  Likewise, we've applied hard lessons, we can now use this process to apply them wider.

Scotland can be all over an EU safety framework, and in so doing make it better, and open the door to us selling our world leading Scottish safety expertise, worldwide.

So as I say, where we share a lot of the expressed UK concerns, our approach to these issues is different, this matters to us on a number of levels.

So I've had a number of meetings with Commission officials and industry in Scotland, that process is ongoing and we're putting together a number of technical experts to get into this process, if anyone here wants to join that effort there is plenty work to go around, speak to me after or email me.

I believe we can not only make this package workable, I think we have a moral duty to make sure our experience and expertise is available to share.  We have a moral duty to do that, but also an economic, legal and political advantage as well.  This will run and run, and I look forward to hearing your thoughts the rest of today.

Key points on Regulation as proposed:

  • We welcome the aims of the legislation, but believe that the use of a Regulation is inappropriate, and would undermine those aims.  A Directive would work better.
  • Government legal advice is that where the content of a Regulation duplicates existing domestic legislation, that domestic legislation must be revoked. There would also be a need to make significant amendments to current established legislation, associated guidance, and industry documentation.
  • This is particularly the case as many requirements in the proposed Regulation mirror existing best practice in the UK and in other North Sea states with mature regulatory regimes, for example in the notification regime, major hazard reports, and independent verifications.
  • The process of introducing a new system would entail significant costs, and risk undermining existing high safety and environmental standards.
  • For example, as the text is currently drafted, there would be a need to produce, assess, and accept the new Major Hazard Reports as required by the Regulation. In the UK, it is estimated that this would cost industry £146m, and require the work of almost all of the Health and Safety Executive’s Offshore Division’s specialist inspector resource for almost a year. This would have an adverse effect on their offshore inspection and investigation presence.