MONTARA – BEFORE & AFTER

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MONTARA – BEFORE & AFTER“A balance between prescriptive standards and technical innovation and flexibility must be achieved. In attempting to strike an appropriate balance, a stead-fast eye must be kept on the ultimate goal of health, safety and environmental protection.”

- Montara Commission of Inquiry June 2010 (at 4.110)

June 2013

Presenter:

Henry ProkudaPartner

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2MONTARA – BEFORE AND AFTER June 2013

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MONTARA INCIDENT

MONTARA - BEFORE AND AFTER June 2013

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MONTARA INCIDENT


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MONTARA INCIDENT


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MONTARA INCIDENT


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OFFSHORE JURISDICTIONAL ISSUES

• 1967 Petroleum Agreement

• Commonwealth Petroleum (Submerged Lands) Act 1967 (PSLA) (repealed, July 2008)

• Commonwealth Sea and Submerged Lands Act 1973 – implementing Convention on Territorial Sea and Contiguous Zone and Convention on Continental Shelf (1964)

• NSW v Commonwealth (1975) 135 CLR 337 (Seas and Submerged Lands Case)

• Off Shore Constitutional Settlement 1979 (OCS)– Coastal Waters (State Powers) Act 1980

– Coastal Waters (State Title) Act 1980

• Petroleum (Submerged Lands) Act 1982 (Qld) and other States


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OFFSHORE JURISDICTIONAL ISSUES

• Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act)

• Offshore Petroleum Act 2006 (C’wlth)– commenced 1 July 2008

– Reviewed and amended in November 2008 as Offshore Petroleum and Greenhouse Gas Storage Act 2006 (“OPGGS Act”)


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OFFSHORE PETROLEUM JOINT MANAGEMENT ARRANGEMENTS

Jurisdiction – Agencies and Functions

• Coastal waters – States and State Legislation (3 nm from baseline i.e., as a result of OCS)

• Commonwealth Waters – (3 nm to outer edge of Continental Shelf) – Commonwealth legislation including OPGGS Act

• Commonwealth waters called “offshore” areas in OPGGS Act

• Joint Authority (JA) in offshore areas under OPGGS Act (Commonwealth and State Minister), but for external territories (e.g. Territory of Ashmore and Cartier Islands) only Commonwealth Minister is the JA

• Designated Authority (DA) – State Minister and Minister’s Department


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JOINT MANAGEMENT ARRANGEMENTS

Jurisdiction – Agencies and Functions

• JA functions (regulation of Petroleum operations, pipelines and sub-sea facilities in Commonwealth waters) can be delegated to DA

• National Offshore Petroleum Safety Authority (NOPSA) created by 2003 amendment to PSLA to oversee OHS arrangements in offshore areas

• States (except WA) conferred power on NOPSA to oversee OHS arrangements in their coastal waters

• NOPSA charged with safety on offshore petroleum facilities, but well integrity issues and environmental regulation remained with States under JA/DA arrangements


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JOINT MANAGEMENT ARRANGEMENTS

Agencies and Functions –

Environmental

• Environmental, JA/JD approval of an “Environmental Plan” under PSL and then OPGGS Environmental Regulation

• From 2000, referral of an “action” to Commonwealth also required under Commonwealth EPBC Act 1999 if action may have significant impact on Commonwealth Waters (MNES)

Safety

• Approval of Safety plan by NOPSA

Well Integrity

• Approval of Well Operations Management Plan (WOMP) by JA/DA.


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MANAGEMENT ARRANGEMENTS AT TIME OF MONTARA INCIDENT – THE “PLAYERS”


PTTEPAA NOPSAJoint Authority (JA)Designated Authority DA (the State)

C’wlth SEWPAC administers EPBC Act and approval of “actions” in C’wlth Waters

AMSA

Various direct obligations under OPGGSA to:•manage risk and observe “good oil field practice”, more objective based than heavily prescriptive, i.e., all things considered “good and safe” in carrying out exploration and recovery of petroleum•control risk to “ALARP”

Manages OHS issues for offshore petroleum facilities - approves “safety case” under 1996 and 2009 Safety Reg. Introduced following “Piper Alpha” in 1988

Coastal and Commonwealth waters

• DA has responsibility for well integrity and approval of Well Operations Management Plan (“WOMP”) under Management of Well Operations Reg 2004

• DA approves “environmental plans” under OPGGSA Environment Reg 1999

• for Montara, JA had delegated functions to Northern Territory Minister/Department – the DA in 2008

Referral to SEWPC, assessment and environmental approval by Commonwealth Environment Minister for action that is “controlled”

(may not be controlled if action can be taken in a “particular manner” to satisfactorily address impacts) e.g., pursuant to “environmental plan”

Oversight of National Marine Oil Spill Contingency Plan (mainly ships) and National Marine Chemical Spill Plan

Australian Maritime Safety Authority Act 1990 (AMSAA)

Offshore Petroleum and GreenhouseGas Storage Act 2006 C’wlth (OPGGSA)

Environment Protection and Biodiversity Conservation Act 1999 C’wlth (EPBCA)

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COMMISSION OF INQUIRYFINDINGS GENERALLY

Cause of incident

• “Batch” drilling of several wells meant partly constructed wells could be left exposed to air increasing risk of a “blow-out”

• Poorly cemented casing shoe – had not been pressure tested - this was the primary well control barrier

• No secondary well control barrier in place at the time. Two pressure containing anti corrosion caps (PCCC) had been planned but only one was installed, the 9 5/8” PCCC

• This PCCC not really intended as a barrier against uncontrolled release of hydro carbon. Was removed some months after installation for maintenance

• Blow out occurred 15 hours later – no back up to the casing shoe


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COMMISSION FINDINGS


PTTEPAThe Northern Territory Department of Resources

The DA

• Did not observe sensible oil field practice (did not come within a

“bulls roar” of sensible practice)

• Northern Territory Department of Resources regulatory regime

“totally inadequate” – little more than “tick and flick”

• Shortcomings in Company’s practice were widespread and systemic • Poor understanding of batch drilling program

• WOMP and Company’s Well Construction Standards were

inadequate

• Should not have approved Drilling Program which allowed well to be

open to air for too long with only one permanent barrier in place

• Limited experience of “batch” drilling operations • As a minimum should have been two

• Failure to properly understand their own Well Construction Standards• When H1 well suspended, approval to use PCCC rather than a

cement plug given in 30 minutes (by phone)

• Failure to comprehend risk implications of cement shoe construction

problems and absence of pressure testing• Only one person who had limited ability to fulfil the task

• No back up barriers even though Standards called for three • Poor monitoring, inspection and audits

• Poor Communication, Management and Communication• Other regulators (DA’s) said they would not have approved the

Program

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COMMISSION FINDINGS AND RECOMMENDATIONS


NOPSA SEWPC and EPBC Act Issues AMSA and National Plan

• NOPSA had no responsibility for well integrity, nor should it have had under arrangements existing at the time.

• SEWPC should not have been expected to consider risk of blow out from well integrity issues

• Did its job very well

• This was responsibility of Company and the DA (i.e. NT DoR).

• EPBC Approval existed – subject to 6 conditions• Some review of monitoring and other

aspects of the National Plan recommended to cope with large “blow outs”

• In future NOPSA should be responsible for well integrity and environmental management rather than JA/DA.

• DA (NT DoR) approved Environmental Plans were “complementary” to the EPBC Approval but didn’t deal with well integrity issues

• NOPSA assuming well integrity responsibility had been recommended in a number of reports over 3 years prior

• SEWPC had no power under EPBC Act to require PTTEPA to undertake scientific monitoring – took over 40 days after incident to get monitoring up and running (by agreement)

More recently, draft Productivity Commission Report (May 2013) recommends that approval by NOPSA, now NOPSEA, of Environmental Plans (rather than the DA), should constitute approval for EPBC Act purposes

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MONTARA – BEFORE AND AFTER

• In total Inquiry made 105 Recommendations

• Commonwealth Government Response Report (February 2011) accepted 92, “noted” 10 and declined 3 focussed on action in 5 areas

– Regulatory Regime

– Regulator Operating Practices

– Response arrangements

– Environmental Management

– Operator response

• Legislative Review followed

• BP Macondo incident in Gulf of Mexico occurred in April 2010 – well integrity issues


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MONTARA – BEFORE AND AFTERFINDINGS AND RECOMMENDATIONS


“Existing regulatory regime largely sufficient to allow effective monitoring and enforcement – inadequacies relate primarily to implementation”

- Commission of Inquiry – Finding 52

“Inquiry supports objective (rather than prescriptive) approach to regulation – but pendulum has swung too far from prescription in relation to some well integrity issues”

- Commission of Inquiry – Recommendation 66

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MONTARA – BEFORE AND AFTERFINDINGS AND RECOMMENDATIONS


Prescription increased in relation to WOMPS and safety cases

Limited Legislative Change

• Improvements to well integrity assessment and management

• Creation of single independent regulatory body looking after safety (safety plan), well integrity (WOMP) and environmental approval (environment plan)

• Cement barrier installation, management• NOPSA becomes NOPSEMA- OPGGS Amendment (National

Regulator) Act 2011

• Improved approach to Risk assessment and use of PCCC’s

• Keep those functions separate from issuing of titles – National Offshore Petroleum Titles Administrator (NOPTA) created

• Cessation of well activity if hazard detected

• Expansion of powers of prohibition, suspension and direction by JA, NOPSEMA (various amending Acts and Regulations 2009 – 2013)

• Communication and operator governance

• “Polluter pays” – duty to stop, contain, control and clean up oil spills, undertake monitoring and remediation if directed by NOPSEMA

• OPGGA (Compliance Measures No.2) Act 2013. (Asserted to 28 May 2013)

• Improved collaboration on and assessment of safety cases

Recurring Themes

• Federalism and the splitting of functions (safety, well integrity and environment)

• Operators taking responsibility

• Prescription versus outcome approaches to regulation

Documents

MONTARA – BEFORE & AFTER