Directive 2013/30/EU and the Future of the Offshore Environmental,

Health and Safety Regime in the UK

The Offshore Safety Directive

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The Offshore Safety Directive The Future of the Offshore EHS Regime in the UK

Contents

Click the page name to navigate through the document.

1.0 Introduction ........................................................................................................................ 2

1.1 Background ............................................................................................................. 2

1.2 Where can I find out more? .................................................................................... 2

2.0 Implementation of EU directive on the safety of offshore oil and gas operations in

the UK ................................................................................................................................. 3

3.0 The future of the UK offshore competent authority following the Wood Review and

the requirements of the Offshore Safety Directive ........................................................ 5

4.0 Offshore Safety Directive - Prevention of major accidents and reporting on major

hazards ............................................................................................................................... 7

5.0 Offshore Directive – Liability for environmental damage ........................................... 10

6.0 Offshore Directive – Financial responsibility .............................................................. 11

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1.0 Introduction

1.1 Background

The Council of the European Union adopted

Directive 2013/30/EU on the safety of offshore

oil and gas operations in June 2013. The

Directive sets out the minimum requirements

for preventing major accidents at offshore oil

and gas facilities and for limiting the

consequences of any such accident.

The Directive will apply to future offshore oil and

gas installations and operations, and, subject to

relevant transitional arrangements, to existing

installations.

The UK’s Department of Energy and Climate

Change (DECC) and the Health and Safety

Executive (HSE) will jointly lead the transposition of

the Directive since it contains requirements relating

to licensing, environmental protection, emergency

response, liability and safety. Both DECC and

HSE’s implementation teams are currently working

towards drafting new regulations.

This short series of articles gives an overview of

various developments surrounding the directive,

including:

The implementation of the Directive

The future of the offshore Competent Authority

Reporting and prevention of major hazards

under the Directive

Liability for financial damage under the Directive

Financial responsibility under the Directive

1.2 Where Can I Find Out More?

If you would like to know more, please contact

Helen Mitcheson at hmitcheson@cra.co.uk or on

0151 207 7846. Alternatively, visit our Oil and Gas

webpage for more information about the services

we provide to the sector.

The full text of the Directive can be found on the

EUR-lex website here.

CRA will provide regular updates throughout the

implementation of the Directive into the UK offshore

regulatory regime via our website news feed

www.cra.co.uk/news, and in our bimonthly

newsletters. You can sign up to receive our

newsletter via our homepage www.cra.co.uk.

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2.0 Implementation of EU Directive on the Safety of Offshore Oil and Gas Operations in the UK

The Council of the European Union adopted

Directive 2013/30/EU on the safety of offshore oil

and gas operations in June 2013. The Directive

sets out the minimum requirements for preventing

major accidents at offshore oil and gas facilities and

for limiting the consequences of any such accident.

The Directive will apply to future offshore oil and

gas installations and operations, and, subject to

relevant transitional arrangements, to existing

installations.

The UK’s Department of Energy and Climate

Change (DECC) and the Health and Safety

Executive (HSE) will jointly lead the transposition of

the Directive since it contains requirements relating

to licensing, environmental protection, emergency

response, liability and safety. Both DECC and

HSE’s implementation teams are currently working

towards drafting new regulations.

Meeting the Key Objectives of the Directive

To achieve the key objectives, several changes will

be made to the current offshore safety and

environmental regime. These include:

The creation of an independent offshore

competent authority, independent from those

with interests in the economic development of

offshore resources. The new competent

authority will have safety AND environmental

regulatory functions.

The integration of the management of safety and

environmental risks. This will impact on the

safety case, well notification, independent

verification scheme and well examination

requirements.

The introduction of independent verification of

safety and environmental critical elements.

New requirements for the production of

emergency response plans. Operators must:

- Prepare and submit emergency response

plans - taking into account the risk

assessments undertaken as part of the major

hazards reporting, including an analysis of

the oil spill response effectiveness.

- Notify Member States without delay if a major

accident occurs, or may be about to occur.

- In the event of a major accident, take ‘all

suitable measures’ to prevent escalation and

to limit its consequences upon human health

and the environment. ‘All suitable measures’

is not defined in the Directive, however, it

does state that ‘Operators should reduce the

risk of a major accident as low as reasonably

practicable, to the point where the cost of

further risk reduction would be grossly

disproportionate to the benefits of such

reduction.’ In addition, the Directive provides

that Operators are not to be relieved of their

duties under the Directive due to actions or

omissions leading or contributing to major

accidents by their contractors.

New requirements on liability for environmental

damage. The Directive amends the 2004

Environmental Liability Directive (2004/35/EC).

The licensee will be financially liable for the

prevention and remediation of environmental

damage caused by offshore oil and gas

operations.

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The reporting on major hazards for installations

prior to commencement of operations and

ensure that this is updated when appropriate or

when required by the competent authority. The

report must consider both safety and the

environment. This requirement is likely to be

transposed into new Offshore Installation (Safety

Case) Regulations, to amend the Offshore

Installations (Safety Case) Regulations 2005.

Duties on operators registered in EU member

states to report major accidents that occur

outside of Europe.

Transitional arrangements for existing

installations and wells.

Key Dates

June to September 2014 - Formal Consultation

January to February 2015 - Ministers agree new

legislative package

March 2015 - New guidance to be published

19th July 2015 - Member States must bring into

force the laws, regulations and administrative

provisions necessary to comply with the

Directive;

19th July 2016 - Laws, regulations and

administrative provisions applied to owners and

operators of planned production installations and

operators planning or executing well operations;

19th July 2018 - Member States are to apply the

laws, regulations and administrative provisions

to existing installations.

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3.0 The Future of the UK Offshore Competent Authority Following the Wood Review, and the Requirements of the Offshore Safety Directive

In the UK at present, the Health and Safety

Executive (HSE) assumes responsibility for

offshore oil and gas health and safety and the

Department of Energy and Climate Change (DECC)

regulates both the economic and environmental

aspects of oil and gas developments.

Calls for Change from the Wood Review

In February 2014, Sir Ian Wood launched the Final

Report of his UK Continental Shelf (UKCS)

Maximising Recovery Review. This called for a new

Regulator to oversee the UK’s offshore operations.

This new Regulator would be an ‘arm’s length’

regulatory body charged with effective stewardship

and regulation of UKCS hydrocarbon recovery and

maximising collaboration in exploration,

development and production across the industry.

On 11th June 2014 at the Oil and Gas Industry

Conference, Chief Secretary to the Treasury the Rt

Hon Danny Alexander MP announced the name for

the new industry regulator- the Oil and Gas

Authority- and confirmed Aberdeen as its

headquarters. The Oil and Gas Authority will be

designed to encourage economic production in the

UK and provide sustainable long-term support for

the industry.

The Wood Review has highlighted a number of

issues with the current regulatory system in place

for the UKCS. In particular, the review highlights

that DECC (formerly DTI) has decreased in size

over the years and is struggling to perform a more

demanding stewardship role, which includes

economic and environmental regulatory aspects.

At present, the DECC must compete for resources

within a body that is balancing licensing, economic

and environmental aspects. Wood states that the

new Regulator must have a significant degree of

independence and enhanced autonomy, resources

and capability, thus making it far more involved and

influential in the UKCS industry’s challenges and

helping to ensure maximum economic recovery

from the industry.

Calls for Change from the Offshore Directive

The offshore directive prescribes that Member

States must appoint a Competent Authority

responsible for the following safety and

environmental regulatory functions:

Assessing and accepting reports on major

hazards;

Handling notifications of well operations, design

notifications and combined operations;

Determining intervals between inspection of

major hazard risk control measures, including to

the environment, for a given installation or

activity;

Overseeing compliance by operators and

owners with the Directive, including inspections,

investigations and enforcement actions;

Advising other authorities or bodies, including

the licensing authority; and

Cooperating with other competent authorities or

contact points.

Member States are at all times to ensure the

independence and objectivity of the Competent

Authority in carrying out its regulatory functions. In

order to ensure that there is no conflict of interest,

these competent authorities must be independent

from those who deal with the economic

development of offshore natural resources and

licensing of offshore oil and gas operations,

including the collection and management of

revenues from those operations.

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How Will These Requirements Shape the New

Competent Authority(s)?

In February 2014, at two industry briefing sessions,

the HSE and DECC provided some insight into how

the safety and environmental Competent Authority

may look. It is proposed that it will be a partnership

between HSE and DECC, based on a

Memorandum of Understanding (MoU) that will

define the Competent Authority arrangements. Both

the HSE and DECC will concentrate on their own

existing expertise, with day-to-day functions

delivered by the respective parts of the DECC Oil

and Gas Environment and Decommissioning

(OGED) and the HSE’s Energy Division.

There will however be a single, consistent

regulatory face for industry and stakeholders, with a

single set of processes and procedures and single

enforcement model for matters covered by the

Directive. It includes major hazard safety and

offshore environmental events. This will be

achieved, in part, by a single on-line portal through

which submissions and notifications on major safety

hazards or environmental issues can be made.

There will be a single intervention plan for each

duty holder covering all planned inspection

activities by the Competent Authority. Offshore

inspections will be fully coordinated and planned

between DECC and HSE, acting as a joint venture

where appropriate, but a having a lead regulatory

partner.

The independence of DECC will be assured

through changes to the Licensing and economic

regime, in accordance with the proposals outlined

by Wood, for an ‘arm’s length’ regulator, the Oil and

Gas Authority, whose role it will be to ensure

delivery of maximum economic benefits for the

industry and the UK from the UKCS over the

coming years.

What is the Timeframe?

According to information on the UK government’s

website, DECC officials are undertaking detailed

planning work around establishing the new Oil and

Gas Authority. The Oil and Gas Authority will begin

to take shape over the coming weeks and months.

Under the Offshore Safety Directive, the new

Competent Authority will be finalised by July 2015.

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4.0 Offshore Safety Directive - Prevention of Major Accidents and Reporting on Major Hazards

The objective of the Offshore Safety Directive

(Directive) is to reduce, as far as possible, the

occurrence of major accidents relating to offshore

oil and gas operations and to limit their

consequences.

As part of their major accident prevention

procedures, the Directive requires operators and

owners to identify all major accident scenarios

relating to all hazardous activities that may be

carried out on an installation. This includes impacts

on the environment that could arise as a result of a

major accident.

In the event of a major accident, the operator or

owners must take ‘all suitable measures’ to prevent

its escalation and to limit its consequences, both

from a health and safety perspective and in respect

of potential environmental damage. Operators or

owners will be obliged to notify relevant authorities

if a major accident occurs, or if there is an

immediate risk of one occurring.

The risk assessments and arrangements for major

accident prevention should be clearly described

and compiled into a Report on Major Hazards. The

report must be amended in respect of any

significant aspect of the lifecycle of a production or

non-production installation.

No installation will be able to operate in offshore

waters of Member States unless the competent

authority has accepted the report on major hazards

submitted by the operator or owner.

The report on major hazards will be required to

include:

A description of the installation and any

association with other installations or connected

infrastructure;

A demonstration that all major hazards have

been identified, their likelihood and

consequences assessed and their control

measures put into place to reduce risks of a

major hazard event to human safety and the

environment to an acceptable level. This

demonstration must include an assessment of

oil spill response effectiveness;

Details of equipment and arrangements to

ensure well control, process safety, containment

of hazardous substances, prevention of fire and

explosion, protection of workers from hazardous

substances and protection of the environment

from a major event;

A description of the arrangements to protect

persons on the installation from major hazards,

and to ensure their safe escape, evacuation and

rescue.

The report on major hazards will also be required to

include the following documents:

The Internal Emergency Response Plan;

The Safety and Environmental Management

System Applicable to the Installation;

The Corporate Major Accident Prevention

Policy; and

A Description of the Scheme of Independent

Verification.

Currently in the UK, operators are required to

submit an Oil Pollution Emergency Plan (OPEP) to

DECC, and a separate Safety Case to the HSE

prior to the commencement of operations. The

major hazards report will require both safety and

the environment to be considered in the same

report.

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Internal Emergency Response Plan

Operators or owners must prepare and submit an

internal emergency response plan to the competent

authority. This must take into account the risk

assessments undertaken as part of the major

hazards reporting and include analysis of oil spill

response effectiveness.

In addition, Member States are to prepare (in

cooperation with operators) emergency response

plans covering all offshore oil and gas installations

or connected infrastructure within their jurisdiction.

The internal emergency response plan shall contain

the following information:

Description of all foreseeable conditions or

events which could cause a major accident;

Description of the actions that will be taken to

control these conditions or events and to limit

their potential consequences;

Description of the equipment and resources

available;

Arrangements for limiting risks to persons on the

installation and the environment;

An estimate of oil spill response effectiveness,

which considers environmental conditions;

Arrangements for providing early warning of a

major accident to the competent authority;

Evidence of prior assessments of any chemicals

used as dispersants that have been carried out

to minimise public health implications and any

further environmental damage.

Safety and Environmental Management System

Applicable to the Installation

The Safety and Environmental Management

System (SEMS) will be required to be integrated

within the overall management system of the

operator or owner and must include the following

information:

Organisational arrangements for control of major

hazards;

Identification and evaluation of major hazards,

their likelihood and potential consequences;

Integration of environmental impact into major

accident risk assessments in the report on major

hazards;

Emergency planning and response;

Monitoring of performance;

Arrangements for preparing and submitting

reports on major hazards; and

Schemes for independent verification of major

hazard prevention procedures.

Within the current UK offshore legislation, there is a

requirement to have a safety management system.

DECC also has in place a voluntary agreement for

operators to produce an environmental

management system. To fully implement the

Directive, operators and owners will have to set out

their safety and environmental management

measures in a single, comprehensive document.

Corporate Major Accident Prevention Policy

The Corporate Major Accident Prevention Policy

establishes the overall aims and arrangements for

controlling the risk of a major accident, and how

those aims are to be achieved and arrangements in

place at corporate level. Operators and owners will

be required to ensure that their corporate major

accident prevention policy also cover their

production and non-production installations outside

of the EU.

Independent Verification

Member States will ensure that operators and

owners establish schemes for independent

verification of their major accident prevention

procedures and that a description of such schemes

is prepared. These are to be included in the SEMS

and submitted as part of the report on major

hazards.

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The independent verification document must

contain:

A statement by the operator or owner, made

after considering the report of the independent

verifier, that the record of safety critical elements

and their scheme of maintenance as specified in

the report on major hazards is suitable;

A description of the verification scheme,

including the selection of independent verifiers,

the means of verification of safety and

environmental critical elements (SECEs) and

any maintenance requirements to ensure

specified plant in the scheme remain in good

repair and condition.

From a safety perspective, the industry already

establishes an independent verification scheme for

safety critical elements. However, there are new

requirements for SECEs to be included.

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5.0 Offshore Directive – Liability for Environmental Damage

The Environmental Liability Directive 2004/35/EC

(ELD) establishes a framework based on the

‘polluter pays principle’ to prevent and remedy

environmental damage. Although the ELD

excludes oil pollution beyond territorial waters (i.e.

up to 12 nautical miles) from its scope, it has

recently been amended by the 2013 offshore safety

directive.

The Offshore Directive also amends the definition

of ‘water damage’ in the ELD to ensure that the

liability of licensees under that directive applies to

marine waters of Member States as defined in the

Marine Waters Framework Directive (2008/56/EC).

The purpose of the updated definition of ‘water

damage’ is to support the export of the ELD regime

offshore, and to plug a perceived gap in the Water

Policy Framework Regime, by ensuring that an oil

spill which causes any degradation in the

environmental status of marine waters is

considered as ‘water damage.’

The extension of liability to the whole UKCS

through the change to the definition of ‘water

damage’ has the potential to expose oil and gas

companies to a greater level of liability for

remediation costs arising from an offshore incident

resulting in environmental damage. Member States

must put this into effect by 19th July 2015.

A further change is the requirement for licensees to

be financially liable for the prevention and

remediation of environmental damage. The States

will also be obligated to ensure that the licensees

have adequate provision in place to cover all

potential liabilities. This decreases the risk that, in

the event of environmental damage occurring, no-

one will be in a position to finance the remedial

measures required. Imposing this duty upon

licensees, rather than on the operator, means that

all of the parties who stand to gain from a

development, also stand to share in this potential

liability.

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6.0 Offshore Directive – Financial Responsibility

Following the Macondo incident in 2010, it became

apparent that covering the ultimate costs and

losses of an extreme major accident was beyond

the capabilities of even the largest energy

companies.

The offshore directive aims to look at financial

capacity of license holders before the

commencement of the offshore operation under

consideration. The Directive aims to ensure that

financial responsibility is dealt with robustly at the

licensing stages, that the full costs of emergency

response and environmental remediation are

considered and that sufficient financial capacity will

be available throughout the lifecycle of the project.

Financial Responsibility Requirements of the

Offshore Safety Directive

Member States shall ensure that decisions on

granting or transferring licenses to carry out

offshore oil and gas operations take into account

the applicant’s capability to meet a number of

requirements. This includes the applicant’s financial

security to deal with any major accident, including

liability for potential economic damages deriving

from the operation.

The licensing authority will not grant a license

unless it is satisfied with evidence from the

applicant that the applicant has made adequate

provision to cover their potential liabilities deriving

from the operation. This provision must be valid and

effective throughout the complete lifecycle of the

project. Applicants must provide evidence of their

financial capacity.

It is not yet decided how licensees will demonstrate

that they have sufficient financial capacity cover

any potential liabilities as required by the Directive.

However, in January 2013, DECC issued a

guidance note titled ‘Guidance Note to UK Offshore

Oil and Gas Operators on the Demonstration of

Financial Responsibility Before Consent May be

Granted for Exploration and Appraisal Wells on the

UKCS’. This guidance note prescribed that the level

of financial responsibility that companies need to

demonstrate for any particular well should be

calculated by establishing the combined cost of well

control and cost of financial remediation and

compensation from pollution. This information

should accompany the relevant OPEP at the time it

is submitted to DECC for approval.

The guidance note states that financial

responsibility can be verified by means of:

Reliance on credit/financial strength rating of

the operator or co-venturer;

Insurance;

Parent company guarantee/affiliate

undertaking; and

Any combination of the above.

Although these guidelines are not law, DECC is

unlikely to issue consent without sufficient evidence

being provided.

However, with the requirements for financial

responsibility for dealing with liability under the

Offshore Directive, Member States will be required

to ensure that an adequate liability regime is in

place in the event of an accident, and in addition,

what requirements in respect of financial capability

may be appropriate for the licensee to provide.

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