01/07/15 Senator Daly Speaks on Petroleum (Exploration and Extraction) Safety Bill 2015

Senator Daly: I move amendment No. 1:

In page 8, between lines 40 and 41, to insert the following:”(3) The Minister shall issue a clear definition on what constitutes ‘as low as is reasonably practicable’.”.

This is an issue we raised on Second Stage. Section 3 provides that the Commission for Energy Regulation, CER, has a responsibility to ensure the risk of accidents offshore as a consequence of the activities of petroleum developers is “as low as is reasonably practicable”. That is a very vague term and surely not the world’s greatest definition. Will the Minister of State indicate how the concept has been defined in legislation in other jurisdictions? The current wording does not provide any clear benchmark or standard to be applied. The petroleum companies’ version of what constitutes “as low as is reasonably practicable” might be very high compared with that of environmentalists, which could be very low indeed. The wording is too vague and I am interested to know what definition is used in legislation in other countries.

Minister McHugh: I acknowledge the Senator’s concerns in this matter. There is no definition of what constitutes “as low as reasonably practicable”, ALARP, set out in either domestic or international legislation. The concept has been considered by the Court of Appeal in the UK and by the courts in Ireland. The Judiciary has found that for a risk to be determined as ALARP, it must be possible to demonstrate that the cost involved in reducing the risk further would be grossly disproportionate to the benefit gained. The concept of reducing a risk to as low as is reasonably practicable is best practice internationally and the concept is reflected in the offshore safety directive.

Providing guidance on what constitutes ALARP is a matter for the Commission for Energy regulation under the Petroleum (Exploration and Extraction) Safety Act 2010. That Act places an obligation on the CER to, among other things, establish and implement a risk-based petroleum safety framework which includes standards and a system for assessing safety performance. In 2013, the commission published a document entitled ALARP Guidance, the purpose of which is to provide detailed guidance to petroleum developers on the CER’s requirements concerning the processes that must be used to determine whether or not a risk is ALARP. It is the responsibility of the petroleum developer to ensure the cumulative risk from its activities is reduced to a level that is ALARP and to demonstrate this through its safety case. The CER will assess whether that demonstration is adequate given the full array of information provided and having regard to the requirements of the 2010 Act and the safety case guidelines.

The ALARP demonstration forms a central part of the safety case submitted by the petroleum developer under the framework. The ALARP guidance is intended to reflect best international practice in this field. In preparing the guidance document, the CER drew on guidance issued by statutory bodies regulating safety in the petroleum exploration and extraction industries internationally, particularly those in the UK and Australia. The commission may amend the guidance document from time to time to take account of changes in national or international practices. It is important that the concept of ALARP be kept under review and modified periodically to reflect developing practices.

Given that the CER has an existing statutory obligation to provide guidance and has already acted in this regard, I do not propose to accept the amendment.

Senator Daly: I suspect even the Minister of State is not happy with the response that was drafted for him. He indicated there is no definition of ALARP but went on to refer to the guidance document that was drawn up. The guidelines in this matter do not have any statutory backup. In other words, petroleum developers can follow the guidelines if they like, but they do not have to do so.They are there for a reason. The guidelines would not necessarily mean that there was any sanction available to the State or any individual if the guidelines were not followed. The reply contradicts itself. It states that there is no definition of “as low as reasonably possible” that can be included, but there are guidelines and it would be quite simple to include a version which includes the phrase “but not limited to” following the guidelines set down. If there are guidelines, they should have a statutory basis. As we all know, including the Minister of State who has dealt with them in his county in the context of planning, guidelines are only indicative and they do not have to be followed. One can tell a planning officer that guidelines exist, but he or she can say that is all they are and they do not have the power of legislation.

This is such a fundamental issue that using terms like “as low as reasonably practical” could be included on a statutory basis in the primary legislation. The legislation could state the guidelines now have regulatory effect and must be followed, but the scope of what they do is not limited in terms of safety. I do not have to emphasise that terms such as “as low as reasonably practical” will make millionaires out of the legal profession. Giving a statutory basis to guidelines and upgrading them to regulations that must be followed, but not limiting them to that alone, might be something the Minister of State would consider. We are not pressing the amendment, but I ask the Minister of State to take the points on board.

—-Later—-

Senator Daly: I move amendment No. 5:

In page 16, between lines 17 and 18, to insert the following:“(c) the requirement for any operator, who is granted an exploration licence or petroleum prospecting licence by the Minister, to put a bond in place, so that in the event of the decommissioning of petroleum infrastructure, the licensee not dismantling the infrastructure within 2 years of extraction being stopped, all cost associated with the decommissioning can be recouped by the State from the bond;”.

This amendment relates to an issue which I raised with the Minister on the last occasion he was in this House. We can learn a lot from the housing crisis. Section 3(b) refers to the modification and decommissioning of petroleum infrastructure. However, nowhere in the Bill is reference made to who will bear the cost of clean-up in that regard. Ultimately, the taxpayer will have to meet that cost unless provision is made in law that an oil and gas extraction company will bear it.

The amendment seeks to ensure that anybody given a licence by the Minister will put in place a bond which could be accessed by the State in situations where a platform is decommissioned but not dismantled within two years. I am not suggesting the amendment as drafted is to the satisfaction of the Attorney General. The Minister of State will, I am sure, have had the experience when on the Opposition benches of being told proposals were not in compliance with the Constitution or to the satisfaction of the Attorney General. I wonder if the current Attorney General is aware of how often that office is mentioned in the context of reasons for not doing something.

For the same reason that there is a bond in place in respect of developers of housing estates, I believe it is entirely practical that in the event of a company not decommissioning an oil and gas platform local authorities would have access to a bond in respect of any infrastructural work in that regard. Otherwise, the taxpayer will have to foot the bill for that work. It does not make sense not to provide that a bond be put in place. It is not that it is prohibitive. Oil and gas companies are supposed to decommission platforms. However, I do not know if they are obliged under current law to do so. If such a provision exists, I have not come across it. Also, in the event of an oil and gas company being deemed insolvent and having no assets that could be seized and sold to ensure no loss to the State, from where would the State get the necessary funding in respect of the decommissioning of a platform? I await the Minister of State’s response to the introduction of this very practical measure. As a requirement for a bond has been already been put in place in respect of the construction industry, I see no reason a similar measure cannot be put in place for the oil and gas industry in respect of the decommissioning of oil and gas platforms, the cost of which would be hundreds of millions of euro. A bond is a very practical solution and would not cost the State anything.

Minister McHugh: I agree on the need to learn from past mistakes. No greater mistake was made than that in respect of the construction industry. The old adage that those who fail to plan plan to fail comes to mind. I agree with the overall principle of the Senator’s argument. It is important, however, to point out that in the history of this State only four fines have been issued in respect of commercial production.

In regard to whether the State or the company should bear the cost of works in this area, the decommissioning regime currently in place in respect of the Kinsale and Corrib gas fields is based on the full cost of decommissioning being borne by the holders of the petroleum lease and not the State. Licensees are also obliged to provide an outline of plans and timeframe for decommissioning of the facilities, including full details of the methods, timing and cost of decommissioning, which are included in a separate facilities decommissioning plan. This plan must be agreed with the Minister early in the life of a producing field and is then subject to review over the lifetime of the field. Such plans will generally make provision for a financial formula relative to reserves left in the field versus the cost of producing those reserves. This provides a trigger for the decommissioning process.

Provision is also made with regard to the obligation on all parties to the lease to post a decommissioning a security once the decommissioning process has been triggered. A petroleum lease also includes a condition that requires a parent guarantee, which means that a deed of guarantee and an indemnity in favour of the Minister must be given by each licensee. This, in effect, means that the Minister has the authority to call on this guarantee in the event of a breach of the lease condition, including obligations with regard to decommissioning.

This Bill is focused on safety and the prevention of major accidents and the question of liability for the cost of decommissioning is already addressed elsewhere. I do not, therefore, propose to accept the amendment.

Senator Daly: The reason I raised the issue is because decommissioning of petroleum infrastructure is mentioned in the legislation. The Minister of State said that the guarantee is given by a parent company. The problem with companies is that they can become insolvent. The reason we put in place the requirement for a bond in respect of the construction of housing estates is to ensure a third party insurance company or otherwise is available in the context of redress. The provision to which the Minister of State referred in his response appears to be a very cumbersome process in the context of ensuring no loss to the State. The decommissioning process is very expensive. The only motivation of petroleum companies is profit, such that a company that does not have another licence in the Irish territorial area will not be too concerned about cleaning up any mess it leaves behind. This has been, unfortunately, the experience in respect of many companies. I do not think the Minister of State or I will be around to see the consequences of this. I believe a bond is a very practical measure, one which would not put too much pressure on the industry. However, I thank the Minister of State for his reply.

—-Later—-

Senator Daly: I move amendment No. 6:

In page 22, line 32, to delete “not exceeding €3,000,000”.

This is a simple amendment which deals with an issue we discussed previously.I do not know why we would limit a fine for non-compliance associated with oil and gas extraction to €3 million, which I am not saying is an insignificant sum. If the cost of any related issue, such as clean-up, is greater than that, it is a matter for the taxpayer, which is the ultimate issue here. I wonder where the figure of €3 million came from. Why not delete it and state that there is no limit to the potential fine? As I pointed out on Second Stage, 8,000 barrels of oil were lost in the first 24 hours after the Deepwater Horizonincident, and the loss was exponentially higher for the three years it took to stop the leaks and reduce the damage that was being done. I merely wanted to get the Minister’s view on that.

Minister McHugh: There are a lot of broader issues being discussed here. As I stated at the outset, it is a complex issue. There is no harm in raising the issues and, at a different stage, having these debates.

There is a safety regime that has been agreed to, with a system of fines for companies that are not following the proper implementation of that safety regime. The issue of environmental damage is separate to this legislation. It is merely a fine for failure to ensure that the safety case and safety management system are implemented. As I said earlier, there is a separation here. This is not the section that addresses liability for environmental damage arising from petroleum activities. The fine has no bearing on environmental pollution or any clean-up costs relating to a major petroleum hazard, to which I will refer in a moment. As for the amount of the fine, it is set at €3 million for an instance of non-compliance with a safety case or safety management system. This is considered proportionate and is consistent with the provisions of the existing fines set out in the Petroleum (Exploration and Extraction) Safety Act 2010.

Turning to the question of liability, section 7(9) of the Bill, which transposes Article 7 of the directive, provides that “a petroleum undertaking is financially liable for the prevention and remediation of environmental damage”. The Bill does not propose a limit on such liability. More generally, section 22(2) of the Bill provides that in assessing an application for any authorisation, the Minister must consider, among other matters, the ability of the applicant “to meet the costs for the immediate launch and uninterrupted continuation of all measures for effective emergency response and subsequent remediation in the event of a major accident”. The Minister must also be satisfied that the applicant for an authorisation has “put in place appropriate insurance, indemnity provision or other financial assurance instruments to cover liabilities potentially deriving from the particular petroleum activity or activities in question”.

As the Bill needs to provide guidance with respect to the maximum level of fines that may apply, I do not propose to accept this amendment.

—-Later—-

Senator Daly: I move amendment No. 9:

In page 27, line 15, to delete “and no later than 24 hours” and substitute “within 180 minutes”.

The amendment relates to what seems like an inordinate delay in the time allowed for the commission to be informed about any immediate danger or risk to human health in relation to a petroleum incident. The Bill provides for a timeframe of “no later than 24 hours”. As I pointed out earlier, in the case of Deepwater Horizon, 8,000 barrels of oil were lost in 24 hours. In the amendment, we submitted a figure of 180 minutes. It is not asking much of somebody to pick up the phone within three hours to inform the Government about an incident. Twenty-four hours looks like an awfully long time in which somebody could be sitting back.

This is only about process. We want to ensure that operators, rather than spending time trying to solve the problem internally, inform the State as soon as is reasonably practicable. At least there is a defined figure here of 24 hours, but I think the Minister of State would agree that 24 hours, in view of the immediate danger to human health from a petroleum-related incident, is too long. We do not want operators to sit back and say “We have another 23 hours and 59 minutes before we have to inform the Government.” I ask the Minister of State to accept the amendment. Even 180 minutes, or three hours, does not seem to represent an emergency. One would imagine that 60 minutes would be appropriate, but we will give them 180 minutes if they feel they need to assess it for a little longer than that.

Senator McHugh: 

I will try to be as co-operative as possible. Every company has bought into a safety regime, and companies will have their triggering and alert systems. That is done straight away, but this provision is about providing a report. It is not a one-line or two-line message stating that an incident has happened at such-and-such a place. It refers to a full and extensive report.

The purpose of the Bill, to elaborate on the matter a little, is to transpose the offshore safety directive into domestic law to ensure that there is consistency in the regulation of safety with respect to petroleum activities throughout EU member states. Section 15(2) of the Bill is a direct transposition of a provision in the directive, which states:

Where an activity carried out by an operator or an owner poses an immediate danger to human health or significantly increases the risk of a major accident, Member States shall ensure that the operator or the owner takes suitable measures which may include, if deemed necessary, suspending the relevant activity until the danger or risk is adequately controlled. Member States shall ensure that where such measures are taken, the operator or the owner notifies the competent authority accordingly without delay and no later than 24 hours after taking those measures.

The purpose of this provision is twofold. First, its intention is to ensure that the owner and operator are bound by these obligations. Second, the primary function is to ensure that immediate action is taken to address the cause of any imminent danger and that the company concerned, having done so, notifies the regulator as soon as possible thereafter.The directive requires immediate notification in the event of a petroleum incident. It requires notification within 24 hours where an operator or owner takes suitable measures, including suspending an activity where the activity poses an immediate danger to human health or significantly increases the risk of a major accident. With the prescribed timelines, the directive differentiates between an incident that has actually occurred and a potential danger that an owner or operator has acted to address. It is reasonable, therefore, that the text of the directive be transposed into Irish law as set out. On this basis, I do not propose to accept this amendment.

On the face of it, I appreciate the argument Senator Daly put forward. However, it is important to point out that the reporting mechanism is not a phone call or a one-line email. It is a full report of what the company did and how the owner or parent company implemented its safety plan within that short period of time, which, obviously, might mean shutting down operations.

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