TRANSACTIONAL: Corporate / London: The UK’s response to Macondo: Government response to independent review of UK offshore regulatory regime is published

by King & Spalding
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On 20 April 2010, Transocean’s Deepwater Horizon drilling rig working on BP’s Macondo well in the Gulf of Mexico exploded. The human tragedies, together with the environmental, social, and economic costs inevitably led the U.S. to conduct an extensive review of its regulatory regime. The UK and the European Commission followed suit.

In December 2012, the UK government published its final report on the adequacy of the present regulatory regime for offshore oil and gas operations on the UK continental shelf (“UKCS”) in the post-Macondo era.

UK Offshore Regulatory Regime

Responsibility for offshore oil and gas regulation in the UK is spread across three authorities: (1) the Health & Safety Executive (“HSE”) which is responsible for the safety integrity of E&P operations; (2) the Department of Energy and Climate Change (“DECC”) which is responsible for licensing and drilling consents as well as environmental protection and response; and (3) the Maritime and Coastguard Agency (“MCA”) which is responsible for responding to oil spills.

In 1988, the UK suffered its own “Macondo” when the Occidental-operated Piper Alpha production platform exploded, resulting in 167 deaths. The subsequent regulatory review led to a raft of safety legislation with the effect that the UK’s offshore regulatory regime is now regarded as one of the most robust in the world and acknowledged as a ‘gold standard’. Nevertheless, Macondo provided a poignant reminder of the importance of maintaining and developing a regulatory regime of the highest standard, capable of managing incidents in increasingly complex and remote drilling scenarios.

Maitland Review

In 2011, a regulatory review panel comprising representatives from DECC, the HSE, and the MCA and independent experts was formed and led by Geoffrey Maitland, a Professor of Energy Engineering at Imperial College London, to examine the vigour of the UK regulatory regime in the context of an incident of Macondo’s scale. The panel published its recommendations in December 2011 (the “Maitland Review”).

Whilst acknowledging that the UK’s existing regulatory framework was rigorous and addressing several key features missing from the U.S. regime pre-Macondo, the Maitland Review identified six areas for general improvement:

  • Ensuring existing systems for management of safety and environmental risk are implemented and remain effective;
     
  • Improving learning cultures and processes for spreading best practice;
     
  • Enhancing collaboration between DECC, HSE, and MCA;
     
  • Establishing a clearer control structure in the event of an oil spill;
     
  • Ensuring operators’ liability and ability to pay in the event of a spill; and
     
  • Intensifying research and development efforts towards improving avoidance and management of oil spills.

26 specific recommendations were made across ten themes: Well planning and control; environmental protection; emergency response; learning from incidents and best practice; implementation assurance; competency and training of workforce; workforce engagement; liability and insurance issues; regulator issues; and technology development.

The Maitland Review is available at:
www.gov.uk/government/publications/offshore-oil-and-gas-in-the-uk-independent-review-of-the-regulatory-regime.

European Dimension

The European Commission has made its own proposals in response to Macondo for EU legislation to centralise control and rationalise standards of offshore health and safety and environmental protection across Europe. Centralised legislation has been widely criticised by the UK and its North Sea neighbours, all of which are considered to have domestic regulatory frameworks amongst the best in the world. The Maitland Review noted that “particular care should be taken to ensure that any future changes at an EU level neither dilute the fundamental strengths of the UK system nor undermine the authority of the relevant regulatory bodies within it…” in response to the Commission’s proposals.

UK Government Response

On 18 December 2012, the government published its response to the Maitland Review. The report concluded that the existing legislative framework was fit for purpose, but the majority of the recommendations made by the Maitland Review were implemented in full or have been addressed using an alternative approach. The following key changes, among others, will bolster the existing regime:

  • The Well Life Cycle Practices Forum (“WLCPF”), established in response to Macondo, will become a permanent work group to discuss well-related issues and help operators to implement learning from incidents and share good industry practice;
     
  • WLCPF has developed guidelines on competency of well personnel and on how human factors impact well integrity;
     
  • Operators must carry out emergency response exercises more frequently, every three, rather than five, years;
     
  • Oil and Gas UK, the industry’s trade organisation, will progress the Environmental Assurance Plan, a concept to effect a goal setting approach to environmental regulation;
     
  • An independent review of selected Environmental Statements and Oil Pollution Emergency Plans will take place annually;
     
  • DECC has published new guidance on how UKCS licensees can demonstrate their financial capability to meet the costs of potential incidents arising from drilling exploration and appraisal wells; and
     
  • DECC and HSE have established a new senior oversight group to ensure the offshore regulatory regime remains fit for purpose.

The government also addressed the proposed EU legislation in its December report, confirming that its “negotiating stance” concurred with the Maitland Review’s observations on this point. Importantly, in October 2012, the EU announced that the proposed legislation would be introduced as a Directive instead of, as originally conceived, a Regulation. Unlike Regulations, EU Directives do not have direct effect in EU member states and are implemented through domestic law. A Directive will give the UK some flexibility to address its concern that EU legislation must not “frustrate or delay the potential improvements highlighted in [the Maitland Review]”.

The UK government response to the Maitland Review is available at: www.gov.uk/government/publications/government-response-to-an-independent-review-of-the-regulatory-regime.


  Susanna Marshall
  London
  +44 20 7551 7576
  smarshall@kslaw.com

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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