Legal framework governing environmental regulation of the oil and gas industry - Essay Example

?“Have international treaties such as UNCLOS and MARPOL, region conventions such as OSPAR, applicable EU Directives and UK national legislation led to “over-regulation” and possibly confusion (at both government/operator levels) in environmental protection, control and monitoring in the UK offshore oil and gas industry? In order to highlight your conclusions, critically examine key environmental legislation and regulations relating to the offshore O and G industry in another European country.” The constant need for energy in the modern world has made the offshore oil and gas industry a vital one for society. Without oil and gas, commerce will grind to a halt and daily life will be irreparably changed. A future without oil and gas is difficult to imagine. And yet, the oil and gas industry are also responsible for some of the biggest environmental disasters that the world has known, making it imperative to set up stringent regulations to ensure that environmental catastrophes and adverse ecological consequences are prevented, or at least mitigated. It then becomes necessary to balance these two sometimes competing interests and craft a regulatory framework that will take into account industry imperatives of the oil and gas sector, whilst at the same time ensuring that resource sustainability issues are adequately addressed. This balancing act, however, is not so easily done. Environmentalists argue that the environmental regulations are not enough and that companies can still routinely flout the prohibitions, causing long-term damage to the planet. On the other hand, industry players say that the restrictions are too heavy-handed, thus unduly curtailing their business. It is in light of this that this paper evaluates the legal framework – international treaties, EU directives, national legislation – of the UK. The objective is to determine whether or not this is a case of “over-regulation” or “under-regulation”. It begins by giving a brief background on the nexus between the offshore oil and gas industry and the environment. The second part will be an overview of the legal framework governing environmental regulation of the oil and gas industry in the United Kingdom. The third part will be a comparison between the legal framework of the UK and of the Netherlands. The Offshore Oil and Gas Industry and the Planet Experts have identified the three major environmental problems caused by the oil and gas industry to be air pollution, acid rain and global warming. These problems are found in the entire production chain, from manufacture to distribution to consumption of the oil and gas. According to Gao: environmental problems start right away with exploration activities such as seismic  surveys and geological prospecting, albeit the environmental interference and disturbance at this stage are limited. Second, it is interesting to observe that, in the upstream operations, environmental problems and their impacts tend to increase and build up along with the project's progress, from the initial visibility and acoustic issues at the exploration phase, accidental spills and blow-out at the development stage, and to operational discharge and emissions such as gas flaring during the production period1.  This is because of the precarious nature of oil and gas extraction and emission. The problem is also political because many of these offshore oil and gas extractions take place in the developing world, where vulnerable communities are hard put to defend their resources from external influences, thus jeopardising the sustainability of these resources and availability for their own consumption. Without regulation, what the world will have in its hands is a veritable time bomb – ticking and waiting to explode. Legal framework of the offshore oil and gas industry The legal framework of the offshore oil and gas industry in the United Kingdom is composed of several components. The primary international treaties that govern offshore operations are the MARPOL (73/78) which is made to apply to Merchant Shipping Regulations and prevent pollution in offshore drainage activities and the OSPAR Convention, which deals with effluents and wastes at sea as a result of discharges from oil drilling and oil plants. The other international agreements are the Convention on the Continental Shelf 1958, Convention on Fishing and Conservation of the Living Resources of the High Seas 1958, Convention on the High Seas 1958, OSPAR Convention 1992, Convention on Civil Liability for Oil Pollution Damage 1969, Convention on Long-range Transboundary Pollution 1979 and United Nations Framework Convention on Climate Change. Within the European Union, there is the EU Directive on Integrated Pollution Prevention and Control 96/61/EC (IPPC Directive), which was formally adopted on 24 September 1996. The Directive compels Member States, to ensure that oil refineries are only given permits if they comply with the standards of pollution prevention reposed within the Directive. The IPPC Directive has been integrated in domestic law in the UK via the Pollution Prevention and Control Act 1999 (PPC Act). Under the Law of the United Kingdom, the offshore oil and gas industry is regulated by the Environmental Protection Act 1990 and the Offshore Chemical Regulations 2002. A very important principle that attends UK environmental legislation is what is known as the ‘precautionary principle’. The adoption of the precautionary principle is reposed in Article 10.6 of the Rio Declaration, to wit – Lack of scientific certainty due to insufficient relevant scientific information and knowledge regarding the extent of the potential adverse effects of a living modified organism on the conservation and sustainable use of biological diversity in the Party of import, taking also into account risks to human health, shall not prevent that Party from taking a decision, as appropriate, with regard to the import of the living modified organism in question as referred to in paragraph 3 above, in order to avoid or minimize such potential adverse effects.2 Another principle is the ‘sustainable development’ principle, which is contained in the report of the World Commission on Environment and Development 1987 and stated as follows: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs"3 Is there a case of ‘overregulation’? This paper argues that the UK oil and gas industry may in fact be right when it states that the environmental regulations in the United Kingdom have created a confusing plethora of rules that overregulate the industry, confuse the stakeholders and implementers, and do not adequately set out the mechanisms and process with which to appeal or seek redress. Some of the environmental rules actually overlap with each other. The Regulatory Enforcement and Sanctions Act 2008 (RESA) could have been an opportunity to organise and clarify the sanctions pertaining to environmental violations, but it only covered a small number of environmental offences. And then there is the Waste Framework Directive 2008 which contains new sanctions as well. And then there are as well Environmental Permitting Regulations (EPR) which impose liabilities as well. The appeals process demonstrate the lack of incongruity among these regulations. A study4 made by the UK Environmental Law Association and King’s College London states that: It is the appeals mechanisms in relation to the various enforcement options available to the regulator that demonstrate the lack of integration in this area. Thus appeals against the Environment Agency’s use of RESA sanctions are heard by the First&Tier Tribunal, appeals against a notice under s59 Environmental Protection Act go to the Magistrates’ Court, appeals against revocation of a permit or enforcement notices under Environmental Permitting Regulations go to the Secretary of State (or Welsh Government), and waste prosecutions go the Magistrates’ or Crown Court. Yet all could arise from the same set of facts. This disintegrated set of appeal paths that the regulator may be called on to follow is not the result of any problems within the administration, but is due to the varying and disconnected statutory provisions that provide enforcement ‘options’ of how to deal with the same environmental problem. There are also jurisdictional issues that are problematic. To use the example of Gao5, “ the 1973/78 MARPOL, for instance, first specifically excludes jurisdiction over pollution and discharge arising from offshore exploration and exploitation, and other associated operations; and then the annex brings back some facets of offshore operations under its provisions.” It is easy to imagine that this might be very confusing for those who want to adhere to environmental guidelines and do not know which is the applicable law. We now proceed to an interesting development that could impact on the oil and gas industry. It involves biotechnology but because of the increasing nexus between offshore gas and oil and biotechnology, industry leaders speculate that they will be affected by it as well. One of the most recent, if not the most recent, significant developments in the international policy regime governing the environment is the Nagoya-Kuala Lumpur Supplementary Protocol on Liability and Redress to the Cartagena Protocol on Biosafety (hereinafter NKLSP), adopted on October 16, 2010. While the NKLSP is a significant step forward in the direction of seeking accountability for damages wrought by biotechnology and its transnational movement, it is immediately discernible that the Supplementary Protocol is still saddled by a number of limitations. A lot of these limitations have to do with the inherent nature of biotechnology that make it difficult to ascertain with any veracity the extent of damage that it has caused, if indeed the causation can be proven in the first place. According to Kmeri-Mbote, “In international law, liability is normally associated with the obligation to provide for compensation for damage caused to persons, property and the environment. Rules of state liability at international law for the fundamental basis for liability and redress in international law.6” And yet, a perusal of the NKLSP reveals that non-mandatory terms were used with regard to the authority of States to impose penalties and assign liability on entities under their jurisdiction for damages caused to other states7. Also, biotechnology often involves private operators, exporters and businesses are the ones that engage in the transport of biotechnology, not countries like the United States, Argentina and Canada. According to Duall, “A regime that does not attribute private conduct to the State would significantly reduce the effectiveness of a liability regime and ignores the existence of obligations on States to regulate and control the conduct of private persons within its jurisdiction or control.8” Whilst the NKLSP does mandate states to regulate the conduct of private entities under their jurisdiction, there are no consequences for the states for if these provisions are ignored. Secondly, the NKLSP defines damage as: an adverse effect on the conservation and sustainable use of biological diversity, taking also into account risks to human health, that … is measurable or otherwise observable taking into account, wherever available, scientifically-established baselines recognized by a competent authority that takes into account any other human induced variation and natural variation; and … is significant. (Article 2.2B, NKSP) The main problem with this definition, as also articulated by Tsioumani9 is that it leaves much discretion in the domestic laws of the country that has jurisdiction to prosecute the damage. This means that the UK will have to craft its own legislation again. But another problem may be equally important and compelling: as stated by Duall10 once toxins are released into the atmosphere, by gas and oil industries for example, it is exceedingly difficult to reverse the damage that is wrought and the common notion of restitution and redress – that is, to endeavour to bring things to their previous condition – might be difficult, if not impossible11. A last point is that it is quite difficult to measure damage if the damage takes place or is discernible far into the future, which is what can happen where biotechnology is concerned. Given that the propensity of the courts is to look for hard scientific evidence, that evidence may be lost and causation no longer traceable. Comparison with environmental regulations in the Netherlands In comparison, environmental regulations in the Netherlands are integrated and are incorporated in the Environmental Management Act. It provides a holistic legal framework that sets out the tasks at the level of the national, provincial and municipal governments. According to the Ministry of Infrastructure and the Environment in the Netherlands12, the environmental management is composed of the following components: Environmental plans, for instance, the national waste management plan that regulates municipal waste collection, disposal of discarded equipment such as refrigerators and TVs, and permits for hazardous wasteshipment. Environmental quality criteria for emissions and discharges of harmful substances such as greenhouse gases and heavy metals to air, water and soil.  Environmental impact assessment is a prerequisite for the construction of major infrastructure such as oil refineries, nuclear power plants, chemical plants, roads, railways, and oil and gas pipelines.  Environmental permits: In addition to regulations for the emission of substances harmful to the environment, large companies, such as chemical plants, are required to obtain environment permits that stipulate limits for the discharge of substances harmful to the environment. Environmental reporting is directed to stimulating companies to make production cleaner and more environmentally friendly. Many companies such as those involved in metal processing and chemical production are required to publish an annual environmental report. The Ministry is responsible for ensuring that the reporting requirement of the EU Pollutant Release and Transfer Register (PRTR) are met. Those companies and organisations required to prepare an Integrated PRTR report on waste, air emissions (greenhouse gases), and discharges into water sources are listed in the Publicatieblad van de Europese Unie Bijlage II van de EG-verordening PRTR.  Enforcement. VROM Inspectorate is largely responsible for ensuring the provisions of the Environmental Management Act are enforced. Enforcement is also a task of the municipalities, the police and the justice system. Whilst there are still several problems with UK environmental law, it still is important to remember that we are still on the right track. The relationship between trade and the environment is a complex one – fraught with tensions and imbalances. There are no easy answers, and there are no fast solutions. Ths is made even more complicated by the fact that the environment is undergoing rapid deterioration. While the law is replete with invocations to protect and preserve our diminishing biodiversity and natural resources, it is impossible to vew the law as a neutral bedrock, without taking into account the needs of the people for fuel through oil and gas. There is a need to strike a balance between market imperatives and environmental considerations. References Duall, E. (2004). “A Liability and Redress Regime for Genetically Modified Organisms Under the Cartagena Protocol.” George Washington International Law Review. Vol. 36, No. 1. Pp. 173-201. Doyle, J. (1995). “Effects of genetically engineered microorganisms on microbial population and processes in natural habitats”. Advances in Applied Microbiology. Vol. 40. p. 237. Gao, Z. (2011). “Environmental Regulation of the Oil and Gas Industries.” Available at http://www.dundee.ac.uk/cepmlp/journal/html/vol2/article2-11.html Kameri-Mbote, P. (2004). “Towards a Liability and Redress System Under the Cartagena Protocol on Biosafety.” East African Law Journal. Vol. 1. P. 119. Kloppenburg, J. and Burrows, B. (2001). “Biotechnology to the Rescue? Ten Reasons why Biotechnology is incompatible with Sustainable Agriculture” in B. Tokas (ed.) Redesigning Life? The Worldwide Challenge to Genetic Engineering. London: Zed Books. Tsioumani, E. (2010). “Liability and Redress: Supplement to the Nagoya Protocol.”Environmental Policy and Law. Vol. 40, No. 6. [Electronic]. Available at http://www.metapress.com/content/c22450034j029359/fulltext.pdf UK Environmental Law Association and King’s College London. “The State of UK Environmental Legislation: Is there a Case for Reform?” August 2011. Available at http://www.lexislegalintelligence.co.uk/lexis_uploads/intelligence/pdfs/UKELLAReport.pdf UK Oil and Gas. Environmental Legislation Website. Available at http://www.ukooaenvironmentallegislation.co.uk/contents/pages/statutory.htm Laws MARPOL (73/78) OSPAR Convention Convention on the Continental Shelf 1958 Convention on Fishing and Conservation of the Living Resources of the High Seas 1958 Convention on the High Seas 1958 Cartagena Protocol OSPAR Convention 1992 Convention on Civil Liability for Oil Pollution Damage 1969 Convention on Long-range Transboundary Pollution 1979 United Nations Framework Convention on Climate Change. EU Directive on Integrated Pollution Prevention and Control 96/61/EC (IPPC Directive) Offshore Chemical Regulations Act 2002 Read More