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New EU Rules Seek To Avoid Repeat Of BP Oil Spill

Date: 28-Oct-11
Author: Barbara Lewis

New EU Rules Seek To Avoid Repeat Of BP Oil Spill Photo: Ann Driver
Preparations to drill a relief well continue at the Macondo oil spill site in the Gulf of Mexico, in this aerial photograph taken from a coast guard helicopter August 21, 2010.
Photo: Ann Driver

The European Union Thursday unveiled draft plans to regulate offshore oil and gas across the bloc and guard against a repeat of BP's catastrophic Gulf of Mexico spill as firms drill deeper to tap remaining reserves.

The proposals are the first attempt to regulate the offshore industry across the 27-member bloc and would only become law if approved by EU governments and lawmakers in the European Parliament.

They could hit resistance from the industry, which has argued national legislation is adequate, and they stand to generate political heat in Britain, for instance.

Home to the largest offshore industry in the EU, Britain is particularly sensitive to anything that can be viewed as an extension of the powers of EU officials in Brussels.

The cost of implementing the measures, which would be mostly met by industry, is estimated at more than 130 million euros per year ($179 million) in a draft text.

Potentially, the cost of accidents is far higher.

BP's disaster in the Gulf of Mexico last year, which killed 11 workers and led to the biggest oil spill in U.S. history, is estimated to have cost more than $40 billion.

"The technical challenges are greater and the risks are greater as well," Energy Commissioner Guenther Oettinger told a news conference, referring to the increased amount of deepwater oil and gas activity.

"Securing best industry operations in all our offshore operations is an indisputable must," he said. "We think our measures are unbureaucratic, effective and proportionate."

EMERGENCY RESPONSE PLANS

Only this week, BP was granted its first permit since its accident to drill a new well in the U.S. Gulf after it passed a series of U.S. regulatory hurdles.

The new EU regulation would require all 27 member countries to enforce stricter standards before awarding offshore operating licences and would enforce a regime of independent checks.

Companies would have to draw up detailed safety reports and emergency response plans.

The draft proposals complement an existing directive on environmental liability, under which the polluter pays.

The Commission aims to expand the reach of that legislation from 12 nautical miles offshore to 200 nautical miles, which Oettinger said would include virtually all offshore oil and gas platforms.

Oil and gas companies would only be subject to the EU rules within Europe, and although the Commission said it hoped European firms would follow best practice world-wide, it could not enforce that.

"While there is agreement on the principle that EU-based companies should not lower standards when operating outside the EU, enforcement would not be feasible," said the draft text.

As far as many in the oil and gas industry are concerned, there is no need for anything more than national legislation.

"Blanket regulation of the type we understand is now being proposed will not, in our opinion, even achieve that end. Instead it will serve to confuse and complicate," said Malcolm Webb, chief executive of industry body Oil & Gas UK.

"We think we've got an excellent regime in place at the moment and we'd be very concerned about anything that would change that position," said a spokesman for Britain's Department of Energy and Climate Change.

Some energy lawyers also see national legislation as enough.

"Further, only a minority of member states have offshore activities going on, so why should the EU get involved?" asked Lucas Bergkamp, a partner at Hunton & Williams in Brussels.

The European Commission's stance has softened since the immediate aftermath of the Deepwater Horizon accident, when it floated the idea of a moratorium on new deepwater drilling operations.

Previous plans also showed the Commission had considered proposing that oil and gas multinationals headquartered in Europe be forced to apply EU standards wherever they operated.

Rebecca Harms, president of the Greens group in the European Parliament, said the new draft law was "certainly an improvement," but the Commission should be going further.

"Drilling in environmentally sensitive areas like the Arctic should be banned," she said in a statement.

The Commission proposals also stopped short of seeking to rule on mandatory insurance for companies in the event of an accident.

Oettinger said the Commission had asked for a study to be carried out into liability insurance. ($1 = 0.724 Euros)

(Additional reporting by Sarah Young and Tom Bergin in London; editing by Rex Merrifield and Anthony Barker)

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