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Australia – Offshore Petroleum Regulator Releases New Guidance To Aid Titleholder Compliance.

19 November, 2014

What You Need To Know

 

  • The National Offshore Petroleum Safety and Environmental Management Authority recently publishedimportant guidance material intended to aid petroleum titleholder compliance with requirements under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) and associated regulations.
  • The newly published guidance material covers financial assurance for petroleum titles, general principles for undertaking planned petroleum environmental inspections, and contains information on the contentand detail required for an Oil Pollution Emergency Plan and the risk management process for oil pollution.

 

What You Need To Do

 

  • Offshore industry participants should review and use this guidance material to make the necessary preparations to comply with the requirements under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) and associated regulations from 1 January 2015 onwards.
  • Offshore industry participants should consider registering and attending industry information sessions that the National Offshore Petroleum Safety and Environmental Management Authority has scheduled on the financial assurance guideline in Perth on 12 or 13 November 2014 and in Melbourne on 18 November 2014.

Overview


New Guidance Material


On 3 November 2014, the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) published new guidance material to aid petroleum titleholder compliance under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (OPGGSA), the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 (Cth) (OPGGS(E) Regulations), and the Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment (Environment Measures) Regulation 2014 (Cth) (Amending Regulations).


NOPSEMA’s newly published guidance material specifically covers issues relating to financial assurance for petroleum titles, general principles for undertaking planned petroleum environmental inspections, and information on the content required for an Oil Pollution Emergency Plan submitted as part of an acceptable environment plan (EP) and the management of oil pollution risk.


In particular, the following material has been made available by NOPSEMA:

 


History Of Changes To The OPGGS(E) Regulations 

 

The Amending Regulations commenced on 28 February 2014, which significantly changed the OPGGS(E) Regulations in order to streamline environmental approvals for offshore petroleum activities. The Amending Regulations and an Explanatory Statement are available here.

 

Guideline: Financial Assurance For Petroleum Titles


Background


The financial assurance obligations, which commenced on 29 November 2013 to complement and support the “polluter pays” amendments to the OPGGSA, require a petroleum titleholder to maintain sufficient financial assurance to ensure it can deal with extraordinary costs, expenses or liabilities arising in connection with the carrying out of an offshore petroleum activity pursuant to the OPGGSA. The amendments:

 

  • clarified the compulsory nature of the revised financial assurance requirement; and 
  • broadened the ability of petroleum titleholders to comply with the requirement by extending the previous narrow concept of insurance to instead include and recognise a variety of forms of financial assurance.

On 27 October 2014, following a period of consultation with the Australian Petroleum Production and Exploration Association (APPEA) and other industry stakeholders, the Commonwealth Department of Industry released the draft Offshore Petroleum and Greenhouse Gas Storage (Environment) Amendment (Financial Assurance) Regulation 2014 (Cth) (Draft Financial Assurance Regulations) for public consultation, which will commence on 1 January 2015.


The Draft Financial Assurance Regulations will put in place a mechanism for NOPSEMA to oversee and ensure that, while it may assess an EP for an offshorepetroleum activity, it may not accept the EP on or after 1 January 2015 unless it is “reasonably satisfied”that financial assurance in relation to the petroleum activity is sufficient, and in an acceptable form.


Purpose And Scope


NOPSEMA’s newly published Guideline (currently in draft form) provides important guidance to be read with the Draft Financial Assurance Regulations on how petroleum titleholders establish that they are compliant with the duty to maintain sufficient financial assurance, and how they should provide NOPSEMA with an acceptable declaration of that compliance.The Guideline also details the steps a petroleum titleholder submitting an EP must take to confirm ongoing compliance with the financial assurance duty.


Capacity To Meet Costs, Expenses Or Liabilities


The Guideline stipulates that financial assurance calculations, for the purposes of complying with the OPGGSA, must focus on calculating the “single greatest credible” costs, expenses and liabilities arising from an offshore petroleum incident. The Guideline outlines in broad terms that these relevant credible costs are to include the:

 

  • capital necessary to undertake the “greatest reasonably credible operational response measures”;
  • costs of carrying out environmental monitoring of the impact of the incident; and
  • costs under “legal obligation”, including third party costs associated with responding to an incident, cleaning up and remediating reasonable credible damage (but excluding “unidentifiable or inestimable costs”).

Application

NOPSEMA has stated that the Guideline will not be applied in an inflexible or mechanical manner and that judgment must be exercised, albeit having regard to the Guideline. The Guideline is intended to apply to assist petroleum titleholders in calculating appropriate levels of financial assurance once:

 

  • NOPSEMA has validated the costs, expenses and liabilities estimation method developed by APPEA; and
  • the Draft Financial Assurance Regulations commence.

Importantly, the Guideline also highlights that the financial assurance obligations do not in any way limit the liability of a petroleum titleholder for expenses relating to the clean-up or other remediation of the effects of an escape of petroleum.


Policy: Planned Petroleum Environmental Inspections


Background


In order to ascertain whether petroleum environmental law has been or is being complied with, NOPSEMA inspectors will gather information relevant to the inspection from the titleholder at their regulated business premises, offshore petroleum premises orother premises in accordance with the OPGGSA.

 

Purpose And Scope


NOPSEMA’s Policy outlines the general principles relating to:

 

  • the purpose of NOPSEMA’s inspections;
  • the manner in which NOPSEMA’s inspections are planned and conducted (including risk-based targets for inspection frequency);
  • how the information gathered is analysed to determine whether compliance with petroleum environmental law has been achieved; and
  • how notices of intent to inspect and reporting are communicated to a titleholder.

Information Paper: Oil Pollution Risk Management


Background


The OPGGS(E) Regulations require that oil pollution risks associated with an offshore petroleum activityare detailed and evaluated. This requires looking at whether oil pollution risks are reduced to as low as reasonably practicable and acceptable levels which, prior to the publication of the Information Paper, hadnot been prescribed in detail.


Purpose And Scope


NOPSEMA’s Information Paper is an extensive document and builds on the information provided in the EP Content Requirements Guidance Note published on 1 January 2013.
The Information Paper describes core concepts and considerations of the risk assessment and management process relating to oil pollution, which is necessary for an Oil Pollution Emergency Plan submitted as part of an acceptable EP required for offshore petroleum activities in Commonwealth waters. 


The Information Paper also covers the implementation strategy relevant to both routine and non-routine events (including consultation, preparedness and response, and monitoring), and common deficiencies NOPSEMA encounters when assessing each EP submission on its own merits.


Next Steps


Offshore industry participants should utilise NOPSEMA’s new guidance materials in assessing how petroleum titleholders are to meet the applicable requirements of the OPGGSA, the OPGGS(E) Regulations and Amending Regulations in practice. Offshore industry participants may send enquiries and feedback regarding NOPSEMA’s guidance material to “information@nopsema.gov.au”.


In relation to the Guideline specifically, NOPSEMA will:

 

  • finalise and publish the Guideline prior to commencement of the Draft Financial Assurance Regulations on 1 January 2015;
  • be holding industry information sessions on the Guideline in Perth on 12 and 13 November 2014 and in Melbourne on 18 November 2014 (for times, locations and registration details see NOPSEMA’s website). Petroleum titleholders will be restricted to two representatives while other interested industry participants will be restricted to one representative in attending the sessions.

 

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For further information, please contact:

 

Paul Newman, Partner, Ashurst
paul.newman@ashurst.com


Katie Winterbourne, Partner, Ashurst
katie.winterbourne@ashurst.com


John Briggs, Partner, Ashurst
john.briggs@ashurst.com


Shane Bosma, Ashurst
shane.bosma@ashurst.com


Cheyne Jansen, Ashurst
cheyne.jansen@ashurst.com


Claire Woodland, Ashurst
claire.woodland@ashurst.com

 

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