Energy Facing the Challenge of the Safety of Offshore Oil and Gas Activities [European Commission proposal for regulation of safety and environmental protection against EU offshore major accidents] A presentation by Directorate General for Energy for a meeting with IndustriAll 18 June 2012 Taf Powell Courtesy of Wintershall 1

Energy Problem definition 1.Likelihood of an EU major incident is significant (and can be reduced) Precursor reports UK & Norway; frequency analysis of incidents 2.Full-scale consequences of an EU major incident not acceptable Gaps in EU legislation; maritime response model 3.Provisions for financial liability/recovery are incomplete Scale of costs and damages seen in GOM 2

Energy Offshore licensing in EU/EEA & adjoining states 3

Energy Exclusive economic zones in the EU 4

Energy Case for EU action No case for non-action: Accident frequency and costs surprisingly high Industry and MS action uneven EU voice in global efforts (G20, ….) Subsidiarity vs. European interest: Health & safety of workers Protection of wider communities and the environment: cross-border impacts of spills Deepening of single market: consolidation of product stds Security of energy supplies 5

Energy Objectives of EU action Problem partGeneral objectivesSpecific objectives 1. Risks can be lowered (i.e. too high to accept) 1. To prevent a major incident from occurring 1. Attain best industry practices; feed raise of global standards 2. Implement best regulatory practices throughout the EU 2. Response measures need improvment 2. To deal with a major emergency should preventive measures fail 3. Implement better emergency preparedness and response in all EU offshore regions 3. Liability provisions incomplete 4. Improve and clarify existing EU liability and compensation provisions 6

Energy Measures to implement objectives Black measures considered separately, red measures not taken further Specific objectives Measures Considered (incl. suggestions from stakeholders) 1. Attain best industry practices; feed raise in global standards Establishing a goal-setting (major hazard report) regime Extending EU standards overseas Establishing a dynamic best practice model for industry 2. Implement best regulatory practices throughout the EU Verifying technical capacity during licensing Establishing an inspections and penalties regime Establishing EU-wide cooperation for offshore regulators Ensuring information sharing & transparency at EU level Establishing EU regulatory body Achieving consistency of product safety standards across EU 3. Implement measures for better emergency preparedness and response in all EU offshore regions Ensuring cross border availability of compatible assets Ensuring effective response to major offshore incidents Establishing EU intervention response capacity Ensuring financial capacity of operators to cover liability 4. Improve and clarify existing EU liability and compensation provisions Clarifying scope for environmental liability Establishing compensation regimes for traditional damage 7

Energy Key points of Legislative Proposal General measures to prevent major accident Risk-based planning and operations Best practices by operators and regulators Transparency/sharing of information Co-ordination and co-operation amongst regulators, and with non- EU countries Emergency preparedness and response Technical annexes for detailed provisions 8

Energy Relationship with existing EU legislation – safety directives Framework Directive & Directive 92/91 includes provision for risk based approach to protection from all workplace hazards New EU regulation requires in addition: Enhanced scrutiny of licensing applications for major accident prevention and response capability Incorporating environment risks into major hazards risk assessment Assessment by and acceptance of major hazards risk assessment report (MHR) and specified activities by new competent authority Independent verification of safety critical elements & well control Sector specific inspections and penalties regime Major accident response plans for each installation, feeding into national arrangements Common reporting format and sharing lessons learned Extending liability for environmental damage to full extent of continental shelf

Energy Relationship with existing EU legislation – environment directives Seveso 2 Directive 96/82 provides for control of major accident hazards integrated for environment and safety at onshore high hazard sites New EU regulation has many similar provisions e.g. MHR for safety/environment Competent authority Emergency response plans New EU regulation differs or goes further Specific provisions needed for marine environment Protection measures for local populations not relevant Qualifying hazards of Seveso not appropriate Stringent licensing reviews Thorough assessment acceptance of MHR Enhanced liability provisions Common reporting & transparency

Energy Legal instrument: Regulation raison d'etre Counter the fragmented and uneven application of existing law (Directives). Act swiftly and directly on industry – highest priority as the risks are in the industry. Limit impact only to MS with offshore licensing. Level up all MS to the sum total of best EU practices (no MS has achieved it, but UK, NL and DK closest). But Commission continuing to engage on the legal form MS can set stricter requirements in national legislation ( art /193 TFEU ) 11

Energy Legal instrument: Regulation Reaction of stakeholders Most MS opposed to the form of the instrument (except DE, SE) on grounds of unwarranted disruption of national regimes BUT all MS in Council supportive and constructive towards principle and substance of the COM proposals NGO's strongly in favour Industry and offshore TU's strongly against EU regulation EP? (Previous opinion – ITRE/Vicky Ford/2011 – supportive of EU intervention) 12

Energy EU Offshore Authorities Group – purpose (1 st meeting held 8 May 2012) First EU-wide forum for regulators, builds on NSOAF and IRF Advisory role Identification and exchange of best practices for: Major Hazard prevention Emergency preparedness Disseminating lessons learned from accident investigations Facilitating rapid information exchange between national authorities and the Commission Identification and exchange of best practices for competent authorities: Verifying compliance Execution of projects Auditing and enforcement Comment on new (national) legislation and EU or international proposals for oil and gas industry 13

Energy EU Timetable (provisional/May 2012) 2 nd draft revision of text by energy working party released 16 April Progress report from DK Pres in drafting (NB recitals have not been discussed so far) TTE meeting will discuss 15 June In EP, File divided, including points of detail: ITRE (most) – Rapporteur Ivo Belet ENVI (quite a lot) JURI (little) COM has met with representatives of ITRE and ENVI committees EP may complete first reading in the autumn CY Pres indicated Lex Offshore is 2 nd high priority Several discussions so far with IE officials who show keen interest 14