Scotland's Independent Expert Commission on Oil and Gas: report

6. Regulation: Health, Safety, and Environment

Key Messages:

• The UKCS has established a robust, world-leading health, safety and environmental regulatory regime.
• Government must build on the aim of making the UKCS the safest place to explore for and produce oil and gas worldwide.
• Health, safety and environmental regulation must be consistent with emergency response arrangements and the statutory requirements of the EU Offshore Safety Directive.

Context

1. There are currently three main bodies responsible for the health, safety and environmental regulation of the offshore oil and gas industry:

a. the Department of Energy and Climate Change ( DECC) is responsible for environmental regulation;

b. the Health and Safety Executive ( HSE) is responsible for health, safety and hazardous material regulation; and

c. the Maritime Coastal Agency ( MCA) is responsible for emergency response in line with the National Contingency Plan ( NCP).

2. There have been several meticulous reviews of health, safety and environmental regulation of the offshore oil and gas industry beginning with The Cullen Inquiry post Piper Alpha. The recommendations made by Lord Cullen were accepted and implemented by Government and industry, resulting in a goal setting, safety case based health and safety regime.

3. The Macondo incident in the Gulf of Mexico instigated the Maitland Review ^[35] of the UK regulatory regime's capacity to mitigate the likelihood of such an incident occurring in the UKCS. Detailed responses to the Maitland Review and subsequent actions were undertaken by Government with input from DECC, HSE and MCA along with Oil and Gas UK ^[36] .

4. These reviews overall have led to the establishment and development of a robust, world-leading health, safety and environmental regulatory regime.

5. The new Regulator proposed by the Wood Review will not have responsibility for Health, Safety or Environmental Regulation. However, it should be noted in this context that effective policy implementation and compliance in Health, Safety and Environmental Regulation has the potential to contribute greatly towards the achievement of MER and TVA through enabling, not impeding, activity and investment, and building on the aim of making the UKCS the safest place to explore for and produce oil and gas worldwide.

Recommendation 1: The new Regulator in its stewardship role must in no way diminish the Health, Safety and Environmental regulation of the UKCS and must build on the aim of making the UKCS the safest place to explore for and produce oil and gas worldwide.

EU Offshore Safety Directive

6. On the 28th June 2013, the European Commission published the Offshore Safety Directive ('the Directive') ^[37] . The objective of this Directive is to reduce as far as possible the occurrence of major accidents related to offshore oil and gas operations in European waters, to limit their consequences, improve response measures and improve and clarify European Union ( EU) liability and compensation provisions. DECC and HSE are jointly leading the transposition of the Directive which must be implemented by 19th July 2015 ^[38] .

7. Whilst not impacting upon the overall ethos of the current regime in the UKCS, the Directive does require the establishment of a Competent Authority ( CA) and therefore some changes will inevitably be required to the functions of the various agencies currently involved in the regulation of health, safety and environmental matters in the UKCS.

8. The establishment of a CA which is compliant with the Directive does not require there to be one single authority responsible for all health, safety and environmental matters, but it does require member states to demonstrate that the regime in operation amounts to and meets the requirements of a CA collectively.

9. Coordination between regulatory bodies will be critical in establishing a compliant CA with the overall responsibility for responding to major incidents. The CA should be a closely linked, multi-jurisdictional entity with the capacity to operate speedily and efficiently. Work is currently underway in the UK by the Senior Oversight Board ^[39] to facilitate all interested parties reaching an agreement on the delivery of a compliant regime for the UKCS.

10. The Commission believes that the strength of the health, safety and environment regime is a positive factor for encouraging investment, and the future sustainability of the UKCS. With the inevitability of some level of regime change, significant efforts must be made to ensure a smooth transition phase, whether in a move to Scottish independence or simply to meet the new EU requirements.

11. Any change to the structure of the regulatory regime requires careful consideration. There is an overall need for clarity in the role of authorities, with clear distinctions between the economic perspective, licensing, health, safety and environmental protection.

Recommendation 2: A single, strong, well-resourced and informed regulatory regime for health, safety and environmental protection of the UKCS must be established with oversight of all relevant duties, in line with the EU directive.

Structural Change

12. A cohesive, clear and informed regulatory regime is required for all health, safety and environmental duties, the specific composition of which might take several forms. Any change in the regulatory structure must ensure that clarity remains for industry in terms of expectations set by the review of safety cases and establish consistency of practice in inspection of assets and in sanction processes. Both personal and process safety must be considered by the health and safety regulator and industry in all aspects of operations.

13. In the event of structural change, for example through the creation of a single body tasked with regulation of health, safety and environmental protection, environmental protection must remain well-resourced and not merely seen as an adjunct to health and safety, ensuring that the regulatory function is well resourced with expert personnel across all aspects.

14. The approval of Oil Pollution Emergency Plans ( OPEPs), the review of environmental aspects of licensing bids and the review of Environmental Assurance Plans ( EAPs) should lie with the environmental regulator, in addition to the annual reporting of and analysis of statistics on environmental matters.

Recommendation 3: The regulatory solution for health, safety and environmental protection, must be consistent with emergency response arrangements and the statutory requirements of the EU Offshore Safety Directive.

Constitutional Change

Health and Safety and Emergency Response: A shared approach

15. In the event of a Yes vote, the establishment of a single regulatory regime for health, safety and emergency response in the UKCS would contribute towards providing clarity and comfort for industry.

16. This would require dual governmental policy control over the relevant regulatory bodies by the Scottish and rUK Governments, in a similar manner to the shared arrangement advocated for in this report in relation to the stewardship and licensing functions of the new Regulator. A shared approach would reduce uncertainties, maintain continuity for projects going forward and reduce compliance costs for both Government and industry.

17. The single regime could be formed through arrangements of shared competence being established in relation to the offshore functions of the HSE and the MCA and all other associated organisations with responsibility over emergency response.

18. Any potential barriers that might result from border variations should be removed, easing the movement of personnel, infrastructure and installations throughout all of the UKCS. Those arrangements should seek to ensure that a cohesive regime is maintained which is compatible with the Offshore Safety Directive and retains the world leading standards of safety in the UKCS.

Health and Safety and Emergency Response: A separate approach

19. Any future move to a wholly separate Scottish regime for offshore health, safety and emergency response would require meticulous planning and consultation, over time, in order to minimise disruption and maintain continuity.

20. If the Scottish Government chose to develop a separate Scottish HSE and Scottish MCA, continuity and minimal disruption must be ensured throughout any transitional phase. A transitional phase would aid in the development of skills, embedding appropriate expertise in Scotland.

21. The creation of any new body must build towards the vision of making the UKCS the safest place to explore for and produce oil and gas worldwide. The aspiration should be for visibility and continuity over the short-term, minimum disruption in the medium term and clarity for the long-term.

22. Current practices in health, safety and emergency response in the UKCS are, as with licensing, regarded by many as exemplary and these standards of operation must be maintained throughout any transition period and beyond.

Environmental Regulation

23 . Environmental Regulation of the UKCS is currently the responsibility of DECC. Assuming this remains to be the case following the implementation of the Offshore Safety Directive, in an independent Scotland these functions should transfer to the Scottish Government in so far as the Scottish portion of the UKCS is concerned.

24 . Responsibility over Offshore Environmental Regulation could potentially be given to Marine Scotland in light of the existing offshore environmental duties carried out there. The Scottish and rUK authorities should continue to work collaboratively on environmental issues to maximise synergies and reduce costs for industry and for Government.