By way of background, I will start off by talking about some of the international precedents that have led to a rethink in this area. We are coming up to the second anniversary of the event at the Deepwater Horizon rig in the Gulf of Mexico. Eleven people were killed in that event, but a major environmental disaster occurred as well. This has caused a significant rethink, not just in the industry but also in bringing regulatory practices up to the right standard. There was a general recognition that there were regulatory failures in that event. There was a similar event in Montara in Australia around the same time. There were no deaths following that event, but there were major environmental concerns.
At a European level, there has been a fundamental review of safety structures and processes in place to ensure that they are appropriate. The biggest event at European level was probably the Piper Alpha event in the 1980s. In that case, 167 people were killed and it changed the thinking about the regulation of the oil and gas industry. A major report was carried out at the time in Great Britain and a review on how they implement their processes. There was also a major event in Norway, with 123 people killed, so it was not just a UK issue. There was a major rethink at the time in Europe. The European Commission recognises that these events occurred 25 years ago and is concerned about whether they could recur and is looking at new regulations to cover those concerns.
The Act dealing with the petroleum safety framework in Ireland was published on 3 April 2010, a few weeks before the Macondo incident in the US. Many of the issues addressed in the Act are in line with best practice internationally. It was driven very much by concerns in the Corrib field and safety issues there, and a report done by Advantica which proposed that a risk-based framework be adopted in Ireland. That was a key component of the Act which transferred responsibility to the CER.
Prior to this Act, responsibility rested with the Department of Communications, Energy and Natural Resources. The Department had a dual function of issuing petroleum licences from an economic perspective and from a safety perspective. The Act transfers that responsibility to us and expands our responsibilities from the current responsibilities for downstream safety. It is also clear that we have to adopt a risk based approach, and this is again in line with best international practice and is the normal standard in Europe. It is an issue in the US and the US is recognising that it will have to adopt this risk based approach to ensure that its regulatory standards for oil and gas safety have improved.
There is a definition of petroleum in the Act and it clearly covers oil and gas extraction, and the Act does not distinguish between onshore and offshore. It makes a distinction between upstream and downstream. We have looked at that, and it seems clear that the point at which it goes from upstream to downstream is the point at which we have a stable product that can be transported. For example, if we take the gas system, the point that it connects to the Bord Gáis system is the point that it becomes downstream. All the production and processing would be upstream and would be covered under this Act. It also covers what is generally known as fracking, which is hydraulic fracturing, a new technique used with shale gas. That can be offshore but is generally onshore. Our interpretation of the definition in the Act covers fracking. We sought legal advice which confirms that.
It is also our clear that our role is limited to safety and does not cover environmental components, but we have a responsibility under the Act to interact closely with other agencies, be they the HSA or the EPA. We have begun that process already.
The next slide provides a geographic picture of the area covered under the Act. The onshore area is the Republic of Ireland, but the sea areas are also covered. There are several numbers in the slide which relate to the various licences that have been issued by the Department of Communications, Energy and Natural Resources. It is important to understand the process and the sequences here. We will not consider a safety case until it has already received an exploration licence from the Department of Communications, Energy and Natural Resources. The sequence is the following. First, the Minister and his Department will issue an exploration licence. Once that licence has been issued, we will then consider it from a safety perspective. The operator can then apply to us to get safety clearance.
The next slide sets out the project status and the various activities in which we have engaged and in which we intend to engage before we can fully take over this function as set out in the Act. The first piece deals with the initial scoping and planning. We wanted to ensure that the processes in Ireland are up to the best international standards. We have joined a group called the NSOAF, which is the North Sea Offshore Authorities Forum and which constitutes the various safety regulators in this area in northern Europe. It is basically made of up Norway, the UK, the Netherlands, Denmark and Germany - all those countries in northern Europe which have gas and oil exploration. We have also engaged consultants to help us build up our expertise in this area, and we have provided some initial training for staff, although there is much more to do.
The planning phase has reached a stage whereby we have been able to issue a consultation on the petroleum safety framework. There has been a very significant response to that consultation, not just by the industry players, which might be expected, but also by many interested parties, such as local groups. A large volume of those responses related to fracking and the concern which arises as a result of fracking. We have reviewed those and brought them into the draft decision paper we have sent to the committee. The Commission for Energy Regulation has always had an open and transparent process to seek to consult on all critical areas and to have an open door policy in terms of talking to any interested parties in an area in which we make decisions.
The next phase will involve our consideration of all the responses to our draft decision paper and, in due course, issuing a decision paper. I want to be clear that the decision paper only sets out the high-level principles. A lot more work needs to be done once they are established to turn them into a detailed design which is sufficient for the various operators to know exactly what we will seek from them when they submit a safety case to us.
We will have a process of internal readiness to ensure we have the appropriate skills and staff within the organisation to be able to accept and review safety cases. We expect that by the fourth quarter of 2013 we will be ready to accept safety cases. The time-line is fairly standard for the development of new frameworks. We have examined places like Australia, which set up new regulations.
I refer to key areas of the petroleum safety framework, PSF 1. We set out what we expect as a vision, namely that we see a safe petroleum exploration and extraction industry for Ireland. It is a clear, simple vision. The devil is the detail in terms of implementation. In our mission statement we set out our independence and the fact that we will act independently not just of government but of the various companies involved. We will ensure we will protect life within exploration and extraction activities.
We have set a number of goals. Our first goal recognises the risk principle, as set out in the Act. We will use risk to try to assess whether something has met the standards we will require to allow it to proceed. The principle of as low as reasonably practicable is fairly internationally understood and will be applied rigorously in assessing safety cases.
We want to ensure safety standards adhere to best international practice. That is the benchmark we have set ourselves for safety regulation in Ireland. It is important we were able to demonstrate that in the various activities in which we engaged.
I referred to transparency. We want to engender confidence and hope to do this through transparent processes and a rigorous adherence to consultation through the process.
The next slide refers to the high-level design of the PSF 2. I will refer to some of the key areas and components of the petroleum safety framework which will try to deliver the mission and goals set out previously.
The first is the permission system. The cornerstone of how we intend to regulate this is the idea of a safety case. Anyone who wants to engage in any activity under the petroleum safety framework must submit a safety case to us before he or she starts operating. An operator will only be allowed to start operation once the safety case has met our rigorous standards and we have accepted it.
The concept of a safety case is best practice internationally and is recognised as one of the areas where there have been some failings in the US. I understand some further soul-searching is taking place there. The safety case regime has been implemented in Norway, the UK and most best practice member states in Europe. It will be used in Ireland as the cornerstone of best practice and its principles are set out in the Act.
Notwithstanding the fact that a safety case has been submitted and we have accepted it, compliance assurance will make sure we test what is being implemented by the various operators in the system to the rigours of the safety case submitted to us. We will define and set out clearly how that will be implemented as we move forward on the development of the petroleum safety framework.
The next component is the incident investigation system. While no one would like to see incidents, it is possible that we could and we need to make sure we are ready to respond and investigate them. At this point we are setting out the high-level principles in which we will engage. Once they have been implemented we will then publish the detailed design for the area.
The Act gives us significant enforcement powers. We intend to use them as necessary if we consider that any operator is not meeting the conditions set out in the safety case and complying with the various requirements.
The next slide shows graphically how the various systems fit together. The permission system is the first process that must be engaged in. We must ensure rigour in the safety case process. We have spent a lot of time looking at best practice internationally and in some cases there has been an over reliance on safety cases. They are ultimately only as good as their implementation.
We will need to ensure safety cases that have been submitted to and accepted by us are demonstrated during investigations and audits of installations. While necessary they are not sufficient for us to be confident about the regime. We will need to ensure compliance assurance will also be rigorously adopted to ensure that people do not just say they will do things safely but that we can see things in action. If we consider that insufficient action has been taken in any areas or we are not confident about something we have rigorous powers under the Act and intend to enforce them.
The next slide refers to enforcement. The idea is that we will be proportionate in the application of our enforcement powers. We can apply any element of them. We could start off with improvement plans, such as writing to an operator to ask it to make changes to improve the situation. Further to that, we can send prohibition notices to operators and tell them they must stop engaging in activities we think are not conducive to safety.
If we think we are not getting an adequate response or an area is insufficient we can enforce court orders and, ultimately, revoke a safety permit. If we do that an operator cannot operate. It is an essential part of the scheme. If the safety case is not to our satisfaction an operator cannot start work and if we see it engaging in activity which, in our view, is unsafe we can ask it to stop.
The Act is very clear in this regard and gives us very strong powers to ensure safety is implemented. Within a criminal framework we can set fines and sentences. The courts will be involved. There can be fines of up to €3 million depending on the offence and up to three years' imprisonment for operators.
I have tried to set out the broad principles of the petroleum safety framework. Consultation is still taking place and closes on 29 March. If committee members want to make any points to us we can include them in our consideration and final decision. We hope to make the final decision this summer but a lot more work needs to be done.
We have set out the principles but we now have to decide what sort of detail will be needed for operators before they can send us a safety case. It is also contingent on our having adequate resources. We have initial resources within the organisation but we will have to enhance them before we finally take over the function.