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Seanad Éireann debate -
Wednesday, 1 Jul 2015

Vol. 241 No. 2

Petroleum (Exploration and Extraction) Safety Bill 2015: Committee and Remaining Stages

Sections 1 and 2 agreed to.
SECTION 3

I move amendment No. 1:

In page 8, between lines 40 and 41, to insert the following:

"(3) The Minister shall issue a clear definition on what constitutes 'as low as is reasonably practicable'.".

This is an issue we raised on Second Stage. Section 3 provides that the Commission for Energy Regulation, CER, has a responsibility to ensure the risk of accidents offshore as a consequence of the activities of petroleum developers is "as low as is reasonably practicable". That is a very vague term and surely not the world's greatest definition. Will the Minister of State indicate how the concept has been defined in legislation in other jurisdictions? The current wording does not provide any clear benchmark or standard to be applied. The petroleum companies' version of what constitutes "as low as is reasonably practicable" might be very high compared with that of environmentalists, which could be very low indeed. The wording is too vague and I am interested to know what definition is used in legislation in other countries.

I acknowledge the Senator's concerns in this matter. There is no definition of what constitutes "as low as reasonably practicable", ALARP, set out in either domestic or international legislation. The concept has been considered by the Court of Appeal in the United Kingdom and by the courts in Ireland. The Judiciary has found that for a risk to be determined as ALARP, it must be possible to demonstrate that the cost involved in reducing the risk further would be grossly disproportionate to the benefit gained. The concept of reducing a risk to as low as is reasonably practicable is best practice internationally and the concept is reflected in the offshore safety directive.

Providing guidance on what constitutes ALARP is a matter for the Commission for Energy regulation under the Petroleum (Exploration and Extraction) Safety Act 2010. That Act places an obligation on the CER to, among other things, establish and implement a risk-based petroleum safety framework which includes standards and a system for assessing safety performance. In 2013, the commission published a document entitled ALARP Guidance, the purpose of which is to provide detailed guidance to petroleum developers on the CER's requirements concerning the processes that must be used to determine whether or not a risk is ALARP. It is the responsibility of the petroleum developer to ensure the cumulative risk from its activities is reduced to a level that is ALARP and to demonstrate this through its safety case. The CER will assess whether that demonstration is adequate given the full array of information provided and having regard to the requirements of the 2010 Act and the safety case guidelines.

The ALARP demonstration forms a central part of the safety case submitted by the petroleum developer under the framework. The ALARP guidance is intended to reflect best international practice in this field. In preparing the guidance document, the CER drew on guidance issued by statutory bodies regulating safety in the petroleum exploration and extraction industries internationally, particularly those in the United Kingdom and Australia. The commission may amend the guidance document from time to time to take account of changes in national or international practices. It is important that the concept of ALARP be kept under review and modified periodically to reflect developing practices.

Given that the CER has an existing statutory obligation to provide guidance and has already acted in this regard, I do not propose to accept the amendment.

Is Senator Mark Daly happy with the Minister of State's response?

I suspect even the Minister of State is not happy with the response that was drafted for him. He has indicated there is no definition of ALARP, but he went on to refer to the guidance document that had been drawn up. The guidelines in this matter do not have statutory backup. In other words, petroleum developers can follow the guidelines if they like, but they do not have to do so.

They are in place for a reason. The guidelines would not necessarily mean that there was any sanction available to the State or any individual if the guidelines were not followed. The reply contradicts itself. It states that there is no definition of "as low as reasonably possible" that can be included, but there are guidelines and it would be quite simple to include a version which includes the phrase "but not limited to" following the guidelines set down. If there are guidelines, they should have a statutory basis. As we all know, including the Minister of State who has dealt with them in his county in the context of planning, guidelines are only indicative and they do not have to be followed. One can tell a planning officer that guidelines exist, but he or she can say that is all they are and they do not have the power of legislation.

This is such a fundamental issue that using terms like "as low as reasonably practical" could be included on a statutory basis in the primary legislation. The legislation could state the guidelines now have regulatory effect and must be followed, but the scope of what they do is not limited in terms of safety. I do not have to emphasise that terms such as "as low as reasonably practical" will make millionaires out of the legal profession. Giving a statutory basis to guidelines and upgrading them to regulations that must be followed, but not limiting them to that alone, might be something the Minister of State would consider. We are not pressing the amendment, but I ask the Minister of State to take the points on board.

Amendment, by leave, withdrawn.
Section 3 agreed to.
Sections 4 to 6, inclusive, agreed to.
SECTION 7

I move amendment No. 2:

In page 13, between lines 28 and 29, to insert the following:

“(12) A petroleum undertaking shall not use the method of flaring of gas.

(13) A petroleum undertaking shall not use unconventional methods of gas exploration or extraction.”.

The flaring of gas from petroleum rings has been banned in Norway for many years as it has been seen as a waste of natural resources and releases an unnecessary level of CO2 emissions into the atmosphere. It was recommended by the Committee on Communications, Natural Resources and Agriculture report on oil and gas published in 2012 that this practice should be banned. The first part of the amendment seeks to ensure this method is not used in petroleum undertakings.

The second part of the amendment refers to fracking. It is a dangerous method of extracting shale gas from rock. The practice has been illegal in the state of New York and everywhere it has been introduced it has been dogged by controversy. It should not be allowed in Ireland. In recent times, the proposal to introduce fracking for the extraction of shale gas in the north west has been dogged by controversy. These amendments have been tabled to ensure that the Minister for Communications, Energy and Natural Resources makes sure this petroleum undertaking does not use unconventional methods of extraction.

Fracking is an unsafe means of extracting shale gas and could have a serious impact on people's health, the environment and the agricultural industry. It is important that we stop it in its infancy and make sure that any proposals for fracking are stopped as soon as possible. It makes sense not just for the environment, but for the economy. Inserting the amendment into the Bill would be a pre-emptive strike and would ban fracking. It is particularly important when one considers the concerns surrounding TTIP, the ISDS and other such issues.

I will address both points. While the subject we are discussing is broad and complex in its scope, I want to reiterate that the Bill is narrow legislation. Many proposals were implemented through legislation in 2010.

On gas flaring, for the purpose of clarity and context, I would like to establish that the transposition of the offshore safety directive which is the purpose of the Bill is to ensure there is consistent regulation throughout Europe with respect to the potential for a major petroleum incident. The flaring of gas is a technology that has more than one purpose. For example, in the case of a gas processing terminal, the flaring of gas can be necessary for safety reasons. When industrial plant equipment items are over pressured, the pressure relief valve is an essential safety device that automatically releases gasses and sometimes liquids. Those pressure relief valves are required by industrial design codes and standards. Any application to flare is subject to safety case assessment and permission from the Commission for Energy Regulation, CER, together with subsequent verification and auditing procedures.

More generally, where gas flaring is contentious, it is where the technology is used in the context of a producing oil field. Gas that is produced with the oil is then sometimes flared as producing the gas would not be commercially viable. In Ireland, we do not, unfortunately, have oil production. If we have commercial oil development in the future and the flaring of gas was to be proposed, it would be subject to an environmental impact assessment, including public consultation.

Regarding unconventional gas, with regard to the conduct of unconventional gas exploration and exploitation, the offshore safety directive relates only to offshore oil and gas activities. Accordingly, this Bill relates solely to the safety regime that applies to petroleum exploration and production activities in the offshore area and has no implications whatsoever for unconventional gas exploration and exploitation. It should also be noted that a multi-agency transboundary programme of research on the potential impacts on the environment and human health from unconventional gas exploration and extraction projects or operations has been commissioned by the Environmental Protection Agency. That work is ongoing and it is not expected to report until the middle of 2016 at the earliest.

The research programme is broad in its scope, covering several environmental parameters, as well as operational practice and regulatory approaches around the world. It would be untimely, at this point, to pre-empt the outcome of this research by prematurely seeking to introduce legislation without being fully informed on the findings of the research programme. The issue has been raised today and Senator Feargal Quinn raised it last week when he called for ongoing debate, which could not be anything but good. However, because the flaring of gas and unconventional gas exploration is outside the scope of the Bill, I do not propose to accept the amendments.

Amendment put and declared lost.

I move amendment No. 3:

In page 14, between lines 5 and 6, to insert the following:

“(6) Any activity referred to in subsection (5) where relevant activity was suspended shall be reported to the Commission.”.

It is important that the commission is informed of any activity that resulted in work being suspended due to a potential danger. Not only would this allow the commission greater oversight of ongoing petroleum exploration projects, but it would also allow it to update its safety regulations.

Section 7 imposes a range of obligations regarding petroleum undertakings on operators and owners. These obligations include an obligation on an operator or owner to take suitable measures, including suspending an activity where the activity poses an immediate danger to human health or significantly increases the risk of a major accident.

Section 15(2) already provides that where an operator or owner takes such a measure, it shall notify the CER within 24 hours. The section also provides that the CER can determine the form such a notification should take and what information should accompany it. As there is an existing provision to report to the CER, this amendment is unnecessary and, therefore, I do not propose to accept it.

Is the amendment being pressed?

Based on what the Minister of State said, it is not.

Amendment, by leave, withdrawn.

I move amendment No. 4:

In page 14, between lines 24 and 25, to insert the following:

“(10) The operator shall ensure that verifiably calibrated and tamper proof flow meter systems are used to accurately monitor the volume of petroleum extracted.”.

There is a lot of confusion about the amount of oil and gas that lies off the coast of Ireland. These amendments were tabled because it is important that information provided by the extractors of petroleum be accurate and show the true amount of what is extracted.

The focus of the Bill is safety and the prevention of major accidents related to oil and gas exploration and production activities. I accept the Senator's point about current momentum in the context of the current round of the Atlantic margin ending in mid-September next. However, I must again reiterate that the focus of the Bill is specifically safety and regulation of oil and gas exploration and production activities.

Regulation of metering is principally an economic regulatory function. Under the existing regime for oversight of metering, prior to the installation or modification of metering the detailed specifications of all metering stations must be submitted for approval by my Department. Metering stations may also be subject to inspection by my Department. In addition, detailed records of all meter calibrations and checks of equipment for accuracy must be retained and made available for inspection and verification. Metering of petroleum volumes also constitutes part of the safety management systems described in any developer safety case which is required to be assessed by the Commission for Energy Regulation, CER. It should be noted that all equipment operated under licence or statutory consent is the subject of a safety case assessment and verification and auditing procedures by the CER. As this activity falls within the current assessment regime, I do not propose to accept the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 5:

In page 16, between lines 17 and 18, to insert the following:

“(c) the requirement for any operator, who is granted an exploration licence or petroleum prospecting licence by the Minister, to put a bond in place, so that in the event of the decommissioning of petroleum infrastructure, the licensee not dismantling the infrastructure within 2 years of extraction being stopped, all cost associated with the decommissioning can be recouped by the State from the bond;”.

This amendment relates to an issue which I raised with the Minister on the last occasion he was in this House. We can learn a lot from the housing crisis. Section 3(b) refers to the modification and decommissioning of petroleum infrastructure. However, nowhere in the Bill is reference made to who will bear the cost of clean-up in that regard. Ultimately, the taxpayer will have to meet that cost unless provision is made in law that an oil and gas extraction company will bear it.

The amendment seeks to ensure anybody given a licence by the Minister will put in place a bond which could be accessed by the State in situations where a platform is decommissioned but not dismantled within two years. I am not suggesting the amendment, as drafted, is to the satisfaction of the Attorney General. The Minister of State will, I am sure, have had the experience when on the Opposition benches of being told proposals were not in compliance with the Constitution or to the satisfaction of the Attorney General. I wonder if the current Attorney General is aware of how often that office is mentioned in the context of reasons for not doing something.

For the same reason that there is a bond in place in respect of developers of housing estates, I believe it is entirely practical that in the event of a company not decommissioning an oil and gas platform local authorities would have access to a bond in respect of any infrastructural work in that regard. Otherwise, the taxpayer will have to foot the bill for that work. It does not make sense not to provide that a bond be put in place. It is not that it is prohibitive. Oil and gas companies are supposed to decommission platforms. However, I do not know if they are obliged under current law to do so. If there is such a provision, I have not come across it. Also, in the event of an oil and gas company being deemed insolvent and having no assets that could be seized and sold to ensure no loss to the State, from where would the State get the necessary funding in respect of the decommissioning of a platform? I await the Minister of State's response to the introduction of this very practical measure. As a requirement for a bond has already been put in place in respect of the construction industry, I see no reason a similar measure cannot be put in place for the oil and gas industry in respect of the decommissioning of oil and gas platforms, the cost of which would be hundreds of millions of euro. A bond is a very practical solution and would not cost the State anything.

I agree on the need to learn from past mistakes. No greater mistake was made than that in respect of the construction industry. The old adage that those who fail to plan plan to fail comes to mind. I agree with the overall principle of the Senator's argument. It is important, however, to point out that in the history of the State only four fines have been issued in respect of commercial production.

In regard to whether the State or the company should bear the cost of works in this area, the decommissioning regime currently in place in respect of the Kinsale and Corrib gas fields is based on the full cost of decommissioning being borne by the holders of the petroleum lease and not the State. Licensees are also obliged to provide an outline of plans and timeframe for decommissioning of the facilities, including full details of the methods, timing and cost of decommissioning, which are included in a separate facilities decommissioning plan. This plan must be agreed with the Minister early in the life of a producing field and is then subject to review over the lifetime of the field. Such plans will generally make provision for a financial formula relative to reserves left in the field versus the cost of producing those reserves. This provides a trigger for the decommissioning process.

Provision is also made for the obligation on all parties to the lease to post a decommissioning security once the decommissioning process has been triggered. A petroleum lease also includes a condition that requires a parent guarantee, which means that a deed of guarantee and an indemnity in favour of the Minister must be given by each licensee. This, in effect, means that the Minister has the authority to call on this guarantee in the event of a breach of the lease condition, including obligations with regard to decommissioning.

This Bill is focused on safety and the prevention of major accidents and the question of liability for the cost of decommissioning is already addressed elsewhere. I do not, therefore, propose to accept the amendment.

The reason I raised the issue is because decommissioning of petroleum infrastructure is mentioned in the legislation. The Minister of State has said that the guarantee is given by a parent company. The problem with companies is that they can become insolvent. The reason we put in place the requirement for a bond in respect of the construction of housing estates is to ensure a third party insurance company or otherwise is available in the context of redress. The provision to which the Minister of State referred appears to be a very cumbersome process in the context of ensuring no loss to the State. The decommissioning process is very expensive. The only motivation of petroleum companies is profit, such that a company that does not have another licence in the Irish territorial area will not be too concerned about cleaning up any mess it leaves behind. This has been, unfortunately, the experience in respect of many companies. I do not think the Minister of State or I will be around to see the consequences. I believe a bond is a very practical measure, one which would not put too much pressure on the industry. However, I thank the Minister of State for his reply.

Amendment put and declared lost.
Section 7 agreed to.
Sections 8 to 10, inclusive, agreed to.
SECTION 11

I move amendment No. 6:

In page 22, line 32, to delete "not exceeding €3,000,000".

This is a simple amendment which deals with an issue we discussed previously.

I do not know why we would limit a fine for non-compliance associated with oil and gas extraction to €3 million, which I am not saying is an insignificant sum. If the cost of any related issue such as a clean-up is greater than that, it is a matter for the taxpayer, which is the ultimate issue. I wonder where the figure of €3 million came from. Why not delete it and state that there is no limit to the potential fine? As I pointed out on Second Stage, 8,000 barrels of oil were lost in the first 24 hours after the Deepwater Horizon incident and the loss was exponentially higher for the three years it took to stop the leaks and reduce the damage that was being done. I merely wanted to get the Minister of State's view on that issue.

There are a lot of broader issues being discussed. As I stated, it is a complex issue. There is no harm in raising the issues and, at a different stage, having these debates.

There is a safety regime that has been agreed to, with a system of fines for companies that are not following the proper implementation of that safety regime. The issue of environmental damage is separate from this legislation. It is merely a fine for failure to ensure that the safety case and safety management system are implemented. As I said, there is a separation. This is not the section that addresses liability for environmental damage arising from petroleum activities. The fine has no bearing on environmental pollution or clean-up costs relating to a major petroleum hazard, to which I will refer. As for the amount of the fine, it is set at €3 million for an instance of non-compliance with a safety case or safety management system. This is considered proportionate and is consistent with the provisions of the existing fines set out in the Petroleum (Exploration and Extraction) Safety Act 2010.

Turning to the question of liability, section 7(9) of the Bill which transposes Article 7 of the directive provides that "a petroleum undertaking is financially liable for the prevention and remediation of environmental damage". The Bill does not propose a limit on such liability. More generally, section 22(2) of the Bill provides that in assessing an application for any authorisation, the Minister must consider, among other matters, the ability of the applicant "to meet the costs for the immediate launch and uninterrupted continuation of all measures for effective emergency response and subsequent remediation in the event of a major accident". The Minister must also be satisfied that the applicant for an authorisation has "put in place appropriate insurance, indemnity provision or other financial assurance instruments to cover liabilities potentially deriving from the particular petroleum activity or activities in question".

As the Bill needs to provide guidance on the maximum level of fines that may apply, I do not propose to accept the amendment.

Amendment, by leave, withdrawn.
Section 11 agreed to.
Sections 12 to 14, inclusive, agreed to.
SECTION 15

Amendments Nos. 7 and 8 are related technical amendments and may be discussed together, by agreement. Is that agreed? Agreed.

Government amendment No. 7:
In page 27, line 10, to delete "section 13KB(4)" and substitute "section 13KB(5)".

The purpose of these technical amendments is to correct typographical errors in the cross-referencing of sections within the Bill. I commend them to the House.

Government amendment No. 8:

In page 27, lines 11 and 12, to delete "section 13KC(2)" and substitute "section 13KC(3)".

Amendment agreed to.
Amendment agreed to.

I move amendment No. 9:

In page 27, line 15, to delete "and no later than 24 hours" and substitute "within 180 minutes".

The amendment relates to what seems like an inordinate delay in the time allowed for the commission to be informed about any immediate danger or risk to human health in relation to a petroleum incident. The Bill provides for a timeframe of "no later than 24 hours". As I pointed out, in the case of Deepwater Horizon, 8,000 barrels of oil were lost in 24 hours. In the amendment, we submitted a figure of 180 minutes. It is not asking much of somebody to pick up the telephone within three hours to inform the Government about an incident. Twenty-four hours looks like an awfully long time in which somebody could be sitting back.

This is only about process. We want to ensure that operators, rather than spending time trying to solve the problem internally, inform the State as soon as is reasonably practicable. At least there is a defined figure here of 24 hours, but I think the Minister of State would agree that 24 hours, in view of the immediate danger to human health from a petroleum-related incident, is too long. We do not want operators to sit back and say, "We have another 23 hours and 59 minutes before we have to inform the Government." I ask the Minister of State to accept the amendment. Even 180 minutes, or three hours, does not seem to represent an emergency. One would imagine that 60 minutes would be appropriate, but we will give them 180 minutes if they believe they need to assess it for a little longer than that.

It is an interesting issue. I witnessed three major oil spills in Bantry Bay in my time.

I will try to be as co-operative as possible. Every company has bought into a safety regime and companies will have their triggering and alert systems. That is done straightaway, but this provision is about providing a report. It is not a one-line or two-line message stating an incident has happened at such and such a place. It refers to a full and extensive report.

The purpose of the Bill, to elaborate on the matter a little, is to transpose the offshore safety directive into domestic law to ensure that there is consistency in the regulation of safety with respect to petroleum activities throughout EU member states. Section 15(2) of the Bill is a direct transposition of a provision in the directive, which states:

Where an activity carried out by an operator or an owner poses an immediate danger to human health or significantly increases the risk of a major accident, Member States shall ensure that the operator or the owner takes suitable measures which may include, if deemed necessary, suspending the relevant activity until the danger or risk is adequately controlled. Member States shall ensure that where such measures are taken, the operator or the owner notifies the competent authority accordingly without delay and no later than 24 hours after taking those measures.

The purpose of this provision is twofold. First, its intention is to ensure the owner and operator are bound by these obligations. Second, the primary function is to ensure that immediate action is taken to address the cause of any imminent danger and that the company concerned, having done so, notifies the regulator as soon as possible thereafter.

The directive requires immediate notification in the event of a petroleum incident. It requires notification within 24 hours where an operator or owner takes suitable measures, including suspending an activity where the activity poses an immediate danger to human health or significantly increases the risk of a major accident. With the prescribed timelines, the directive differentiates between an incident that has actually occurred and a potential danger that an owner or operator has acted to address. It is reasonable, therefore, that the text of the directive be transposed into Irish law as set out. On this basis, I do not propose to accept the amendment.

On the face of it, I appreciate the argument Senator Mark Daly put forward. However, it is important to point out that the reporting mechanism is not a telephone call or a one-line e-mail. It is a full report of what the company did and how the owner or parent company implemented its safety plan within that short period of time, which, obviously, might mean shutting down operations.

I thank the Minister of State for his reply. I would like to know what other European countries have done in this regard because the provision was for 24 hours. Did all of the other member states provide for the maximum time allowed? Twenty-four hours is merely an arbitrary figure.

There is a phenomenon in management known as the anchoring trap. If a figure of 24 hours is provided for something to be done, people will do it within 24 hours, even if a more immediate timeframe would be more practical. A lot of damage can be done in 24 hours. I appreciate the point about the reporting mechanism, but I am interested to know whether the Minister of State is aware of what other countries did in that regard.

I will address the point which may put the Leas-Chathaoirleach at ease also. If an incident occurs it is a case of instant notification. That is the prescription for a potential incident but, obviously, the focus is on preventing it from happening. Within that 24-hour period, a full written report of what happened has to be provided. I assure the Senator that if an incident occurs off the coast of Cork, there is instant notification in that regard. I want to have that matter clarified.

I am acutely aware of that because, as a trainee solicitor, I attended all the hearings of the tribunal of inquiry into the Betelgeuse disaster, which cost the State £250,000 at the time, money that was efficiently spent. There is a 300-page report on that incident if anyone wants to read it.

Amendment put and declared lost.
Section 15, as amended, agreed to.
SECTION 16

Amendments Nos. 10 and 11 are related and may be discussed together.

I move amendment No. 10:

In page 27, between lines 38 and 39, to insert the following:

“(2) Such reports can be released on the instruction of the Minister.”.

I do not propose to accept the amendment, but if the Senator wants me to read my reply for clarification purposes, I will do so.

I propose to discuss amendments Nos. 10 and 11 together.

Article 26 of the directive relates to an investigation following a major accident. It provides that member states shall initiate thorough investigations of major accidents occurring in their jurisdictions. A summary of the findings pursuant to paragraph (1) shall be made available to the European Commission either at the conclusion of the investigation or at the conclusion of legal proceedings, as appropriate, and the member state concerned shall make a non-confidential version of the findings publicly available.

The concept of a non-confidential version of the investigation report is to ensure the publication of the findings of such an investigation is not delayed due to ongoing legal proceedings or enforcement action. It also recognises that an investigation will have access to information that may be commercially sensitive. The approach proposed in sections 16 and 17 is fully consistent with the directive.

It is also worth noting that the Bill provides for a mechanism through which the Minister can give consent to the publication by the CER of a non-confidential version of a report in the normal way. It would be open to the Minister to publish a report when received. In making such a decision, the Minister would have to consider whether commercially sensitive or other confidential material should be published.

As the relevant provisions of the Bill represent a positive initiative with the intention of ensuring the fullest possible information is provided as soon as possible, I do not propose to accept the amendments.

Amendment put and declared lost.
Section 16 agreed to.
SECTION 17

I move amendment No. 11:

In page 28, lines 34 and 35, to delete “a non-confidential version of the reports” and substitute “the reports in their entirety”.

Amendment put and declared lost.
Section 17 agreed to.
Sections 18 to 24, inclusive, agreed to.
Title agreed to.
Bill reported with amendment, received for final consideration and passed.
Sitting suspended at 5.45 p.m. and resumed at 7 p.m.
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