First Montara, then Deepwater Horizon - is Australia protected from catastrophic oil spills?

Could it happen again? AAP

With the release of the US Government’s “Report regarding the causes of the Macondo Well blowout”, it may be time to take another look at whether Australian legislation can prevent a Deepwater Horizon here.

About 70% of Australia’s crude oil and condensate production occurs in the ocean sub-soil off the north-west coast. The surrounding seas and oceans are fairly clean, so when a significant oil blowout occurred through PTTEP’s Montara Wellhead Platform on 21 August 2009, it attracted a lot of anxiety and attention.

The Montara well was in a field approximately 250 km north-west of the Western Australian coast, and almost 700 km from Darwin, in Commonwealth waters.

For ten weeks after the spill, oil and gas flowed into the Timor Sea, eventually covering an estimated area of 90,000 square kilometres. It was the worst offshore oil spill in Australia’s history.

In response to the spill, the Australian Maritime Safety Authority implemented its National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (the National Plan). It undertook surveillance and monitoring followed by some oil clean up and some use of dispersants.

A Commonwealth inquiry was established to look into the Montara blowout.

The Montara Inquiry Commission’s Report was highly critical. AAP

The Terms of Reference were wide and the Montara Inquiry Commission sat over many months. The Report was released publicly in November 2010 together with a paper setting out the government’s response to the 105 recommendations in the report.

The Report found that the company’s installation of the barrier in the well to stop a blowout escaping was deficient and that it did not even install the second barrier that was required to be in place.

Overall the Report was highly critical of the company and the NT government officers. It did not make any real critical analysis of the strengths and weaknesses of the Commonwealth departments.

One of the recommendations was that the government should introduce effective arrangements to ensure petroleum companies fully pay for all cleanup costs and all costs of operational and scientific monitoring.

The Report also considered the relevant provisions of the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 and found they were deficient. It said that there is “a major gap in the application of environmental legislation applying to Commonwealth waters”.

Other important recommendations included the creation of a “single, independent regulatory body” to look after safety. This was repeating and confirming what had already been recommended by the Productivity Commission in 2009.

In a news release on 24 November 2010 the relevant Minister confirmed his view that if Montara’s operators or the NT Designated Authority had done their jobs properly the Montara blowout would never have happened.

With a few minor exceptions, the Commonwealth government decided to implement the recommendations of the Commissioner.

The government agreed that the National Offshore Petroleum Safety Authority (NOPSA) was to have its powers extended and a new National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) be established.

NOPSEMA would be responsible for the day-to-day administration and regulation of occupational health and safety, well integrity, environment plans and day-to-day operations in the Commonwealth offshore areas. This, of course, is long overdue and reduces the reliance on the State and NT government departments for regulation of some vital areas.

Under the Offshore Constitutional Settlement 1979 between the Commonwealth and the States and subsequent legislation and government arrangements, the Commonwealth only regulates from the three mile limit outwards.

Could a new authority prevent further spills? AAP

The States and the NT laws apply within that area. The States are given most of the responsibility of overseeing the offshore industry, apart from workplace health and safety.

Under the proposed new NOPSEMA structure, the States are given the option to allow their three-mile areas to come under NOPSEMA. Given the history of the past 110 years since federation, having all of the State governments agree to all of the provisions is not likely.

If some opt in and some stay out we may be in a more complicated legal and regulatory situation than that prevailing at the moment.

Since the spill, although only after a careful review of the improvements in governance in the company, PTTEP has been given permission to continue with its many petroleum interests and more development programs.

These include drilling more wells in the Timor Sea in the form of two appraisal wells at the Cash and Maple gas fields where it plans to develop a multibillion dollar floating LNG project.

Work is also steadily progressing in the Montara region with development of the Montara, Skua, Swallow and Swift fields, all of which are about 650km west of Darwin.

PTTEP maintains that it has made major changes to its management and procedures, including improvements to safety, health and environmental processes and improved consultations with the government regulators. All in all, the offshore energy industry has already been approved for massive further activity and PTTEP is to continue as a major player in it.

The legislative changes made by the Commonwealth government have been fairly speedy to date and amendments have been made to the main Act, the Offshore Petroleum and Greenhouse Gas Storage Act 2006, and the government has announced major new legislative amendments to come.

In the meantime on 20 April 2010 oil and gas blew out of a well under the Deepwater Horizon platform in the Gulf of Mexico USA, resulting in explosions and fire on the rig.

The fire continued for 36 hours. The rig then sank and oil and gas continued to flow from the reservoir through the well and the blowout preventer for 87 days, causing major pollution in the water and on the shores of the State of Louisiana.

The Deepwater Horizon fire and spill resulted in world-wide publicity which considerably raised the profile of offshore oil operations and their risks.

The resulting US Presidential Commission Report had a lot of parallels with the Australian position. Two findings were that the loss could have been prevented and that the immediate causes were a series of mistakes by BP, Halliburton and Transocean. These came from a systemic failure in risk management and placed doubt on the safety culture of the entire industry.

Another look at insurance could help fund clean ups. AAP

As to government, the Report stated: “All of these problems were compounded by an outdated organizational structure, a chronic shortage of resources, a lack of sufficient technological expertise, and the inherent difficulty of coordinating effectively with all of the other government agencies that had statutory responsibility for some aspect of offshore oil and gas activities”.

It can be seen then that the criticisms and recommendations of the US Presidential Commission Report in relation to laws and governance have a close analogy to similar issues in Australia.

Because offshore petroleum is an international industry, there should be an international regulatory structure. There are fairly good international agreements and national structures for the international shipping and for international fisheries but none for petroleum.

It isn’t easy to say which international body could best deal with the regulation of offshore oil and gas platforms. There is no such body at the moment and there are difficulties with the nearest UN body, the International Maritime Organization (IMO), taking on these duties.

The purposes of the IMO are clearly set out in Article 1 of its convention and all of them relate to international shipping and the protection of the marine environment from ships. No mention is made relating to any aspect of offshore petroleum platforms.

Nonetheless, the IMO Legal Committee, adopting a pragmatic attitude and seeing the need, has established a working group to address the issue of regulation of oil pollution from offshore platforms.

Back in 1977, the Comite Maritime International (CMI) began drafting a convention. However, the petroleum industry successfully lobbied against it and the work halted.

Had this work gone ahead and had the offshore energy industry then become regulated along similar lines to the international shipping industry, the major issues arising from the Deepwater Horizon and the Montara Platform oil spills may have been averted.

The Montara oil spill revealed a lack of regulation internationally, a lack of regulation by the Australian government and a woeful lack of expertise by the offshore industry. The same types of shortcomings were found by the US Presidential Commission concerning the American blow out.

There should be an international structure and this needs to come from the UN. In Australia, one major national agency should be responsible and it should operate under the one set of Commonwealth laws.

Finally, the lack of compulsory insurance to meet the costs of cleanup and of damage done by an oil spill should be addressed. The model in use for shipping could be applied.

Australia derives great economic benefit from our offshore oil and gas industry but we must lift our game and manage it better.

This article is a much shortened version of a paper given to the Federal Court of Australia Conference in Sydney on 6 May 2011. It is intended to be a chapter in a book to be published by the Federal Court later this year.