If Canada is serious about developing its offshore oil and gas resources, it’s time for an overhaul of its regulatory and fiduciary regime to provide better protection for workers, the environment and taxpayers.
The federal government’s environmental watchdog has pointed to the weaknesses of an outdated and cumbersome regulation framework for offshore development.
Several audits conducted by Scott Vaughan, federal commissioner of the environment and sustainable development, found that the marine environment and the Canadian taxpayer are exposed under the present regime.
“We identified several shortcomings, including insufficient spill response tools across the federal government, inadequately tested capacity, poorly co-ordinated response plans and out-of-date or missing agreements between the boards and supporting departments.”
Undotted i’s and uncrossed t’s of this nature aren’t the sorts of oversights you want to see when you’re allowing high-risk enterprises like offshore drilling and production in your territorial waters.
In other words, if there were an incident or disaster in which provincial-federal agencies were called in to co-ordinate the response, the left hand might not know what the right is doing.
The commissioner also finds the Canadian taxpayer would be exposed because of liability limits that have not been raised in 25 years.
Presently, operators exploring and producing off the coast of Nova Scotia would have cleanup costs limited to $30 million, unless they are are proven negligent, in which case liability would be unlimited.
So if a production platform following all the rules and procedures was to be hit by an angry nor’easter, causing a spill of hydrocarbons, operators costs could be capped at $30-million.
This means the price of risk is transferred to the taxpayer.
Consider that BP, which has pleaded guilty, is looking at $40 billion in cleanup costs and has been fined another $4.5-billion for the Macondo Deepwater Horizon spill in the Gulf of Mexico.
In the U.S., the liability cap is $75 million. In countries like Norway, there is no liability cap.
This makes Nova Scotia and Newfoundland’s offshore attractive for oil and gas operators wishing to explore here. The low liability cap could even motivate companies to assume greater risks than they might if they carried more liability.
And this leads us to a fundamental problem with the way the offshore oil and gas sector is regulated in Canada.
In this province, the Nova Scotia-Canada Offshore Petroleum Board is the agency responsible for promoting Nova Scotia and selling commercial leases to operators. It is the same agency that regulates offshore activities, including safety.
It is, in other words, both salesman and policeman.
The low liability cap is a good example of how this conflict can play out. The offshore petroleum board markets Nova Scotia to potential operators who may be attracted, in part, by liability limitations.
The same board must then regulate safety, which could be compromised through higher risks assumed on the back of the low liability cap.
The position is structurally conflicted.
This conflict has been recognized in other jurisdictions. In the U.K., an independent Health and Safety Executive, was established after the death of 167 workers in Piper Alpha explosion in the North Sea in 1988. Lord Cullen, who investigated the tragedy, recommended the safety authority remove conflict of interest.
In Newfoundland and Labrador, Supreme Court, Justice Robert Wells also recommended a clearer distinction between safety and promotion roles of offshore boards after the Newfoundland helicopter crash that killed 17 offshore workers in 2009.
Commissioner Vaughan has given us a heads-up on problems with our offshore. Governments should act quickly to increase liabilities and create a stand-alone regulator to enforce safety without the conflict of marketing.
Original Article
Source: thechronicleherald.ca
Author: GAIL LETHBRIDGE
The federal government’s environmental watchdog has pointed to the weaknesses of an outdated and cumbersome regulation framework for offshore development.
Several audits conducted by Scott Vaughan, federal commissioner of the environment and sustainable development, found that the marine environment and the Canadian taxpayer are exposed under the present regime.
“We identified several shortcomings, including insufficient spill response tools across the federal government, inadequately tested capacity, poorly co-ordinated response plans and out-of-date or missing agreements between the boards and supporting departments.”
Undotted i’s and uncrossed t’s of this nature aren’t the sorts of oversights you want to see when you’re allowing high-risk enterprises like offshore drilling and production in your territorial waters.
In other words, if there were an incident or disaster in which provincial-federal agencies were called in to co-ordinate the response, the left hand might not know what the right is doing.
The commissioner also finds the Canadian taxpayer would be exposed because of liability limits that have not been raised in 25 years.
Presently, operators exploring and producing off the coast of Nova Scotia would have cleanup costs limited to $30 million, unless they are are proven negligent, in which case liability would be unlimited.
So if a production platform following all the rules and procedures was to be hit by an angry nor’easter, causing a spill of hydrocarbons, operators costs could be capped at $30-million.
This means the price of risk is transferred to the taxpayer.
Consider that BP, which has pleaded guilty, is looking at $40 billion in cleanup costs and has been fined another $4.5-billion for the Macondo Deepwater Horizon spill in the Gulf of Mexico.
In the U.S., the liability cap is $75 million. In countries like Norway, there is no liability cap.
This makes Nova Scotia and Newfoundland’s offshore attractive for oil and gas operators wishing to explore here. The low liability cap could even motivate companies to assume greater risks than they might if they carried more liability.
And this leads us to a fundamental problem with the way the offshore oil and gas sector is regulated in Canada.
In this province, the Nova Scotia-Canada Offshore Petroleum Board is the agency responsible for promoting Nova Scotia and selling commercial leases to operators. It is the same agency that regulates offshore activities, including safety.
It is, in other words, both salesman and policeman.
The low liability cap is a good example of how this conflict can play out. The offshore petroleum board markets Nova Scotia to potential operators who may be attracted, in part, by liability limitations.
The same board must then regulate safety, which could be compromised through higher risks assumed on the back of the low liability cap.
The position is structurally conflicted.
This conflict has been recognized in other jurisdictions. In the U.K., an independent Health and Safety Executive, was established after the death of 167 workers in Piper Alpha explosion in the North Sea in 1988. Lord Cullen, who investigated the tragedy, recommended the safety authority remove conflict of interest.
In Newfoundland and Labrador, Supreme Court, Justice Robert Wells also recommended a clearer distinction between safety and promotion roles of offshore boards after the Newfoundland helicopter crash that killed 17 offshore workers in 2009.
Commissioner Vaughan has given us a heads-up on problems with our offshore. Governments should act quickly to increase liabilities and create a stand-alone regulator to enforce safety without the conflict of marketing.
Original Article
Source: thechronicleherald.ca
Author: GAIL LETHBRIDGE
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