Australian Government Progress Report on implementation of the recommendations of the Montara Commission of Inquiry – September 2012 The Australian Government, through its commitment to apply the lessons from the Montara and Gulf of Mexico oil spill incidents, has made significant progress in implementing the accepted recommendations in the Final Government Response to the Report of the Montara Commission of Inquiry (Final Government Response), which was released on 23 May 2011. The June 2010 Report of the Montara Commission of Inquiry (the Report) made 105 recommendations which have implications for governments, Regulators and the operational procedures and practices of the offshore petroleum industry. In the Final Government Response, the Government accepted 92 recommendations and noted 10; it did not accept three Montara Commission of Inquiry (MCI) recommendations because they were technically inappropriate. Implementation of the Government’s response has included a suite of initiatives, including amendments to legislation and improvements to strengthen institutional arrangements. These include amendment of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to establish, on 1 January 2012, the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), the new national regulator in Commonwealth waters, in for safety, well integrity, environmental regulation and day-today operations of petroleum activities; and a new national titles administrator, the National Offshore Petroleum Titles Administrator (NOPTA). This report details progress against the Implementation Plan of the Final Government Response (the Implementation Plan). The Implementation Plan organised the recommendations under the following key themes: Regulatory Regime; Regulator Operating Practices; Response Arrangements; Environmental Management; Review of PTTEP Australasia’s Response to the Montara Blowout; and Additional Recommendations. To date, 81 recommendations of the 92 accepted recommendations are complete, and 11 remain in progress (72; 84; 85; 86; 88; 92; 93; 94; 97; 98; 100). It is anticipated the 11 recommendations will be completed by end 2013, within the Government’s legislative program; concurrent with the revision of the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances and supporting arrangements; with finalisation of the review of the OPGGS (Environment) Regulations; and implementation of the Commonwealth ‘s response to the Report of the independent Review of the Environment Protection and Biodiversity Conservation Act 1999. 1. Regulatory Regime (Recommendations: 2; 23-26; 28; 44; 48; 66; 68; 71-72; 79; 83; 88- 89; 91-92; 95- 97). a. Offshore Petroleum and Marine Environment Legislative Review The Report made 21 recommendations proposing legislative amendments to the regulatory regime for offshore petroleum and marine environment (Commonwealth waters). To give effect to these recommendations, the Implementation Plan committed the Government to undertake by June 2012 a review of Commonwealth legislation applicable to the offshore petroleum activities and the marine environment. The Government has concluded the review and will introduce amendments to legislation during 2012-13 that will strengthen the operating practices of the offshore petroleum industry and provide additional enforcement powers to Regulators. The proposed changes to legislation include: Amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) and associated Regulations to include a statutory duty requiring titleholders to stop, contain control and clean up a hydrocarbon spill; carry out appropriate monitoring; and remediate the environment, including strengthening and clarifying the ability for third parties to recover from the titleholder costs incurred by them if the titleholder breaches the duty. This enhances the existing legislative application of the ‘polluter pays’ principle (Refer MCI recommendation 95 and 96); Clarifying as appropriate in the OPGGS Act and associated Regulations directions giving powers, arrangements for recovery of costs from third parties, insurance, and requirements for environmental monitoring during and post an offshore petroleum incident; The introduction of a civil penalty regime to the OPGGS Act, providing the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) with a broader range of compliance and enforcement tools aimed at improving compliance outcomes (Refer MCI Recommendation 71). Specifically: o current criminal penalty levels under the OPGGS Act and associated Regulations will be increased, consistent with major hazard industry legislation; o the OPGGS Act and associated regulations will be amended to introduce a range of alternative enforcement mechanisms (e.g. options will include infringement notices, enforceable undertakings, civil penalties, adverse publicity orders, injunctions, and orders for restoration, broadly consistent with those provided for in like legislative regimes, as a supplement to existing criminal penalties); o penalties, including custodial penalties, for occupational health and safety offences under the OPGGS Act will be harmonised with the Work Health and Safety Act 2011 (WHS Act) (Cth) or made greater, as appropriate, to reflect the greater consequences in a major hazard industry; o the OPGGS Act will be amended to allow for cumulative penalties for appropriate strict liability offences; and o NOPSEMA’s inspectorate powers will be redrafted to provide greater clarity and consistency between the various powers of each category of inspector and remove unnecessary procedural requirements that are likely to impede NOPSEMA’s ability to effectively perform its enforcement functions. Amendments to the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to strengthen the legislative application of the ‘polluter pays principle’, with a focus on creating offences for causing damage to the environment in connection with the Commonwealth marine area, and strengthening remediation determination powers (Refer MCI recommendation 95 and 96). The Government will also: Retain the current definition of ‘good oilfield practice’ in the OPGGS Act and by end 2012, the Department of Resources, Energy and Tourism, with the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), will develop and publish supplementary guidance material for regulators and titleholders on concepts underlying, and practical interpretation, of ‘good oilfield practice’ (Refer MCI recommendations 68); Address gaps that may arise in responding to offshore petroleum incidents with cross-jurisdictional impacts using administrative arrangements provided for in the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (National Plan) and supporting arrangements, including the National Maritime Emergency Response Arrangements and inter-governmental agreements; By June 2013, undertake an assessment of whether Australia’s international treaty obligations relating to the marine environment that apply to offshore petroleum activities are sufficiently provided for in the marine environment and offshore petroleum legislative regimes; and Establish an equitable cost sharing arrangement between the offshore petroleum and shipping industries for mutually required equipment and services for preparedness costs incurred by the Australian Maritime Safety Authority (AMSA), as articulated through the National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substances (the National Plan), consistent with the contents of offshore petroleum oil spill contingency plans and the obligations on titleholders created by the offshore petroleum legislative framework. The arrangement will be implemented by June 2013 (Refer MCI recommendation 91). Concurrently, reviews of the OPGGS (Environment) Regulations, and Part 5 (well operations) of the OPGGS (Resource Management and Administration) Regulations, are underway and due to conclude by end 2012. The reviews are examining the fitness of these Regulations to meet the objectives of the OPGGS Act (Refer MCI recommendations 23-26, 28, 44, 48, 66, and 97). In addition, on 24 August 2011, the Australian Government released its response to the Report of the independent Review of the Environment Protection and Biodiversity Conservation Act 1999 (the Hawke Review). The Government’s response to the Hawke Review agreed to streamline the environmental approvals process between the OPGGS Act and the EPBC Act and noted options would be available under the amended EPBC Act to accredit the systems and processes administered by NOPSEMA (Refer MCI recommendations 98 and 100). Discussions are ongoing between NOPSEMA and SEWPaC to progress this streamlining. b. Regulator Prohibition Powers The Government proposes to introduce the Offshore Petroleum and Greenhouse Gas Storage (Compliance Measures) Amendment Bill 2012 during the 2012 Spring sittings of the Parliament. The Bill will extend the circumstances in which NOPSEMA can issue a Prohibition Notice to include when an activity may occur at a facility that would involve an immediate health or safety risk to a person. The passage of this Bill will complete action against MCI Recommendation 72. c. Regulator and Operator Engagement During an Offshore Petroleum Incident On 6 March 2012, the Offshore Petroleum and Greenhouse Gas Storage Amendment (Significant Incident Directions) Act 2012 (No. 2 of 2012) came into force. The Act amends the OPGGS Act to provide NOPSEMA with the power to issue a direction to a petroleum titleholder in the event of a significant offshore petroleum incident occurring within the title area that has caused, or might cause, an escape of petroleum. The direction would require the titleholder to take an action or not take an action in relation to the escape or possible escape of petroleum and its effects, and may apply either within or outside the titleholder’s title area. This Act completes action against MCI Recommendation 79. In addition, the Second Triennial Review of the Operational Effectiveness of the National Offshore Petroleum Safety Authority (NOPSA) Report (the 2011 Operational Review) was tabled in the Parliament on 8 December 2011. The 2011 Operational Review determined that NOPSA (now NOPSEMA) has firmly established itself as a respected and competent regulator and noted its commitment to representative, tripartite and consultative stakeholder engagement, building on existing work programs and fora. It also noted that stakeholder engagement is an intrinsic element of an effective regulatory model, but not at the expense of regulatory independence. The Government’s response to the 2011 Operational Review was made public by the Minister for Resources and Energy in May 2012. 2. Regulator Operating Practices (Recommendations: 5-9; 14; 16-19; 22-35; 39-40; 41-44; 48-41; 69; 81-83) a. Establishment of the National Offshore Petroleum Safety and Environmental Management Authority and the National Offshore Petroleum Titles Administrator Since the release of the Final Response, the Government has substantially reformed the way offshore petroleum activities in Commonwealth waters are regulated and administered. The reforms were supported by recommendations made by the MCI, and include the establishment of a single national regulator for Commonwealth waters, in the Offshore Petroleum and Greenhouse Gas and Storage Act 2006, for safety, well integrity, environmental regulation and day-to-day operations of petroleum activities (NOPSEMA), and a national titles administrator (National Offshore Petroleum Titles Administrator NOPTA). Both NOPSEMA and NOPTA commenced operations on 1 January 2012, and their establishment implements in full MCI Recommendations 73, 74, and 75. In addition, the Offshore Petroleum and Greenhouse Gas Storage Regulatory Levies Legislation Amendment (2011 Measures No.2) Act 2011 has provided for NOPSEMA to impose levies on holders of offshore petroleum titles (in respect to regulation of environment plans) to recover the costs associated with NOPSEMA’s administration of the OPGGS (Environment) Regulations. b. National Legislative Compliance Framework The National Legislative Compliance Framework (NLCF) was finalised and published on the Department of Resources, Energy and Tourism (RET) website in November 2011. The NLCF supports consistent best practice approaches by regulators of Australia’s petroleum industry. State and territory regulators, NOPSEMA and NOPTA have agreed to undertake a self assessment of their regulatory operations against the NLCF and will make changes as appropriate supporting implementation of regulatory best practice. 3. Response Arrangements (Recommendations: 81; 84-86; 94) a. Responding to a future offshore petroleum incident The Commonwealth, through the Department of Resources, Energy and Tourism, is progressing development of an Incident Management and Coordination Framework specific to an offshore petroleum incident in Commonwealth waters. This framework will be finalised in light of the Commonwealth’s response to the Review of the National Plan to Combat Pollution of the Sea and Oil and Other Noxious and Hazardous Substances (the National Plan) (refer 3(b) below). b. Review of Australia’s National Plan to Combat Pollution of the Sea by Oil and other Noxious and Hazardous Substances and the ‘Polluter Pays Principle’ In December 2011, AMSA released the draft Review of Australia’s National Plan to Combat Pollution of the Sea by Oil and Other Noxious and Hazardous Substance and the National Maritime Emergency Response Arrangements (Draft National Plan Review). The Draft National Plan Review, among other things, analysed how well Australia is meeting its international obligations, the adequacy and suitability of the National Maritime Emergency Response Arrangements (NMERA). It identifies areas where the efficiency and effectiveness of NMERA can be improved and made recommendations to improve the National Plan (Refer MCI recommendation 86, 88, and 93). AMSA as the manager of the National Plan is responding to the National Plan Review through engagement with stakeholders, including Sate and Territory Governments, Commonwealth agencies, various industry representatives (shipping; offshore petroleum; fisheries, and others) and environmental and community representatives. Finalisation of the National Plan review, including re-negotiation of the Intergovernmental Agreement, is anticipated for December 2013. 4. Environmental Management (Recommendations: 86-93; 95-100) a. Strengthen environmental protection regime for Commonwealth waters, through the legislative regime and the review of the National Plan As outlined in 1(a) above, during 2012-2013 the Government will bring forward proposed amendments to: the OPGGS Act to impose a statutory duty requiring titleholders to stop, contain, control and clean up a hydrocarbon spill; carry out appropriate monitoring; and to remediate the environment, including an ability for third parties to recover from the titleholder costs if the titleholder breaches the duty. This strengthens and clarifies the existing legislative application of the ‘polluter pays’ principle (Refer MCI recommendation 95 and 96). Amendments to the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) to strengthen the legislative application of the ‘polluter pays principle’, with a focus on creating offences for causing damage to the environment in connection with the Commonwealth marine area, and strengthening remediation determination powers (Refer MCI recommendation 95 and 96). Also, the National Plan Review will take account of roles and responsibilities for environmental and scientific monitoring. Finalisation of the National Plan review is anticipated for December 2013. b. “Off the Shelf” Monitoring Program The MCI Recommendation 90 recommended the development of ‘off the shelf’ monitoring programs that can be implemented quickly following a future incident in Commonwealth waters. Within the bounds of its environmental management functions, as provided for in the OPGGS Act, NOPSEMA, in consultation with the Department of Sustainability, Water, Environment, Population and Communities (DSEWPaC), is leading the development of ’off the shelf’ monitoring guidance which will detail how operators could meet their current and future obligations under the OPGGS Act. NOPSEMA is leading the development of ‘off the shelf’ monitoring tools as it is relevant to its environmental management functions. Also, the Department of Resources, Energy and Tourism, NOPSEMA and AMSA have jointly prepared an Explanatory Note clarifying the arrangements for oil spill preparedness and response as they relate to offshore petroleum industry activities in the Commonwealth offshore area. The Explanatory Note is published on the NOPSEMA website and clarifies, as an interim measure, the arrangements for oil spill preparedness and response as they relate to offshore petroleum activities in the Commonwealth offshore area. The arrangements for offshore petroleum activities in the Commonwealth offshore area will ultimately be reflected within the National Plan (Refer 3 (b) above). Review of PTTEP Australasia’s Response to the Montara Blowout c. On 22 February 2011, the Minister for Resources and Energy entered into a binding Deed of Agreement with PTTEP, the parent company of PTTEP Australasia (Ashmore Cartier) Pty Ltd (PTTEP AA), to implement the PTTEP AA Montara Action Plan (MAP) in respect of all PTTEP’s Australian activities. A copy of the Deed of Agreement is available on the RET web site. RET engaged Noetic Solutions Pty Ltd to independently assess and verify, including through site visits to PTTEP’s operations, PTTEP’s progress in implementing the MAP. The monitoring program includes four individual reviews, one every six months, over an 18 month period commencing in April 2011 and concluding in December 2012. To date, PTTEP has met its obligations under the Deed of Agreement, which is scheduled to cease on 21 October 2012. The Minister for Resources and Energy will consider whether any further action is warranted in respect of the cessation of the Agreement. The Minister for Resources and Energy through various offshore Joint Authority decisions has also applied additional conditions to all existing offshore petroleum titles held by PTTEP and its Australian subsidiaries, or those that it has an interest in. 5. Additional Recommendations (Recommendations: 4; 11-15; 21; 36; 37; 45-47; 52-56; 57-60; 61-63; and 65) a. Offshore Petroleum Industry Oil and gas companies have been applying the lessons from the Montara and Macondo incidents both domestically and internationally, in well design operational procedures, reporting, competency and regulation of offshore wells. The Australian industry is constantly evaluating its procedures and practices to ensure that its operations are safe and environmentally sustainable. Members of the Australian Petroleum Production and Exploration Association (APPEA) (the peak national body representing Australia’s oil and gas exploration and production industry) have been working at three levels: with individual companies, nationally through APPEA’s Montara Taskforce and the Australian Marine Oil Spill Centre (AMOSC), and internationally through the International Association of Oil and Gas Producers (OGP), focussing on: Prevention; Intervention; and Response capability. Furthermore, offshore oil and gas companies operating in Australia have thoroughly reviewed and amended critical safety, environmental management and operational areas including: well design, integrity and operations; barrier principles; verifications systems; oil spill response capacities and preparedness; and blowout contingency plans. Companies have demonstrated their commitment to continuous improvement and implementing leading industry practice, and they regularly evaluate and amend their practices and procedures on a project and activity basis. b. APPEA Montara Response Taskforce In 2010, the APPEA Board established a “Montara Response Taskforce” to advise the APPEA Board on, and co-ordinate, cross-industry actions in relation to well integrity and oil spill response. Under the auspices of the Taskforce, the industry has developed a program of collaborative activities aimed at improving Australia’s well incident prevention, intervention and response capability. Specifically the work has delivered: A Self-Audit Tool that aims to assist companies with assessing their management systems, and clarifying responsibilities between the titleholder and the facility operator. The tool focuses on the critical areas of well planning, preparation, execution and operations. A Memorandum of Understanding (MoU) on mutual aid which sets up a framework for ‘best endeavours’ mutual assistance arrangements, under which parties to the memorandum have agreed to assist each other and share equipment in responding to an offshore well incident. The MoU recognises that emergency conditions arise that necessitate urgent response and assistance by the industry to minimise adverse impacts. Establishment of the APPEA Well Integrity and Safety Committee, whose aim is to increase sharing of information and collaboration within the Australian offshore petroleum industry, promoting implementation of leading practice procedures and operations Expanding oil spill response capability of the offshore petroleum industry including through the industry funded Australian Maritime Oil Spill Centre (AMOSC) reviewing preparedness and response equipment and strategies including planning, training, location and levels of spill response equipment, as well as the design and construction of an Australian based well capping and containment solution. c. Australian Well Capping and Containment Solution One of the key outcomes of the Australian Government hosted International Offshore Petroleum Regulators and Operators Summit (the Summit) held in August 2011 was the announcement of APPEA’s commitment to develop an Australian Well Capping and Containment Solution. The Australian solution is being developed as part of the international capping and containment solution led by the Subsea Well Response Project (SWRP). The SWRP is preparing four capping stacks, with each stack capable of handling a variety of scenarios. The capping stacks will be stored at separate locations in Brazil, Norway, South Africa and Singapore. From these locations, the kits can be transported by sea or air to possible incidents around the world. On 14 May 2012 APPEA announced funding for a sub-sea response solution to be in place by early 2013. A consortium of 12 oil and gas companies operating in Australian waters (Apache, BP, BHP Billiton Petroleum, Chevron, ConocoPhillips, ENI, ExxonMobil, INPEX, PTTEP, Santos, Shell and Woodside), have committed more than $2 million as Foundation Members for the development of the Australian component of the Well Capping and Containment Solution. The Australian component of the Well Capping and Containment Solution will be managed under the auspice of AMOSC, which will provide the organisational structure to oversight the establishment of the Subsea First Response Toolkit, an additional component of this solution. The Subsea First Response Toolkit will be located in Australia and will contain all relevant specialised equipment to enable the well-head and surrounding area, including the seabed, to be cleaned up and made safe for installation of a ‘capping’ device. The industry consortium will fund the acquisition, maintenance and deployment of the Subsea First Response Toolkit over the next five years. All Australian offshore petroleum operators will have access to the toolkit on an affordable basis. Supporting this development, APPEA has established a “technical group” to provide advice on the equipment, including maintenance and training requirements for the Subsea First Response Toolkit. 6. Other matters a. Lessons for Industry- International Offshore Petroleum regulators and Operators Summit (August 2011) On 10-11 August 2011, the International Offshore Petroleum Regulators and Operators Summit (the Summit) organised by the Australian Government, was held in Perth, Western Australia. The Summit provided a global platform for Governments, industry and regulators to review the collective lessons arising from the 2009 Montara and 2010 Gulf of Mexico incidents. It also provided an opportunity for international collaboration to identify best practice arrangements to strengthen existing offshore petroleum regulatory frameworks. Topics included culture, leadership and management; incident response and preparedness; environmental impacts and management; and innovation and R&D in deep sea drilling. Over 400 delegates attended the Summit, comprising government representatives, regulators, operators and industry professionals from China, Europe, Indonesia, New Zealand, Papua New Guinea, Singapore, South America, Timor-Leste, and the United States of America. The Summit outcomes focussed on the theme of “Cooperation, Commitment, and Prevention,” under the broader headings of Government, Regulation, and Industry. The ‘Summit Outcome Statement and Action Plan’ endorsed by the Government, APPEA, and NOSPEMA is available on the Department of Resources, Energy and Tourism’s website. b. International Engagement - US Ministerial Forum on Offshore Energy Safety On 14 April 2011 the Department of Interior of the United States of America, hosted the inaugural Ministerial Forum on Offshore Energy Safety. The Forum, Offshore Drilling and Containment, focussed specifically on the lessons learned from the Montara and Macondo incidents and global developments in well containment technologies. The Australian delegation included a senior government official from each of the Department of Resources, Energy and Tourism and the national offshore petroleum safety regulator. Australia presented on the Montara incident and Australia's Policy Response. The 2012 Ministerial Forum on Offshore Energy Safety was held in Norway in June. The Forum focused on offshore safety priorities, current and emerging, that are identified by Government, Regulators and the offshore petroleum industry, supporting continued action to improve the safety of offshore petroleum operations, through best practice legislation, regulatory approach and industry operations. c. International Regulators Forum The International Regulators Forum (IRF) promotes improvements in offshore health and safety through collaboration in joint programs and sharing of information. The IRF is a group of nine regulators of health and safety in the offshore upstream oil and gas industry from Australia, Norway, the United States, Mexico, New Zealand, Canada, Brazil, the United Kingdom, and the Netherlands. It holds an annual plenary meeting and periodically hosts an International Regulators’ Offshore Safety Conferences. Australia is represented on the IRF through the National Offshore Petroleum Safety and Environmental Management Authority. In October 2011, the IRF held a summit conference in Stavanger, Norway, to review progress on the application of learning’s and outcomes following the Montara and Macondo incidents and to identify what more needs to be done by industry and regulators. The key outcomes of the IRF Summit Conference included: d. The need for better coordination between safety and environmental regulation, responses and outcomes, recognising the difference between the performancebased approach to safety regulation and environmental regulation which historically has been more compliance orientated; An emphasis on the principal of continuous improvement by industry and regulators: “We don’t need a catastrophe to move forward” (Magne Ognedal, Director General, Petroleum Safety Authority Norway); A major theme around the use of internationally consistent standards by operators and regulators, within goal-setting, performance-based regimes; Recognition that action on prevention will yield the most effective outcomes for safety; and A general concern of industry and European regulators with calls to put offshore regulation in Europe under a central European Union body. Global Marine Environment Protection Working Group Prompted by several high profile offshore drilling accidents, G20 Leaders took the initiative in 2010 to create the Global Marine Environment Protection (GMEP) Working Group, comprised of G20 countries and international organisations. Its mandate is to “share best practices to protect the marine environment, to prevent accidents related to offshore exploration and development, as well as marine transportation, and to deal with their consequences”. Australia is represented on the G20 GMEP Working Group through the Department of Resources, Energy and Tourism. The GMEP Working Group has actively engaged with the offshore oil and gas industry and in July 2011 it hosted a seminar with offshore petroleum companies from around the world, the G20 and other invited countries, and international associations and organisations. Participants discussed the latest developments in the offshore oil and gas industry’s efforts to ensure safety and to minimize the environmental impacts of offshore oil and gas exploration and development. Conclusions underlined the need for international cooperation to prevent offshore oil spills and to develop emergency preparedness and response strategies. Participants expressed a desire to continue this work by further exploring mechanisms to exchange best practices. The GMEP Working Group has agreed to establish a Marine Environment Protection Best Practices Sharing Mechanism in the form of a website supported by face-to-face meetings. It is proposed that the mechanism, once established, will be used as a means to exchange information about best practices to protect the marine environment and to prevent accidents related to offshore oil and gas exploration and development. e. Offshore Petroleum Industry The Australian industry continues to work closely with the international offshore oil and gas industry through the International Association of Oil and Gas Producers (OGP). In response to the April 2010 Macondo incident in the US Gulf of Mexico, the OGP established a Global Industry Response Group (GIRG), which made a number of recommendations for improving well incident prevention, intervention and response capability. The international industry has formed three entities to implement the recommendations of the GIRG, they are: an OGP-governed Well Expert Committee that is considering incident prevention, with a focus on the design and operations of subsea wells in deepwater; a well capping consortium representing nine major oil and gas companies; and a a Joint Industry Project on Oil Spill Response, which is looking at all elements of oil spill response including practices, modelling and monitoring risk/hazard assessment models, principles on dispersant use (surface, aerial and subsea) and the role of in-situ burning as a response strategy. Australian industry interests are represented directly by companies through their international offices, and/or APPEA, and AMOSC for oil spill response, as direct members of these entities.