REGULATORY IMPACT ASSESSMENT
1.
Title
The Offshore Chemicals Regulations 2002.
2. Purpose and Intended Effect
2.i Issue and objective
The objective of the Regulations is to implement the UK’s obligations under the Convention for the
Protection of the Marine Environment of the North-East Atlantic (OSPAR) Decision (2000/2) on a
Harmonised Mandatory Control System for the Use and Reduction of the Discharge of Offshore
Chemicals (“HMCS”). The Regulations will only apply to the offshore oil and gas industry. Under the
Regulations, the use and discharge of offshore chemicals by offshore operators will require a permit to
be issued by the Secretary of State for Trade and Industry.
2.ii Risk Assessment
Failure to implement the OSPAR requirement would be a breach of the UK’s international obligation.
Non-implementation might lead to loss of the environmental benefits envisaged under the regime of
progressive moves towards the use of less hazardous substances.
2.iii Issues of Equity or Fairness
The Regulations will introduce a regime that will strike a balance between the need for effective
controls on the use and discharge of chemicals offshore - thus leading to greater protection for the
marine environment - and the requirements of the offshore industry. Chemicals play a vital part in both
the day-to-day operations of the offshore industry without which hydrocarbon production would not be
possible. Other States with an offshore industry in the North East Atlantic are also bound by the
OSPAR Decision.
3. Options
3.i Identify options
a)
do nothing. This is not possible as the OSPAR requirement represents an international obligation
that has to be implemented.
b) maintain the current voluntary scheme known as the Offshore Chemicals Notification Scheme
(“OCNS”). Again this is not possible because the voluntary scheme does not include all that is
required under HMCS.
c)
introduce Regulations. This is the only viable option as the OSPAR Decision calls for mandatory
controls. The Regulations will be made using the order-making power in the Pollution Prevention
and Control Act 1999.
4. Benefits
The use of chemicals offshore inevitably gives rise to some contamination of the marine environment
since discharge of some of them into the sea is unavoidable. The Regulations are designed to achieve
better control on the use and discharge of chemicals from offshore installations in a cost-effective and
proportionate manner paying particular regard both to the key requirement of the Decision to move to
less hazardous chemicals wherever possible and to the cumulative effects on the marine environment.
The Regulations will introduce a permitting scheme that allows for transparency and openness in the
use and discharge of chemicals. A major component of an application for a permit will be an
assessment of the risk to the marine environment of the discharge of chemicals at discharge points.
5. Costs
Offshore operators already comply with the voluntary OCNS under which the use and discharge of
chemicals are notified to the Department in order to assess the effect of such use and discharge on the
marine environment. The HMCS is a mandatory scheme and adds to OCNS by introducing such
matters as a requirement to seek substitutes for chemicals considered hazardous and ranking of
chemicals.
Implementation Costs (arising from the administration needed to comply with the Regulations) will
come from the costs to be borne by operators associated with applying for a permit and the small costs
associated with maintaining a database of chemicals that may be used offshore. Manpower and other
internal company resources will be required to put together an application for a permit including a risk
assessment of the environmental impact of the discharge of chemicals at the discharge point.
Since neither the industry nor Government could sensibly handle the administrative burden arising from
the large number of permits which would be required to be issued on the day the Regulations come into
force, the Regulations provide for a rolling start for existing production operations offshore lasting for
up to two years. This recognises that there needs to be a transitional period during which operators of
existing fields can apply for permits on a progressive basis.
The industry has estimated that their additional costs in the two years of the rolling start will be of the
order of £2 million reducing thereafter. With 27 operators having to apply for permits during the
rolling start, the average additional costs for each operator during this period will be of the order of
£75,000.
It is estimated that in each of the two years of the rolling start there will be about 250 applications and
the total administrative cost to Government will be approximately £1,200,000 which will be
recoverable through fees to operators. The average fee to operators over the rolling start will therefore
be of the order of £45,000 which will be in addition to the costs mentioned above. The bulk of this
number of applications will be for existing operations but it also includes an estimate of the number of
applications from activities such as new offshore developments and decommissioning activities which
are not included within the rolling start and which will also require permits. Fees will be charged to
operators by way of a Fees Scheme made under powers contained in the Pollution Prevention and
Control Act 1999. The allocation of fees will be related to total discharges on an annual basis (i.e.
using the polluter pays principle). Costs subsequent to the rolling start process will be less since by that
time new applications for permits will only be required for new operations. Once the rolling start has
been completed, the costs will be primarily associated with requests for variations to existing permits,
permit review and reporting.
There will be no implementation costs for chemicals suppliers who already register their chemicals
under the voluntary OCNS. The costs of developing new chemicals will not be directly affected by
introduction of the Regulations although there will be an increased emphasis on environmental factors
as well as efficacy. The cost of maintaining the chemicals database will be borne by the operators and
is included in the above figure of £1,200,000 over two years.
The table below summarises the above. The figures for Years 3 and 4 are best estimates. Because
there will be full cost recovery under the Regulations, the cost to Government will fall to the industry as
well.
Cost to
Government
Additional cost to
industry
Total
Year 1
600,000
Year 2
600,000
Year 3
500,000
Year 4
500,000
1,000,000
1,000,000
800,000
800,000
1,600,000
1,600,000
1,300,000
1,300,000
Policy costs (arising from compliance with the aim of the Regulations) will relate to compliance with
permit conditions. For example, there could be a cost associated with the search for a less hazardous
chemical. These costs however should not be significant as permit conditions will very largely reflect
what operators would be doing anyway to seek ongoing improvement in their use and discharge of
chemicals following on from the operation of OCNS.
Additional policy costs will also be incurred in relation to monitoring the marine environment
particularly round discharge points. A rough estimate is that monitoring may cost about £100-150,000
in total in any one year in which it is carried out to be borne by operators again on a pro rata basis.
However, the details of monitoring and monitoring methods have yet to be worked out so a firm cost
figure is not available. The monitoring programme will be developed in discussion with operators and
scientific advisers once the Regulations are in operation.
6. Impact on small business
The only business sector directly affected will be the UK offshore oil and gas industry which does not
comprise small businesses. Some chemicals suppliers may be small businesses but the Regulations will
not impose any additional burdens and costs on them. These companies will only be required to
continue to do what they are doing already under the current OCNS and they will not be charged under
the scheme being introduced by the Regulations. There will be some benefit to consultants and
chemicals suppliers in providing advice to operators on their risk assessments.
7. Securing compliance.
The Regulations will be enforced by the Department of Trade and Industry with advice from the Centre
for Environment, Fisheries and Aquiculture Science (CEFAS - an Agency of the Department for
Environment, Food and Rural Affairs) and the Fisheries Research Services (FRS - an Agency of the
Scottish Executive). Comprehensive Guidance Notes will be available from the Department for the use
of operators and chemicals suppliers.
8. Consultation
Consultation on drafts of the Regulations, the Guidance Notes and this Regulatory Impact Assessment
was carried out from 22 December 2000 to 31 March 2001. Eight bodies, none of whom raised any
objections in principle to the proposals, responded. These comments resulted in a few minor changes to
the Regulations and some changes to the Guidance Notes almost exclusively for the purposes of
clarification. A further truncated consultation was carried out from 5 October to 2 November this year
on extending the scope of the Regulations to include chemicals used during decommissioning activities.
The only response came from the industry who welcomed the proposal.
9. Recommendation
The OSPAR Decision requires a mandatory control scheme to be introduced and the recommendation is
that it be so through use of the order-making power in the Pollution Prevention and Control Act 1999.
10. Enforcement and Sanctions
The Department employs offshore environmental Inspectors whose duties will include investigating
whether any requirements or prohibitions imposed by the Regulations or by way of conditions of
permits are being complied with.
The Department will be able to revoke permits if it transpires an operator is contravening any condition
of his permit. Operators will be required to report actual chemical use and discharge on a monthly basis
and permits will be reviewed once every three years or more frequently if that is considered desirable
by requesting an updated Risk Assessment from an operator holding a permit.
A person guilty of an offence under the Regulations will be liable to a fine.
11. Monitoring and Evaluation
The HMCS is scheduled to be reviewed by OSPAR in 2004. Any changes made to the Decision
however are unlikely to require amendments to be made to the Regulations.
The Regulations and more particularly the Guidance Notes will be kept under review during their
administration in order to ascertain whether they could be improved by introducing amending
Regulations and further editions of the Guidance Notes.
Declaration
I have read the Regulatory Impact Assessment and I am satisfied that the benefits justify the costs.
Signed by the responsible Minister ……………………………….
Date……………………………………
Contact point
Graeme Cobb
Oil and Gas Directorate
Department of Trade and Industry
1 Victoria Street
London SW1H 0ET
Tel 020 7215 5151
e-mail graeme.cobb(a)dti.gsi.gov.uk