New offshore environmental legislation passed

The Offshore Petroleum and Greenhouse Gas Storage Amendment (Compliance Measures No. 2) Act 2013(Amendment Act) was passed on 17 May 2013.

The Amendment Actis part of a legislative regime to strengthen offshore petroleum regulations concerning compliance, safety, integrity and environmental management objectives under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGSSA).

The regime aims to safeguard against future uncontrolled releases of hydrocarbons. The stringent requirements place a statutory responsibility on operators to protect their workforce and Australia's environmental assets.

The Amendment Act introduces an express 'polluter pays' obligation, supported by mechanisms to ensure compliance and environmental performance of titleholders, including the new requirement for financial assurance.

What are the key changes?

The polluter pays

The Amendment Act imposes a duty on titleholders, in the circumstances of a petroleum spill in Commonwealth waters, to:

• eliminate and control the petroleum escape;
• clean up and remediate any damage; and
• monitor the environmental impact of the escape.

The other amendments are designed to ensure compliance with the above duty, enabling NOPSEMA to:

• require titleholders to remove perceived environmental threats from offshore operations, by issuing and publishing prohibition and improvement notices;
• take action if a titleholder fails to fulfil its duty, including daily penalties for continuing offences, civil penalty provisions, injunctions and the introduction of adverse publicity orders;
• recover from titleholders any costs incurred in addressing a spill; and
• require titleholders to maintain sufficient financial assurance.

Titleholders have strict liability to reimburse any entity (including states and territories), that incurs costs in carrying out these obligations.

Maintain financial assurance

The Amendment Act imposes a compulsory obligation to maintain financial assurance.  Financial assurance is widely defined to include self-insurance, a bond, an indemnity or other surety, a letter of credit, a mortgage or any combination of these.

The assurance must be sufficient to meet potential costs and liabilities arising from carrying out petroleum activities, including costs of complying with any requirement under the OPGGSA or regulations. It is at NOPSEMA's discretion as to whether the level of financial assurance is sufficient and not unworkably complex.

Regulations are being contemplated to allow NOPSEMA's refusal or withdrawal of an approval for an environmental plan for a specific activity, where financial assurance is insufficient. Titleholders should engage with NOPSEMA to ensure suitable cover and types of assurance are obtained.

Increased enforcement measures

The additional mechanisms are aimed at achieving future behavioural change, rather than serving a purely punitive function.

Expansion of criminal penalties

• Penalties are extended to certain occupational health and safety provisions and environmental offences.

Daily civil penalties

• Daily penalties for certain continuing offences and contraventions of civil penalty provisions, at a daily rate of 10% of the maximum penalty for the relevant offence or civil penalty provision.

Improvement notices

• Improvement notices give NOPSEMA the power to prevent a particular activity from being conducted or offshore structure from being operated, if it is determined there is an immediate or significant threat to the environment.
• The failure to comply with notices incurs a maximum penalty for corporations of $510,000, in addition to daily civil penalties. Daily penalties accrue uncapped until a notice is complied with.
• A determination by NOPSEMA of a threat to the environment will not be subject to merits review.

Introduction of adverse publicity orders

• An adverse publicity order is publication of the offence or civil penalty order, its consequences and the penalty imposed, on the NOPSEMA website.

Titleholders should consider the adverse consequences of these changes to their reputation. In particular, the advertised finding of guilt may give exposure to civil litigation and a negative reputation to the affected.

Changes to the regime for multiple titleholders

The Amendment Act expands the administrative actions regime for multiple titleholders.  The OPGGSA regime provides, in the case of multiple titleholders, for the nomination of one titleholder to take all voluntary actions on behalf of the titleholder group.

Voluntary actions include actions permitted, but not required under the OPGGSA, such as making an application, giving a nomination and giving notice. Voluntary actions are submitted to the Joint Authority, the Titles Administrator or the responsible Commonwealth Minister.

Voluntary actions now also include the giving of plans and objections and actions made to NOPSEMA under legislative instruments. Nominated titleholders retain responsibility for these new categories, unless the nominated titleholder is changed by the relevant parties.

The increased scope of eligible voluntary actions will commence from Proclamation, enabling time for nominated titleholders to be informed.