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What Australia can learn from the BP Oil Spill

An opinion piece by international energy law expert, Assistant Professor Tina Hunter, Bond University

The BP Gulf of Mexico oil spill is unprecedented in its destruction of ocean ecosystems and coastal wetlands, and its devastating and long-term economic effects. What it also demonstrates, however, is the limited capacity that oil companies have to control spills at great depths.

This spill has highlighted the ineffectiveness of government regulation of offshore petroleum activities and the flaws of a system that instead leaves regulation to the companies that conduct the petroleum activities themselves. Clearly, there is a lack of contingency and knowledge that companies have to respond to an oil spill of this magnitude. The BP oil spill has taught regulators globally that even the best oil-spill response plan will be rendered ineffective if the source of the spill cannot be controlled.

The Gulf of Mexico disaster has placed the oil industry - both oil companies such as BP, and service companies such as Halliburton - on notice that they will have to comply with greater regulatory control over their activities in the future. This means that not only will their operations be subject to greater scrutiny, but the health, safety and environmental aspects of their petroleum activities will be subject to greater regulation. The era of self-regulation for petroleum companies is likely to change as government control over petroleum activities rapidly increases.

The comparatively smaller, yet still significantly damaging Montara spill in the Timor Sea off north-west Australia in August last year first highlighted the ineffectiveness of oil company self-regulation of wells, and the limitations of the current offshore petroleum safety framework.

At present, under the self-regulation regime, oil companies regulate well management in both Australia and the Gulf of Mexico, utilising a Well Operation Management  Plan (WOMP). The spills in Australia and the Gulf of Mexico have laid bare the ineffectiveness of this regime.

Furthermore, the inability of BP and PTTEP to cap the leaking wells in the Gulf of Mexico and Montara respectively, highlight the ineffective response capacity of oil companies to oil well incidents that result in oil spills.

The oil spills in both companies have clearly demonstrated that oil companies should not be responsible for the self-regulation of wells, which should be regulated by a third party. The government, which owns the petroleum resources and grants the exploration and production licences in these areas, should have an active regulatory role, in order to prevent such well spill incidents from occurring again.

In Australia, the National Offshore Petroleum Safety Authority (NOPSA) regulates offshore petroleum safety, although its regulatory scope is limited to the health and safety of personnel, and at the time of the Montara spill, its responsibilities excluded petroleum well safety.

Legislative amendments have since addressed this issue, extending the regulatory scope of NOPSA to now include oil wells. However, the present offshore safety regime remains a hands-off approach, where NOPSA does not involve itself in the day-to day safety of offshore petroleum platforms. Instead, it conducts a bi-annual inspection/audit of high-risk operations. Whether this practice is good enough is what the commission and many state governments have questioned, and has been a focus of the Montara commission of Inquiry.

The NOPSA response to the Montara oil spill was also poor. The authority’s decision to declare a two nautical mile exclusion zone effectively prevented any close range response to the spill, including the capping of the well, forcing PTTEP to drill a relief well that took three months to complete, thereby delaying the capping of the leaking well.

As a consequence of the NOPSA response and the failure of current offshore safety and regulatory arrangements in Australia, the source of oil in the Montara oil spill was uncontrolled for 106 days. Worryingly, this spill occurred in only 200m of water. Australia has recently released exploration opportunities in the pristine Mentelle Basin west of Perth, with a water depth of up to 3,800 metres. If a well leak occurred in the Mentelle Basin there would be catastrophic results, given the proximity to Ningaloo Reef, whale migratory paths, and other pristine wilderness areas.

This raises the pressing question of whether Australia should suspend deep water exploration and drilling.

The Montara spill has demonstrated that our country cannot effectively contain an oil spill in 200m of water, let alone greater depths of thousands of metres. Unless and until Australia can effectively contain oil spills from exploration and production wells, it should suspend deep-water exploration and drilling. At the very least, we need to reassess our commitment to deep-water exploration activities until the BP Gulf of Mexico spill has been contained and analysed.

The Minister for Resources Energy and Tourism Martin Ferguson MP released the Mentelle Basin Acreage in May 2010, with exploration applications closing May 2011. To date, there have been no licences granted in the area. The ideal opportunity to suspend deep well exploration is now, prior to the granting of any licences in the area. This would also bring Australia into line with a number of other western petroleum-producing countries, most notably Norway, who has suspended the granting of licences in deep-water areas until the Gulf of Mexico Deep Horizon well is capped and an inquiry completed.

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