Environmental Law

05/02/2016

Towards an International Liability and Compensation Regime for Offshore Oil Accidents?

Oil spills (which, for the purposes of this note, are defined as those marine oil spills that occur in oil and gas operations – i.e. during exploration, exploitation and production) usually show as a series of crude oil releasing from offshore installations (drilling rigs, platforms, vessels) and pipelines. Spills, including both small leaks and accidental discharges (with explosions, fires, blowouts, collision, etc.), can contaminate vast offshore and coastal areas, kill countless wildlife (sea birds, mammals, shellfish and other organisms), and disrupt fishing, transport, recreation, and other activities. Over the past decade, accidents on offshore oil platforms (Australia, 2009; United States, 2010; China, 2011; Brazil, 2012) have led to dramatic consequences. At the same time, offshore operations are being carried out from shallow coastal areas to areas of deep water (over 500 meters below sea level), which undoubtedly brings more difficulties to remedy oil spill damages when extreme accidents occur.

(Photo by Flickr user Bryan Burke)

The problem is that there is presently no international liability and compensation regime covering those oil spill accidents that occur in offshore extractive activities; with attempts to establish such a regime having been unsuccessful. In 1977, the Committee Marine International (CMI) drafted a Convention on Offshore Mobil Craft, also known as the Rio Draft, at its Conference in Rio de Janeiro. As the Rio Draft model of incorporation by reference could not “produce a practical regime suitable for offshore units”, the draft convention text was further revised in 1994, then accepted by the CMI, and became known as the Sydney Draft. However, the International Association of Drilling Contractors and the United States Maritime Law Association insisted that a comprehensive international treaty for oil installations is unnecessary, and this resistance led to the removal of the Sydney Draft from the IMO long-term working plan. Although efforts to establish an international convention for offshore installations were officially ceased, a CMI working group and the Canadian Maritime Law Association developed the Draft Convention on Offshore Units, Artificial Islands and Related Structures Used in the Exploration for and Exploitation of Petroleum and Seabed Mineral Resources 2001 (‘Canadian Draft’), comprehensively covering various aspects of oil installations, including poverty, registration, privileges, mortgages, civil and penal jurisdiction to salvage, pollution and liability for leakage aspects. At the 2004 CMI Conference in Vancouver, the majority of participants supported this draft convention received, despite continued strong opposition from the United States. Finally, participants of the conference agreed to work continually towards improving this document.

Due to different levels of offshore industry development, as well as different interests among countries, historical practices did not successfully establish an international liability and compensation regime for offshore oil accidents, whereas some private agreements operating at the regional level have shown a great deal of advantages in liability distribution and effective compensation for offshore oil pollution. Since 1 May 1975, a private agreement between operators of offshore facilities, called the Offshore Pollution Liability Agreement (OPOL) of the United Kingdom, has been in effect. The agreement has worked well up to date, providing for a limited amount of liability for incidents involving the escape or discharge of oil from offshore facilities. The agreement has subsequently been extended to offshore facilities within the jurisdictions of Denmark, the Federal Republic of Germany, France, the Republic of Ireland, the Netherlands, Norway, the Isle of Man, the Faroe Islands and Greenland, but excluding offshore facilities located in the Baltic and Mediterranean Seas, and can be extended so as to apply to offshore facilities within the jurisdiction of any other state. In terms of compensation, the OPOL establishes a current maximum of 250 million USD per incident, subject to a few exceptions, for pollution damage and the cost of remedial measures incurred. Each operator accepts strict liability.

However, do private agreements suit all the regions with potential risks of offshore oil spills? Obviously, liability and compensation for offshore oil accidents are not strictly legal problems, but also relate to a political issue: States do not want to relinquish sovereignty over their continental shelves and Exclusive Economic Zones, and resist subscribing to an international convention regarding those offshore extraction activities, because they understand international law may limit the jurisdictional powers over their sovereign areas. However, as risks of offshore oil spills increase, a unified international regime is likely the most effective method to provide adequate and fair compensation for the oil pollution damages in member states. One reason for this is that offshore oil and gas industries are usually operated by multinational corporations, which could bring difficulties to making compensation claims when an oil spill accident occurs. Especially for developing countries, poor international and national regulations both limit victims’ ability to be compensated for damages suffered and allow multinational corporations to earn economic profits without taking responsibility for oil pollution. Another reason is that offshore oil accidents may cause transboundary pollution, and without a unified international compensation standard, the laws applicable to oil pollution have become a controversial issue among states. Furthermore, with offshore industries expanding their activities to the high seas and polar areas, international regulations will be of significant importance to prevent and control the potential risks of offshore oil accidents in the global commons. All these reasons together demonstrate that the negotiation of a convention on offshore extractive activities should be placed on the international agenda.

References

* Preben Hempel Lindøe, Michael Baram and Ortwin Renn: Risk Governance of Offshore Oil and Gas Operations (Cambridge 2014).

* The Offshore Pollution Liability Association Ltd, available at http://www.opol.org.uk/about-1.htm.

* Jacqueline Allen, ‘A global oil stain – cleaning up international conventions for liability and compensation for oil exploration/production ‘, (2011) 25 Australian and New Zealand Maritime Law Journal 90-107, at p. 91.

* Position paper of the Iberoamerican Institute of Maritime Law in relation to the need of an international convention on the offshore extractive activity promoted by the IMO, Legal Committee, 102th session, Agenda item 11.

02/02/2016

The Paris Climate Agreement: silent about agriculture

In our previous blog on the Paris Climate Agreement, we already showed that there are important things missing from the Agreement, such as a collective emissions reduction target and a proper enforcement mechanism. This time, I would like to focus on another missing and completely underestimated issue: the impact of climate change on agriculture and vice versa.

Photo by Flickr user philHendley

The very few references that earlier versions of the negotiating texts made to agriculture all disappeared from the Agreement. As a consequence, the Agreement does not mention agriculture at all. This is a missed opportunity. There are pressing reasons for the international community to start regulating both emissions from agriculture and adaptation in this sector. The agricultural sector is responsible for almost 25% of anthropogenic GHG emissions, both through CO₂ emissions caused by deforestation and peatland drainage, and through methane (NH₄) emitted by livestock and rice cultivation, as well as through nitrous oxide (N₂O) emissions caused by the use of synthetic fertilizers and the application of manure on soils and pasture. The latter two substances have a 25 times and 300 times stronger impact on the climate than CO₂ respectively. With a sharp rise in food demand ahead of us, these emissions can be expected to go up drastically when no regulatory caps are in place.

Agriculture is also among the sectors that will suffer the largest negative impacts of climate change, for which, consequently, huge adaptation efforts are needed. Local temperature increases of 2°C or more without adaptation will negatively impact production of the major crops in tropical and temperate regions (wheat, rice and maize) and irrigation demand will increase by more than 40% across Europe, USA, and parts of Asia. The negotiators of the Paris Climate Agreement were worried about the food security issues and mentioned in the preamble that they recognize the fundamental priority of safeguarding food security and ending hunger, and the particular vulnerabilities of food production systems to the adverse impacts of climate change. This is a much weaker version, though, of an earlier proposal to include a binding adaptation goal in the Agreement on “maintaining food security”. The first part of the preambular provision on food security seems to imply that maintaining food security might be a reason to not impose mitigation measures on the agricultural sector. In the negotiating texts, food production regularly emerged as a limiting factor to mitigation actions. In the final version of the Paris Climate Agreement, only one such reference survived. One of the objectives of the Agreement, laid down in Article 2, is: “Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production”.

Given the contribution of agriculture to climate change and the impact of climate change on agriculture, it is disappointing that so little attention is paid to agriculture in the Paris Climate Agreement, as this document is expected to set the tone for the world’s climate policies of the coming years.

The European Union opted for a much firmer approach toward agriculture. In the run-up to the Paris Climate Agreement, the European Commission announced that it would encourage “climate friendly and resilient food production, while optimising the sector’s contribution to greenhouse gas mitigation and sequestration.” For example, it proposed to include cropland and grazing land management in its policy from 2020, developing instruments to do so before 2020. The EU even proposed to focus its future climate change instruments on all agricultural activities, such as enteric fermentation, manure management, rice cultivation, agricultural soils, prescribed burning of savannahs, field burning of agricultural residues, liming, urea application, other carbon-containing fertilisers, cropland management and grazing land management and “other.” As a consequence, the EU proposed to fully include agriculture in the Paris Climate Agreement in two ways: as a source of greenhouse gas emissions, and as a means of CO₂ absorption and sequestration. This would mean that the agricultural sector has to undergo a drastic transition from conventional farming to farming using climate smart agricultural practices.

The above account of what survived the negotiations shows that the EU negotiators were not able to convince the others of the importance of including agriculture in the Paris Climate Agreement.

The fact that the Paris Climate Agreement does not pay attention to agriculture, however, does not mean that the document will not be important for the sector at all. Article 4 states that a balance needs to be achieved between anthropogenic emissions by sources and removals by sinks of greenhouse gasses in the second half of this century, in order to hold the increase in the global average temperature well below 2°C. It is obvious that this automatically implies that drastic mitigation actions are needed to reduce emissions from a sector that is responsible for almost 25% of the greenhouse gas emissions. Apparently, the world leaders were afraid to tell you…

Similarly in the area of adaptation, the silence about agriculture does not mean nothing will happen. Many of the provisions on adaptation and finance aim at giving increased support to developing countries to meet their adaptation needs, both through greater emphasis on providing financial resources and through the transfer of technology and capacity building. Given the impact of climate change on agriculture and the dependence of developing countries on this sector, it is beyond doubt that implementation of these new provisions will in fact largely focus on agriculture. The same might be true for the role National Adaptation Plans will play. Article 7(9) of the Paris Climate Agreement requires states to have such a plan aimed at building the resilience of “socioeconomic systems”. Agriculture definitely falls in this category.

Within only two decades a drastic transformation of the entire agricultural sector across the world, in developed and developing countries, is needed. This requires tremendous efforts of policymakers, farmers and the entire agribusiness. Let us hope that, despite the remarkable and regrettable silence of the Paris Climate Agreement about agriculture, states understand the urge to start to develop effective policies aimed at reducing emissions from agriculture while at the same time helping the sector to become more resilient to climate change.

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 655565.