Health and safety a priority in oil and gas production
Hon Christopher
Finlayson
Acting Minister of
Labour
27 November
2012 Media Statement
Health and safety
a priority in oil and gas production
New regulations will ensure that health and safety is a
priority in the growing petroleum exploration and extraction
industry, Acting Minister of Labour Christopher Finlayson
announced today.
New regulations are being introduced to strengthen management of oil wells over the whole life of the well, including managing hazards that could cause a major accident, and minimising the likelihood of an uncontrolled release of oil and gas. Operators will also be required to prepare and submit safety cases to the regulator for assessment before commencing any new operations.
From June 2013, operators carrying out petroleum exploration and extraction activities will have to comply with new regulations for the management of major accident hazards, made under the Health and Safety in Employment Act.
“The recent report of the Pike River Royal Commission, although concerned primarily with underground mining, made very clear that New Zealand’s regulatory standards in hazardous industries were not up to world standard,” Mr Finlayson said. “The changes announced today will bring the petroleum exploration and extraction sector into line with practice in the United Kingdom and Australia.”
“Oil and gas is an important and growing industry in New Zealand. It has the potential to create many jobs and economic opportunities, so it is vital that the industry develops with a stronger focus on the health and safety of workers.”
“New Zealand has never had a major accident resulting in multiple fatalities or injuries in the oil and gas sector, but that is not a justification for standing still,” Mr Finlayson said. “Building skilled and safe workplaces is one of the priorities of this government. It is a vital part of our growth agenda. We are determined that such operations in New Zealand must be managed, and regulated, in such a way as to protect themselves, their workers and the environment from danger.”
Under the new regulations:
• Operators (both onshore and offshore) will be
required to prepare a safety case and submit it to the
Ministry for acceptance before the commencement of
operations. The Ministry will be able to recover, from
operators, the full cost associated with its assessment of
safety cases.
• Operators of smaller scale, lower risk
onshore production installations will be required to prepare
an overview of the measures in place to protect the health
and safety of those at, or near the installation in lieu of
a safety case.
• All operators will have to report
‘near miss’ incidents that could have led to a major
accident – this will ensure the Ministry has sufficient
data to inform the targeting of its regulatory
interventions.
• The regulatory regime will focus on
the whole lifecycle of the well to ensure that wells are
designed, modified, commissioned, constructed, equipped,
operated, maintained, suspended and abandoned in a way that
ensures operators reduce the risks to a level that is as low
as is reasonably practicable.
• All operators will be
required to implement arrangements for independent and
competent persons to examine the design, construction, and
maintenance of all wells within their inventory.
Q AND A
How will these regulatory changes
enhance the existing position?
The changes will ensure that operators, before they commence operations, identify and evaluate all hazards with the potential to cause a major accident and identify suitable control measures. The Ministry will need to accept the findings of this assessment before operations can commence. Currently this requirement is confined to the offshore petroleum industry and does not require regulatory acceptance.
The changes will also introduce more robust requirements to ensure that well integrity is maintained throughout the lifecycle of wells. Well integrity is the first line of defence against an uncontrolled release of oil and gas (or blowout).
Won’t this add a level of
cost and complexity to the exploration and extraction
process – a focus of the Government’s forward energy
policy?
Major accidents,
such as the 2009 Montara incident off the northwest
coast of Australia, the 2010 Deepwater Horizon
incident in the Gulf of Mexico, and the Pike River Mine
incident here in New Zealand leave no room for doubt.
Unless the management of major accidents is scrupulously
observed by the sector and those who regulate it, the
potential for harm to petroleum workers, and (in some cases)
the environment exists. These regulations will strengthen
the management of these hazards.
How much will this new regime, particularly on safety cases, cost operators?
Operators will be required to pay fees of between $70k and $100k for the assessment of their safety case, depending on the type of installation they will be using. The assessment of a revised safety case will cost between $34k and $54k.
Arrangements for the independent examination of wells are likely to cost individual operators $70k per annum (on average).
Other changes will effectively codify what diligent operators have always done as a matter of routine and are unlikely to increase costs.
Why are you
putting the cost of health and safety on the operators when
there is already a Health and Safety levy they must
pay?
The technical
sophistication of this sector will likely require the
Ministry to engage specialist advice to support the
assessment of safety cases. Given the limited number of
such operations in New Zealand, it is not feasible for the
Ministry to have such specialist resources on staff, so it
will have to be purchased on the open market or from
overseas regulators. Operators stand to reap significant
profit from their work in and around New Zealand but
equally, if something goes wrong, the cost to the country in
human, economic and environmental terms could be very
substantial and so mitigating that risk should not be a cost
to taxpayers. Most submitters in the consultation process,
including the industry association (PEPANZ), supported the
cost recovery proposals.
What international jurisdictions were studied as these regulations were prepared?
Findings from the Commission of Inquiry into Montara and the National Commission on the Deepwater Horizon Oil Spill were taken into consideration during the review of the current health and safety regulations that apply to petroleum exploration and extraction activities. The current regulations were also compared against those used in the United Kingdom and Australia. The new regulations ensure that our approach in New Zealand is more consistent with practice in Australia and the United Kingdom and developments in light of recent major accidents that have occurred overseas.
Is the Ministry properly resourced to implement
these regulatory extensions?
The High Hazards Unit was established in 2011 to improve the Ministry’s capacity and capability to provide effective oversight of the petroleum, geothermal, and mining industries.
The safety case regime’s cost recovery mechanism enables the High Hazards Unit to purchase specialist advice to support the assessment of safety cases.
Have you introduced the concept of
on-site “check inspectors” as is proposed for
underground mining?
In the
consultation, unions advocated expanded powers for health
and safety representatives working on installations. Under
the Health and Safety in Employment Act, that is not
possible, but instead, their work will be addressed with the
development of an Approved Code of Practice for employee
participation in the sector. The Independent Health and
Safety Taskforce, being chaired by Shell NZ head Rob Jager
is due to report in April next year and may have views on
this matter.