OPRED consults on the financial civil sanctions for offshore environmental offences

United Kingdom

On the 20th November 2018 the Department for Business, Energy and Industrial Strategy (“BEIS”) and the Offshore Petroleum Regulator for Environment and Decommissioning (“OPRED”) launched a consultation on the draft guidance to accompany the Offshore Environmental Civil Sanctions Regulations 2018 (“OECSR”). The consultation invites views on the draft guidance that seeks (a) to explain the mechanics of OECSR, which came into force on 1 October 2018 and (b) to clarify how OPRED will apply the new financial civil sanctions on or after the 1 November 2018. Details of the consultation, the draft guidance and the OECSR are briefly outlined below and is recommended reading for those who are operating offshore. The overarching message of the new sanctions regime, which is already well established onshore (particularly in England and Wales) is that there will be considerable change to the processes and outcomes of enforcement.

OECSR

The OECSR equips OPRED with powers to impose Non-Compliance Penalties (“NCP”), Fixed Monetary Penalties (“FMP”), Variable Monetary Penalties (“VMP”) or Variable Monetary Penalty Undertakings (“VMP Undertaking”) on offshore companies engaged in oil & gas related activities within the United Kingdom Continental Shelf and relevant UK territorial waters, who commit certain criminal environment offences. These penalties are particularly suited to lesser environment offshore offences, perhaps where the breach has already been remedied and damage rectified and/or where no environment harm was caused but could have been caused.

The creation of the VMP Undertakings could prove to be a significant element. It has similarities to (but not exactly the same as) the onshore “Enforcement Undertaking”, which is a mechanism increasingly used by onshore industry and onshore regulators (the Environment Agency, Natural Resources Wales, and latterly the Scottish Environment Protection Agency). In real terms this mechanism is a success story in the sense that it provides a mechanism for enforcement in an appropriate and proportionate manner, without the “criminality tag” (the argument often being that many environment offences are not true “crime crimes” and should not be treated as such).

Applicability of OECSR

OECSR will allow OPRED to apply civil sanctions ranging from £500 to £50,000 for breaches of the following environment related offshore oil & gas regulations: 

  1. The Merchant Shipping (Oil Pollution Preparedness, Response and Co-operation Convention) Regulations 1998.
  2. The Offshore Chemicals Regulations 2002.
  3. The Offshore Installations (Emergency Pollution Control) Regulations 2002.
  4. The Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005.
  5. The Offshore Combustion Installations (Pollution Prevention and Control) Regulations 2013.

The sanctions may now be an appropriate enforcement response for breaches of the following “relevant permits”:

  • An authorisation to use or discharge an offshore chemical within the meaning of the Offshore Chemicals Regulations 2002.
  • An authorisation to discharge oil within the meaning of the Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005.
  • A permit to operate an offshore combustion installation within the meaning of the Offshore Combustion Installations (Pollution Prevention and Control) Regulations 2013.

The OECSR provide alternative enforcement responses. They do not alter the nature of existing criminal offences and do not create any new ones.

Draft Guidance

The starting points and maximum levels of financial penalties which OPRED is empowered to impose have been fixed in the OECSR with one important exception. This is in respect of VMP Undertakings where there is no limit (see below). The draft Guidance sets out (a) the details of the circumstances and scenarios in which OPRED will consider whether it would be appropriate to impose a financial civil penalty and (b) the determination process OPRED will follow before settling on a penalty.

Annex A in the draft Guidance contains a “Table of Offences and Civil Penalties Applicable”. The Table sets out which sanction may be imposed for which particular offence. For instance, failure to operate an offshore combustion installation without the relevant permit or in breach of the conditions of a permit, may be punishable either by an FMP of £2,500 for a single breach with no aggravating factors, or by a VMP of up to £50,000 where aggravating factors are involved. Should an unlawful discharge/release/continued release of oil occur, this may attract a VMP of up to £50,000. For more details of offences and applicable penalties see Annex A on page 18 of the draft Guidance Document (see link below).

Fixed Monetary Penalty (FMP)

For minor environment offences where there are no aggravating factors, there are three levels of FMPs which OPRED may impose, being: £500, £1,000 and £2,500. The draft Guidance states that an FMP is deemed “most suitable” for offences where a low-level monetary penalty is more likely to change an offender’s behaviour and encourage future compliance in scenarios where advice and guidance have not been enough to deter non-compliance.

Variable Monetary Penalty (VMP)

More serious environment offences may attract a VMP. These are capped at £50,000. When deciding on the final amount, the draft guidance states that OPRED will take into account all the circumstances of the offence, including whether there are any aggravating or mitigating factors.

Variable Monetary Penalty Undertaking (VMP Undertakings)

In response to OPRED issuing a VMP notice of intent, the offender (within 35 days) can offer a VMP undertaking. The VMP Undertaking will set out details of the offence, actions taken to rectify and avoid reoccurrence. An aspect of VMP undertakings (and likewise onshore enforcement undertakings) which is likely to prove attractive, is the opportunity for the offender to make a payment (which may include amounts to reflect avoided costs or financial gain) as a result of the non-compliance which instead of going to the state (which would be the case in terms of a fine), is paid to benefit persons affected by non-compliance. Onshore, what often happens is that identified persons who may have been harmed receive a payment and often a payment is made to a relevant charity.

There are, of course, sanctions should there be non-compliance with the VMP Undertaking itself.

Right to Appeal

The sanctions may be appealed (28 days) to the First-tier Tribunal (General Regulatory Chamber) in respect of any territory within the United Kingdom. The grounds for appeal are wide: namely a) the decision was based on an error of fact; (b) the decision was wrong in law; (c) the decision was unreasonable; (d) any other reason. An appeal stays payment of the penalty until after the appeal has concluded.

Publication of civil sanctions

The fact of one of these sanctions will be made public unless, in a particular case, OPRED thinks publication would not be suitable.

Comment

The consultation runs only for a modest period closing on 18 December 2018. If the offshore industry is similar to onshore industry this will be a welcome development.

Draft guidance, consultation document and details of how to respond are here

OECSR regulations are here