Offshore Oil and Gas Environmental Law: UNCLOS, MARPOL, OSPAR & EU

Introduction

The offshore oil and gas industry operates within a complex web of rules and regulations. Many different regulatory bodies exert some degree of control over the industry, and they do not always work together as effectively as they should. This can become a serious problem for companies involved in oil and gas production, as they may struggle to keep all applicable regulations straight. With UNCLOS, MARPOL, OSPAR, and the EU each offering their own regulations and requirements, it becomes very difficult for companies to be clear on what is expected of them.

Unfortunately, that confusion can lead companies to make mistakes, misunderstand rules, or ignore regulations that seem too complicated or of uncertain applicability. That can get a company into serious trouble, so it is very important that these companies carefully consider how to handle the multiple regulatory frameworks with which they must comply.

UNCLOS: The Law of the Sea

UNCLOS, or the United Nations Convention on the Law of the Sea, is an international agreement that came into force in 1994. It defined the responsibilities and rights of nations with respect to the world's oceans. The treaty established guidelines related to the environment, natural resources, marine life, and the conduct of businesses operating on and around the world's oceans. There were originally four treaties addressing these issues, dating back to 1958; once UNCLOS came into force, those earlier treaties were replaced.

As of August 2013, 165 countries as well as the European Union had joined the convention, but it remains unclear to what extent UNCLOS actually creates binding international law. In other words, those attempting to abide by UNCLOS are not always certain they are legally required to do so, and many discrepancies remain unresolved. Because there are few definitive answers, a number of people and businesses operating on and around the ocean — including many in the oil and gas industry — simply ignore UNCLOS or choose to follow a different treaty or national law. This is a serious concern, as it prevents UNCLOS from being properly enforced and creates conflicts with a number of other treaties and regulations governing the world's oceans.

There is also the issue that not all of the world's countries have agreed to UNCLOS, raising questions about how it can be enforced when not every country has signed it. Whether non-signatory countries are exempt, or whether only parties using those countries' waterways are exempt, is part of the ongoing debate. The oil and gas industry has little interest in parsing which regulations apply to which region, country, or area of ocean. UNCLOS is clearly confusing, and that is not the only problem. In addition to the confusion over this particular treaty, there are numerous other treaties, rules, laws, and regulations that also claim relevance to the oceans.

Many of these conflict with UNCLOS, making it increasingly difficult to determine which framework to follow. UNCLOS replaced a 17th-century concept whereby a nation held rights to waters within three miles of its coastline, with all waters beyond that distance considered international and free for use by any nation. Early in the 20th century, however, nations began expressing interest in extending their territorial claims. They wanted to protect fisheries, enforce pollution controls, and secure rights to minerals and other valuable assets — including oil and gas reserves. The United States used its continental shelf as a logical boundary for national waters, and other nations quickly followed suit.

Some nations extended their claims to 200 nautical miles while others extended only 12 nautical miles, creating considerable confusion since each country had a different — and often arbitrary — distance defining its national waters. Oil and gas companies and others doing business at sea were consequently unsure where national jurisdiction ended and international waters began. UNCLOS helped to establish limits for various types of waters — internal waters, territorial waters, and exclusive economic zones (EEZs) — to ensure a degree of equality among nations. The continental shelf and EEZs extended the furthest, at 200 nautical miles.

UNCLOS also created obligations requiring companies to safeguard the surrounding environment and protect natural marine resources. The treaty has been amended several times in an effort to make it clear, concise, and appropriate for all countries. However, many countries — including the United States — have objections to at least one part of the treaty and have declined to ratify it until those concerns are addressed. Countries that have not ratified the treaty may agree to follow certain parts of it while ignoring others, which makes it difficult to claim that UNCLOS functions as genuine international law.

MARPOL: Marine Pollution from Ships

MARPOL is short for "marine pollution" and deals with any kind of pollution originating from ships. It was signed in 1973 but did not receive sufficient ratifications to come into force until October 1983. It is one of the most important international environmental conventions addressing marine pollution. Its goal was to minimize the amount of pollution entering the sea, including oil, exhaust emissions, and waste dumping — issues of particular importance to the oil and gas industry, whose operations carry an inherent risk of marine pollution. Naturally, some of the requirements also imposed costs on industry that could adversely affect companies' bottom lines, making compliance a significant business concern.

Minimizing not just deliberate but also accidental pollution is a central objective of MARPOL. As of May 2013, parties to MARPOL represent over 99% of the world's shipping tonnage. Ships flagged in countries that have agreed to MARPOL are required to follow its requirements regardless of which ports they call at. While MARPOL deals specifically with ships and may not seem immediately relevant to oil and gas companies, those companies do rely on tankers and other large vessels to transport extracted oil and gas — vessels that can fall under MARPOL regulations if they are flagged in a signatory country.

Since some countries have not agreed to MARPOL, an oil and gas company wishing to avoid those rules could simply register its ships under a non-signatory country's flag. While this might not be well-received by customers, it would be a legally viable option. MARPOL and UNCLOS share a similar goal — protecting the world's oceans from pollution and damage — but are not identical in their requirements. It would seem logical to consolidate these two frameworks, rather than attempting to reconcile them. Some countries belong to both, some to neither, and some to only one, meaning that several different sets of rules apply and not all parties are required to follow the same standards.

The EU and Environmental Policy

Again, however, only some countries have ratified OSPAR, while others have agreed only in part or have ignored it altogether. The convention entered into force in March 1998. Significant concerns about the quality of the marine environment in the Atlantic and the North Sea prompted its creation, and the offshore oil and gas industry falls under its regulations. This only adds to the overall regulatory confusion, since the interplay between OSPAR, UNCLOS, and MARPOL must be carefully considered, as must the question of which framework takes precedence in any given area of the world. Generally, little can be done to fully reconcile all of the governing frameworks, leading to ongoing disputes about which rules are correct and which countries have or have not accepted various treaties.

Companies from countries that have not ratified a given treaty cannot be held accountable under it, which effectively allows those companies to avoid standards that their competitors in other countries must follow. It could reasonably be argued that companies based in non-ratifying countries hold an unfair advantage, since they are not bound by the same regulations. This disparity can affect their cost structure, customer relationships, and overall competitiveness. Given the enormous scale of the oil and gas industry and the high demand for its products, any competitive advantage is highly significant.

The European Union was founded in 1957. At that time, it had no environmental policy and no laws designed to protect the natural world. Over the past four decades — and particularly in the last 20 years — the EU has developed some of the most progressive and stringent environmental laws in the world. With a robust legislative network covering all aspects of environmental protection, the EU has positioned itself at the forefront of global efforts to safeguard the planet. Water protection is among the most important issues on the EU's agenda, making international treaties such as UNCLOS, MARPOL, and OSPAR critically important. However, significant overlap exists among these frameworks, and gaps and loopholes remain. The fact that non-ratifying countries need not abide by these treaties is also a challenge that the EU must navigate as it determines which companies it will do business with and how it manages its own oil and gas sector.

EU environmental law encompasses more than 500 decisions, directives, and regulations, making it one of the most significant areas of EU politics. Establishing a common environmental policy across all member states became a priority in order to ensure that every country operated under the same rules and that businesses could compete on a level playing field. This harmonization helped ensure that companies within the EU could carry out their operations under the same regulatory conditions as their peers in the same industry.

Conclusion

Overall, environmental regulations are important and much needed in the oil and gas industry. However, they must be effective and efficient, and they must be applied consistently across all jurisdictions — otherwise they will be of little value. Companies that object to environmental regulations in one location will simply relocate their operations to a more permissive environment. While this makes obvious commercial sense for those companies, it makes little sense for the environment or for the countries working to protect it. Treaties are valuable tools for expressing a country's position on an environmental issue, but they are not laws in the strict sense. They are agreements by which particular countries commit to refraining from specific practices. Countries that ratify such agreements are bound by them; their signature signals a willingness to work toward a mutually acceptable solution to a shared problem.