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Ripple Effect of BP Oil Spill Likely to Lead to Increased Regulatory Scrutiny in Alberta

29-Jun-10

While it may be a generation or more before the full extent of the impact of the BP oil spill in the Gulf of Mexico is known, it is likely that regulatory impacts will be felt much sooner in oil and gas jurisdictions, including Alberta.

As investigations into the cause of the BP spill unfold in the United States, allegations are surfacing that the emergency response planning of BP was deficient, relied on ‘boilerplate’ emergency response language and failed to specifically address the uniqueness of the Macondo well itself and the environment in which it was being drilled.

Many regulators, including Alberta’s Energy Resources Conservation Board (“ERCB”), require oil and gas facility applicants to prepare site specific Emergency Response Plans (“ERP”) for certain well and pipeline projects, as well as to maintain up to date corporate ERPs to operate certain facilities within their jurisdictions. In Alberta the ERCB has set out its ERP requirements in Directive 71: Emergency Preparedness and Response Requirements for the Petroleum Industry.

The ERCB emergency response regulation is directed primarily at sour gas facilities. In Alberta an applicant for a sour gas well, pipeline or other facility may be required to demonstrate, through the provision of detailed ERPs, that a well can be safely drilled and a pipeline or facility can be safely constructed and operated. These ERPs must further outline measures in place and actions that will be taken in response to any level of emergency. Frequently the applicant will be called upon to defend the efficacy of its ERPs at a public hearing.

Though regulatory regimes differ from jurisdiction to jurisdiction, the ERP prepared by BP for the Macondo well and approved by American regulators is now being characterized as deficient and ‘boilerplate’. If the allegations of deficiency prove to be true, the American oil and gas regulators will face considerable criticism for their ‘rubber stamping’ of an inadequate plan.

We anticipate that the ERCB will react to this spill and the emerging allegations by becoming even more vigilant about the ERPs before it. Accordingly, oil and gas operators should ensure that the ERPs they produce for their facilities are in fact site-specific, account for the unique variables present in the particular project, and can be legitimately defended as being responsive to any ‘worst case scenario’ blow out or other disaster – regardless of how unlikely.

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