EUROPEAN COMMISSION 
Brussels, 27.10.2011 
SEC(2011) 1293 final 
  
COMMISSION STAFF WORKING PAPER 
IMPACT ASSESSMENT  
Accompanying the document 
PROPOSAL FOR THE REGULATION OF THE EUROPEAN PARLIAMENT AND 
OF THE COUNCIL 
on safety of offshore oil and gas prospectio n, exploration and production activities 
{COM(2011) 688 final} 
{SEC(2011) 1292 final} {SEC(2011) 1294 final} 
 
 
  
Lead DG:  ENER 
Other involved services : ECHO, EEAS, EMPL, ENTR, ENV, JRC, MARE, MOVE, SG, SJ 
Agenda planning or WP reference:  2011/ENER/007 
 
 TABLE OF CONTENTS 
INTRODUCTION............................................................................................................. III 
1. PROCEDURAL ISSUES AND CONSULTATIONS OF INTERESTED 
PARTIES..................................................................................................................... 5 
1.1. Organisation and timing.................................................................................... 5 
1.2. Consultation and expertise ................................................................................ 5 
2. PROBLEM DEFINITI ON AND BASELINE ............................................................ 6 
2.1. Nature of the problem: A need to fu rther reduce the risks posed by offshore 
oil and gas operations........................................................................................ 6 
2.2. The extent of the problem ................................................................................. 9 
Geographical extent........................................................................................... 9 Material extent................................................................................................. 10 
2.3. Underlying drivers of the problem.................................................................. 11 2.4. The Baseline.................................................................................................... 14 
2.4.1. Problem evolution during the deve lopment of offshore oil and gas 
activities in Europe and the effect of existing EU acquis ................. 14 
2.4.2. Impacts under the baseline scenario.................................................. 16 2.4.3. Foreseen evolution of the baseline.................................................... 18 2.4.4. Effects of a "do-nothing" approach................................................... 21 
2.5. Need for EU action.......................................................................................... 21 
3. OBJECTIVES & MEASURES................................................................................. 29 
3.1. General objectives........................................................................................... 29 
3.2. Specific objectives........................................................................................... 29 
4. POLICY OPTIONS................................................................................................... 30 
4.1. Overview of the policy options ....................................................................... 31 
4.2. Description of the policy options .................................................................... 31 
4.2.1. Option 0............................................................................................. 31 4.2.2. Option 1............................................................................................. 31 4.2.3. Option 1+........................................................................................... 33 4.2.4. Option 2............................................................................................. 34 4.2.5. Option 3............................................................................................. 40 
4.3. Summary of options ........................................................................................ 41 4.4. Deferred options.............................................................................................. 42 
5. IMPACT ASSESSMENT OF POLICY OPTIONS.................................................. 44 
5.1. Option 0 - No EU Action ................................................................................ 46 
 
 5.2. Option 1........................................................................................................... 47 
5.2.1. Impact on risk mitigation .................................................................. 47 5.2.2. Regulatory and compliance costs...................................................... 48 5.2.3. Social, economic and environmental impacts ................................... 49 
5.3. Option 1+......................................................................................................... 49 
5.3.1. Impact on risk mitigation .................................................................. 49 5.3.2. Regulatory and compliance costs...................................................... 50 5.3.3. Social, economic and environmental impacts ................................... 51 
5.4. Option 2........................................................................................................... 51 
5.4.1. Impact on risk mitigation .................................................................. 51 5.4.2. Regulatory and compliance costs...................................................... 52 5.4.3. Social, economic and environmental impacts ................................... 53 
5.5. Option 3........................................................................................................... 53 
5.5.1. Impact on risk mitigation .................................................................. 53 5.5.2. Regulatory and compliance costs...................................................... 54 5.5.3. Social, economic and environmental impacts ................................... 54 
6. CONCLUSIONS OF IMPACT ASSESSMENT ANALYSES FOR POLICY 
OPTIONS.................................................................................................................. 55 
7. PREFERRED POLICY OPTION AND LEGAL INSTRUMENT........................... 59 
7.1. Preferred option............................................................................................... 59 
7.2. Implementing measures for Option 2.............................................................. 59 7.3. Preferred form of legal instrument .................................................................. 63 
8. MONITORING AND EVALUATION..................................................................... 63 
 
 INTRODUCTION 
The Deepwater Horizon drilling rig disaster  on 20 April 2010 cost 11 lives. The massive 
escape of oil from the faulty well caused si gnificant environmental, economic and social 
damage. The incident focused the attention of public policy makers around the world on the 
scale of risk in the offshore oil and gas industry. Whilst the regulatory framework and 
operating conditions in Europe are in general di fferent from those in the USA, the disaster 
provided an impetus for examining the lessons to  be learned about the nature of the oil and 
gas industry hazards in EU waters, the capability of industry to prevent them being realised 
and, if there are major incidents, the preparedness to limit and repair the consequences.  
By reviewing applicable European legisla tion and consulting with industry and Member 
States' authorities1, the Commission identified, in summer 2010, shortcomings in EU's 
regulatory frameworks and industry practices and started2 preparing to reinforce the safety of 
offshore oil and gas activities in Europe . In October 2010 the Commission adopted a 
Communication "Facing the challenge of the sa fety of offshore oil and gas activities".3 
Following a fitness test of EU legislation to a ddress an even similar to the Deep Horizon, it 
outlined areas where more coherent applicati on of best industrial and regulatory practices 
throughout the EU was justified.   
This Impact Assessment has been based on fu rther research, analysis and consultations, 
including a formal public consultation, all of  which build on the initial work of the 
Commission. It establishes, in Chapter 2  the underlying drivers to shortcomings in offshore 
risk controls in the EU and the need for EU  action to meet the safety and environmental 
challenges. It articulates in Chapter 3  the general and specific objectives for the enhanced 
prevention of major offshore incidents. In Chapter 4  a number of policy options progressing 
steadily from the current starting point to mo re profound reforms are set out and analysed. 
Each option is assessed in Chapter 5  for its calculated environmental, economic, 
administrative and social impacts. This sets the scene in Chapters 6 and 7  for the selection of 
a preferred option to go forward.  
The suggested option implements, by means of new legislation and soft law, wide ranging 
reforms that level up the practices in EU Member  States with offshore oil and gas activities to 
current best standards. It also provides for gr eater public transparency about the performance 
of the industry and the regulators. It esch ews wholly new or unfamiliar approaches, and 
thereby avoids the risk of destabilising the currently best performing EU regimes.  
While some of the underlying measures of the preferred option can be implemented without 
delay, others require implementing or delegated acts, with further input from Member States, 
to complete their implementation. For three measures, due to their complexity, it is 
recommended to carry out further evaluation with in separate policy development. Those three 
are described fully in this report notwithstandi ng they do not form part of the integrated 
proposal covered by this impact assessment.  
                                                 
1 Public administration bodies  involved in licensing and supervision of offshore activities in Member States. 
2 Statements of Commissioners Oettinger and Damanaki at EP plenary on 7 July 2010 
3 COM(2010) 560 final  
 
 In Chapter 8  we suggest mechanisms for monitori ng and evaluation of the proposals once 
implemented.  
 
 1. PROCEDURAL ISSUES AND CONSULTATIONS OF INTERESTED PARTIES  
1.1. Organisation and timing 
The preparation of the Impact Assessment started in late 2010, partly building on the 
review of the European regulatory fram ework launched by the Commission after the 
Deepwater Horizon accident and on consultations with stakeholders. 
The analysis feeding into the Impact Assessment was performed internally by 
Commission services, partly with the use of  external sources of information and 
expertise. The Commission's Joint Research Centre (JRC) provided important input to the document, in particular to the quantitative analyses. The Commission also made extensive use of studies from external sources, the list of which is available in Annex IX . 
1.2. Consultation and expertise 
An Inter-Service Group (ISG) was establis hed in January 2011 by the Directorate-
General for Energy (ENER) with participation from the Secretariat General, the Legal Service, the European External Action Service and DGs ECHO, EMPL, ENTR, ENV, 
MARE and MOVE. The ISG met 7 times between January and June 2011 for the discussions of the scope, of interim analyti cal results and of draft texts for individual 
elements of this Impact Assessment report, as well as the public consultation document published in March 2011 (more details furthe r below). Bilateral consultations with 
individual DGs were undertaken in the same time period. 
In addition to the internal Commission consultative process involving the above 
mentioned services, the Impact Assessment study drew on consultations with external 
experts and stakeholders who were consulte d throughout the preparation of the work and 
provided invaluable expertise.  
An on-line public consultation was carried  out between 16 March and 20 May 2011 to 
ascertain the views of interested parties on the need for EU action in various policy 
fields. The consultation was based on a docum ent outlining the key issues and containing 
18 open questions. The public consultation re sulted in 65 reactions and contributions 
from Member State authorities, industry asso ciations, individual enterprises, NGOs and 
citizens concerning various aspects of offshor e safety. The contributions proved to be 
instrumental in developing the Impact Asse ssment and the ensuing legislative proposal. 
The key results of the public consultation are summarized in Annex VII. 
Apart from the on-line public consultation, stakeholders were consulted in regular 
meetings. National authorities involved in th e regulation and supervision of offshore 
activities have met in four meetings hoste d jointly by the Commission and the North Sea 
Offshore Regulatory Forum (NSOAF). The issue of  offshore safety was also raised in the 
meetings of the Berlin Forum I ndigenous Fossil Fuels Working Group
4. In addition to 
the above structured dialogues, numerous mee tings have taken place with experts of the 
International Association of Oil and Gas Producers (OGP), national industry 
                                                 
4 The EU Fossil Fuels Forum (aka. Berlin Forum) is an annual stakeholder meeting convened by the 
Commission. Between the annual plenary sessions, working groups hold regular meetings to discuss the most topical issues iden tified at the plenaries. 
 
6 associations, individual enterprises, NGOs and independent verification companies. 
These consultations provided unique access to  up-to-date industrial expertise and know-
how. Furthermore, the Commission has regularly  attended the meetings of the Oil Spill 
Prevention and Response Advisory Group (OSPRAG) established in the UK. 
Opinions of the Impact Assessment Board  
The first opinion of the IAB was received on 8 July in response of the initial submission 
of the Impact Assessment on 16 June 2011. Th e IAB requested a resubmission of the 
report, with the following recommendations for improvements: 
• Better define the problem and develop a full baseline scenario in the report 
• Present a clear intervention logic by better structuring the content of options and 
choices made  
• Improve the assessment of impacts  
• Add stakeholder views throughout the document on key points 
The impact assessment was accordingly reorganised and resubmitted on 31 August. The 
opinion of the IAB, was received on 23 Se ptember. It recognised that earlier 
recommendations had been followed to a significant extent but asked still to: 
• Better justify grounds for EU action in term s of subsidiarity (see 2.5 "Need for EU 
action") 
• Further structure the content and choice of options to facilitate the reading and to  
elaborate on the discarded but important options and the plans for their later 
implementation (see Chapter 4, throughout) 
• Further improve the assessment of impacts and their comparison (see chapter 5, 
Chapter 6 – diagram and text box) 
• Further incorporate stakeholder views (see mainly Chapter 4 – description of the 
options- but also throughout the report and in updated Annex VII) 
 
The references in parentheses indicate areas of changes; 
   
2. PROBLEM DEFINITION AND BASELINE  
2.1. Nature of the problem: A need to furt her reduce the risks posed by offshore 
oil and gas operations 
Offshore oil and gas operations entail risks and – as seen in the Gulf of Mexico in 2010 
and elsewhere – the consequences of an accide nt can be catastrophic. The risks are more 
real than they may appear - it is a matter of  public record that in the 31 years between 
Mexico’s 1979 Ixtoc and the 2010 Deepwater Horiz on disasters, there have been at least 
9 other offshore disasters of a major scale5, and a large number of lesser incidents that 
could have resulted in total loss of the rig or  platform instead of the smaller damage or 
pollution that actually happened in those cases.  
                                                 
5 Ixtoc 1979/Norway Alexander Kielland 1980/Canada Ocean Range r 1982/China Glomar Java Sea 
1983/UK Piper Alpha 1988/Brazil Enchova 1984 and 1988/Tha iland SeaCrest (8 of the 91 dead were from 
the EU) 1989/Brazil P.36 2001/India Mumbai High 2005/Mexico Usumacinta 2007/Deepwater Horizon 2010. Moreover, a well head accident on the Montara pl atform on 21 August 2009 resulted in a fire and an 
uncontrolled discharge of oil and gas lasting until 3 November 2009. 
 
7 Some of these happened in Europe (including Norway) or involved European operators. 
The risks of major offshore incidents, alt hough reduced in the past decades in some 
Member States through major reforms intr oduced following the Alexander Kielland and 
Piper Alpha disasters6 remain, also in Europe, high. This  is evidenced by the persistent 
occurrence of tell-tale signs (pr ecursors of potential major accidents7 that do not 
materialise - 'near misses') in reports from the European offshore sector. Some reports on hazard precursors and risks in fact reveal dec lining industry performance in the control of 
major offshore risks even in jurisdictions that are considered to feature some of the most 
advanced safety regimes
8. For example, Norway's recently  released reflections of the 
state of its offshore industry conclude that th e risks of major offshore incidents are higher 
than was previously thought9. 
At the same time, the stress test of the EU  regulatory framework carried out in summer 
2010 and further developed during the preparat ory stages of this Impact Assessment 
identified a number of shortcomings in the regulatory framework for the offshore oli and 
gas activities in the EU. The offshore industr y, including individual subsidiaries of the 
same company, operates to different environmental, health and safety standards in different European jurisdictions. Those sta ndards are partly guided by local requirements 
and are largely determined by national legisl ation since existing EU law sets mainly 
minimum requirements covering only partia lly the relevant aspects of offshore 
activities
10. 
The result of the above is that licensing, permitting, environmental protection, technical 
and financial capacity requirements, equipmen t safety standards, reporting practices and 
inspection regimes vary from Member State to  another. This does not create a suitable, 
comprehensive and EU-wide coherent regulat ory environment that would prioritize and 
indeed necessitate continuous reduction of risks of major accidents. 
The differences in the regulation of offs hore activities are even more marked when 
moving between EU regions. Whilst there are similarities in offshore hazards, the regulation of them outside the North Sea is less developed and does follow a clearly 
specified model
11. Any detailed benchmarking between individual Member States, let 
alone amongst them at EU level, is, however , complicated by the lack of transparency, 
                                                 
6 The Piper Alpha North Sea oil production platform expl oded in 1988, killing 167 people. The event was 
caused by failures to operate production systems safely. An earlier incident in the Norwegian North Sea resulted in 123 deaths when the Alexander Kielland platform capsized in 1980. These two incidents led to reforms of the structural resilience of offshore structures, particularly mobile units. 
7 Precursors of major hazards include hydrocarbon leak s, failures of production process safety control; loss 
of drilling well control; safety failure caused by invalid design change; high number of maintenance backlogs of safety critical elements. 
8 Norwegian Petroleum Safety Authority Risk Report 2010, ref http://www.ptil.no/news/rnnp-2010-major-
challenges-in-important-areas-article7810-79.htm l; UK Key Programme 3 (installation integrity) 2007 
report ref http://www.hse.gov.uk/offshor e/kp3.pdf and 2009 progress report ref 
http://www.hse.gov.uk/offshore/kp3review.pdf 
9 Norwegian Petroleum Safety Authority Risk Report 2010, ref http://www.ptil.no/news/rnnp-2010-major-
challenges-in-important-areas-article7810-79.html  
10 For example, EU legislation on the authorisation of offshore activities deals only with competition 
aspects of the procedures; EU directives on product safe ty apply to equipment on fixed installations but not 
mobile ones (such as was the Deepwater Horizon rig); EU legislation on the health and safety of workers 
introduces i.a. the risk management concept of a health and safety document, however, does not oblige the companies to submit that to competent authoritities 
11 For example, Romania and Bulgaria have seemingly less comprehensive regulatory regimes than the 
North Sea states. 
 
8 comparable data and statistics. The industry also does not systematically share 
information or lessons learnt from incidents and is in complex conditions such as deep water. We develop the issue of industry a nd regulators performance benchmarking – both 
between sectors and between countries – in Annex XIII.  
Moreover, the follow-up to the Deepwater Horizon in Europe or in some EU Member 
States has revealed that a major accident of similar or even smaller proportions could put 
the available emergency response capacities under a serious strain
12. A look at EU shows 
that the EU Civil Protection Mechanism' s Monitoring and Information Centre is 
available for offshore pollution events on a 24/ 7 basis. However, there are today no EU 
law requirements on issues such as sharing, pl acing or compatibility of response assets to 
deal with an event, maintenance of industr y asset inventories or cross-border emergency 
response. The Deepwater Horizon response effort in the US was complicated precisely by similar lack of coordination of response inventories and by compatibility problems of 
assets (machinery, etc). 
Finally, the Gulf of Mexico disa ster revealed that an extreme damage to the environment, 
and ultimately to marine and coastal economies, raises important questions about the liability for the damage and responsibility for its remediation. The EU does have a system of provisions for the remedy of envi ronmental damage following an accident. The 
analysis carried out in summer 2010
13 pointed to some scope to improve the system. For 
instance, the fact that EU waste law applies to oil spills by virtue of a ruling of the European Court of Justice has consequen ces on the responsibility of operators, so it 
would benefit from better visibility with guidance from the Commission. Secondly, in the 
framework of the Environmental Liability Dir ective (ELD), there is a need to ensure 
without any ambiguity that offshore operators are liable not only for damage caused to protected species, natural habitats and to the water damage to territorial waters, but also 
damage to all marine waters under the juri sdiction of Member States. The status quo, 
which does not address the latter, might perpetuate the possibility that some 
consequences of a marine accident may be in ternalised at least partly to the Member 
State, contradicting the polluter pays pr inciple that governs ELD. Also, the current 
framework makes unclear whether Member St ates could enforce compensation from the 
polluter for the deployment of national conti ngency assets and for traditional damage in 
case of an emergency of extreme proportions. 
Related to the above is the issue of guara ntees of operators' financial strength. The 
operator of the license in the Deepwater Hori zon case estimates the outcome costs of the 
incident at $40bn. Very few companies a nd no existing risk-pooling scheme could 
accommodate such a sum, which would leave the host country exposed to unwarranted 
public financial risk. In the EU, there is no cons istent approach that would ensure that the 
"polluter pays" principle would be fully upheld to cover damages of a transboundary 
character and/or of level seen in the Gu lf of Mexico. The insurance market cannot 
furnish an instrument that guarantees un limited financial indemnity. Apart from the 
                                                
 
12 The industry itself recognizes that it still lacks equipm ent to contain oil spills in deep-water or other 
complex environments. For example, OSPRAG has been set up in the UK between industry and regulator to review and improve well control and em ergency response inventories and financing 
(http://www.oilandgasuk.co.uk/knowledgecentre/OSPRAG. cfm ); the Association of Oil and Gas 
Producers has similarly established a response gr oup to develop improved response and well capping 
capability: http://www.ogp.org.uk/ pubs/PressReleases/PR100909.pdf 
13 COM(2010) 560 final and SEC(2010) 1193 final 
 
9 North Sea-based risk pooling arrangement between operating companies14, no guarantees 
amongst Member States or international soluti ons are in place at present. The absence of 
an international liability regime governing offshore oil and gas accidents (revealed most recently equally by the Deepwater Horizon a nd Montara events, both referenced earlier) 
is in contrast to the maritime transport s ector where a body of liability conventions and 
trust funds exist to facilitate compensation of victims.  
As result of all the above, the EU is facing a threefold problem with respect to oil and 
gas activities off its shores: 
First, the risk of a major offshore oil or  gas accident occurring in EU waters is 
significant and the existing fragmented le gislation and regulatory and industry 
practices do not provide for all achievable reductions in the risks throughout the EU. 
Second, the existing regulatory framework and operating arrangements do not provide 
for the most effective response to all consequences of accidents in EU waters. 
Third, under existing liability regimes, the re sponsible party (such as the polluter in 
case of oil spill) may not always be clearl y identifiable and/or may not be able, or 
liable, to pay all the costs of remedy of the damage caused by its action.  
2.2.  The extent of the problem 
Both the potential sources of major incidents a nd areas at risk from them are extensive in 
geographical terms and in the potential material and societal impacts.  
Geographical extent Over 90% of oil and over 60% of gas produced  in Europe (EU and Norway) comes from 
offshore operations. Offshore operations (expl oration and exploitation) are ongoing in 
the territorial waters of 11 Member States. Fu rthermore, some other Member States plan 
to commence drilling activities in the near future. In total, over 1,000 offshore installations are operating in European waters (including Norway)
15. There are more than 
6,000 wells, more than 400 of them in Italian and Spanish waters. These numbers are growing despite an overall decline in hydrocarbon production. 
The national regimes in the North Sea region, while all different, are the source of the 
most advanced risk control practices by virtue of their goal-setting regulatory 
approaches. Nevertheless, even in this regi on the reduction of major hazard risks remains 
a valid concern as reports from relevant authorities reveal
16. This is important since the 
majority of offshore oil and gas in Eur ope (EU & EEA) is produced in the Danish, 
Dutch, German, Norwegian and UK sections of the North and Norwegian Seas.  
                                                 
14 OPOL (The Offshore Pollution Liability Association LTD) 
15 More detailed data on European offshore activities are available in the Commission Staff Working 
Document accompanying the Commission Communication "F acing the challenge of the safety of offshore 
oil and gas activities" (http://ec.europa.eu/en ergy/oil/offshore/doc/sec(2010) staff_working_doc.pdf) 
16 For example, as recently as in May 2010, well contro l was lost on the Gullfaks C installation in Norway; 
according to the Norwegian Petroleu m Safety Authority's report on the event issued later in 2010, only 
chance averted a sub-surface blowout a nd/or explosion. In 2003,  windy weather conditi ons helped to avoid 
an explosion following a gas line rupture on the BP Forties Alpha platform in the UK North Sea. 
 
10 Activities may be less intensive in the Medite rranean and Black Sea regions - most of 
offshore operations in this region occur in th e Italian and Romanian waters while more 
Member States (e.g. Cyprus, Malta) are pl anning to commence drilling activities in the 
near future. However, the risks associated with the operations may be even higher there as, apart from Italy, the offshore oil and gas industry has shorter traditions and the 
regulatory authorities less resources in those regions. In a recent report to the French 
Parliament, the risks from hydrocarbon expl oration and exploitation activities in the 
Mediterranean are underlined, as is the ga p between progress of drilling technologies, on 
the one hand and of safety measures on the other hand. 
17Moreover, instead of goal-
setting regulation, EU Member States in thes e regions apply more prescriptive regulatory 
approaches which focus more on detailed requirements and less on effective risk control
18. 
Material extent  
A major accident at any one of Europe's offshore installations would likely entail 
material and costly damage to the environment, the economy, local communities and society at large, while the lives and health of  those working in the sector may be put at 
risk. Offshore accidents and failures of production equipment can result in significant damage and extremely high flow-rates of oil and gas. This can create challenges for the rescue of a substantial workforce isolated a great distance from land, and also for the arrest and containment of the oil or gas spill itself. As past accidents have clearly shown, 
coping with such situations after they ha ve arisen requires mobilisation of massive 
international expertise and physical assets
19. 
The direct impacts of an offshore incident on the health and safety of offshore workers 
are obvious from events like Deepwater Horizon and Piper Alpha. Crude oil contamination of oceans and seas can also have a detrimental impact on marine and 
coastal ecosystems (damage to marine waters and to protected species and natural habitats), the full extent of which can only be  assessed several years after the event. And, 
as seen in the Gulf of Me xico, major disasters damaging such ecosystems can also 
directly jeopardise the health and livelihoods of coastal communities.  
Finally, there can be indirect impacts on othe r activities linked to the sea. This includes 
ports, but also agriculture and power  stations with sea water intake
20. Other important 
indirect impacts include the potential loss of  major corporate earnings and its affect on 
investments (pension funds, for example, su ffered badly as a result of the Deepwater 
Horizon incident), interruptions to other offs hore sectors, such as wind farm construction 
and operation, or maritime transport. 
Societal extent  
The national economies of the coastal Member States affected by the incident would be 
placed under pressure by a large release of oil into the seas as a result of public aversion 
                                                 
17 "La pollution de la Mediterranée: état et perspective à l'horizon 2030" Office Parlementaire d'évaluation 
des choix scientifiques et technologiques, Juin 2011, p.44-48 
18 The presecriptive approaches have been abandoned in the North Sea region during the reforms following 
major accidents in the 1980s; they are now also under revision in the US following the Deepwater 
Horizon. 
19 More details on the costs of Deepwater Horizon rescue and clean-up in Annex I. 
20 ITOPF Handbook 2010/2011 describes these impacts ba sed on experience from some 10 000 oil spills.  
 
11 to a large scale disaster in EU waters with in the time frame in which a recurrence might 
be anticipated (twenty years). In addition, a major incident in the EU would probably 
limit activity through moratoria or even lead to termination of offshore licensing21. 
The economy relating to the offshore oil i ndustry, including its suppliers would be 
severely affected by such restrictions. Th e companies directly concerned may fail, 
market and public confidence may falter, and national production of oil and gas may 
diminish. All of these outcomes would impact  negatively on state revenues. Equally, the 
security and affordability of oil and gas supp lies could be affected. Offshore oil and gas 
form a significant and increasing share of total oil and gas production, so any loss of 
access to indigenous European reserves, or  uncertainty about access, would have 
implications for EU's supply of oil and gas and possibly for energy markets. 
2.3. Underlying drivers of the problem 
The threefold problem (significant and insuffi ciently mitigated risks of a major accident; 
the insufficiency of existing provisions to en sure most effective emergency response; the 
incompleteness of existing liability regimes) which characterizes the present offshore oil 
and gas operations in Europe is the result of a confluence of factors.  
The risky nature of the offshore oil and gas s ector and the persistence of those risks in 
Europe are driven by factors related to th e industry as well as to the regulation and 
oversight the sector is subject to. Many of th e present operations in Europe take place in 
maturing fields - roughly half of the produci ng installations in the North Sea are past 
their predicted production life and the mobile ri g fleet is ageing, with a number of mobile 
rigs of 70’s vintage. The business models  applied by operators reflect the maturing 
operating environment – the major players are moving on to frontier areas (e.g. deep water, high pressure zones – with higher risks associated with the potentially high 
rewards), disposing of their ageing, high cost platforms in more standard locations to 
smaller companies specialized on low yield, low capital operations. This trend may entail 
higher risks both on account of new operations shifting to more complex environments 
and on account of specialist companies havi ng possibly less financial strength and less 
in-house expertise to ensure comprehensive risk mitigation and to cope fully with 
liabilities in case of a major incident.  
These industry-wide characteristics are co mpounded with factors related to company-
specific corporate practice. As evident from th e persistent levels of legal enforcement in 
the high activity region of the EU (northern North Sea – where, significantly, enforcement data is accessible)
22, there is lack of evenness in compliance of individual 
operators with the rules and regulations a pplicable in respective jurisdictions. The 
compliance challenge can be seen as a reflecti on of the state of the safety culture of the 
industry23 and further results in inconsistent app lication of best practices and techniques 
when dealing with broadly similar problems.  
                                                 
21 In the USA, for example, there are offshore production sites from where the sector is now banned 
22 UK offshore enforcement statistics since 2001/02 (comprising the total number of prosecutions and 
statutory improvement or prohibition notices) are broadly steady over the past 10 years at 49/year (2010/11 provisionally = 47). See Annex 13 for more informa tion on benchmarking between sectors/countries.  
23 An Advisory Committee set up by UK's Health a nd Safety Executive (HSE) produced already in the 
1990s a definition of safety culture that has been re-used extensively: ‘The safety culture of an 
organisation is the product of i ndividual and group values, attitudes,  perceptions, competencies, and 
 
12 Drivers related to the quality of the current  frameworks for regulation and oversight 
reflect the fact that there is not a consiste nt approach to regulation of the oil and gas 
sector despite its unique mobile, global nature (including the fact that an incident in one 
jurisdiction can cause pollution in others). Pa rtly because of the unique characteristics of 
the sector, EU instruments that are effective for safety and environment risk assessments 
or which drive consistent equipment standard s in other sectors,  do not have the same 
impact offshore24. Moreover, there is uneven technical expertise amongst regulators in 
the EU, who however play a cruc ial role in verifying that operators correctly account for 
the safety and long term integrity of their undertakings.  
The second aspect of the identified problem, namely the suboptimal level of provisioning 
for effective emergency response to offshore oil and gas accidents affecting the EU, can 
be generally seen as driven by an overall uns atisfactory state of risk-based emergency 
planning by public authorities and industry. Th e factors that make offshore accident 
escalation a higher risk than necessary are inadequate risk assessment in emergency 
plans, lack of joined-up responsibility for re sponse (failure to maximise the resources 
available), and incompatibility of physical assets and expertise of an incident.  
Inconsistencies exist in emergency planning between Member States. Some do cooperate 
with neighbours on emergency planning, but overall the current situation does not 
guarantee that in a large-scale emergency th e deployment of national assets, coordination 
by national representatives, consideration to ad joining Member States and others, and the 
interaction with EU marine contingency in struments (such as those handled by EMSA) 
will be as smooth as it could be. Besides consistency and compatibility of national resources, risk-based planning also requires transparency and sharing of information on 
risks and emergency plans.  
Analysis of the Deepwater Horizon incident revealed shortcomings in the preparedness 
of the companies involved, both in the initial response and in the race to cap the well and contain the spilled oil. The recent report of th e US Coastguard has been instructive that 
in spite of the obvious potentia l scale of the pollution and the challenges of ensuring a 
good prospect of survival of the personnel, th e risk assessments and response plans were 
relatively modest. It is also reported that ma jor operators in the Gulf of Mexico were 
prone to copy-out similar emergency response plans rather than develop site specific 
plans based on proper risk assessments. While  the situation in EU appears different 
where a risk based or goal setting regime is de ployed – such as the Member States in the 
North Sea region – the current lack of information on industry emergency response 
inventories puts limits to the extent to which industry emergency resources can be 
incorporated in national and EU emergency planning.  
Finally, the uncertainty about the consistenc y with which the "polluter pays" principle 
could be applied in the EU in case of an offshore accident comparable to the Deepwater 
Horizon can be attributed to two main factor s. First, existing EU legislation concerning 
environmental liability (Environmental Li ability Directive 2004/35/EC) does not extend 
                                                                                                                                                
 
patterns of behaviour that determine the commitment to, and the style and proficiency of, an organisation’s 
health and safety management.  
24 We explain further in Annex X that (i) the Drilling Extractive Indus tries Directive 92/91/EEC (safety 
risk assessment documents) cannot be amended; (ii) the Seveso 2 Directive 96/82/EC (risk assessments 
and joined up inspection and emergency planning for both safety and environment) is not suited to 
offshore application; and there is a range of equipmen t standards applying to fixed platforms that are not 
applicable to mobile ones, because they are regarded inappropriately as ships. 
 
13 the obligation of remedy for  water damage be yond territorial waters (12 nautical miles, 
i.e. about 20 km). The EU Marine Stra tegy Framework Directive extended in 2008 
protection by EU environmental law to a ll marine waters under Member States 
jurisdiction. This inconsistent legal situation could come into question, even in case of an 
offshore accident of even smaller proportions  than the one in the Gulf of Mexico. 
Second, apart from the North Sea-based ri sk pooling arrangement between operating 
companies, no guarantees amongst Member States  or international solutions are in place 
at present to ensure that liable party(ies), once established beyond question, would be in the financial position to cover the requisite su ms from its resources. The estimates of the 
Gulf of Mexico damages go up to $40bn; such  damages in Europe would exceed the 
financial capacity of most operators. This is a complex driver that is given added 
momentum because, currently, compensation is unlikely to be available in time to prevent failure of the innocent businesses affected by the incident. 
To summarize, the table below presents a s ynoptic overview of the hierarchy of drivers 
identified in the preceding text and links them to the three distinct aspects of the overall 
problem; more detailed description for each category and individual drivers can be found 
in Annex III. 
Table 1  
Drivers of the significant and insufficiently mitigated risks in European offshore operations 
Driver category Underlying drivers 
Ageing infrastructure and matu ring industrial environment  
Structural shift of the industry towards diversification  Industry evolution 
Shift to "frontier" operat ions and new technologies  
Inconsistent use of state of the art practices and technology 
Failures of compliance with rules and standards Company-specific corporate 
practices 
Inadequate/uneven safety  culture in companies 
Uneven technical expertise amongst regulators 
Suboptimal transparency an d sharing of information Drivers related to the regulatory 
framework 
Fragmented regulatory framework 
Drivers of the suboptimal level of emergency preparedness 
Inconsistencies in emergency planning between MS  State of risk-bas ed planning  
Cross-border incompatibility of response assets  
Lack of information on industry emergency response inventories Integration of public and industry 
plans and assets 
Consistency in the quality of company emergency plans 
Drivers of the inadequacy of liability provisions 
Clarity and scope of EU legislat ion on environmental liability  
Lack of financial security and guarantees to cover liabilities  Clarity and comprehensiveness of 
liability provisions 
Inadequate compensation schemes for tr aditional damages, different national 
rules for civil liabilities 
 
14 2.4. The Baseline  
The baseline scenario evaluates the developm ents assuming that no policy change takes 
place at EU level.  
2.4.1.  Problem evolution during the development of offshore oil and gas activities in 
Europe and the effect of existing EU acquis  
The EU has over time developed a body of legislation relevant to certain aspects of 
offshore oil and gas operations. This covers, at least to some extent, authorisation 
procedures, occupational hazards and worker  safety, environmental risks and their 
prevention, equipment safety, liability for envi ronmental damages, etc. A comprehensive 
overview of the applicable EU aquis and an an alysis of its adequacy are given in Annex 
V. The legislation is complemented by agreed policies, such as EU's Integrated Maritime 
Policy (IMP) which aims at a coherent policy approach by the EU to the oceans, seas and 
coastal areas and provides context for speci fic tools for good governance of the marine 
space and its resources. The comprehensive picture is described in following diagram. 
Diagram 1 
 
The North Sea, together with the adjacen t Norwegian Sea, has almost 50 years of 
experience of oil and gas operations. Buildi ng on the lessons of two unrelated offshore 
disasters in the 1980's in which 291 men died25, the North Sea regulatory regimes have 
been reviewed and extensively revised in a number of national jurisdictions, including 
the UK, the Netherlands, Denmark and Norway.  
                                                 
25 Alexander Kielland 1981; Piper Alpha 1988 
 
15 In brief, European countries most experienced with offshore activity – including major 
incidents – have developed on the basis of the acquis relatively consistent regimes for 
controlling major hazards. These are on one hand often regarded at present as world class 
although on the other hand are by those countries  themselves recognized as deserving of 
further improvements and strengthening. In the wake of the Deepwater Horizon disaster, 
their authorities have been conducting own reviews of the systems: for example 
Norway's recently released report26 points out areas for significant improvements despite 
the fact that the Norwegian safety regime is generally regarded as top-level by global 
comparison. 
Box 1: Offshore Regimes applying to North Sea 
The roughly comparable model for the North Sea is as follows. An aspiring operator acquires a license to 
explore from the Government Ministry sponsoring the development of oil and gas reserves (the licensing 
authority), and he thereby is appointed an operator, for exploration only. The operator determines that he 
needs to drill in some speci fic locations and produces a well plan whic h he sends to the safety regulator for 
any comments or further requirements (the licensing authority has no role to play in this procedure). The 
well must be drilled by a mobile rig that has a 'maj or hazards report' which is  acceptable to the safety 
regulator. This report (called a safety case in the UK) describes the major hazards the rig may encounter in 
the range of wells for which it is designed (e.g. water depth, subsurface pressures) and the means to control 
them.   
Should the operator find by his drilli ng results that he has a commercia l production field, he will send to 
the licensing authority a field development plan and apply for a production license. There is now much 
more information available to the licensing authority of the hazards a nd technical challenges for optimum 
production and minimum environmental impact to feed into the production licensing decision. Should the 
operator be appointed under a producti on license, he will now begin to produce detailed engineering plans 
and begin negotiations with the safety  regulator and submit a 'major hazards report' (aka 'safety case' in the 
UK) to the safety regulator. The report will dem onstrate how the identified major hazards of the 
production facility at its precise loca tion will be controlled (which is di fferent from the mobile rig major 
hazards report described earlier which is generic to the range of wells it may drill). The production 
facilities may not be operated unless the measures c ontained in the report are acceptable to the safety 
regulator. The licensing authority has, again, no part in this formal safety assessment procedure. 
Where regimes differ within the North Sea region is whether the safety regulator issues a statutory 
acceptance of the submitted report (Norway and the UK do this, Netherlands and Denmark do not). In 
addition there are differences in the way environmen t and preparedness/response to pollution are regulated. 
In Netherlands this is an integrated function by a single regulator; in the UK, environment regulation is in 
the sponsoring Ministry, and safety regulation is st ructurally independent from industry sponsorship and 
therefore also from environment regulation.     
The recent events and trends in the industr y however point to the need of renewed 
attention to the current operation and regul atory models. The move to "frontier" 
operations described in the section on risk dr ivers is taking place in all regions in and 
around Europe. About one fifth of deepwate r discoveries worldwide were made in 
European, mainly Norwegian, waters in 2009-201027. This shift poses new challenges to 
both industry and regulators and motivates th e search for improvements even in those 
European jurisdictions considered most a dvanced as regards offshore risks regulation. 
Offshore production also occurs in the Mediterranean, the Black and the Baltic Seas. With the exception of Italian waters, activities in these areas are relatively recent but are 
increasing. Some of these countries ha ve less experience in managing offshore 
operations. 
                                                
 
26 Norwegian Petroleum Safety Authority Ri sk Report 2010, ref http://www.ptil.no/news/rnnp-2010-
major-challenges-in-important-areas-article7810-79.html  
27 PFC Energy memo "Deep and ultra-deep di scoveries continue apace", 8 November 2010  
 
16 2.4.2.  Impacts under the baseline scenario 
The likely economic cost and the probability  of offshore accidents in the EU-27 under 
present regulatory and technological conditions have been assessed and are presented in 
detail in a fully developed analysis of the baseline scenario in Annex I. The analysis 
covers accidents resulting in major oil spills (principally blowouts) and accidents resulting in significant losses to life and infrastructure ("major accidents"). 
Available statistics indicate that major o ffshore events – stemming from irregular 
situations and leading to either risks of or occurrence of damage – occur more frequently 
than is commonly assumed. A database of offshore blowouts and well releases includes 
573 such incidents that have occurred worldwide since 1955
28. In the UK and Norway 
alone, 2.3 such incidents occurred per year between 1980 and 2008 on average. A 
detailed analysis is provided in Section 2 of Annex I . 
The analysis of past accidents (see Section 1 in Annex I) also s hows that costs of 
offshore accidents tend to be significant even if the most serious large blowouts (which 
may cause economic damage of hundreds of m illions to billions of euros) are excluded29. 
While the economic costs of offshore accident s depend on a number of factors (such as 
the type, scale, time, location and duration of the event), case histories and studies 
indicate that even offshore accidents not qua lifying as low-probability/high-impact cases 
can be expected to cause economic damage in the order of tens of millions of euros and 
upwards. 
Combining probability statistics with available cost data from past accidents allows for a 
theoretical estimate of an annualised average value for direct, tangible costs for offshore 
accidents in Europe. The analysis presented in  Annex I shows that this value depends on 
a range on assumptions and, crucially, on the ex tent to which the available data on the 
damage from the Deepwater Horizon accident  are incorporated. Being unique in its 
extent, that accident does impact the calculati ons heavily while discussions continue as 
to the degree to which the available data can be considered indicative of a general 
picture. These considerations point to the n eed to establish a value range rather than a 
singular value for the estimate of levelized average annual costs of offshore accidents in 
Europe. Accordingly, the analysis, presented in  full detail in Annex I, results in a value 
range of €205 – 915 million30. 
 
Box 2: Estimated annual cost of offshore accidents for the Baseline scenario 
                                                 
28 SINTEF Offshore Blowout Database, http://www.sintef.no/sintefcom/Technology-and-Society/Safety-
Research/Projects/SINTEF-O ffshore-Blowout-Database/ 
29 It is relatively rare for blow-outs occurring on the scale of Norway's Ekofisk (1977), Mexico's Ixtoc 
(1979/80), UK's Ocean Odyssey (1988), USA's Timbalie r Bay (1992) and Deepwater Horizon (2010), and 
Egypt's Temsah field (2004). Loss of well control resulting in small blowout s and well releases of the scale 
of Australia's Montara (non fatal/destructive but polluting) make up the greater proportion of incidents in the referenced (SINTEF) database  
30 Assuming a recurrence rate of 35 years for each majo r incident and an average economic cost range of 
€5 billion (clean-up only) - €30bn (full economic cost),  this amounts to costs of €140 - €850 million per 
year. Add to this an estimated annual figure of €65 million in property losses resulting from more common 
less serious documented accidents. These estimates ar e based on detailed probability  and accident statistics 
analyses in Annex I. 
 
17 The cost of accidents in the offshore oil and gas i ndustry is associated to the extent of undesired 
consequences of these accidents, namely: 
- Injuries or deaths 
- Damage to equipment and facilities 
- Environmental pollution  
- Fines due to non-compliance  
- Lost work time and lost revenues due to facility down time  
 
Indirect impacts of accidents include: 
- Legal costs and lawsuits  
- Effects on oil prices 
- Damage to offshore industry reputation 
- Effects on security of energy supply 
The quantification of all direct a nd indirect impacts of accidents woul d be a complex undertaking due to 
the scarcity of comparable data. For this reason, this impact assessment covers only the two  largest 
directly quantifiable categories of cost i.e. infrastruct ure losses and costs associated with the cleanup of oil 
spills. In this respect the results can be considered conservative.  
The annual cost of offshore accidents is estimated by the cost of the damages caused by such accidents, 
annualized over their recurrence time. The calculations of recurrence time, or of the frequency with which 
these accidents occur, were performed base d on publicly available historical data,31 with adjustments for 
trends. A detailed and complete account of the calculations can be found in Annex I of the Impact 
Assessment.  
Two main categories of acci dents are distinguished: 
- oil well blowouts, and  
- other major accidents (e.g. releases, fires and explosions, with multiple in juries or fatalities, total loss or 
severe damage to offshore units and/or small size environmental pollution). 
The average cost of major offshore accidents  - taking into consideration case histories which indicate that 
this cost ranges from few tens of millions of eu ros up to hundreds or even exceeding 1 billion – is 
estimated at €50 million. Historical  data from major accidents occurred in the North Sea in the years 1970-
2007 indicate an aggregated rate of 2. 6 major accidents per year, with a d eclining trend for the last years. 
Adjusting for this trend, the rate becomes 1.3 major accidents per year. This brings the annualized cost of 
major offshore accidents at €65 million .  
The cost of an oil well blowout  depends on the duration of the blowout , i.e. on the amount of oil spilt into 
the sea. The main cost component here is clean-up of the oil spill. The aver age per-tonne cost varies 
among different countries, ranging from €2500 for UK to €18500 for Norway. This brings the estimated 
average cleanup cost for an oil well blowout lasting fo r ca. 50 days to €5 billion. This figure is the lower 
bound of the blowout cost, with upper bound being th e cost of the Macondo accident, which was €30 
billion. Therefore the blowout cost is estimated to be in the range €5-30 billion.  
The calculation of the recurrence period of an oil well blowout was based on historical data, which 
indicated a probability of 0.65 per year for a blowout of any type and duration to occur in European 
waters. This figure was adjusted to count for oil we lls – taking into account the lower frequency of oil well 
blowouts with respect to gas wells – and for relatively large duration (i.e. for an interval with a 
representative duration of ca. 50 days) and resulted in a probability of 2.7×10-2 per year, or – in other 
words – a recurrence period of 35 years. 32 
                                                 
31 Sources: “Risk Assessment Data Directory – Major Accidents”, Report No. 434-17, March 2010, 
International Association of Oil and Gas Producers ; “Risk Assessment Data Directory – Blowout 
Frequencies”, Report No. 434-2, March 2010, International Association of Oil and Gas Producers ; 
“Blowout and Well Release Frequencies – Base d on SINTEF Offshore Blowout Database, 2005”, 
26/06/2006, Scandpower .  
32 Reports commissioned by some Trade Associations suggest different interpretations regarding the 
Commission's data analysis on the frequency of blowouts. These interpretations were analysed but not considered fully convincing. It has been sugge sted that industry and regulators may want to 
 
18 Annualizing the blowout cost (€5-30 billion) over the period of 35 years, we get an annual oil well 
blowout cost in the range of €140-850 million . Adding to this an annual figure of €65 million in property 
losses of less costly, but more common, major accidents, the annual direct tangib le cost of offshore 
accidents in Europe is estimated at €205-915 million . 
 
2.4.3.  Foreseen evolution of the baseline  
In the wake of the Deepwater Horizon accide nt, steps are and will be taken by individual 
Member States, international bodies and indus try as a response to the lessons learned 
from the accident. However, there is consider able heterogeneity in the responses seen 
from these entities so far. The three main ar eas in which some evolution is anticipated 
are: regulatory; industry/corporate; and international agencies and associations. 
2.4.3.1.  Regulatory framework evolution  
Some national authorities have applied an inte nsification of inspection effort, operational 
restrictions, and the development of new designs for emergency response equipment33. 
Some other Member States report that their systems are adequate and robust34. The most 
intense activity is where the regimes are already most advanced. 
At the international level, there are vari ous activities focusing on improving standards in 
offshore drilling (i.e. pre-production stages). This is to be expected but somewhat 
overlooks the risks arising from offshore pr oduction; an area where regulators in the UK 
and Norway have also reported concerns. Inte rnational activity on some relevant issues 
can be observed at a regional level, such as  OSPAR (the Convention for the Protection of 
the marine Environment of the North-East Atlantic), the North Sea Offshore Authorities Forum (NSOAF) and the USA, and at a global le vel, such as the International Regulators' 
Forum (IRF) and the G-20
35. However, because there is no overarching authority to 
either drive progress towards goals, or to en sure compliance with the delivered outputs, 
these efforts are unlikely to bring about rapid improvements. For example, recent discussions within OSPAR show a clear pref erence to await EU action before developing 
any appropriate measures at regional level. 
Member States measures for licensing of exploration and production operators will 
continue to be inconsistent regarding capability  of applicants to control the major hazard 
risks and pay for the consequences thereof. For operations subsequently carried out under the authority of the license, but subject to specific regulations, MS regulatory models will continue to be widely separated and ri sk control measures less well regulated in 
some Member States. For example: no clear jo int authority approach to safety and the 
environment in some countries compared to others; no process of 'accepting' a safety case in some countries; and continuing with a discredited prescriptive  approach to regulation 
and inspection in others. 
                                                                                                                                                
 
collaborate on updating the international incident tables in the light of the Deepwater Horizon and 
other recent accidents 
33 E.g., the UK decided to hire new inspectors and to increase the number of offshore environmental 
inspections from 60 to 150 annually wh ile Italy placed temporary limits on offshore activities in its waters. 
34 Results from the DRILLEX Questionnaire sent to OSPAR contracting parties. 
35 G-20 Global Marine Environmental Protection (GMEP) Working Group 
 
19 The overarching provisions for safety and health from drilling extractive industries 
Directive (92/91/EEC) will continue to be silent on preventing environmental impact; 
emergency preparedness and response; and s ubmission of formal hazard assessments by 
operators for acceptance to the competent authority. Other regulatory anomalies will 
persist – e.g: machinery standards that apply to fixed platforms will not apply to mobile 
drilling rigs; Environmental Liability Dir ective (ELD) 2004/35/CE will only apply for 
water damage inside the 20km line. 
The problem of low transparency in the offs hore sector and the continuing low level of 
public confidence as a result will not be addressed. Similarly, the heterogeneity of the regulatory organisations around the EU will not encourage operators to react in a positive 
way to the current inconsistent industry performance in different Member States. 
2.4.3.2.  Industry developments 
Action by individual companies is understanda bly proving to be uneven: some have 
announced and already implemented specific measures in the wake of the Deepwater Horizon disaster, others are less proactive.  Commission inquiries and consultations with 
industry have resulted in information and data inputs from 20 oil and gas companies 
active in EU waters. Whilst several of thes e have specified measures undertaken – for 
example, to increase internal complian ce with procedures, verify well designs, 
emergency procedures and reassess the way risks are evaluated – others have simply described how their internal control system s and processes are applied, and vowed to 
stay vigilant, with no concrete measures for change outlined. Very few of these responses 
have actually yielded concrete company plan s for changes to operations in the future, 
although these were specifically asked for by the end of 2010. Furthermore, additional follow-up exchanges between October 2010 and May 2011 with the offshore industry 
have yielded some quantification of measures  taken to improve offshore safety practices 
from only 2 companies, making it extremely di fficult to assess and verify which changes 
to operational practises the industry actually intends to implement. 
Joint industry initiatives, at times in cooperati on with national administrations, have been 
launched in certain Member States and at a global level to address some of the problems 
and challenges currently being faced
36. Industry initiatives to develop capping and 
containment devices, described in detail in Annex XII, are certainly commendable, but the availability of operable equipment for all foreseeable emergencies is presently 
uncertain. Furthermore, these types of measur es target first and foremost improvements 
in emergency response rather than accident prevention, whereas industry agrees the latter 
is the highest priority. For all of these in itiatives, which are largely just recommendations 
or designs at the moment, the greatest cha llenge will lie in their implementation and 
enforcement. 
Even with the actions by individual companies and industry as a whole, some issues will 
continue to dominate corporate agendas: how  to offload ageing installations; insoluble 
scarcity of skills; technical challenges of new frontiers; pressure on EU cost base relative 
to other oil basins where the same price is paid per barrel; increasing diversification of 
                                                
 
36 The Global Industry Response Group (GIRG) was created within the International Association of Oil 
and Gas Producers (OGP) to assess current practices and consider improvements. The Oil Spill Prevention and Response Advisory Group (OSPRAG) was established by Oil & Gas UK to provide a focal point for the sector’s review of the industry's practices in the UK. 
 
 
20 companies, with smaller less capable compan ies acquiring licenses and/or old assets in 
MS regions. 
Individual oil companies and drilling contractors will continue to react to the drivers to 
reduce costs; with continuing divestment a nd acquisition and contractorisation, loss of 
corporate memory will not be stemmed; there will continue to be inconsistent standards 
of well control and process safety within the same companies operating in different 
Member States - particularly where regimes are not risk based - and between different 
companies operating in the same regions. 
2.4.3.3.  Prospects of a global solution 
Considering that most of the problem driver s identified in Annex III are not exclusive to 
European marine areas and that many oil and gas companies operating in the EU are active across the world, a global solution is certa inly desirable. An international solution 
would also present the considerable advantag e of a global level playing field. During the 
last year, efforts in various international fo ra have been already made or proposed to 
improve the safety of offshore oil and activ ities across the world. While these efforts are 
commendable, they are not without their limitations.  
A framework for a global regime could be sought in the G-20, the members of which 
cover most major offshore basins. In June  2010, the declaration of the G-20 Toronto 
summit recognized the need to share best prac tices to prevent accidents and to protect the 
marine environment. For this purpose, th e Global Marine Environmental Protection 
(GMEP) working group was set up. The discussi ons in this group are useful but so far 
have been limited to a sharing of best prac tices and are unlikely to result in a binding 
international framework in the foreseeable future. 
Another forum for aiming at a global solution is the International Maritime Organization 
(IMO) which has already established a comp rehensive legal framework in the shipping 
sector. Besides the rather protracted timef rame for putting the IMO framework in place 
(up to 10-15 years), the IMO suffers from the lack of proper means to ensure that its 
regulations are applied throughout the worl d, thus IMO regulations are not applied 
everywhere with the same rigour
37 
On the other hand, at the regional level, the EU is Contracting Party to the Barcelona 
Convention together with 21 other Mediterran ean countries. The Offshore Protocol of the 
Barcelona Convention for the Protection of the Marine Environment and the Coastal 
Region of the Mediterranean deals with pollu tion concerning a wide range of exploration 
and exploitation activities, permit requireme nts, removal of abandoned or disused 
installations, use and removal of harmful substances, liability and compensation requirements, regional coordination, safet y, contingency planning and monitoring. It 
entered into force only in March 2011.In parallel to the legal instrument proposed in concjunction with this Impact Assessment, the Commission proposes also to the Council that the EU accedes to the Offshore Protocol . Efforts to activate this advanced legal 
instrument will need to be stepped up. 
                                                
 
37 For this reason, following maritime accidents in the pa st the EU moved to adopt  specific legislation to 
improve the safety of maritime transport (notably  the three so-called maritime safety packages). 
 
21 2.4.4.  Effects of a "do-nothing" approach 
The assessment is that any changes introdu ced by industry will focus on hardware and 
standards and guidance. These can be exp ected to bring down the current risks and 
therefore also reduce over time the incu rred damages from standard operations. 
However, this improvement will be elective in nature and therefore patchy and suggests 
that the necessary significant change in safety culture and actual performance in 
preventing major incidents cannot be attained  across EU without an overhaul of best 
practices requirements for operators and regulators.  
The current absence of risk assessment appr oaches to preventive measures in some 
Member States, and failures of risk assessment to deliver permanent risk reduction in the North Sea means that flat-lining or increas ing major hazard risks as reported by UK and 
Norway will not improve. At the same time, th e trends in the industry, as described also 
in chapter 2, mean that the focus of its activities is gradually moving to operations entailing increasing risks. Hence the effect of  improvements to company practices will be 
at least partly counterbalanced by the increas e in riskiness of typical/usual operations. 
The same can be assumed about the efforts of public authorities at improvements of their oversight of the industry within the existing regulatory framework. Overall there is little confidence that the safety culture of industr y, overall, will improve, or even level up to 
the current best standard.  
As result of the above considerations, it can be estimated that in the baseline scenario, 
the range of €205–915 million presented in section 2.4.2 may remain generally representative of the future record of the sector as well if no thorough change processes 
are stimulated by a policy action at least partly driven at EU-level. 
2.5. Need for EU action 
The challenge posed by the risk of a large offshore accident requires that state of the art 
practices become the norm throughout the EU and its waters. Such a uniform high level 
of safety will elicit full public confidence and can underpin EU efforts to ensure high levels of safety, preparedness and response also beyond European borders, both in other 
jurisdictions and in international waters. The baseline and its analysis indicate that action 
is required for preventing, responding to, and coping with major offshore incidents. 
We emphasise in the problem definition secti on of this chapter that EU has fragmented 
regulatory frameworks and these present an object lesson in the need for concerted action at EU level. EU law does not provide a co mprehensive framework to ensure a level 
playing field and adequate safety and protec tion of the marine environment and coastal 
communities. A number of examples illustrate why the disparity of approach across the 
EU is problematic and calls for an EU legislative approach to remove the adverse effects. 
i. Product safety . As explained throughout this re port, product safety legislation 
does not apply to mobile installations which are classed as ships. Therefore 
there are inconsistent standards applying across the EU between fixed and mobile units. Further, mobile drilling units well control equipment is beyond the scope of IMO codes for such units. Therefore it is only in Member States 
where national law requires formal safety assessments of the major hazard risks that due consideration is given to safety critical equipment by the regulator 
 
22 ii. Safety and health document (SI 92/91/EC).  The requirement for operators to 
have a safety and health document is  unaccompanied by a requirement for its 
submission and appraisal by the national regulator. Only where a risk based 
regime exists – in the North Sea is the formal risk assessment subject to enforcement by incorporation into the national regulatory and inspection programmes. Amending Dir 92/91/EC to more specifically create duties for 
prevention of offshore major hazards is not feasible as we clarify in Annex X 
iii. Environmental liability  (ELD 2004)  The ELD is out of st ep with evolved EU 
policy for the common good of EU maritim e space as expressed in the later 
Marine Strategy Framework Directiv e 2008/56/EC. The liability for water 
damage within Member states EEZ be yond the territorial seas may only be 
extended through legislative action at EU level. We extend the description of 
this problem and the challenges for EU environmental policy in Annex X 
iv. Integration of safety and environm ental risk assessment and emergency 
response planning.  The Seveso Directive is a well proven and regarded model 
for integrated protection of safety  and the environment resulting from 
industrial activity. Deepwater Horizon ha s brought into sharp relief the close 
relationship between a major safety accident and a major accident to the environment when operating offshore. Our examination of the situation in the EU is that some Member States inte grate safety and environmental risk 
assessment to a recognisable degree, others do not. And no Member State 
achieves the standard of integration of  regulation of environment and safety, 
or formal safety assessment and integrated emergency planning that is provided onshore under the Seveso 2. It is not feasible to extend the directive offshore for reasons we make clear in Annex X and therefore EU-wide legislation is required to raise the bar to onshore levels. 
v. Transparency  National reporting arrangements ar e notoriously problematic to 
compare between countries and so the re lative levels of risk in different 
Member States is not apparent to anyone. The international data available from the industry (see Annex XII – Benchmarking) suggests Europe is 
relatively low down the international league table for safety incidents, and that Member States of Europe have different  performance standards but at national 
level and higher (eg amongst NSOAF members in the North Sea) this is all but 
impossible to analyse. Only countri es that actively compare data at 
considerable cost of refinement a nd factoring make available plausible 
reporting of offshore safety performan ce. The leading countries are the UK 
and Norway and both report concerns about the flat or downward trends in risk of major accident hazards. As we report in Annex XIII it is precisely because of the investment by these countries  in attending to their data that they 
can interpret the onset of problems and target their resources accordingly. Agreement on common data formatting ha s eluded the best endeavours of the 
leading regulatory forums (NSOAF and IRF) and it is clear that EU-level 
action is necessary if this important goal is to be attained. 
Whereas the risk of a major offshore incident is significant and can be reduced, EU 
action can contribute to the prevention and re medy of major incidents which could occur 
in the EU. This will only be achieved by e ffecting an EU-wide change in both the 
industry (e.g. applying best practices, making comprehensive risk assessments, including 
relating to the environment) and in the regulatory system (e.g. implementing a best 
 
23 regulatory model and oversight for joined up safety and environmental protection, and 
achieving suitable transparency). The action ought to provide, as well, for better emergency preparedness and response, with effective emergency plans and assets in place both in industry as well as in Member  States. This could also include areas 
bordering EU waters, where possible and appropriate. In addition, the action could ensure the availability of adequate provisions for recovery and liability, in the event that 
a major offshore incident would ultimately o ccur. These measures should therefore make 
provisions for environmental liability and compensation.  
All this can only be achieved through dete rmined action by the public authorities in 
Europe and a strong partnership between a ll actors involved - EU institutions, Member 
States, industry, NGOs and other stakeholders – in line with the principles of the EU's 
Integrated Maritime Policy. The Commission has in its Communication of October 2010 
identified actions to be undertaken in the EU in the interest of increased offshore safety. 
This Communication was welcom ed and endorsed by the Council
38. The European 
Parliament has issued in October 2010 a resolution on EU action on offshore oil 
activities calling on the Commission to bring fo rward a comprehensive legal framework 
ensuring uniformly high safety standards a pply across the EU and third countries and 
including proposals covering inter alia acci dent prevention, disaster response and 
liability39. 
The subsidiarity and proportionality questions relate to whether the Member States (and 
industry) alone are sufficiently positioned to address each of these issues at national 
level, and, if not, what EU-wide measures are necessary to achieve the objectives set.  
Subsidiarity considerations 
EU action has been considered only where it can achieve the policy objectives more 
effectively than the Member States or wh ere actions by Member States alone may not 
deliver optimal improvements. This proposal uses both the environmental legal base as well as the energy one, thus the objectives of both policies need to be fulfilled.  
The regulatory framework governing offshore o il and gas activities is characterised by a 
high degree of fragmentation along the lines of national jurisdictions. Despite these differences, the offshore regimes in the UK, the Netherlands, Denmark and Norway have 
in common the predominantly goal-setting regulatory approach that is considered world class. However these countries would acknow ledge they are capable of improvement 
through making adjustments towards the composite North Sea benchmark.  
In addition, offshore production occurs increasingly in the Mediterranean, the Black and 
the Baltic Seas. Countries in some of thes e marine regions have less experience in 
regulating offshore operations. Since Deep water Horizon, many oil producing Member 
States have been reviewing their offshore syst ems, but, the responses vary as much as the 
national regulatory regimes and standards. Some have intensified inspections; others have restricted operations or developed ne w designs for emergency response equipment. 
Some others report that their systems are adequate and robust
40. Most activity is where 
                                                 
38 Reference to Council conclusions 
39Resolution on EU action on oil exploration and ex traction in Europe adopted on 07 October 2010. 
40 Results from the DRILLEX Questionnaire sent to OSPAR contracting parties. 
 
24 the regimes are already most advanced, ye t both the likelihood and consequences of 
major offshore incidents are unacceptably high throughout the EU.  
Overall, a failure to take action at EU level will exacerbate the fragmentation in Europe 
of regimes and national policies and deprive Member States of the most suitable means to reduce risks of offshore major incidents in a reasonable time frame.  
In terms of preventive measures, the desire d situation is for effective and reliable 
practices to be applied consistently by industry. The global nature of the industry speaks in favour of extending a state-of-the-art risk control model, already practised in parts of 
the EU, to all EU waters. Furthermore, severe  incidents in one Member State, if resulting 
in an oil spill, will almost inevitably impact on other Member State(s).
41 Considering the 
limitations of a global solution (see Section 2.4.5.), an EU-level blueprint for state-of-
the-art industry practice and regulation seems the best means to achieve the desired situation. The EU's involvement could also bring a solution to hitherto insoluble difficulties of making meaningful comparisons  of industry performance, and increasing 
the sharing of intelligence and incident data. 
In terms of response, the costs and conseque nces are high as is the risk of a large 
transboundary oil spill affecting adjacen t countries. Industry has put in place 
collaborative measures for dealing with major incident response, but does not control all 
of the necessary resources. Primary res ponse would fall to the individual civil 
contingency measures of each Member Stat e but these would be overwhelmed in the 
event of an incident of the scale of Deepwater Horizon or Piper Alpha. Encouragingly, it 
is considered that sharing of resources and expertise will probably be relied primarily amongst Member States. However, more fo rmal convergence of emergency response 
plans, environmental sensitivity reports and industrial inventories would ensure the necessary level of compatibility and effectiven ess of action in a real emergency. The EU 
is best placed to promote a more joined up and coherent approach through its capacity for coordination, making best use of existing EU assets, and leading on the development of 
common information formats and tools. 
Coordination and alignment of national pr actices are desirable features both in 
prevention, response, and liability in the event of a significant incident. Increasing safety 
can lead the sector to minimise its harmful impacts, while continuing its growth. Maintaining a healthy and safe offshore sect or contributes to energy supply security, 
environmental protection, jobs and economic de velopment in the regions and to growth, 
in line with the principles of Europe 2020. These features are also the basis for the 
development of the internal market, which is  a fundamental driving force of European 
integration in the energy area, as it is in othe r sectors. This market integration must not 
occur at the expense of lowering safety sta ndards. In addition, as many offshore oil and 
gas companies are active in more than one EU  jurisdictions, an alignment of regulatory 
practices would lead to a reduction of trans action costs. It is recognised that reduced 
transaction costs may not be game-changi ng in relative terms, but the increased 
efficiency of regulation could nevertheless facilitate compliance and give a valuable boost to the European safety technology market. 
Being able to speak with one voice and clear ly demonstrate the EU's offshore safety 
standards through one EU-wide regime would also improve the EU's position in 
                                                
 
41 Such trans-boundary spills may of course orig inate both in EU and non-EU marine areas.  
 
25 international discussion on offshore safety  improvements and on marine environment 
protection. The conclusions by the Council and the resolutions by the Parliament agree 
on the value of having the EU and its Member States play a prominent role in promoting 
global offshore safety awareness through international initiatives and regional cooperation. A good example is the Mediterran ean region, where, adoption of an EU 
wide legal instrument in connection with the ratification by the EU of the Offshore 
Protocol, will confirm the EU's active role in the region and is likely to stimulate 
ratification by other Parties of the Bar celona Convention and thus facilitate and 
accelerate practical application of the provi sions of the Protocol. A common EU model 
would strengthen the role of the EU in safety  diplomacy efforts that aim to manage risks 
from adjacent regions and, globally, from mobile industry assets such as drilling rigs.  
Proportionality considerations 
The proportionality consideration dictates that  EU action be proposed only where the EU 
can achieve the objective more cost eff ectively than the Member States (e.g. 
environmental liability, EU-wide practices, co mmittees). Where administrative costs are 
involved (e.g. achieving increased transparency), care has to be taken to seek the most cost-effective solutions between new mechan isms and improving existing national ones. 
Whenever possible, the aim is to improve th e implementation of existing EU legislation 
through non-legislative measures (e.g. guidelin es, committees) and only where this is 
deemed insufficient, are amendments or ne w legislation proposed. Industry's potential for 
self regulation (e.g. response technology) and international options (e.g. civil liability) 
are also duly taken into account. 
In achieving the requisite balance between the objectives and the means proposed to 
achieve them this analysis takes into account: 
• The costs realised by the Deepwater Horizon incident are estimated by BP to be in 
excess of $40bn; costs of a similar event in EU waters could be similar or even higher 
• Incidents of the magnitude of Deepwater Horizon occur in the offshore drilling and 
production industry at a fre quency of decades which is high for extreme major 
accident hazards 
• The value of the EU offshore sector is very high in terms of national economies 
(revenues and employment) and its contribution to security of supply 
• The offshore sector generates exceptional financial return for the operating companies 
involved 
• The public has developed an aversion to fu rther major incidents risks, which is 
heightened by the recent nuclear power plant incident in Japan 
In the next part, we describe the options that may be adopted to address the whole 
problem of offshore risk in EU waters. The co st of the options is modest in comparison 
to the benefits they will secure and no advers e impact is foreseen on the retail market or 
to SME's. We consider that the proposal co mprises enabling measures that would assure 
the future of the industry in the EU a nd thereby the economic wellbeing of Member 
States that have offshore petroleum reserves , and the security of indigenous supply of 
energy in the EU more generally. 
Existing EU law provisions in the area of the proposal 
 
26 EU has no offshore oil and gas sector specific legislation; however there is broader EU 
legislation that applies to certain aspects of the offshore sector, often in a partial manner. 
This proposal complements the following pieces of EU legislation: 
i. Environmental liability.  Environmental Liability Directive (ELD) 2004/35/CE 
addresses liability for damages to the envir onment that can result from an accident or 
other critical events in offshore activities, with the main aim of remediation towards 
the innocent affected. No consideration of  intent or negligence is necessary to 
establish liability in relation to offshore petroleum. Because the ELD preceded the 
Marine Strategy Framework Directive (2008/ 56/EC), its application regarding water 
damage is limited to waters within the territorial seas – 20 km from the shore. This proposal aims to update this definition of waters by the more recent one, established 
in the MSFD, covering also marine waters under the jurisdiction of the Member States. 
Establishing environmental liability relies on jurisprudence from the Court of Justice 
of the EU
42 instituting that oil spilled in the s ea becomes waste under the scope of the 
Waste Framework Directive 2008/98/EC. Conse quently, the operator is regarded as 
the producer or holder of waste and woul d, in accordance with the polluter pays 
principle, bear the costs of waste manage ment. Liability extends to parent companies 
which are not able to abrogate liability towards subcontractors.43 
ii. Environmental Impact Assessment : Offshore petroleum production activities (i.e. 
long duration installations) are in the scope of Directive 2009/31/EC on 
environmental impact assessments. It is, however, discretionary for some drilling operations – e.g. for transient explorati on well projects such as the Deepwater 
Horizon in the US.  
iii. Health and safety of workers at work:
 - Provisions containing minimum requirements 
for health and safety of workers across different sectors are laid down in the Framework Directive 89/391/EEC, its relevant  individual Directives (e.g. Directives 
89/656/EEC on personal protective equi pment, 2002/44/EC on vibrations, 
2003/10/EC on noise, 2009/104/EC on work equi pment etc.) and the sector-specific 
individual Directive 92/91/EEC that app lies to onshore and offshore drilling. The 
main aim of this legislation is the prevention of all risks for workers, both major and minor. Directive 92/91/EC contains further minimum requirements applicable to the 
off-shore sector as regards risk assessmen t, protection from fire and explosions, 
escape and rescue, etc. The measures in  this proposal go beyond Directive 92/91/EC 
in requiring a) measures to include environmental assessment; and b) for the risk assessments and control measures to be inco rporated into a report to be submitted to 
the regulator for consent; c) for well operations to be notified in advance to the regulator, and d) for a scheme of independent verification of critical risk control elements. 
                                                
 
42 ECJ case C-188/07 (Commune de Mesquer v Total France SA and Total International Ltd.) provides 
important jurisprudence. The ECJ in the abovementioned case concerning maritime transport (Erika tanker 
accident) came to the conclusion that oil accidentally  spilled at sea following a shipwreck, mixed with 
water and sediment and drif ting along or being washed at the coast of a Member States constitutes waste 
within the meaning of the Waste Framework Directive. 
43 See for instance the Van de Walle case (C-1/03) with  Texaco being considered as holder of waste or 
Mesquer case (C-187/03) with Total being potential holder of waste. 
 
27 iv. Major hazards:  The Seveso Directive 96/82/EC does not apply to the offshore sector 
but certain aspects of it are relevant also for offshore and therefore included in this 
proposal. Among such relevant aspects are requirement for industry practices in major hazards risk control, joint regula tion of safety and environment of major 
hazard sites, and emergency preparedne ss. Others, such as land use planning 
precautions are not relevant offshore. This proposal goes beyond Seveso in a) 
requiring consent by the regulator of the operator's major hazards report, b) in 
strengthening provisions for verifying tec hnical and financial capability at licensing 
stages, and c) in provisions for evacuation escape and rescue of a marooned workforce.  
v. Granting hydrocarbon prospection, explor ation and production authorisations:
 
Directive 94/22/EC - . This Directive introdu ces the requirement to use technical and 
financial capacity of an applicant as selec tion criteria in procurement process. This 
proposal strengthens these considerations of technical and financial capability of 
applicants for licenses to ensure that the environmental and safety risks of operating 
in the licensed area are fully taken into account  in addition to the ability to exploit the 
licensed area for hydrocarbons. It comple ments also Dir 94/22/EC by introducing 
provisions applicable to the later stages  (drilling consents, well notifications) of 
offshore exploitation that are outside the scope of 94/22/EC. 
vi. Emergency response: The Community Civil Protection Mechanism Directive 
2001/792/EC provides for support, on request, in the event of a major emergency and facilitates improved co-ordination of assistance intervention. It covers both civil protection and marine pollution and allows responding to any major disaster inside 
and outside the EU. To support the Directive, the Commission operates the Monitoring and Information Centre (MIC) to coordinate requests and offers for assistance from EU27, Croatia and the EEA countries. The MIC works closely with 
the European Maritime Safety Agency
44 (EMSA) in this regard. EMSA is foreseen to 
be authorised to support offshore oil and gas sector emergencies, however, lacks 
resources to act on the prevention. The proposal aims to complement the work of MIC by facilitating various aspects of cross border response including the governmental and industry asset inventories.  
Consistency with other policies and objectives of the Union 
This regulation is consistent with the Energy Strategy for 2020
45, viz Priority 3, the 
element for safe, secure and affordable en ergy in Europe. The second action under this 
priority is for the enhancement of offshore safety and security frameworks. It says: " The 
safety conditions of offshore oil and gas extraction are being reviewed by the 
Commission in the light of the Deepwater Hori zon accident, with the aim of introducing 
stringent measures from prevention to re sponse and liability issues which will guarantee 
the highest level of protection throughout  the EU and the rest of the world ." This impact 
assessment and regulatory proposal is pursuant to that strategy.  
                                                 
44 EMSA was established in the aftermath of the Erika (1999) and Prestige (2002) tanker disasters for the 
purpose of ensuring a high, uniform and effective leve l of safety, security, prevention of pollution and 
response to pollution at sea, irrespective of source. 
45 SEC(2010) 1346: Energy 2020, A st rategy for competitive, sust ainable and secure energy. 
 
28 The joint communiqué of the current and two fu ture Presidencies of the Union also make 
offshore oil and gas safety a policy priority, with Denmark indicating that it expects new 
legislation to be adopted during its Presiden cy. This proposal aims to align with that 
timetable. 
This regulation is also consistent with EU 's environmental policy and its main tenets 
such as pollution prevention, control and the polluter pays and precautionary principles. 
It is fully coherent with marine envir onment policy, notably the goal of achieving by 
2020 the Good Environmental Status of th e marine environment (Marine Strategy 
Framework Directive 2008/56/EC, 'MSFD'). The MSFD requires to apply an ecosystem-
based approach to the management of hum an activities, ensuring that the collective 
pressure of such activities is kept within le vels compatible with the achievement of good 
environmental status. All human activities having a potential impact on the marine 
environment, including offshore activities, n eed to contribute to reducing the current 
pressures. The MSFD specifically require s protecting and preserving the marine 
environment, to prevent its deterioration, a nd to prevent and reduce inputs in the marine 
environment, with a view to phasing out pollution, so as to ensure that there are no significant impacts on or risks to marine bi odiversity, marine ecosystems, human health 
or legitimate uses of the sea. The new legislative initiative of the EU in relation to offshore activities has the objective to reduce the occurrence of major accidents related to offshore oil and gas activities and to limit their consequences, thus increasing the protection of the marine environment and coastal economies against pollution. Therefore, it is not only compatible with, but in reality contributes directly to the goal of achieving 
by 2020 the Good Environmental Status of the marine environment under the  MSFD. 
 The Environmental Liability Directive (2004) was adopted after the entry into force of 
the Waste Framework Directive (2000), which a pplies in coastal and territorial waters, 
but before the adoption of the Marine Strategy Framework Directive (2008), which 
extended environmental protection to all mari ne waters under sovereignty or jurisdiction 
of EU Member States. Deepwater Horizon illustrates a problem related to an overall 
fragmented legislative framework in the EU environmental framework For example in terms of geographical scope the 6
th Environmental Action Pl an (2002-2010), adopted by 
co-decision by Parliament and Council, request ed a thematic strategy for the protection 
of European seas, having identified a gap in the common goods to be protected at EU level. This request led to a Commission proposal for MSFD adopted in 2008. To the extent that EU policy evolves in accordan ce with the directions by Parliament and 
Council, the question is now raised whether it is appropriate to adjust already existing 
instruments (such as the ELD) to such a gradual policy evolution, or whether it is 
preferable to keep them in their original form, irrespective of overall progress in policy.  
The status quo would perpetuate a framewor k where some of the consequences of 
accidents on marine waters from operations are not adequately internalised (which is a major purpose of the environmental liability framework), in accordance with the polluter 
pays principle. Therefore this legislative pr oposal presents an opportunity to ensure the 
sector in charge of potential damage to the common goods identified in current EU law 
(marine waters) would take expressly enhan ced responsibility. In other words, the main 
consequence of any geographical extension of the ELD to water damage at sea is above 
all a matter of prevention, which is coherent with the overall logic of intervention on this issue, and would in fact close a gap in an otherwise comprehensive consistent structure 
for environmental protection in the EU.  
 
29 Maintaining a healthy and safe offshore sect or contributes to energy supply security, 
environmental protection, jobs and economic de velopment in the regions and to growth, 
in line with the principles of Europe 2020.  
The legislative proposal is also in line with internal market considerations insofar as it 
brings about convergence and a certain reduc tion of transaction costs born by industry 
which currently operates under highly divers e and fragmented national jurisdictions. 
Firstly it aims above all to level up EU offshor e regulation to the best EU practices.  In 
terms of the industry, this is a welcome manoeuvre because the currently fragmented regulatory framework in the EU has start- up costs for operators and suppliers moving 
between different EU countries. And b ecause the proposal does not aim for new 
regulatory systems but extends well underst ood best practice requirements from the 
North Sea (mainly) the market uncertainties that arose following Deepwater Horizon will 
be assuaged.  
Secondly, in lowering risk of major offshore ev ents and associated public aversion to the 
sector, the proposal de facto  enhances continuity of production and, as we illustrate in the 
impact assessments in chapter 5 and annexes I and IV, reduces financial exposure of the EU when expressed in terms of annualised cost s of the current level of risk of a major 
incident in the EU (up to €915m/year). 
Thirdly the proposal addresses, opportunistica lly, unsustainable anomalies in the supply 
and use of equipment for offshore installations  that follow from the current classification 
of mobile rigs as ships – which they clear ly are not when stationed and engaged in 
drilling and/or production. This move is especially welcomed by regulators and 
suppliers.  
  
3. O
BJECTIVES & MEASURES  
3.1. General objectives 
Given the definition of the problem and its dr ivers identified in the preceding chapter, an 
EU initiative would logically follow two general objectives  stemming from the relevant 
competences of the EU as described in th e Treaty, in the EU acquis or in agreed 
European policies: 
1. To prevent a major incident from occurri ng in EU offshore oil and gas exploitation 
(relating, in particular, to major accident hazards (MAH)). 
2. To enable the EU to deal effectively with a major emergency, should preventive 
measures fail. 
3.2. Specific objectives 
The problem characterisation and baseline analys is presented in the preceding chapter, as 
well as consultation with stakeholders indicate that the general objectives set above can be met only by a comprehensive initiative wh ich will address issues arising along the 
whole value chain of the sector and which will target the specific drivers underlying the 
identified problem.  
 
30 In that spirit, the two general objectives c ited above can be developed into the following 
set of specific objectives for EU action: 
1. Ensure a consistent use of best practices for major hazards control by oil and gas 
industry offshore operations potentially affecting EU waters or shores; 
2. Implement best regulatory practices in all European jurisdictions with offshore oil 
and gas activities; 
3. Strengthen EU's preparedness and respons e capacity to deal with emergencies 
potentially affecting EU citizens, economy or environment; 
4. Improve and clarify existing EU liability and compensation provisions.  
These specific objectives build on the Commi ssion's position taken in its Communication 
of October 2010 through subsequent consultations and analyses. 
4. POLICY OPTIONS  
To recap, the reaching the objectives identified in Chapter 3 would bring solutions to the 
3-fold problem defined in Chapter 2.1. The pr oblem itself is influenced by the drivers 
listed in Table 1 and described briefly in the preceding text and in more detail in Annex III. In Commission research and analysis a nd through consultation we identify a number 
of actions (14) which we refer to as measures which, if all implemented through law, would represent the highest level of ambition for dispensing with the problem of offshore 
major hazards prevention. However the highest level of ambition may not be justified, so 
policy options have been developed whic h assemble the measures in different 
combinations and means of implementation. These options are described in further detail in the following paragraphs. 
Table 2: Links between problem drivers and Measures 
 
 
31 4.1. Overview of the policy options  
The options identified differ by the degree of practical change to the existing operational 
models of regulators and industry and by the level of policy ambition and cost on 
industry and Member States as follows. 
Box 2:  OVERVIEW OF THE POLICY OPTIONS  
Option 0 : The Commission taking no role in o ffshore safety and environmental 
protection ("Baseline option") 
Option 1 : Levelling all EU regions up to the existing North Sea practice ("North Sea 
basic model") 
Option 1+:  Option 1 combined with some improvements in existing EU law addressing 
inconsistencies/lack of clarity ("North Sea + model"); 
Option 2:  Comprehensive offshore reform raising all EU (including the North Sea) up to 
what constitutes in current expert consensus possible best practise; ("EU best practice 
model") 
Option 3:  Complementing the comprehensive offshore reform through institutional 
structures/instruments at EU level ("EU Agency model") 
Each policy option consists of a package of  measures which, as we say above, will act 
upon the drivers of the problem. In the followi ng section we describe the policy options 
and the package of measures they comprise. We allude to the form of implementation 
necessary for each option (guidance/law/etc) in the text, and summarise this in Table 3 at 
the end of the chapter. The detailed an alysis supporting the different ways of 
implementing each option (in effect sub options) is in Annex XI. 
4.2. Description of the policy options  
4.2.1.  Option 0 
Option 0  is the baseline option which leaves the status quo to evolve. We describe this 
situation in section 2.4.3 'Foreseen evolution of the baseline' as elective and patchy and of little overall impact on the problem drivers, so justifying EU action. 
From this starting point, policy options ha ve a cumulative impact on the drivers and 
hence on delivery of the specific objectives. The full suite of measures is listed in Table 2. The rest of this section describes how m easures may be progressively implemented to 
achieve higher levels of policy options. 
4.2.2.  Option 1 
Option 1 (North Sea Basic)  would aim to bring all EU Member States to the level of 
prevention and emergency preparedness currently in place in the North Sea region, bearing in mind that the region's risk-based  regulatory framework is considered at 
present amongst the very best in the world. As such, Option 1 would eliminate regional 
differences currently present in the EU but would not remove any of the current disconformities with absolute best practice between North Sea Member States and so 
 
32 would not achieve a higher common denominator in  that region nor in the EU than exists 
today. 
This option would entail the following measures  which would require to be implemented 
through law. Annex XI explains at length the ra tionale behind the legal instrument 
for implementing this option . The numbering refers to the number assigned to the 
measures on the right hand side of Table 2 above. 
(3) Submission of formal safety assessments for acceptance by the regulator prior to 
operations with major hazards potential  
This measure reflects existing practices in some of the European jurisdictions considered 
as most advanced, namely in the North Sea region. It requires from any licensed operator a coherent exposition of its risk control m easures, presented in a (up-to-date) major 
hazards report (MHR), which has already been  briefly introduced and described in the 
text box in chapter 2. The MHR establishes the most suitable means for preventing a 
major incident from occurring and, if it none theless occurs, providing for the survival, 
evacuation and rescue of workers as al ready required under Directive 92/91/EEC, but 
goes further in requiring submissi on to and acceptance by the regulator
46. This creates a 
goal-setting, as opposed to prescriptive, re gulatory regime where operators are not 
merely following a prescribed set of instru ctions or requirements. They would be 
compelled to focus on actively preventing th e occurrence of a major accident (including 
well control, structural integrity of installations etc.) and limit the consequences and the resulting (major) impacts for safety and health of workers; they would ideally be obliged 
to have such a document/report, specific to each site/installation, reviewed for suitability 
and adequacy by the regulatory authorities before  they engage in specific exploration or 
production activities (e.g. drilling) which carry pa rticular risks. Such a provision would 
ensure that the relationship between the ope rator and the expert regulator is centred 
around the major hazard risks and steers the operator to the use of best available 
practices and state-of-the-art technology in order to reduce the risks as much as reasonably possible. 
Given the obvious attraction, at face value, of amending EC 92/91 we have provided a 
detailed explanation of the need for a separate  legal instrument in Annex X, in addition 
to the comprehensive assessment of implementing options in Annex XI. 
All respondents to the public consu ltation and members of the regular 
industry/regulator/Commission liaison meetings  that have continued through the past 
year join with the European Parliament in supporting this measure. Many accept this 
measure as global best practice. Like the Parliament, many responders urge the formal 
risk assessment document (which many adopt  as shorthand the UK 'safety case') be 
                                                
 
46 Acceptance of the MHR m eans that the regulator receives the major hazards report from the operator 
and undertakes a suitable level of expert verification of  the report to establish whether it has objections to 
the measures described, which require modifications to be made and incorporated into a revised report. At 
the conclusion of this process the regulator will communicate the outcome of its review to the operator which will either be that the report is acceptable or that it is not. The i ndication of acceptability could be in 
the form of a statutory acceptance of  the report, without which the ope rator may not proceed. Equally, the 
written indication could take the form that no further dialogue is  required. In all cases the MHR, in its final 
form, will be a basis for targeted inspection by the regulator, during the lifetime of the MHR. This is usually about 5 years, then it needs to be reviewed by the operator w ho will need to show any necessary 
changes to the regulator. Should the installation unde rgo major modification, the operator reviews and 
where necessary revises the MHR, irresp ective of the age of the current MHR. 
 
33 extended to incorporate environmental impact assessment (see Measure 4  which is 
implemented within Option 2) and include installation specific emergency response. Industry and regulator contributors to the Co mmission's analysis have been quite clear 
that this model should be applied universa lly across the EU, and that an entirely new 
model would destabilise the regimes in the currently best regulated Member States. 
(2) Establishing regular inspections and a penalties regime 
The aim behind this measure is the attainment of consistent high standards of assurance 
(through inspections, sanctions, etc.) that adequa te controls are in place by the industry to 
prevent a major offshore incident in EU waters . It addresses the current concern that the 
thoroughness of the assessment of safety repor ts, site inspection and enforcement of 
defects varies between Member States. In a ddition, the attainment of consistently high 
standards in major incident prevention acro ss the EU depends partly upon a consistent 
focus by EU regulators on the corresponding control measures. Where regulatory inspection focuses on occupational safety and health factors
47, which are more easily 
inspected without a concomitant interest  in the more complex major hazards 
arrangements48, industry focuses its attention acco rdingly. Finally, the detection of 
problems via inspection - ideally based on the submitted major hazards report – see 
measure (3) - would ideally be complement ed by follow-up investigation by regulators 
where necessary and, in all justified cases, by sufficiently discouraging sanctions. A number of existing regimes can serve as be st practice examples - both in EU and 
elsewhere (for example Norway, Australia, Ca nada and Brazil). This measure has been 
defined with input from Member States re gulatory authorities in both the North Sea area 
and some of the other Member States k een on reinforcing their inspection capacities 
using the North Sea experience as inspiration. 
This measure is universally supported in the public consultation, and by the Parliament's 
position. The great majority of responders urge  a goal setting, risk based regime focusing 
on preventing major hazard incidents, and avoiding prescription. Public authorities, 
citizens and NGO's stress the importance of expertise and adequacy of funding for 
regulators for tackling inadequate safety cu lture of the industry, and believe regulators 
should be independent of licensing and commercial sponsorship by governments 
4.2.3.  Option 1+  
Option 1+ (North Sea plus) begins to act also on North Sea Member States and 
therefore takes the level of industry and re gulatory performance to above that of the 
current North Sea baseline. However, it doe s so only by reinforcing provisions already 
available in existing EU legislation and st eering clear of proposing new legislation.  
This Option would add to the measures of  Option 1 the following ones (with numbering 
following the right hand side of Table 2) 
                                                
 
47 For example in the degree of automation of lifting heavy objects, washroom hygiene, wearing of suitable 
personal protective equipment, and preventi on of slips, trips and falls from height 
48 For example in the maintenance of safety integrity levels that depend on the interaction of a number of 
independent factors; and in the management of change  where original design intent of safety systems may 
be infringed. Inspection may be complex a nd based on a systematic audit approach.  
 
34 (1) Detailed verification of the technical capacity of potential operator 
For option 1+ this first layer of action that  would be implemented would be pursued at 
EU level only through the soft-law means of guidelines to Directive 94/22/EC, reflecting 
the reality that the degree to which national authorities in the North Sea region give effect to the corresponding provisions of Di rective 94/22/EC differs at the moment 
(12) Clarifying the applicability of waste legislation in the scope of environmental 
liability 
Oil spills qualify as waste for the purpose of  EU waste law, with a range of legal 
consequences as to the responsibilities of operators. This important legal finding, which also applies to oil spills from offshore installations, was upheld in a landmark ruling of the European Court of Justice. Since it is not  explicit in legislation, it would benefit from 
adequate visibility, as a matter of clarity. This clarification could be included in a 
Frequently Asked Questions document on Directive 2008/98/EC on waste (Waste 
Framework Directive), which is under pr eparation by DG Environment and will be 
published by the end of October 2011.  
 (10) Preparedness for effective emergency response to major offshore accidents 
This part of option 1+ establishes the ba sis of emergency preparedness for Member 
States through soft-law instruments, this op tion in effect sets a planning template for 
national emergency response plans - such th at plans can be shared and resources 
allocated on a collaborative basis between MS in the same region, but also to open up the 
potential for helping other regions combat extreme emergencies. This model is largely in place in the North Sea region.  
(11) Ensuring cross-border availability and compatibility of intervention assets 
Under option 1+ and  by means of soft-law instruments, this option motivates Member 
States to develop interoperable assets for sharing across boundaries when it is required to 
lend assistance to other MS emergency responses. As a natural corollary to this measure, Member States would collate industry inve ntories and stimulate interoperability of 
industry and national assets, which then opens  up the whole of the EU to transferring 
equipment and expertise should this be necessary to bring a major incident under control. 
(5) Extending EU practices to overseas operations 
The third layer of this option is in extendi ng, formally, EU efforts overseas. This would 
be both in the medium of securing agreemen ts on good practice standards e.g. with IMO, 
neighbouring states, and the governments of IRF countries, and in securing voluntary 
agreements with EU based companies to appl y, as far as is feasible, the modus operandi 
of their EU operations to their activities outside the Union. 
4.2.4.  Option 2 
Option 2  (EU best practice model) seeks more profound changes even to the current 
practices in the North Sea. It does not eschew  new EU legislation and therefore can also 
integrate exemplary and proven practices or approaches developed in individual 
 
35 jurisdictions (mainly again in the North Sea region) independently of existing EU 
legislation. 
Lying at the heart of option 2 is a best pr actices model for industry and regulators that 
tackles industry culture, reliability of systems, and transparency. Hence, this first layer comprises an industry best practices mode l that would be adopted and supported by 
independent verification.  
(4) Extension of formal safety assessments in view of creating a comprehensive risk 
management model for EU offshore  
Under this measure, environmental risk assessments and emergency plans would be 
incorporated in the major hazard report (MHR).  The purpose is to ensure that individual 
companies and the industry as a whole own and consistently follow operational models 
that allow them to manage the full spectru m of risks from their activities to a higher 
degree of control than at present.  
First and foremost, this means ensuring that  all operators incorporate their policy for 
major hazard prevention in their corporate policy statement, and makes the necessary organisational and procedural adjustments to bring this policy into effect. Setting these 
matters into a corporate policy statement would begin the attainment of the desirable safety culture that has been called for follo wing the various investigations following the 
Deepwater Horizon disaster and reduce the likelihood of catastrophic events. In addition, 
the assessments carried out by authoritative regulators following the Deepwater Horizon, 
and by the Commission prior to publishing its  2010 Communication all conclude on the 
need to address key issues such as main tenance of well integrity, reliable decision 
making, management of major hazard activitie s, competency of key post holders, and 
risk assessment. Therefore we see this measure also establishing the priorities for collaboration by industry and regulators on ke y operational rules and standards which 
underpin the stronger safety culture.  
Like the EP, the great majority of respondents either urge the integration of safety and 
environment risk assessment, or refer to th e joined approach as self evidently obvious. 
Many regulators, citizens, and non-operator industry respondents identify inadequate 
safety culture of industry as the primary targ et for more stringent policy statements and 
associated implementing arrangements by ope rators, supported by rigorous targeting of 
major hazard risk controls and management  systems by the regulator. Some (NGO's) 
suggest extending the application of the Seve so 2 Directive to offshore oil and gas. 
Scrupulous third party verification with acce ss to the regulator by the verifier, and 
protection of whistle blowers are cited by so me respondents as necessary indicators of 
improved safety culture. 
The EU has since 1996 had a model – Seveso 2 - for integrating the regulation of safety 
and environmental protection and emergenc y response from major hazard industries 
onshore.  
The priority areas for attention by the indus try would include environment damage and 
limiting escalation within the formal risk a ssessment in the major hazards report, the 
scope of which would be extended compared to  Options 1 and 1+, integrating safety and 
environment offshore along the Seveso mode l, though without bringing the sector under 
the scope of the Seveso legislation itself which applies to a wide range of onshore 
industries with different safety needs, e.g. land use planning. It is reasonable to imagine 
 
36 that Seveso 2 may be applied to the offshor e oil and gas sector, removing the need for a 
separate legal instrument. This is ultimately not a feasible option but because there is a 
body of  support for extending Seveso 2 we pr ovide a detailed explanatory note in Annex 
X (supplementing the review of the implementing measures for this option in Annex XI). 
Apart from ensuring that industry applies be st practices for the prevention of major 
accidents, it is equally important that a sound regulatory system exists in Member States. 
The following measures are therefore also re quired under policy option 2 to ensure that 
the industry is subject to a regulatory model th at upholds the principles of state-of-the-art 
operations across the EU.  
(6) Establishing a Competent Authority in each jurisdiction 
In order to achieve appropriate balance be tween avoiding an incident and limiting its 
consequences, it is essential that a Competent Authority49, i.e. the regulator and other 
authorities working in the area of oil and ga s activities in a given jurisdiction, plan and 
execute their activities consistent with rec ognised best practices. This measure would 
ensure that Member States establish such Competent Authorities for the oversight of oil 
and gas activities in their area of jurisdic tion, with certain minimum characteristics, 
which may include: 
(a) Absence of perceived or actual conf licts of interest between licensing, 
revenue collection, and safety and environmental inspection 
(b) Clarity in the role of the regulator as verifier, as distinct from the role of 
industry as controller of risks 
(c) Clarity of the desired outcomes to be achieved by regulation using goal-
setting approaches to major hazard prevention and mitigation: 
In design and operation 
– In construction and decommissioning 
– In emergency response 
– In aligning safety and environmental protection  
(d) Establishment of the generic level of  expertise required of the regulator, 
and use of expert external advi sors as called for by goal-setting 
approaches 
(e) Indemnity by industry against costs incurred by the regulator in major 
hazard controls verification 
(f) Consistency of enforcement approaches 
 
All respondents, like the Parliament, emphasi se the critical contribution of expert, 
independent and adequately resourced re gulators; Parliament, many regulators, non-
operator industry, citizens and NGO's regard it e ssential to combine regulation of health, 
safety and the environment. Industry is wary  of reforms to regulatory structures. The 
importance of regulatory independence fr om licensing and industry sponsorship by 
government is emphasised by some respondent s, including industry. An active dialogue 
between regulators and third party verifiers is seen as necessary by some respondents. 
                                                 
49 The term refers to legal competency for shared regul ation of safety and environment, not to the attribute 
of being competent to do the job, by virtue of training etc 
 
37 Some respondents feel an EU-level regulat ory agency would be more effective in 
consolidating the best regulatory practices.   Supporting the inculcation and maintenance of  regulatory best practices would be the 
setting up of a Commission-led group of regulator s that would also enhance the efficacy 
of existing regional groups such as NSOAF.  
(7) Establishing a platform for regul atory dialogue and information sharing 
amongst jurisdictions  
The aim behind this measure is the establishm ent of a means for the representatives of 
the relevant national authorities of Member St ates to engage into an EU-wide regulatory 
dialogue. The purpose of this Group would be  to assist each Member state and the 
Commission in resolving offshore issues, e.g. id entification of best practices for major 
hazards prevention and emergency preparedne ss, and disseminating lessons learned from 
accident investigations. At present a sim ilar framework exists for labour inspection 
services of the Member States (SLIC
50), but for the EU regulators of the oil and gas 
industry, a comparable body is lacking. Th e proposed measure would benefit from 
experience gained by SLIC and by the regul ators for oil and gas activities around the 
North Sea, combined in the NSOAF51. It is a measure building on the example of 
NSOAF and on the experience of ad-hoc EU regulatory workshops co-organized by the 
Commission and the NSOAF since summer 2010, wh ich also included participation of 
Member States representatives from other EU offshore regions. 
All respondents with some knowledge or understanding of bodies like NSOAF and IRF 
(including the EP) strongly support an EU-wid e forum of this kind. Opinion is divided 
(industry – rest) whether this should be a voluntary or a formal institution. A few 
respondents (from NGO's, and non-operator industr y) see an EU inspection agency as the 
right destination for this concept.  
The second layer of this option develops po licy for integrating environmental protection 
into major hazards safety regulation. In including environment within the formal risk assessment, it would now be possible under option 2 to establish within the envelope of the MHR internal emergency plans that would aim to limit the escalation of an incipient 
major hazards incident to the areas controlle d by the installation. The internal emergency 
plan would be the foundation of the nationa l emergency plan for the specific area around 
the particular installation. This also makes it possible to link the preparation of national 
emergency plans to the risk assessments perf ormed by the operators and attain coherence 
between the operator who creates the risk, a nd the national arrangements that protect the 
public from such risks that is not currently attainable. 
Option 2 would thus entail strengthening the e ffects of option 1+ by incorporating some 
of the environmental measures implemented through preparation of guidelines in the earlier option into law as follows. 
                                                
 
50 Committee of Senior Labour Inspectors - Commission Decision 95/319/EC 
51 Reference/explanation for NSOAF 
 
38 (10) Preparedness for effective emergency response to major offshore accidents 
The aim behind this measure is to achieve a level of emergency preparedness throughout 
the EU allowing the most effective response to a major offshore accident affecting any 
part of EU waters and shores. Standard  operating procedures for such emergency 
situations need to be consistent across the EU and to integrate public and industry 
resources most effectively. The offshore indus try has the global experience, the technical 
capacity and the financial strength to prepar e robust plans and to deliver against them. 
However, it does not have control or ownershi p of all assets – both human and hardware 
– required to affect a total response to all possible scenarios. Much of the necessary 
response lies within the Member States' civil contingency inventories and mechanisms, for example in making available search and rescue helicopters. The control by Member States of response to an offshore emergency is  not at question; however it can clearly be 
enhanced if neighbouring Member States and industry contribute to the planned 
organisational arrangements. Therefore, an ideal system will secure reliable cooperation 
from industry and other Member States, and will be capable of being thoroughly tested 
through exercises, including cross-border ones.  
All responders expressing a view share the position of the Parliament in favour of 
regularising cooperation between and across industry and coastal states; with some 
pointing out that North Sea country alrea dy have exemplary regional arrangements. 
Some NGO and regulatory respondents suggested  EMSA provide a core model for the 
oil and gas sector, others extending this id ea to a specific EU emergency response group 
of Member States. Some industry responde nts made the link between the MHR and 
installation specific emergency planning wh ich becomes possible when environmental 
risk assessment is integrated with safety assessment.   
(11) Ensuring cross-border availability and compatibility of intervention assets 
This component of option 2 concerning inte rvention assets is complementary to the 
previous measure (10) i.e. focused on opera ting procedures and emergency planning. The 
aim behind this measure is twofold: (i) to en sure that industry and Member States have 
assets available to limits the e ffect of a major accident should it occur, and (ii) to ensure 
that Member States have the wherewithal to share assets which are compatible or 
interoperable, including expertise. 
An important requirement for the industry assets  is that they ought to be compatible for 
use throughout the Member States. Furthermor e, the presence and deployment times of 
these assets ought to be known to contingenc y planning authorities in Member States, in 
order that emergency plans drawn up by Member  States can take account of the relevant 
properties. 
As the previous measure, this receives universal support from respondents to the 
consultation and from the Parliament's pos ition. A number of respondents point out the 
importance of harmonising standards for e.g. dispersants to achieve full transboundary 
inventories of response assets. 
(12) Clarifying fully the scope of environmental liability  
Further to the proposed guidelines in the a pplicability of waste regulatory framework in 
the offshore oil and gas sectors, there is need to provide for clarifications in the scope of 
environmental liability for addressing damages to marine waters. The Environmental 
 
39 Liability Directive was adopted in 2004 and doe s not address water damage for marine 
waters of Member States beyond territorial  waters. The Marine Strategy Framework 
Directive 2008/56, however, adopted in 2008, laid  down that all marine waters under the 
sovereignty or jurisdiction of Member Stat es need to be protected. Therefore, the 
Commission identified a gap that exists between the "polluter pays" principle 
underpinning environmental EU legislation a nd the current geographical scope of the 
Environmental Liability Directive. Action could be undertaken to achieve a clear provision on environmental liability for water damage in marine waters.   The evolution of EU policy for marine envi ronmental protection is a key factor in 
considering the extension of ELD as a legal option. This particular example is also an object lesson in the fragmentary EU legislation that needs to be regularised if the EU is 
to secure a significant reduction in risk of a major oil and gas accident in its waters. In view of the critical importance of this matte r at the policy level as revealed by the ELD 
considerations, we have included a detailed e xplanation in Annex X, in addition to the 
explanatory text for all implementing measures in Annex XI.  Industry accepts the polluter pays principle but some respondents made the point that 
liability should be based on worst case scen ario modelling and the availability of 
baseline status to reveal any pre-existing dama ge in the marine environment. Concern is 
also expressed that extending ELD could create uncertainty and duplication of liability and inadvertent capture of other sectors (shipping). NGO's and citizens are strongly in 
favour of extending strict liability in all EU waters. Regulators and non-operating industry give broad support to this measure,  which is also strongly supported by the EP 
position.    
Supporting best industry/regulator and environm ental practices that are implemented in 
option 2 as described above would be a thir d layer that provides greater transparency 
than at present of industry and regulator pe rformance. This would lead to a number of 
reporting requirements between industry a nd MS and between MS and the Commission, 
and general publication of EU performance and lessons learned from incidents. 
(9) Comprehensive information sharing and transparency 
Currently, Member States that try to share performance related data spend a great deal of 
time and effort in harmonising data, leading to compromises in the validity of information. The aims behind this measure,  supported by stakeholders responding to the 
Public Consultation, would be three-fold:  (i) to encourage knowledge transfer acr oss the industry and regulators and the 
sharing of 'lessons learned' to promote continuous improvement in major incident 
prevention 
(ii) to give public access to information on the performance of both industry and 
regulators on the basis of which interest ed members of the public can either 
formulate queries or gain assurance that , in the EU, the industry is well run and 
regulated.  
(iii) to ensure that the public and potentially  affected countries are consulted to an 
appropriate degree as part of the authorisation/licensing process.  
This measure reflects the Parliament's  position and is broadly supported by all 
respondents, although operators are concerned that commercially confidential information must be protected, and operato rs also suggest more positive information 
 
40 should be published about the industry's cont ribution to the economic and technological 
wellbeing of the EU. This measure is seen by NGO's, citizens and non operating industry members as critical to improving safety culture and aiding improved performance. 
Protection of whistle blowers is regarded by some respondents – NGO's and citizens (and Parliament) as an essential precursor. Many (including some non operator industry 
members, but not industry or regulators) s ee the role of a cross-EU regulator body as 
pivotal for effective transparency.  
4.2.5.  Option 3  
Option 3  goes further than Option 2 not necessarily  in the extent of the new operational 
model for the sector but rather in the degr ee of its consolidation and institutionalization. 
Where feasible and admissible from the point of view of subsidiarity and proportionality, 
this option seeks the creation of an EU body(ie s) as the means to implement of most of 
the measures comprising Options 1, 1+ and 2. For example, an EU body/agency would 
be tasked to undertake inspections and/or i nvestigations of major hazard incidents and 
oversee the performance of MS competent authorities and third party verifiers (e.g. 
classification societies). The option also a ssumes the creation of an EU intervention 
capacity, and helping build capacity for emergency response beyond the EU.  
To summarise, this option has the effect of consolidating and institutionalising at the EU 
level the following delivery measures that are inherent to the other reform options: 
1  (Verification of operators technical capacity ) 
2  (Regular inspections and penalties regime ) 
3  (Submission of formal safety assessments for acceptance by the regulator ) 
5  (Extending EU practices to overseas operations ) 
6  (Establishing a competent authority ) 
7  (Establishing a platform for regulatory dialogue ) 
10 (Preparedness for emergency response ) 
11 (Cross border availability of compatible assets ) 
12 (Clarifying the scope of environmental liability )  
There are a number of EU bodies, such as EMSA  in maritime safety or even in atomic 
energy regulation, that could be considered as blueprints or for adoption (at least partially) in lieu of the creati on of a new entity. However, at least to some degree account 
would have to be taken of the fact that existing entities may not be entirely suitable for the nature of the offshore oil and gas industry which is essentially non-maritime
52, and 
has very different risk profiles to the nucl ear sector. So a new design could be required. 
Of the measures implemented by option 2, creating an institution under option 3 is 
assessed to have the most significant impact on securing more consistent safety performance by EU based operators. 
(5) Extending EU practices to overseas operations 
The aims behind this measure, evidenced through the public consultation and European 
Parliament positions as one of the most pre ssing for European public, are twofold. Firstly 
                                                
 
52 Offshore installations, when on station, are in eff ect land-like major industrial sites placed in a marine 
environment. 
 
41 to give assurance inside the EU that compan ies headquartered here have adopted a true 
best practice culture such that their operations are reliably consistent worldwide. Secondly it is to demonstrate globally that EU level standards effectively reduce risks 
and therefore damages to economies and envi ronments which would increase pressure 
everywhere to attain EU level standards for offshore operations. The measure recognises 
that in practice, it would be difficult to enforce binding requirements on the application 
of EU standards in third countries. Howe ver, by achieving recognition that the EU 
frameworks for offshore operations are exempl ary in nature, the EU will be in better 
position to promote the levelling up of offshore safety requirements in other jurisdictions 
to the benefit of the EU itself. This could be e.g. be attained by securing agreements on 
good practice standards e.g. with IMO, nei ghbouring states and IRF members and/or 
securing voluntary agreements with EU based companies. 
Like the Parliament, most respondents are s upportive of the principle that failure to 
follow EU best practice overseas is an a dverse trait amongst EU companies. NGO's and 
citizens particularly feel this should result in  strong sanctions – refu sal or withdrawal of 
licensing. Regulators are more circumspect regarding the legality of sanctions for 
perceived failings in another jurisdiction, and ope rators generally feel this ambition to be 
unattainable due to varying requirements of  overseas regulators notwithstanding best 
endeavours of operators. Some respondent s – NGO's, citizens and some non operating 
industry respondents believe an EU regulator y agency could be effective in securing 
more consistent international performance by operators. 
4.3. Summary of options  
The alignment of the policy options with  each other and their suitable modes of 
implementation are illustrated in the table below.  
Table 5 
Comparison of policy options 
No. Measure Option 
0 Option 
1 Option 
1+ Option 
2 Option 
3 
1 Detailed verification of the technical capacity of 
potential operator 0 0 G L EU 
2 Establishing regular inspections and a penalties 
regime 0 L L L EU 
3 Submission of formal safety assessments for 
acceptance by the regulator 0 L L L EU 
4 Extension of MHR into a comprehensive risk 
management model 0 0 0 L L 
5 Extending EU practices to overseas operations 0 0 G G EU 
6 Establishing a Competent Authority 0 0 0 L EU 
7 Establishing a platform for regulatory dialogue 0 0 0 L EU 
9 Comprehensive information sharing and 
transparency 0 0 0 L L 
10 Preparedness for effective emergency response 
to major offshore accidents 0 0 G L EU 
11 Ensuring cross-border availability and 
compatibility of intervention assets 0 0 G L EU 
 
42 No. Measure Option 
0 Option 
1 Option 
1+ Option 
2 Option 
3 
12 Clarifying the scope of environmental liability 0 0 G L L 
Table legend: 
0 Measure not implemented G Measure implemented through guidelines L Measure implemented through legislation EU Measure (further) institutionalised at EU level (e.g. in EU body) 
As analyzed in detail in Annex XI, a measure can be implemented by different means, 
often offering a trade-off between effectivene ss and complexity/practicality. This results 
in differences amongst the way individual measures are to be implemented under 
individual options. For example, Measure 11 ( Ensuring cross-border availability of 
common response assets ) may be implemented through guidance in Option 1+, through 
new law in Option 2, or through an EU ins titution in Option 3. As result, each of the 
policy options is characterized on one hand by th e set of measures retained in the option 
and by the preferred implementation means for each measure under that option.  
There is generally a wide consensus in the stakeholder community that the measures we 
have identified as components of the 4 opti ons can be both implemented by the industry 
and regulators and will be effective in reduc ing risks of major accident hazards offshore 
in the EU. This is evidenced inter alia  by the similarity of the measures recommended or 
advocated and action plans proposed in the positions and statements of the different 
stakeholder groups – the reports and declara tions adopted by the European Parliament, 
the Commission views and plans expresse d in the October 2010 Communication, the 
recommendations of existing groups of regulators (such as NSOAF or IRF
53) and also the 
recommendations and action plans issui ng from the industry (OSPRAG, GIRG)54. 
4.4. Deferred options 
Three of the measures (8, 13, 14 in Table 2) deal with product safety and the financial 
capability of operators to fully cover civil lia bilities for damage. They are antidotes to the 
problem drivers and would complete full implementation of options which satisfy the specific objectives. But they are, as yet, in sufficiently mature to be included in this 
impact assessment 
Product safety 
(8) Achieving consistency of product and equipment safety standards across the 
sector 
The aim behind this option is to obviate a regulatory anomaly, clearly identified as 
unhelpful by regulators and some parts of industry – primarily on the supplier side, but also amongst oil companies - in the responses  to public consultation and in bilateral 
discussions, . Mobile offshore drilling units  (MODUs) are subject to the voluntary IMO 
MODU Code but only in respect of maritime equipment, while the code does not cover drilling equipment – including well control equipm ent such as BOP's. At the same time, 
MODUs are entirely exempt from EU product safety legislation, being treated a ships 
when in fact they are - when stationed for drilling - industrial sites based at sea. This 
legislation does apply to equipment used on non- mobile facilities, but the lack of specific 
                                                
 
53 http://www.irfoffshoresafety.com/conferences/2010conference/communique-nov-01-2010.aspx 
54 See Annex XII 
 
43 harmonised standards leads to a low level of  consistency and compatibility in safety 
critical equipment and increased cost burde ns on industry working between different 
Member state jurisdictions. Safety deficits arise from lack of familiarity of crews 
operating between different jurisdictions.  
There is considerable support by indus try respondents (operating and non-) and 
regulators (NSOAF) for this measure. However,  matters related to equipment used in the 
offshore oil and gas industry concern also th e ATEX sector, alongside the Machinery and 
the Pressure Equipment sectors. Therefor e this issue has been referred beyond this 
impact assessment. Following a EU Workshop in February 2011 on standards for equipment used in the offshore oil and gas industry, a draft Standardisation Mandate has 
been developed. The Commission is currently consulting the European Standardisation Organisations and other stakeholders inform ally on the Draft Mandate, before submitting 
it to the Directive 98/34/EC Committee. A specific discussion point on this issue will be included into the agenda of the next A TEX Working Group meeting, to be held in 
Brussels in January 2012. 
Liability for damages 
(13) Ensuring financial capacity of operators to cover environmental liability 
The aim behind this part of the option for c overing all liability for damages is to assess 
the possible mechanisms to better guarantee that , in addition to a clear liability system in 
the EU, operators can cover any arising liabilitie s, in particular in the event of a major 
accident. This option aims to overcome a ny vagueness within present provisions in 
relevant EU legislation (Directive 94/22/EC, Directive 2004/35/CE (ELD)) and 
differences in availability of information throughout different stages of offshore licensing. The assessment of the financial capacity may differ in detail for the exploration phase, where information con cerning the contingent liabilities is less 
detailed, while for licensing at the devel opment or production stage much detailed 
information will be available for a thorough a ssessment of risks. The assessment of the 
financial capacity requires assessing in any cas e the guarantees and financial security for 
liabilities to be conducted, prior to award of a license.  
This policy option reflects concerns of the general public expressed through the Public 
Consultation as well as identified shortcom ings in the present regulatory framework 
identified by both the Commission and the Eur opean Parliament and Council. However, 
there are a variety of positions on this meas ure, which itself is complex as liabilities 
range between traditional ones (civil include d) and environmental. Industry broadly 
favours some (high) limitation on liability re lative to fairness, underpinned by existing 
pooling arrangements, with the North Sea OP OL arrangement seen as a model and re-
insuring: there is concern that smaller operato rs would be needlessly priced off the scene. 
Insurers feel their members are probably unable to provide all foreseeable cover to address an extraordinary event similar to th e Deep Horizon, and in any case major oil 
companies have large liquid assets that woul d not require underwriting - particularly on a 
EU basis. For insurers, global instruments pr ovide the only realistic chance of adequate 
funding pools to address off-shore risks. NGO' s and citizens urge taking criminal powers 
to enforce liability; a limited reference is ma de to an EU inspection agency providing 
better assurance of responsible behaviour by liable parties.  
(14) Establishing compensation regimes for traditional damage (civil liabilities)  
 
44 The aim of this measure would be to ensure that EU has a comprehensive liability regime 
not only for environmental damage but also for traditional liabilities such as human life losses and economic losses to different sector s like fishing and tourism. The Deepwater 
Horizon experience revealed the extent to which such traditional liabilities may quickly come to dominate public's attention and in terests following a major accident causing 
extensive damage not only to the environmen t but also to coastal communities and local 
economies. 
There is widespread support from Parliament  and from public consultation for a strict 
damages scheme to assure rapid payout to  affected businesses/individuals. Some 
respondents envisage such schemes should be supported by regional cash pools (fed by 
operators). Operators are relatively sile nt. Regulators are di vided whether new 
arrangements are needed, and some are wary of a deterrent effect on smaller operators. 
NGO's suggest criminal powers to enforce rapid damages payments to victims. 
In respect of both these provisions, as they c oncern issues of a relatively high complexity 
in terms of national legal frameworks for civ il liability but also international implications 
and harmonisation of their impacts, they ar e not pursued in this impact assessment. 
Instead, the Commission continues the analysis of  the subject together with stakeholders, 
for example in the insurance sector, in  supporting national regimes to examine 
harmonisation of civil liability provisions, and in encouraging consideration of international pooling arrangements (with IMO) . Financial and administrative provisions 
have been made in the 2012 Commission budget to pursue further this work (studies, consultation, etc).   
5. I
MPACT ASSESSMENT OF POLICY OPTIONS  
In this chapter, each of the policy options outlined in Chapter 4 is assessed on the basis 
of its most important and relevant likely impacts: 
• the extent to which they mitigate the risk/costs of offshore accidents, 
• regulatory and compliance costs on Member States, industry and the Commission, 
• other environmental, social, economic and external impacts. 
The main objective of any policy action in this field is to reduce the risk of accidents and 
thereby to avoid human, environmental a nd economic losses. Therefore, the first 
criterion to be evaluated will be the proposed policy’s impact on mitigating the risk/costs 
of offshore accidents to the Member States. Th is is assessed by the estimated impact of 
the measures under each policy option on the baseline range of €205-915m annualised costs introduced in the baseline analysis in chapter 2.   
Box 3: Estimation of the effectiveness of the proposed policy options in reducing the 
cost of major accidents  
Estimating the effectiveness of th e proposed policy options in reduci ng the probability and therefore the 
cost of major accidents is a difficult task and can only be made by expert opinion based on the best 
available information. In fact, wh ile there are databases of accidents and incidents that have occurred, 
information about accidents th at have been prevented is not availa ble. Furthermore, because the proposed 
measures within the different options are sui generis , our estimates of their effectiveness are based on the 
best possible data we have available, always norma lised to account for the size of the relevant population 
of oil wells and offshore activities. An account of the exact estimations for each one of the proposed 
options is given in Annex IV.  
The followed approach can be demonstrated taking the example of Option 1. The proposed measures here 
– with respect to the baseline scen ario – are the application of a goal setting (or objective-based) regime 
 
45 and the establishment of regular inspections and penalties regime. The effectiveness of these measures is 
estimated by expert opinion in light of the strong empirical evid ence of the effectiveness of objective-
based risk management in the offshore sector.  Indeed, the UK Health and Safety Executive’s Offshore 
Safety Division has collated sta tistics on offshore accidents and ill h ealth from 1995/96 to 2009/10. During 
or just before this period, several key pieces of  legislation were introdu ced mandating the goal setting 
approach to offshore regulation on the UK continental shelf. The statistical data demonstrate a significant 
reduction in accident rates (and an incr ease in safety), which – according to HSE – can also be attributed to 
the introduction of the goal setting legi slation. Furthermore, studies co mparing blowout rates in Norway 
and in the USA have demonstrated significantly lower rates for Norway, which is also attributed to the 
application of the goal setting legislation. Based on this evidence, it was assumed a 50% reduction of the 
major offshore accidents rate.  
The difference between Option 1 and the Baseline Scenar io is application of the goal-setting regime in 
Italy and Spain - since this regime is already applied in the North Sea countries. Italy and Spain count for 
408 out of 6315 wells in Europe, i.e. 6.5% of offshor e activity. Taking into consideration the assumed 50% 
reduction of accident rate, overa ll offshore accident cost reducti on between €7 and €30 million is 
estimated.  
 
 
Secondly, the additional financial and admini strative costs of implementing the proposed 
policies to Member States, the industry a nd the Commission will be highlighted and to 
the possible extent quantified. These econom ic costs can be roughly divided into 
regulatory costs (the costs incurred by pub lic authorities in providing the oversight 
necessary to effectively implement the policie s) and compliance costs (the costs incurred 
by industry). All cost elements can further be divided into one-off costs (the initial investment needed to update practices with the regulation) and running costs (the on-going operational cost). 
Regarding regulatory costs, the cost to the re gulator of enforcing regulations is primarily 
the opportunity cost of the time taken to enfo rce and provide support to the operators as 
required. This was gauged by means of two questionnaires presented to European 
offshore regulators in combination with cal culations as per the EU Administrative 
Burden Calculator. 
The compliance cost that industry bears can be divided into three categories following 
the EU Standard Cost Model as define d in Annex 10 of the Impact Assessment 
Guidelines.
55 
1) Administrative burdens are the costs on bus inesses of complying with the information 
obligations resulting from legislation and regulations. An example of administrative 
burdens in the offshore sector may be th e notification of dangerous occurrences, 
inspections, and reading guidance material. 
2) Substantive compliance costs are the costs that businesses incur in order to comply 
with the content obligations that legisla tion and regulations require of a production 
process or a product. In the offshore sect or these include the costs of additional 
equipment or machinery to ensure compliance, or the costs of hiring consultants to help 
with compliance. 
                                                 
55 http://ec.europa.eu/governance/impact/commissi on_guidelines/docs/ia_guidelines_annexes_en.pdf. 
 
46 3) Financial costs are the result of a concrete  and direct obligation to transfer a sum of 
money to the Government or the competent au thority. An example of a financial cost in 
the offshore sector is the fee for notification charged by national regulators. 
Each of these categories of compliance cost  has been gauged by means of a questionnaire 
presented to industry, and supplemented with calculations as per the EU Administrative 
Burden Calculator.  
For the purposes of calculating some administrative burdens, the opportunity cost is 
assumed to be equal to the wage rate of th e relevant member of staff, inflated by 30%. 
This 30% adjustment is to reflect the true economic cost of employing that member of staff and includes employer taxes and pens ion contributions, as well as so-called 
‘overhead-costs’ such as premises, telephone, heating, electricity and IT equipment. 
Finally, a section for each option summarizes other relevant environmental, social, 
economic or external impacts associated with the option. 
The impacts of all analyzed policy options ha ve also been assessed in relation to the 
respect of fundamental rights as described in the EU primary law (notably in the Charter 
of Fundamental Rights of the European Union)  and case law of the Court of Justice of 
the EU. 
This chapter presents only the highlights of the impact analysis conducted. Annex IV  
provides further details on the findings and the estimates and modelling employed. This 
chapter does not provide a comprehensive e numeration of every possible impact but 
focuses on select key dimensions where the scal e of the impact is most significant, where 
its nature is well-understood and where the combination of clear facts and dependable 
data allow concrete conclusions to be drawn as a basis for policy formation. The main reason for such limitation is the lack of compar able and authoritative data available to the 
Commission at present. Where possible, proxies  or modelling were used to make up for 
missing hard figures. 
In the following paragraphs, benefits and co sts are presented for each individual policy 
option. As the policy options constitute a phased approach for implementation of 
measures, the benefits and costs will accrue with the execution of each policy option. At 
the end of this chapter, a table is included showing the incremental (aggregated) benefits 
and costs for all the policy options.  
5.1. Option 0 - No EU Action 
The analysis of impacts of Option 0 is in fact contained already in Chapter 2 (and the 
supporting Annex I) as the Baseline, as per its  expected evolution, coincides in practice 
with Option 0. To summarize the baseline evolu tion, substantial material improvement to 
the overall level of risk control in the EU as a whole by operators and regulatory 
authorities is not considered likely without an EU policy stimulus. Individual Member 
States may implement partial measures, but pr obably where the level of safety is already 
above average. Even in those cases, however , there is no foreseeable change in the 
intensity of regulation and control of the major hazard aspects, including loss of well 
control. Transparency – at a low level in th is sector compared to other major hazards 
sectors - will not improve, and so public conf idence in the sector will not be noticeably 
enhanced.  
 
47 Because of continuing initiatives by industry, global agencies and institutions, and 
Member States, there will be incremental improvements in emergency preparedness and 
response capability, particularly in the North Sea where the intensity of research is greatest in the EU. The effect of these e fforts may however be counterbalanced by the 
increasing risks of operations due to the ove rall industry trend toward more "frontier" 
and complex operations undertaken by major companies, whilst the existing inventory of ageing platforms continues to be divested to smaller operators. 
As a result, it can be estimated (Annex 1) th at Option 0 will not result in any change to 
the range of  €205 – 915 million of estimated le velized annual costs of damage caused in 
the European offshore sector and that this range remains representative of the future 
record of the sector as well. 
5.2. Option 1 
It should be noted that, because this opti on aims to level-up all European offshore 
regimes to currently existing best practice, so me Member States will be more affected by 
it than others. The calculations presented in the annex supporting this chapter specifically 
address this (see Section 1 in Annex IV). By  contrast, because every subsequent option 
proposed in this report (Options 1+, 2 and 3)  is premised on the implementation of the 
present one, this report assumes that Member  States will be equally affected by these 
subsequent options. 
5.2.1.  Impact on risk mitigation 
In this option, the offshore oil and gas industry in all EU jurisdictions would be required 
to prepare a major hazards report (MHR) based upon the North Sea practice in the 
implementation of the requirement for a sa fety and health document in the Drilling 
Extractive Industries Directive 92/91/EEC . The MHR would amplify the minimum 
requirements of Directive 92/91/EEC towards prevention of offshore major hazards, for 
example marine well control, structural integr ity of offshore platforms, and survival of 
personnel in an emergency. Current practice is the North Sea region is also for a well plan to be notified to the regulator that  contains key information on well design and 
control measures in sufficient time for the regulator to form a competent view on the 
suitability of the plan and to intervene if necessary to require additional safeguards.    
Option 1 measures thus go further than Dir ective 92/91/EEC necessarily obliges because 
regulators would be required to receive the report for their verification of the control 
measures, and be required to base their in spection and investigation regime on the MHR 
while introducing a system of penalties for breaches of duty. This would bring about a 
step change in Member States that currently do not practice a risk based regime of this intensity, for example those who use a more generic approach based on a "minimalist" interpretation of the broad framework of Directive 92/91/EEC.  
The main effect of this option is to defi ne the relationship between the duty holder and 
the regulator on the basis of their shared responsibilities towards risk assessment as cemented in the MHR. The option would not  go beyond this point of principle but 
nevertheless secures some progress towards the goal of consistent risk assessment by 
requiring industry and regulators to adopt a goal setting regime based around the health 
and safety document (92/91/EEC) but going further. This induces partial improvement in the safety culture of industry. An informal  grouping of EU offshore authorities is likely 
to form which, when combined with new information emerging via the formal risk 
 
48 assessments, makes available new information for sharing and learning. Upgraded 
inspection and penalties also supports this trend.  
Correspondingly, the range of estimated annuali zed cost of damage used as baseline 
would be affected but only as  regards regions other than North Sea. Using data on the 
proportion of operations in the North Sea regi on and other parts of the EU, the reduction 
in the levelized costs of annual damage for th e whole of Europe have been estimated to 
be between €6.66 and €29.7 million annually compar ed to the baseline scenario (details 
in Section 1.1 of Annex IV). These figures follow from a reduced impact on losses from an offshore incident as a result of implemen tation of this policy option, in areas other 
than the North Sea. Because the levelized a nnual cost is a surrogate for risk (i.e. a 
product of likelihood and consequence of a majo r incident in EU waters), the reduction 
in levelized costs can be used as a surrogate for reduction in risk. Therefore this option contributes a 3% reduction in baseline risk (average of risk reduction)/(average of 
baseline risk).  
Vicarious effects and omissions of option 1 
The focus on risk assessment would stimulat e some elective improvement in regulatory 
and industry practices and equipment standa rds, but this would be patchy. Voluntary 
groupings of regional Chief Inspectors might em erge outside of the North Sea, along the 
NSOAF model.  
This option would not address all of the be st practice measures that target the full 
panoply of problem drivers. For example it does not mandate industry to adopt a 
consistent culture in the management of  their major hazard operations (see option 2 
below). Nor does it integrate environmental as pects into the MHR. Current levels of 
transparency of performance and sharing lessons learned would remain unchanged. 
5.2.2.  Regulatory and compliance costs 
To implement these two measures (on industry and the regulator) would require 
legislation. It would not be practicable to introduce through voluntary means this level of 
requirement on industry and regulators that do not currently operate such a regime from 
within their own jurisdictions (i.e. the EU regions outside the North Sea). For example, 
responsibility for the MHR regime would need to be applied to defined entities (broadly, 
licensed operators and mobile rig owners) who have a duty to submit, and to comply with the measures contained in, the MHR. Th ere would need to be a concomitant offence 
for non submission/compliance. Regulators would need to acquire the means to 
discharge their responsibilities towards the MH R and the inspection/enforcement regime 
that accompanies it. An enforcement model would need to be introduced to secure 
consistent action by regulators on operators throughout the EU. 
Regulatory and compliance changes will be n ecessary only in regions outside the North 
Sea. Based on available data on the differen ce between the costs of administration and 
compliance in the goal-setting regime of th e North Sea and regions with other (e.g. 
prescriptive) regulatory regimes, it can be estim ated that Option 1 will lead to an increase 
of compliance costs for the industry to th e tune of €35.50m per year under the present 
extent of operations in the individual EU offshore regions (details in Section 1.2 of 
Annex IV). As for administrative costs for public authorities, these are not likely to 
exhibit major increases as available data (see Section 1.2 of Anne x IV giving details on 
 
49 data collected by the Commission through questionnaires issued to regulatory authorities 
throughout the EU) show that administrative expenses and budgets of the regulators in the goal-setting North Sea region are not n ecessarily higher than in other regions. 
However, one-off retraining costs to the st aff of prescriptive based regimes can be 
expected. 
Since Option 1 is the one aiming at bringing ot her EU regions to the North Sea standard, 
it is the only one where it is anticipated to have a disproportionate impact on Italy and 
Spain with regards to North Sea countries. Th ey are the Member States most likely to 
strongly benefit from the package of proposed measures in terms of improved safety.  
5.2.3.  Social, economic and environmental impacts 
The social, economic and environmental impacts are primarily related to the reduction of 
probability and limitation of effects of accide nts as large offshore accidents can have 
devastating consequences as demonstrated earlier. 
However, it is important to take into account all impacts of proposed measures in given 
context where the urgency to prevent accide nts and their consequences becomes even 
clearer. Strengthening of the regulatory requi rements would lower the probability of the 
secondary impacts of accidents that threaten to negatively affect many related sectors, 
such as tourism or fisheries with impact s going far beyond the obvious scale of offshore 
oil and gas sector.  
This approach would also bring additional benefits for economies outside North Sea as 
the goal-setting regimes typically create new business opportunities for consultancies and 
specialist expertise service companies who he lp with the preparation of major hazard 
report. It is worth noting that such rela ted consultation services open opportunities for 
SMEs in an otherwise very complex, resource and capital demanding industry.  
Though some assessments of hazards would be  made in connection with health and 
safety of workers on the basis of existing legislation, no additional protection would be 
introduced for environmental aspects beyond present North Sea practices.   
5.3. Option 1+ 
5.3.1.  Impact on risk mitigation 
Compared to Option 1, Option 1+ can be exp ected to achieve incremental improvement 
in technical capability verification at the licensing stage, but makes complete liability of operators for any pollution very clear, and formalises the goal of making emergency 
assets and plans suitable for sharing across MS borders. EU begins to secure raised 
standards overseas and establishes the princi ple of EU based companies as ambassadors 
in this regard. This may have some dete rrent effect on operators and therefore the 
reduction of the levelized annual damage can  be more significant that under Option 1 
though not in a major way. However, due to th e characteristics of the measures and the 
fact that implementation of the individua l measures under this policy option is by 
guidance only, it became apparent that the benefits and the costs for each measure could not be precisely quantified. Instead, a more general approach is taken for this policy option, where the benefits and costs for the entire policy option are determined, instead 
of for each individual measure. As already indicated, the complete option will result in reduced losses as a result of a blow-out. In  Section 2.6 of Annex IV this is further 
 
50 quantified. The benefits under this policy option are estimated to be between €17.85 – 
€79.3m annually, compared to the baseline scen ario. The cumulative effect of options 1 
and 1+ together is €24.5-109.0m, which re presents a reduction on the baseline 
(equivalent to a reduction in risk) of 12%.  
Vicarious effects and omissions of option 1+ 
Further improvements would be induced in  industry and regulatory practices by the 
systematic application of emergency response planning at the national level and the cross 
boundary sharing of plans. Elective minor im provement is envisaged at the licensing 
stage vis a vis  financial risk through closer invol vement with the regulator on the 
technical risks pertinent to the area being licensed. This measure will also assist in 
developing response capacity in non EU ne ighbour states, and in promoting EU 
standards worldwide. 
What this measure will not achieve is a significant impact on prevention of a major 
incident beyond that achieved in option one. In other words option 1+ will not induce a 
further significant improvement to industr y safety culture, environmental risk 
assessment, joined up inspection by safety and environment regulators, and transparency. 
5.3.2.  Regulatory and compliance costs 
The option would firstly require the licen sing authorities of MS to make certain 
minimum steps to determine the technical 'entry level' for applicants in the various stages 
of licensing which each MS practices. We gene ralize these as (i) initial survey (i.e. to 
conduct seismic and other surveys to identify potential hydrocarbon prospects); exploration (to carry out exploration drilli ng); and production (to establish a production 
facility and to produce and market oil and/or  gas). This measure would complement, at 
the licensing stage, the risk based approach  applied to the operational phases (drilling 
and production) and would involve formal cooperation between licensing authorities and 
safety and environment regulators. 
The implementing measures are relatively straightforward and do not require making 
new law. Sharpening the requirements for scruti ny of technical capacity of applicants for 
licensing can be achieved by issuing guidelines on the application of Article 5 (1) (a) and (d) of Directive (94/22/EC) on hydrocarbon licensing. 
Clarifying the liability faced by licensed operato rs could be achieved to a large extent 
through issuing guidelines clarifying the app lication of EU waste law to oil spills. 
However, this approach would not address the fact that the Environmental Liability Directive 200/35/EC does not address water dama ge in marine waters and is therefore 
not in line with the coverage of the Marine Strategy Framework Directive 2008/56/EC.  
Striving for compatibility and interoperab ility of national response assets, collating 
industry owned inventories of equipment a nd similarly striving for compatibility of 
industry equipment with national inventorie s appears to be achievable through issuing 
guidelines. We take this view in the light of  the considerable activity being taken jointly 
by some MS and industry on improving emer gency response assets following lessons 
learned from the Deepwater Horizon disaster. An extension of the soft approach appears 
appropriate within the context of option 1+ to achieve agreement to a common template 
for national response plans that may be shared between MS and non EU neighbours.  
 
51 Extending EU efforts overseas is not possi ble through legislative means. Pursuing 
agreements through existing channels available to the EU, eg in IMO, NSOAF and IRF can be stimulated through MS membership  of these organizations. The work on 
compatibility of national/industry owned assets and a template for national response plans will facilitate diplomatic efforts to grow capacity in non EU neighbours. It is 
consistent with this generic approach to the implementing measures in option 1+ to also strive for voluntary agreements with EU  based companies to wherever possible 
implement and display their EU operating standards when operating farther afield.  
All this will represent additional admini strative costs for regulators in all EU 
jurisdictions with offshore safety activities.  However, these costs will be lower than 
under Option 2 which assumes more profound changes to their operations. Precise 
quantification of the administrative costs prove d to be not possible, as already indicated 
in the previous section. However, based on th e approach taken and elaborated in Section 
2.6 of Annex IV, the additional administrativ e costs have been estimated at €2.53 million 
annually. 
Implementing Option 1+ will have higher industry compliance costs than Option 1 due to 
the further change in operating practices . Based on this assumption, the additional 
compliance costs for industry under this option have been estimated to amount to €15.79 million annually (see Section 2.6 in Annex IV ). Cumulative costs are estimated at 
€53.82m. 
5.3.3.  Social, economic and environmental impacts 
While Option 1+ doesn't bring many significan t improvements over Option 1 in terms of 
prevention, its benefits in the area of mini mising the negative impacts of accidents can 
have positive impacts on social factors threatened by large scale incidents, which is how we estimate the overall decrease on baseline risk  of options 1 and 1+ together is 12% 
compared to 3% by option 1 alone. Earlier and more effective emergency response can 
minimise impact on industries such as fisher ies or tourism, thus greatly limiting negative 
social and economic impacts. Given the exposur e of those industries to real or perceived 
consequences of pollution, lowering the risk  of accidents has strong benefits on the 
sustainability of jobs and life of local communities. 
Legal clarity on the application of EU waste law to oil spilss will help provide assurance 
to the offshore sector, and regulators and w ill overall increase the level of environmental 
protection. Moreover, positive impact of more efficient emergency response on environment is obvious while bringing less self-e vident benefits such as better protection 
of wildlife. For example, ma ny animals, especially bird species, are threatened by oil 
spills even when those do not reach the shore. Better emergency plans can prevent more negative effects as well as address the probl ems of oiled animals reach the shore long 
before the actual oil spill, thus limiting damage and costs of recovery. 
5.4. Option 2  
5.4.1.  Impact on risk mitigation 
This option activates, mainly, two things that  lie beyond previous options. It levels EU 
MS up to the optimum best practices everyw here (which happens to comprise EU MS 
and EEA, rather than farther afield), and it introduces new practices that are relatively 
 
52 modest additional costs and therefore a ttainable. Option 2, on the other hand, would 
make a robust assault on the main problem drivers described in chapter 2. 
Option 2 makes an impression on all of the problem drivers by incorporating 
environment risk assessment and emerge ncy planning into major hazard reports, 
underpinned by inspection and sanctions by the newly joined-up regulator, and by 
Operators that are required to adopt policie s and corporate arrangements leading to an 
effective major hazards prevention culture . Incorporation of environment risk 
assessments into the major hazards report en ables standard operating procedures between 
MS leading to significant improvement in cr oss border cooperation in emergencies. The 
enhanced sector culture renders an improvement in verifying technical capacity during licensing. The EU Offshore Authorities Group is  established under EC auspices to the 
benefit of all MS, equally, and supported by obligatory standard reporting for the first 
time across any national borders. This enhances public scrutiny and transparency and facilitates EU regulatory programmes, in agreement with the Member States. 
In view of the above, the levelized annual da mage estimate is significantly impacted. It 
can be estimated that, due to significant reducti on in losses due to of a major blow-out as 
a result of the implementation of the policy option, the levelized costs for damage are 
reduced by €76.9 - €343.1 million annually (for this option alone, see Section 3.1 of 
Annex IV). The effect of option 2 cumulativel y with Options 1 and 1+, is to lower the 
baseline scenario by €102.7 – 454.7m (or approximately 50%).  
Vicarious effects and omissions of option 2 
The all encompassing regime for industry and regulators will also move EU based 
companies towards a more consistently high standard wherever they operate. Cooperation with non EU neighbours in inci dent prevention and response would be 
enhanced by the raised levels of risk awareness and transparency throughout the EU 
This option would not provide for any form of enforcement against operators who do not 
uphold consistent high standards of complian ce in every MS they operate, nor would it 
ensure an EU coordinated response to a major offshore incident that exceeds the 
resources of the region in which it occurs  although it would increase the prospects of 
external aid becoming available quickly. 
5.4.2.  Regulatory and compliance costs 
A number of legislative measures would be needed to implement the measures that 
comprise this option to ensure the policy benefits accrue as designed. 
Firstly, attaining industry best practices is  the outcome of industry demonstrating a 
strong safety culture across the EU. To do this, operators and MODU owners must go 
beyond the process of constructing major hazard reports (option 1) and incorporate their 
major hazards prevention policy within their top corporate policy and in their corporate 
organisation and procedures, supported by e ffective performance monitoring, analysis 
and reviews of effectiveness. Legal interventi on needs to be available for serious neglect 
of these principles and therefore a legal inst rument is necessary to establish clear duties 
that support the broad generic frameworks of the EU safety and health provisions.    
Further, industry, as a whole, need to iden tify the priorities in good practices relating to 
major hazards prevention – for example relati ng to maintaining oil and gas within the 
 
53 vessels and pipework designed for their safe handling (referred to as process safety), and 
human and organisational factors that encour age sound judgement and leadership, and so 
on.  
All this will result in an incr ease in compliance costs for the industry higher than in case 
of Options 1 and 1+. Based on the analysis  of available industry data, including the 
limited responses to specific cost questi onnaires prepared by the Commission in the 
course of the present analysis (see Annex VIII) the increase is estimated at €70 million 
annually (details in Section 3.5 of Annex IV). Industry would incur these costs for 
extending their risk management and MHR pro cesses to include environmental risks and 
to improve transparency and information sharing under this policy option. 
The likely additional running costs to all the public authorities from the proposed 
policies have been assessed on the basis of an  administrative cost survey conducted with 
existing competent authorities in relevant Memb er States. The analysis of thus collected 
data and information yields estimates in the region of €9.61 – 15.33 million annually, 
with one-off costs between €17.75 and €44.15 m illion (see Section 3.5 in Annex IV). 
Public authorities would incur the annual running costs mainly for additional resources for inspections, assessments of major hazar d reports and collection and sharing of 
information provided by the industry. The one-off costs are mainly incurred for the establishment of Competent Authorities in Member States. The cumulative running costs for option 2, including options 1and 1+ are estimated at €133.43-139.15m annually. 
5.4.3.  Social, economic and environmental impacts 
Option 2 brings significant benefits over ear lier options in terms of environmental 
protection with the full coverage of marine water damage under the ELD, but also in terms of accident prevention. Including the environmental concerns in the major hazard report can help minimizing the negative impacts on the environment. Improved transparency and sharing of information can further improve quality of preventive measures as well as effectiveness of emer gency response and thus limit negative social, 
economic and environmental impacts described for earlier options. 
Moreover, resulting increased consistency of national regulatory measures could lower 
compliance costs of those operators activ e in more than one jurisdiction. Common 
standards and practices will also improve th e functioning of the internal market and 
enhance competition.  
Increased focus on independent verification and quality of offshore major hazard reports 
would also increase opportunities for secondary  industries related to offshore operations 
that would be accessible also to SMEs. 
5.5. Option 3 
5.5.1.  Impact on risk mitigation 
Option 3 consolidates the benefits produced by option 2 and enhances the 
implementation of EU law and EU's effectiv eness in influencing overseas standards and 
in the performance of EU based companies wo rking elsewhere. It establishes an EU-wide 
intervention capability that is targeted on th e unique characteristics of offshore oil and 
gas disasters. On the one hand an EU Agency  offers a source of technical assistance to 
new or evolving national regimes, promot es regulatory coherence, strengthens 
 
54 deterrence, coordination and transparenc y. On the other hand, it could destabilise 
existing mature regimes (North Sea, Italy) and lead to fewer benefits than in option 1 or 2 
by introducing standards based on the lowest common denominator, creating potential for duplication, and aggravating the shortage of expert, specialist personnel.  
Vicarious effects and omissions of option 3  
An incremental improvement is anticipated in  transparency under the auspices of an EU 
agency, acting on both the regulators, and the industry. Investigations into major incidents by the EU agency would introduce an  element of independence that could be 
very effective in establishing objectivity, ensuring lessons are learned by the MS regulators, and in increasing public confidence. Increased diligence of EU companies operating outside the EU is to be expected both because of the greater consistency in 
corporate performance within the EU, and because of greater influence over the long 
term by the EU in global standards.  
On the other hand if the sharing of ro les and responsibilities between MS and EU 
regulators is not made clear, the efficacy of MS competent authorities, especially in the 
North Sea, could be hampered by delays in re sponding to events which is a risk inherent 
to both centralised and multi-actor interven tion. The likelihood of such problems would 
be reduced if the role of the agency were clear and logical, as is the case with EMSA.  
5.5.2.  Regulatory and compliance costs 
The increase in regulatory costs in Option 3 is  higher compared to Option 2 particularly 
due to the additional costs for setting up and operating a dedicated EU body (agency). 
These costs can be estimated by using other EU bodies as proxies. The additional costs 
can be estimated at the level of €33.6 m illion in annual running costs and further €17.75-
44.15m one-off costs for setting up the new competent authority (safety and environment) plus an non-quantified sum –  €.tens of millions - for purchase of additional capital emergency response assets for the EU body (see s.4.3 of Annex IV). 
However, it should be also kept in mind that there would be a number of non-financial obstacles to be overcome in establishing an EU agency with power s to intervene with 
industry and MS. These include: the relati onship between the EU agency and MS 
jurisdictions for criminal investigation and prosecution; cost recovery mechanisms; the 
relationship between MS and the agency in respect of non major hazard regulation; the 
relationship with licensing authorities; the handling of major hazards reports by the 
regulator, leading to consents; and in agreeing emergency plans.  
Compliance costs for the industry would not be significantly increased compared to 
Option 2 so the estimates developed in that section can be equally used here. Therefore 
the cumulative running costs for option 3 including options 1, 1+ and 2 amount to 
€167.03-172.75m annually. 
5.5.3.  Social, economic and environmental impacts 
Further improvements in prevention of acci dents would bring significant benefits; 
however, the risk of bringing the focus away  from local conditions and needs does also 
mean a potential threat to effectiveness of the adopted measures. A balance would need 
to be found between EU and national respons ibilities that would ensure that applied 
policies take account of the specificities a nd needs of local communities and economic 
and environmental conditions. 
 
55 6. CONCLUSIONS OF IMPACT ASSESSMENT ANALYSES FOR POLICY OPTIONS  
Chapter 2 described the three-fold problem a nd its drivers. Chapter 3 described general 
and specific objectives for an EU initiative to remedy the problem and introduced 14 measures that would deliver the objectives by addressing the problem drivers. Three of 
the measures (product safety, financial capacity and civil liability) were confirmed as important but excluded from further assessm ent at this stage because further policy 
evaluation is necessary. Chapter 4 introdu ced four policy options beyond the do-nothing 
baseline option, each implementing a specific subset of the measures implemented 
through different means (guidelines, legisla tion, agency etc – described in detail in 
Annex XI). Chapter 5 summarised the cos t/benefit impacts of the different policy 
options, with detailed assessments provided in Annex IV.  
This chapter summarises the pros and cons of the policy options in terms of their 
effectiveness in meeting the objectives (Table 4) and their associated costs and benefits 
weighed against the baseline scenario (Table 5). 
Table 6 illustrates the increasing impact in terms of effectiveness of individual 
measures  identified in chapters 3 and 4 within the context of the policy options which 
they deliver. All options produce beneficial e ffects, and Option 1+ secures benefits in 
terms of liability and sharing compatible re sponse assets. However Options 2 and 3 stand 
out clearly as the most effective overall. 
Table 4  
Assessed effectiveness of policy options 
No. Measure Option 
0 Option 
1 Option 
1+ Option 
2 Option 
3 
4.1.1 Detailed verification of the technical capacity 
of potential operator      
4.1.2 Establishing regular inspections and a 
penalties regime      
4.1.3 Submission of formal safety assessments for 
acceptance by the regulator      
4.1.4 Extension of MHR into a comprehensive risk 
management model      
4.1.5 Extending EU practices to overseas 
operations      
4.1.6 Establishing a Competent Authority      
4.1.7 Establishing a platform for regulatory 
dialogue      
4.1.8 Comprehensive information sharing and 
transparency      
4.1.9 Preparedness for effective emergency 
response to major offshore accidents      
4.1.10 Ensuring cross-border availability and 
compatibility of intervention assets      
4.1.11 Clarifying the scope of environmental liability      
 
56 Table legend: 
Extent to which the aim of the 
measure is attained: None Little/ 
patchy Some Mostly 
Colour     
 
How to interpret Table 4 
Option 0  does not impact on the problem drivers consistently across MS. Improvements in cross border 
sharing of compatible assets, and in cross border emergency planning, are anticipated as a result of 
ongoing industry/MS initiatives and research. 
Option 1  secures some progress towards the goal of cons istent risk assessment by requiring industry and 
regulators to adopt a goal setting regime based around the health a nd safety documen t (92/91/EC) but 
going further. This induces partial improvement in the safety culture of industry. An informal grouping of 
EU offshore authorities is likely to form which, when combined with new information emerging via the 
formal risk assessments, makes available new information for sharing and learning. Upgraded inspection 
and penalties also supports this trend. 
Option 1+  achieves limited improvement in technical capability verification at the licensing stage. It 
clarifies some aspects of liability of operators (application of EU waste law), and formalises the goal of 
making emergency assets and plans suitable for shari ng across MS borders. EU begins to secure raised 
standards overseas and establishes the principle of EU based companies as ambassadors in this regard. 
Option 2  makes an impression on all of the problem drivers by incorporating environment risk assessment 
and emergency planning into major hazard reports, unde rpinned by inspection and sanctions by the newly 
joined-up regulator, and by Operators that are re quired to adopt policies and corporate arrangements 
leading to an effective major hazar ds prevention culture. Incorporation of environment risk assessments 
into the major hazards report enables standard opera ting procedures between MS  leading to significant 
improvement in cross border cooperation in emergenc ies. The enhanced sector culture renders an 
improvement in verifyi ng technical capacity duri ng licensing. The EU Offshore Authorities Group is 
established under EC auspices to the benefit of a ll MS, equally, and supported by obligatory standard 
reporting for the first time across any national borders. This enhances public scru tiny and transparency and 
enables EU regulatory programmes, in agreement with MS. The scope of water damage under the 
Environmental Liability Directive is extended to marine waters, aligning it with the Marine Directive.  
Option 3  institutionalises and cements the benefits produced  by option 2 and enhances EU effectiveness in 
influencing overseas standards and in the performan ce of EU based companies working elsewhere. It 
establishes a major intervention capability that is targeted on the unique characteristics of offshore oil and 
gas disasters. The introduction of an EU Agency ha s a destabilising effect on existing mature regimes, 
especially in the North Sea and Ital y leading to a reduction in the benef its accruing to option 2 in respect of 
MS regulatory efficacy and through that on th e safety culture of the industry.    
 
Table 5 displays the incremental costs and benefits  after implementation of each 
consecutive policy option from 0 through 3. They are compared against the estimated quantifiable cost of the baseline option i. e. €205-915m of levelized, annual cost. In 
practice all options beyond option 1 would be  implemented in combination with the 
previous measures and costs would be incremental – as we show in the table 
The conclusions from this part of the asse ssment indicate that that costs and benefits 
increase hand in hand with the complexity of the options. The expected quantified 
benefits start to make a noticeable difference at Option 1+ because all offshore regions are affected by this option but mainly becau se of the positive (though still partial) impact 
it has on liability and emergency response. The benefits accruing in option 1+ are reinforced in Option 2 through new law, and by integrating EU best practices into a 
 
57 single model. Option 3 does not improve on th e baseline reduction in a way that can be 
quantified, but the increased costs of this option produce the non quantifiable benefit of 
greater assurance that the measures will be  implemented as intended, and sustained over 
the long term.   
We can express the benefit of each option in  terms of its percentage reduction on the 
baseline cost, which is a surrogate for the baseline risk.56 :.  
• 0% for Option 0 
• 3% for Option 1  
• 12% for Option 1+   
• 50% for Options 2 and  3.  
                                                 
56 Formula: (average of benefit ra nge) / (average of baseline range) 
 
58 
Option Likely additional 
costs Expected impact on 
the est baseline 
damage cost  
( €205 – 915m/year) Non-quantifiable impacts 
0 No costs anticipated No reduction 
anticipated Benefits  (limited to North Sea area): 
- implementation of ongoing (par tial) improvement measures; 
- incremental improvement in ER; 
Costs : 
- increased risk due to 'frontier' and complex operations. 
1 Running costs: 
€35.50m/yr  Net reduction : 
€6.66 - €29.7m/year  (3% baseline reduction) Benefits : 
- reduced losses from future operations in the Mediterran ean/ Black Sea from levelling up standards & best practices. 
Costs : 
- falls to operators in the Mediterranean and Black Sea; 
- one-off cost for authorities changing from prescriptive to goal-setting regime. 
1+ Additional running 
costs:  €18.32m/yr  
 Cumulative running costs: €53.82m/yr Additional reduction: 
€17.85-79.3m/yr  Net redn inc option 1   €24.5 - €109.0m/yr  (12% baseline redn)  Benefits : 
- increased efforts from operators via legal clarity on the appli cation of EU waste law to oil spills; sharing of intervention assets and 
coordination of contingency plans - incremental improvement in technical capacity  of smaller operators applying for licenses 
- extending EU standards overseas. 
Costs : 
- lost earnings by smaller companies unable to meet technical  capacity requirements; loss of some offshore sector jobs 
- lost tax revenues to MS due to non-development of resources; 
- modest admin burdens for MS due to shar ing of ER assets, coordinating ER plans. 
2 Additional running 
costs: €79.61 -  €85.33m/yr Cum. running costs: €133.43-139.15/yr One-off costs:  €17.75 - €44.15m  Additional reduction: 
€78.2 – €345.7m/year  Net redn inc opt 1,1+ : €102.7-454.7m/yr  (50% baseline redn) Benefits : 
- increased quality of ER plans within MHR due  to approval of major hazards report (MHR); 
- more effective oversight by independent Competent Authorities; - greater awareness of hazard trends due to improved transparency and information sharing 
- polluter pays principle applies to water damage in marine waters. 
Costs:  
- start up costs for new legal provisions 
3 Additional running 
costs: €33.6 million Cum. running costs: €167.03-172.75/yr One-off costs:  €17.75-44.15m/yr + €10s millions capex Consolidation of 
benefits realised in option 2  (remains at 50% baseline redn) Benefits : 
- more effective emergency response/EU in tervention capacity   - more effective monitoring of compliance with EU law; 
- more consistency in assessment of license applications;            - independent oversight of national regulators and 3
rd party verifiers 
- improved application of best practices in overseas operations 
Costs : 
- loss of initial stability in MS;                                                      - start up costs in MS for aligning wit h new agency 
Table 5 – summary of the impacts estimates
 
59 7. PREFERRED POLICY OPTION AND LEGAL INSTRUMENT  
This chapter presents the preferred policy op tion and the preferred legal instrument that 
this impact assessment supports. The choices have been made bearing in mind the annual 
levelised cost of the baseline option at €205- 915m, high fragmentation of the sector in 
the EU and the risk analysis concluding that  in the remaining lifetime of its offshore 
sector, Europe will experience another offshore major disaster. 
7.1. Preferred option 
The preferred policy option is Option 2.  i.e. a comprehensive offshore reform raising, 
through new law, the North Sea standard up to  current best practises and providing for 
greater transparency of performance of industry and regulators. 
This option can in the most decisive ma nner reduce the baseline risk of offshore 
incidents in EU waters (50%) – expressed bot h in terms of likelihood and consequence of 
occurrence. Importantly, it introduces the ma jor hazard risk model enhanced with the 
environmental aspects – a priority element of  the EU initiative. Wh ile on par with Option 
3 on these two accounts, the analysis concludes that Option 2  is more  affordable 
administratively and a more proportionate means to address the baseline problems. In fact Option 3 is politically and financially considerably more challenging to implement 
than Option 2 – much due the fact that it introduces a new regulatory body.  
Option 1+ would be a modest choice ach ieving a modest impact (ca 12%) on the 
objectives while offering modest enforcemen t possibilities (largely soft law) and little 
resistance for change from conservative stak eholders such as notably the industry. The 
entry level Option 1 although administration a nd industry operating costs are small, the 
risk reduction is insufficient to justify action.   
7.2. Implementing measures for Option 2 
As explained briefly in Chapter 4 and in mo re detail in Annex XI, Option 2 comprises a 
comprehensive programme of reforms most of which is introduced through a legislative instrument and partly also through soft law. : 
The following measures are proposed to be incorporated in the new legal instrument:  
• detailed verification of operating technical capacity at the licensing stage, acting on 
the Directive 94/22/EC; 
• establishing regular inspections and penalties regimes, with details to be established 
in consulting with Member States experts] 
• requiring the preparation of a Major Hazar d Report along the lines required under the 
Directive 92/91/EC, but including envir onment risk assessment and internal 
emergency planning locally (installation sp ecific) and submission of the report for 
acceptance by the regulator; incorporating major hazards prevention policies at 
corporate board level; and establishing fo rmal priorities for producing new guidance 
and standards for industry. The Commission w ill seek advice of Member States and 
industry experts on the details.  
• Establishing a competent authority (CA) in  each jurisdiction for joined-up regulation 
of major hazards regarding environment a nd safety, along the Seveso model. Design 
standards for the CA would be determined by comitology (Member States) 
 
60 • Establishing a EU offshore authoritie s group (EUOAG). Details of remit and 
organisation could to be discussed with Me mber states experts considering models 
such as the SLIC Directive. 
• Establishing a standard reporting system from industry to Member States, and 
subjective provisions for sharing informa tion with the EU and the general public 
(transparency).  
• Preparedness for effective cross-boundary emergency response, linking external 
emergency response plans (i.e. national plans) to operators internal emergency plans in the MHR. Member states to contribute through comitology in developing standard operating procedures. 
• Ensuring cross border availability of compatible response assets; Member States and 
industry to advise on the details for inventory sharing and for progressively upgrading the degree of compatibility including in human expertise. 
• Amending the scope of the Environmental Li ability Directive in line with the Marine 
Strategy Framework Directive, in relation to water damage for marine waters (in 
addition to clarification of producer re sponsibility for waste generated by offshore 
exploration and production activities ba sed on the provisions of Directive 
2008/98/EC on waste, as part of a Frequen tly Asked Questions documents prepared 
for the Directive). 
 These measures comprise the skeleton of a proposed new legal instrument for offshore 
safety. It will be complemented by a soft law instrument such as guidelines to incentivise 
voluntary application of EU best practices by EU based major companies when operating 
overseas. 
 The following diagram (Diagram 3) is an illu stration of the practical logic behind the 
implementation of option 2.  
 Firstly (green boxes) the Member States a nd industry establish a framework for best 
practice in operations and regulation, e.g. Me mber State licensing authority appointing 
licensees with appropriate technical capability  and safety policy, Member State appoint 
competent authority(CA), Commission a ppoints EU offshore authorities group 
(EUOAG) from CA’s. CA’s and licensees/ope rators prepare policies and establish 
implementing arrangements. Industry/EUOAG implementation priorities for revised 
standards and guidance. 
 Secondly (orange boxes) operators and CA’s undertake activities in line with policies 
and arrangements, including major hazard re ports incorporating environment risk 
assessments and related installation based emergency response plans which are assessessed/consented by CA, and which form the basis of inspection sand enforcement. 
Member States national emergency respons e plans prepared in consideration of 
installation emergency response plans. 
 Finally (red boxes) CA’s Member States  and industry respond to events during 
operations – emergency response, investig ation and reporting. EUOAG share lessons and 
experience. CA’s advise Commission w ho publish periodic reports, supported by 
EUOAG.      
 
61 Diagram 3 
Logic model for the practical operation of option 2 
1. Establishing best practices for licensing by MS, safety/environment regulator and industry 
Member States consider safety policy and relevant 
well operations expertise at the time of awarding 
exploration and production licenses  Member States appoint Competent Authority (CA) and 
provide adequate resources to regulate offshore safety 
and environmental protection 
EC amends ELD to extend full liability for water damage to MSCS' beyond territorial seas line  
EU Offshore Authorities Group is establishe d (by EC) comprising EUMS and EEA with 
offshore activit y or pendin g activit y
Operators prepare corporat e safety policy for major 
hazard prevention and mitigation; also prepare 
detailed safety management systems SMS) and set 
up scheme for independent verification.  CA establishes policies and procedures for offshore 
regulation including assessment and acceptance of 
MHR; inspection; investiga tion; enforcement; research 
and continuous improvement 
Operators and EUOAG agree and implement prior ities for new/revised st andards and guidance 
for offshore ma jor hazards prevention
Operators and EUOAG agree and implement standa rd data reporting system for EU offshore 
oil and gas
Operators commit to upholding EU-standards to maximum allowable extent when operating 
outside EU 
2. Securing best practices during actual operations in licensed areas 
Well operators prepare well plan and submit 
notification document to CA >14 days before 
starting operations. To include internal emergency 
response plan Operator or rig owner prepares relevant type of major 
hazards report (MHR) and submits it to CA ahead of 
specified time depending on type of MHR. To include 
internal emergency response plan 
CA reviews well notification and takes any 
necessary measure to secure amendment or prohibit 
the planned well. Otherwise operator continues as 
planned  
CA makes assessment of MH R necessary for acceptance 
or declines to accept. Oper ator proceeds accordingly to 
operate, withdraw or resubmit MHR 
CA makes any necessary notification to countries that may be affected by the planned 
operation (well o peration , or production ) 
MS to prepare new or amend existing external emergency response plans 
Operators compile and submit inventories of 
emergency response equipment. Aim for 
interoperability and compatibility with other 
companies and the MS MS compiles inventories of interoperable and 
compatible equipment and expertise and shares with 
adjacent MS 
Operations commence. Oper ator complies with well 
plan/MHR, other applicable regulations, , his 
corporate policy and SMS, all applicable standards 
& guidance  
CA implements inspection plans, investigates incidents 
and takes necessary enforcement action for breaches of 
regulatory duty 
3. Emergency response, investigat ion, reporting and transparency 
Operator reports incidents and other events and 
information to CA in line with common reporting 
forma t  MS routinely publishes reports on performance of the 
oil and gas sector 
 EC publishes reports of EU safety and envi ronmental protection performance based on MS 
submitted re ports
In the event of a major in cident, operator activates 
internal emergency response plan, notifying MS as 
required and necessary  Where necessary, MS activates external 
emergency response plan, advising EC and 
neighbouring MS where necessary.  
 CA conducts major incident investig ation and reports findings to EC 
EUOAG promotes sharing of information and 
development of standards and guidance by the 
industry 
Supports MS in conducting x-boundary emergency 
exercises  EC publishes reports of x-EU performance of the 
offshore oil and gas sector. 
Supports MS in conducting x-boundary emergency 
exercises 
 
 
62 The following diagram (Diagram 4) illustrates the effect and interfaces of the proposed 
legal instrument with existing EU legislation relevant to oil and gas offshore activities. 
 The preferred policy option for the implem entation of the first two categories of 
measures can be pursued jointly through a p ackage of measures consisting of soft-law 
actions, international initiatives and a legisl ative proposal. The general structure of the 
intended legislative proposal is expressed in expressed in the flow diagram below. 
This legislation will be meant to comp lement the existing regulatory framework. 
Diagram 1 used in chapter 2 for the visualization of the currently applicable legislation can be accordingly amended to provide the following contextualized picture: 
Diagram 4  
Effect of option 2 on the existing legislative framework for offshore 
 
As regards the most appropriate form of th e legislative proposal, a Regulation seems to 
bring important benefits over a Directive. A regulation seems to be an appropriate legal 
form also taking into account its advantages with regards to its speed of application, 
efficient implementation at the EU-level and clarity and consistency through direct application
57. Given the urgency for an EU-ac tion to establish a common minimum 
                                                 
57 It is worth noting, that in comparison with other major legal acts relevant for high risk industries, one 
can detect certain preference for Dir ectives, such as IPPC Directive or SEVESO II Directive. However, in 
contrast to broad, horizontal sectors such as chemical industry, other high risk sectors with more narrow scope, such as civil aviation, often use Regulation for their legal framework. 
 
 
 
63 safety level in a precise activity field of offshore prospection, exploration and production 
of oil and gas, the principles laid down in a Regulation would be applicable to all actors 
concerned while delegated/implementing acts would be developed in areas where more 
detailed requirements need to be set. By  obliging directly also the industry, the 
Regulation would also increase clarity a nd provide for a level playing field. The 
arguments for direct application are even str onger as regards emergency plans, especially 
in connection with potential transboundary effects of offshore accidents. 
7.3. Preferred form of legal instrument 
A Regulation is considered as the most appr opriate legislative instrument to implement 
the preferred policy option. It has advantages ove r a Directive with regard to its speed of 
application, efficient implementation at the EU-level and clarity and consistency through 
direct application57. Given the need rapid EU-action to establish a common minimum 
safety level in a precise activity field of offshore prospection, exploration and production 
of oil and gas, the principles laid down in a Regulation would be applicable to all actors 
concerned while a delegated or implementing act could be developed to establish or 
maintain detailed requirements in certain ar eas (such as the standard reporting format.. 
By acting directly on the industry, the Regula tion would also increase clarity and provide 
for a level playing field. The arguments for direct application are even stronger as 
regards emergency plans, especially in conn ection with potential transboundary effects of 
offshore accidents. 
8. MONITORING AND EVALUATION  
The proposals aimed at improved transparency  and comparable reporting will allow the 
Commission to monitor and evaluate progre ss towards meeting the objectives and to 
compare this progress across Member States. In  this context, the trends of the following 
safety performance indicators will be particularly informative: 
• Number of major accidents (e.g. collisions, fires, well control losses) and near-misses 
and major causes; geographical location/ regional distribution of the accidents 
• Number and volume of accidental releases of hydrocarbons 
• Number of fatalities and injuries. 
Of course these indicators have to be compared to the scope of operations (e.g. total 
hours worked, oil and gas produced, number of installations, number of wells drilled) in order to gain comparable figures across years and across Member States. 
Data related to the compliance verificati on activities of public authorities are also 
important indicators. These may include information on: 
• The handling of authorization requests; 
• Inspections; 
• Major compliance breaches; 
• Sanctions. 
 
Improved transparency will serve not only th e Commission. It will also make it possible 
for the general public to find accessible, reliable and comparable information on the offshore activities and their regulation in vari ous EU regions. This should help the public 
acceptance of offshore oil and gas activities in  European waters by demonstrating that 
 
64 the risks they carry to life, environment and property are appropriately managed and 
controlled. 
In addition to reporting by Member States, re gular meetings with the competent national 
authorities will also allow the Commission to monitor the development of offshore safety in Europe by the exchange of experience and views on matters relevant for regulation of 
offshore operations.