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Disasters in the offshore : are regulators learning their lessons? La'Cassie, Marguerite Helen 1991

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DISASTERS IN THE OFFSHORE: ARE REGULATORS LEARNING THEIR LESSONS? by MARGUERITE HELEN LA'CASSIE LLB (Hons)., The University of Auckland, 1988 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE FACULTY OF GRADUATE STUDIES (School of Law) We accept this thesis as conforming THE UNIVERSITY OF BRITISH COLUMBIA September 1991 © Marguerite Helen La'Cassie, 1991 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. 1 further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. (Signature) Department of LAvvi The University of British Columbia Vancouver, Canada Date Septemfeft / • lie*- !<=(<=)} DE-6 (2/88) IX ABSTRACT Oil exploration and production in the offshore conjures up images of danger, of men wrestling with steel and testing their wits against the potentially hostile sea. The occurrence of major disasters in the offshore, such as the sinking of th«i Ocean Ranger offshore eastern Canada and the explosion and fire which destroyed the Piper Alpha platform in the North Sea merely reinforces these images. This thesis challenges these images in the context of worker safety and safety regulation in the offshore. It focusses specifically on offshore disasters and the lessons which regulators could and should learn from them in order to formulate offshore safety regulations. It suggests that safety regulation may have been compromised in the early stages of its implementation in order to encourage the oil industry to eiabark on an expensive exploitation of the offshore. The legacy of this development and the flaws which are inherent in the regulatory process itself -contribute further to imperfect safety systems. These imperfections are illustrated by a consideration of regalatory process and an examination of the reports three committees of enquiry into offshore safety. The first committee considered the offshore safety regime in the United Kingdom (the Burgoyne Report),while the remaining two reports considered offshore safety in the context of two major offshore disasters - the Ocean Ranger Disaster and the Piper Alpha disaster. Each of n nri rn j i i n i ,, U U U U '<• C C u C these reports identified fundamental flaws in their respective regimes. Having identified these flaws and imperfections, the New Zealand offshore safety regime is considered in order to determine to what extent these flaws are present. Finally, the major thrust of this thesis is that adequate offshore safety regimes require fundamental changes in attitudes at all levels of the industry and government. While there is no magical "simple solution" to the problems posed by offshore safety, there are valuable lessons for regulators to learn from offshore disasters which could significantly improve safety in the offshore. Until such time as regulators take note of these lessons, disasters will continue to occur. TABLE OF CONTENTS ABSTRACT INTRODUCTION I WORKER SAFETY, RESPONSIBILITY AND THE LAW (a) Who is responsible? (b) The Employee (c) The Employer (d) Society/ The Public (e) The Role ot the Law (f) Freedom of choice and the justification for government intervention II REGULATORY THEORY ANn PRACTICE (a) •(b) (c) Introduction Standard Setting and the Regulatory Process (i) Setting Initial Agenda amd Preliminary standard (ii) obtaining Information (iii) Formulating the standard (iv) Negotiation of the Final Standard Problems in the Standard Setting Process V III OPERATIONAL SAFETY AND SAFETY REGULATION IN THE OFFSHORE - THE CRITICISMS 54 (a) Introduction (1) The Burgoyne Report (a) Introduction (b) The Recommendations 54 56 56 57 (2) The "Ocean Ranger" and the Hickman Commission (a) Introduction (b) The Recommendations - Regulatory Control 71 71 72 (3) The "Piper Alpha" and the Cullen Report 85 (a) Introduction 8f (b) The Recommendations 86 (b) The Conclusions 94 IV OFFSHORE SAFETY REGULATION IN NEW ZEALAND 99 (a) Introduction (b) The Petroleum Act 1937 .(c) The Licensing Process (d) Operational Controls (e) Blowout Prevention (f) Fire Safety (g) Offshore Installations (h) Safety Equipment 99 100 102 105 111 113 115 120 n c l i S l U J 1 ... vi (i) Medical Personnel 123 (j) Training Offshore Personnel 124 (k) The Problems Identified 127 CONCLUSION 134 BIBLIOGRAPHY 138 1 INTRODUCTION "To each his own element. The mountains, which I love, can be as hostile as the sea. They, too, do not accommodate themselves to the human scale, cannot be fooled, do not relent. But like all climbers, I enjoy heights and get a kick out of the sense of exposure. I also understand, more or less, what is involved and feel I can cope, more or less, if things go wrong. The sea, quite simply, scares me; its great depths of black water induce in me a Jcind of vertigo. I also find it monotonous, lacking in the physical variety of the mountains, the constant ebb and flow on a climb - the build-up to the difficult pitches, the rela^tion on the belay. Even under sail, in good weather or >^ad, ninety-eight percent of the time at sea ™e to be rather boring. The other two percent were as . terrifying as being caught in an avalanche - a sense of terrible impotence, of being reduced to nothing at all by uncontrollable natural forces." A. Alvarez, "Offshore; A North Sea Journey", Sceptre, London (1987) p.13 The ocean can be an incredibly changeable environment. It can be calm and inviting at one instance and_intensely hostile the next. It is its sudden changeability that makes the ocean a challenging environment-*in which to undertake an industrial activity. On land, the oil and gas industries have a long history of development. The same cannot be said of the oil and gas industries in the offshore. The development of these' industries in the offshore is a relatively recent occurrence, generally characterized by speed due to the urgent need to develop alternative energy reserves. This need for energy often made development of these industries a policy priority €or governments, at the expense of other, equally important, considerations. In the midst of this development lies the often', neglected issue of worker safety. The safety of workers, in the rush to find and exploit offshore oil and gas reserves, was usually relegated to a low priority level, with top priority being given to energy self-sufficiency, productivity and profit. As will seen from the discussion in Part III, these objectives were often, and continue to be, at odds with the objective of safety in the workplace. The speed of development also meant that, in many cases, the safety provisions that were given any level of priority were piecemeal and generally inadequate. Inevitably, these inadequacies were not patently apparent to the public until a major offshore disaster highlighted one or other of them. Then, and only then, was public attention focused for a short time on the offshore safety regime and its perceived failure to prevent the disaster. Unfortunately, this focus of public attention also tended to focus blame for the disaster on the shortcomings of the system of regulation for offshore safety. This pattern has resulted in a tendency to believe that there is a simple solution to the problem of offshore safety and that all. that is required to prevent accidents in the offshore is a change in the existing regulation and/or further regulation of different aspects of the industry. This thesis does not purport to cover the entire topic of worker safety in the offshore but rather fcvcaiifiaas oa safety in the context of large-scale offshore disasters and the lessons to be learned from these disasters. The main contention of this thesis is that regulators could and should learn important lessons from disasters in the offshore about how regulations work in practice. They should also understand that there is no "simple solution" to the questions and problems posed by this kind of safety regulation in the offshore. The unique elements of the offshore oil and gas industries only accentuate the conflict between efficacy and certainty. Efficacy, in the context of offshore safety regulation, requires a high degree of flexibility to reflect the sapid changes in technology and • the hybrid nature of the industry. Flexibility can, however, usually only be achieved at the expense of certainty. As will be illustrated in later chapters, regulations, once in place, are usually highly resistant to change and therefore tend to be inflexible in relation to rapid technological change. n h ri n >7 3 1'n n 11 11 11 11... 1- .- .; v Obviously, th& converse of this problem is true. If cre's objective is to achieve certainty in a regime of safety regulation, ofee must be prepared to do so at the expense of Elexibility and efficacy, in terms of application and enforcement of standards. In addition to this potential difficulty, the system of formulation, implementation and enforcement of regulations is somewhat flawed. The cumulative effect of these problems is the conclusion that a system of regulation of safety in the offshore will also bs flawed and will r.oAtinue to produce the problems which are in evidence 'today. In support of this assertion, it is ..proposed to look generally, in Part I, at issues of responsibility for worker safety in the broader context and the division of this • • • responsibility between the employee, the employer and society as a whole. The role of the law in relation to the discharge of responsibilities is a_further important consideration under this heading and will be examined, particularly in the context of welfare economics. Part II of this thesis will look at regulatory theory and practice and the flaws in the standard setting process, the classical method of regulating the behavior of industries. It is hoped that this examination of the process will illustrate that regulation, although the most common form of government control, is essentially flawed in its application to worker safety and will never provide a simple solution to any of the problems arising from the issue of safety in the offshore. Having considered the questions of responsibility, for worker safety in general and the flaws inherent in the regulatory standard setting procass, Part III will focus specifically on the offshore and operational safety ,in the context of major offshore disasters. It'will consider the •criticisms of offshore safety regimes in Canada and the United Kingdom contained in the reports of three different coEHmit&©as and commissions of enquiry. In particular, the defects identified and the, recommendations made by these reports will be examinee!, as will the extent to which these defects are common to all three reports and to the problems identified in Chapters I and II. Part IV will focus on the offshore safety regulation currently in force in New Zealand and the extent to which it reflects that flaws and criticisms identified in the earlier chapters. In'conclusion, the flaws and criticisms identified in the previous chapters will be summarized to illustrate that the difficulties encountered in regulation of safety in the offshore are multi-dimensional in nature and lead one to the conclusion that regulators may not be learning the right lessons from offshore disasters but rather are still searching for the elusive "simple solution". PART I WORKER SAFETY, RESPONSIBILITY AND THE LAW (a) Who should be responsible? The industrial revolution and the introduction of large-scale mechanized factory-based industries brought not only profit and prosperity to the manufacturers but also brought the working class squalor, overcrowding, long hours and "the very real danger of being killed or maimed by a range of dangerous machinery and processes."-1 The gross abuses which permeated industrialized Britain eventually spawned early factory legislation, which was the direct ancestor of many of the industrial safety laws in existence today in some commonwealth countries. Despite living in a technological age, daily work continues to be potentially dangerous. For some, the mere fact of working in a particular occupation in order to support one's self and one's family is a regular brush with death or injury. Despite the regular presence of danger and risk, these same workers continue to carry out these dangerous occupations year after year. Unfortunately, 1 Neil Gunningham, Safeguarding the Worker; Job Hazards and the Role of the Law. (Sydney: The Law Book Company, 1984) p.37 2 Ibid, p.36 workers continue to be injured or killed in these occupations year after year. Despite living in a socially enlightened age, these persons may have little or no choice as to whether or not such risks are acceptable to them, and for various social and economic reasons, must accept what the majority of people would consider to be unacceptable. Risk is a fact of life in modern society. An average person will consider and accept numerous risks of varying degrees every day. It would be socially undesirable and virtually impossible to eliminate all risk to society. The cost of such an elimination would be immense and it is likely that the social and economic costs of such actions would greatly outweigh the gains.3 Because total elimination of risk is virtually impossible and socially desirable, there comes a point in time at which we must accept some level of risk. In order to decide what level of risk should be accepted, we must carry out the exercise of balancing, risk against utility and "accept risk as the price of freedom, for the pleasure that it brings or even for the greater risks which are thereby avoided."4 3 Ibid, p.276 4 Charles Drake, Law of Health and Safety at Works The New Approach. (London: Sweet & Maxwell, 1983) p 20 The acceptance of risk by society in the context of the workplace gives rise to a number of questions. It poses a delicate moral dilemma with regard to those upon whom tb.a risks are imposed, since it favours the utilitarian approach to a problem arising in an essentially individualistic society. An extensive examination of these moral problems is outside the scope of this thesis. There are, however, some broader issues relating to responsibility for the risk in the workplace, which will he examined. In particular, one must consider who should be responsible for the safety of an employee in the workplace? There are a number o£ different responses to this question. In the Unitad Kingdom, the Report of the Committee on Wealth and Safety at Work considered that:-"The primary responsibility for doing something about the present levels of occupational accidents and disease lies with those who create the risks and those who work with them."5 This statement could be interpreted in a number of different ways. It could be that the Committee was of the opinion that responsibility for occupational safety should be shared between the employer, as the party who creates the risk, and the employee, as the party who works with the risk. It is not clear from this quote or indeed from the 5 hereafter referred to as "the Robens Committee" - Report of the sfeimmittee 1970-72, Cmnd. 5034, para.28 , report itself whether the Committee considered that the division of responsibility should be an equal one or whether one or other of these parties should be primarily responsible.. An alternative interpretation is that employers are dirirectly responsible for most -accidents and are in the best position to take steps to prevent then.6 This approach relies on the idea that those engaged in any particular activity should be responsible for its safe undertaking. As the party in control, the employer is the entity "engaged in the activity" and is thus fundamentally responsible for its safe undertaking. Yet another, though less palatable, interpretation is that employees, as the weakest link in the safety chain,7 not ohlv work with the risks but also create them. This interpretation would suggest that the primary responsibility for preventing or reducing workplace accidents lies with the victims themselves, the employees. _ The size and type of industrial operations carried out in our modern industrialized society has also added a public dimension to the issue of worker safety. Industrial accidents can often have a major impact on the; public, at 6 Gunningham, op. cit. 6 7 Ibid, p.5 - *.'«•*'—-'*-'— - "- ' - J - • 1 v riViit,*'"' "•.'li'-v-'. ?"* i 'it* * Vr » «W.-M»-| .r'.iV^iiniji'vv'^,-: Ji I 11 large. The occurrence of such accidents and the potential for disaster has given rise to greater public awareness of worker safety. It can no longer be said that what goes on in the workplace only concerns those who work there. In order to determine which of these three participants (namely employers, employees or society at large) is primarily responsible for worker safety, it is necessary to examine in detail the arguments behind the approaches noted above and to consider why and how the law is given such a central role in safeguarding the workplace.8 (b) The Employee It has been observed that most occupational accidents are caused by human failure rather than hardware failure and that people are often the weakest link in the safety chain.5 Indeed, one of the major defects identified by the Robens Committee was employee apathy at work. The Committee concluded that most job injuries resulted from worker < carelessness, and that a greater awareness of the importance of health and safety at work was needed in order to remedy the problem. 8 ibid 9 Gunninaham. op. clt. p. 5 These observations would tend to suggest that, in some respects, employees are the authors of their own misfortune and that the primary responsibility for increasing worker safety and reducing accidents is theirs and theirs alone. One could argue that the conclusion of the Robens Committee that responsibility lies with "those who create the risks and those who work with them"'10 is directed primarily towards the employee. As noted above, the risks within the workplace may be created by the worker apathy and carelessness described by the Committee, in which case the primary responsibility for reducing accidents and improving worker safety would rest mainly on the worker. But how accurate is this conclusion? Although attractive from an employer's perspective, it ignores the reality of the employer-employee relationship and fails to consider the social factors which may give rise to employee attitudes which diminish the importance of safety in the workplace. It also fails to address the extent to which individual employers or, indeed, entire industries are responsible for generating attitudes of apathy and carelessness. In many job markets, economic circumstances are such that workers are at a considerable disadvantage in 10 ibid at p.35 f-M n n n,/"/•••; , , U LI LI LI, Q U D 0 I L 13 negotiations with employers.13 Depending on the availability of alternative employment opportunities, workers may not be freely mobile to choose between different jobs and different risks.12 Circumstances may be such that workers are forced to accept ria-ts that would, in an ideal world, be unacceptable. This inability to choose freely which risks to accept may cause them to place a lower value on their lives than they might otherwise have chosen. This lack of mobility and choice in the area of risk can often lead to the apathy amongst workers noted by the Robens Committee. The fact of being forced, by circumstances beyond their control, to lower the value of their own lives can result in a fatalistic acceptance of the risks and a subconscious diminishment of the seriousness of those risks. This is inevitable when a worker must face and accept such risks on a daily basis and becomes too familiar with them. In his observations of life on an offshore platform, A.Alvarez retold some of the North Sea folk tales related to him and commented: "Like [the] story about the safety boat that could not turn, it was typical of North Sea folk tal&s, all of which serve one purpose:_to saniti[z]e disaster by turning it into a joke."1,3 It is therefore hardly surprising that in those kinds of circumstances, workers would, even subconsciously, diminish 11 Gunningham, op. cit. p.280 12 Ibid 13 A. Alvarez, Offshore; A Worth Sea Journey. (Great Britain: Sceptre, 1987) p.89 •••,:.. the risks involved and perhaps lower the value of their own lives. The recommendations of the Robens Committee, that employees be made more "safety conscious", is of limited value because of the relationship between employers and employees.14 Employees have limited control over their work environment and, without the support of strong unions, are often not in a position to reorganize work systems in accordance with safety principles.-15 Indeed, the inequality inherent in the relationship between employers and employees may mean that employees are unaware of the potential hazards of their occupation, simply because they do not have all of the information which is available to employers.16 Since the element of control by the employer is central to the definition of a contract of service, it is unlikely that this inequality will change in the near future without substantial government intervention anrt redefinition of "employment". In the absence of soma degree of compulsion, it is-unlikely that employers would willingly supply information that could in any way undermine their position in negotiations with workers. 14 Gunningham, op. clt. p.269 15 Ibid - As Gunningham notes, "control" iB the key determinant of whether or not a particular individual is, in law, an "employee" - see p.269, n.25 16 Ibid 15 Socialization also influences decisions concerning job risks.^7 Employees may be socialized to accept the danger which are inherent in some occupations. They may convince themselves that they must perform those jobs in order to make a living.18 This process of socialization takes place because society accepts certain risks for the benefits which flow from them and adopts the somewhat dubious utilitarian approach that such risks should be borne to a greater extent by a small group for the benefit and greater good of society as a whole. This approach has been found to be unsound and somewhat amoral. Although it is largely obsolete in its classical application, it tends to surface in marginal areas, such as risks in relation to technological progress. The difficulty with this type of approach is that it often leads to socialized acceptance of risk by workers and the belief that "someone has got to do the dirty work" but that "these things [ie. accidents] always happen to the other guy."29 Socialization may also involve-romanticism of the occupation. This is particularly evident in the offshore oil industry, which portrays itself as an industry in which 17 Ibid at p.6 18 Ibid 19 Gunningham, op. cit. p 282 n n n n u u u u D 3 D I jT 0 men wrestle with steel. Alvarez describes the activities on the drill-floor in the following emotive terms: "[P]ungent, greasy drilling mud that coats the overalls and gloves and boots of the roughnecks, making them look like Roman wrestlers as they grapple with the base of the dangling stand of pipe and balance it carefully across the floor. Although the steel of the pipe is half an inch thick, it whips and flexes as though alive."20 To the extent that socialized acceptance of risk induces worker apathy and carelessness, it is a matter of particular concern to employers and society as a whole, since they may be primarily responsible for its initial development and continued existence. (c) The Employer Perhaps a more socially palatable approach is that employers are primarily responsible for worker safety. It is arguable that most work accidents are caused, not directly by worker carelessness but rather by unsafe working systems21 Accidents could be prevented by the utilization 20 Alvarez, op. nit, p.61 21 Gunningham, op. cit. p.6 and p.269,n.26 - Gunningham refers to an illustration by Kinnersly (1973) in which "a man loses one eye changing the oil qn a car when the spanner he is using slips. Is this necessarily the result of carelessness or stupidity or rather because the man was given inadequate room in which to work safely, inadequate lighting to see what he was doing, inadequate tools (which might therefore slip) and inadequate training (always to exert force away from the body)?" . of accident prevention techriques to make work systems safe.22 In their position of control, employers are also in the best position to design and organize workplaces and machinery to make them safe for workers. They are most able to design work systems which reduce employee boredom and thus, apathy and carelessness and to bear the economic costs of any preventative measures undertaken. Employers are in the best position to provide information on the hazards involved in the occupation and the education and training necessary to foster safe attitudes and minimize the risks involved in the execution of an employee's duties. Thus, not only could it be said that employers are directly responsible for most accidents but they are also in the best position to prevent them from occurring.23 They also stand to benefit substantially from an accident-free workplace. Since accidents generally have social.and economic cost consequences, it is arguable that an accident-free workplace which omits these costs is of considerable economic benefit to employers. It is therefore in their own interests to take steps to prevent accidents. : 22 Ibid - Accident prevention techniques include not only physical changes in the working environment but also strategies such as education, training ar>d provision of information. See also Gunningham, op. cit. p.268 23 Gunningham, op. clt. p.6 Unfortunately, the argument that employers have a vested interest in taking steps to prevent accidents in the workplace does not take account of the profit factor. Most employers are in business, their purpose being to maximize earnings and to minimize costs. The maintenance and/or increase of profits is the primary motive of most businesses. The concept of profit is rarely in concert with the concept of worker safety. Indeed, the profit motive often requires businesses to compare the costs of preventing accidents and the costs of letting them occur. If it is more cost-effective to let the accirtait occur than to prevent it, the profit-driven company will let the accident occur. For example, as a prelude to the famous Ford Pinto case, reporter Mark Dowie wrote and award-winning article entitled "Pinto Madness" in which he "detailed Ford's allegedly cold and calculating decision to market a "fire trap" ...in the name of profits".24 He set out calculations . of the cost/benefit exercise allegedly undertaken by Ford in its decision to market the Pinto. The exact calculations are as. follows: 24 Francis T. Cullen, WilliiMi J. Maakestad and Gray Cavender. Corporate Crime under Attack: The Ford pinto Case and Beyond. (Cincinnati:, Anderson Publishing Company, ,'4987) p. 160 19 $ 1 1 V . B U R N D E A T H Benefits and Costs relating to Fuel Leakage Associated with the Static Rollover Test Portion of FMVSS 208 BENEFITS Savings: 180 Burn deaths, 180 serious burn injuries,2100 burned vehicles Unit Cost: $200,000 per death, $67,000 per injury, $700 per vehicle Total Benefits: 180 x ($200,000) + 180 x ($67,000) + 2100 x ($700) = $49.5 million COSTS Sales: 11 million cars, 1,5 million light trucks Unit Cost: $11 per car, $11 per truck Total Cost: 11,000,000 X ($11) + 1,500,000 x ($11) = $137 million25 On the basis of this calculation, Ford concluded that "it was impractical initially to fix or later recall the Pinto" and chose instead to resist safety regulations which threatened profits.27 Although the Ford Pinto case involved consumer protection rather than employee safety, the situation is analogous and the calculations made by Ford are indicative of the kind of calculations made by employers in relation to worker safety. It is largely due to this cost-effectiveness approach that employer self-regulation in relation to worker safety has thus far failed to remedy the problem of reducing workplace accidents and increasing worker safety. The 25 Ibid at p.162 26 Cullen, op. cit. p.163 27 Ibid ••••• n n n n 3 D I> c •iaMISM u U U U ' • L L profit motive will virtually always override the concept of safety. The failure of self-regulation has facilitated the need for government intervention to ensure adequate standards of workplace safety and to ensure that employers recognize their responsibilities to meet these standards.28 Government intervention has not, however, occurred without affecting the perceptions of responsibility for safety. Regulation of safety by government agencies has encouraged people to regard safety as a matter of government responsibility rather than as a matter for which individuals, primarily employer, are responsible.25 This perception of government responsibility has resulted in a greater reliance on the mechanism of government intervention, such as regulation, to the extent that regulations are regarded as maximum standards to be achieved rather than minimum standards to be surpassed. It will be argued in subsequent chapters that this heavy reliance on government regulation is a major reason for the failure to find a "simple solution" to the problems posed by offshore safety. 28 Gunningham, op. cit. p.7 29 Ibid, p.266 21 Despite this perception of government responsibility for worker safety, it will be argued that the primary responsibility for minimizing work hazards rests on employers, since "[o]nly they have control over the work environment and power to make it safe".'30 (d) Society/The Public As noted above, the size and type of industrial operations which are carried out in our technological society have added a public dimension to the issue of worker safety. On one level, largo-scale industrial accidents can often impact directly on the public at large.31 At the very least, industrial disasters focus public awareness on the issue of occupational safety and the risk to society posed by some industrial activities.32 The public dimension of occupational safety also occurs at another level. All human activity involves risks to the well-being of persons.33' Technology has brought with it new, specialized risks not previously considered and at some point, society must make a choice as to the risks which are 30 Gunningham, o p . elt. p.269 31 e.g. the Union Carbide disaster in Bhopal, India 32 e.g. environmental damage 33 J.M. Ham, Risks and Res^onsibilitles re; technology at Work, Paper presented at the Hazards at Work: Law and the Workplace, a national seminar held in Toronto, November 16 - 17, 1977 ! acceptable for the sake of technological advance and those which are not. An acceptable level of risk, once fixed, will not remain constant. Acceptance of risk represents a social judgment34 and thus, the acceptable level of risk is likely to vary, depending upon the state of the economy and the accepted morality of the day. The past four decades have seen a growing intolerance of risks, particularly those associated with industrial processes and workplace safety. Hazards which were traditionally viewed as being "part of the job" are no longer considered acceptable to society.35 Out of the cultural changes which have brought about this intolerance have sprung "a growing counterculture, environmental and consume'7-protection organizations, and public interest advocf ;y groups"36 which have brought the undesirable results of technological advances into the spotlight and ensure.d that the public are more aware of them. These public interest groups have, in the past, argued that business and industry are technically and economically capable of preventing these undesirable side-effects and are 34 Ibid ' ; 35 E. Bardach and R. Kagan, Going by the Book; The Problem of ; Regulatory Unreasonableness. IPhiladelphia: Temple University Press, 1982) p. 13 36 Ibid 23 not doing so because of their desire to maintain and/or increase profits. It was in this climate that the concept of violation of moral rights began to achieve popular acceptance. Social harms began to be seen as a violation of moral rights and eventually, protectable legal rights.37 A safe workplace suddenly became a right to be claimed by workers and something to be protected by tough regulations and enforcement.38 It has been suggested that this emphasis on rights was at least partially responsible for the shift in responsibility away from the individual and on to society, particularly business.35 The question of what constituted responsible conduct was considered to be far too important to be left to business, since the existence of the problem was evidence that it had not yet voluntarily accepted responsibility for the problems. Therefore the definition of standards of responsibility and enforcement of these standards became and remains a government function.40 Despite the growing risk intolerance, society recognizes that some degree of risk must be accepted as the price for technological progress. The reason why society accepts risks or imposes risks on individuals or groups 37 Ibid 38 Ibid 39 Ibid at p.14 40 Bardach, op. cit. p.14 within society is that activities in question are perceived as being of some benefit to society as a whole.41 The problem is deciding what level of risks are acceptable to those who impose the risks and those who experience them.42 If we rationalize the risks associated with the use of new technologies by reference to the perceived benefit to society as a whole and the addition to the common good, it is impossible and, indeed, undesirable for society to escape responsibility. By choosing to pursue risky industrial activities and new technology for the common good, society must bear much of the responsibility for the risks it imposes on particular individuals and groups. This responsibility becomes the price it pays for progress. (e) The Role of the Law It is difficult to say which of the three participants is or should be primarily responsible for worker safety. It is clear, however, that all three have an interest in worker safety and thus all three share the responsibility for the risks involved. Problems arise when one tries to apportion responsibility between them and ensure that each participant meets its responsibility. 41 Drake, op. cit. p.20 42 Ibid at p.21 25 In the absence of a more effective mechanism, it is the law that plays a key role in preventing injury and ensuring that the participants meet their responsibilities. In its classical role as the preventer of evil43 the law plays a central role in safeguarding those persons exposed to hazards in the workplace. But is government intervention necessary? On the face of it, all the participants have an interest in workplace safety. Employees have an obvious interest, since their own personal safety is at stake. They have a clear motivation to do all that is required to improve safety in the workplace and to reduce accidents. Society has a clear interest in the protection of workers, both for social and economic reasons. It will obviously further the "common good" if the workplace is at least perceived to be safe for its workers and the risks to a significant portion of society, that is employees, are reduced. Economically, it is arguable that an injury-free workplace is a substantial benefit to society since it gets the benefits of uninterrupted industrial activity and the economic and social costs of injuries are not passed on to society as a whole. 43 Drake, op. clt. p.10 26 Employers too may argue that they have a vested interest in improving workplace safety since accidents are potentially expensive events and can seriously impact on profit margins. They would no doubt suggest that it is in their own best interests to prevent accidents and improve workplace safety. Despite the apparent depth of interest in safety by the participants government intervention necessary. Past experience has shown that the particjipants, particularly employers, simply cannot be relied upon to discharge their responsibility and to voluntarily take such measures as are necessary to make the working environment safer. As noted in the preceding section, the very existence of problems in relation to the workplace is evidence of the reluctance of employers and industries voluntarily to accept responsibility for safety and to take, the necessary steps to prevent and/or reduce workplace accidents. Employees have the most obvious motivation but are, arguably, in the weakest position. They often do not have sufficient bargaining strength or information within the prevailing market to decide what level of wage premium to demand in return for risk acceptance and to make rational decisions about the level of risk to accept. They may also be socially conditioned to accept what would otherwise be unacceptable risk levels. These factors can contribute to n n n n >< o 1 i i u b u U\t< 0 DOC 27 apathy and carelessness in the workplace which are clearly identified as some of the major causes of most workplace accidents. Employees are simply not in a position to make the necessary changes to their working environment. The issue of workplace safety is by no means a simple one for employers. They are under pressure from their shareholders to maximize profits, even at the expense of other equally important considerations. This can often lead to the taking of unacceptable risks and the imposition of unacceptable risks on their workers. This is, however, not a recent phenomenon. Even the most cursory examination of the history of industrialization would reveal the proclivity of industrial employers "to sacrifice the health and safety of their workers in the pursuit of profit and sometimes, economic survival".44 If the industry is competitive, management must prioritize profit and productivity, often at the expense of safety considerations. In some circumstances, it may be less expensive for employers to allow certain industrial accidents, rather than spending money on their prevention.45 Profit and safety are simply not harmonious concepts. . The weak position of employees and the influence of the profit "motive on employers suggest that it is not sufficient 44 Gunningham, op. cit. p.270 45 see discussion of Ford Pinto cost/benefit analysis at p.17 above "•I i AV n n n n D n ^ 1 1 V* ^ S^/'Mi-SiMS;!®; < t r * , u u u u • C L J J to rely on voluntary standards alone to ensure adequate standards of workplace safety.46 Some form of external pressure is required in order to force the participants, particularly employers, to first recognize and then discharge their respective responsibilities.47 While the law is the most evident and, perhaps, the most effective source of external pressure, there are, in fact, a number of different sources of external pressure. For example, trade unions are a potential source of external pressure in that they often have sufficient industrial strength to negotiate safeguards for their members to prevent them from being killed or injured or to negotiate a sufficient wage premium for accepting certain levels of , 48 risk. ° Despite this potential, unions have traditionally refused to use their strength to negotiate improved safety standards, choosing instead to take the position that employers are fundamentally responsible for providing a safe working environment and the law should ensure that they do AQ . • , . so. ^ This lack of willingness to. use their strength to negotiate safety standards obviously limits the effectiveness of trade unions as a source of external pressure on employers in this regard. 46 Gunningham, op. cit. p 7 47 M b i d 48 Gunningham. op. cit. p.7 49 Ibid Economic incentives are another potential source of external pressure on employers. Whether this source of pressure can be used effectively as a mechanism to prevent accidents is open to some question, largely because the effectiveness of economic incentives relies heavily on the assumption that a business will act in an economically rational manner.50 Although this is a valid assumption in the real world, this will not always be the case in our "less-than-perfect" system. The effectiveness of this mechanism is therefore severely limited.. These limitations thus make the law one of the most effective mechanisms for compelling participants to take some form of action to meet their responsibilities. Some 5 1 would argue that workplace safety is a private matter between the employer and the employee, into which the government should not intervene. The maintenance of privacy in negotiations between employers and employee would ensure freedom of choice and enable the parties to mutually agree on an acceptable level of risk and the efficient allocation of resources. This argument is rejected by the author on the basis that employees are in too weak a position to make the necessary changes to their work environment and the "private matter" argument essentially ignores society's duty 50 Ibid at pp.298-307 51 primarily employers 30 to protect its weaker members from harm. The public element of worker safety would also tend to indicate that this is not a valid argument. It does, however, pose an interesting question as to the justification for state intervention and the economic reasons for opposing intervention. ( f) Freedom of choice and the justification for government intervention Economists have long criticized government intervention for interfering with freedom of choice and causing an inefficient allocation of resources.-52 They argue that the agencies set up to administer the policies are often created to simply serve the interests of the industries they control or that they are subsequently "captured" by those same industries, to the detriment of the public interest.53 Economic theory views economic efficiency as its prime objective and therefore economists argue that the free market solution is the only setting in which a society can achieve wealth maximization and optimum resource allocation.54 52 Gunningham, op. cit. p.275 53 Ibid 54 Ibid 31 Welfare economists apply this same approach to worker safety. They postulate that since it would be socially undesirable to eliminate all accidents due to the substantial social and economic costs, safety policies should be formulated with a view to achieving economic efficiency.55 The policies should attempt to prevent accidents up to the point where it becomes more expensive to prevent them than to allow them to occur.56 The logical conclusion of this approach is that when an accident becomes more expensive to prevent than to occur, it should be allowed to occur.57 This approach also assumes that the accident and its consequences can be expressed in monetary terms and valued accordingly.58 How, then, should resources be allocated so as to achieve economic efficiency? From the economists point of view, an important starting point in any consideration of the efficient allocation of resources is the Coase theorem.55 The basic premise of the Coase theorem is that in the absence of operating or transaction costs, an efficient allocation of resources will occur irrespective of legal rules.60 A zero transaction cost setting is considered to be the perfect market setting since it assumes 55 Ibid at p.276 56 Ibid 57 Ibid at p.277 58 Ibid at p.277 at n.7 59 R.H. Coase, "The Problem of Social Cost" (1960) 3 Journal of Law and Economics 1. as referred to in Gunningham. op. clt. p.278 60 Coase (1960), ibid rr n o f l i J D D I . •••• 32 • that all parties have perfect knowledge and that there are no negotiation costs.~ It has been argued by some economists that the contractual relationship between an employee and an employer approximates the presumption of zero transaction costs and therefore the Coase theorem can be applied to occupational safety in order to determine how to achieve economic efficiency." According to the theorem, it is this contractual relationship which enables the parties to negotiate without impediment and allows for the efficient allocation of resources, irrespective of whether the employers are made liable at law for occupational safety or not.63 Not surprisingly, economists rely heavily on the Coase theorem in support of their argument that there is no need for government intervention, either to impose liability for accident costs or to prevent accidents.64 There are, however, a number of serious flaws in any argument against government intervention based on the Coase theorem.65 First, the free market argument depends on the 61 Ibid • 62 R. Posner, "Review: The Cost of AccidentB" (1970) 37 U. Chicago Law Review 636, as referred to in Gunningham. op. cit. p.278 63 Posner (1970), ibid 64 Cunningham, op. cit. p.279 65 Ibid at p.280 - Gunningham provides an excellent summary of the deficiencies of this argument . n n n n ' j n o * > , ; .. , U U,U U Q C. d p ,. -transaction costs being zero or at least negligible. For the transaction costs t o be zero in the relationship between employer and the •employee, the individuals involved in the bargaining must have adequate information, be mobile, be in the best position to determine what is best for them and to act accordingly.66 T h i s is clearly not the case in the real world. It is extremely rare that an employer will have adequate information about the hazards likely to be incurred in any job. Workers w i l l often experience problems obtaining this information from the employer, either because the employer does not h a v e the information or because it is unwilling to relinquish, its strong bargaining position. An employee cannot, therefore, make an informed decision about whether he/she is preparer] to accept the risks involved. Without adequate information, any negotiations between employers and employees in respect of wage premiums for risk •••• .' ' ' 1 , t r y • acceptance will be conducted on an unequal footing.D/ Workers are often not mobile and in a position to choose freely between different occupations. This inability to choose freely may cause employees to accept work hazards which would, in more perfect circumstances; ic unreasonable.68 This economic and social compulsion to accept unreasonable worOt hazards may also cause workers to adopt a fatalistic approach to their work and to place a 66 Ibid at pp. 280-281 67 Gunningham. op. cit. p . 2 8 1 68 Ibid at p.282 lower value on their lives.69 This can be reinforced by regular exposure to the work hazards and familiarity with the risks involved.70 It is also dangerous to assume that employees can make economically rational decisions about the level of risk to accept in the workplace.71 In reaching their decisions about the level of job-related risk to accept, workers are generally influenced by a number of social and cultural forces and these forces can have a serious effect on the economic rationality of their decisions. In the absence of a free market situation or its approximation, the Coase theorem has no application to occupational safety. The employer-employee relationship is clearly not approximated with zero transaction costs and therefore any application of the theorem to occupational safety has serious limitations. From an intervention perspective, this economic theory is not a convincing argument against government intervention. That is not to say that economic theory has no : application to occupational safety and government intervention. It is arguable that, on the basis of economic theory, the costs of work-related accidents should rest with 69 Gunningham, op. cit. p.282 70 Ibid 71 Ibid 35 the employer and where the unregulated market does not impose these costs on the employer, the government should intervene to do so.72 The "externalities" approach assumes "that the externality emittor should pay all the external costs of the activity".73 This approach postulates that if some of the indirect costs of work-related accidents are borne by external parties, such as the injured workers and their families, who have little or no control over safety levels, then the employer will have an excess number of work-related accidents.74 Failure of the employer to bear all the costs of production, including the direct and indirect costs of accidents, will mean that the price of the goods produced will not reflect the true social costs of production 75 In an imperfect market situation, few employers bear the indirect costs of work-related accidents such as pain, suffering, disablement etc. 7 6 Therefore, employers are not fully-accountable for all of the consequences of their failure to provided a safe working environment.77 Because these costs are not passed on to employers, they do not appear in the balance sheet and there is little economic 72 Cunningham, op. cit. p.283 73 Ibid 74 Ibid at p.283 at n.39 75 Gunningham, op. cit. p.283 76 Ibid at p.284 77 Ibid n n n n ) i i n </ U U u U " c C, I I incentive for them to improve safety levels and reduce accidents.78 Assuming that social benefits will outweigh social costs, it is appropriate for the government to intervene in this situation to correct the market imperfections and ensure that employers are made liable for all of the costs of work-related accidents or to "internalize costs which at present are externalized"79 The flow-on effect of this intervention would be to provide economic incentives for employers to improve workplace safety.. While this "externalities approach clearly justifies government intervention to correct the market imperfections, it does not deal with the more practical issue of government intervention to regulate safety standards. Many economists still argue strenuously against this degree of intervention, on the grounds that it interferes with basic freedoms. It will be assumed, for the purposes of this thesis, that government intervention by way of the creation of regulatory safety standards is not only justified on moral, equitable and policy grounds, but is also vitally important for the protection of a large section of society, namely employees. 78 Gunningham. op. cit. p.284 79 Ibid PART II REGULATORY THEORY AND PRACTICE (a) Introduction In this day and age, the word regulation conjures up a number of different images. On one hand, it has been described as "the key to civilized society".80 This description may be somewhat exaggerated but it conveys a sense of the importance of regulation in modern society and the extent to which it permeates all aspects of day-to-day life in the twentieth century. It is, perhaps because of its pervasive nature, that regulation has also acquired a less favorable image and has become a popular scapegoat in many industries. This is particularly so where regulation compels industries to spend large sums of money on objectives not related to profits, such as safety in the workplace. - • While traditional economic regulation can trace,its origins back to the turn of the century, when governments introduced controls at the request of the industry, social or public interest regulation is a much more recent • 80 Susan J. Tolchln and Martin Tolchin, Dismantling America - The Rush to Deregulate. (Boston: Houghton, Mifflin Company, 1983) p 1 '-. • - ".ii- •/, '-' • ' '•• '..-VJ5"~_'L -V.-*- ."Vl-.v: "jjj'i 3. - U . . . f j i l i rti Ti'.im-ifv'h.., — 38 phenomenon. Social regulation is largely concerned with implementing social policy. This type of regulation usually affects the conditions under which goods and services are produced. It can have substantial economic effects and ultimately extends to many more industries and consumers than traditional economic regulation.81 Not surprisingly, social regulation is becoming a matter of much greater concern to industries, since it often directly involves the government i n the affairs of the corporations which it affects. It is, however, arguable that in our highly technological society, the need for social regulation has n e v e r b e e n g r e a t e r . 8 2 Because of our social structure, it would seem that only the government has the power to create and enforce social regulations which protect citizens from the potentially devastating effects of technology.83 It is also generally accepted that the government is_in a position to look at the relevant social issues beyond the "balance sheet-" perspective. The validity of this generalization , will be explored in greater detail later in this chapter. Assuming, for the present, that this generalization is correct, the government would appear to be in the best position to effectively implement social policy, control the 81 Florence Heffron and Neil McFeely, The Administrative Regulatory ProcesB. (New York: Longman, 19R3) p 7 82 Tolchin, op. cit. p 5 83 Ibid n n nn n 'i 'in u' u u u u , C c\ I I 39 behavior of industries and their technology, and protect the public at large. From the discussion in the previous chapter, it would also appear that the most effective tool that the government has to carry out these functions is regulation. How, then, does the regulatory process work? (b) Standard Setting and the Regulatory Process Standard setting is the classical method for regulating industries' behavior. In an ideal world, the standard setting process would proceed as follows:-The Regulator 1. Defines the adverse effect which it seeks to control 2. Uses a preliminary cost/benefit analysis to select the specific part of the general problem that should be attacked initially in order to obtain the greatest improvement at the lowest cost 3. Obtains information and designs a standard that would reduce the adverse effects to reasonable level in the least expensive way available 4; Enforces the standard and develops a means to ensure compliance with the standard n n n <Jy n 11 r u u u^ u i 40 5. Monitors enforcement, evaluates the effectiveness of the standard and revises the standard in light of the findings84 Unfortunately, this description does not reflect the process which actually occurs in our less-than-ideal world. The regulatory standard setting process is, in practice, heavily reliant on precedent in setting its standards.85 It is characterized by continued negotiations and long delays Once in place, the standards are highly resistant to change.86 The precise features of the standard setting process will vary from jurisdiction to jurisdiction. There are, however, some general features which appear to be common to a significant number of western jurisdictions. This chapter will describe and consider some of these general features of the typical standard setting process, particularly the four distinct stages of:-1. Setting the initial agenda and-preliminary • standards 2. Obtaining detailed information 3. Formulating basic standards 4. Bargaining over modifications 84 Stephen Breyer, Regulation and its Reform. (Cambridge, Massachusetts: Harvard University Press, 1982) p 101 85 Breyer. op. cit. p.101 86 Ibid (1) Setting Initial Agenda and Preliminary Standard This stage requires a cost/benefit analysis in order to establish priorities of the regulator in setting the standard(s). In practice, however, there is usually insufficient time to conduct a proper cost/benefit analysis. The regulator must therefore rely on existing precedent and existing related standards in order to shape the initial proposals. This can create serious problems when a regulator relies on pre-existing voluntary standards as precedents in the formulation of mandatory standards. The reason for this is that when an industry develops its own voluntary standards, there is virtually no risk of harm since the industry remains free to reject any standards which it concludes are outdated, inappropriate or simply wrong.87 There is usually no compulsion on the industry to review its voluntary standards on a regular basis, since it retains the flexibility to accept or reject the standards. This kind of flexibility is lost when the standards are simply adopted by the regulator and made mandatory. Mandatory standards must be reviewed on a regular basis to ensure that they remain fair and enforceable. This review is critical to this stage of the standard setting process since mandatory standards which are not fair and enforceable have the potential to be highly dangerous. It is, however, 87 Breyer, op. cit. p.102 42 a time consuming process which can, in some circumstances, negate the benefits of relying on the pre-existing standards in the first place.88 (2) Obtaining Information One of the most important tasks of a regulator is ' . . O Q , obtaining accurate, relevant information. It is also one of the most difficult tasks of a regulator, since it may not have the technical expertise to obtain the information or to identify what information is relevant and accurate. In these circumstances, it will be necessary for the regulator to consult persons with the requisite expertise. This gives rise to the additional problem of finding impartial sources which are both knowledgeable and trustworthy. (3) Formulating the standard The formulation of the standard requires the regulator to consider a number of key questions. The regulator must decide whether the standard should aim directly at the evil targeted in the regulatory program or whether it should aim at a surrogate.90 This question is important in terms of administering the standard. A • '88 Ibid V 89 Breyer. op. cit. p.102 /' 90 Ibid at p 103 43 standard aimed directly at the evil targeted in the regulatory program will often be very complex and thus difficult to administer.51 In the interests of administrative simplicity and perhaps enforcement, the standard will often aim at a surrogate. This apparent departure from the regulatory program is justified on the basis that the standard should only attempt to eliminate unreasonable risk. Despite best intentions of the policy makers, some risk is inevitable in any society and this risk simply cannot be eliminated at a reasonable cost.'2 The comparative administrative simplicity of a surrogate has to be balanced against the risk that the agency administering the standard may lose sight of its primary aim and lose much of its administrative flexibility. The regulator must also consider the degree of specificity of the standard and decide whether the policy would be best implemented by means of a general or a more detailed standard. -i T h e main advantage of a detailed standard is that, the : administering agency will have greater control over and involvement in the activity.93 • . 91 V 92 93 Ibid Breyer, op. cit. p 104 Ibid 1 • , ' . < n n n n i, i i u n • U u u u c.c Li 44 This advantage is counterbalanced by the difficulty which the regulator will have in writing detailed, practical standards, given the varying conditions and technologies in different industries and the speed of technological change. A general standard has the advantage of administrative simplicity, flexibility, and ease of formulation but may not be sufficient to discharge the regulator's responsibility to implement the policy and promote the public interest. Yet another question to be considered by the regulator is whether the standard should be a design standard or a performance standard. This will obviously depend, to a large extent, on the type of industry/activity involved. In general terms, however, a design standard is precise in its specifications and is theoretically easier to enforce. Unfortunately, this type of standard tends to freeze existing technology and limit the flexibility of both the agency and the industry,54 Conversely, a performance standard permits flexibility and change, in that it states the obligation of the industry in terms of the ultimate goal to be achieved.95 The industry is then free to achieve that goal in any appropriate way. This type of standard is, however, very siifficult to enforce and can lead to complex arguments between the agency and the industry about the 94 Breyer, op. cit. p 105 95 Ibid n n n n /j o C n 1 * -t , U U U< LK • < 0 Cv J LI ' s 45 proper way of testing different "appropriate" methods of achieving the ultimate goals.96 The guefition of a design standard or a performance standard can be particularly vexing for a regulator since there is a fundamental tension between the desire for flexibility and the need for enforceability.97 Finally, the regulator must consider whether to set a standard for the industry which is unattainable using existing technology thus forcing the industry to make technological advances in order to comply with standard. Once again, this will depend on the industry and the activity involved. The major difficulty with this type of standard is that the regulator will often lack the information and the technical expertise to set the standard in this way and to predict whether or not the industry will comply.98 (4) .Negotiation of the final standard At this "negotiation" stage, several participants will normally take part. These participants will usually include the regulatory agency, representatives form the affected 96 Ibid 97 Brever. op. cit. p 106 98 Ibid "n n n<n i i r uouo • '<: € '"C 3 I ' '••' I 46 . groups within the industry and interested consumer groups.95 • • •••.:• •.... | Each participant, however, has its own goals as well as its • own arsenal of weapons to achieve those goals. It is perhaps a little misleading to describe this stage as a "negotiation", since it does not take the form of a collective bargaining process in which the parties meet and trade specifics in order to reach a final agreement.-100 The actual process involves each of the participants using its weapons in an effort to shape the final standard in line with its own particular goal(s). (c) Problems in the Standard Setting Process As with so many theories of behavior, there are a number of problems inherent in the standard setting process which cannot be ignored. The first major problem which is inherent in the process is gathering the information necessary to formulate a fair and practical standard. There are number of possible sources of information, including the industry, government staff, independent consultants, academics and consumer groups. Unfortunately, each of these sources of information 99 In the case of occupational safety regulation, the "consumer groups" referred to will generally be groups representing the interests :•„• of workers, such as unions. 100 Breyer, op. cit. p.108 47 has its disadvantages. Each of these sources and disadvantages will now be considered. (1) Industry The industry to be affected by the proposed standard is commonly the source of the most specific information needed to formulate the standard. As the foremost affected party, however, the industry can often use its control of the information to influence the regulator in its favour.101 Alternatively, the industry may use its control of information, both current and future, as a bargaining weapon 7 no in the standard negotiation process. (2) Government Staff This source of information is not tainted by industry self-interest but its impartiality is often achieved at the expense of the requisite technical ability. This deficiency j will severely limit the adequacy of any information obtained from government staff. 48 (3) Independent Experts/Academics For some industrial activities, it may be difficult to find academics or independent experts with the relevant expertise. Often, when such experts are available, they are expensive not sufficiently "independent" since they will often consult regularly with industry sources in order to IflO keep abreast of developments. " • (4) Consumer Groups The major problem with this source of information is that the interested groups will often have less information than the government staff and may suffer from an anti-industry bias.204 It is clear from this brief examination of the participants that "[t]he information problem is central and endemic to the standard setting process..."105 Another important problem inherent in the standard setting process relates to the question of enforcement of the standard. Since there is little point in writing standards which are not enforceable, a regulator must always write the standard with an eye towards enforcement. The 103 Breyer. op. cit. p.Ill 104 Ibid at p.109 105 Ibid at p.112 i'i n n n , v i r u d u y !_'>•' c c i I f V1 * . ' . '49 difficulty with this approach is that the regulator may be thus compelled to write standards which do not meet the enabling statute's primary objective, simply because it is too difficult to enforce. The regulator must develop practical compliance tests which are capable of easy, wide-spread application.-106 These tests must be fair and objective and not arbitrary. This requirement may cause serious difficulties for regulators developing tests in complicated technical areas.-107 A further consideration in formulating tests is the expense and ease of application. Yet another important problem inherent in the standard setting process is the reliance on voluntary compliance. Most administrative agencies rely heavily on voluntary compliance.108 The reason for this is generally the elaborate nature of enforcement procedures which follow after discovery of a violation. Not only is the process expensive and time-consuming, but the agency administering the standard may have to defend the standard itself from an . , i n Q attack on its validity. J 106 Breyer, op. cit. p. 112 107 Ibid at p.113 108 Ibid at p.114 109 Ibid - n n n n , j 3 c z ' / j j u u U i ' C C J J x i / It is largely because of these problems that the actual standard setting process differs so dramatically from the more ideal process set out at the beginning of this section. How, then, does offshore safety regulation measure up to the regulatory standard setting process described above? In many cases, the regulation of safety in the offshore has developed in line with the general theory described above but with an additional emphasis on the factors which are peculiar to the industry and the history of its development. Most offshore development has occurred in recent times and over a relatively short period of time. The development of offshore resources in jurisdictions such as Britain and Canada is characterized by a heavy concentration on developing a licensing regime and the adoption of speed as a policy priority. The result of this development is that the general standard setting process has been modified somewhat to take account of these factors. The first stage, during which the preliminary standard is set after the conduct of a cost/benefit analysis, recognizes that there will usually be insufficient time to conduct a proper cost/benefit analysis. The theoretical model does, however, presuppose that some degree of cost/benefit analysis would take place prior to the formulation of the preliminary standard. In the case of offshore safety, the time, constraints imposed by the nature 51 of development often precluded any effective cost benefit analysis and resulted in an even greater reliance on pre-existing voluntary Standards. In the information-gathering stage, regulators were often unable to spend the considerable time necessary to find impartial sources of information and were often compelled to r e l y on the information provided by the industry. Many governments were trying to encourage the industry to engage in offshore activities, a difficult task given the enormous expense involved. For this reason, some governments were willing to co-operate closely with the industry to ensure that the development took place and that it did so rapidly. In formulating the standards, the regulators had a potentially difficult task since they had to deal with fundamental tensions on two levels. On one hand, they had to deal with the tension between the desire for flexibility and the need for enforceability of-the standard. On the other hand, they had to deal with the more problematic tension between formulating a standard which would not discourage the industry from proceeding with development but at the same time, setting a standard at an adequate level to discharge the government's responsibility to promote- safety and the public interest. For example, in deciding whether to adopt a performance standard or a design standard, the n n ri o D i e u u u' Lf i ,.i 52 regulators had to consider the issue from different perspectives. The issue had to be considered in terms of the comparative advantages and disadvantages of each type of standard. At a higher level, the regulator had to consider the issue of responsibility and accountability as between the government and members of the industry and the extent to which the proposed standard was capable of discharging these responsibilities. It would appear that in some cases, the regulators paid some attention to the first perspective and largely ignored the second. With regard to the negotiation of the final standard, the industry generally occupied a strong bargaining position. This is, perhaps, linked to the political priorities in terms of encouraging rapid development of i offshore resources. The result was that some governments were more inclined to make large concessions to the industry in fixing the final standards. The problems inherent in the regulatory process, which were identified above, were further compounded by che hybrid nature of the industry. The combination of marine and industrial activities often lead to fragmented administration of different aspects of the operations. Thus, offshore safety regulations were often established in somewhat less-than-perfect circumstances. !-,"/''<::/vj-i'i K«Y •; v. m i s s n n n n , tiro- »> u u li, u J j c C J a *' " v—'-» <.Vriw-t" I-:"';1"-•! ' 'AT: .-.'."jv/^Jr/. v, . v - ' : ^ v • . ' ' 53 The problems inherent in the regulatory process were exacerbated by the difficulties which arose from the nature and history of the industry. 54 PART III OPERATIONAL SAFETY AND SAFETY REGULATION IN THE OFFSHORE THE CRITICISMS (a) Introduction Operational safety and its regulation in the offshore has been the subject of considerable criticism in the past. The occurrence of major offshore disasters such as the sinking of the semi-submersible drilling rig Ocean Ranger off the coast of eastern Canada and the loss of the Alexander Kielland in the Norwegian:sector of the North Sea has focused public attention on the apparent deficiencies in the safety regimes of various jurisdictions. The magnitude of some of these disasters has often necessitated an enquiry into and an examination of the safety regulations in place at the time of the accident, usually in an effort to apportion blame. One could ask why public attention has, in the past, focussed squarely on the loss of the installation, especially in situations where other installations which were subjected to similar circumstances remained afloat? Perhaps it is because disasters are "attention grabbers" -extensive media coverage of such events and the often large-55 scale loss of life, make them difficult to ignore and they generally send people scurrying to find a scapegoat on which to lay the blame. It is highly questionable whether this "knee-jerk" reaction is in any way beneficial to the industry and the persons who work in it and it is suggested that it is largely counterproductive, since it rarely reaches the heart of the problem - the attitudes of the people in all levels of the industry, from roughneck to Chief Executive. Government simply cannot regulate an "attitude to safety". Perhaps the focus should shift from the rigs that were lost to the rigs that were not and a consideration of why they were not lost. There is much to be learned from such a study. Unfortunately, major offshore disasters continue to occur and committees continue to enquire into the reasons for the losses. The purpose of this chapter is to examine the recommendations of three of these committees of enquiry and consider the extent to which the deficiencies identified by the committees are similar to the general problems -outlined in Chapters 1 and 2. This chapter will examine: (1) The Burgoyne Report (2) The Ocean Ranger Royal Commission Report (3) The Piper Alpha Report 56 The report into the loss of the Alexander Kielland will not be examined since it is primarily an enquiry into the specific causes of the accident rather than a more general critique of the Norwegian safety regime. It should also be noted that the extent to which the recommendations of the following three reports were followed by their respective governments will not be dealt with in this chapter. The purpose of examining these reports is merely to identify common criticisms of offshore safety regimes. (1) The Burgoyne Report a) Introduction During the height of the North Sea oil boom in the early and mid-1970s, the multifaceted nature of offshore operations resulted inevitably in a fragmentation of the administration of offshore safety laws in the United Kingdom. Different departments and agencies were responsible for different aspects of offshore operations. The potential for conflict in the administration of offshore safety was high. The situation was further complicated in 1972 when a • • . .. • iin Committee of Enquiry into Health and Safety at Work'-1" 110 also known as the Robens Committee - Report of the Committee 1970-72, Cmnd. 5034 recommended the creation of "a more effectively self-regulating system"111 and the establishment in 1974 of the Health and Safety Commission (HSC)112 an " the Healt^ an(j Safety Executive (HSE).113 The question thus became, whether or not offshore safety would be brought under HSC/HSE control. In late 1978, the Burgoyne Committee was established in order "to consider, so far as they are concerned with safety, the nature, coverage and effectiveness of the Department of Energy's regulations governing the exploration, development and production of oil and gas offshore and their administration and enforcement"..114 The Committee reported back in March 1980 with 66 conclusions and recommendations. b) The Recommendations The first, and perhaps most significant, off'the CnBimittBBls^ recommendations was that the government 111 W.G.Carson, The Other Price of Britain's oil - Safety sxVJ! fr.-.<•.-nl in the North Sea. (Oxford: Martin Robertson, 1982) p.190 112 The Health and Safety Commission (HSC) was established af« the body responsible for effecting the general purposes of the Act, It; in comprised of 8 members nominated by the Confederation of British Industry, the Trades Union Congress and local authority association®. The chairperson is appointed by the Secretary of State for EQpl.oyrce-s. 113 The: Health and Safety Executive (HSE) was established by the Aot as the body generally responsible for health and safety legislation ft for exercising any functions delegated to it by the HSC. It is a corporate body made up of 3 persons appointed by the HSC. 114 J.H.Burgoyne, Offshore Safety: Report of the Committee (L&ndom H.M. Stationery Office, Cmnd. 7866) p.l, para 1. discharge its responsibility for offshore safety via a single government agency.115 The Committee was critical of the division of responsibility for offshore safety between the Department of Energy, the HSC/HSE, the Department of Trade and the Civil Aviation Authority. It, observed that this division of responsibility led to "overlapping and conflicting legislation with divided administration and enforcement".1±6 The Committee's report described the tendency to differentiate between structural and occupational safety as "unrealistic"-117 It noted the criticisms of the arrangements in submissions received by it, particularly in relation to the difficulty of implementing the arrangements.1-18 A further reason relied on in the case for a single agency was the international dimension of offshore safety arrangements,119 and the trend of harmonization of national standards and practices. The Committee also felt that the divided administration caused problems of delay in relation to the promulgation and amendment of regulations. It was .largely because of these factors that the Committee recommended that all offshore safety matters should, as a matter of urgency, be vested in a single agency. 115 ibid'at p.Dl 116 Ibid 117 Ibid at p.13 118 Ibid 119 Burgoyne, op. cit. p. 14 i | • 59 j recommendation is the second recommendation of the Committee which was that the | Department of Energy be givan this responsibility.120' The | • Committee saw the HSE and the Department of Energy as th^ j . two main contenders for the role of single agency. It : discounted the Department of Trade as having only a minor role in offshore matters. The Committee examined a rtuiiiber of arguments for and against the appointment of either the HSE or the Department of Energy. For example, the Department of Energy had beetn directly involved in the ; ' • ' • • sponsorship of the industry and would be subject to economic /I, and political pressures which would influence its attitude towards safety matters. appointment of the HSE would also pose certain difficulties. While the 'conflict of interest' criticism could nPt be levelled against it, the Cefflm-fcte© n o t e d that the h s £ had Been c r i t i c i z e d 1 2 1 f o r i t s involvement in offshore safety due to its lack of expertise in certain key industry areas, such as deep diving, petroleum engineering and structural engineering in an ocean environment.122 The Committee felt-that the Department of '; Energy had satisfactorily approached its task in relation to safety matters and that its involvement with the industry from its inception could be viewed as a distinct advantage, since the department had "grown up with the offshore f-:-: 120 Ibid ".: 121 primarily by the U.K. Offshore Operators' Association - see Burgoyne, op. cit. p.241, submission 43 122 Burgoyne, op. cit. p.16 n n ri n,< j o l c u. u. u u ..I..I". c. a industry" and was "in the best position to understand its problems",123 The Committee members were acutely aware of the factors which made the offshore industry unique and warranted ifcs separate treatment. For example, two of the most crucial differences noted were the environment and the remoteness of operations. The structure and equipment have to withstand forces in the marine environment well in excess of anything onshore and tha remoteness of operations means that employees have to live at their workplace. It was generally accepted by the Committee that "the offshore industry is quite different rom any encountered in normal U.K. imtetadaL life".124 Essentially, it was felt that the Department of Energy, with responsibility for safety in only one industry, would be more speedy and flexible in its approach than and agency such as the HSE which had responsibility for industrial safety in a wider context. The Committee was therefore of the opinion that the Department of Energy was capable of "discharging this responsibility effectively, provided that it is suitably strengthened and seeks advice from other bodies on matters of common concern".125 123 ibid 124 Ibid 125 Burgoyne, op. cit. p.16 61 There were some dissenting opinions within the Committee on this point. Messrs Lyons and Miller accepted the recommendation for a single government agency but were unwilling to recommend that the Department of Energy be given this responsibility. They were concerned that the Department of Energy had been directly involved in the implementation of North Sea policy, designed to encourage speedy exploration and production, ultimately leading to oil and gas self-sufficiency. This gave rise to concerns that the "members of the Petroleum Engineering Division may experience conflicting pressure emanating from the exigencies of production on one hand and the requirements of safety on the other".126 Conversely, they felt that the HSE had inherited relative independence, from its roots in the Factory Inspectorate in the 1880s. Messrs Lyons and Miller felt that the HSE had the necessary attributes of "an agency concerned with conditions at the workplace".-127 They saw the need for greater understanding of the broader history of worker safety by those primarily concerned with offshore oil activities in the North Sea and suggested that safety in the offshore was not necessarily an issue which warranted separate treatment by the Department of Energy. They concluded that the simplification of the administration by use of single agency could be most effectively achieved by vesting "complete responsibility for safety in the offshore 126 Ibid at p.59 127 Burgoyne, op. clt. p.58 to the HSE"-1*8 The personnel required to provide the necessary expertise could simply be transferred from the Department of Energy. The HSE, with its vast responsibility, was experienced at establishing specialized 129 units to deal with particular industries and was amply qualified to administer and enforce offshore safety matters. Despite their convincing arguments, the position in favour of the HSE as the single agency remained the minority voice of dissent. The Committee's terms of reference required it to consider and assess the role of certifying authorities. The Committee found that the use of the certifying authorities as independent scrutineers in the design and construction process met with widespread support and approval by the industry participants. It was noted that there were no submissions suggesting its discontinuance and the majority view, which the Committee accepted, was thac the arrangements for the use of certifying authorities were generally satisfactory. Having thus assessed their role, the Committee recommended that the responsibility of certifying authorities be extended. It considered that the role of the certifying authorities is to provide "independent verification of design, construction and 128 Ibid at p.60 129 For example, the Coal Mines Inspectorate - Ibid 63 operating procedures . . ."130 The Committee saw the need to extend the responsibility of certifying authorities as far as practicable to include verification of the complete oil and gas pressurized system from the down-hole safety valve • 7 3 7 to shore or tanker connections. In addition to this extension of responsibility, the Committee also made a number of recommendations connected with the role of certifying authorities. It recommended that certain regulations be amended to bring the pressurized system referred to above within the certification scheme.-132 It was also suggested that consideration be given to a system of official approval of independent surveyors who are suitably qualified to undertake specialized surveys on behalf of the certifying authorities, where required. It was also recommended that provision be made for appeal to the Secretary of State against the refusal of a certifying authority to grant a certificate of fitness. The Committee also dealt with the issue of United Kingdom jurisdiction and the application of civil and criminal law to vessels attendant to offshore installations. In relation to attendant vessels, the Committee recognized the potential for conflict of jurisdiction between U.K. law 130 Burgoyne, op. cit. p.51 131 Ibid at p.52 132 Ibid n n n n i n i rr u u.u u j.c o 0 7 3 J and that of the country of registry of the vessel. It recommended that the civil and criminal laws of the United Kingdom should be applied to vessels engaged in pipeline activities. In addition, it recommended a clarification of the legal status of a floating installation attached by walkway to a fixed platform.1'34 With regard to the actual nature of the regulations and safety documentation, the Committee came to certain . conclusions with regard to the structure of written controls.135 It identified problems in relation to the status of the guidance notes issued by the Department of Energy and the misunderstandings which resulted. • . • • Accordingly, it concluded that an appropriate structure for written controls would be the detailing of mandatory objectives in regulations and the provision of non-mandatory advice, in the form of guidance notes, on methods of achieving those objectives. The Committee therefore recommended that all future safety regulations specify distinct objectives and avoid overlap and that methods of implementation should be advised as fully as possible in non-mandatory guidance notes. 1 3 6 It was suggested that these guidance notes be updated continuously, although their status as "non-mandatory guidance should be made clear".137 133 Burgoyne, op. cit. p.24 134 Ibid 135 Ibid at p.22 136 Burgoyne, op. cit. p.S3 137. Ibid . • 65 The Committee made specific recommendations with regard to management responsibility. It recommended that the specific duties bestowed upon the Offshore Installation Manager by the regulations made under the Mineral Workings (offshore) Act 1971 should be reviewed.138 Under the Act, the Offshore Installation Manager [OIM) had general responsibility for all matters which affected the health, safety and welfare of personnel and for maintaining order on board the installation.139 In addition to this general responsibility, there were a number of specific responsibilities, such as ensuring the suitability, safety and soundness of all equipment. The Committee was concerned that the OIM could be at risk of prosecution for matters outside his/her control and it was therefore recommended that only those specific duties which would be reasonable for him/her to control should be allocated to the OIM. 1 4 0 The Committee also recommended that guidance be given to employers and OIMs with regard to resolution of conflicts between the responsibilities allocated by 'the 1971 Act and the application to the offshore of the Health and Safety at Work Act 1974. 1 4 1 The Committee was concerned that although it was desirable that a single person on an offshore installation be in a position of authority and 138 Ibid • 139 Ibid at p.21 140 Burgoyne, op. cit. p.21 141 Ibid : responsibility with regard to safety matters, the 1974 Act confused the situation by placing responsibility on the employer, rather than on the OIM. The resolution of this conflict required additional guidance from the Department of Energy. The subject of safety zones was also canvassed and the Committee recommended the establishment, as a matter of urgency, of safety zones for mobile drilling units and urged the government to enlarge the radius of the safety zones from 500 metres,-142 With regard to design and construction of the installations, the Committee suggested that more detailed guidance was required and that the Department of Energy should encourage a "more systematic approach to safety assessments of structures and plant during design and construction".143 It recognized that practices in respect to safety assessments of plant and structures would vary considerably between different compunies and suggested that the Department of Energy take the initiative in defining objectives and achieving some sort of uniformity. It was also recommended that regulations for the control of worker safety during construction be formulated and implemented as soon as possible. 142 Ibid 143 Burgoyne, op. cit. p.54 67 The Committee made general recommendations with regard to production operations, pipelines, electrical safety and diving. On the subject of safety management, the Committee concluded that every person on or associated with an offshore installation is responsible for his/her own safety and the safety of others and should therefore consider him/herself a safety officer, despite the appointment of someone with special duties with regard to safety. Notwithstanding this, it was recommended that each operating company should have a safety management organization.144 This organization would have a safety committee and be represented on board each offshore installation by a safety officer. The safety officer and representative safety committee would be vested with certain rights and responsibilities and would report to a Chief Safety Officer on shore, who would in turn report to the Chief Executive of the operating company. Members of_the Safety Committee would receive training suitable for the position and would receive information relevant to the exercise of their duties. The safety organization would be used to conduct an analysis of the causes of common, every-day accidents and take remedial action, with the guidance of the Department of Energy. 144 Ibid at p.56 The Committee received submissions that suggested that accidents and dangerous occurrences on installations were not sufficiently or consistently reported, particularly in the case of minor accidents. It was felt that, properly reported, information on' these events would be particularly valuable and useful. It was therefore recommended that the Department of Energy should provide further guidance with regard to the kinds of dangerous occurrences to be reported to it and the extent of the information required by these reports.-145 The Committee suggested that the information provided in the reports should be analyzed periodically and the results disseminated throughout the industry participants. The Committee noted that adoption of a single government agency would not remove the need for interface with other authorities. It therefore made certain recommendations with regard to specific aspects of safety which were the subject of overlapping jurisdiction and suggested that interface with other government departments was required. For example, it was suggested that the Department of Energy consult with the Civil Aviation Authority and establish a set of minimum standards for 145 Burgoyne, op. eit. p.56 at para.6.52 69 survival equipment and training, in respect of helicopter transportation to and from an o.f£^-hore installation.146 A number of important recommendations were made by the Committee regarding the management of emergencies and the Emergency Procedures Regulations 1976'.. These included suggestions that the Department of Energy issue guidance concerning the stability of standby vessels and services in order to better facilitate assessment of the suitability of standby vessels attending offshore installations.14,7 The Regulations listed a number of different emergencies, the most serious of which were a blow-o'at and/or collapse or capsize of the primary structure. These are both emergencies which would require the evacuation of the installation, an exercise of enormous proportions. In preparation for such emergencies, operators are required by the legislation to have a contingency plan, which the Department of Energy encourages them to test by means of exercises. It was recommended that further guidance be given by the Department of Energy about these emergency exercises and the type of procedures rehearsed during these drills and that specific instructions about these procedures be included in the emergency procedures manual.14® 146 Burgoyne, op. cit. p.57 147 Ibid 148 Burgoyne, op. cit. p.57 70 The Committee was mindful of the magnitude of an evacuation operation from and installation in the event of a major emergency. Alternative means of rapid evacuation was an issue for which consideration by the Department of Energy was therefore recommended.-149 Related to this recommendation was the suggestion that further studies be conducted into the interface problems between the different ^ •mpariB of5 pvacuati nn from an installation and the use of standby or other vessels in the rescue operation. The Committee also identified the standards of maintenance and readiness of lifesaving equipment, together with the means of minimizing body temperature loss o£ • persons in the water as two areas requiring investigation and attention. On the subject of safety training, the Committee was of the opinion that more consistent training to recognized standards was needed and that the Department of Energy shomild appoint a special inspector,-with responsibility to +">-= r^ " i ^ i ^ n and qualification systems.151 The CGraiaitt.ee recognised the need "for prior training and instruction of all construction workers proceeding offshore; and practising of offshore personnel generally (including visitors) regarding emergency fire and evacuation 149 Ibid 150 Ibid 151 Burgoyne. op. cit. p.57 71 i co , a c t i o n . O t h e r training needs identified included systematic job training for life boat crews, crane operators, safety representatives, divers and those persons responsihle for maintaining safety equipment, in relation to offshore hazards and emergency responses. Finally, the Committee recommended an additional effort be devoted to research and development of methods of improving and enhancing' occupational safgty in ttl§ 9ff§hQF§< (2) The "Ocean Ranger" and the Hickman Commission (a) Introduction In the early morning of February 15, 1982, the semi-submersible drilling rig Ocean Ranger sank in a violent storm on the Grand Banks of Newfoundland. The entire crew complement of 84 died in the tragedy, even though some of that number had managed to escape from the rig before it sank. A Royal Commission was established by the governments of Canada and Newfoundland to determine to cause of the disaster' and to make recommendations concerning to 152 Ibid at p.47 regulation of offshore safety in hydrocarbon activity off the eastern coast of Canada. The Ocean Ranger was registered in the United States and the United States Coast Guard and the National Transportation Safety Board established a marine board of investigation to investigate the loss and published a report of their findings.153 This report will not be considered in this section, as it is largely scientific and technical in nature and were accepted into evidence by tht: Royal Commission. The purpose of this section is to examine the recommendations made by the Royal Commission' ("the Commission") with regard to regulatory control of safety in offshore operations. b) The Recommendations - Regulatory Control One of the goals of the Hickman Commission was to identify ways and means of improving human safety during exploratory and delineation drilling operations off eastern Canada.154 i n t J a e i a : attempt to achieve this goal, the 153 United States Coast Guard, Marine Casualty Report into the Capsizing and Sinking of the Mobile Offshore Drilling Unit (M0DU1 "Ocean Ranger" on February 15. 1982. Report No. 001 HQS 82, May 20, 1983; 154 Royal Commission on the Ocean Ranger Marine Disaster (Canada), Report of the Royal Commission on the Ocean Ranger Marine Disaster. Vols. 1 5 2 (Ottawa: The Royal Commission, 1984-1985) Vol 2, p.vii ... .. , . Ji.. H 73 Commission examined to general regulatory environment in which the industry functions offshore and tried to identify the weaknesses in the system by looking at aspects of the Ocean Kanger disaster. The Commission sought to lay out the multifaceted considerations that must be taken into account in developing a safety regime which adequately covers the special conditions which exist off the east coats of Canada. 1 5 5 Following a consideration of the existing regulatory regime for safety and a brief comparison of the regulatory regimes of other jurisdictions with offshore oil and gas exploration and production industries, the Commission made the following 28 recommendeitions specifically concerning regulatory control: In Recommendation 78, the Commission recognized the jurisdictional difficulties which arise by virtue off the absence of any legislation exte/nding domestic law t.o offshore activities, despite the fact that Canada, has ratified the 1958 U.N. Convention on the; Continental Shelf Convention.156 It was recommended~±hat early action be taken to enact a Continental Shelf Act and/or other necessary legislation to extend the application of appropriate Canadian law to offshore oil and gas activities.157 155 Ibid at p.127 156 1958/04/29, 499 U.N. Treaty Series 311 157 Royal Commission Report, op., cit. p. 150 i Recommendation 79 related to a proviso to the 1958 Continental Shelf Convention concerning safety zones of the coastal state. The Convention provides that the coastal state may establish safety zones of up to 500 metres around the drilling installation, except where such a zone would interfere with recognized sea lanes.258 Canada has gone beyond the Convention by adopting different safety zones for installations moored by anchors.155 Despite exceeding the Convention in this respect, the Commission concluded that the safety zone was still inadequate and recommended the establishment of a safety zone of 500 metres form the perimeter of the anchor pattern.160 The Commission was quick to point out that this extension of domestic law to the offshore would only remove some of the uncertainties, since the existing regulation to be extended to the offshore may well be deficient.161 Recommendation 80 concluded that some of the existing regulation was not designed to cover mobile offshore drilling units or jack-up rigs and-that more specific legislation was required. It recommended the enactment of an omnibus act, specific to mobile offshore, drilling units and their drilling operations.162 l S S I b i d ' 159 50 metres beyond the anchor pattern - Ibid 160 Ibid 161 Ibid 162 Royal Commission Report, op. cit. p.151 One of the weaknesses in the safety regime which was recognized by the Commission was the fact that the prime instrument of control was not the regulations and guidance notes but rather, the application-permit process, a factor which had lead to a decrease in certainty for the industry.163 It had also lead to a privatization of the application of the law and regulations as between the operator and the regulatory body. 1 6 4 The Commission recognized that it is necessary for the requirements which operators are expected to observe to be clear and certain but that they must also be flexible to the rapidly changing technology.165 Accordingly, Recommendation 81 suggested that more extensive regulations and guidance notes be developed and that, as far as is practical, regulations be framed in terms of goal-or.iented performance standards, supplemented by comprehensive guidance notes. 1 6 6 In Recommendation 82, the Commission recommended the establishment of an intergovernmental technical advisory committee, made up of recognized specialists, to assist in the formulation of these "extensive" regulations and guidance notes. 1 6 7 163 Ibid -164 Ibid 165 Ibid : 166 Ibid 167 Royal Commission Report, op. cit. p.151 76 Due to the nature of the industry, the establishment of the extensive regulations recommended by the Commission would require expertise of a highly technical nature, probably outside the technical expertise of and regulatory agency. The Commission thus recognized the desirability of industry participation in the formulation of the regulations, since the industry has the experience, knowledge and interest in the subject matter. 1 6 8 In Recommendation 83, the Commission suggested that the regulatory agency should be required by statute to consult regularly with the associations of those affected by the regulatory requirements.169 The Commission did, in fact, go beyond the concept of industry participation in the formulation of regulations and suggested in Recommendation 84 that: ' •• "[W]here industry associations have the recognized knowledge, interest and commitment, their guidelines setting forth standard to be observed by their members be reviewed, accepted, and monitored by the regulatory agency.1,170 In line with this recommendation, the Commission went 168 Ibid 169 Ibid at p.152 170 Ibid on to suggest in Recommendation 85 that the International Maritime Organization's17-1 Code for the Construction and Equipment of Mobile Offshore Drilling Units (MODUs) be endorsed and revised by Canada in the development of its regulatory requirements.172 In making Recommendation 86, the Commission noted and endorsed the trend away from fragmented regulation of offshore operations towards a single regulatory agency.173 It considered it desirable to concentrate responsibility for offshore safety in.as few regulatory bodies as possible,174 thus reducing the risk of administrative overlap and fragmented policy objectives. It was thus recommended that Canada maintain its "single window approach"175 with the establishment of the Canada Oil and Gas Lands Administration (COGLA) as a single regulatory agency, exercising regulatory control over MODUs, their drilling operations and their standby vessels. 1 7 6 171 The International Maritime Organization (IM0) is a primary intergovernmental agency, designed to establish common standards for marine safety, pollution and navigation. Its membership is drawn from most of the maritime nations of the world. It has no legislative or regulatory powers, as its conventions only come into force when ratified by member states. It has no means of compelling member states to comply with its rules and conventions. 172 Royal Commission Report, op.cit. p.152 173 Ibid • •  174 Ibid ' .• 175 Ibid "176' Ibid • • . ' " —— - -J.1.••• • • . . .'. u •• . ' " •• -78 Consequent to this recommendation, the Commission also suggested in Recommendation 87 that any necessary powers and personnel be transferred, by way of memorandum of understanding, to the single regulatory agency from other -government agencies so that it could effectively exercise ' • its responsibility for the safety of MODUs and their drilling operations.177 The "single window approach" is not without its problems, as was noted by the Commission. There is a large potential for conflict where an agency is responsible for administering both the economic production aspects and the safety aspects of oil and gas operations. It is foreseeable that the drive for increased production and profit could ' result in a diminishment of the importance of safety of operations. The Commission's answer to this potential problem was to recommend the establishment of a Safety Branch of co-equal status within the single regulatory agency, with responsibilities to include development, application and monitoring of safety standards and the analysis of safety data.178 In Recommendation 89, the Commission noted the importance of accurate data in "the formation and implementation of regulatory policy"175 and suggested 177 Royal Commission Report, op. cit. p.153 178 Ibid - Recommendation 88 179 Ibid at p. 153 79 accordingly that information regarding significant events and matters pertaining to human safety be standardized, collected, collated and analyzed by the Safety Branch with the results to be disseminated to the industry. With regard to Recommendations SO and 91, the Commission considered what it described as the "fundamental question facing the regulatory authority pertaining to the safety of drilling operations on the continental shelf"180, that is, the suitability of any particular drilling rig to operate in the particular environmental conditions which exist off eastern Canada. In view of this "fundamental question", the Commission made two specific recommendations ; concerning the establishment of performance standards, against which operational safety could be assessed and the use of a three-phase safety audit for the assessment of operational safety. The three phases included an assessment of the physical integrity and stability of the rig, evaluation of the operability of its critical systems and their interrelationships and assessment of the crew in terms of qualifications and competence.^81 Recommendation 91 also suggested that the safety audit take place in timed stages, to ensure that a substantial portion of the audit is completed before the rig is committed to a drilling program offshore eastern Canada.182 180 Royal Commission Report, op. cit. p.154 181 Ibid at p.155 182 Ibid at p.154 Recommendations 92-95 also deal with the specifics related to the suitability of rigs to operate in the waters offshore eastern Canada. The Commission recommended full-scale real-time measurements of environmental conditions and rig responses to those conditions in order to develop more accurate methods of assessing the stability of the rig(s).i83 It also recommended an assessment of the quality control inspections and testings which are required during • 7 fiJl the construction of the rig. In Recommendation 96, the Commission recognized the importance of critical systems to the safety of the rig and recommended that the regulatory authority consult with the industry and identify the systems which are critical to the safety of the rig and crew for each drilling rig offshore. The ramifications of this recommendation for the regulatory agency are potentially huge since the task of analyzing the critical systems of every rig operating offshore could be enormous. It requires the postulation of a wide range of accident possibilities against which, the adequacy of the systems, as a whole, are evaluated. It is arguable that such a task would be outside the expertise of the relevant regulatory agency and would unreasonably stretch the resources of the agency beyond its limits. 183 Royal Commission Report, op. cit. p.155 184 Ibid 81 Recommendations 97-100 deal specifically with the problems highlighted by the Ocean Ranger disaster itself, that is, the possibility of damage to floodable compartments and the rules governing stability. The Commission recommended weather-tight closures on any downflooding opening, appropriate protection for loss of buoyancy due to wave impact, special allowances in calculating of damage stability and operability of critical systems in compartments adjacent to the sea, even after damage and/or flooding.185 • •v.. ' Similarly, Recommendation 101 deals specifically with damage stability requirements in relation to ice impact damage, a factor which is, perhaps, more relevant to operations in the waters off eastern Canada than to some other jurisdictions engaged in offshore oil and gas operations. The Commission recommended a review of structural and damage stability requirements after the completion of research into ice impact damage.136 The terms of reference of the Commission required it to "inquire into, report upon and make recommendations with respect to marine and drilling aspects of practices and procedures in respect of offshore drilling operations on the Continental Shelf..."187 185 Royal Commission Report, op. elt. p.156 186 Ibid 187 Ibid at p.iii 82 In the recommendations made under the heading of "Regulatory Control", the Commission concluded that the way in which a regulator ensures compliance with the rules and • • . • • • • . • regulations promulgated by it will depend largely upon the objectives of the regulator, the nature of the regulation and the responsibility and accountability of the operator.188 In terms of objectives, a regulator may simply seek to police the regulations, assess blame and ensure strict adherence to the law. Alternatively, it may seek to monitor the regulations and develop sensitive attitudes and shared responsibility for safety.189 In light of the observations made earlier in this thesis, the latter of these two objectives is obviously the preferred position. Unfortunately, a large proportion of safety regulation reviews are undertaken following, and in response to, a major disaster, which has focused public attention on the regulations. This is unfortunate because the heightened public awareness and outrage tends to cloud the preferred objectives of the regulator and focuses on apportioning blame for the disaster. For present purposes, we can assume that the objectives of the regulator should be to monitor, assure safety, develop 'a "shared responsibility" approach to safety .and 188 Royal Commission Report, op. cit. p.157 189 Ibid , n n n n , < ri -rj-vT 83 190 impose penalties where operators fail to comply. How, then, does the regulatory agency ensure compliance? The answer to this question will depend on the type of regulations involved. The level of judgement and experience required of the staff of the regulatory agency will depend whether the regulations are specific or general, design 7 91 standards or performance standards. In Recommendations 102 and 103, the Commission considered the role of the regulatory agency in the enforcement of its regulations and suggested that a capable Inspection Service be established within a single regulatory agency to assure compliance. It was also recommended that where external bodies are engaged to assist the regulatory agency in ensuring compliance, that those external bodies should be required to assume full responsibility for the 7 9? accuracy of their reports. It was of some concern to the Commission that the ever-increasing complexity of the industry was tending towards a "dilution and diffusion of responsibility and accountability"193 and the Commission went to great pains to emphasize the need for a clear understanding of the responsibility of each of the parties involved in offshore 190 Ibid 191 Royal Commission Report, op. cit. p.157 192 Ibid 193 Ibid activities.194 In Recommendation 104, it was suggested that: "(a) every effort be made to enforce the . responsibility and accountability of the drilling contractor for the physical integrity of his rig, the operability of its critical systems, the quality of its management and the competence of its crew. (b) the operator be held responsible and accountable for the integrity and safety of services provided to him under contract in the execution of his drilling program."195 The Commission did not ignore the fact that compliance is generally enforced by way of penalties and in Recommendation 105, it was recommended that a range of penalties be established, with the severity of the penalties to reflect the significance of the failure.156 In its final recommendation under this heading, the Commission considered the unusually wide discretionary powers conferred on the Chief Conservation Officer under the Oil and Gas Production & Conservation Act. It was felt that this system was defective in that it gave undue discretionary power to a statutory, officer who was appointed rather than elected to his/her position.197 It was suggested in Recommendation 106 that the powers of the regulatory agency be circumscribed and greater reliance be placed on the published regulations and guidance notes. It 194 Ibid 195 Royal Commission Report, op. cit. p.158 196 Ibid 197 Ibid:". . • ' . • was also recommended that legislative provision be made for appeal to -the Minister by a person affected by a. discretionary decision of the head of the regulatory agency. 1 9 8 (3)i The "Piper Alpha" Report (a) Introduction Shortly before 10 pm on the evening of July 6, 1988 the fist of a number of explosions rocked the Piper Alpha production platform. The platform was operated by the Occidental Petroleum (Caledonia) Limited in the North Sea.. Subsequent explosions destroyed the platform in less than twenty minutes. A total of 167 men died in the disaster, primarily from asphyxiation. Others died while trying to escape f r o m the burning platform. Survivors recounted horror stories of their escape from the burning platform into the freezing waters of the North Sea. Many of those who did escape from the platform were drowned or died from hypothermia. It was Britain's worst offshore disaster since the loss o f the jack-up drilling rig "Sea Gem" in 1965, with the loss o f thirteen lives, and the worst multi-death accident in the North Sea ii^ce the Norwegian drilling rig Alexander Kielland capsized and sank in 1980 with the.loss of 123 lives. 198 Royal Commission Report, op. cit. p.158 86 The United Kingdom government established a public enquiry into the disaster and appointed Scottish judge, Lord Cullen, as its chairperson. The enquiry lasted 13 months and its report and recommendations were released on 12 November 1990. Unfortunately, at the time of writing, the author has been unable to obtain an official copy of the report. It should therefore be noted that the discussion concerning the recommendations of the enquiry derives solely from newspaper reports of the enquiry findings and will only deal with the main recommendations made by Lord Cullen. As with earlier sections in this chapter, this section will examine the recommendations of the Cullen enquiry, as it came to be known, with regard to the regulatory control of safety in offshore operations. (b) The Recommendations As with the Hickman Commission-report into the loss of the "Ocean Ranger", the Cullen enquiry was not limited to an enquiry into the loss of the "Piper Alpha" but also included an enquiry into all aspect of operational safety which related to workers on the platform. This necessarily involved'some strong criticisms not only of the safety systems on board the platform but also the United Kingdom offshore safety regime generally. Lord Cullen strongly criticized a number of participants in the Piper Alpha tragedy, particularly the operator of the platform, Occidental Petroleum (Caledonia) L i m i t e d and t h e Department of Energy.155 He described the Energy Department's safety inspection procedures as superficial and doubted whether the type of inspection practised by the department was at all effective as means of monitoring the management of safety on the North Sea oil industry.200 In line with these general criticisms, Lord Cullen made a number of specific recommendations concerning future safety management of operations in the North Sea. Perhaps one of the most significant recommendations of the Cullen Report was that the Department of Energy should lose its responsibility for safety in the North Sea and that responsibility for this important part of offshore operations should pass to the Health and Safety Executive.201 This recommendation comes almost exactly ten years after the Burgoyne Committee suggested that the Department of Energy was capable of effectively discharging its responsibility for industrial safety, since it had "grown up with the offshore industry" and was "in the best 199 The Times Tuesday November 13, 1990, p.l 200 Ibid 201 Ibid position to understand its problems".202 The observations of Lord Cullen echo the dissenting opinions of Messrs Lyons and Miller of the Burgoyne Committee who expressed their concern at the Department of Energy's ability to adequately prioritize industrial safety when faced with the pressure to maximize production. In recommending the transfer of responsibility for safety away from the Department of Energy, Lord Cullen attacked the deficiencies of the energy department's inspection system.203 He referred to the inadequacy of the Department's inspection procedure and the substandard training and guidance afforded to, inspectors Lord Cullen examined the reports of inspections leading up to the disaster and noted that the inspection was "superficial to the point of being little use as a test of safety of the platform".205 His recommendation to strip the energy department of its responsibility for safety clearly indicated his finding that, in the face of such conflicting pressures from the exigencies of production and from the requirements of safety, the Energy Department was not able to properly discharge its responsibilities with regard to reasonable safety requirements. The safety system used by Occidental on the "Piper Alpha" platform was the subject of scathing criticism by 202 Burgoyne, op. cit. p.16 203 The Times Tuesday November 13, 1990, p.A5 204 Ibid 205 Ibid Lord Cullen. He blamed the company's safety system for leaving most of the men helpless in the accommodation module during the emergency.206 In particular, he notied that Occidental relied too heavily on the effectiveness of the "permit-to-work" system, based solely on the apparent absence of any problems. 2 0 7 The company did not take any steps to satisfy itself that the system was actually working in practice. The company also did not provide adequate training to ensure that the permit-to-wc.ck system was working adequately. It was not sufficiently prepared for a major disaster and did not ensure that emergency training was being provided.208 Although the safety procedures were in place, they were not implemented in practice and appear to have been treated very superficially or ignored altogether. Lord Cullen observed that the company "adopted a superficial attitude to the assessment of the risk of a major hazard",209 He therefore recommended that the safety management system of the company should set out the safety objectives, the system by which those objectives are to be achieved, the performance standards required to be met and p i o the means of monitoring adherence to those standards.'-" Essentially, the operator must demonstrate that the design and operation of its installation are safe. It was also recommended that operators audit their safety systems 206 The Times Tuesday November 13, 1990, p.AS 207 Ibid 208 rbid 209 Ibid 210 Ibid 90 regularly and that the regulatory body have the power to check those audits whenever it thinks fit to do so. Lord Cullen recommended that each operator should submit a "safety case" to the regulatory body. The safety case would include a formal safety assessment of the installation and details of escape routes, embarkation points and lifeboats.211 It would also detail provisions for a temporary refuge for employees in the event of a disaster. The purpose of this refuge is to provide some relatively safe haven for employees while the emergency is assessed and evacuations preparations are made. The refuge should have adequate facilities to monitor and emergency and radio equipment to maintain communications. The safety case should also state how long the refuge can withstand a disaster and the risk of its failure. The safety case would govern each of its installations, be updated every five years and be subject to regular audit by the company and 2 72 spot checks by the regulatory body. Recognizing the importance of workers in any safety regime, it was a l s o recommended that the regulatory body, operators and contractors should s u p p o r t and encourage the involvement of offshore workers in relation to safety 211 The Times Tuesday November 13, 1990, p.A5 2 1 2 I b i d , : j matters.21,3 It was hoped that such encouragement would ensure practical input from the very people affected by the j safety system and some degree of operational efficiency in j its implementation. The eternal optimist would also hope that encouraging worker input on safety matters may also go some way towards changing entrenched attitudes to safety and its importance.214 Lord Cullen was strongly critical of the 11 permit-to-work" system. Under this system, certificates had to issued before maintenance of potentially dangerous machinery could be carried out. 2 1 5 According to his enquiry, Lord Cullen observed that there were many practices within the system which were unsafe and numerous errors such as work description, dates and times. 2 1 6 He also noted that many practices in the permit-to-work system were patently unsafe and established practises were not kept to. It was therefore recommended that the "permit-to-work" procedures should form part of each operator's safety management system and that those persons required to_ operate the system should be trained to an appropriate standard set by the regulatory body. 2 1 7 Inclusion of this procedure in the operator's safety management system would compel operators to satisfy themselves that the system is working adequately. 213 The Times Tuesday November 13, 1990, p.A5 214 Ibid at p.A8 (editorial comment) 215 Ibid at p.A5 " •• 216 Ibid . I : 217 Ibid xV?::. J J v * n n n n~" i i n i 92 Another important part of any company's safety management system is its level of safety training. Lord Cullen observed that the safety training on board the "Piper Alpha" platform was not adequate.218 In particular, he noted that advice to new personnel on induction was no more than cursory and safety drills were not given consistently.219 The result was that the men on board the installation were not prepared to deal with a major emergency of the kind which occurred. This state of unpreparedness was evident even at management level on the platform. Indeed, Lord Cullen found that the offshore installation manager and the production manager did not take any initiative to save the lives of the men on board once it become clear that all of the emergency systems had become ineffective.220 He suggested that the death toll might have been lower if the managers had instructed the men to escape by whatever means they could.221 Accordingly, Lord Cullen recommended that emergency training should form part of each operator's safety management system. It was also recommended that every person on board an installation be provided with a survival suit, lifejacket, smokehood, torch and fireproof gloves and be fully trained in their use in an ppp 1 • emergency situation. 218 The Times.Tuesday November 13, 1990, p.A5 219 "Ib id , , ' . : 220 Ibid 221. I b i d • . ' . • • 2 2 2 I b i d 93 The importance of support/standby vessels in an emergency situation was also considered in the report. These vessels are critically important in any evacuation of an installation and for rescuing survivors in the water. Lord Cullen recommended that standby vessels should be required to have certain basic emergency equipment; including remote controlled search lights, at least 2 fast rescue craft equipped with VHF radios and a communications system between the vessel, its rescue craft and the installation.223 An important finding of the enquiry was that "the platform personnel and management were not prepared for a major emergency as they should havo been".224 Lord Cullen therefore made recommendations to encourage a more appropriate level of risk preparedness, risk analysis and emergency preparation.225 He recommended that operators be required to submit a detailed risk analysis to the regulatory body for approval.226 He also recommended that all operators carry ou't an analysis of the systems of control of an emergency, including means of escape, availability of helicopters, survival craft and liferafts, the capabilities and functions of standby vessels, the 123 The Times Tuesday November 13, 1990, p.A5 224 Ibid 225 Ibid 226 Ibid availability and types of fast rescue vessels and the availability of personal safety/survival equipment.227 The criticisms and recommendations contained in the Cullen Report suggest the need for fundamental changes in the way in which safety in the North Sea is regulated. But it is important to note Lord Cullen's observation that the safety policies and procedures were already in place but were not being implemented at a practical level. This observation highlights the fact that regulations do not, of themselves, bring about safety. Operational safety in the offshore requires a change in attitude about the importance of safety and its priority. This "change in attitude" requires management commitment to safety as an over-riding concern. To some extent, the "Piper Alpha" disaster and the implementation of the Cullen Report will facilitate a change in management attitudes towards safety but the question remains how much will attitudes change and for how long? (b) The Conclusions Each of the reports examined above identified deficiencies in the systems and regimes in question and made certain recommendations to remedy these deficiencies to their respective governments. The extent to which the deficiencies identified are common to all three reports will 227 I b i d now be considered, particularly with regard to the Burgoyne Report and the Cullen Report. The Burgoyne and Hickman reports identified jurisdiction as an issue in offshore safety and recommended its clarification by parliament. Although the British government took steps to extend criminal and civil law to the offshore, the Canadian government has yet to do so, although an Offshore Laws Application Bill has been tabled a ppo number of times in recent years."" All three reports endorsed the "single window" approach into the industry. The Burgoyne report recommended a single government agency administer offshore operations, including safety and recommended that the Department of Energy be given this responsibility. The Government implemented this recommendation within months of the release of the report, despite the dissenting opinions of certain committee members as to the ability of the Department of Energy properly to discharge its responsibility with regard to safety. The full import of this implementation became apparent during the enquiry into the Piper Alpha disaster, when Lord Cullen identified examples of the Department of Energy's failures with regard to offshore safety. His recommendations that responsibility for offshore safety be given to the Health 228 Bill C-39, An Ret to apply federal laws and provincial lawB to offshore areas. 2nd Sess., 34th Pari. 1989 and Safety Executive echoed the dissenting opinions of Messrs Lyons and Miller of the Burgoyne Committee expressed ten years earlier. The structure of written controls was also the subject of consideration by the Burgoyne Committee and the Hickman Commission. The Burgoyne Committee recommended the use of a two-tier system of mandatory regulations, supplemented by non-mandatory guidelines. The Hickman Commission also favoured the use of regulations and non-mandatory guidelines as a means of achieving some degree of flexibility. The Commission recommended the use of goal-oriented performance standards to ensure certainty in the regulations, while providing comprehensive guidance notes to supplement the regulations. All three reports considered the importance of emergency preparedness and critical systems and recommended more appropriate levels of preparatic.i. The Hickman Commission also recommended an assessment of the critical systems of all offshore installations in order to evaluate their effectiveness and identify weaknesses. This kind of task, although useful, would likely stretch the resources of the regulatory agency, at the expense of its other functions. •97 Interestingly, both the Burgoyne report and the Cullen report recommended more consistent standards of safety training, drills and induction. It is disquieting that such a recommendation was made almost ten years before the Piper Alpha tragedy, with no apparent results, and was subsequently identified as an important weakness in the safety system of the installation. It highlights the fact that identification of the problem is only the first step to improving worker safety in the offshore. The issues raised must be given suitable priority to encourage the necessary changes. Unfortunately, as was noted at the outset of this chapter, public attention focuses on disasters. Once the immediate impact of a disaster has passed, the need to remedy the perceived problems is not so great and the problems are prioritized accordingly. It is, therefore, not surprising that a number of the safety recommendations made by the Burgoyne Committee in 1980 were repeated in the Cullen report almost ten years later. Perhaps the most interesting observation that can be made about the two safety regimes considered in the three reports is the extent to which each believed that the offshore oil and gas industries possessed certain characteristics which removed them from the realm of ordinary industrial activity. These characteristics meant that offshore installations required special treatment in terms of their operations and safety. In respect to the •98 United Kingdom, these characteristics were the justification for giving responsibility for safety to the Department of Energy rather than the better equipped Health and Safety Executive. The observations of Lord Cullen would suggest that although the existence of these characteristics cannot be denied, their importance has been over-emphasized in respect to safety and its administration and that special treatment of the industry in this regard is not warranted. The key attitudes which affect safety in any industrial activity are in existence both onshore and offshore and the geographic isolation of offshore activity should not be relied on as an excuse for special treatment. Sadly, as the Piper Alpha disaster illustrated, reliance on these special characteristics as an excuse can have tragic consequences for the administration of safety. n n n n LI u u LI 3 ~i n a i j u i 99 PART IV OFFSHORE SAFETY REGULATION IN NEW ZEALAND (a) Introduction In the previous chapters, the general problems of occupational safety and the regulatory process have been identified and examined. Chapter III then looked specifically at offshore safety and considered the criticisms of operational safety by examining the conclusions and recommendations of three different committees and commissions of enquiry. This chapter will focus specifically on the regulation of safety in offshore operations in New Zealand. The purpose of this chapter is to examine the offshore safety regime currently in place in New Zealand and consider the extent to which the problems and criticisms described in earlier chapters are applicable. Although the focus of this chapter is safety in the New Zealand offshore, it is necessary to establish a framework in which to consider offshore safety. The first part of this chapter will therefore deal with how offshore n n n n •• o $,n c u u u It '!• o "i u - I operations are commenced and the provisions for licensing such operations. (b) The Petroleum Act 1937 The Petroleum Act 1937 is the means by which the New Zealand parliament has legislatively provided for the exploration for and exploitation of its petroleum resources, both onshore and offshore. The Petroleum Act ("the Act") can be described as omnibus act and applies to both oil and gas resources. "Petroleum" is defined in the Act as being:-"(a) Any naturally occurring hydrocarbon (other than coal) whether in a gaseous, liquid or solid state; or (b) Any naturally occurring mixture of hydrocarbons (other than coal) whether in a gaseous, liquid, or solid state; or (c) Any naturally occurring mixture of one or more hydrocarbons (other than coal) whether in a gaseous, liquid or solid state, and one or more of following, namely hydrogen sulphi||£ nitrogen, helium, or carbon"dioxide In Section 3 of the Act, the right of property in all petroleum existing in its natural condition on or below the surface of any land is vested in the Crown.2-30 The Crown's 229 Petroleum Act 1937 (NZ), section 2(1) 'petroleum' 230 Ibid, section 3(1) • 1 0 1 right of property in petroleum does not, however, extend to all parts of the offshore. The word "land" is defined in the Act as "all land within the territorial limits of New Zealand; and includes land below the sea and any other water." According to the Territorial Sea and Exclusive Economic Zone Act 1977, the territorial waters of New Zealand only extend 12 nautical miles from the baseline, thus excluding a large proportion of the Continental Shelf.232 Natural resources on New Zealand's continental shelf have been legislatively dealt with in the Continental Shelf Act 1964. Whilst the Act does not invest in the Crown the rights of property to all petroleum existing on/in the continental shelf, it does confer rights of sovereignty over any natural resources in this environment.233 Section 3 provides that:-"3. Exploration and Exploitation of Continental.Shelf-All rights that are exercisable by New Zealand with respect to the continental shelf and its natural resources for the purpose of exploring the shelf and exploiting ±hose resources are hereby vested in the Crown." 3 4 No other state is therefore entitled to exercise sovereign powers over natural resources on/in New Zealand's 231 Ibid, section 3(2) 232 Territorial Sea and Exclusive Economic Zone Ret 1977 (NZ), section 3 233 Continental Shelf Act 1964 (NZ), section 3 234 Ibid ~n ln"n n r 1 tj II. U.LI LI >1 I' "I I I I •102 continental shelf. 2 3 5 For practical purposes, the Crown is vested with rights of property over these resources since no other state has sovereignty over them. 2 3 6 In any event, the New Zealand Government has not distinguished between onshore and offshore/continental shelf petroleum in formulating its licensing and regulatory regime. Section 4(1) of the Continental Shelf Act 1964 applies the Petroleum Act 1937 to petroleum existing on or in the continental shelf and thus the legislative regime which applies to land within New Zealand territorial waters also applies to the seabed and subsoil of submarine areas out to the edge of the continental margin or 200 nautical miles. 2 3 7 (c) The Licensing Process The Petroleum Act and its regulations create the structure for the granting of licences. The Minister of Energy may grant prospecting licences and mining licences. Section 5 of the Act provides that the Minister may grant a prospecting licence authorizing theJLicensee to prospect for petroleum on the whole or any part of the land specified in the application.238 As noted above, the definition of "land" set out in section 2 of the Act includes land below 235 D.E.Fisher, "Petroleum Licensing in New Zealand" [1936/87] 6 oil and Gas Law and Taxation Review 151 236 Ibid 237 E.J. Haughey and B.N. Gundersen, "Energy Law in New Zealand" (1984) 2 Journal of Energy and Natural Resources Law. 117. at 132 238 Petroleum Ret 1937 (NZ), section 5 •103 the sea and any other water. 2 3 9 As a condition of the prospecting licence, a work programme approved by the minister must be diligently and continuously carried out in accordance with good oilfield practice.240 The initial term of a prospecting licence is a maximum of 5 years, although the licensee may apply for an extension before the 'expiration'Of the initial term. 2 4 1 The prospecting licence confers on the licensee the exclusive right to prospect for petroleum on the land comprised in the licence and to carry out mining operations for that purpose.242 In the event that the holder of the prospecting licence finds a deposit of petroleum, he may exchange his prospecting licence for a mining licence, after satisfying the Minister of Energy as to the existence of the deposit and his ability and willingness to comply with the conditions of a mining licence.243 Mining licences are granted at the discretion of the Minister244 and are granted for and initial term of not more than 4 years. 2 4 5 This term may be extended by the Minister but_may not exceed a period of 40 years from the date of approval of the work programme except in certain specific circumstances.246 The Minister 239 Ibid, section 2 240 Ibid, section 5(3) 241 Ibid, section 6 242 Ibid, section 7(l)(a) 243 Ibid, section 11 244 Ibid, section 12 . 245 Ibid, section 13 246 Ibid, section 13(3) •104 is specifically empowered to refuse an extension of a mining licence initial term if he/she is satisfied that the rate of production of petroleum from the deposit in the licence would be contrary to the national interest.247 Once a licensee has obtained a mining licence, he may not commence construction of any permanent works or structures unless the Minister has approved the work programme.248 As noted above, a prospecting licensee must diligently and continuously carry out his work programme. If the licensee fails to develop a petroleum discovery within his licence area, and this failure to develop would be contrary to national interest, the Minister may reduce the area of land comprised in the prospecting licence or revoke the licence entirely.245 Royalties are payable to the Secretary of Energy in respect of all petroleum produced from the land comprised in the licence.250 247 Ibid, section 14B 248 Ibid, section 14A 249 Ibid, section 14C 250 Ibid, section 18(2) 105 (d) Operational Controls The Petrol sum Act not only sets out the provisions for granting licences, but also deals with general operational aspects of petroleum development. In terms of statutory control of petroleum prospecting and mining operations, it is a statutory condition of every prospecting licence that a programme of work be approved by the Minister of Energy and be diligently and continuously carried out by the licensee in accordance with recognized good oilfield practice.25-1 The legislation also has some flexibility to enable it to respond to changing conditions. Section 10 of the Act provides that in the application of the licence holder, the Minister may modify, suspend the whole or any part of any programme of work or any obligation in the prospecting licence.252 In terms of obtaining ministerial consent to a programme of work for development of a petroleum discovery, the cardinal principle is set out in section 14A(2) which provides that no construction of any works for the development of any petroleum discovery shall be commenced until ministerial approval of the work,programme has been obtained.253. 251 Ibid, section 5(3) 252 Supra note 242 253 Ibid, section 14A O ri n )i J'o'i in i U U U If ' ir'i -i •>I _a 1 - • - , 106 More specifically, the legislation sets out operational controls in respect to well-drilling, an integral part of petroleum prospecting and mining. Indeed, it is this aspect of petroleum operations which impacts most heavily on worker safety. Part III of the Petroleum Regulations 1978 relates to well-drilling, the definition of which includes "any operation relating to any on-site preparation prior to drilling, to the completion, suspension, or abandonment of a well and to the re-entry of a well for any deepening, repair, re-drilling or any other purpose"254, together with the actual drilling of the borehole for the purpose of prospecting for or obtaining petroleum.255 This wide definition of well-drilling includes most day-to-day activities which take place in the exploration for and exploitation of petroleum, whether onshore or offshore, and the regulatory controls imposed upon well-drilling in the regulations are therefore highly relevant to the issue of operational safety in the offshore and its regulation. Anything of an operational nature outside this definition would probably fall within the more-general heading of "mining operations", which is dealt with in Part IV of the Regulations. An integral part of the regulatory control of well-drilling operations is the question of who is in charge. It 254 Petroleum Regulations 1978 (NZV. regulation 35 255 Ibid, regulation 2 is difficult to ascribe responsibility if it is not clear who is to be in charge of the well-drilling operations. Regulation 36 provides that well-drilling operations may only be carried out under the supervision of a holder of a service permit granted by the Chief Inspector.256 Indeed, the regulation goes so far as to require that well-drilling operations must be carried out under the direct personal supervision of a service permit holder. 2 5 7 This requirement clearly establishes a chain of supervision and a resting place for operational responsibility in relation to well-drilling operations. The regulatory requirements for obtaining a service permit would suggest that only an individual person may obtain such a permit and exercise control over the operations. It does not appear possible for an operating company to apply for and obtain a service permit, although the person in charge may be an employee of the operating company. Regulation 36(2) presides that an applicant must satisfy the Chief Inspector •r.'iat he. is:-256 Ibid, regulation 36(1)(a) 257 Ibid, regulation 36(1)(b) •108 (a) a New Zealand resident (b) a person having an aggregate of at least 3 years experience in various capacities at wells where gas and oil have been dealt with or the equivalent period of other strata drilling experience (c) a person of ability, sobriety, good conduct and over the age of 21. 2 5 8 The Chief Inspector may cancel a service permit if he is of the opinion that the holder is not capable of fulfilling his duties. 2 5 9 In the event that the operation in question falls within the general heading of "mining operations", Regulation 31 sets out similar provisions in relation to who is in charge of the operation. This regulation requires that no mining operation may be carried unless the owner of the operation has appointed a person in charge.260 This person must possess the competence and skills suitable to the type of mining operation in question and must exercise daily, personal supervision of th^operation. 2 6 1 Although the owner of the operation may appoint the person in charge, the appointment must be approved by the Inspector, after consideration of the appointee's qualifications.262 If the 258 Ibid; regulation 36(2) 259 Ibid, regulation 36(3) 260 Ibid, regulation 81(1) 261 Ibid, regulation 81(2), (5) 262 Ibid, regulation 81(4) ' • - - * 7 . - - . s' / / . ~ 109 operation involves well-drilling, the appointed person in charge must be the holder of a service permit.253 Having thus established clear responsibility for the operations, the regulatory operational controls set out in the regulations require various actions and duties of the person in charge of the operation. Regulation 38 requires the person in charge of the well-drilling operation, or an approved person appointed by him, to inspect the drilling rig and any other installation under his supervision at least once every 24 hours.264 This inspection is supposed to include an examination of all safety appliances and gear connected with the well-drilling operations.265 Following this inspection, the person in charge must record, in writing, his opinion as to the condition and safety of the rig, installations and gear and any alterations or repairs required to ensure greater safety to the persons employed in the working of the rig or its installations.266 In the event that this inspection reveals any part of the rig or its operation that is unsafe, the rejulations place a duty on the person in.-charge to take immediate steps to have it p fry made safe. 263 Ibid, regulation 81(6) 264 Ibid, regulation 38(1) 265 Ibid 266 Ibid 267 Ibid, regulation 38(2) The person in charge must also keep a record of any accidents or occurrences on the rig/installations from which any hazard may arise and all of these records must be accessible to the Inspector and the persons employed on well-drilling operations at all times.26® The Regulations set out other specific requirements for well-drilling operations including requirements for application for well-drilling consent269, records to be kept and forwarded to the Chief Inspector270, testing of drilling fluid271, and casing of wells.272 Aside from these general operational requirements, how, then, do the Regulations address the aspects of operations offshore which impact directly or indirectly on worker safety? The Petroleum Regulations seek to address simultaneously the operational aspects of drilling onshore and those operational aspects which are unique to the offshore. In order to specifically consider offshore safety regulation, it is therefore necessary to consider all of the regulations which impact upon operational safety and select those regulations which apply generally to both onshore and offshore oil and gas operations and those which apply only to offshore operations. 268 Ibid, regulation 38(3),(4) 269 Ibid, regulation 40 270 Ibid, regulation 41, 42 271 Ibid, regulations 44-46 272 Ibid, regulations 47-55 (e) Blowout Prevention Blowout prevention is a major safety concern of both the industry and government and is therefore, not surprisingly, the subject of extensive and relatively detailed regulation.273 Whilst the regulations provide for the installation and maintenance of blowout prevention equipment conforming to "recognized oil or gas-field standards and practice",274 the detailed technical requirements set out in the regulations d o not distinguish between onshore and offshore drilling.275 The regulations require the installation of blowout prevention equipment prior to drilling below the first string of cemented casing or on re-entering a completed well. 2 7 6 The blowout preventers must be dual controlled, with one control at the driller's station and the other at least 25 metres from the well".head:. Back-up controls for all the equipment is required.277 273 Ibid, regulation 56 2 74 Ibid, regulation 56(1) 275 There" is a minor reference to offshore wells in r5fa(2) which provides that shear rams are required for offshore wells and wells where high pressure is anticipated. 2 76 Ibid, regulation 56(2) 2 7 7 Ibid, regulation 56(4) •112 The blowout prevention equipment must be pressure tested and function tested at specified regular intervals.278 A blowout prevention drill is required weekly for each drill crew to ensure that all the equipment is operational and that the crew are properly trained to carry out emergency duties.279 No other training for blowout emergency duties is specified in the regulations. The regulations also prohibit the removal of blowout prevention equipment during the period of well drilling until proper action has been taken by the licensee to ensure that the well is safe. 2 8 0 What constitutes "proper action" and a "safe" well is not set out in the regulations and appears to have been left the discretion of the licensee. There is, however, some control on this exercise of discretion by the licensee in that the regulations do provide that the Chief Inspector must be advised when blowout prevention equipment is removed for anything other than routine operations, the reasons for removal, the steps taken by the licensee to make the well safe and the date when the equipment is to be reinstalled.281 270 Ibid, (regulation 57 279 Ibid, 'regulation 57(4) 280 Ibid, regulation 58 281 Ibid, regulation 58(2) (f) Fire Safety The volatile nature of oil and gas make fire an ever-present hazard in any offshore operation. Indeed, fire accounts for a significant number of the serious accidents which occur on offshore installations. The regulation of fire safety is thus an important area of offshore safety regulation. As with blowout prevention, the regulations on fire safety are reasonably detailed although once again there is no distinction drawn between onshore and offshore mining operations. The regulations require the licensee or any contractor employed by him to install and maintain a firefighting system where a potential fire hazard exists.262 The firefighting system must be designed to meet "recognized standards" and should be appropriate to the mining • poo operation. J Whilst these requirements appear at first blush to be fairly loose, it is important to note that the firefighting system and equipment is required to be approved by the Chief Inspector before installation.284 This provides some flexibility for licensees in terms of designing and implementing an appropriate firefighting system, while still maintaining an adequate minimum standard to be approved by the Chief Inspector. The Chief Inspector 282 Ibid, regulation 95(1) 283 Ibid 284 Ibid, regulation 95(2) 114 may also require visiting foreign offshore installations to modify their firefighting system or equipment to comply with New Zealand firefighting requirements?.285 Firefighting equipment is required to be tested and inspected by an approved person at three month intervals or such lesser period as may be specified by the manufacturers. 286 The person in charge of the well-drilling operations is responsible for ensuring that all persons employed on the installation are trained in the use of the firefighting equipment.287 The person in charge is also responsible for ensuring that all employees on the installation are familiar with the procedures to be followed in the event of a fire. 2 8 8 It is the responsibility of the licensee to , ODQ prepare the procedures to follow ..in the event of a f i r e . " Automatic detector and alarm systems for combustible and noxious gases are required in all enclosed areas containing gas handling facilities and in any other areas designated as hazardous by the Chief Inspector .. 290 The regulations also make specific provision for situations 285 Ibid 286 Ibid, regulation 95(3) 287 Ibid, regulation 95(5) 288 Ibid, regulation 95(6) 289 Ibid 290 Ibid, regulation 65 n n n n < D D n where hydrogen sulphide gas or noxious gas is likely to be encountered.251 The licensee is required to provide suitable rescue equipment and procedures and personnel trained in the use of such equipment.252 The steps taken by the licensee in providing rescue equipment and procedures is once again subject to the approval of the Chief Inspector. (g) Offshore Installations Almost as an afterthought, the legislators have recognized that certain aspects of offshore mining operations differ markedly from the corresponding onshore operation, to the extent that the general provisions of the regulations which apply to both onshore and offshore operations left some important omissions with regard to the operation of offshore installations. The unique location of offshore installations are perceived to require special provision in relation to certain safety equipment and evacuation procedures. Regulations 103 - 106 of the Petroleum Regulations purport to deal specifically with the safety and evacuation aspects of offshore mining operations which distinguish this type of operation from the more general safety provisions set out in the body of the regulations. 291 Ibid 292 Ibid, regulation 65(5) •116 These regulations use the term "offshore installation" to describe the structures commonly used in offshore mining operations. The regulations define the term "offshore installation" as ar.y fixed or mobile offshore structure, drillship or semi-submersible drilling unit used in conjunction with petroleum mining operations.293 This definition does not specifically include the structure known as an "artificial island" although it is arguable that such a structure could be described as a fixed offshore structure. The regulations provide generally for certification of offshore installations.294 The design and method of : construction of a fixed offshore installation must be approved by an acceptable certifying authority and the installation must hold a certificate from that certifying authority to the effect that it complies with the design and that the construction is sound. The certifying authority must be approved by the Secretary of Energy.295 Obviously it is a matter for the discretion of the Secretary of Energy as to what constitutes an approved certifying authority, but it would probably be safe to assume that certificates issued by the large classification societies such as Lloyd's 293 Ibid, regulation 103 294 Ibid, regulation 104 295 Ibid, regulation 104(1) and (2) n n n h' 3 j y 117 Register of Shipping, American Bureau of Shipping or det Norske Veritas or a New Zealand authority such as the Ministry of Transport would meet with the approval of the Secretary. Both fixed and mobile units require a certificate of fitness from an approved certifying authority that the installation reaches a level of fitness appropriate to the conditions under which it is to operate.296 The brevity with which the regulations deal with the question of certification of offshore installations leads one to the conclusion that the legislators are relying heavily on the standards and rules of the classification societies. The primary role of the classification societies is to satisfy the owner and insurer of the installation that it is designed, constructed and maintained to a standard whicih is sufficient for the area of operation for which the installation was intended. The standards which the classification societies apply to installations have been formulated on the basis of this role. There are many aspects of operation of the installation such as navigation, communication and evacuation systems which should perhaps be covered in the realm of certification but which are not dealt with in the standards set by the classification societies. Regulation and control of these areas is the 296 Ibid <• -a » ^ * V n n o n sole responsibility of the coastal state. Thus the adequacy of the certification provisions set out in the regulations can only be considered in the context of other regulatory provisions relating to the safe operation of the installation which are outside the classification societies' rules. The New Zealand legislators' answer to this challenge is entirely set out in only two regulations which deal with lifesaving equipment and evacuation systems. Every offshore installation is required to have at least 2 separate unobstructed escape routes, a means of escape to upper or lower levels, personnel landings at sea level and emergency knotted ropes, ladders or scramble nets. 2 5 7 The installations are also required to be equipped with sufficient life rafts to provide coverage for twice the maximum number of people on the installation at any one • pap , time.. • . The liferafts must be stowed on at least two sides of the installations in a manner suitable for lowering by OQQ freefall. " Every person on board the installation must be provided with a lifejacket which must be worn during an evacuation of the installation and during other specified operational activities.'300 The licensee or contractor is required to make provision for every person on the 297 Ibid, regulation 105(1) 298 Ibid, regulation 105(3) 299 Ibid 300 Ibid, regulation 105(4) installation to be properly trained in the use of lifejackets and other lifesaving appliances.301 Every installation must be equipped with appropriate communications to enable a distress signal to be transmitted and to enable communication to be established between the installation, its shore base and its standby vessel.302 A standby vessel is required to be near an offshore installation at all times while it is manned. The regulations do not specify what is considered to be a distance "near" the installation but the vessel must be capable of rendering immediate rescue assistance.303 The regulations also contain provision for the evacuation of offshore installations. The licensee or contractor is required to appoint evacuation officers, one of whom must be on the installation when it is manned.304 The evacuation officer is in sole charge of evacuation from the installation and the regulations require him/her to be properly trained in survival at sea and in the use of all survival and evacuation equipment.305 m terms of training personnel on the installation in safety and evacuation procedures, the regulations require only that the evacuation officer inform every person arriving on the installation of 301 Ibid,-regulation 106(6) 302 Ibid, regulation 105(6) 303 Ibid, regulation 105(5) 304 Ibid, regulation 106(1) 305 Ibid, regulation 106(1) and (4) •120 the evacuation procedures, emergency signals and the location of survival equipment.306 The licensee or contractor is required to make provision for personnel to be " properly trained in the use of lifejackets and similar lifesaving appliances"307 but outside these requirements, there is no duty on either the evacuation officer or the licensee/contractor to conduct formal evacuation training. The regulations require the conduct of "approved practice drills"308 although it is not clear who the drills are to be approved by. One would assume that the approval of the practice evacuation drills should come from the Chief Inspector but this is not clear from an examination of the regulations. (h) Safety Equipment The Petroleum Regulations contain specific reference to certain items of safety equipment and their use during well-drilling and mining operations _ Regulation 91 sets out a list of equipment to be supplied to employees by the licensee or the contractor if the operation(s) involve risk of various types of impairment. Approved safety helmets are required to be 306 Ibid, regulation 106(6) 307 Ibid 308 Ibid, regulation 106(7) •121 supplied to each employee engaged in mining operations and are required to be worn at all times in the. areas designated as safety helmet areas.309 If the operation or any part of it involves a risk of foot injury, the licensee or the contractor must supply approved safety boots to all employees engaged in such operation(s).3J0 Where the operation involves risk of injury to eyes, either from flying particles, corrosive substances or harmful radiations, the licensee or contractor must provide employees engaged in the operation with "suitable and efficient equipment or appliances for the protection of eyes" if such persons are not protected in any other way. 3 1 1 If persons engaged in the operation(s) are exposed to noise from the activity which, in the opinion of the Inspector, is likely to causa impairment to the hearing of such employees, the first duty of the licensee or the contractor is to take all steps as may be practicable to prevent those employees from being exposed to that noise.312 Thus, if it is "practicable" to redesign work systems in order to avoid exposing employees to such noise, then the 309 On an offshore mobile or fixed platform, safety helmet areas include all areas outside of the living or administration quarters and any such other areas of the mining operations designated safety helmet areas by the Inspector.- Ibid, regulation 92 310 Ibid, regulation 91(2) 311 Ibid, regulation 91(3) 312 Ibid, regulation 91(4) Is/ t 'X • * - - 'H.' - * - / t - v -r, ' j • -"'"'i """•v."');. "MV^i •'VLVVj "vYi>t' f • • 122 .'"• licensee or the contractor take steps to do so. If it is not practicable to prevent exposure of employees to the noise, either by reducing the noise output or by insulating i " the activity, then the duty on the licensee or the contractor changes and requires them to provide such employees with personal ear protection devices of a type approved by the Medical Officer of Health.313 The regulations also provides that all of the safety equipment referred to must be worn at all times by persons involved in the operation. It is not clear form the regulation itself who is responsible for ensuring that. ' 1 - • • . . . . ".'I . 'V ! employees wear the appropriate safety equipment. There does j not appear to be any duty on the licensee or the contractor j to ensure that employees wear the proper equipment during J hazardous operations. There is a general duty on employees to comply with the Act and it regulations314 and any directions as to safety and discipline given to them, by the ; person in charge of the operation. It may be that this I general provision shifts responsibility for ensuring use of ; | safety equipment away from the licensee/contractor and on to J the employee(s). '•.•.•:;•:•.•.••. -"-of There is clear potential for conflict in the -.i. 1 regulations with regard to who is to be responsible for J 313 Ibid, regulation 91(5) ;.-.f -•>:v:;wm 314 Ibid, regulation 83 '•.".:• V' •','•'•:.  •"-.' '-V'.-'X'-V'•'•.:-:• •!"•"•'' V'H • -^-J-",' i-' : * V-/Si^SE^'LVii^&^^H » n n n n n <0330 •123 provision of the safety equipment. The regulations provide that "the licensee or any contractor employed by him" shall ensure that suitable safety equipment is provided to each affected employee. Obviously the licensee and contractor(s) may deal with this issue in their contractual negotiations and final agreement. A problem may arise where the matter has not been dealt with contractually and the licensee and the contractor(s) cannot agree on who is responsible for provision of the equipment. The regulation does not make any provision for this occurrence and the practical result of a disagreement between the licensee and the contractor is that employees may not be provided with the appropriate safety equipment and may thus be exposed to unreasonable risk. This potential result obviously impacts heavily upon the efficacy of the regulation and ultimately, the safety of persons involved in hazardous aspect of the well-drilling and mining operations. (i) Medical Personnel The relative isolation of an offshore installation make the availability of medical personnel an important factor in the safe operation of the installation. The. Petroleum regulations require only that the : licensee or contractor ensure that there are an adequate number of personnel trained in first aid and the use of •124 breathing aj^aratus.315 There is no indication in the regulations as to what would constitute an "adequate" number of personnel in any given circumstance. In addition to providing personnel trained in first aid, the licensee need onlv arranae for the services of a medical practitioner to be available in the event of any accident.3-16 Such a general requirement is probably adequate for the purposes of onshore mining operations but does not address the practical difficulties which arise when an accident occurs on an offshore installation and urgent medical assistance is required. (j) 'rralninH QfjfsiliioiPTg PisirsKMmrogJ Training is. a vital eigmsot i® developing an effective safety system. Qualified personnel properly operating proper equipment is the essence of occupational safety in the offshore.317 It is therefore surprising that the issue Ot training is. act. dealt with in more detail in the New Zealand regulations. Regulation 81 provides that the person in charge of mining operations must possess the competence and skills 315 Ibid, regulation 97(3) 316 Ibid, regulation 97(4) 317 Report of Task Force on Ocean Ranger Recommendations. Ottawa! 1987, p.8 " 125 suitable for the type of mining operation of which he will be in charge.•3iS The regulations do not contain any guidelines as to what constitutes suitable "competence and skills" and does not set any minimum standards to be reached by the appointee. There are no formal training requirement's provided for and the only check on the appointment is that it uiust be approved by the Inspector. There are no minimum training requirements as to the safe operation of equipment. Regulation 85 provides only that employees shall check the safety of their workincr place 320 and all the equipment they are required t@ use. In the absence of minimum safety training stanela£d§: this regulation has the potential to be useless since untrained personnel may not be able to recognize hazards is theif werkplae© and/or equipment. I a r e same traiJiiRf? provisions with regard to emergencies, both onshore and offshore. Regulation 95(5) provides that the person in charge of mining operations is responsible for ensuring that all personnel are trained in •.. .. 221 the use of firefighting equipment and procedures. Regulation 97(3) requires the licensee or the contractor to 318 Petroleum Regulations 1978 (MZ). regulation 81(2) 319 Ibid, regulation 81(4) 320 Ibid, regulation 85 321 Ibid, regulation 95(5) I - ',. , , ..,.-.f .i . , ' , / ' . .. - ,„.».,•• t Q~0 ri'rt.'ij?D..-0. J.7>.• •126 have an adequate number Of personnel trained in first aid.322 Only one regulation deals specifically with training requirements in the offshore. Regulation 106(4) provides that the evacuation officer, who has sole charge of evacuation from the installation, shall be properly trained in survival at sea and the use of all survival and evacuation equipment on the installation.323 There are also required to be sufficient personnel on the installation at all times, proficient in the use of and able to take charge of any lifeboat, iiferat't or similar equipment on the installation.324 With regard to emergency safety training for persons on the installation, the licensee or any contractor is required to make provision for every person to be properly trained in tJaa use of lifejackets and similar lifesavin^ a p p l i a n c e s . Once again, it is not clear whether the final responsibility to make such provision rests on the. licensee or the contractor. There is also no duty to ensure that personnel are properly trained. The regulation only requires that the licensee or contractor "make provision" for persons to be properly trained. If the licensee or contractor simply arrange'for training sessions and practice drills to .be 322 Ibid, regulation 97(3) 323 Ibid, regulation 106(4) 324 Ibid, regulation 106(5) held, without taking steps to ensure attendance, it / s arguable that the provisions of regulation 106(6) have been met, even if personnel do not attend such sessions. The licensee or contractor can still be said to have "made provision" for the training. (k) The* Prnhlsms Tdentified New Zealand offshore safety regulations are a classic example of the problems identified in earlier chapters. They bear the characteristics of the problems discussed in Chapters I, II, and III and it is therefore possible to identify potential problems at three different levels - the operational level, the regulatory level and the occupational safety level. At the operational level, there are a number of potential problems with the regulations and the safety regime in general. There are no minimum training requirements in respect of either operations of equipment and machinery or in relation to safety and evacuation systems. More particularly, there is no duty on the licensee or the contractor to ensure that personnel on board the installation are properly trained. In the absence of such a duty, it is possible that the licensee and/or the contractor will adopt a very superficial attitude toward operational and safety training, which attitude is likely to •128 permeate throughout the installation. Without- any duty to ensure that personnel are properly trained in safety and • operations, thfcrs is little incentive for licensees and contractors to provide adequate safety training, particularly when it becomes expensive to do so. It has been noted above that safety and profit are highly incompatible objectives. The regulations place responsibility for provision of certain specific items of safety equipment on the licensee or the contractor. As noted earlier in this chapter, this division of responsibility is workable as long as the • licensee and the contractor deal with the provision of safety equipment in their contractual arrangements. If the matter is omitted from the contract, fchere is no guidance in the regulations as to who the ultimate responsibility , to provide this safety equipment wil.L fall on. A possible consequence of this omission is that important safety equipment will simply not be supplied to employees because the licensee and the contractor cannot agree on who will be responsible for its supply. The whole issue of safety regulation for offshore installations is dealt with by the regulations in very general'terms, with only brief reference to the factors which differentiate offshore operations from those carried out onshore. The certification requirements for offshore •129 installations are covered in the most general terms, requiring only a certificate of fitness from an acceptable certifying authority. The regulations rely heavily on the' standards of the certification or classification authority.' In the case of the larger classi-fination sonipt-.-ip.q, such as Lloyd's Register, their standards have been formulated on the basis of their role in satisfying owners and insurers that the installation is designed and constructed to a suitable standard for its area o operation. There are • obviously operational aspects of the installation which impact upon its fitness to operate but which are outside the standards used by the classification society. There is also the potential for conflict of authority on board the installation. The regulations provide that the person in charge of well-d"11ing and mining operations shall exercise daily, personal supervision over the installation. and its operation- The regulations also provide for the appointmsit of and evacuation officer, who is to-be properly trained in survival at sea and is in sole charge of any evacuation from the installation. What is not clear from the regulations is where the authority of the person in charge ends and where the authority of the evacuation officer begins. For example, who makes the decision to evacuate the installation? This is vitally important in an emergency situation since the time frame for •130 evacuation is often critical. It is =»+• what point th<2 evacuation officer takes charge. Perhaps one of the more obvious omissions from tha . regulations is in respect to medical personnel. The regulations require that there are an adequate number of personnel trained in first aid and that arrangements be made for the services of a medical practitioner in the event of an accident. This requirement not address the practical difficulties presented by the isolation of : o££sJkm» instaillaitiuajss in the event that urgent medical assistance is required. At the regulatory level, there are potential problems in relation to the administration of the regulations. The Petroleum Act and its regulations are administered by the Minister of Energy. As with the Department of Energy in the United Kingdom, the Ministry of Energy is directly involved in the implementation of New Zealand offshore policy and is therefore susceptible to conflicting pressures from the exigencies of production on one hand and the requirements of safety on the other. This also increase the possibility of regulatory capture of the agency by the industry. The standards set out in the regulations are fairly general in nature and resemble performance standards. This allows for a degree of flexibility to reflect the rapid • 1 3 1 technological changes in the industry but conversely makes the standards difficult to enforce. The generality of the performance standard allows more scope for interpretation by the industry and makes the task of enforcement by the regulatory agency much more complicated. There is a heavy reliance on voluntary compliance with the regulations. There are no sanctions for breach of the regulations other than revocation of the prospecting or mining licence. The government recognizes that it is expensive for licensees to operate offshore and any offshore development must be strongly encouraged by the government. In light of this fact, the Minister of Energy would generally be quite reluctant to revoke a mining licence for breach(es) of the regulations, despite his/her power to do so. The absence of lesser sanctions makes it necessary to rely heavily on voluntary compliance. A possible consequence of this is that the safety regulations will, in some case, be ignored, particularly if it is expensive to comply. _ At an occupational safety level, the regulations impose a specific duty upon the licensee or contractor with regard to noise exposure. The licensee or contractor is required to take all steps as may be practicable to prevent employees from being exposed noise levels which are likely to cause impairment. In theory/a licensee could be required to take steps to redesign its work systems in order to prevent exposure to the noise. Such a duty is clearly warranted since the employer is in the best position to design work systems to achieve adequate safety levels. Unfortunately, the question of what is meant by "practicable" is open to considerable interpretation. It may be "practicable" to redesign a work system but it may be cheaper to supply ear protection devices, which may or may not be worn by employees. The end result is profit ahead of safety. The brevity of the New Zealand safety regulations does little to convey a sense of responsibility for safety to employers and employees. As with the regimes considered in Chapter III, the regulations tend to shift responsibility for safety in the offshore on to government. Perhaps this shift in responsibility is convenient for regulators and industry alike but it does not address the fundamental problem of safety attitudes. Government cannot regulate an attitude to safety. Education is required at the highest levels of the industry in order to ^ develop a more healthy attitude to safety. The New Zealand regulations have not been examined and tested to the extent that the regimes in Canada and the United Kingdom have been examined. This is largely because there is little activity in the New Zealand offshore, other than the Maui gas platform which is some distance off the Taranaki coastline. It is, however, clear that there are a number of potential problems with safety regulation for the offshore, should the offshore undergo extensive development in the future. •134 CONCLUSION The title of this thesis poses the question, are regulators learning their lessons? The preferred answer to that question at the omtsiit of this work was no. There are valuable lessons to be learned from all of the offshore disasters particularly about attitudes; to safety. One cannot regulate an attitude to safety ar:>> there is no "simple solution" to the questions and problems posed by the regulation of this kind of safety in the: offshore. The body of this work has established why this is the author's preferred answer. : -..-V The regulation of any industrial activity is subject to a number of different influences, but the issue of worker safety adds yet another dimension. It adds a human dimension to the problem since it concerns the risk of injury or death to individuals in the course of their employment. It raises questions as to who should be responsible for the safety of employees in the workplace, how this responsibility should be discharged and at what point should society aacept the risk as a fair price to pay for the benefits received? As difficult as these questions may be to answer, they cannot be ignored simply because they are too hard. These questions impact on how adequate worker safety is to be achieved. It is not enough to hope that the parties involved will work out an appropriate solution between them or will voluntarily accept adequate standards of workplace safety. The law must step in and play a role in compelling participants to take some form of action to meet their responsibilities. This adds the regulatory dimension to the problem. Unfortunately, the standard-setting process, which is the classical method fcr regulating the behavior of industries, is fraught with its own problems. It is difficult to obtain the information necessary to formulate a fair and practical standard. There are few sources of independent information and the regulatory agency will often not have the expertise or resources of its own to obtain the information required. This leaves the industry which is to be subjected to the standards. It will generally have the most specific information needed to formulate the standard but is in a position to control the release of such information in order to influence the agency it its favour. The regulatory agency must also concern itself with the enforceability of the standards, which may mean formulating standards which do not conform with the primary objective,of the enabling statute. The limited resources of the regulatory agency often make it necessary to rely heavily on voluntary compliance. A possible effect of this reliance is that the industry does not take the standard seriously since there is little likelihood of sanction in the event of non-compliance, In the case of offshore operations, one jnu'it also factor in the operational dimension. The development of offshore oil and gas has often been described as a unique industry. It is certainly a hybrid industry since it involves an industrial activity being carried out in a marine environment. It is, perhaps, the hybrid nature of offshore oil and gas operations which differentiates then from other, similarly hazardous, industrial operations and justifies differential treatment them. There are operational aspects of offshore oil and gas exploration and production which are unlike anything onshore and thus require special treatment. Unfortunately, this factor, together with the history of rapid development of the • industry simply compound the problems which already exist in relation to the regulation of a hazardous industrial activity. An examination of the offshore safety regime in •New Zealand -serMar as a useful illustration of the difficulties faced by any regulator in trying to set effective safety standards for the offshore. Quite simply, there is no simple solution to thft. problems posed by safety regulation in the offshore. There is, however, some hope for those concerned that safety •137 standards may be improved. What is required is a marked change in attitude about the importance of safety in the offshore. This will not be an easy task, given the popular image of oil workers as modern-day frontiersmen. While this thesis has focussed on disasters resulting in large-scale loss of life, one cannot ignore the accidents which occur every day in the offshore. As Carson notes in his book, the statistics which are available suggest that the number of "minor" accidents in the offshore are considerably higher in the offshore than in any other comparable onshore industry.325 The number of accidents and the difficulty in obtaining acurate statistics suggest that worker and industry attitudes to safety are not what they should be. A change in these attitudes is not, however, impossible. The changing attitudes towards environmental protection and recycling are illustrative of the fact that old habits can be broken. It takes time and commitment from all levels of the operation. It requires commitment from the industry to embark on programs to improve attitudes towards the importance of worker safety and it-requires regulators to take note of the valuable lessons to be learned from the major offshore disasters. Until then, the present system will continue to operate imperfectly. 325 W.G. Carson. The Other Price of Britain's Oil - Safety and Control in the North Sea. Oxford: Martin Robertson, 1982, p.18 - 30 n n n n * i i u u u 'J -' C J i ~t BIBLIOGRAPHY •138 BOOKS Alvarez, A., Offshore: A North Sea Journey. Great Britain: Sceptre, 198 ' Baram, Michael S., Alternatives to Regulation. Massachusetts: Lexington Books, 1982 Bardach, E. and Kagan, R.A., Going by the Book: The Problem of Regulatory Unreasonableness. Philadelphia: Temple University Press, 1982 Breyer, S., Regulation and its Reform. Cambridge, Massachusetts: Harvard University Press, 1982 Brown, E.D., Sea-bed Energy and Mineral Resources and the Law of the Sea. London: Graham & Trotman, 1984 Burgoyne, J.H., Offshore Safety: Report of the Committee. London: H.M. Stationery Office, 1981, Cmnd. 7866 Canadian Centre for Occupational Health and Safety, Canadian Occupational Health and Safety Law: Future Practice Perspectives. Hamilton, Ontario: C.C.O.H.S., 1986 Carson,"W.G., The Other Price of Britain's Oil - Safety and Control in the North Sea. Oxford: Martin Robertson, 1982 Committee in Assessment of Safety of OCS activites, Marine Board, National Research Council, Safety and Offshore Oil. Washington D.C.: National Academy Press, 1981 Cullen, FvD., Maakestad W.J. & Cavender, G., Corporate Crime Under Attack: The Ford Pinto case and beyond. Cincinnati': Anderson Publishing Co., 1987 139 Drake C. and Wright, F. , Law of Health and Safety at Work.;. The N§$ Approachr London: Sweet & Maxwell, 1983 Fink, S. , Ciriaia Management; Planning fox the Inevitable, New York: Amacom, 1986 Frieze, P.A., McGregor, R.C. S Winkle, I.E., eds,, Marine agd Offshore Safety,. New York:. Elsevier Science Publishing Co., 1984 Gunningham, N.„ Safeguarding the Worker: Job Hazards and the Role of the Law, Sydney: The Law Book Company Ltd, 1984 Hawkins, K. and Thomas, J.M.,; e d s. # Making Regulatory Policy. Pittsburgh: University of Pitt§ b u r g h p r e ss, 1989 Heffron, F. and McFeeLy, N. T h e Administrative Regulatory Process, New York: Longman, 1983 Henry, C.E., The Carriage of Dangerous Goods by Sea - The Role of the International Maritime organization in International laqisla^kan-' London: Frances pjnter, 1985 — — — — — — — — — International Labour Office, Problems in the Offshore g e f c ^ e m i M m f c g ^ Geneva; i§78 Johnson, D.M., Gold, E. and Tangsubkul, P. , eds.International Symposium on the New Law of the Sea in South East Asia -Developmental Effects and Regional Approaches. Halifax: Dalhousie Ocean Studies Programme, 1983 -Kaasen, K., Sikkerhetsregulering 1 Petroleumsvirksomheten (Safety Regulation of Offshore Petroleum Activities. Oslo: Sjorettsfondet, 1984 Keto, D.B., Law and Offshore Oil Development: The North Sea Experience.• New York: Praeger Publishers, 1978 Kindt, J., Marine Pollution and the Law of the Sea. Buffalo, New York: William S. Hein & Co. Inc., 1986 140 Kitchen, J., Labour Law and Offshore Oil. London: Croon Helm, 1977 Mendeloff, J., The Dilemma of Toxic Substance Regulation: How Overreaulation causes Underregulation at OHSA. Cambridge, Massachusetts: MIT Press, 1988 Mendeloff, J., Regulating Safety: An Economic and Political Analysis of Occupational Safety and Health Policy. Cambridge, Massachusetts: MIT Press, 1979 Morgenstern, F., Deterrence and Compensation: Legal Liability in Occupational Safety and Health. Geneva: International Labour Office, 1982 Nudell, M. and Antokol, N., The Handbook for effective emergency and crisis management. Massachusetts: Lexington Books, 1988 Otway, H. and Peltu, M., eds., Regulating Industrial Risks -Science. Hazards and Public Protection. London: Butterworths, 1985 Pontecorvo, G., ed., The New Order of the Oceans - The Advent of a Managed Environment. New York: Columbia University Press, 1986 Royal Commission on the Ocean Ranger Marine Disaster (Canada), Report of the Royal Commission on the Ocean Ranger Marine Disaster - Report l: The Loss of the Semi-submersible drill rig Ocean Ranger and its crew - Report 2: Safety Offshore Eastern Canada. Ottawa: The Royal Commission, 1984-1985 Sutherland, V., Man and Accidents Offshore: An examination of the costs of stress among workers on oil and gas rigs. Clochester, Essex: Lloyd's List, 1986 Tolchin, S.J. and Tolchin, M., Dismantling America - The Rush to Deregulate. Boston: Houghton Mifflin Company, 1983 Townsend-Gault, I., Petroleum Operations on the Canadian Continental Margin: The legal issues in a modern perspective, Calgary: Canadian Institute of Resources Law, Faculty of Law, University of Calgary, 1983 ' ' 141' Townsend-Gault, I. ed. Offshore Petroleum Installations Law and Financing. London: International Bar Association, 1986 World Health Organization, Health Hazards of the Human Environment. Geneva: W.H.O., 1972 142 ARTICLES Barrett, B. and Howells, R., "Where Offshore Safety falls short", (1988/89) 138 New Law Journal 553-4 Barrett, B. and Howells, R., "Safe Systems for exploiting the Petroleum Resources of the North Sea", (1984) 33 International and Comparative Law Quarterly 811 Braithwaite, J., "The Limits of Economism in controlling harmful crporate conduct", (1981-82) 16 Law and Society Rev. 481 Brill, B.E., "The Role of Energy in the New Zealand Economy", (1981) 9 International Business Lawyer 125 Chircop, A.E., "The Marine transportation of Hazardous and Dangerous Goods and the Law of the Sea: An Emerging Regime", (1988) 11 Dalhousie Law Journal 612 Fisher, D.E., "The Legal Context of Petroleum Development in New Zealand", (1984) 14 Victoria University of Wellington Law Review 13 Fisher, D.E., "Law and Policy for accelerating petroleum exploration and development in New Zealand", (1986) 16 Victoria University of Wellington Law Revievf 11 Fisher, D.E., "Petroleum Licensing in New Zealand", [1986/87] 6 Oil and Gas Law and Taxation Review 151 Fisher, D.E., "Legal Stability and the Role of the Government in Petroleum Exploration in New Zealand", [1987/88] 6 Oil and Gas Law and Taxation Review 134 Ham, J.M., "Risks and responsibilities re: technology at Work in Hazards at Work: proceedings", a transcript of Hazards at Work: Law and the Workplace, a national seminar held in Toronto, November 17 143 Harrison, R.J., "Public and Private Responsibilties in Environmental and Safety Regulations", unpublished paper presented at Workshop on Managing Hydrocarbon Operations in Southeast Asia held in Bali, Indonesia May 31 - June 2 1990 Haughey, E.J. and Gundersen, B.N., "Energy Law in New Zealand", [1984] 2 Journal of Energy and Natural Resources Law 117 - 133 Lewis, D., "Worker Participation in Safety II - An Industrial Relations Approach", [1974] 3 The Industrial Law Journal 96 Townsend-Gault, I., After Ocean Ranger; A New Approach to Canadian Offshore Safety Regulation?. (Faculty of Law, University of British Columbia, 1990)[unpublished] Townsend-Gault, I, Offshore Hydrocarbon Development and Marine Pollution, unpublished paper presented as SEAPOL International Conference on the Implementation of the Law of the Sea Convention in the 1990s, Bali, Indonesia May 28 - 30, 1990 

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