MONTARA – BEFORE & AFTER

MONTARA – BEFORE & AFTER “A balance between prescriptive standards and technical innovation and flexibility must be achieved. In attempting to strike an appropriate balance, a stead-fast eye must be kept on the ultimate goal of health, safety and environmental protection.” - Montara Commission of Inquiry June 2010 (at 4.110) Presenter: Henry Prokuda Partner 8977481/1

MONTARA – BEFORE AND AFTER

MONTARA INCIDENT MONTARA - BEFORE AND AFTER

Offshore jurisdictional issues • 1967 Petroleum Agreement • Commonwealth Petroleum (Submerged Lands) Act 1967 (PSLA) (repealed, July 2008) • Commonwealth Sea and Submerged Lands Act 1973 – implementing Convention on Territorial Sea and Contiguous Zone and Convention on Continental Shelf (1964) • NSW v Commonwealth (1975) 135 CLR 337 (Seas and Submerged Lands Case) • Off Shore Constitutional Settlement 1979 (OCS) • Coastal Waters (State Powers) Act 1980 • Coastal Waters (State Title) Act 1980 • Petroleum (Submerged Lands) Act 1982 (Qld) and other States MONTARA - BEFORE AND AFTER

OFFSHORE JURISDICTIONAL ISSUES • Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) • Offshore Petroleum Act 2006 (C’wlth) • commenced 1 July 2008 • Reviewed and amended in November 2008 as Offshore Petroleum and Greenhouse Gas Storage Act 2006 (“OPGGS Act”) MONTARA - BEFORE AND AFTER

OFFSHORE PETROLEUM JOINT MANAGEMENT ARRANGEMENTS Jurisdiction – Agencies and Functions • Coastal waters – States and State Legislation (3 nm from baseline i.e., as a result of OCS) • Commonwealth Waters – (3 nm to outer edge of Continental Shelf) – Commonwealth legislation including OPGGS Act • Commonwealth waters called “offshore” areas in OPGGS Act • Joint Authority (JA) in offshore areas under OPGGS Act (Commonwealth and State Minister), but for external territories (e.g. Territory of Ashmore and Cartier Islands) only Commonwealth Minister is the JA • Designated Authority (DA) – State Minister and Minister’s Department MONTARA - BEFORE AND AFTER

JOINT MANAGEMENT ARRANGEMENTS Jurisdiction – Agencies and Functions • JA functions (regulation of Petroleum operations, pipelines and sub-sea facilities in Commonwealth waters) can be delegated to DA • National Offshore Petroleum Safety Authority (NOPSA) created by 2003 amendment to PSLA to oversee OHS arrangements in offshore areas • States (except WA) conferred power on NOPSA to oversee OHS arrangements in their coastal waters • NOPSA charged with safety on offshore petroleum facilities, but well integrity issues and environmental regulation remained with States under JA/DA arrangements MONTARA - BEFORE AND AFTER

JOINT MANAGEMENT ARRANGEMENTS Agencies and Functions – Environmental • Environmental, JA/JD approval of an “Environmental Plan” under PSL and then OPGGS Environmental Regulation • From 2000, referral of an “action” to Commonwealth also required under Commonwealth EPBC Act 1999 if action may have significant impact on Commonwealth Waters (MNES) Safety • Approval of Safety plan by NOPSA Well Integrity • Approval of Well Operations Management Plan (WOMP) by JA/DA. MONTARA - BEFORE AND AFTER

MANAGEMENT ARRANGEMENTS AT TIME OF MONTARA INCIDENT – THE “PLAYERS” Offshore Petroleum and GreenhouseGas Storage Act 2006 C’wlth (OPGGSA) Environment Protection and Biodiversity Conservation Act 1999 C’wlth (EPBCA) Australian Maritime Safety Authority Act 1990 (AMSAA) PTTEPAA AMSA NOPSA Joint Authority (JA) Designated Authority DA (the State) C’wlth SEWPAC administers EPBC Act and approval of “actions” in C’wlth Waters Manages OHS issues for offshore petroleum facilities - approves “safety case” under 1996 and 2009 Safety Reg. Introduced following “Piper Alpha” in 1988 Referral to SEWPC, assessment and environmental approval by Commonwealth Environment Minister for action that is “controlled” (may not be controlled if action can be taken in a “particular manner” to satisfactorily address impacts) e.g., pursuant to “environmental plan” • Various direct obligations under OPGGSA to: • manage risk and observe “good oil field practice”, more objective based than heavily prescriptive, i.e., all things considered “good and safe” in carrying out exploration and recovery of petroleum • control risk to “ALARP” • DA has responsibility for well integrity and approval of Well Operations Management Plan (“WOMP”) under Management of Well Operations Reg 2004 • DA approves “environmental plans” under OPGGSA Environment Reg 1999 • for Montara, JA had delegated functions to Northern Territory Minister/Department – the DA in 2008 Oversight of National Marine Oil Spill Contingency Plan (mainly ships) and National Marine Chemical Spill Plan Coastal and Commonwealth waters MONTARA - BEFORE AND AFTER

COMMISSION OF INQUIRYFINDINGS GENERALLY Cause of incident • “Batch” drilling of several wells meant partly constructed wells could be left exposed to air increasing risk of a “blow-out” • Poorly cemented casing shoe – had not been pressure tested - this was the primary well control barrier • No secondary well control barrier in place at the time. Two pressure containing anti corrosion caps (PCCC) had been planned but only one was installed, the 9 5/8” PCCC • This PCCC not really intended as a barrier against uncontrolled release of hydro carbon. Was removed some months after installation for maintenance • Blow out occurred 15 hours later – no back up to the casing shoe MONTARA - BEFORE AND AFTER

COMMISSION FINDINGS MONTARA - BEFORE AND AFTER

COMMISSION FINDINGS AND RECOMMENDATIONS MONTARA - BEFORE AND AFTER

MONTARA – BEFORE AND AFTER • In total Inquiry made 105 Recommendations • Commonwealth Government Response Report (February 2011) accepted 92, “noted” 10 and declined 3 focussed on action in 5 areas • Regulatory Regime • Regulator Operating Practices • Response arrangements • Environmental Management • Operator response • Legislative Review followed • BP Macondo incident in Gulf of Mexico occurred in April 2010 – well integrity issues MONTARA - BEFORE AND AFTER

MONTARA – BEFORE AND AFTERFINDINGS AND RECOMMENDATIONS MONTARA - BEFORE AND AFTER

MONTARA – BEFORE & AFTER