Conor Lenihan (Dublin South West, Fianna Fail)

I move: "That the Bill be now read a Second Time."

I am pleased to introduce the Petroleum (Exploration and Extraction) Safety Bill 2010 for the consideration of this House. I believe it is appropriate that we address an important issue such as the regulation of petroleum activities with respect to public safety with both clarity and purpose. It is also important that we should have confidence in our public administration operating efficiently and in the public interest at all times.

While this is a relatively short Bill, it will provide for an important strengthening of the overall regulatory framework governing exploration for and production of oil and gas. The Bill is a key part of the Government's priority legislative programme. At present the Department of Communications, Energy and Natural Resources is responsible both for licensing petroleum exploration and extraction activities and regulating those activities from a safety perspective. This Bill proposes to confer responsibility on the Commission for Energy Regulation, CER, for the regulatory function for safety in the case of upstream petroleum activities and the associated infrastructure.

In conferring this new responsibility on the commission, this Bill gives effect to a key recommendation of the report produced by Advantica following its safety review of the Corrib Gas pipeline. Advantica recommended that a new risk assessment based safety framework with respect to gas pipelines, in line with best international practice, should be developed and implemented in Ireland. The risk assessment approach is the commonly accepted methodology for managing safety worldwide and is reflective of the approach taken in the dangerous substances and chemicals legislation.

The Bill expands on this concept to provide that petroleum activities generally would be governed by the new safety framework. The safety framework will in effect be a manual setting out the nature and scope of the petroleum activities and associated infrastructure that will be designated and subsequently regulated by the commission. It will include the systems and procedures to be operated by the commission in designating and regulating such activities and associated infrastructure, including an ongoing system for audit and inspection. It is envisaged that the framework will cover a wide range of activities including the construction, operation, maintenance, modification and decommissioning of petroleum infrastructure.

Before turning to the detail of the Bill, I should like to outline how this new function sits well with the existing responsibilities of the commission. Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the commission's powers and responsibilities were extended under the Gas (Interim) (Regulation) Act 2002 to incorporate the regulation of natural gas. These powers and responsibilities were further extended by the Energy (Miscellaneous Provisions) Act, 2006 and the Electricity Regulation (Amendment) (Single Electricity Market) Act 2007 with respect to the commission's participation in the development of an all-island energy market.

The 2006 Act extended the commission's regulatory role with regard to the operation, maintenance and development of gas transmission and distribution networks. That Act conferred responsibility on the commission for the regulation of safety for the transmission and distribution of downstream gas. This Bill proposes to consolidate the commission's role as the regulator for gas safety by conferring it with responsibility for the regulation of safety in the case of upstream petroleum activities and the associated infrastructure. Given its already wide-ranging knowledge and experience of both the gas and electricity markets and its statutory responsibility to carry out its activities in a fair and impartial fashion, I believe that the commission is well placed to take on the additional functions and responsibilities proposed by this Bill.

I shall now turn to the detail of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published which provides a synopsis of the Bill's provisions. There are only four sections in the Bill. Section 3 inserts a new Part II into the Electricity Regulation Act 1999. Part II now effectively comprises a new section 13, which consists of 28 sections. Section 13A is the definitions section. Section 13B provides that the provisions of the Bill will not affect any other existing statutory obligation with respect to petroleum undertakings. Section 13C sets out the type of undertakings and activities to be governed by the new safety framework to be established and operated by the commission.

Section 13D provides for the designation by the commission of the specific petroleum activities and associated infrastructure to be regulated. There is a very wide range of activities and infrastructure, both offshore and onshore, which potentially could be required to conform to the new safety regime. Such activities may include the drilling of wells for the purposes of exploration and extraction of petroleum, transmission of gas by sub-sea and onshore pipelines and gas processing terminals. The criteria to be considered in determining designation will include the nature of the activity and the type of infrastructure associated with it, together with an assessment of the potential risks of engaging in such an activity and the safety measures required to reduce such risks.

The extent to which an activity is regulated by other legislation will be also a factor. Prior to the designation of any activity, the commission will consult with specified bodies, including the Health and Safety Authority, to ensure that any potential overlap in functions is managed in an effective and proper manner.

While the role of the commission will be to regulate with respect to public safety, the Health and Safety Authority is the national body in Ireland with responsibility for securing health and safety at work. The Health and Safety Authority responsibilities cover every type of workplace and every type of work in both the public and private sectors. The functions and responsibilities of the HSA will remain unaffected by the provisions of this Bill and the commission and the HSA will undertake their respective statutory obligations in parallel.

The National Standards Authority of Ireland, NSAI, will be also a mandatory consultee. The NSAI is responsible for the development of Irish standards, representing Irish interests in the work of the European and international standards bodies such as CEN, the European Committee for Standardization and ISO, International Organization for Standardization, and for the publication of Irish standards.

In effect the NSAI certification creates, maintains and promotes recognised standards. To ensure there is clarity with respect to the appropriate standards applicable to the petroleum activities and infrastructure that will be designated by the commission, the NSAI will create a petroleum exploration and extraction standards committee in accordance with section 10 of the NSAI Act 1996. The purpose of this consultative committee will be to advise the authority in respect of the need for, and the content of, standardisation in the field of petroleum exploration and extraction. The commission will liaise with the NSAI, when it is setting out in the safety framework the appropriate code or standard with respect to safety, to which all petroleum undertakings must conform when carrying out each designated activity. Before designating the activities to be regulated, the commission will provide an opportunity for interested individuals, organisations and other bodies to provide their views. In addition to the HSA and the NSAI, the Bill specifically provides that the commission must consult with the Environmental Protection Agency, the Maritime Safety Directorate and the Irish Aviation Authority.

Section 13E makes it illegal for petroleum undertakings to carry on any designated activity without having been issued with a safety permit by the commission. Section 13F ensures that it will be a condition of all licences issued by my Department that such undertakings hold a safety permit. This will ensure compliance by all petroleum undertakings, whether they are existing or new licensees, with the requirements of the safety framework, within the statutory timeframes proposed by the Bill.

Two of the amendments tabled in the Seanad by the Minister, Deputy Eamon Ryan, dealt with the question of public access to information. This will result in greater openness and transparency and will help generate public confidence in regulatory processes. The Bill provides for access by members of the public to information contained in safety cases and safety permits. The Bill also provides for participation by interested parties and by the general public in the development of the safety framework itself and of the guidelines that will set out what should be included in a safety case.

Section 13G provides for an enhanced role for the Commission for Energy Regulation in that it establishes as an objective of the commission that it should foster and encourage safety with regard to the carrying on of petroleum activities. The actual functions of the commission with regard to its new regulatory role are established in section 13H. While the key function is to establish and implement the safety framework, other specific functions place obligations on the commission to investigate and report on petroleum incidents, to monitor and enforce compliance with the requirements of the framework and to grant safety permits where it is satisfied with the safety management system proposed by the petroleum undertaking. The matters to be considered by the commission in carrying out its functions are also set out. They include minimising the potential for overlap or duplication of effort. This will be achieved by the commission having regard to where similar functions are already performed by other bodies and by co-operating and consulting with the bodies specified in the Bill.

Section 13I expressly sets out what is required of the commission in establishing and implementing the safety framework, including the information to be contained in the framework document. It is envisaged that the framework document shall contain information in respect of the following: the nature and scope of the petroleum activities to be regulated; the systems and procedures to be operated by the commission; a list of designated petroleum activities and associated infrastructure and the appropriate code or standard with regard to safety relevant to each; the procedures for assessment by the commission of a safety case application; and a system for the ongoing monitoring of compliance of petroleum undertakings through audits and inspections. In deciding what other matters may feature in the framework, the commission may consider such issues as technological developments, industry best practice, reviews of safety codes and standards, or submissions or recommendations made by interested parties. In the interests of transparency, the commission is also required to report annually to the Minister as regards the functioning of the safety framework.

The implementation of the framework in compliance with section 13M will mean in practical terms that within a specified statutory period, a petroleum undertaking will be required to submit a safety case application to the commission with respect to any designated petroleum activity it is carrying on or it proposes to carry on subsequent to the enactment of the Bill. This section addresses the fact that the new regime will apply to both existing and to new licensees. The use of a safety case regime is a standard feature in the regulation of safety-critical industries, including rail, nuclear and chemical. It is well established and has been used in the offshore oil and gas sector in the United Kingdom and Australia for the past 20 years. In the UK, the Health and Safety Executive is responsible for the safety regulation of the offshore oil and gas sector. Undertakings responsible for offshore oil and gas installations are required to submit safety cases to the Health and Safety Executive for acceptance as a condition of operating in UK waters. In Australia, the National Offshore Petroleum Safety Authority is responsible for the regulation of offshore safety, where the requirement is to have an accepted safety case for each offshore petroleum facility and for the facility operator to act in accordance with the safety case.

In Ireland, the commission has already successfully implemented a safety case regime in discharging its downstream gas safety responsibilities under the natural gas safety regulatory framework, provided for under the Energy (Miscellaneous Provisions) Act 2006, under which, similarly, if a safety case application is approved by the commission, a safety permit will be issued to the petroleum undertaking.

Section 13L provides that the commission, following consultation with specified bodies, will be required to draw up and publish safety case guidelines which will set out the appropriate content of a safety case. This may include the specification of the appropriate technical design principles and safety standards to be achieved, together with the procedures to be followed in the submission of a safety case for approval to the commission. This will provide guidance for petroleum undertakings in respect of what is required of them in submitting a safety case. This requirement will make it illegal for petroleum undertakings to continue to carry out a designated activity without having submitted their safety case within the prescribed timeframe.

The Commission will approve a safety case pursuant to section 13P, or a revised safety case pursuant to section 13N, only for the purpose of issuing a safety permit where the information in the safety case complies with the requirements of the safety case guidelines. The commission must also satisfy itself that the petroleum undertaking is capable of implementing the safety management system described in the safety case.

Using similar provisions governing other functions of the commission, the Minister may, pursuant to section 13J, in the interest of proper and effective regulation, give written directions to the commission in connection with the exercise of its statutory functions. A written direction could be given if, for example, the safety framework was not published within the specified timeframe, or where measures might need to be taken arising from reports on major accidents, or where the Minister considers that it would be in the public interest that the framework be reviewed or amended. While petroleum undertakings must comply with the specific requirements of the safety framework, section 13K of the Bill also places a general duty on petroleum undertakings with respect to reducing risks with regard to safety to a level that is as low as is reasonably practicable. Section 13O imposes an obligation on petroleum undertakings to carry out designated activities in conformance with their approved safety case.

Section 13P sets out the basis upon which the commission may approve a safety case and issue a safety permit. A key consideration for the commission will be the capability of the petroleum undertaking to implement the safety management system described in its safety case.

Section 13Q provides the commission with a power to refuse to grant a safety permit or to revoke a safety permit. It sets out the basis for taking such decisions and the process that the commission must follow. Revocation of a safety permit by the commission, which would prevent the continuation of a particular activity, might occur if, for example, an undertaking were not complying with the conditions of its safety permit. This section also provides for a right of appeal by a petroleum undertaking to the High Court where a permit is refused or revoked.

Sections 13S, 13T, 13U, 13V, 13W and 13X make provision for what should happen in the event of a petroleum incident occurring. A petroleum incident is defined for the purposes of this Bill as an incident resulting in loss of life, personal injury or damage to property not belonging to the undertaking. There is an obligation on the undertaking to report such an incident and the steps the commission is subsequently required to take, including furnishing a report to the Minister, are also set out.

The purpose of this Bill is to promote risk assessment and risk management. To assist the commission in ensuring full compliance in this regard, it has the power to appoint petroleum safety officers, as required, to investigate any circumstance it deems appropriate. The routine functions of the petroleum safety officer are clearly set out in the Bill. A significant power proposed is that in the event that a petroleum safety officer perceives there may be imminent serious danger in regard to a designated activity, he can, pursuant to section 13AB, request that a direction be issued by the commission to interrupt the activity. Failure by a petroleum undertaking to comply with such a direction may result in an ex parte application to the High Court for an order to prohibit the activity in question.

The commission will for the most part monitor compliance through a system of inspection and monitoring and in the event that it considers that an undertaking is not complying with its approved safety case, it can request that it submit an improvement plan. Should the improvement plan not be submitted, or fail to satisfy the concerns of the commission, a prohibition notice may be issued. This would suspend the carrying on of the activity in question until the commission could be satisfied that the risk has been reduced to an acceptable level. In the interests of fairness and transparency, either of these actions by the commission may also be appealed to the High Court.

The Bill provides for the cost of establishing and implementing this new safety regime, which will be funded by way of an annual levy on the petroleum industry and the imposition of administration charges with respect to consideration by the commission of safety case applications and the issuance of safety permits. The requirement with respect to transparent accounting procedures in this regard is also clearly established.

This Bill is an important measure in further strengthening the overarching regulatory framework governing exploration for and the production of oil and gas. By focusing on safety, this Bill will, on enactment, have considerable benefits for all existing and potential petroleum undertakings in Ireland. It will provide greater clarity and robustness of process. It will establish the appropriate code or standard with respect to safety relevant to each designated activity to be regulated by the commission. It will also provide for the issue of safety permits by the commission which will enable petroleum undertakings to carry on their business in conformity with their approved safety case.

I look forward in particular to working closely with the commission on ensuring the speedy implementation of the Bill's various provisions following enactment. I hope the outline I have provided of the provisions of this Bill has been of assistance to Opposition Members. I look forward to listening carefully to the views of Members on this important Bill and to their assistance in progressing it into law.

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