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Risk regulatory regimes of the Norwegian

Petroleum Sector and the “Nordic model”

Professor Ole Andreas Engen, University of Stavanger,

Norway

Outline

• The Norwegian offshore regime

– Context

– Values and culture: The ”Nordic model”

– A history of development

• Comparing the Norwegian, US-, and UK-regimes

• Discussion

– Assessing regimes

– Bottom-up or top-down

– A robust EU-regulation?

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The Robust Regulation Project

• Project goals:

– Understand and conceptualize the robustness of the Norwegian risk regulation regime

– Comparing the Norwegian regime with UK and US

– Assessing relation between regulation, Risk Management Systems and risk behaviour in the industry

• Partnership with industry, unions and regulators (PSA)

• Part of the Petromax research program

– Project periode: 2008 – 2012

– New program announced from 2012 - 2017

The tripartite model

Authority

Employer Unions Tripartite collaboration

Individual working contract

Employee

Safety organisation

National (workinglife)

Industry

Workplace

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1970-1990: A paradigm shift i risk regulation

Social production of wealth with increasing technical, ecological,

social and medical risk (Beck 1986)

Old regulation regime: Reactive and prescriptive with

technical requirements

New regulation regime: Pro-active with goal setting and functional requirements and “self-

regulation”

2000 1970 1990

Seveso (1976), Three Miles (1979), Alexander Kielland (1980), Bhopal (1984), Tjernobyl (1986) and Piper Alpha (1988) Robins report (1972), Nordic Work Environment Laws (1977+) and

Framework Directive 89/391 (1989)

1900

Phases, major accidents and regulations

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Time Major accident

UK-regulations Norwegian-regulations

US-regulations

1961-1970

Sea Gem (1965) Amoco Cadiz (1969)

Continental Shelf Act (1964)

Petroleum Act (1963) Outer Continental Shelf Lands Act (1953)

1971-1980

Bravo (1977) Alexander Kielland (1980)

Mineral Working (Offshore Installation) Act (1971)Robens report (1972) HSWA (1974) Burgoyne Committee (1977)

Regulations relating to safe practices (1975 and 1976). Work Environment Act (1977)

1981-1990

Piper Alpha (1988)

The Lord Cullen Report, 1990

Principles of internal control (1981), Petroleum Act (1985)

1991-2000

Offshore Safety Act (1992)

Petroleum Act (1996)

2001- 2011

BP Macondo (2010)

Offshore Installation (Safety Case) Regulations (2005)

Revised regulations (2011)

Separation of leasing function & creation of BOEMRE agency, new prescriptive rules & SEMS rule (2010, 2011)

Comparing NCS and US (I)

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Area Norwegian continental shelf

US outer continental shelf

Legal framework

Coherent integrated performance based framework with functional requirements. A framework regulation with four more detailed regulations

Many laws and regulations with prescriptive detailed rules with a multitude of legally-enforceable requirements.

Cost-benefit analysis

Ambiguous and not doctrinal Presidential directive with strong emphasis on defending burden of new regulations

Legal standards

Legal standards give flexibility and a space of interpretation. Companies follow industrial standards and are free to choose among these standards

Regulators adopt industrial standards for company implementation.

Lindøe, Baram & Braut (2011): Empowered agents or empowered agencies?

Assessing the Risk regulatory regimes in the Norwegian and US offshore oil and gas

industry

Comparing NCS and US (II)

Area Norwegian continental shelf

US outer continental shelf

Inspections and sanctions

One strong agency. Inspections announced and dialogue and trust based. Soft helpful approach.

More inspectorates. Unannounced inspections based on numerous checklists for “Potential Incidents for Non-Compliance” (PINC). Hard policing approach.

Involve-ment of work force

Strong involvement of unions in different arenas of cooperation; policy, industrial and company level

Non-involvement of workers, unions and occupational safety agency.

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Bottom-up or top-down?

NCS

• delegates control and presumes willingness and capability among the actors to collaborate upon an accepted standards for “good practice”

• uses the legislation to establish a binding framework for mutual activities striving for consensus among the actors

• Regulator’s role in enabling the process of continuous improvement

US • The regulator uses the legislation

as a means for giving clear distinctions between right and wrong as defined through norms expressing the societal expectations

• The legislation aims to solve disputes and conflicts

• Regulator role becomes more like a judge

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Different systems or a false dichotomy?

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Prescriptive rules and regulation

including industrial standards

(Command & Control)

Self-regulation with voluntary and

accepted standards

Voluntary industrial standards in

compliance with regulations

Regulator

Industry

Performance based rules

with functional requirements

Legal standards

Two logics of standard setting

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Knowledge-

production and science

Legal

binding

norms

Civil society

third party Politics: Legislation,

Administration, Inspection

Industry-

standards

Best

practise

Scope of

regulation

Value creation

Industrial activities

Value- and

policy-driven

Technology &

industry driven

Two different roles of the state

• State as protector of law and order where the primary task is, by the use of legitimate authority, forcing citizens/enterprises to follow laws and regulations

– The control role, anchored in this principle, creates an asymmetrical relationship between the regulator and the regulated

• State as service provider, stimulating towards growth in society (ref. welfare model in Scandinavia)

– This role works in a symmetrical way by developing mutual arenas for improvement, learning and building mutual confidence between state and public institutions, industrial sectors, etc.

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Legal norms and standards

Norms Main groups Examples

Legal binding

norms

Acts Petroleum Act, Working Environment Act

Regulations

The Framework Regulation (Royal Decree)

Regulations regarding (1) Management, Activity,

(2) Information and (3) Installation (Passed by

PSA)

Non-legal

norms

Regulatory

guidelines

Guidelines to the regulation

Letters of interpretation

Industrial

standards

ISO, IEC and CEN standards

NORSOK-standards

Recognised industry standards

Company

internal

Company specific requirements and guidelines

Project specific requirements

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Legal

standards

Complex roles and mixed norms in a regime of ”Enforced self-regulation”

Inspectors roles

Controller

Asymetrical relation

Service Provider

Symmetrical relation

Legal binding

norms

1

Investigator of compliance:

How to interprete functional

laws and regulation?

2

Counseling on legal issues:

Confusing legal norms with non-

legal norms and professional

standards?

Non-legal

norms and

standards

3

Enforcing compliance with

non-legal standards:

Mismatch with own

standards and ethic codes?

4

Aiming at improvement:

How to keep a necessary

distance to regulated?

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Legal

standards

Summing up (I)

• The UK and Norwegian regime has been developed during 30 – 40 years of experience, triggered by major accidents

– Risk- and purpose based with functional requirements

– Exchange of experience and ideas across the North Sea

– One strong coordinating regulatory body

• The US OCS-regimes has had almost the opposite characteristics

– American companies adaptet to the NCS-regime in the 1980s

– In US the opposed new regulation until 2010

• The ”Macondo accident” has vitalized a debate and re-orientation of offshore risk regime:

– In US, UK and Norway and the EU commission

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Summing up (II)

• The design and logics of the three regimes should be assessed in the perspectives of major accidents, industrial relations, legal and administrative practice and major as well as cultural values and norms.

• The NCS strategy may be chosen when one might expect the possibility to achieve consensus among actors with long lasting relations, but may fail if the main aim of the legislation is to define stable norms in an unambiguous way

• The proposed EU regulation combines elements from the Norwegian and UK (Safety case) regimes.

• Critics from Norway is that

– The tripartite system in not a part of the regulation

– An integrated and consistent regime in place, but mixed with a

“superior” EU regulation will be complicated and burdensome

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Robust Regulation

Thanks for your attention.

See website for the project:

www.uis.no/robustregulation

www.seros.uis.no

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