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The Offshore Petroleum Regulator for Environment and Decommissioning (“OPRED”) issued a consultation (“Consultation”) on 18 January 2018 in relation to the introduction of The Offshore Environmental Civil Sanctions Regulations 2018 (the “Regulations”). The relatively short consultation period closes on 15 February 2018. Strangely, the Consultation has been issued in the middle of an informal consultation on the same matter (issued by OPRED on 22 December 2017) which remains open for comment until 25 January 2018.

A draft of the proposed Regulations were issued with the Consultation. The purpose of the Regulations is to provide OPRED with the power to issue civil penalties (being a more proportionate enforcement option) as an alternative to criminal prosecution in the event of a breach of certain offshore environmental regulations by oil and gas companies.

Sanctions

The Schedule to the Regulations sets out the existing offshore environmental regulations which fall within the ambit of the Regulations. The Schedule also lists the specific offences under those regulations and the applicable sanctions that could be imposed in the event of a breach. The sanctions imposed by the Regulations take the form of monetary penalties and these are split into fixed and variable monetary penalties:

  • Fixed Monetary Penalties - the fixed monetary penalties range from £500 to £2,500. The Consultation notes that the majority of offences listed would be subject to a fixed monetary penalty of less than £2,500. If the Secretary of State determines that an offence has been committed it will issue a notice of intent which will set out the grounds for imposing the sanction and the amount of the sanction. The recipient is provided with the opportunity to discharge the liability at a discount by paying two-thirds of the penalty amount within 28 days of the notice of intent. If the recipient wishes to object to the proposed sanction, they can make written representations and objections to the Secretary of State within 28 days stating why the sanction should not be imposed. The Secretary of State is not permitted to impose a fixed monetary penalty if that person would not, by reason of any defence raised, be liable to be convicted of the offence. After the 28 day period has elapsed, the Secretary of State will decide whether or not to impose the sanction taking into account any written representations and objections. If the sanction is imposed, the Secretary of State will issue a final notice which will set out the grounds for imposing the sanction, how to make payment and the period in which payment must be made (being 28 days), the rights of appeal and the consequences of non-payment. It should be noted that if payment is not made to discharge the liability within 28 days of the notice of intent and The Secretary of State ultimately determines that the penalty is payable, there is no discount available. The Secretary of State has the power to withdraw a final notice at any time. If the Secretary of State decides not to impose the sanction he will give notice in writing.
  • Variable Monetary Penalties – the variable monetary penalties range from £5,000 to £50,000, which are stated to be imposed in the most serious of cases. In the case of a single breach, the starting point is a penalty of £5,000. The Consultation states that where there are mitigating factors (such as swift action being taken to return to compliance; to eliminate, reduce or repair any harm to the environment; a good compliance record and whether the breach was voluntarily reported) the penalty amount may be reduced to the level of the fixed monetary penalty for that offence or £2,500 if there is no fixed monetary penalty for that offence. The variable monetary penalty can be increased where there are aggravating factors (such as duration of non-compliance; history of non-compliance; financial gain resulting from non-compliance; the level of harm to the environment and the conduct of the operator after identification of non-compliance). The Consultation states that where the breach results in harm and/or is not remedied with sufficient urgency the variable monetary penalty will likely be increased to the maximum amount. There is no opportunity for a discount on the penalty amount for early payment. Similar to the process for fixed monetary penalties, the Secretary of State will issue a notice of intent which will set out the breach, the intention to issue a sanction and the proposed penalty. The recipient is provided with a 28 day period to provide objections and written representations (which may include any mitigating factors) and may also provide an undertaking to take specific actions. Following expiry of the 28 day period, the Secretary of State will consider the written representations and objections, any mitigating factors and any offer of undertakings. If an undertaking is accepted (notice of such acceptance must be given), the Secretary of State must take this into account when deciding whether to issue the sanction, reduce it or not issue it at all. The Secretary of State is not permitted to impose a variable monetary penalty if that person would not, by reason of any defence raised, be liable to be convicted of the offence. Where a sanction is imposed, the Secretary of State will issue a final notice which shall set out the grounds for imposing the sanction, how to make payment and the period in which payment must be made (being 28 days), the rights of appeal and the consequences of non-payment. The Secretary of State also has the power to withdraw a final notice at any time. If the Secretary of State decides not to impose the sanction he will give notice in writing.

The Consultation states that the decision as to which sanction to impose will be made in line with OPRED’s Enforcement Policy. It should be noted that the Enforcement Policy has not been updated since October 2015. The Enforcement Policy states that the principles of enforcement are:

  • Proportionality in the method of enforcement use – the method of enforcement must be proportionate to the seriousness of any alleged offence, the potential for pollution, or actual pollution caused.
  • Targeting of enforcement – enforcement is directed primarily towards those whose activities:
    • give rise to, or create a risk of, serious pollution;
    • have the potential to affect the environment, damage amenities or interfere with other uses of the sea;
    • historically have given rise to non-compliance with the regulations;
    • have taken place, or are ongoing, in the absence of a required permit;
    • have given rise to previous warnings or enforcement with no evidence of improvement;
    • give rise to, or there is a likelihood of, non-compliance with permit conditions where a permit has been granted;
    • have given rise to previous reportable incidents; and
    • give rise to inspection/investigation findings
  • Consistency of approach – aims to achieve consistency in (i) advice to those who have duties under the law; (ii) the response to pollution and other incidents; (iii) the exercise of powers by inspectors; and (iv) decisions on whether to pursue enforcement action. The inspectors have discretion within the framework of the Enforcement Policy to exercise their professional judgement so that the appropriate action is taken. The Enforcement Policy states that there are arrangements in place to promote consistency in the exercise of that judgment. The Enforcement Policy sets out the following non-exhaustive list of factors taken into account when determining whether enforcement action is appropriate:
    • scale of actual/risk of pollution;
    • location of the incident;
    • amount of emissions or chemicals released or discharged outwith the conditions of a permit;
    • type and nature of the emissions or chemicals discharged or released;
    • implementation of an oil pollution emergency plan;
    • number, or significance, of permit conditions that have not been complied with;
    • causal factors and circumstances that have given rise to consideration of enforcement including those that arose as a result of something which could not reasonably have been prevented or were due to something done as a matter of urgency for the purpose of securing the safety of any person;
    • the measures and robustness of arrangements, or lack of them, that the permit holder/operator has in place to achieve compliance;
    • likelihood of recurrence;
    • actions of management, including their level or cooperation with any investigation undertaken;
    • previous history of incidents, compliance record and enforcement;
    • evidence available and gathered to pursue the appropriate enforcement in line with the Enforcement Policy;
    • any potential conflict of enforcement with other statutory provisions.
  • Transparency – to ensure that (i) where action is required, it is clearly explained why the action is necessary and by when it must be carried out; and (ii) where notices are issued, that the recipient understands its contents and consequences.
  • Accountability – OPRED is responsible to the Secretary of State, Parliament and the public for its actions. OPRED have policies and standards in place against which it can be judged. There are arrangements in place for dealing with complaints or comments and there is an appeals process for reviewing its decisions.

The draft Regulations also require the Secretary of State to prepare and publish guidance (“Guidance”) on the power to issue penalties and regard must be given to these when exercising such powers. The Guidance will provide information as to:

  • the circumstances in which a penalty is likely to be imposed or not imposed;
  • in the case of a fixed monetary penalty, the amount of the penalty and how liability can be discharged and the effect of discharge;
  • in the case of a variable monetary penalty or non-compliance penalty, the matters likely to be taken into account by the Secretary of State in determining the amount of the penalty (including, where relevant, any discounts for voluntary reporting of non-compliance);
  • rights to make representations and objections;
  • rights of appeal.

The Regulations also require the Secretary of State to publish a report from time to time specifying the cases where (i) penalties under the Regulations have been issued, (ii) liability for a fixed monetary penalty has been discharged; and (iii) undertakings have been accepted.

The decision as to whether to impose a sanction will be determined by the Secretary of State alone as opposed to criminal prosecution which could only be brought by the Procurator Fiscal following a recommendation from the Secretary of State. While the burden of proof under the new Regulations for determining whether an offence has been committed continues to be the criminal standard of “beyond reasonable doubt” (rather than the lower civil standard of proof of “on the balance of probabilities”), there are additional evidential hurdles that must be met in a criminal prosecution (such as corroboration) and it is not clear whether the Secretary of State, when determining a breach and issuing sanctions, would be required to meet these tests.

The Enforcement Policy currently provides for other methods of enforcement such as letters to the operator/permit holder, enforcement notices and prohibition notices which are non-punitive in nature which are stated to be used where an alleged non-compliance does not warrant more severe enforcement action such as the revocation of a permit or prosecution. The Consultation does not expressly state whether this will change following the introduction of the Regulations. However, the Consultation does state that the current enforcement measures do not provide sufficient deterrent against non-compliance and that the new Regulations would provide OPRED with the ability to tackle the behaviour of those who continue to perform poorly and ignore their environmental responsibilities. It is therefore unclear whether the Secretary of State will continue to use the non-punitive enforcement methods prior to issuing civil sanctions under the Regulations. Although the fixed monetary penalties can be as little as £500, oil and gas companies will wish to ensure that the Secretary of State does not issue these in the first instance without providing such companies with the opportunity to remedy a breach (as is the case with notification letters, enforcement notices and prohibition notices).

Right of Appeal

If a sanction is imposed, the recipient has the right to appeal to the First Tier Tribunal (General Regulatory Chamber) of the Courts and Tribunal Service within 28 days. The grounds of appeal are error of fact, error of law or that the sanction is unfair or unreasonable for any reason (including that the penalty amount was unfair or unreasonable). During the appeal process, the issued sanction is suspended until a decision is made by the First Tier Tribunal. The First Tier Tribunal may confirm the sanction, reduce the amount of the penalty, cancel the sanction and award costs.

Consequences of Non-Payment

A failure to pay any fixed monetary penalty or variable monetary penalty is enforceable by OPRED as a civil debt as if payable under a court order.

As the civil sanctions under the Regulations is an alternative to prosecution no criminal proceedings can be brought for an offence for which a fixed monetary penalty has been imposed (or liability discharged by payment within 28 days) or for which a variable monetary penalty has been imposed. Where an undertaking is accepted in relation to an offence, the person giving the undertaking may not be convicted of the offence except where no variable monetary penalty was imposed or the person fails to comply with the undertaking.

If an undertaking has been given to the Secretary of State and this is subsequently breached, the Secretary of State can also impose a non-compliance penalty (of an amount to be determined by the Secretary of State) by way of a non-compliance penalty notice. Such notice must specify the grounds for imposing the non-compliance penalty, how payment may be made and the period in which it must be made (being 28 days), rights of appeal and the consequences of non-payment. The Secretary of State may withdraw a non-compliance penalty notice at any time. The recipient of a non-compliance penalty notice may appeal to the First Tier Tribunal in the same way as noted above.

Conclusion

The Regulations provide civil sanctions as an alternative to criminal prosecution for breach of certain offshore environmental regulations. However, the option to prosecute remains an option in serious cases.

As noted above, the Consultation closes on 15 February 2018, following which, OPRED will publish a summary of the comments received and also OPREDs responses to them. We hope that the OPRED’s responses and the new Guidance will provide clarification on the following:

  • whether the Secretary of State will continue to use the non-punitive enforcement methods (i.e. notification letters, enforcement notices and prohibition notices) prior to issuing civil penalties; and
  • whether the Secretary of State will be required meet the same evidential requirements as would be used in a prosecution when determining whether an offence has been committed and whether to issue sanctions.

Laura Bisset, Senior Solicitor

Chambers UK 2018

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