Effects of International Petroleum Agreements - Research Paper Example

TABLE OF CONTENTS SL. NO. Page No Introduction 2-3 1 International Petroleum Agreements 3-4 2 IPAs and Environmental Pollution 4-5 2 ExxonMobil Corp. Violates The Clean Air Act 5-6 2.1 Shell Group to Install Anti – Pollution Equipment 6-7 3 Observations 7-8 3.1 Oil Sector of Libya and Environmental Laws 9 3.2 BP Deploys Oil Spill Minimization System 10 4 Oil Spill is a Worldwide Issue 11-12 5 Conclusion 12-13 Sources 14 INTERNATIONAL PETROLEUM AGREEMENTS and the Environmental Clause 1. Introduction Since times immemorial human beings have been relentlessly finding ways of obtaining various resources from nature that not just address their vital needs, but also promise financial prosperity. These activities of mankind are inclusive of exploration and exploitation of land for obtaining coal, fuel sources, precious metals, and water, amongst many others. With passage of time and with consistently growing intelligence and technological strength of people, it was but an obvious consequence that the aforesaid exploration operations just displayed a rapid rise. Gradually, all relevant operations led to a scenario where human beings started to excessively interfere with Mother Nature, so as to create imbalance in the environment, not to mention the another obvious grave outcome – increase in pollution. These exploration and exploitation activities, coupled with all other developments related to rapid urbanization, have led to the advent of serious issues such as the Greenhouse Effect and global warming. As a matter of fact, all these started to jeopardize the well-being of the denizens of this planet. It was at this juncture that various governments across the globe fully realized the gravity of the situation and promptly started to initiate various measures aimed at minimizing pollution and restoration of balance in the nature. Consequently, there is now a comparative improvement in the relevant state of affairs, as all the commercial operations involving exploitation of natural resources are strictly bound by diverse laws and legislations. But for the purpose of this particular research paper, the focus would be on the environmental issues that are an inevitable consequence of the International Petroleum Agreements (IPAs). It (Research Paper) would elaborate on the alarming manner in which IPAs have contributed to the environmental pollution. Subsequently, this paper would examine the manner in which various committed governments have effectively tackled the situation by making it mandatory for all the IPAs, coming under their purview, to abide by the related environmental laws. Before dwelling upon the various pertinent aspects of IPAs, as well as on the related legal and environmental issues, it would be immensely helping to briefly focus on having a basic understanding of International Petroleum Agreements. 1.1. INTERNATIONAL PETROLEUM AGREEMENTS International Petroleum Agreements, which encompass the aspects of exploration and exploitation operations related to obtaining of oil or natural gas in a specific region, involve entities that are based in different countries. IPAs could be between companies & governments or companies based in different countries. But the key point is that, for classifying a petroleum agreement as an international one, it is imperative that the entities involved in the contract pertain to different countries. For about the past two decades, the globe has been witnessing a rapid rise in globalization, where the World is steadily becoming just a huge global village. Huge overseas projects involving different economies have now become the order of the day. And the sector of “Petroleum Exploration and Exploitation” is no exception to this surge in globalization, for the global economy is witnessing a rapid growth also in various International Petroleum Agreements. At this point, it won’t be out of place in mentioning about the different types of IPAs, as the same would be of great help in understanding the ensuing contents of this paper. Over the preceding few decades, International Petroleum Agreements have been undergoing many changes, in accordance with the rapidly changing global trends. And the rapidity with which these trends have been constantly undergoing transformations is attributable to diverse economic, social, geographical, and political factors. Consequent to all the above changes, the present-day IPAs are divided into many categories, with the following being the primary ones: production sharing contracts, concession agreements, joint venture agreements, and service contracts, to cite a few. (1) 1.2. IPAs and Environmental Pollution It has already been stated in this paper that, the surge in International Petroleum Contracts has brought about an imbalance in the natural environs, along with increasing the pollution to alarming levels. Probably, the major form of pollution caused by oil exploration & exploitation is the oil spill, which takes place when tankers or pipelines get damaged and release huge quantities of oil into the sea. This severely imperils the life of creatures living in the sea, some of which have already been recognized as endangered species. The related equipment can get damaged due to several reasons, with not the least amongst them being human error, faulty equipment, natural calamities, and acts of terrorism, amongst many others. (2) In addition to all that, there is one more factor leading to oil spills – intentional dumping of huge quantity of wasted oil for avoiding the expensive alternative of decomposing it. Whatever may be the reason, the rising instances of oil spills, on a global basis, are killing millions of sea birds and animals, annually. (2) Owing to this highly disturbing scenario, many countries have introduced strict laws to successfully combat not just oil spills, but also all forms of pollution and contamination attributable to International Petroleum Agreements. Now, the focus would be shifting to the study of some real examples where the concerned governments are bringing forward stringent environmental laws, and all IPAs pertinent to them (governments) are obligated to abide by them. 2. ExxonMobil Corp. Violates The Clean Air Act In May 2010, two subsidiary companies of ExxonMobil Corp., Mobil Mariana Islands Inc. and Mobil Oil Guam Inc., have given their consent for paying $2.4 million as damages, for their violation of the provisions enumerated in the Clean Air Act. An allegation was leveled against both these companies, operating in the Islands of Mariana and Guam, respectively, that they released compounds that are highly volatile into the sea. (3) The Clean Air Act includes provisions that make it mandatory for all oil exploration & exploitation companies to install storage tanks and other relevant equipment that helps in minimizing the pollution of sea waters. This Act also obligates all the companies to submit the necessary reports about pollution control measures, to the concerned authorities. It (The Act) encompasses also the provisions that combat other forms of pollution, but for the purpose of this paper, the focus has been confined to only that provision which is related to sea water contamination. (3) But in this particular instance, ExxonMobil neither installed the equipment necessary for curbing pollution, nor did it submit the specified report, thus leading to a highly blatant violation of this all – important Act, from the perspective of a clean environment. Subsequent to accepting of paying the above-mentioned damages, ExxonMobil has expressed its consent for both installation of all the pertinent anti-pollution equipment, and also for submitting the necessary reports to the authorities. (3) 2.1. Shell Group to Install Anti – Pollution Equipment In March 2010, two subsidiary companies of Royal Dutch Shell PLC, Shell Chemical Yabucoa and Shell Chemical LP, have been penalized to the tune of $3.3 million by the federal government, for violating the related provisions of the Clean Air Act. This particular violation resulted from the failure of the companies to install equipment that facilitates minimized pollution, in two of their refineries based at Alabama and Louisiana, respectively. The same amounted to violation of the related provisions of the aforesaid Act. (4) In addition, the two companies have now expressed their consent for installing the anti – pollution equipment, whose cost is estimated to be about $6 million, in the two refineries. Shell Chemical LP and Shell Chemical Yabucoa shall be carrying out all the concerned up gradation operations in their terminal based at Puerto Rico, too. (4) 3. Observations The above two instances vividly focus on the fact that, when the Law is strengthened so as to include stringent provisions against environmental pollution, the same would serve as a very strong deterrent against reckless pollution causing operations of exploration & exploitation companies. It needs to be noted that the main companies involved in the aforesaid two cases are global giants in the sector (oil exploration & exploitation), and yet, they could not escape from being penalized by the law of the land. Based on this, there would not be any hesitation in drawing an inference that, when the presence of an environmental clause is made mandatory in all International Petroleum Agreements, the globe would indeed be witnessing a pleasant scenario of substantial drop in the levels of pollution. At this juncture the most logical question that arises is, “When law can so effectively tackle the menace of pollution, why is it so that many governments are yet to initiate the corrective measures?” That indeed is a highly valid question warranting a satisfactory answer. The above two cases fall under the purview of a country where, apart from presence of high level of awareness on environmental issues, the relevant laws are also very stringent. In the US, topmost priority is being given to the aspect of combating pollution, and the authorities do not hesitate to penalize the defaulters, though there is a risk of losing some lucrative overseas projects. This very commitment is what that is lacking in many other countries, where the mere possibility of an overseas venture makes both the authorities and also the companies to compromise on vital environmental issues. It is now high time that these societies transform this perspective of theirs’, and start contributing towards battling various forms of pollution. Additionally, some powerful groups, governments and associations, among others, of the World, are now necessitated to unite themselves as a combined force and enable in bringing out a law that makes it compulsory for all International Petroleum Agreements to include the all-important environmental clause. Unless this particular initiative is taken on a global basis, integration of worldwide anti-pollution measures is not possible, and the menace cannot be tackled with comprehensive success. Now, it would be appropriate to dwell on some latest developments that emphasize on the growing concern, on a global basis, on issues pertaining to minimizing environmental pollution. These developments speak of the manner in which the concerned governments have brought forward laws regulating and monitoring operations of the oil exploration & exploitation industry, so that the anti – pollution norms are adhered to. 3.1. Oil Sector of Libya and Environmental Laws In the year 2003, the Government of Libya introduced a new law of environmental preservation to reduce the levels of pollution increasing at an alarming proportion. At this point, a bit of background information is needed for fully comprehending the relevance of this Law. (5) Towards the concluding years of the previous century, the markets of Libya started getting liberalized, wherein; many foreign entities began commercial operations in the country. Owing to that, the presence of stringent environmental laws became more or less imperative in Libya, as the already existing one (law), which is recognized as Law no 7/82, was not that effective in tackling the menace of pollution. Consequently, the country’s government brought forward the above-mentioned law. And this law achieved significant success in educating the general public on the relevance of both environmental preservation, and also the perils associated with unchecked pollution. (5) The aspect of meticulous and stringent implementation of this law is addressed by NOC HSE Work Program, which is an outcome of this Law of 2003, which was named as Law 15/03. Owing to all these positive developments, from the angle of environment, companies operating in the Libyan Markets are now scrupulously adhering to all the environment-centric provisions of the new Law, thus contributing to the key issue of minimizing pollution. (5) 3.2. BP Deploys Oil Spill Minimization System In May 2010, BP PLC deployed a system that enables in bringing about a substantial reduction in the volume of oil spill. The deployment was carried out in the Gulf of Mexico, at Mississippi Canyon Block seabed. An official of the company conveyed that this system would not be bringing a drop in the quantity of the actual spill, but it will surely ensure that volume of the spill touching the shore is considerably low. The official also added that, this new system would be working in conjunction with all the other manual efforts in reducing impact of the spill. Another key aspect of this development is that, BP PLC would be teaming up with various governmental and federal agencies in carrying out endeavors aimed at tackling the issue of oil spill. (6) This particular development related to the company, despite not making any mention of the Clean Air Act, yet, subtly implies that BP PLC’s initiative in promptly installing the system was primarily for satisfactorily addressing the provisions of the Act. In the examples elaborated earlier in this paper, it has been noted that companies were severely penalized for violating the stipulations of the Clean Air Act. On the contrary, this particular instance focuses on the fact that BP PLC initiated corrective measures well before the authorities could invoke the Law (Clean Air Act) against the company. The deployment by BP PLC speaks volumes about the fact that, when the environmental law is enforced strictly, the companies falling under the region’s political jurisdiction become bound by it and are hence entailed to act accordingly. 4. Oil Spill is a Worldwide Issue A serious note has now been made by the global community of the fact that oil spills are not necessarily issues whose grave impacts are confined only to the zones where they occur. As a matter of fact, it has been observed in several instances that, oil spills, after originating in a region, spread with fair level of rapidity even to zones that are very distant. That this is an alarming phenomenon warrants no special mention. For instance, in the year 2009, a big oil spill of Australia travelled a great distance and started to exercise its grave impacts in Indonesia. Likewise, it is also anticipated that there is a very strong possibility that the oil spill related to Gulf of Mexico could cover a great distance and touch the Atlantic Ocean. (7) In light of the above-mentioned oil spills that have the potential to impact multiple regions of the globe, the issue no longer remains a one that is just related to any one particular country or zone. In fact, this is now a matter of grave concern to the entire world, including even those countries that are not a party to any International Petroleum Agreement. (7) It now needs to be noted that, presently, there is an international law whose primary objective is to tackle the pollution resulting from the oil sector. But unfortunately, this law is currently focusing on pollution resulting from mishaps involving tankers, even to the extent of ignoring other forms of seawater contamination. (7) It is now high time that all the countries of the world unite as a team and start making the much needed amendments to the international law, so as to make it more effective in battling pollution. And these amendments should invariably be including a provision that makes it mandatory for all IPAs to encompass an environmental clause under their purview. In the contemporary scenario, most of laws governing the operations of oil exploration & exploitation companies are those confined to individual countries. As a matter of fact, even all the real instances elaborated earlier speak solely of the concerned country’s legislations, and not of any strong law that is in vogue throughout the World. And it is an incontrovertible fact that, as far as their respective political jurisdictions are concerned, many countries are making good efforts in stringently implementing the different environmental laws. But a strong combination of all these efforts, on the global landscape, is now the need of the hour, as that is the only effective means of ensuring that commercial entities, in their materialistic pursuits, do not display utter disregard for mother- nature. When an environmental clause in IPAs becomes compulsory, notwithstanding the possible initial opposition from some vested interests, in the long run, the same would indeed be obtaining the acceptance of almost the entire global economy. For this purpose, the globally recognized experts in the sphere of both law and also oil exploration should meticulously deliberate on the matter. This, in all likelihood, would facilitate the advent of a clause that strikes a perfect equilibrium between the environmental norms and the commercial interests of various pertinent entities. 5. Conclusion This research paper first gave a general introduction on the aspect of pollution, and then went on to succinctly elaborate on both International Petroleum Agreements, and also on the manner in which they increased environmental pollution. After discussing about some real instances of anti– pollution initiatives by the governments, the paper made the same as its basis for arguing in favor of “mandatory presence of environmental clause in IPAs”. It (research paper) briefly dwelled also on the manner in which a stringent worldwide law can be introduced for addressing the serious issue of pollution resulting from oil sector. The subject of IPAs and environmental safety is a vast one, where volumes of writings are more or less indispensable for covering all the relevant points. It is just not possible to be including all that in a brief paper such as this one. Yet, a genuine attempt has been made in covering most of the key aspects, not to mention the inclusion of highly relevant real examples pertaining to the contemporary scenario. SOURCES 1) “Addressing Risk in International Petroleum Agreements”, blakes.com/english/view_disc.asp?ID=110, Internet, Mark Rappaport, January 2006. 2) “Oil Spills”, library.thinkquest.org/CR0215471/oil_spills.htm, Internet, library.thinkquest.org, ND. 3) “ExxonMobil settles federal air pollution charges on Pacific Islands”, ogj.com/index/article-display/3396093616/articles/oil-gas-journal/general-interest-2/2010/05/exxonmobil-settles.html, Nick Snow, OIL & GAS JOURNAL, May 3, 2010. 4) “$3.3 million penalty imposed on Shell for Clean Air Act Violations”, royaldutchshellplc.com/2010/03/31/3-3-million-penalty-imposed-on-shell-for-clean-air-act-violations/, Internet, Associated Press, March 31, 2010. 5) “Environmental Laws in the Libyan Oil Industry”, globalpetroleumclub.com/environmental-laws-libyan-oil-industry,Internet, globalpetroleumclub.com, April 28, 2010. 6) “BP to lower oil spill containment system into gulf”, ogj.com/index/article-display/4652975009/articles/oil-gas-journal/general-interest-2/hse/2010/05/bp-to_lower_oil_spill.html, Internet, Paula Dittrick, OIL & GAS JOURNAL, May 6, 2010. 7) “Gap in Rules on Oil Spills From Wells”, nytimes.com/2010/05/17/business/energy-environment/17green.html, Internet, Kate Galbraith, New York Times, May 16, 2010. 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