Scoop Election 08: edited by Gordon Campbell

On the death of Gaddafi and how the Rena spill relates to East Cape oil exploration

October 21st, 2011

The death of Muammar Gaddafi – either from wounds inflicted by a NATO air strike, or (more likely) from summary execution on his way to hospital – cancels the option of an international war crimes trial. Doubtless, such a trial would have given the Libyan dictator a useful platform from which to harangue the court, and to reveal embarrassing details of the lucrative deals he’d signed in the past with the same Western governments who eventually sent their warplanes to depose him.

No doubt, Gaddafi alive would have been a disruptive figure on the landscape of the new Libya. The trial of Slobodan Milosevic didn’t set an inspiring precedent for how the rule of law is likely to operate in such cases, Yet for all their flaws, such trials are the only alternative to the extra-judicial killings and assassinations (eg Osama Bin Laden, Anwar Al-Awlaki) that are fast becoming the West’s preferred modus operandi.

Also, there was a faint hope that Gaddafi on trial could have been the focus of a truth and reconciliation process in which the Libyan people who suffered at his hands could have confronted the humbled tyrant in a courtroom, and told their stories. More to the point, Gaddafi dead removes a source of national unity. Hostility to Gaddafi is just about all that is holding together the various Libyan rebel militias.

That lack of unity is a product of Gaddsafi’s 40 year personality cult, which crushed any semblance of civil society. Now, all the tribal factions that Gaddafi manipulated so skilfully will have to be represented in a government of national unity. As the Stratfor intelligence think tank has pointed out, it is already clear that the Libyan Transitional National Council that the West recognises, enjoys little respect or authority among many of the rebel fighters:

The NTC is one of several political forces in the country. Since the rebel forces entered Tripoli on Aug. 21, there has been a steady increase of armed groups hailing from places such as Misurata, Zentan, Tripoli and even eastern Libya itself that have questioned the authority of leading NTC members. These groups have been occupying different parts of the capital for two months now, despite calls by the NTC (and some of the groups themselves) to vacate.

In other words, the TNC has only a shaky clam to authority beyond Benghazi. At the same time, the outside world is expecting the TNC to honour the dodgy contracts for Libya’s oil reserves that Gaddafi signed, and not to let matters like internal politics or morality get in the way:

There have been repeated questions over the status of business contracts and agreements involving Russian companies, which have been signed by the Gaddafi regime, and whether they will be honoured. They generally involve oil or gas development and exploration, but also include railways and military cooperation….

Last month the Russian Foreign Ministry recognized the Transitional National Council of Libya as the current authority, adding that it expected existing contracts to be honoured.

“At present the Transitional National Council is analyzing the contracts, signed by the Gaddafi regime, in order to establish whether or not they are transparent. I do not think the new Libyan government will begin with the evaluation of contracts with Russia by political criteria,”Margelov said, adding that it would be more correct for the new government to analyze the contracts from a technical and economic perspective.

Now, the real problems begin.


You’d think it would be obvious that if New Zealand hasn’t got the necessary equipment or management skills to handle an oil spill just outside Tauranga, it should suspend oil exploration activities that could well lead to a similar spill – or worse – off the remote regions of the East Cape. No such luck, though.

A striking aspect of media commentary on the Rena disaster has been the patronising stance taken towards anyone treating the Rena disaster as a warning about the dangers of deepwater oil exploration. Oil exploration is different, according to the pundits. Here’s an example of the condescension I’m talking about:

We desperately need onshore mining and offshore oil exploration to help lift us out of our precarious economic position. Onshore mining has received a public relations backlash. Now the Rena grounding, while completely unconnected with offshore exploration, has presented environmentalists with an emotive argument against the development.

Oh, those emotive environmentalists. Yes, oil exploration is “completely unconnected” to offshore exploration. Actually, that’s a problem. Because if anything, the legal position regarding the ambit of compensation is even worse when it comes to static oil platforms than it is to ships passing through international or coastal waters. More on that below.

For now, the liability picture in Tauranga remains extremely murky. The Key government has already found it difficult enough to get any compensation from the Mediterranean Shipping Company, who chartered the Rena – but who continue to deny any liability, and instead lay all the blame upon Costamare, the owners of the vessel. All MSC has done so far is make a voluntary “goodwill” donation of $1 million to the cost of the clean-up. No precedent value in that.

At this point, the extent to which the insurers for Costamare will come to the party remains unclear. Will they pay for all, or only for part of the clean-up, and will it be only for the cleanup? What about the related and enduring economic costs to business that has been lost or badly affected by the disaster? Will the owners’ insurance pay for any of that?

Probably not. On overseas experience (the Exxon Valdez, the Texaco/Chevron oil spills in Ecuador) there is usually a distinction between accountability for the clean-up and accountability for the ongoing economic and environmental damage caused by the company’s activities, which is usually shunted on to taxpayers. .

So far, the Key government has talked vaguely about compensation to Tauranga business – which, if it materialises at all, will be paid for by the New Zealand taxpayer. Clearly, “clean-up costs” are a very, very vague notion. Usually the best that multinational oil (and shipping companies) do is pay for a quick spruce- up of the immediately affected area, before they hightail it out of Dodge

Now, back to that “ completely unconnected” matter of oil exploration in deep water locations off East Cape, or in the Great South Basin. Nearly 18 months ago, I wrote a cover story for Werewolf that noted the Wild West situation under international law when it come to static oil platforms, as opposed to the far more settled position ( governed for example, by the Bunker Convention) when it comes to ships in transitr. The relevant passage is worth repeating :

The international conventions and maritime regulatory frameworks that do exist belong to an earlier era. They speak of general obligations (eg Law of the Sea article 192) to “protect and preserve” the marine environment. While that point is elaborated on in UNCLOS article 208 (which says that states are responsible for “artificial islands, installations and structures under their jurisdiction”) there is no legal or administrative framework to police and enforce these vague exhortations. To date, the oil spill risk has been seen almost entirely in terms of discharges and sinkings of oil tankers as they move through international waters – as with the Exxon Valdez in Alaska in 1989, and with the huge Amoco Cadiz and Erika spills that occurred off the coast of Brittany in 1978 and 1999, respectively.

However, deepwater oil platforms are not like ships in transit – they are parked semi-permanently, often in chronically difficult conditions. At the time of writing, the International Maritime Organisation was meeting to try and finalise an update of its Code for the Construction and Equipment of Mobile Drilling Units – but at present, there are no binding international rules, standards or practices for oil rig platforms.

Therefore, when Energy Minister Gerry Brownlee is giving out assurances that industry best practice will be observed and would be enforced with respect to the likes of Petrobras and Exxon-Mobil, he is uttering empty assurances in a void. At the level of technical expertise, no one knows how to devise BOPs (blowout preventers) guaranteed to work at such depths and in such open sea conditions. In addition, there are no international or local framework of design standards and operating procedures that can be enforced, even if there was a will to do so. As for adequate compensation for fishing and tourism operators whose livelihoods might be destroyed by oil spills …the Exxon Valdez case should be a sobering warning about the inadequacy of the current compensation mechanisms, as I’ll explain later in this article. In May, shortly after the BP spill began, the New York Times noted the glaring gap in international law in these terms:

“There is a tremendous body of international law addressing oil pollution, dealing with matters including construction and seaworthiness of ships, safety of navigation, pollution response, and liability,” said Tim Stephens, a senior lecturer on the law faculty at the University of Sydney and the co-author of a forthcoming textbook on the law of the sea.

However, the international maritime conventions ….do not apply to accidents involving oil platforms, like the Deepwater Horizon spill. “It is definitely an omission,” Mr. Stephens said, adding that only “tentative” steps have been taken so far to make the maritime agency’s rules applicable to platform spills.

A key area for exploration and production-related spills is liability. “There is no global convention governing this issue,” said Sergei Vinogradov, a senior lecturer at the Center for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, in Scotland. By contrast, liability from tanker spills is covered by two 1992 conventions, one dealing with civil liability and the other with an oil-pollution compensation fund…

Given this situation, many are urging a halt to any new deepwater drilling operations. “We should hold off on exploring in some of the deeper basins,” Tina Hunter, an assistant law professor at Bond University in Queensland who studies offshore oil regulation, said in this Bloomberg Business Week article in mid June. “The last thing we need is to go into deeper waters and risk something like what happened in the U.S.”

That leaves communities on East Cape with even less protection – regarding liability and insurance – than the people of Tauranga.. (In the coming weeks, this column will be seeking to clarify whether the legal position regarding oil platforms has changed substantially in the ensuing 18 months.)

The other main ground for concern is a purely practical one. The response to the Rena grounding has given New Zealanders no reason to believe there would be a properly equipped and co-ordinated response from local and central government if and when there was a major oil spill triggered by Petrobras operations in the Raukumura Basin.

It is highly unlikely, for instance, that Petrobras will be asked to put up a bond to cover the possible environmental impact of their activities. What then, will be the ceiling for the relevant insurance compensation, and what will be the ambit of possible claims against it? Will it be only for cleanup costs, or for the economic damage to business, food resources, and the local environment – and if the latter, how will eligibility for compensation be assessed?

The liability issues also relate to the extent of provable negligence. If, say, Petrobras drills into a difficult and techtonically unstable deep sea region (which the Raukumura Basin is known to be) and that triggers an oil spill, will that be deemed to be negligence – or merely the best industry practice possible in a difficult environment, and how will such distinctions impact on the level of compensation?

After all, negligence can be easily proved with respect to the Rena because there is established procedure about using navigational charts to detect and steer safely around the Astrolabe Reef. That’s not the case with deep sea drilling. Negligence can be almost impossible to prove.

Already in Tauranga, we have seen the split in responsibility/liability between the owners and the charterers of the vessel. In the Gulf of Mexico oil spill last year, there was a similar split between BP’s responsibility and that of Anadarko, who operated the platform. At the moment, has the government any idea at all about how liability would pan out off East Cape between Petrobras, and any negligence by sub-contractors that it may employ?

Does an Oil Spill Contingency Plan yet exist that governs the Petrobras activities off East Cape, and what input have local councils and communities had to the development of such a plan? Until the government can answer such questions – and clearly Crown Law is struggling right now to assess legal liability in the far more clearcut situation of the Rena grounding – it would be foolhardy to allow the Petrobras oil exploration to proceed.


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