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Offshore oil and gas operators will need to hold higher levels of insurance under new rules proposed by Associate Minister for Transport Julie Anne Genter.
According to Genter, the cabinet has agreed to consult on increasing the amount of insurance that oil companies are required to hold so it covers costs in the event of an oil spill. The proposed rule raises the required insurance cover from the current $27 million to a maximum of $1.2 billion.
The minister explained the amount of insurance required of existing operators would be “well below” the $1.2 billion upper limit. She noted an insurance estimate for current production installations in Taranaki ranges from about $170 million to $360 million.
“While the likelihood of an oil spill is low, if one occurs it could have significant environmental, financial and cultural impacts and cost tens or even hundreds of millions to clean-up,” Genter said. “Communities and taxpayers shouldn’t be left to foot the bill for the clean-up of an oil spill, like we saw with the Rena.
“It’s only fair that operators are able to cover the clean-up cost of a worst-case scenario oil spill,” she stated.
As part of the proposed new regime, the minister also introduced a bill amending the Maritime Transport Act 1994 to provide certainty in relation to the liability of insurers to the Crown and to other third parties who are affected by the pollution. It clarifies that rules may specify the types of liability that will need to be insured against, and may provide for the insurance or other financial security to cover the cost of well control measures and other costs of implementing marine oil spill contingency plans. The rules also propose the amount of insurance or financial security required to be held.
“Under the existing Act, owners of offshore oil and gas installations face unlimited liability for the cost of pollution damage and clean-up resulting from a spill from their facilities in New Zealand waters,” Genter said. “The amendment bill does not change their unlimited liability.”
The minister added that the remainder of the regime, including the increased limits for financial assurance, will be implemented through marine protection rules. Consultation on these draft rules will occur alongside the bill.
