IC21_NZ

Research questions
What are the liability and compensation issues of marine pollution from offshore drilling in New Zealand? Will the current legislation provide adequate compensation in the event of a major oil spill? How does it compare with alternatives internationally?

State of the Art
Liability compensation for tanker spills are covered by the 1992 International Convention on Civil Liability for Oil Pollution Damage (CLC), the 1992 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (Fund Convention) and its 2003 Protocol. Tanker owners are strictly liable for oil spill damage up to a set limit, and must provide insurance coverage up to that limit. The Fund Convention provides compensation for pollution damage above those limits, to cover the reasonable costs of reinstatement of the environment, and loss of profits caused by impairment of the environment.
There is no international fund convention providing compensation for oil spills from offshore drilling; it is an issue for states to cope with at a national or, at most, regional level. Adequate compensation, therefore, depends upon the strength of the financial guarantees provided by offshore oil exploration companies.
New Zealand’s Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (“EEZ Act”) and Maritime Transport Act 1994 (“MTA”) incorporate the CLC and Fund Conventions and apply them to both shipping and offshore activities, but without acknowledging that these conventions were not designed to cover offshore activities. The regulation of our coastal waters is complicated by the fact that the coastal marine area will be regulated by New Zealand’s primary environmental statute, the Resource Management Act 1991 (“RMA”), an act with entirely differing philosophical underpinnings.

An alternate model is provided by the United States of America’s Oil Pollution And Clean Water Acts. The Oil Pollution Act 1990 (“OPA”) requires polluters pay for removal costs plus a maximum of $75 million USD. In addition, the OPA provides for a $ billion compensation fund that includes compensation for Natural Resource Damages. This cap and fund system has been shown to be insufficient to cope with BP’s Deepwater Horizon incident, but civil penalties of up to $17.6 billion under the Clean Water Act may be applied to the economic and environmental restoration of the Gulf States.

Project Description
This research project will examine the legal and financial implications of applying the CLC and Fund Conventions to offshore drilling in New Zealand’s Exclusive Economic Zone given that they do not themselves apply to offshore drilling. The hypothesis is that New Zealand’s reliance upon these conventions has created a dangerous lacuna in the regulation of offshore drilling and that the outcome will be that compensation for a major oil spill disaster will depend entirely on the strength of financial guarantees given by exploration firms. The project will, therefore, examine, amongst other things, how pollution damage is defined, the adequacy of mandatory financial guarantees, and the role of EEZ versus RMA regimes. The Deepwater Horizon incident will provide a comparative case study, and the US model will be assessed and compared with the international conventions in the hopes of providing a more comprehensive compensation regime. Private law remedies will also be evaluated.