The Offshore Pollution Liability Association Ltd
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Liability under OPOL
Parties to OPOL have agreed that the operator of an offshore facility at the time of a discharge of oil will be responsible for claims unless they can establish that the incident:
a) resulted from an act of war, hostilities, civil war, insurrection, or a natural phenomenon of an exceptional, inevitable and irresistible character;
b) was wholly caused by an act or omission of a third party with intent to cause damage;
c) was wholly caused by the negligence or other wrongful act of any State or other authority, or resulted from compliance with conditions or instructions given by the licensing State; or
d) resulted wholly or partially either from an act or omission of the claimant done with intent to cause damage, or from the negligence of that claimant, in which case the liability is reduced accordingly.
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Limit Upon Liability
The maximum liability of a party under OPOL is US $250,000,000 per incident. This is made up of US $125,000,000 to cover pollution damage claims and US $125,000,000 for remedial measures. However when all the costs in one category have been met, any surplus may be used to meet unsatisfied costs in the other category. If the total costs in a category exceed the sums available in that category, then after any surplus from the other category has been fully utilised, the compensation is pro-rated amongst the claimants.
Establishment of Financial Responsibility
Parties to OPOL undertake to establish and maintain their financial responsibility to meet their obligations for an amount of not less than US $250,000,000 for any one incident and US $500,000,000 in the annual aggregate.
Note – Guidance by Department of Energy and Climate Change (DECC) on the demonstration of financial responsibility for exploration and appraisal wells and other facilities in the UKCS.
1. From 1 January 2013 new Guidance issued by DECC applies. Details of the Guidance can be accessed from DECC's web site at: https://www.gov.uk/guidance/oil-and-gas-legislation-on-emissions-and-releases#financial-responsibility-guidance-note-for-exploration-and-appraisal-drilling-in-the-ukcs--january-2013
2. DECC state that in determining whether an operator has provided sufficient evidence of financial responsibility they will place considerable weight on an operator having met Guidelines to Assist Licensees in Demonstrating Financial Responsibility to DECC for the Consent of Exploration and Appraisal Wells (the OGUK Guidelines). The OGUK Guidelines are available at: http://www.oilandgasuk.co.uk
3. The OGUK Guidelines require an operator to estimate the cost of well control, pollution and compensation and to demonstrate that they and their co-venturers have the financial resources to address the potential consequences of an unintended and uncontrolled release of hydrocarbons from an exploration or appraisal well.
Establishment of Financial Responsibility (cont.)
4. The OGUK Guidelines provide that for gas wells, gas condensate wells (other than HP/HT wells) and wells which require artificial lift to flow the financial responsibility demonstrated by an operator to OPOL will be sufficient to deal with the pollution impact of any incident. For remaining wells the OGUK Guidelines provide that operators should assess their exposure to the costs of remediation and compensation by applying the methodology set out to determine which of four bands they fall within. If those costs are unlikely to exceed US $250m financial responsibility demonstrated to OPOL is deemed to be sufficient.)
Details of arrangements for facilities other than exploration and appraisal wells are available in a letter dated 10 August 2015 issued by DECC.
Contribution to Claims
Under OPOL the parties agree to contribute to the payment of claims due from a party that fails to meet its obligations to claimants. Contributions by the remaining parties are proportionate to the number of offshore facilities operated by the parties.
In the event of any dispute arising between a claimant and a party, provision is made for arbitration in London in accordance with the rules of the International Chamber of Commerce.
Administration of OPOL
The Offshore Pollution Liability Association Limited ("the Association") was formed in England to administer OPOL. All parties to OPOL are members of the Association.
The Association is primarily concerned with the administration of OPOL and the relations between the parties, but in addition it administers the contributions referred to above and, at the request of any State to which OPOL applies, will confirm to that State that a party has accepted OPOL and established satisfactory evidence of financial responsibility.
Duration of OPOL
OPOL came into effect on 1st May 1975 and continues indefinitely.