PETROLEUM EXPLORATION AND PRODUCTION- WHAT ARE THE ENVIRONMENTAL OBLIGATIONS OF JOINT VENTURE PARTICIPANTS?

Abstract

Participants in joint venture operating agreements in Australia are potentially liable for environmental offences under State environmental statutes as well as Petroleum (Submerged Lands) Acts and State Petroleum Acts. In addition, adverse environmental impacts can affect an array of other commercial factors, including the future costs of obtaining finance, insurance cover and access to new acreage.

The nature of potential risks and liabilities are such that environmental management must be regarded as an on-going risk management activity, integrated into all planning and day-to-day operations in the same way that health and safety management is now being widely incorporated in petroleum industry activities. Joint venture participants generally pay considerable attention to the calibre of the technical (geological and engineering) advice provided by the operator. It follows that they should also place considerable importance on the calibre of environmental management expertise provided by the operator and its contractors.

A successful system of management should be modelled on a due diligence defence, which requires that those who are directing joint venture activities exercise due diligence, requiring the establishment of a proper system to prevent violations of the law and the effective operation of that system, including supervision, maintenance and improvements in business methods.