Reviewing the legal consequences of oil spills and accidents offshore Brazil

As exploration in the presalt layer offshore Brazil continues to discover success, questions arise over whether legislation will be sufficient to prevent or mitigate the environmental risks of an accident. While there is room for improvement, the author believes the legal consequences established under Brazilian law are sufficient to cover the risk of exploration of oil and gas in the presalt layer.

Recently, Brazil has made significant changes to its environmental protection regulation for the oil and gas industry. In 1997, the Petroleum Law was enacted not only with a purpose to protect the environment, but also created the National Petroleum Agency (ANP), to regulate the oil and gas industry and to enforce environmental preservation actions. As bid rounds for offshore concessions occurred, the need increased for dialog between the ANP and the Brazilian Environmental Protection Agency (IBAMA). As a result, in 2006 the two agencies restructured the preliminary studies to consider the environmental sensitivity for the definition of the viability of the offered blocks. In October 2011, the environmental licensing proceeding was modified to adjust the severity of the requirements to the sensitivity of the area.

As to the consequences imposed on offshore oil and gas producers in the event of an accident, Brazil has entered into international treaties, such as the International Convention on Oil Pollution Preparedness, Response and Co-operation (ORPC), and the International Convention for the Prevention of Pollution from Ships (MARPOL). ORPC establishes an international cooperation for the combat of major incidents or threats of marine pollution. MARPOL requires the countries to create contingency plans, and to request individual emergency plans from the ships and vessels operating in its territory.

Legislation in Brazil is detailed in regards to environmental liability with the Federal Law No. 9,966, of April 29, 2000. The law is the main legal instrument related to oil pollution, requires vessels to prepare individual emergency plans, and to immediately communicate accidents. It also authorizes the Brazilian Navy to inspect events of marine pollution. There are also rules which control the use of chemical dispersants offshore, and require the conduction of periodical environmental audits. In this sense, the first legal consequences of an accident are that the responsible agent must immediately adopt measures to mitigate the damage pursuant to its individual emergency plan and communicate to Brazilian authorities.

Under Brazilian law, legal responsibility is divided into three types: civil, administrative, and criminal liability. The purpose of civil liability is to recover the environment and/or indemnify for the losses and damages caused. The civil liability is joint and severe. Any agent that contributed to the damage may be obliged to pay for the entire cost of indemnification. No argument of fault or degree of care may be used to relieve or reduce the liability. The piercing of the corporate veil theory also is adopted in case the existence of the legal entity is deemed as an obstacle for the recovery of the environment. There is no legal limitation for the amount paid as civil liability.

The purpose of administrative and criminal liabilities is to handle sanctions imposed over the pollutant. Causing pollution is considered both an administrative infraction and a crime. Both sanctions may vary from warnings, to fines that can reach up to R$50 million ($24 million) and – most severely – the prohibition to obtain public financing, and enter into future contracts with public authorities.

Based on the Petroleum Law, the concession agreements signed with the ANP provide for several environmental liability clauses. The concessionaire is responsible for any environmental damage and breach of the conditions of its environmental licenses. Thus, the event of an environmental pollution may also trigger contractual liabilities imposed by the ANP that may vary from fines to the termination of the concession agreement, and forbiddance to participate in future bid rounds.

If Brazilian law needs to be further developed, it should be to mitigate the risks of an accident: increase the periodical inspections by public authorities, conduct efficiency tests of the companies' emergency plans, and build a strong chain of cooperation between all industry contributors to contain damages.

Luciana Vianna Pereira
Attorney-at-Law, associate
Trench, Rossi, and Watanabe Advogados (Brazil)

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