No. 1, 2008

Caspian states should act for an early adoption of harmonized environmental legislation

The Caspian Sea is a unique habitat of many rare and endangered species. From time immemorial it is famous for abundance of sturgeon and other popular food fish. Its subsoil wealth has proved as fabulous. Since the mid-20th century the Caspian has been associated with oil. Its hydrocarbon resources are at least double those of the North Sea. However, the absence of international legal regulation of the oil production operations conducted on the Caspian shelf may, before very long, create serious ecological, legal and economic, let alone political, problems for coastal states.

More questions than answers

After the breakup of the USSR in 1991, the Caspian states hastened to delimit the Caspian offshore area. It is perfectly clear, though, that sectoral sea-floor division will offer no solutions to most environmental problems.

The construction of underwater oil and gas pipelines is hardly an internal affair of any Caspian state. The cyclone activity pattern in the Caspian zone is such that even the slightest pollution anywhere will inevitably trigger the “domino effect.” In the meantime, there still remains a legal vacuum in the spheres of subsoil and water use and environmental protection.

In any case, there is so far no theoretical and practical answer to the main question: the laws of which of the Caspian states should have jurisdiction over the said relations? No international legal document makes the matter clear. Moreover, further progress of subsoil use in the Caspian is hindered by its lack of international status (meaning that the provisions of international maritime law conventions do not apply to it) and by insufficient coordination of the coastal states’ actions in developing a common approach to environmental protection. This runs counter to universally accepted world practice. For example, prior to the development of the North Sea offshore fields, special conventions were adopted to regulate this activity in detail.

Finally, the absence of clear-cut subsoil and water use regulations based on international legal norms puts in question the subsoil users’ rights to the development of certain offshore fields of the Caspian. This is fraught with inter-company and inter-state legal conflicts. It is high time that uniform navigation, fishing, oil production and underwater pipeline laying rules be laid down.

Who’s in charge?

Unfortunately, neither the Framework Convention for the Protection of the Marine Environment of the Caspian Sea which took effect in 2007, nor the Russia-Kazakhstan Agreement on the Delimitation of the Northern Caspian Seabed with a View to Exercising Sovereign Rights to Subsoil Use, in force since 1998, contain any mandatory environmental regulators.

Until a proper legal framework is laid, the legitimacy of subsoil and water use in the Caspian will remain problematic as no company can substantiate, let alone prove, to a controlling agency of any Caspian state the rightfulness of its actions to observe environmental requirements. Bringing the project in line with all the norms contained in the legislations of all the Caspian states is no easy matter for a number of reasons. Besides, it is necessary to conduct the project’s preliminary environmental impact assessment in countries whose ecological interests have been affected. Otherwise, any economic activity can and must be stopped in accordance with the relevant legal provisions of any of the states.

Another legitimate question arises: the authorities of which country, on what grounds and in which part of the offshore area are authorized and in duty bound to exercise control over the observance of environmental standards? This matter is of special importance because there is a strong likelihood today of natural calamities and technogenic disasters occurring. After all, even normal steady-state well operation mode does not altogether rule out heavy oil spills.

At the same time, an ecological disaster in the Caspian is not only possible but even inevitable, unless proper provisions are made against it. It may be provoked by drilling in zones with anomalously high pressure in the northern region (in some of Kazakhstan’s oilfields reservoir pressure of hydrogen sulfide amounts to thousands of atmospheres) or by the breaking of oil and gas pipelines stretching across an earthquake generating zone of the offshore area. Tanker shipping is also fraught with accidents in crowded waters; and, besides, the risk of oil spillage from storages and pipelines is quite high.

The only solution to the above-mentioned ecological problems related to the development of offshore Caspian oil fields lies in adopting coordinated and unified approaches to, requirements of and procedures for environmental impact assessment, environmental control, standard setting, monitoring, ecological damage evaluation methods, prompt emergency response and settlement of ecological disputes.

Drawing on positive experience

The said approaches, requirements and procedures should be dovetailed with those now used in offshore oilfield development by the EU countries and also by Norway, Canada and the United States.

Norway’s record of accounting for and including in its environmental law the regulatory approaches and principles provided for under the EU Directives deserves special attention. Norway is, besides, a participant in the Oslo-Paris Convention for the Protection of the Marine Environment in the North-East Atlantic (OSPAR Convention) which defines ecological standards and environmental protection mechanisms for offshore oilfield development operations in the North Sea. As a result, that northern kingdom has worked out, over the past fifteen years, the most advanced shelf development legislation based on international law. Russia, with its Barents and Caspian seas, may well model its own relevant legislation on it. Practical experience has shown that Norway’s emphasis on the harmonization and unification of this legislation with European approaches and principles has proved most constructive.

The Caspian states have a lot to learn from this Convention, particularly from its standing Commission which draws up resolutions, recommendations, agreements, marine environment protection programs binding on all its members. The provisions of the Convention and of the resolutions stemming from it embrace all kinds of pollution and other adverse impacts that offshore subsoil use operations in the North Sea have on the environment. Incidentally, it is noteworthy that rather than being restricted to any one project, regulatory provisions apply to all the activities in progress in the aquatic area. The Commission sets strict limits to adverse effects, conducts environmental impact assessments (EIA), carries out monitoring of the sea fauna in all its biological diversity with a view to ensuring its protection and realizes an ecosystems approach.

Obviously, it is necessary and possible to develop a Caspian marine environmental protection mechanism modeled on the OSPAR Convention, with its priorities sorted out as follows: working out the principles underlying an accident prevention and response system; elaborating methods of ecological risks and damage assessment; laying down ecological risk insurance regulations; setting unified ecological standards in all stages of economic activity; creating the environmental protection mechanism (EIA, ecological control, standard setting, monitoring, dispute settlement, legal responsibility, research investigations); laying the regulatory groundwork for the development of transborder fields (unitization).

As a result, a special act of international law taking precedence over acts of national legislation might lay the foundation for the regulation of environmental protection in the process of subsoil use in the Caspian Sea.

To begin with, it would be a good idea to enlist cooperation in this effort of just three coastal states – Russian, Kazakhstan and Azerbaijan situated in the Northern Caspian zone, i.e. in the area where the concentration of hydrocarbon reserves is at its highest, and economic activity at its busiest. Considering that the three former Soviet republics still have much in common (Russian as the language of international communication, historical backgrounds, structures of their economies), their legal systems are similar and their geopolitical interests coincide, the adoption of an agreed legal framework in the foreseeable future, that is by the commencement of an intensive commercial development of the Caspian Sea’s hydrocarbon reserves, looks like a realistic proposition. With the passage of time, Turkmenistan and Iran might join the common environmental protection system.

Thus, pending the adjustment of the international legal status of the Caspian, the interests of environmental protection ought to relegate the still persisting minor differences to the background. It is safe to predict that the Caspian states will only benefit from that and put environmental activities in order throughout the Caspian.