BP 2013 Annual Report Download - page 258

parties or other losses. The allocation of those risks vary among contracts
and are determined through negotiation between the parties.
In general, BP is required to pay income tax on income generated from
production activities (whether under a licence or PSAs). In addition,
depending on the area, BP’s production activities may be subject to a
range of other taxes, levies and assessments, including special
petroleum taxes and revenue taxes. The taxes imposed on oil and gas
production profits and activities may be substantially higher than those
imposed on other activities, for example in Abu Dhabi, Angola, Egypt,
Norway, the UK, the US, Russia and Trinidad & Tobago.
Environmental regulation
BP has operations in around 80 countries and is subject to a wide variety of
environmental regulations concerning its products, operations and
activities. Current and proposed fuel and product specifications, emission
controls, climate change programmes and regulation of unconventional gas
extraction under a number of environmental laws may have a significant
effect on the production, sale and profitability of many of BP’s products.
There are also environmental laws that require BP to remediate and
restore areas affected by the release of hazardous substances or
hydrocarbons associated with our operations. These laws may apply to
sites that BP currently owns or operates, sites that it previously owned or
operated, or sites used for the disposal of its and other parties’ waste.
Provisions for environmental restoration and remediation are made when
a clean-up is probable and the amount of BP’s legal obligation can be
reliably estimated. The cost of future environmental remediation
obligations is often inherently difficult to estimate.
Uncertainties can include the extent of contamination, the appropriate
corrective actions, technological feasibility and BP’s share of liability. See
Financial statements – Note 29 for the amounts provided in respect of
environmental remediation and decommissioning.
A number of pending or anticipated governmental proceedings against
certain BP group companies under environmental laws could result in
monetary or other sanctions. We are also subject to environmental
claims for personal injury and property damage alleging the release of, or
exposure to, hazardous substances. The costs associated with such
future environmental remediation obligations, governmental proceedings
and claims could be significant and may be material to the results of
operations in the period in which they are recognized. We cannot
accurately predict the effects of future developments on the group, such
as stricter environmental laws or enforcement policies, or future events
at our facilities, and there can be no assurance that material liabilities and
costs will not be incurred in the future. For a discussion of the group’s
environmental expenditure see page 252.
A significant proportion of our fixed assets are located in the US and the
EU. US and EU environmental, health and safety regulations significantly
affect BP’s exploration and production, refining and marketing,
transportation and shipping operations. Significant legislation and
regulation in the US and the EU affecting our businesses and profitability
includes the following:
United States
• The Clean Air Act (CAA) regulates air emissions, permitting, fuel
specifications and other aspects of our production, distribution and
marketing activities. Stricter limits on sulphur in fuels will affect us in
future, as will actions on greenhouse gas (GHG) emissions and other
air pollutants. Additionally, states may have separate, stricter air
emission laws in addition to the CAA.
• The Energy Policy Act of 2005 and the Energy Independence and
Security Act of 2007 affect our US fuel markets by, among other
things, imposing renewable fuel mandates and imposing GHG
emissions thresholds for certain renewable fuels. States such as
California also impose additional fuel carbon standards.
• The Clean Water Act regulates wastewater and other effluent
discharges from BP’s facilities, and BP is required to obtain discharge
permits, install control equipment and implement operational controls
and preventative measures.
• The Resource Conservation and Recovery Act regulates the
generation, storage, transportation and disposal of wastes associated
with our operations and can require corrective action at locations
where such wastes have been disposed of or released.
• The Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) can, in certain circumstances, impose the entire
cost of investigation and remediation on a party who owned or
operated a site contaminated with a hazardous substance, or arranged
for disposal of a hazardous substance at a site. BP has incurred, or is
likely to incur, liability under the CERCLA or similar state laws,
including costs attributed to insolvent or unidentified parties. BP is also
subject to claims for remediation costs under other federal and state
laws, and to claims for natural resource damages under the CERCLA,
the Oil Pollution Act of 1990 (OPA 90) (discussed below) and other
federal and state laws. CERCLA also requires hazardous substance
release notification.
• The Toxic Substances Control Act regulates BP’s import, export and
sale of new chemical products.
• The Occupational Safety and Health Act imposes workplace safety and
health requirements on BP operations along with significant process
safety management obligations.
• In May 2012, the US adopted the UN Global Harmonization System for
hazard classification and labelling of chemicals and products, with the
modification of the Occupational Safety & Health Administration
Hazard Communication Standard. Manufacturers are required to
reclassify both Substance and Mixture safety and data sheets (SDS) by
1 June 2015 and to have trained employees on the new label elements
(pictograms) and SDS format by 1 December 2013. BP completed the
training for its employees by the 1 December 2013 deadline.
• The Emergency Planning and Community Right-to-Know Act requires
emergency planning and hazardous substance release notification as
well as public disclosure of our chemical usage and emissions.
• The US Department of Transportation (DOT) regulates the transport of
BP’s petroleum products such as crude oil, gasoline, petrochemicals
and other hydrocarbon liquids.
• The Maritime Transportation Security Act (MTSA), the DOT Hazardous
Materials (HAZMAT) and the Chemical Facility Anti-Terrorism Standard
(CFATS) regulations impose security compliance regulations on around
50 BP facilities. These regulations require security vulnerability
assessments, security risk mitigation plans and security upgrades,
increasing our cost of operations.
OPA 90 is implemented through regulations issued by the US
Environmental Protection Agency (EPA), the US Coast Guard, the DOT,
the Occupational Safety and Health Administration, the Bureau of Safety
and Environmental Enforcement and various states. Alaska and the west
coast states currently have the most demanding state requirements.
As a consequence of the Deepwater Horizon incident BP has become
subject to claims under OPA 90 and other laws and has established a
$20-billion trust fund for legitimate state and local government response
claims, final judgments and settlement claims, legitimate state and local
response costs, natural resource damages and related costs and legitimate
individual and business claims (see Gulf of Mexico oil spill on page 38). BP
is also subject to natural resource damages claims, claims for civil penalties
under the Clean Water Act, and numerous civil lawsuits by individuals,
businesses and governmental entities. The ultimate costs for these claims
cannot be determined at this time. For further disclosures relating to the
consequences of the 2010 Deepwater Horizon oil spill, see Legal
proceedings on page 257.
BP has also been in discussions with the EPA regarding alleged
CAA violations at the Toledo refinery and the EPA has alleged certain
CAA violations at the Cherry Point refinery and the Carson refinery (which
BP sold to Tesoro Corporation on 1 June 2013).
European Union
• The 2008 EU Climate and Energy Package, includes the EU Emissions
Trading System (EU ETS) Directive and the Renewable Energy
Directive (see Greenhouse gas regulation on page 44). In January
2014, the European Commission proposed a new Climate and Energy
Package for the period up to 2030. Under the third trading period of the
EU ETS – ‘Phase III’ – which started on 1 January 2013, the EU ETS
254 BP Annual Report and Form 20-F 2013