Review and proposed extension of the APPEA Method for estimating levels of financial assurance

Abstract

In 2014, the Australian Petroleum Production and Exploration Association (APPEA) published the ‘Method to assist titleholders in estimating appropriate levels of financial assurance for pollution incidents arising from petroleum activities’, referred to as the APPEA Method. The APPEA Method provides a standard approach to quantifying the appropriate level of financial assurance required under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act). The National Offshore Petroleum Safety and Environment Management Authority (NOPSEMA) endorsed the APPEA Method for an initial period of 2 years (until December 2016) with the requirement that APPEA review the method against a broader range of case studies to confirm its validity. In 2017, APPEA applied the APPEA Method to 18 case studies, comparing independently calculated cost estimates with the APPEA Method cost band for each case study. For 17 of the 18 case studies, the independent cost estimate was less than the APPEA Method cost band, confirming the validity of the APPEA Method for those case studies. For one of the case studies involving marine fuel oil, the APPEA Method cost band potentially underestimated the response and clean-up costs. The robustness of the APPEA Method can be improved by amending the hydrocarbon type impact score for fuel oils. Based on the review, NOPSEMA has since endorsed the APPEA Method until September 2018. The APPEA Method is currently endorsed for incidents in which the total volume of hydrocarbon released is <1 000 000 m3 and the total volume of oil ashore is <25 000 m3. Based on an assessment of the response and clean-up costs from three additional case studies that exceeded these limits, amendments to the APPEA Method are proposed that would extend the range of incidents to which it could be applied.