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Journal of Energy & Natural Resources Law Volume 20, 2002 - Issue 4
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Original Articles

Adoption of International Environmental Standards by Transnational Oil Companies: Reducing the Impact of Oil Operations in Emerging Economies

Alexandra S Wawryk B Ec (Hons), LLB (Hons), PhD (Law) (Adelaide), Barrister and Solicitor of the Supreme Court of South Australia, Lecturer at the University of Adelaide. The author can be contacted by e-mail at [email protected].
Pages 402-434 | Published online: 08 Jun 2015

  • There is no one clear, fixed and generally accepted definition of an emerging economy. For the purpose of this article, the term ‘emerging economies’ refers to a group of countries that includes ‘countries in transition’ from socialist to market economies, and ‘developing countries’, that are, generally speaking, yet to undergo the industrialisation and development of high-technology societies of the Western ‘developed’ countries. Development Assistance Committee, Development Cooperation Report 1997 (OECD, Paris, 1998), p A101; OECD, External Debt Statistics (OECD, France, 1997), pp 4–5.
  • As a general guide, at the end of 2000 the OECD countries held 8.1 per cent of the world's proven reserves of oil and accounted for 28.1 per cent of world production of oil: BP Amoco, Statistical Review of World Energy 2001, http://www.bpamoco.com.
  • In some cases, the impact of environmental degradation on the culture and traditional lifestyle of the indigenous community is so devastating that a breach of human rights occurs. Inter-American Commission on Human Rights, Report on the Situation of Human Rights in Ecuador, OAS Doc OEA/Serv.L/V.II.96, doc 10, rev 1, 24 April 1997, Inter-American Commission on Human Rights, http://www.cidh.oas.org/country.htm.
  • American Petroleum Institute (API), API Environmental Stewardship Pledge for CAREFUL Operations, http://www.api.org, accessed 27 February 2002.
  • Australian Petroleum Production and Exploration Association Limited (APPEA), Environmental Policy, June 1997, http://www.appea.com.au/environment/; Regional Association of Oil and Natural Gas Companies in Latin America and the Caribbean (ARPEL), Code of Environmental Conduct, May 1997, http://www.arpel.org/code_e_c.htm.
  • For example, the worldwide chemical industry has adopted the Responsible Care programme as a self-regulatory health, safety and environmental management scheme, while an example of an international environmental code in the mining industry is the Mining and Environment Guidelines, adopted at the International Round-table on Mining and the Environment, Berlin, 25–28 June 1991.
  • For example, the United Kingdom Offshore Operators’ Association (UKOOA) promotes ‘innovation rather than relying on compliance against prescriptive standards or technologies’, while one of APPEA's key objectives is ‘self-regulation through the formulation and acceptance of codes of practice in key areas of business activity’. UKOOA, Environmental Principles, http://www.ukooa.co.uk/; APPEA, ‘Key Objectives’, www.appea.com.au/.
  • Oil Industry International Exploration and Production Forum, Oil and Gas Exploration and Production in Mangrove Areas: Guidelines for Environmental Protection (Gland, Switzerland: IUCN/ E&P Forum, Report No 2.54/184: 1993); Oil and Gas Exploration in Arctic and Subarctic Onshore Regions: Guidelines for Environmental Protection (Gland, Switzerland; Cambridge, UK: IUCN/E&P Forum, Report No 2.55/185: 1993) E&P Forum Oil Industry Operating Guideline for Tropical Rainforest, Report No 2.49/170, April 1991; Exploration and Production Waste Management Guidelines, Report No 2.58/196, September 1993; Decommissioning, Remediation and Reclamation Guidelines for Onshore Exploration and Production Sites, Report No 2.70/242, October 1996.
  • See also the API's Environmental Stewardship Program Pledge for CAREFUL Operations, http://www.api.org/, accessed 27 February 2002.
  • American Petroleum Institute, Onshore Oil and Gas Production Practices for Protection of the Environment (Washington DC, API, 2nd edn, 1995).
  • ARPEL, Code of Environmental Conduct, above n 5; APPEA, APPEA Code of Environmental Practice (1996 edn), http://www.appea.com.au/environment/code.html; UKOOA, Environmental Principles, http://www.ukooa.co.uk/.
  • World Bank, ‘Industry Sector Guidelines: Oil and Gas Development (Onshore)’, Pollution Prevention and Abatement Handbook 1998, World Bank, http://www.worldbank.org/, at 361.
  • International Union for the Conservation of Nature and Natural Resources, Oil Exploration in the Tropics: Guidelines for Environmental Protection (Gland, Switzerland: IUCN, 1991).
  • Conservation International Policy Paper, Vol 2, 1997.
  • The API currently produces and maintains about 400 voluntary standards that ‘are so widely used both in the United States and around the world that they define standard industry practice’: API, ‘Standards Safeguard the Environment and Human Health’, 30 June 1999, http://www.api.org/step/standards.htm. ISO Technical Committee 67 is developing a series of technical standards for Materials, Equipment and Offshore Structures for Petroleum and Natural Gas Industries, based primarily on API standards. The OGP, which ‘firmly supports the internationalisation of standards’, promotes the publication, development and use of ISO standards, and supports their use without modification. The OGP's Catalogue of International Standards Used in the Petroleum and Natural Gas Industries (Report No 1.24/299, November 1999) lists hundreds of ISO standards that are used in the international oil industry.
  • There are numerous articles and books on EIA. See, for example, A Gilpin, Environmental Impact Assessment (EIA): Cutting Edge for the Twenty-First Century (Cambridge, UK: Cambridge University Press, 1995); J Glasson, R Therivale and A Chadwick, Introduction to Environmental Impact Assessment: Principles and Procedures, Process, Practice and Prospects (UCL Press Limited, London, 1994); P Morris and R Therivel (eds), Methods of Environmental Impact Assessment (London: UCL Press Limited, 1995); C Wood, Environmental Impact Assessment: A Comparative Review (Essex, UK: Longman Group Limited, 1995).
  • T King, ‘What Should be the “Cultural Resources” Element of an EIA?’ (2000) 20 Environmental Impact Assessment Review 5 at 15–16.
  • C Wood, above n 16 at 227.
  • Ibid at 197–199.
  • IUCN Inter-Commission Task Force on Indigenous Peoples, Indigenous Peoples and Sustainability: Cases and Actions (Utrecht: International Books, 1997), p 150.
  • The Interorganisational Committee on Guidelines and Principles for Social Impact Assessment, ‘Guidelines and Principles for Social Impact Assessment’ (1995) 15 Environmental Impact Assessment Review 11 at 11 (hereafter ICGPSIA, Guidelines and Principles for SIA).
  • ICGPSIA, Guidelines and Principles for SIA; World Bank, Social Assessment—Key Concepts, http://www.worldbank.org/.
  • Oil Industry International Exploration and Production Forum, Principles for Impact Assessment: the Environmental and Social Dimension, Report No 2.74/265, August 1997 (hereafter E&P Forum, Principles for Impact Assessment) at 3.
  • A Kiss and D Shelton, International Environmental Law (Ardsey, New York: Transnational Publishers Inc, 2nd edn, 2000), p 203; G Pring, J Otto and K Naito, ‘Trends in International Environmental Law Affecting the Minerals Industry (Part I)’ (1999) 17 JERL 39 at 54.
  • Rio Declaration on Environment and Development, adopted 14 June 1992, UNCED Doc A/CONF. 151/5/Rev. 1, (Vol I), Annex I, 13 June 1992,(1992) 31 ILM 874; Convention on Biological Diversity, adopted 5 June 1992,(1992)31 ILM 818 (entered into force 29 December 1993); Framework Convention on Climate Change, adopted 9 May 1992, (1992)31 ILM 848 (entered into force 21 March 1994); UNEP, Goals and Principles of Environmental Impact Assessment, UNEP Governing Council Res GC14/25, 17 June 1987; endorsed by the United Nations in UNGA Res 42/184 (1987).
  • Convention on Environmental Impact Assessment in a Transboundary Context, (Espoo), adopted 25 February 1991, (1991) 30 ILM 800; the Antarctic Treaty (Washington), adopted 1 December 1959, 402 UNTS 71; 12UST 794; UKTS 97 (1961), Cmnd 1535; TIAS 4786; (1980) 19 ILM 860 (entered into force 23 June 1961); Protocol to the Antarctic Treaty on Environmental Protection (Madrid), adopted 4 October 1991, (1991) 30 ILM 1455 (not yet in force).
  • EEC Directive on the Assessment of the Effects of Certain Projects on the Environment, adopted 27 June 1985, 85/337, OJ 1985 L 175. For information on the Directive, see A Kiss and D Shelton, above n 24 at 208–209.
  • E&P Forum, Principles for Impact Assessment, above n 23. A third document, Guidelines for Social and Environmental Assessment, is under development. See also E&P Forum, The Oil Industry: Operating in Sensitive Environments, Report No 2.73/255, May 1997, stating that ‘environmental and social impact assessment is an integral part of project development and implementation’; APPEA's 1996 Code of Environmental Practice and ARPEL's Guidelines for Environmental Impact Assessment (EIA) Process (1992).
  • E&P Forum, Principles for Impact Assessment, above n 23 at 1 and 3.
  • Ibid at 4–7.
  • E&P Forum, Oil Industry Operating Guideline for Tropical Rainforest, above n 8; Oil and Gas Exploration and Production in Mangrove Areas, above n 8; Oil and Gas Exploration in Arctic and Subarctic Onshore Regions, above n 8; E&P Forum, Exploration and Production Waste Management Guidelines, above n 8; Decommissioning, Remediation and Reclamation Guidelines for Onshore Exploration and Production Sites, above n 8.
  • Oil and Gas Exploration and Production in Mangrove Areas, ibid at 1; Oil and Gas Exploration in Arctic and Subarctic Onshore Regions, ibid at 1.
  • Oil and Gas Exploration in Arctic and Subarctic Onshore Regions, ibid at 16.
  • Ibid at 23.
  • Environmental Assessment Sourcebook (Washington DC: World Bank, 1991).
  • World Bank, Good Practice 4.01, Environmental Assessment, ‘Annex B: Types of Projects and their Typical Classifications’, January 1999.
  • World Bank, Russia—Petroleum Joint Venture, Project Information Document No RUPA8807, 30 September 1996, World Bank, http://www.worldbank.org/, paras 10 and 13. For a critical report on the World Bank's role in the proposed development, see E Schmidt, The World Bank and Russian Oil (Bonn: World Economy, Ecology and Development Association, June 1996), http://www.weedbonn.org/.
  • World Bank, Russia—Petroleum Joint Venture, ibid, para 19.
  • Ibid para 20.
  • Personal communication with Charles McPherson, Task Manager, World Bank, 16 March 1999.
  • World Bank, ‘Environmental and Social Impact Mitigation Practices’ (2001), http://www.worldbank.org/ogsimpact/, accessed 20 March 2002.
  • International Chamber of Commerce (ICC), The Business Charter for Sustainable Development: Principles for Environmental Management, http://www.iccbo.org/home/environment/charter.asp.
  • A Gilpin, above n 16 at 3.
  • OE&P Forum, View of Environmental Impact Assessment, Report No 2.40/135, October 1986, at 3; E&P Forum, Principles for Impact Assessment, above n 23 at 4.
  • E&P Forum, Principles for Impact Assessment, ibid.
  • G M Bates, Environmental Law in Australia (Sydney: Butterworths, 4th edn, 1992), pp 179–182.
  • Ibid at 183–188.
  • C Wood, above n 16 at 302–308; T Kerr, ‘What's Good for General Motors is Not Always Good for Developing Nations: Standardizing Environmental Assessment of Foreign-Investment Projects in Developing Countries’ (1995) 29(1) International Law 153 at 160.
  • Wood at 302.
  • J Wagner, ‘Oil and Gas Operations and Environmental Law in Latin America’ (1998) 16 JERL 153 at 179.
  • The ISO standards on EMS have their roots in BS7750, the first international EMS standard. Developed by the British Standards Institution in 1992 as the national EMS standard for the United Kingdom, and revised in 1994, the standard has since been withdrawn.
  • W Von Zharen, ISO 14000: Understanding the Environmental Standards (Rockville, Maryland: Government Institutes Inc, 1996), p 51.
  • W Von Zharen, ibid at 43–46; D Wells, ‘Corporate Environmental Management Systems’ (1997) AMPLA Yrbk 530 at 534–535.
  • W Von Zharen, ibid at 46–48; D Wells, ibid.
  • W Von Zharen, ibid at 48–49; D Wells, ibid.
  • I Ritchie and W Hayes, A Guide to the Implementation of the ISO 14000 Series on Environmental Management (Upper Saddle River, New Jersey: Prentice Hall Inc, 1998), p 6.
  • European Council Regulation 1836/93 of 10 July 1993, Concerning Voluntary Participation by Companies in the Industrial Sector in a Community Eco-Management and Audit Scheme OJ L 168/1.
  • Ibid Art 2(a).
  • Oil Industry International Exploration and Production Forum, Guidelines for the Development and Application of Health, Safety and Environmental Management Systems, E&P Forum, Report No 6.36/210, July 1994.
  • American Petroleum Institute, Strategies for Today's Environmental Partnership Newsletter, November 1998, http://www.api.org/step/newsletter/November98.htm.
  • American Petroleum Institute, Model Environmental, Health and Safety (EHS) Management System, and Guidance Document for Model Environmental, Health and Safety (EHS) Management System, above n 7. See also API, Model Environmental, Health and Safety (EHS) Management System and Guidance Document, http://www.api.org/pasp/step/ehsms.htm.
  • APPEA Code of Environmental Practice, above n 11, p 6.
  • D Wells, above n 53 at 533.
  • D Wells, ibid; K Trainor, ‘Taking the Myth Out of Environmental Management Systems’ (1997) AMPLA Yrbk 555 at 561; K Armstrong, ‘The Green Challenge—Managing Environmental Issues in Natural Resource Projects in Developing Countries’ (1996) 42nd Rocky Mountain Mineral Law Institute 3–1 at 3–54.
  • I Ritchie and W Hayes, above n 56 at 11. For a comprehensive, critical analysis of the ISO standards and the move to international standards in general, see N Roht-Arriaza, ‘Shifting the Point of Regulation: the International Organization for Standardization and Global Lawmaking on Trade and the Environment’(1995) 22 Ecology Law Quarterly 479.
  • For an example of this situation, see J Kimerling, ‘International Standards in Ecuador's Amazon Oil Fields: The Privatization of Environmental Law’ (2001) 26 Columbia Journal of Environmental Law 289.
  • W Kuhre, ISO 14031: Environmental Performance Evaluation (EPE) (Upper Saddle River, New Jersey: Prentice Hall PTR, 1998), p 3.
  • Ibid at 24–26.
  • For examples of these indicators in the oil industry, see W Kuhre, ibid at 211–218; and API, Environmental Performance Indicators: Methods for Measuring Pollution Prevention, September 1994.
  • SustainAbility Ltd/UNEP, The Oil Sector Report: A Review of Environmental Disclosure in the Oil Industry (London: The Beacon Press, 1999), p 55.
  • Ibid at 57.
  • Ibid.
  • Ibid at 44.
  • Ibid at 59.
  • E&P Forum, Principles for Impact Assessment, above n 23 at 11.
  • Ibid.
  • The Oil Industry: Operating in Sensitive Environments, above n 28; APPEA Environmental Policy, above n 6.
  • W Prince and D Nelson, ‘Developing an Environmental Model: Piecing Together the Growing Diversity of International Environmental Standards and Agendas Affecting Mining Companies’ (1996) 7 Colo J Int'l Envt L & Pol'y 247 at 292.
  • Ibid at 293.
  • Ibid.
  • European Council Regulation 1836/93 of 10 July 1993, Concerning Voluntary Participation by Companies in the Industrial Sector in a Community Eco-Management and Audit Scheme OJ L 168/1, above n 33.
  • Ibid Art 4.
  • T Wälde, ‘Environmental Policies Towards Mining in Developing Countries’ (1992) 10 JERL 327 at 348; W Prince and D Nelson, above n 78 at 261–262.
  • W Prince and D Nelson, ibid at 306.
  • E&P Forum, Guidelines for the Development and Application of Health, Safety and Environmental Management Systems, above n 35 at 25; ARPEL, Guidelines for Conducting Environmental Audits for Onshore Petroleum Operations (1992); ARPEL, Guidelines for the Elaboration of Terms of Reference for the Environmental Impact Assessment of Petroleum Industry Projects and Environmental Audits of OH and Gas Industry Activities (1998).
  • J Kimerling, ‘The Environmental Audit of Texaco's Amazon Oil Fields: Environmental Justice or Business as Usual?’ (1994) 17 Harv Hum Rts J 199 at 200.
  • Ibid.
  • United Nations Commission on Human Rights, Question of the Violation of Human Rights and Fundamental Freedoms in any Part of the World: Situation of Human Rights in Nigeria, Report Submitted by the Special Rapporteur of the Commission on Human Rights, Soli Jehangir Sorabjee, UN Doc E/CN.4/1999/36, United Nations High Commissioner for Human Rights, http://www.unhchr.ch/, para 116.
  • On theories of regulation including regulatory capture, see G Stigler, ‘The Theory of Economic Regulation’ (1971) 2 Bell J of Economics & Management Science 3–21, and more recently, I Ayres and J Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (New York: Oxford University Press, 1992).
  • SustainAbility Ltd/ UNEP, above n 70 at 34–40; C Deegan, ‘Environmental Reporting for Australian Corporations: An Analysis of Contemporary Australian and Overseas Environmental Reporting Practices’ (1996) 13 EPLJ 120 at 125–126.
  • SustainAbility Ltd/UNEP, above n 70, Appendix 1 at 62–63 lists a number of mandatory environmental reporting initiatives.
  • European Council Regulation 1836/93 of 10 July 1993, Concerning Voluntary Participation by Companies in the Industrial Sector in a Community Eco-Management and Audit Scheme OJ L 168/1, above n 33, Article 1(c).
  • Ibid Art 3(f)-(h).
  • Ibid Art 3(f) and Annex V; see also European Commission, ‘Eco-Management and Audit Scheme’, http://www.europa.eu.int/comm/environment/emas/.
  • SustainAbility Ltd/UNEP, above n 70, Appendix 2 at 64–65 lists a number of voluntary environmental reporting guidelines and initiatives.
  • Confederation of British Industry, Introducing Environmental Reporting: Guidelines for Business (CBI, London, 1994), cited in C Deegan, above n 90 at 128.
  • SustainAbility Ltd/UNEP, above n 70 at 10.
  • OGP, ‘Environmental Performance Indicators—Report for 1998’, Highlights, August 2000, http://www.ogp.org.uk/highlights/index.html.
  • American Petroleum Industry, 6th Annual Petroleum Industry Environmental Performance Report (American Petroleum Industry, May 1998), http://www.api.org/pasp/step.
  • SustainAbility Ltd/UNEP, above n 70 at 10.
  • Ibid at 11–23.
  • Ibid at 41.
  • Ibid at 43.
  • World Business Council for Sustainable Development (WBCSD), Meeting Changing Expectations: Corporate Social Responsibility (1998), http://www.wbcsd.ch/publications/csrpub.htm.
  • SustainAbility Ltd/UNEP, above n 70 at 43 and 46.
  • Ibid at 43.
  • Ibid at 43–47. The other seven categories are: business values and integrity; human rights; distribution equity; diversity; employee conditions; employee development; and social investment.
  • Another manifestation of the move towards social accountability is ‘ethical investing’ or ‘social investing’. Ethical investing involves the purchase of securities in products in firms that meet positive criteria, such as environmental sensitivity, and avoiding investments in firms that meet negative criteria, such as weapons manufacturing. V Zondorak, ‘A New Face in Corporate Environmental Responsibility: The Valdez Principles’ (1991) 18 Bost Coll Env Aff L Rev 457 at 481.
  • SustainAbility Ltd/UNEP, above m 70 at 46.
  • The World Business Council For Sustainable Development supports the view that corporate social responsibility offers clear business benefits by enabling business to monitor shifts in social expectation, control risks, identify market opportunities and improve the corporation's public reputation: WBCSD, above n 104. Others have argued that the role of corporations is to make profit and maximise shareholder value, while achieving social justice is the responsibility of governments: C Friedman, ‘The Social Responsibility of Business is to Increase its Profits’, New York Times, 13 September 1970 (Magazine), No 6 at 32, 126.
  • K Armstrong, above n 64; W Prince and D Nelson, above n 78; G Pring, J Otto and K Naito, above n 24; G Pring, J Otto and K Naito, ‘Trends in Environmental Law Affecting the Minerals Industry (Part II)’ (1999) 17(2) JERL 151.
  • For a discussion of soft law see P Birnie and A Boyle, International Law and the Environment (Oxford: Clarendon Press, 1992), pp 26–30; C Chinkin, ‘The Challenge of Soft Law and Change in International Law’ (1989) 38 Intl and Comp LQ 850; P Dupuy, ‘Soft Law and the International Law of the Environment’ (1991) 12 Mich J Int'l L 420; L Guruswamy, Sir Geoffrey Palmer, B Weston and J Carlson, International Environmental Law and World Order: A Problem-Oriented Coursebook (St Paul, Minnesota: West Publishing Co, 2nd edn, 1999), pp 55–62; H Hillgenberg, ‘A Fresh Look at Soft Law’ (1999) 19(3) EJIL 499; A Kiss and D Shelton, International Environmental Law (Ardsey, New York: Transnational Publishers Inc, 2nd edn, 2000), pp 46–52; G Palmer, ‘New Ways to Make International Environmental Law’ (1992) 86 AJIL 259; P Szasz, ‘International Norm-Making’ in E Brown Weiss, Environmental Change and International Law: New Challenges and Dimensions (Tokyo: United Nations University Press, 1992), pp 69–72.
  • Furthermore, IGOs and NGOs that have mechanisms for monitoring compliance with human rights and environmental norms may be able to shame governments and corporations into abiding by the norms: P Szasz, above n 3 at 71.
  • G Pring, J Otto and K Naito, (Part I), above n 24 at 55.
  • For example, clause 7.1.5 of Ecuador's Model for Service Contracts in Exploration and Exploitation of Hydrocarbons requires oil operators to ‘perform all of the services which are the object of this contract, according to the best techniques, equipment and generally accepted international practices for the hydrocarbon industry’.
  • APPEA Code of Environmental Practice, above n 11.
  • K Armstrong, above n 12 at 3–41.
  • D Wells, above n 53 at 537; K Trainor above n 64 at 557.
  • [1999] NSWLEC 192. See also EPA v The Shell Company of Australia Ltd [1999] NSWLEC 16.
  • ‘BP Amoco Admits Environmental Lapse’, Oil and Gas Journal, 4 October 1999, 34–35.
  • D Wells, above n 53 at 534.
  • H Pitt and K Groskaufmanis, ‘Minimizing Corporate Civil and Criminal Liability: A Second Look at Corporate Codes of Conduct’ (1990) 78 Georgetown LJ 1559.
  • The Oil Industry: Operating in Sensitive Environments, ‘Texaco Exploration in North East Bangkok’ (IPIECA/E&P Forum, Report No 2.73/255, London, May 1997). At the time of the report, the Thai Government was intending to use Texaco's procedures for closure of the site as the case study for future reference for other concessionaire operations onshore in Thailand.
  • B Hepple, ‘A Race to the Top? International Investment Guidelines and Corporate Codes of Conduct’ (1999) 20 Comp Labor Law & Pol'y J 347.
  • J Kimerling, above n 66.
  • For more information on Responsible Care, see N Gunningham, ‘The Chemical Industry’ in Gunningham Neil and Grabosky Peter, Smart Regulation: Designing Environmental Policy (New York: Oxford University Press, 1998), and the Chemical Manufacturers Association (US) internet site, http://www.cmahq.com/responsiblecare.nsf/.

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