Proposal to insure against oil spills

The New Zealand government has announced a new proposal to offer further protection for taxpayers from the cost of potential oil spills.

Under proposed new rules, offshore oil and gas operators would be required to insure up to NZD1.2 billion (USD791 million) in order to help cover the fallout of an oil spill. Associate transport minister Julie Anne Genter announced that the Cabinet had agreed to consult on increasing the amount of cover oil and gas operators are required to hold.

At present, operators are required to insure for about NZD27 million (USD18.3 million), but the new proposal would see them pay more based on their risk, up to a maximum level of USD791 million. Citing the example of the Rena oil spill, Genter said communities and taxpayers should not be left to foot the bill for clean-up of an oil spill, according to the NZ Herald.

Genter said: “It’s only fair that operators are able to cover the clean-up cost of a worst-case scenario oil spill.”

As per the proposed regime, operators must hold insurance proportionate to the risk posed by their installation poses.

Genter said: “The proposed upper limit has been set at USD1.2 billion to future-proof the regime in the event that a future installation proceeds in a higher-risk, deep water location.