Oil and Gas Regulation in the United States

Question: Despite recent developments in the field of Litigation, parties embroiled in an oil and gas dispute still prefer to choose International Commercial Arbitration as a preferred method of resolving their disputes. Examine the truth behind this statement and evaluate the reasons why this may be the case in Oil and Gas Disputes. Answer: International Law in Oil and Gas industry International oil and gas law is a part of overall ordinary property law which includes the rules and regulations related to exploration, production, transportation and dispensation of crude oil, natural gas and associated hydrocarbons. International oil and gas law is established based on three streams of business. First steam is known as; upstream that is the "EP" of the business explains exploration, production of oil and gas. Next is midstream that explains the rules and regulations related to gathering, processing, storing, delivering and marketing of manufactured oil and gas and downstream that explains refining of crude oil and distribution of natural gas and products derived from crude oil. The main purpose of International Oil and Gas law is to organize the detection, organize and share possession, management and use of oil and natural gas as energy sources in the fuel modern civilization (Ross and Voeten 2015). Oil and gas law means gathering of legislative, dictatorial and judicial law that normally applies to the three steam of the oil and gas business. International oil and gas law not only includes contract, property and corporate law but also includes environmental law, taxation, service, managerial and even tort law. However, the challenges and legal issues a person faces while organizing a company to acquire and establish a particular offshore and onshore oil and gas prospect are unique. Therefore, to deal with these problems it is necessary to consult with a specialized oil and gas lawyer (Borgerson 2013). Oil and gas lawyers are also an important part of the oil and gas law just like oil and gas leases. Oil and Gas lease builds a suitable understanding and communication between the owner of property and an oil production organization. According to Christiansen (2014), oil and gas leases, owner of a land who owns the rights to the surface and mineral rights to his farm must be approached by a landsman to start the leasing of mineral rights. Oil exploration company carries the responsibility to establish an oil and gas lease right after the landsman has studies the geological maps of the area. However, it is highly important to find out the proper owner of the land as in the oil lease only the name of the owner can be included (Baker 2013). Therefore, an oil company must carry out a lot of homework before creating a sign a lease contract. In most of the countries and states, mineral rights are separate from surface rights of the landholding. Therefore, before creating a lease contract, it is crucial for the landowner, landsman and oil company to go further and find out whether the landowner has the right to lease the minerals according to the terms of the oil and gas laws. The royalty payment is another part of the oil and gas industry (Lowe et al. 2012). According to this law, the costs of implementing lease operations are deducted first and then the landowner receives a percentage of the remainder. Another part of the agreement states that the lessee will protect the land and the property from any type of drainage. Besides, the company will redevelop the property after drilling the well in the area (Truss and Robertson 2012). The Environment Protection Agency also plays a major role in oil and gas laws as they monitor the operations of the oil production company to make sure that the property after the exploration is finished environmentally safe. Key principles of contract formation in International commercial transaction International commercial transaction or law is an association of lawful regulations, conventions, treaties, familial legislation and commercial customs or usages which monitor international commercials. (Kulander 2014). A transaction will be considered as international when more than one country is involved. There are several parts of international commercial transactions. The international commercial contract is one of them. This contract is the sale transaction agreement between different parties from different countries. This method helps to understand the methods of entering a new market with the choice made balancing cost, control and risk by evaluating some different options. Those options are export openly, using foreign agents to sell and distribute, Using foreign distributors to provide on-sell to local customers, opening a new business or acquiring any foreign subsidiary to manufacture products in foreign countries, license to a local manufacturer, joining hands with any fo reign entity and recruiting a franchise in the foreign country. Incoterms 2010 is the latest collection of important international commercial and trade terms. When integrated with a sales contract, the Incoterm code serves to help the parties to understand their rights and obligations in detail (Kulander 2013). The International Chamber of Commerce (ICC) is solely responsible for revising Incoterm occasionally to reflect changing practices in international trade. Effectiveness of International law in addressing the environmental impact of oil exploration and exploitation Several international conventions, treaties and agreements including environmental instruments are established to protect the environment. These rules and regulations have either direct or indirect impact on the oil and gas industry (DeMeritt and Young 2013). These international environmental instruments help the companies to acquire precautionary principle for better environmental protection from oil and gas pollution at the time of exploration and exploitation. Activity Resources Used Effectiveness Aerial Survey Aircraft, Space Satellites Due to the strict international law, the oil and gas companies are now forced to conduct an environmental assessment to identify protected areas and sensitive areas (Symeonides 2013). During the time of less sensitive operation, schedules monitoring and planning is used. Onshore Seismic operations Seismic equipment To preserve the vegetation cover, the companies are now using the Shot-hole method in the place of vibroseis method. The professionals make sure that the electrical charge is minimum enough and deep enough to avoid extra works. Offsets are used to avoid particular sensitivities Company professionals make sure that misfired charges are disabled. The cleanup crew are called upon after completing an operation. Base camp and access Companies now regularly communicate with the local authorities and other stakeholders before choosing a location (Bamberger and Oswald 2014). This is done to ensure that sensitive areas are left alone. Oil exploration companies are now using instruments that are helping them to minimize the effects on the environment and local communicates. According to the environmental law, companies are asked not to build additional roads for transportation. They are asked to use existing infrastructure. Companies are advised to use manual cutting machinery in place of heavy machinery like bulldozers. Oil exploration companies are forced to minimize their activities while exploring for oil and other hydrocarbons. According to the environmental law, workers are prohibited from hunting and communicating with local people (Ratner and Tiemann 2014). During any exploration companies are strictly ordered to control waste disposal. Line Cutting Hand-cut lines to minimize disturbance. Companies are ordered not to cut trees that are in a diameter greater that local regulations permit. Offshore Seismic operation Resources and equipment For operations companies are instructed to use environmental assessment tools to find out protected areas and local sensitive zones. Vessel operations Company professionals must consult with their stakeholders and local people to conduct surveys before signing any permits and notifications. Following the planned survey track is also necessary to evade any unnecessary interface. All dissipate resources and oily waters should be disposed of in a proper manner to meet national and international rules and regulations. Proper environmental friendly processes must be taken to handle and maintain cable oils. According to Shipboard Oil Pollution Emergency Plan 1992, contingency plans for lost equipment and oil spillage is also important. Explosives used I exploration must be stored in according to operational procedures and local regulations. Using guard boats is essential is high populated areas. Taking help of local people is necessary to print out wildlife and marine life (Haberl et al. 2013). Onshore exploration and drilling Selection of Site Less sensitive areas must be selected to use directional drilling to access targets beneath the area. Access Before gaining access to a site, companies are now instructed to consult with local authorities to find out preferred routings. Companies are instructed to use existing roads and resources. According to the Environmental rules and regulations, companies must focus on hampering minimum amount of vegetation loss and disturbance (Grooms 2015). While building roads, companies must use local resources and should minimize cutting of timber. Table 1: Effectiveness of oil and gas law (Source: Author) Importance of International Commercial Arbitration as a preferred method of resolving disputes in oil and gas industry International Commercial Arbitration is used as one of the most effective tool for settling international disputes. There are various reasons related to this effectiveness which are, International Commercial Arbitration is the one-stage procedure only. The parties who are relating to disputes, will never waste time because of absence of appellate and cassation instances. Therefore, it can satisfy the business needs. This procedure is a quick procedure which again satisfies the business. Another advantage of this arbitration is the disputing companies need to pay for one stage only which makes it a comparatively cheap procedure. This again satisfies business. The professionals who are responsible for decision-making process are specialists in international commercial law, private international law and business affairs. Therefore, it is easy for them to understand the matters and facts related to it. Besides, the parties have their rights to select arbitrators which again satisfies their business needs. The formalities in this process are minimum as it uses less paper therefore, consumes less time and money. Importance of International Oil and Gas laws International oil and gas law mainly helped to reduce the negative effects of oil and gas explorations. From the above the table it is clear that oil and gas companies are now forced to follow tons of rules and regulations before starting their exploration. Now, any company cannot just choose an area and start drilling for hydrocarbons (Opp 2012). Currently, oil exploration companies must consult with local and national authorities before starting the drilling and collection procedure. Different oil and gas laws have served differently and have different importance. Resource Conservation and Recovery Act (RCRA) is such an act that regulates the generation, transportation, treatment, storage and disposal of hazardous and non-hazardous waste (Skogdalen and Vinnem 2012). Due to this act, companies are now showing more responsibility while handling wastes associated with investigation, growth and manufacture of crude oil or gas. Clean Water Act is another important act that has helped to keep the environment clean and safe. Before this act, exploration companies could discharge their pollutant materials in the sea or the rivers without taking any permission (Grooms 2015). However, this act has restricted their activities, as now they will have to take permission from the government before disposing of anything related to pollutants including spills and leaks of oil and other substances. There are some other small advantages of oil and gas law. The oil and gas law serves to protect not only the interests of the local people but also the interest of the government. The law prevents from wrongful taking of personal property. In the initial stages of oil and gas exploration, companies used to trespass in personal properties without proper permission to dig a well or to place drilling machines. The oil and gas law has helped the people to build their rights and has prevented companies from doing anything like this. The oil and gas law has developed a new idea which is nature of ownership. This concept is a very important part of oil and gas law as it helps to minimize conflicts among the local people and exploration companies. The ownership theory is divided into two parts which are non-ownership and ownership in place. Last but not the least, the most important part of the international oil and gas law is, it unites the world under one roof (Symeonides 2013). It is already mentioned that different countries and states had their different rules and regulations. Therefore, it was very difficult for the companies to adopt in different rules and regulations at the time of exploration. Besides, another importance of this law is, it serves equality among the countries. Countries like Nigeria did not have any rules and regulations over oil and gas exploration processes (Wenrui et al. 2013). Therefore, companies could use any methods and procedures to extract oil and other hydrocarbons. Sometimes their methods caused severe harms to the environment in backward countries while countries like UK, US, OMAN and UAE established strict laws to protect their environment. 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