Offshore Oil and Gas Drilling: A Review of Regulatory Regimes in the United States, United Kingdom, and Norway

This article investigates the regulatory regimes for offshore oil and gas in the United States (U.S.), United Kingdom (U.K.), and Norway from both a positive and normative perspective. The positive analysis reveals that all three countries are converging on a similar regulatory system that combines strict liability, command-and-control, and management-based regulations for controlling site-specific risks. The timing of the adoption of each element in this regulatory system varies across the three countries and has been driven largely by accidents along the individual country’s continental shelf. In particular, the adoption of the management-based approach occurred after a significant accident revealed the weaknesses of a one-size-fits–all set of prescriptive rules. Although the normative analysis reveals theoretical support for the use of both liability and management-based approaches, the empirical data are limited, and the data that do exist call into question the superiority of the management-based approach over command-and-control. More research is needed that develops and systematically evaluates incentive-compatible regulatory regimes. (JEL: Q38, Q40, Q48, K32)