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Articles

Improving outcomes for future generations in petroleum licensing regimes – an assessment of the United Kingdom's regime: Part 2 – assessment of the UK regime

Pages 301-336 | Published online: 03 Nov 2020
 

Abstract

Part 2 of this article assesses the United Kingdom's offshore petroleum licensing regime for its treatment of the interests of future generations using the methodology developed in Part 1. The assessment is a functional assessment across nine areas: four environmental areas (ecosystems necessary for human life, other ecosystems, cultural heritage and amenity values and restoration of ecosystem damage) and five non-environmental areas (technology, risk management, planning and strategy, resource management and limits on development and production).

Notes

1 The contractual nature of licences under the UKPA was confirmed by the Administrative Court in R (Benjamin Dean) v The Secretary of State for Business, Energy and Industrial Strategy [2017] EWHC 1998 (Admin). For a discussion of their function as a regulatory instrument see Greg Gordon, ‘Petroleum Licensing’ in Greg Gordon, John Paterson and Emre Usmenez (eds) UK Oil and Gas Law Current Practice and Emerging Trends (3rd edn, Edinburgh University Press 2018) (UK Oil and Gas Law) vol 1, 106.

2 The current version of model clauses for production licences is set out in the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008, SI 225/ 2008 (UK). These were amended by the Petroleum and Gas Storage and Unloading Licensing (Amendment) Regulations 2017 SI 2017/855 to incorporate changes required by the ‘innovate’ model for licences introduced by the 30th Offshore Licensing Round in 2017.

3 Greg Gordon, John Paterson and Uisdean Vass, ‘The Wood Review and Maximising Economic Recovery upon the UKCS’ in UK Oil and Gas Law (n 1) vol 1, 132.

4 Luke Havemann and Tina Hunter, ‘Environmental Law and Regulation’ in UK Oil and Gas Law (n 1) vol 1, 341.

5 The Right Honourable Alok Sharma MP was appointed the Secretary of State for BEIS on 13 February 2020. He holds this title, rather than minister, because he is a member of the Cabinet responsible for a department. Generally the term ‘minister’ will be used in this article rather than ‘secretary’.

6 Sir Ian Wood, UKCS Maximising Recovery Review: Final Report (24 February 2014) (‘Wood Review’) www.ogauthority.co.uk/media/1014/ukcs_maximising_recovery_review.pdf accessed 8 October 2020.

7 UKPA s 9A(1), which goes on to say:

in particular through: (a) development, construction, deployment and use of equipment used in the petroleum industry (including upstream petroleum infrastructure), and (b) collaboration among the following persons (i) holders or petroleum licences; (ii) operators under petroleum licences; (iii) owners of upstream petroleum infrastructure; and (iv) persons planning and carrying out the commissioning of upstream petroleum infrastructure.

By virtue of UKPA s 9(A)(3), these do not limit what a strategy may cover.

8 Relevant UK waters are defined in UKPA s 9I as ‘(a) the territorial sea adjacent to the United Kingdom; and (b) the sea in any area designated under section 1(7) of the Continental Shelf Act 1964 … ’.

9 Upstream petroleum infrastructure is defined in UKPA s 9H as a gas processing facility, oil processing facility and upstream petroleum pipeline as further defined in s 90 of the Energy Act 2011 (UK).

10 ‘MERUKS’ refers to Maximising Economic Recovery of UK Petroleum: The MER UK Strategy (18 March 2016 OGA Publication) www.ogauthority.co.uk/regulatory-framework/mer-uk-strategy accessed 8 October 2020.

11 The draft strategy was laid before Parliament for scrutiny on 28 January 2016, and since neither house passed a negative resolution against the draft, it was produced (came into force) on 18 March 2016.

12 MERUKS 8.

13 Oil & Gas Authority, Consultation on Proposals to Revise the MER UK Strategy (6 May 2020) (‘MERUKSConsultation2020’) www.ogauthority.co.uk/news-publications/consultations/2020/consultation-on-new-oga-strategy accessed 8 October 2020. The consultation closed on 29 July 2020.

14 This received the Royal Assent on 12 May 2016. The OGA did not become an independent government company until 1 October 2016.

15 By amending UKPA s 9A. See UKEA Sch 1.

16 Wood Review 13.

17 Wood Review 1.

18 Ibid.

19 The British National Oil Corporation created by section 1 of the Petroleum and Submarine Pipelines Act 1975 (UK) was one of the first state-owned enterprises to be privatised by Margaret Thatcher's government, which commenced in 1979. For a detailed history of the period leading to its creation see Alex Kemp, The Official History of North Sea Oil and Gas Volume 1: The Growing Dominance of the State (Routledge 2012). For a review of its petroleum policies and legislation see Greg Gordon, ‘Hydrocarbon Policies and Legislation: United Kingdom’ in Eduardo Pereira and Henrik Bjornebye (eds) Regulating Offshore Petroleum Resources: The British and Norwegian Models (Edward Elgar, 2019) 165.

20 Greg Gordon, John Paterson and Uisdean Vass, ‘The Wood Review and Maximising Economic Recovery upon the UKCS’ UK Oil and Gas Law (n 1) vol 1, 136.

21 Ibid quoting G. Gordon, ‘Production Licensing on the UK Continental Shelf: Ministerial Power and Controls’ (2015) 75 LSU Journal of Energy Law and Resources 81; see also Gordon ‘Hydrocarbon Policies and Legislation’ (n 19) 174–78.

22 Greg Gordon, John Paterson and Uisdean Vass, UK Oil and Gas Law (n 1) vol 1, 169

23 Ibid, 152–67.

24 Wood Review 1.

25 One of the points made in commentary is that it is not clear whether the focus of MERUKS is the volume of petroleum produced or its value. The Wood Review talks in terms of the OGA maximising economic recovery of the UK's oil and gas reserves ‘in the short, medium and long terms’ (Wood Review 6). But the target it refers to is recovery over the next 20 years (Wood Review 8).

26 House of Commons Committee of Public Accounts Eighty-Ninth Report of Session 2017–19 Public Cost of Decommissioning Oil and Gas Infrastructure (HC 1742 published 27 March 2019 12 [24].

27 Ibid.

28 See also OGA The Move to Net Zero www.ogauthority.co.uk/the-move-to-net-zero/overview accessed 8 October 2020.

29 MERUKSConsultation2020 9.

30 Wood Review 6.

31 Wood Review 17.

32 This is done by substituting OGA for the Secretary of State in the underlying legislation such as the UKPA.

33 The European Union is a party to this convention, the United Nations Economic Commission for Europe 1998 Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters. See United Nations Economic Commission for Europe (UNECE) Environmental Policy www.unece.org.env/pp/introduction.html accessed 8 October 2020.

34 WFGW s 3. Section 5 sets out the sustainable development principle that requires a public body ‘act in a manner which seeks to ensure that the needs of the present are met without compromising the ability of future generations to meet their own needs’ and under Section 5 (2) (a) to take account of ‘the importance of balancing short term needs with the need to safeguard the ability to meet long term needs, especially where things done to meet short term needs may have detrimental long term effect’.

35 Convention on Biological Diversity, opened for signature 5 June 1992, 1760 UNTS 79 (entered into force 29 December 1995). Article 1 sets out the objectives of conservation of biological diversity, sustainable use of its components and the fair and equitable sharing of the benefits arising out of the utilisation of genetic resources.

36 Ibid, Article 8.

37 UK National Ecosystem Assessment (2011) uknea.unep-wcmc.org accessed 8 October 2020.

38 Natural Environment White Paper, HM Government (2011) https://publications.parliament.uk/pa/cm201213/cmselect/cmenvfru/492/492.pdf accessed 8 October 2020. This followed commitments given by the UK at the UN conference in Nagoya, Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits arising from their Utilization, opened for signature 3 October 2010, CBD, Annex to COP10 Decision X/1.

39 Department of the Environment, Food and Rural Affairs, 2011, Biodiversity 2020: A Strategy for England's Wildlife and Ecosystem Services assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/69446/pb13583-biodiversity-strategy-2020-111111.pdf 4 accessed 8 October 2020. The vision for 2050 is ‘By 2050 our land and seas will be rich in wildlife, our biodiversity will be valued, conserved, restored, managed sustainably and be more resilient and able to adapt to change, providing essential services and delivering benefits for everyone’. Ibid, 12.

40 In addition to putting in place measures to maintain biodiversity, it will also have measures to halt further degradation, and restoration is occurring where possible. This will be supported by marine plans ‘ensuring the sustainable development of our seas’. Ibid, 12.

41 HM Government, A Green Strategy: Our 25 Year Plan to Improve the Environment (2018) assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/693158/25-year-environment-plan.pdf accessed 8 October 2020.

42 Ibid, 10.

43 Ibid, 104.

44 Environment Bill 2020 www.gov.uk/government/publications/environment-bill-2020 accessed 8 October 2020. At the time of completing this article in September 2020 the bill was being considered by the Public Bill Committee of the of the UK Parliament which was due to report at the end of September.

45 UKEB2000 s 22.

46 Ibid, s 1.

47 DEFRA, The Environment Bill Impact Assessment (3 December 2019) services.parliament.uk/Bills/2019-21/environment/documents.html 1 accessed 8 October 2020.

48 Ibid, 6. It says ‘The Bill is underpinned by the natural capital approach. Natural capital assets support our economy by providing goods as vital as food, water, air and raw materials. Natural assets give millions of people a place for leisure and recreation. If we want these essential services to be available to us and future generations it is vital that our environment is managed sustainably’. See the gov.uk website for the natural capital committee for more details of its work https://www.gov.uk/government/groups/natural-capital-committee accessed 8 October 2020.

49 This was done by the Climate Change Act 2008 (2050 Target Amendment) Order 2019 SI 2019 No 1056 which came into force on 27 June 2019.

51 OGA The Move to Net Zero www.ogauthority.co.uk/the-move-to-net-zero accessed 8 October 2020; see also MERUKSConsultation2020 (n 13) about revising MERUKS to include net zero.

52 UK Government, Voluntary National Review of Progress Towards the Sustainable Development Goals (July 2019) assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/816887/UK-Voluntary-National-Review-2019.pdf 5 accessed 8 October 2020.

53 See for example Andrea Ross, ‘It's Time to Get Serious – Why Legislation Is Needed to Make Sustainable Development a Reality in the UK’ (2010) Sustainability 2 1101 www.mdpi.com/2071-1050/2/4/1101 accessed 8 October 2020.

54 Jon Lunn, Sustainable Development Goals: How Is the UK Performing (4 July 4 2019, House of Commons Library) commonslibrary.parliament.uk/social-policy/health/sustainable-development-goals-how-is-the-uk-performing accessed 8 October 2020.

56 They are ‘set out a vision for the energy system consistent with the government's 2050 climate goals, with concrete actions that government will take up to 2030; support clean growth and promote global action to tackle climate change; Ensure our energy system is reliable and secure; Deliver affordable energy for households and businesses; and Manage our energy legacy safely and securely.’

57 [2001]OJ L197/30.

58 SI 2004/1633.

59 [2009] OJL 20/7.

60 [1992] OJL206/7.

61 SI 2001/1754.

62 [1985] OJ L 175/40.

63 [1997] OJL 73/5.

64 SI 1999/360 amended by The Offshore Petroleum Production and Pipelines (Environmental Impact Assessment and other Miscellaneous Provisions) (Amendment) Regulations 2017 SI 2017/583 (UKEIAR 2017).

65 Department of Business Energy & Industrial Strategy and Offshore Petroleum Regulator for Environment and Decommissioning (UK), Offshore Energy Strategic Environmental Assessment (SEA): An Overview of the SEA Process (last updated 17 January 2020) (‘UK SEA Overview’) www.gov.uk/guidance/offshore-energy-strategic-environmental-assessment-sea-an-overview-of-the-sea-process accessed 8 October 2020.

66 Recital (1) of the EU SEA Directive refers to Community policy including the preservation, protection and improvement of the quality of the environment, the protection of human health, the prudent and rational utilisation of natural resources and the promotion sustainable development.

67 EU SEA Directive Article 1 Objectives.

68 UK SEA Overview (n 65) 2 appears to confirm this when it refers to the UK environmental regulator taking ‘a proactive stance on the use of SEA as a means of striking a balance between promoting economic development of the UK's offshore energy resources and effective environmental protection’.

69 Department of Energy and Climate Change UK Offshore Strategic Environmental Assessment OSEA March 2016 www.gov.uk/government/consultations/uk-offshore-energy-strategic-environmental-assessment-3-oesea3 accessed 8 October 2020.

70 These are set out in Part 3 of the Environmental Report at 55 assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/504827/OESEA3_Environmental_Report_Final.pdf accessed 8 October 2020. This also describes the extensive process for arriving at the objectives.

73 eg Department of Business Energy & Industrial Strategy, Offshore Oil and Gas Licensing 31st Seaward Round Habitats Regulations Assessment assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/799403/31st_Round_HRA_Screening_Report_-_Stage_1.pdf accessed 8 October 2020.

74 Ibid, 7.

75 Ibid.

76 And see Managing Natura 2000 Sites – The Provisions of Article 6 of the Habitats Directive 92/43/EC ec.europa.eu/transparency/regdoc/rep/3/2018/EN/C-2018-7621-F1-EN-MAIN-PART-1.PDF accessed 8 October 2020.

77 Ibid, 41.

78 Luke Havemann and Tina Hunter, ‘Environmental Law and Regulation’ in UK Oil and Gas Law (n 1) vol 1, 346.

79 This was formerly the responsibility of the Secretary of State but was transferred to the OGA by the Energy (Transfer of Functions, Consequential Amendments and Revocation) Regulations 2016 (S.I. 2016/912).

80 UKEIAR reg 3B.

81 Department of Business, Energy and Industrial Strategy BEIS Offshore Petroleum Regulator for Environment and Decommissioning the Offshore Petroleum Production and Pipelines (Assessment of Environmental Effects) Regulations 1999 (as Amended) – A Guide (May 2020 Revision 6) (‘UKEIAR Guidance’) 23.

82 Ibid, 25.

83 Luke Havemann and Tina Hunter, ‘Environmental Law and Regulation’ in UK Oil and Gas Law (n 2) vol 1, 349.

84 UKEIAR reg 9. UKEIAR Guidance (n 81) 64.

85 UKEIAR Guidance (n 81) 26.

86 Oil and Gas Environmental statements reviewed www.gov.uk/guidance/oil-and-gas-environmental-statements-reviewed accessed 8 October 2020.

87 UKEIAR Guidance (n 81) 25.

88 The 1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972 (London Protocol).

89 1046 UNTS 1977 (entered into force 30 August 1975).

90 Catherine Redgwell, ‘International Regulation of Energy Activities’ in Martha Roggenkamp and others (eds), Energy Law in Europe (3rd edn, Oxford University Press 2016) 73.

91 Oslo/Paris Convention for the Protection of the Marine Environment of the North-East Atlantic (OSPAR), 2354 UNTS 67, opened for signature 22 September 1992 (entered into force 25 March 1998). Article 2 (1) (a) says that ‘The Contracting Parties shall, in accordance with the provisions of the Convention, take all possible steps to prevent and eliminate pollution and shall take the necessary measures to protect the maritime area against the adverse effects of human activities so as to safeguard human health and to conserve marine ecosystems and, when practicable, restore marine areas which have been adversely affected’.

92 Referred to in OSPAR Article 2 2 (b) as ‘the polluter pays principle, by virtue of which the costs of pollution prevention, control and reduction measures are to be borne by the polluter’.

93 Redgwell (n 90) 76. Article 2.2 (a) refers to ‘the precautionary principle, by virtue of which preventive measures are to be taken when there are reasonable grounds for concern that substances or energy introduced, directly or indirectly, into the marine environment may bring about hazards to human health, harm living resources and marine ecosystems, damage amenities or interfere with other legitimate uses of the sea, even when there is no conclusive evidence of a causal relationship between the inputs and the effects’.

95 Regulator interview March 2020.

96 See n 91.

97 SI 2005 No 2055.

98 See para 2 and 4 of the Explanatory Memorandum www.legislation.gov.uk/uksi/2005/2055/pdfs/uksiem_20052055_en.pdf accessed 8 October 2020.

99 SI 2005 No 2055.

100 This was a target under OSPAR Recommendation 2001/1; see Oil and Gas UK, ‘Produced Water’ oilandgasukenvironmentallegislation.co.uk/contents/topic_files/offshore/produced_water.htm accessed 8 October 2020.

101 Ibid.

102 See also the Deposits in the Sea (Exemptions) Order 1985 (SI 1985/1699).

103 SI 2002/1861. This gives effect to OSPAR Decision 2000/2 on a Harmonised Mandatory Control System for the Use and Discharge of Offshore Chemicals (commonly called the OSPAR HMCS). The Decision was subsequently amended by Decision 2005/1 on a Harmonised Mandatory Control System for the Use and Reduction of the Discharge of Offshore Chemicals, and is supported by a number of additional OSPAR decisions and recommendations.

104 The IMO Guidelines are published by the International Maritime Organization – website <imo.org>. For a detailed description of the UK rules of decommissioning see John Paterson ‘Decommissioning Offshore Installations’ in UK Oil and Gas Law (n 1) vol 1, 392.

105 Department for Business, Energy and Industrial Strategy, Guidance Notes Decommissioning of Offshore Installations and Platforms (November 2018) assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/760560/Decom_Guidance_Notes_November_2018.pdf accessed 8 October 2020.

106 Ibid, 2.

107 John Paterson ‘Decommissioning Offshore Installations’ in UK Oil and Gas Law (n 1) vol. 1, 440.

108 Luke Havemann and Tina Hunter, ‘Environmental Law and Regulation’ in UK Oil and Gas Law (n 1) vol. 1, 368.

109 SI 2002/1861.

110 SI 1998/1056.

111 Department of Business Energy and Industrial Strategy, BEIS Offshore Petroleum Regulator for Environment and Decommissioning The Offshore Petroleum Production and Pipelines (Assessment of Environmental Effects) Regulations 1999 (as Amended) – A Guide (February 2019 Revision 5) 23. An ES is an environmental statement and EIA an environmental impact assessment.

112 eg UKOPAR reg 16 (1)(a) that creates an offence for discharging oil into relevant waters except in accordance with a permit.

113 So the decommissioning guidance (Guidance 6, n 106) refers to ‘A polluter pays principle that means we expect those who have benefitted from exploitation or production hydrocarbons in the UKCS to bear the responsibility for decommissioning’.

114 Offshore Decommissioning Unit, Offshore Petroleum Regulator for Environment and Decommissioning, Department for Business, Energy and Industrial Strategy, Guidance on Decommissioning of Offshore Oil and Gas Installations and Pipelines (November 2018) 44–48 and 66.

115 Ibid. Regard must also be had for the UK's obligations under OSPAR in relation to restoration. See OSPAR recommendation 2006/5 on a management regime for offshore cuttings piles.

116 On the latter see John Paterson, ‘Decommissioning Offshore Installations’ in UK Oil and Gas Law (n 1) vol. 1, 412–20.

117 UKNEP ch 5 deals with ‘Securing Clean, Healthy, Productive and Biologically Diverse Seas and Oceans’.

118 UKOCIR reg 4 (2) (a) requires that ‘all appropriate measures are taken to prevent pollution, in particular through application of best available techniques’. The expression ‘best available techniques’ is defined in regulation 2.

119 MERUKS 11 (para 18); UKPA s 9C.

120 OGA Technology Strategy www.ogauthority.co.uk/technology/strategy accessed 8 October 2020. However, unhelpfully it does not say that it is a plan for the purposes of paragraph 23.

121 Oil and Gas Technology Strategy 1.

122 Ibid.

123 OGA Technology Strategy 2.

124 Ibid.

125 OGA Technology Strategy 8.

126 For the commercial return safeguard see MERUKS para 3. The qualifications in MERUKS para 19 say that when considering whether to deploy relevant technologies under para 18 relevant persons may have regard to ‘the risks and uncertainties associated with such technologies’ and ‘the potential benefits to the UK’ of their development and deployment.

127 See OGA Asset Stewardship Strategy www.ogauthority.co.uk/news-publications/publications/2016/asset-stewardship-strategy accessed 8 October 2020.

128 World Commission on Environment and Development, Our Common Future (Oxford University Press 1987); see also World Commission on Environment and Development, Report of the World Commission on Environment and Development, UN Doc A/42/427 (4 August 1987) annex (‘Report of the World Commission on Environment and Development: Our Common Future’).

129 United Nations University Tokyo and Transnational Publishers New York (1988).

130 Brown Weiss IFFG 141.

131 OGA Technology Strategy 10.

132 Ibid.

133 Ibid, 213.

134 Council Directive 2013/30/EC of June 2013 on Safety of Offshore Oil and Gas Operations Amending Directive 2004/35/EC [2013] OJ L178/66.

135 Ibid, Articles 2(1) and (37).

136 As required by MC 23.

137 For a discussion of the risks commonly analysed by the UK's National Audit Office and Public Accounts Committee, such as major project risks and administrative risks, see Patrick Dunleavy, Christopher Gilson, Simon Bastow and Jane Tinkler, ‘The National Audit Office, the Public Accounts Committee and the Risk Landscape for UK Public Policy’, a discussion paper (LSE Research Online, November 2009) eprints.lse.ac.uk/25785/1/The_National_Audit_Office%2C_the_Public_%28LSERO_version%29.pdf accessed 8 October 2020.

138 A point made in the Wood Review Impact Assessment; Department of Energy and Climate Change and Oil and Gas Authority, Maximising Economic Recovery of Offshore UK Petroleum Impact Assessment (28 January 2016) assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/506649/20160308_-_MER_UK__Strategy_-_Impact_Assessment_-_Signed_by_Minister.pdf para 75 accessed 8 October 2020.

139 Decommissioning provides an example in relation to both, with the OGA assisting companies to reduce their decommissioning costs but also seeking more accurate estimates. See the House of Commons Committee of Public Accounts (n 26) [1]–[20].

140 Section 4.4 of Part 1.

141 Brundtland Report ch 12 para 43, 58.

142 Ibid para 34, ch 12 para 12.

143 Energy Act 2016 s 16(5) requires regular reviews of the OGA which are presented to the UK Parliament. An example is the Secretary of State for Business Energy and Industrial Strategy, Oil and Gas Authority Review 2019 (January 2020) assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/859281/oil-gas-authority-review-2019.pdf accessed 8 October 2020.

144 Eg the Labour Government's white paper, United Kingdom Offshore Oil and Gas Policy (Command Paper 5696), 11 July 1974.

145 An example is the Public Accounts Committee's The Public Cost of Decommissioning Oil and Gas Infrastructure Inquiry (n 26).

146 An example is Section 5 of the Well-Being of Future Generations (Wales) Act 2015 that requires a public body to act in a manner ‘which seeks to ensure that the needs of the present are met without compromising the ability of future generations to meet their own needs’ and also requires a public body to consider how its well-being objectives impact the objectives of other public bodies.

147 See OGA, The Move to Net Zero www.ogauthority.co.uk/the-move-to-net-zero/overview accessed October 2020.

148 Ibid. See also now the MERUKSConsultation2020 (n 13).

149 Eg the Protection of Wrecks Act 1973 (UK).

150 OGA Technology Strategy 10.

151 See OGA, The Move to Net Zero www.ogauthority.co.uk/the-move-to-net-zero/overview accessed 8 October 2020.

152 An energy white paper has been expected for some time, but has been delayed. It had not been produced at the time this article was finalised.

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