On 26 March 2012 the Department for Energy and Climate Change (DECC) published new guidance on Disputes over Third Party Access to Upstream Oil and Gas Infrastructure. The publication clarifies how DECC will deal with an application by a third party who has been unable to agree satisfactory terms of access with the owner of upstream oil and gas infrastructure. Under the Energy Act 2011, the Secretary of State can require infrastructure owners to grant access to third parties and impose the terms and conditions on which that right is granted.
The revised guidance supplements the Infrastructure Code of Practice, a voluntary code which encourages infrastructure owners to provide transparent and non-discriminatory access to third parties.
Fair and Appropriate Terms and Conditions
The guidance seeks to ensure that an infrastructure owner cannot abuse its position by imposing unfair terms and conditions on a third party. As such, the terms imposed by the Secretary of State will be similar to those that would be offered by an infrastructure owner who faced effective competition from other infrastructure owners. Any terms and conditions will be fair and appropriate based on the costs and risks which apply in that particular case.
Striking a balance
In considering the terms and conditions which will apply to a grant of access, the Secretary of State will seek to achieve a balance between terms which reward past investment in infrastructure while ensuring that the terms are attractive enough to encourage the exploration and development of new fields. The guidance sets out a number of factors which will be taken into account in reaching a decision, including:
- the capacity of the pipeline which is or can reasonably be made available;
- the reasonable needs of the owner;
- the interests of all users and operators of the pipeline.
Applications are expected to take the form of a letter with supporting annexes and should be processed within 16 weeks, although DECC acknowledges that it is difficult to know exactly how long the process will take.
Abuse of a dominant position
Significantly, the Office of Fair Trading considers that infrastructure owners are unlikely to have breached the prohibition on abuse of a dominant position where they have complied with the principles contained in the guidance. As such, it would be prudent for infrastructure owners to familiarise themselves with the guidance.
The guidance can be accessed here