The Energy Bill was introduced by DECC into the House of Lords in July this year and received its first reading in the House of Commons on 6 November 2015.
The Energy Bill’s provisions aim to implement the recommendations from Sir Ian Wood’s review into UK offshore oil and gas recovery and its regulation (specifically looking at how economic recovery could be maximised since North Sea’s oil and gas production peaked 15 years ago).
The report of the Wood Review was published in February last year and its four key recommendations were:
- that the Government and energy industry commit to develop a new strategy for Maximising Economic Recovery from the UK Continental Shelf (called the “MER UK” strategy) (n.b. a statutory obligation to produce a MER UK Strategy was introduced by section 9A of the Petroleum Act 1998 (as inserted by the Infrastructure Act 2015) and, on 18 November 2015, the Government launched a consultation on its draft MER UK strategy, which consultation closes 8 January 2016);
- that a new Oil & Gas Regulator be established by the Government as an arm’s length statutory body charged with the day-to-day stewardship and regulation of UKCS hydrocarbon recovery (focused on supervising the licensing process and maximising economic recovery of the UK’s oil and gas reserves in the short, medium and long terms);
- that the Oil & Gas Regulator should be granted additional powers to facilitate its implementation of the MER UK strategy, including enforcement powers and sanctions (such as formal warnings followed by the loss of operatorship and then license); and
- that the Oil & Gas Regulator should develop and then implement separate Sector Strategies (covering such things as hydrocarbon exploration, asset stewardship, regional development, infrastructure, technology and decommissioning).
The new regulator to be established by the Energy Bill is to be called the Oil and Gas Authority(“OGA”), which will be headquartered in Aberdeen but will have a strong presence in London (and approximately 180 staff).
On 1 April 2015, the OGA was established as an Executive Agency within the remit of DECC. Once the Energy Bill becomes law (most likely in Summer 2016), the OGA will transition to become a Government-owned company and assume full responsibility for a range of oil and gas functions, including licensing (which functions currently sit with the Secretary of State for Energy and Climate Change), albeit that, in the case of Scotland and Wales, the OGA’s status and duties will take account of devolved powers as regards onshore assets and activities.
The OGA will exercise certain licensing and regulatory functions under the Petroleum Act 1998, relating to the licensing of oil and gas exploration and production (which powers are to be exercised in accordance with the Hydrocarbons Licensing Directive (94/22/EC) and the Offshore Safety Directive (2013/30/EU)). The OGA will also exercise licensing functions under Chapters 2 and 3 of Part 1 of the Energy Act 2008, relating to the importation and storage of combustible gas and the storage of carbon dioxide. It will also be responsible for the exercise of the functions of the Secretary of State under Chapter 3 of Part 2 of the Energy Act 2011 relating to access to upstream petroleum infrastructure and have a role in advising on the costs of the decommissioning of offshore installations.
However, notwithstanding the changes set out in the Energy Bill, DECC will continue to be the environmental regulator of the territorial sea and UKCS. DECC will also continue to be the Government party to all licences and have decision making powers over licence transfers and aspects of decommissioning.
Other elements of the Energy Bill include:
- enabling more comprehensive charging of the offshore oil and gas industry for permits and licences for environmental and decommissioning activity (to recover the costs of environmental and decommissioning activity in line with the “polluter pays” principle of environmental law);
- giving the OGA additional powers such as: rights to access company meetings of licensees, data acquisition, retention and transfer; non-binding dispute resolution; and sanctions;
- charging an industry levy on licence holders, to meet the costs incurred by the OGA in exercising its functions and the costs incurred by the Lord Chancellor in connection with any Tribunals convened to consider appeals made by licence holders against decisions of the OGA;
- removing the need for the Secretary of State’s consent to large onshore wind farms (over 50 MW) in England and Wales under the Electricity Act 1989, acting in tandem with other measures to, in effect, transfer the consenting of onshore wind farms to local authorities (or the Welsh Ministers) under the Town and Country Planning Act 1990 (n.b. this implements the Government’s pre-election manifesto commitment to decentralising decision making on new onshore wind farms); and
- amending section 27 of the Climate Change Act 2008 to prevent, with effect from 2028, the carbon units derived from the European Union Emissions Trading System from being taking into account in the calculation of the net UK carbon account.
As regards its jurisdiction, the Energy Bill will have a UK extent where it relates to oil and gas production (but it will not apply onshore in Northern Ireland), i.e. it will apply:
- offshore in the territorial sea around the UK and in the UKCS;
- onshore in England; and
- onshore in Scotland and Wales (albeit in a manner that respects devolution arrangements).