Further steps in relation to the devolution of responsibility for onshore petroleum licensing to the devolved governments in Scotland and Wales have been made in the form of the Scotland Act 2016 and Wales Act 2017 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (the “Regulations”). The Regulations amend section 45A of the Petroleum Act 1998 (the “Act”) to transfer powers currently held by the Oil and Gas Authority (“OGA”) to Scottish and Welsh Ministers.
Section 45A of the Act presently provides a basis for OGA to request information regarding a licensee’s financial standing, to allow an assessment of their financial capability to plug and abandon a well they have drilled or are drilling. These powers – so far as they relate to onshore licenses - will now transfer to the Scottish Ministers (and Welsh Ministers, following devolution to them of the underlying licensing responsibility, which is anticipated to be effective from 1 October 2018).
The Scottish perspective
Responsibility for onshore petroleum licensing was devolved to the Scottish ministers on 9 February 2018 pursuant to section 47 of the Scotland Act 2016.
The new Regulations provide that, in relation to that licensing power, Scottish ministers may require a licence holder to provide specified information relating to its financial affairs, or to supply specified documents or types of documents relating to those affairs. The licence holder must be able to show that it has the necessary funds in place to plug and abandon a well they have drilled or commenced drilling.
If the authority (i.e. the Scottish ministers) are not satisfied following the submission of the licence holder’s financial information, they may issue a further notice requiring the licence holder to take action. This could include the provision of security to the authority to ensure the costs of plugging and abandoning the well are covered.
The powers cover both conventional and unconventional oil and gas licences. These devolved powers are directly relevant to the few existing conventional onshore licences. There will be no immediate impact as regards unconventional oil and gas in light of the position adopted by the Scottish Government on that type of development – of course, the question of whether there is a ban on unconventional oil and gas (otherwise known as fracking) has been the subject of recent consideration by the Scottish courts and our law now article on that debate, ‘Fracking in Scotland: when is a ban not a ban?’ can be found here.
The Regulations can be found here. The transfer to Scottish Ministers takes effect on 18 July 2018; it is effective as regards the Welsh Ministers either on that date, or 1 October 2018 (dependent upon the devolution of the underlying licensing responsibilities, also expected to take effect on 1 October 2018).