The Department of Energy and Climate Change (DECC) is about to implement new means of funding its services under t he Gas and Petroleum (Consents) Charges Regulations 2013 (the “Regulations”) which are due to come into force on 17th June 2013 ( see here for the Regulations).
The Regulations provide for DECC to impose fees for the processing and approval of various consents and authorisations under petroleum licences, gas storage licences and carbon dioxide appraisal licences. Consents/authorisations will not now be granted until such time as DECC have received funds from the applicant.
Under the Regulations, DECC's fees may be fixed or variable depending on the applicable category of services. Category A Services, which are considered to involve more complex applications/consents, include for example, the approval of an onshore or offshore field development plan or a pipeline work authorisation. Fees in connection with such services will be calculated in accordance with the formula set out in the Regulations - £500, multiplied by the number of days estimated to be required by DECC to consider whether or not to grant the consent/authorisation, multiplied by the number of officers estimated to be required by DECC.
Category B and C services on the other hand, which are considered to involve more straightforward consents/applications, are charged at a set fee as pre-calculated and listed in the Regulations. For example, category B services include consents in relation to the Wells Online Notification System and the charge for a consent to drill a new well is £647. Under category C, the fee for consents relating to extended well tests is £994.
The Regulations follow a consultation by DECC seeking views from the energy sector on its proposals to recover costs for its services (see here for the original Consultation). Whilst Industry did acknowledge the difficulties that DECC faces and the limitations on it resources, it was highlighted that considerable sums are already paid by industry by way of licence fees. Concerns were also voiced that increased fees could potentially impact on the amount of activity within the UK if the costs continue to increase (see here for DECC’s summary of the consultation responses).
DECC explained that the difference with the new charges is that such revenue can be retained and utilised solely by DECC. Licence fees on the other hand are considered a national asset and must be surrendered to the Treasury - DECC cannot retain such sums for its disposal. In order to take industry concerns into account and address any issues which arise in practice, DECC proposed that an annual review should take place to evaluate the operation of the regime and, as necessary, make changes and /or issue required guidance.
The Regulations are the second set of regulations to introduce fees for DECC services in short succession. The Offshore (Oil and Gas) Installation and Pipeline Abandonment Regulations 2012, which were recently implemented, provide that before a party submits an abandonment programme or a proposal to revise an abandonment programme, they must first make a request for an appropriate fee to be determined. In addition, DECC already charges for certain services provided in the environmental regulation of the offshore oil and gas industry.
It appears that due to limitations on government resources and industry demand for a faster turnaround on administrative processes, the introduction of charges for Government services within the energy industry could become standard. Section 188 of the Energy Act 2004 does provide quite broad scope for doing so, however, it remains to be seen whether this will in fact be the case – much may depend on the success of the Regulations.