Fossil fuel projects face higher standards in Britain as legal challenges mount

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In an unforgiving stretch of the North Sea, about 250km east of Aberdeen, Shell engineers have been drilling since last September to develop the vast Jackdaw gas field, aiming to produce its first gas in 2026.

However, in less than two months, lawyers for the FTSE 100 company will head to an Edinburgh courtroom to try to defend the project against climate change campaigners who want to shut it down, after a judge ruled last week past that the case could continue.

Greenpeace’s legal challenge will be the first involving an offshore oil and gas project to be heard following a landmark Supreme Court ruling in June that emboldened activists and stepped up pressure on fossil fuel projects.

The so-called Finch ruling, named after the activist and writer Sarah Finch who helped bring the case, means planning officials considering allowing large developers to drill for fossil fuels must take into account emissions when the product is used by consumers.

It raises even more questions for the North Sea oil and gas industry as the Labor government finally tries to phase out fossil fuels in favor of renewable energy and position Britain as a global leader in tackling climate change.

There is also a push for planning officials to take climate goals more into account when deciding whether to approve projects other than fossil fuels.

“One by one, the bogus defenses are being rejected,” said Niall Toru, senior lawyer at Friends of the Earth. “Developers must own the climate impact of their projects.”

The Finch judgment, a three-to-two ruling led by Lord Justice George Leggatt, quashed planning permission for onshore oil drilling in Horse Hill, Surrey. Two other projects have already been blocked as a result.

A permit for onshore oil drilling in Biscathorpe, Lincolnshire, was rejected by High Court judges in July, while in September they also canceled permission for a mine in Whitehaven, north-west England, to supply coal to steel mills .

The challenge to be heard in November against Shell’s Jackdaw gas field will be the next test of the implications of the Finch decision, as will a separate challenge by activists Greenpeace and Uplift to Equinor’s giant Rosebank oil field in the North Sea. If the companies lose, they would have to decide whether to reapply for the development agreement or walk away. The government does not defend the cases.

Meanwhile, there are 14 UK oil and gas projects with government drilling licenses that are at various stages of seeking development consent from the oil and gas regulator and are now affected by the Finch ruling.

The ruling specifically covers fossil fuel projects, given the clear line between production and consumption emissions. But “it’s not impossible” to imagine the ruling being cited in other carbon-intensive projects, noted Steven Wilson, senior associate at Vinson and Elkins. Airport expansion is an obvious target for climate change campaigners.

“I think it will be fascinating to see how this is applied to other types of projects,” said Matthew McFeeley, partner at Richard Buxton Solicitors, who represented South Lakes Action on Climate Change in its Whitehaven coal mine challenge. “It’s the million dollar question.”

However, approvals for oil and gas projects are not out of the question. The Finch ruling does not prevent authorities from approving projects as long as they have considered their impact. The law does not specify what level of emissions is acceptable.

“This is a tough question that will have to be taken on a case-by-case basis,” said Robert Meade, partner at Bracewell. “These (legal rulings) are about procedure.”

At the Court of Session in Edinburgh in November, Shell’s lawyers will argue the energy security benefits of its Jackdaw project. It was approved at the height of the 2022 energy crisis, when gas prices soared following Russia’s full-scale invasion of Ukraine.

To help clarify what officials should do, the UK government said last month it would develop new environmental guidelines for oil and gas projects. It is expected to set tough standards given its approach to the sector so far.

Planning policy beyond oil and gas projects is also evolving. The government continues to explore potential changes proposed by its Conservative predecessor to the national planning policy framework, which covers planning in England. The ideas include a “carbon impact assessment”, although a consultation raised doubts about the proposal.

Meanwhile, the court cases could further undermine the confidence of oil and gas drillers in the UK, following Labor’s decision to increase taxes on the sector and cut investment allowances. It also plans to stop issuing new exploration licenses.

“You’re going to get to the stage where investors would be doing their shareholders a disservice if they put capital here,” one industry insider warned. Oil and gas still provide 75% of the UK’s total energy demand, but domestic production has fallen as the basin ages.

On the other hand, climate change campaigners sense the growing opportunity for legal victories. “We’re always looking (at potential legal cases),” adds Friends of the Earth’s Toru. “I wouldn’t rule anything out.”

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