Court battles could derail huge new UK oil and gas projects

The two biggest oil and gas projects approved for development in the UK’s North Sea in the past two years could be delayed or never completed as obstacles to UK oil and gas drilling grow bigger.

Shell and Equinor, operators of the Jackdaw and Rosebank projects respectively, will have to defend their developments in a Scottish court next month after environmentalists won landmark court battles earlier this year and the Labor government dropped its defense of the reviews legal action against the plans.

While environmental groups and campaigners hail the growing challenges to big oil projects as a victory for the climate, Big Oil and Britain’s offshore industry body say that without further developments Britain will only increase its oil imports and gas from countries with lower environmental standards. .

The latest legal challenges add to the UK’s planned increase in the one-off levy on UK North Sea operators, which is undermining investment plans and prompting companies large and small to reconsider their presence in the region.

Flagship decision of the Supreme Court regarding domain 3 emissions

As the industry quietly calculated the potential damage from Labour’s promised increase in the one-off tax, a blow to new fossil fuel developments in the UK came from the UK Supreme Court in June.

The top court has ruled that a local council illegally approved an onshore oil drilling project because planners must have taken into account emissions from the future use of oil as fuel, in a landmark case that could upset the new plans of UK oil and gas projects.

By a majority of three to two, the Supreme Court allowed Sarah Finch’s appeal on behalf of the Weald Action Group and other environmental organizations against Surrey County Council, which had granted planning permission to expand oil production from a well at Horse Hill. near Horley in Surrey, close to Gatwick Airport. Related: Chevron restarts gas production in Israel after brief shutdown during Iran attack

The judges wrote in the ruling that “It is an agreed fact that, if the project goes ahead, it is not only probable, but inevitable, that the oil produced from the wellhead will be refined and, as an end product, subjected to combustion in the follow. and that burning will produce greenhouse gas emissions.”

The ruling, which became known as the Finch judgment after Sarah Finch, set a precedent, and now local councils and the government must account for all future emissions from a given fossil fuel project, including Scope 3 emissions from burning the fuels produced from the new project. projects.

“Developers need to own the climate impact of their projects,” Niall Toru, senior lawyer at Friends of the Earth, told the Financial Times.

The Finch decision does not by itself revoke approvals that have already been granted. But it opens the door to new litigation, which could delay or derail new fossil fuel projects.

Revised projects

Last month, for example, the High Court in London quashed a planning permission for the first new coal mine in Britain in three decades, ruling that the permission was illegal because it failed to take into account emissions from burning the fuel. Climate activists, including Friends of the Earth, had challenged the approval of the Woodhouse Colliery project in Whitehaven, north-west England, developed by West Cumbria Mining (WCM).

The project to mine metallurgical coal, which is used to make steel, will be needed to support steel production during the transition to Net Zero over the next few decades, WCM said in late 2023.

Following the Supreme Court’s Finch decision, the UK government in July withdrew its support for the project and said it would no longer defend the case at the High Court.

All eyes are now on the Court of Session in Edinburgh, which will hear arguments in November from campaign groups Greenpeace and Uplift. Environmentalists brought judicial reviews to stop development of the Rosebank and Jackdaw fields, and those reviews were allowed to proceed to full hearings last week.

The UK government said in August it would not challenge the judicial reviews, throwing further uncertainty over these already consented projects.

The Labor government is also planning new environmental guidelines for oil and gas companies, which the cabinet says would help “to ensure the stability of the industry, support investment, protect jobs, grow the economy and meet its climate obligations , as the North Sea transitions to its clean energy future.”

The oil and gas industry is different.

Shell and Equinor see their projects as contributing to UK energy security, amid declining legacy oil and gas production and still high UK oil and gas consumption. Oil and gas still account for about 75% of total energy demand.

Commenting on the upcoming court hearing in November, a Shell spokesperson told the BBC of the company’s project: “Jackdaw is a vital project for the UK’s energy security which is already underway.”

If the projects are subject to further environmental assessments, Shell and Equinor will have to resubmit applications for approval, taking into account Scope 3 emissions and stop work in the meantime.

For its part, Equinor, the operator of Rosebank, said it was awaiting clarity on the UK tax regime before developing strategies and committing to investments in the UK North Sea.

The many challenges to UK oil and gas projects, including planning consent for new fields and the exceptional tax on producing assets, are discouraging investment in the UK North Sea and driving companies away from the mature basin.

David Whitehouse, chief executive of leading trade body Offshore Energies UK (OEUK), said last month “I fully support the development of renewable energy at a vital pace for net zero. But today 24 million homes are heated with gas.”

“We ignore the need for domestic gas production at our peril – don’t protect consumers and tackle climate change by importing energy at the expense of domestic production.”

By Tsvetana Paraskova for Oilprice.com

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