The two biggest oil and gas projects approved for development in the UK’s North Sea over the past two years could be delayed or never completed as the hurdles to oil and gas drilling in Britain are becoming higher.
Shell and Equinor operators of the Jackdaw and Rosebank projects, respectively, will have to defend their developments in a court in Scotland next month after environmentalists won landmark court battles earlier this year and the Labour government dropped its defense of the judicial reviews against the plans.
While environmental groups and campaigners hail the mounting court challenges to the large oil projects as a win for climate, Big Oil and the UK’s offshore industry body say that without new developments, Britain will only increase its oil and gas imports from countries with lower environmental standards.
The latest legal challenges add to the planned increase in the UK’s windfall tax on operators in the UK North Sea, which is undermining investment plans and has large and smaller companies reconsidering their presence in the region.
Landmark Supreme Court Ruling on Scope 3 Emissions
While the industry was quietly calculating potential damages from Labour’s promised increase in the windfall tax, a blow to new fossil fuel developments in Britain came from the UK’s Supreme Court in June.
The top court ruled that a local council unlawfully approved an onshore oil drilling project as planners must have considered the emissions from the oil’s future use as fuels, in a landmark case that could upset new UK oil and gas project plans.
By a three-to-two majority, the Supreme Court allowed the appeal from Sarah Finch 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 site at Horse Hill near Horley in Surrey, close to the Gatwick airport.
The judges wrote in the judgment that “It is an agreed fact that, if the project goes ahead, it is not merely likely but inevitable that the oil produced from the well site will be refined and, as an end product, will eventually undergo combustion, and that that combustion will produce greenhouse gas emissions.”
The ruling, which became known as the Finch ruling after Sarah Finch, set a precedent, and now local councils and the government should consider all future emissions from a given fossil fuel project, including the Scope 3 emissions from burning the fuels produced from the new projects.
“Developers have to own the climate impacts of their projects,” Niall Toru, senior lawyer at Friends of the Earth, told the Financial Times.
The Finch ruling on its own doesn’t revoke approvals that have already been granted. But it does open the door to further litigation, which could delay or derail new fossil fuel projects.
Projects Reviewed
Last month, for example, London’s High Court quashed a planning permission for the UK’s first new coal mine in three decades, ruling that the permit was unlawful as it hadn’t considered the emissions from burning the fuel. Climate campaigners, including Friends of the Earth, had challenged the approval of the Woodhouse Colliery project in Whitehaven, northwest England, developed by West Cumbria Mining (WCM).
The project to mine metallurgical coal, the one used for steelmaking, will be required to support steelmaking throughout the transition to Net Zero over the next few decades, WCM said at the end of 2023.
Following the Finch Supreme Court ruling, the UK government pulled in July its support for the project and said that it would no longer defend the case at the High Court.
Now, all eyes are on the Court of Session in Edinburgh, which will hear arguments in November from campaign groups Greenpeace and Uplift. The environmentalists have brought judicial reviews to stop the development of the Rosebank and Jackdaw fields, and these reviews were allowed to proceed to full hearings last week.
The UK government said in August that it would not challenge the judicial reviews, throwing more uncertainty about these already consented projects.
The Labour government also plans new environmental guidance for oil and gas companies, which, the cabinet says, would help “provide stability for industry, support investment, protect jobs, deliver economic growth, and meet its climate obligations, as the North Sea transitions to its clean energy future.”
The oil and gas industry begs to differ.
Shell and Equinor see their projects as contributing to the UK’s energy security amid falling legacy oil and gas production and still high oil and gas consumption in the UK. Oil and gas still account for about 75% of total energy demand.
Commenting on the upcoming court hearing in November, a Shell spokesperson told BBC about the company’s project, “Jackdaw is a vital project for UK energy security that is already well under way.”
If the projects are ordered to undergo new environmental assessment reviews, Shell and Equinor will have to re-submit applications for approval with Scope 3 emissions considered and halt work in the meantime.
For its part, Equinor, the operator of Rosebank, has said it awaits clarity on the UK tax regime before strategizing and committing to investments in the UK North Sea.
The numerous challenges to UK oil and gas projects, including planning consent for new fields and the windfall 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 the leading trade body Offshore Energies UK (OEUK), last month said “I fully support the build-out of renewable energy at pace as vital to net zero. But today 24 million homes are heated with gas.”
“We ignore the need for domestic gas production at our peril – you do not protect consumers or tackle climate change by importing energy at the expense of homegrown production.”
By Tsvetana Paraskova for Oilprice.com
