As North Sea petroleum moves towards the end of its lifespan, the UK taxpayer is to spend some £25 billion in the next five years to pay nearly half the cost of removing the offshore infrastructure.
This might sound like the right thing to do, but as I have argued before, it is probably not the best use of public money. The environmental benefits of decommissioning are questionable. If we instead spent the money on, say, building more renewable energy, it would create jobs for longer and you would generate carbon-free power for your trouble. Others might not share this view – my point is it’s a debate we’re not having.
I have repeatedly asked the relevant government agencies to outline the motivations that support the current plans. They have never given me straight answers. My latest move has been to submit a request for information to the government’s Department for business, Energy & Industrial Strategy.
In my request, I once again expressed my concerns about value for money. I said my previous requests had been met with a stock response that offshore operators have to decommission installations at the end of a field’s economic life, and that in accordance with UK and international obligations this has to be safe, efficient and cost-effective to the taxpayer while minimising the risk to the environment and other users of the sea.
This, I told them, says nothing about the reasons behind the policy – neither the primary environmental motivation nor anything to do with society or economics. I asked for the environmental basis underpinning the policy.
I received a reply from the director of decommissioning at the department. It says:
The UK’s international obligations on decommissioning are governed principally by the 1992 Convention for the Protection of the Marine Environment of the North East Atlantic (the OSPAR convention) and in particular decision 98/3 on the disposal of disused offshore installations.
The UK is indeed one of 15 parties to the convention, all of them countries in western Europe. Paragraph 2 of decision 98/3 stipulates that disused offshore installations can’t be dumped or left “wholly or partly in place” at sea.
The competent authority can allow exceptions, but it’s quite narrow – covering certain concrete infrastructure; the base of large steel structures; and some other installations that are very damaged. It leaves little scope for what I am suggesting.
The response says that:
We seek to achieve effective and balanced decommissioning solutions which are consistent with international obligations and have a proper regard for safety, the environment, other legitimate uses of the sea, economic and social considerations as well as technical feasibility …
[The decommissioning process] entails an assessment of the environmental impact [by the operator, and] … it is one of the factors that influences the final decision [by them on whether to go ahead] … Ultimately if leaving the infrastructure in place would not have a significant detrimental effect on the environment then an operator may make a case to decommission in-situ.
None of this says anything about overriding environmental benefits in removing these structures. Decision 98/3 is silent, and none of the government reports I have read address them either.
As for the operator’s environmental impact assessment, it is not their job to consider the taxpayer’s options. It is for the government, and it’s not happening.
How does this therefore amount to the government achieving a balanced solution? Where is the evidence that the legislation is providing a positive outcome? If it can’t be provided then the legislation is not appropriate and should be challenged – however well intentioned it may be.
The response also informs me that a joint industry project called INSITE is aiming to “enhance scientific understanding of the effect of man-made structures on the North Sea and thus support decision-making [by operators]”.
I am familiar with INSITE and have met with the project manager and discussed the programme. INSITE is undertaking some first-class science but its very existence and government funding only serves to demonstrate the lack of evidence that supports removal.
The money question
The department’s response also addresses the cost to the taxpayer, which is being spent in the form of tax relief for operators who are decommissioning. It says:
North Sea operators have paid over £330bn of tax since the 1970s at tax rates significantly higher than onshore companies, therefore allowing tax relief on decommissioning ensures a fair tax system that gives companies good incentives to maximise economic recovery.
What is that justifying or explaining? Because oil and gas companies have paid due taxes on eye-watering profits in the past, the government can use taxpayers’ money for future decommissioning costs?
The response refers to these as an “unavoidable cost for industry”. Well plugging and abandonment is unavoidable, but asset removal? Witness the rigs to reefs programme in the US.
The response says the government and industry are working on reducing decommissioning costs by 35 per cent. But why spend the money in the first place? If a large proportion of costs can be removed, surely that would be a better incentive to maximise petroleum recovery?
The UK, it concludes, remains committed to OSPAR and decision 98/3 and “there are no proposals to change the decommissioning process in operation”. The taxpayer, in other words, will be running up this huge bill to follow legislation without anyone having to demonstrate the case for it.
It is time that decommissioning policy be hastily re-examined in the UK. The government needs to commission a full evidence-based report into the environmental, social and economic benefits, comparing them to other options such as building more green energy stations and even spending the money on things like health or education.
If I am proven right about which will come out on top, the UK should renegotiate terms with OSPAR. Blindly going ahead with this policy is wrong. It is time to think again.