The Energy Bill 2015-16: Background and changes in the Lords

The Energy Bill has passed through the House of Lords and is due for Second Reading in the House of Commons on 18 January 2016.

The Bill mostly deals with fully establishing a new regulator, the Oil and Gas Authority (OGA), and how it regulates oil and gas companies in the UK’s territorial waters. It implements recommendations of the Wood Review on Maximising the Economic Recovery of petroleum from the UK’s continental shelf. In so doing it would formally establish the OGA as an independent regulator and transfer a number of functions to it from the Secretary of State for Energy and Climate Change.

Additionally, the Bill would implement the Conservative Party’s manifesto commitment to alter the planning law on onshore windfarms.

Significant changes were made to the Bill in the House of Lords. The Bill was to have ended subsidies for new onshore wind in Great Britain under the Renewables Obligation (RO) from 1 April 2016. This clause was removed by an opposition amendment on division. Another new opposition clause amended the way progress would be measured under the UK’s carbon budgets.  

Opposition amendments were also made that alter the “principle objective” of Maximising the Economic Recovery of oil and gas so that decommissioning and carbon capture and storage will need to be taken into account by operators in the offshore industry and by the OGA.

A new Part that also deals with infrastructure and decommissioning was added to the bill by Government amendments.

Government amendments were made to improve the functions of the OGA as set out in the Bill and bring in a new requirement for the Secretary of State to carry out reviews of the OGA’s performance each year.

The Bill in its current form will:

• Part 1 – formally establishes the OGA as an independent regulator, which will take the form of a government company. The OGA charged with the regulation of domestic oil and gas recovery; transfers the Secretary of State for Energy and Climate Change’s existing regulatory powers in respect of offshore oil and gas to the OGA; provides the OGA with powers to charge fees and levy charges. And amends the ‘principal objective’ of maximising the economic recovery of UK offshore petroleum to include provisions on decommissioning oil and gas infrastructure and securing its re-use for transportation and storage of greenhouse gases (carbon capture and storage)
• Part 2 – gives the OGA additional powers including: access to company meetings; data acquisition, retention and transfer; dispute resolution; and sanctions.
• Part 3 – amends and provides for new legislation in relation to petroleum infrastructure and decommissioning of offshore facilities to maximising the economic extraction of oil and gas
• Part 4 – introduces provisions in relation to charges for the OGA’s services to industry.
• Part 5 – makes legislative changes to remove the need for the Secretary of State’s consent for large onshore wind farms (over 50 Mega Watt (MW)) under the Electricity Act 1989.
• Part 6 – makes an amendment to the Climate Change Act 2008 preventing, from 2028, the net UK carbon account taking into account carbon units derived from the European Union Emissions Trading System.
• Part 7 – set out provisions on the commencement of parts of the Bill and on regulatory making powers.