Energy Bill 2008 – Proposals For Oil And Gas Decommissioning

The primary focus of comment on the new Energy Bill has unsurprisingly been on the proposals for nuclear power.

However, the Bill also proposes a number of changes to the Petroleum Act 1998.

This bulletin focuses on changes to the current offshore decommissioning regime, in particular the closing of certain "loopholes" in terms of the persons who can be made liable and the timing of liability, and the protection of funds set aside for decommissioning in the event of insolvency. Future bulletins will consider some of other proposals put forward.

For further information on the proposals for decommissioning, please see below.

Full Article

The primary focus of comment on the new Energy Bill has unsurprisingly been on the proposals for nuclear power. However, the Bill also proposes certain changes to the current offshore decommissioning regime contained in the Petroleum Act 1998 (the "Act"), in particular the closing of certain "loopholes" in terms of the persons who can be made liable and the timing of liability, as put forward in a BERR consultation paper in June 2007.

Summary Of The Current Regime

Essentially, the Secretary of State (under Part IV of the Petroleum Act 1998) may by written notice (a "Section 29 Notice") require the submission of a costed decommissioning programme for each offshore installation and submarine pipeline. Those persons given Section 29 Notices are jointly liable to submit a programme. A wide range of persons may be served with Section 29 Notices, including operators, licensees and owners.

If the Secretary of State approves a decommissioning programme, it is the joint and several duty of the persons who submitted it to ensure it is carried out.

In the event of failure to submit a programme or carry it out, the Secretary of State may carry it out and recover the cost from those given Section 29 Notices or under section 34 of the Act may require a wide range of other persons (including ex-owners and their affiliates) to carry it out.

Proposed Changes

The changes in the Bill are designed to ensure that liability for decommissioning oil and gas assets falls on the appropriate persons and does not fall on the taxpayer, even if the current owners of the field are insolvent. The changes are in two main areas:

Changes are proposed to ensure that insolvency laws do not threaten funds placed in trust by the licensees to provide for the costs of decommissioning - in other words to prevent an insolvency practitioner...

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