UK court rules in favour of oil & gas regulator but ‘the fight goes on’ for activists

UK’s petroleum regulator, the Oil and Gas Authority (OGA), has welcomed a ruling in its favour by the High Court in a case where a group of environmentalists challenged the regulator’s strategy. However, the activists remain determined in their fight to put a stop to actions that they believe allow the government to prop up the oil and gas industry with public money.

The Oil and Gas Authority regulates petroleum recovery and is responsible for licensing and approval decision-making in the UK. It administers an Oil and Gas Authority Strategy, which came into force in February 2021.

A High Court judge, Justice Sara Cockerill, on Tuesday threw out a legal case, which labelled the OGA’s assessment of the UK’s MER strategy application to “maximise economic recovery” of oil and gas in the North Sea sector as unlawful and irrational.

Justice Cockerill said the action failed on both grounds, stating: “I reject the contention that the strategy is unlawful because the definition of ‘economically recoverable’ was irrational. It follows that the claimants’ claim fails and is dismissed.”

The OGA expressed its satisfaction with the ruling by stating: “We welcome the judgment. We remain firmly focused on regulating and influencing the oil, gas and carbon storage industries to both secure energy supply and support the transition to net-zero.”

The three environmentalists – Jeremy Cox, Mikaela Loach, and Karin Van Sweeden – who legally challenged the adoption of the government’s strategy on a pre-tax basis in May 2021, justified the unlawful part of their accusation by arguing that the OGA’s strategy did not account for the significant tax breaks provided to fossil fuel companies, as when prices are low, the government actually returns the money to oil and gas producers.

To illustrate the point, the environmentalists explain that this enables the oil and gas industry players to get pay-outs from public money while the government is not benefiting from tax receipts. However, the High Court ruled in favour of the OGA, justifying the decision by stating that “companies are not receiving tax revenues from the UK taxpayer.”

From the climate activists’ perspective, the policy is irrational as it serves to endanger the UK’s ability to meet its net-zero targets, increasing emissions by augmenting extraction activities.

“The claimants’ approach also entirely fails to grapple with the changes to reflect the move to net-zero. Carbon costs have now been brought within the assessment of economic recovery – with reference particularly to carbon appraisal values for greenhouse gas emissions and the associated social discount rate,” added Justice Cockerill.

In addition, Justice Cockerill explains that balancing various objectives is not a matter for the court, as this is a question for the regulator and concluded: “The OGA, in consulting on and adopting the strategy, manifestly had considerable regard to UK domestic action on climate change. It is common ground that it has taken steps to reduce the industry’s carbon footprint and it is patent that the driving reason for the review was to integrate net-zero. The OGA’s aim of assisting with the net-zero target within the bounds of its remit is apparent from reading the strategy.”

The High Court ruling was also welcomed by the Business Secretary, Kwasi Kwarteng, who stated on Twitter: “Turning off North Sea oil and gas overnight would put energy security, jobs and industries at risk – and make us even more dependent on foreign imports. This has to be a transition, not extinction.”

On the other hand, the environmentalists, Loach, van Sweeden and Cox, expressed their determination on Twitter to continue the fight by saying: “We forced the UK government to admit that it is using public money to prop up the oil & gas industry. There’s no going back. We will continue to fight this.”

Paid to Pollute claims that the environmental activists have been “vindicated” in presenting a challenge to the OGA’s net-zero strategy, as the ruling confirms the possibility for oil companies – including foreign-based ones – to profit from the UK’s tax regime, which was previously denied by the OGA. The campaigners are seeking advice on appealing the legal conclusion to the Court of Appeal in the UK.