Decommissioning Offshore Renewables: Parallels with Oil & Gas

Regulatory Control:

In April 2017 the Scottish Ministers assumed responsibility from Westminster for the review and approval of offshore renewable energy decommissioning plans. The powers of the Scottish Ministers in relation to offshore renewables decommissioning are derived from the Energy Act 2004 (as amended). In contrast, the decommissioning of onshore wind farms is determined by planning laws and responsibility lies with local planning authorities as to whether to impose decommissioning responsibility on the operator as a condition of planning. The Department for Business, Energy and Industrial Strategy (“BEIS”) retains ownership of the approval of offshore renewables decommissioning plans for the remainder of the UK and also has overall responsibility for the decommissioning of offshore oil & gas infrastructure.

Offshore Renewable Decommissioning Plans:

Marine Scotland is presently consulting on the first draft guidance on offshore renewables decommissioning plans (the “Guidance”), with comments required by 16th March 2020. The current draft of the Guidance can be found on the Scottish Government website and illustrates the desire to follow the line taken by onshore wind as opposed to the oil & gas industry.

The draft requires approved decommissioning plans to be in place prior to the construction of offshore installations. The intention is “to ensure that they [developers] understand their decommissioning obligations and can take account of them from an early stage.” In comparison, oil & gas decommissioning plans are submitted long after fields have already commenced production and at such times as when fields are closer to the end of their commercial life.

There is a marked difference in the approach taken towards decommissioning securities, with an emphasis in the offshore renewables sector of the provision of upfront security or otherwise much earlier in the installation’s lifecycle. In particular, the Guidance states that developments involving newer technologies (being seen as higher risk) will be more likely to provide security in advance as compared with installations utilising tried and tested equipment. This contrasts with the oil & gas method, where the requirement to provide security is “triggered” when decommissioning costs are expected to out-weigh future economic returns from the field. However, it represents general alignment with onshore windfarms, in which participants must submit security in the form of upfront bonds covering 100% of estimated decommissioning costs.

It will also be interesting to observe what, if any, differences emerge as a result simply of the transfer of powers and the fact that separate government bodies will be responsible for regulating the respective processes. How will the approach taken by Scottish Ministers differ from that applied by BEIS to what are objectively similar issues? Only time will tell.

Learnings:

What lessons could be learned by the oil & gas industry from the approach taken in offshore renewables? If it becomes apparent that the renewables method of addressing decommissioning in advance provides material benefits, will the oil & gas sector change tack? To the contrary, with the push towards a carbon-neutral Britain by 2050, will the requirement to submit a decommissioning plan well in advance of construction be seen as an unnecessary barrier to going green? Will the provision of advanced security be an excessive burden on companies seeking to introduce new technologies who may not have the benefit of substantial financial backing?

Shared Opportunities:

Environmental protection forms a core element of the approval of each decommissioning plan. The Guidance describes the emphasis on installation removals being conducted in such a way that “provides the most benefit or least damage to the environment as a whole”. In this respect, there is a significant degree of convergence between the sectors, with environmental concerns playing a similarly crucial role in the decommissioning of oil & gas infrastructure. As our understanding of the offshore decommissioning process continues to grow, it will be important that any learnings relating to the environment, and indeed on other issues, are shared between sectors. There are mutual opportunities for cost reduction through the sharing of information and joint utilisation of supply chains. It is also another means by which energy companies can play an active role in the attempt to reach a carbon-neutral future, demonstrating their continued ability to not only add value to the UK economy but to provide social benefit to the communities they operate in.