Decommissioning - whose liability is it anyway?

Decommissioning - whose liability is it anyway?

Long-term costs of decommissioning to come under the spotlight at University business breakfast.

The issue of where liability lies for oil and gas infrastructure left in place after decommissioning will come under the spotlight at a business breakfast taking place at the University of Aberdeen this week.

Professor John Paterson, from the University’s Law School, will lead a discussion that will ask whether the current legal position is sufficiently clear, and explore potential options that might benefit industry. 

The event, which takes place at the Sir Duncan Rice library on Wednesday (November 21st), is taking place to promote the University’s online learning programmes, which includes the world’s first MSc in Decommissioning

Guidance issued by the UK Government states that liability for costs associated with problems arising after an oil field is decommissioned – for example, the degradation of infrastructure left in the sea – rests with the owner or section 29 notice holder* at the point of decommissioning.

However, a legal analysis informed by property law and how it relates to infrastructure on the UK continental shelf means this guidance could be open to challenge.  There is also a question mark over what would happen if a responsible party was to go bust, a scenario that may leave the UK taxpayer to foot the bill for any future repairs. 

Professor Paterson said: “As decommissioning of oil and gas infrastructure gathers pace it is important to know who will be liable for anything left in place.  Government guidance had previously stated that residual liability for decommissioning remains with the owner in perpetuity – albeit without specifying who the owner is.

“The most recent guidance from the Department for Business, Energy & Industrial Strategy clarifies that it is the owner of an installation or pipeline or a section 29 notice holder at decommissioning who bears residual liability.

“But is that the result that emerges from an analysis informed by property law? Even if it is, might it be preferable for the state to assume liability, as a pragmatic alternative that offers clarity and long-term security, but leaves the UK taxpayer to pick up the tab for future problems?  Or should any transfer of liability to the state be on the basis of a contribution from the relevant industry actor – as is at least envisaged in Norway? 

“These are the questions and issues that I look forward to discussing at this week’s business breakfast.”

In addition to the discussion led by Professor Paterson, there will also be a look at the University’s collaboration with the Oil and Gas Technology Centre, which has resulted in the creation of the new National Decommissioning Centre.

The Centre will tackle current and future challenges in partnership with the oil and gas industry in the UK and internationally, anchoring key skills and expertise in the north-east of Scotland.

*Decommissioning obligations arise when the Secretary of State serves a section 29 notice under the Petroleum Act 1998 to the operator of the field and each of the licensees, requiring them to submit a decommissioning programme.

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