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Energy Act 2016

Contents

Policy background

  1. The UK’s oil and gas industry makes a substantial contribution to the UK's economy, energy security and employment. 42 billion barrels of oil equivalent (BOE) have been produced from the UK Continental Shelf (UKCS), and it is estimated that a further 12 to 24 billion BOE could be produced. The UKCS is one of the most mature offshore basins in the world. It faces challenges of a very different exploration and production environment compared to when production peaked 15 years ago. On 10 June 2013 the then Secretary of State for Energy and Climate Change announced a review into maximising UK offshore oil and gas recovery and its regulation, led by Sir Ian Wood. The final report was published on 24 February 2014.
  2. The central recommendation from the report was the creation of a new arm's length regulatory body charged with effective stewardship and regulation of petroleum recovery. The Act, building on the powers contained in the Infrastructure Act 2015, formally establishes the OGA as an independent regulator (taking the form of a Government company) transfers regulatory powers and functions to it and provides it with new powers. This aims to ensure the OGA has the powers it needs to become a robust, independent and effective regulator, and enable it to give effect to the principal objective set out in section 9A of the Petroleum Act 1998.
  3. Within the Department of Energy and Climate Change (DECC), the offshore Oil and Gas Environment and Decommissioning Unit (OGED) is the body responsible for environmental regulation functions relating to the offshore oil and gas industry on behalf of the Secretary of State.
  4. OGED has been charging fees annually to operators in the territorial sea and the UKCS to cover the costs of its functions. OGED reviewed the fees charged by the Secretary of State to ensure they were in line with current Treasury Guidance. As a result of this work, it became clear that whilst the majority of fees that were recovered were properly covered by fee schemes, there were elements that were not provided for by the existing legislation. The Act therefore validates those charges that have already been raised without authority. The Act also provides that the Secretary of State can charge a fee in future for two sets of functions.
  5. The Government made a manifesto commitment to decentralise decision making on new onshore wind farms. Ministers have said that onshore wind energy development should only get the go-ahead if supported by local people (Written Ministerial Statement (opens in new window)). DECC is implementing measures, including those in this Act, to help fulfil the commitment by removing the requirements for a consent from the Secretary of State for Energy and Climate Change in relation to the construction, extension or operation of onshore wind farms with a capacity greater than 50MW. In future, local authorities (or potentially the Welsh Ministers in the case of Wales) will be the primary decision-makers for all onshore wind projects including those with a capacity greater than 50MW.
  6. The Government’s manifesto also committed to ending new public subsidies for onshore windfarms. To help deliver on this commitment, the Act brings forward the closure of the RO to new onshore wind projects in Great Britain, with provision for grace periods for projects which meet certain conditions. The Act also makes provision allowing the Secretary of State to make regulations to restrict the use of renewables obligation certificates relating to new onshore wind in Northern Ireland.

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