The Offshore Gas Storage and Unloading (Licensing) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations are made under Part 1, Chapter 2, of the Energy Act 2008 (“the 2008 Act”), which establishes a new licensing regime for the offshore storage and unloading of combustible gas. Except in relation to the unloading of gas to a pipeline, the provisions of that Chapter are commenced by the Energy Act 2008 (Commencement No. 4 and Transitional Provisions) Order 2009 (SI 2009/2809 (C. 123)). The offshore area to which the regime applies comprises both the United Kingdom territorial sea, and the Gas Importation and Storage Zone designated under section 1(5) of the 2008 Act (see S.I. 2009/223). These Regulations lay down, in particular, model clauses for a category of licence granted under section 4 of the 2008 Act. Model clauses are deemed to be incorporated into the licences for which they are prescribed, unless the Secretary of State decides to exclude or modify them in any particular case. Model clauses for a category of licence granted under section 4 are also prescribed by the Offshore Exploration (Petroleum, and Gas Storage and Unloading) (Model Clauses) Regulations 2009 (SI 2009/2814) (“the Exploration Licence Regulations”).

Regulation 2 lays down requirements for making an application for a licence granted under section 4, and in particular specifies an application fee of £2,100. There is, however, no fee in the case of an application for an exploration licence. Such licences, which authorise the exploration of the offshore area generally, by means of such relatively non-intrusive methods as seismic surveys and shallow drilling, will be issued in conjunction with the corresponding licence granted under section 3 of the Petroleum Act 1998 (for which the application fee is currently £500). Model clauses for exploration licences under the 2008 Act (as well as under the Petroleum Act 1998) are prescribed by the Exploration Licence Regulations.

Regulation 3 and the Schedule prescribe model clauses for gas storage licences. The licensed activities are: the storage and recovery of gas; the conversion of a natural feature for the purpose of storage; exploration with a view to, or in connection with, the carrying on of such activities; and the establishment or maintenance of installations for those purposes. In contrast to the clauses prescribed for exploration licences, the exploration authorised by these clauses is limited to specific places within the offshore area, and can include such more intrusive methods as drilling in the seabed below 350 metres.

In order to carry on such activities, the developer will also have to obtain rights from The Crown Estate enabling use of the relevant places within the offshore area. The authorisation granted by a gas storage licence is limited to the area or volume covered by a Crown lease specified in a Schedule to the licence, and the licence will terminate in circumstances where rights are no longer exercisable under any lease that is so specified. For those purposes, “Crown lease” means a lease of property forming part of the Crown Estate, or an authorisation to exercise rights forming part of that Estate.

An Impact Assessment has not been prepared for these Regulations. However, the assessment for the proposed offshore licensing regime contained in the Impact Assessment for the Energy Bill 2007-08, is relevant. That assessment can be found at Annex C to the Government’s Consultation on the Proposed Offshore Gas Storage and Gas Unloading Licensing Scheme: Implementing the Energy Act 2008, and is updated in section 8 of that document. The document is available at:

http://www.decc.gov.uk/en/content/cms/consultations/open/gsuls/gsuls.aspx

Alternatively copies can be obtained from: Ricki Kiff, Energy Development Unit, Department of Energy and Climate Change, 3 Whitehall Place, London SW1A 2AW. Tel: [phone]; email: [e-mail].