Bruno Rucinski, an associate at Allen & Overy LLP, examines the dismissal of the judicial review applications brought by Greenpeace and Uplift to the UK’s 33rd licensing round for offshore oil and gas exploration and production, and what this means for future climate-related claims against the Government.
- Whether granting additional licences for oil and gas exploration and production is compatible with the UK’s net zero target is a political, and not legal, judgment.
- The court will typically defer to the judgment of the decision maker who is answerable to Parliament on climate change issues.
- Currently, the environmental assessment process for oil and gas exploration and production does not require analysis of the emissions from downstream or end-use.
The Secretary of State for Energy Security and Net Zero (SoS) owns a private company with shares called the North Sea Transition Authority (NSTA), formerly known as the Oil and Gas Authority. Its function is to extract the most value out of the oil and gas in the North Sea. It can grant licences and regulate activity in relation to oil and gas in the UK, including oil and gas exploration, carbon capture and storage, and offshore gas.
In October 2022, the NSTA launched the 33rd oil and gas licensing round to award over 100 petroleum licenses to stimulate exploration activity in the North Sea basin. One of its goals was to enhance the UK’s energy security, as it faced a long period of underinvestment and global energy markets were strained by current geopolitical pressures.
Why did Greenpeace and Uplift bring a judicial review challenge to the licensing round?
Greenpeace and Uplift, two environmental campaign organisations, sought to challenge a series of decisions made which resulted in the authorisation of a new round of licensing.
In broad terms, they raised concerns about how the decision to offer new licenses for oil and gas exploration considered the environmental impacts of more fossil fuel extraction and how it aligned with the climate compatibility checkpoint. This is a new requirement before any licensing round that checks if it fits with the UK Government’s goals to cut emissions to net zero by 2050.
In addition, there was a challenge to the failure to publish proper reasons for the conclusion that a new licensing round would be compatible with the climate compatibility checkpoint and the UK’s climate objectives.
What is the relevant legal framework?
The Environmental Assessment of Plans and Programmes Regulations 2004 sets out the legal rules that apply to the claims. Specifically, they require that a strategic environmental assessment be carried out before a plan or programme about energy is adopted.
The strategic environmental assessment must assess and explain the probable major impacts on the environment of carrying out the plan or programme and provide the information that is reasonably needed to comprehend the “likely significant effects on the environment including short, medium and long-term effects, permanent and temporary effects, positive and negative effects, and secondary, cumulative and synergistic effects” including on issues such as “climatic factors”.
The Regulations also require that “reasonable alternatives” to a proposed plan or programme about energy be properly assessed.
What did the parties argue?
In light of the above, Greenpeace and Uplift argued that the emission of greenhouse gasses from the end-use of the extracted hydrocarbons (the emissions emitted when the oil and gas are eventually used by consumers) constituted a “likely significant effect on the environment”, which the SoS was required to assess.
Specifically, they argued that as the central purpose of the SoS’s plan was to advance energy security by providing a secure energy supply for UK consumers, the end-use of oil and gas as an energy source in the UK was an integral feature of the plan. By failing to consider this end-use, however, arguably an “inevitable” product of the proposed plan, the SoS had acted irrationally.
Greenpeace and Uplift also argued that the SoS breached the Regulations by failing to assess the “reasonable alternatives”, i.e. not proceeding with further licensing. Finally, they argued that the SoS unlawfully failed to provide reasons for a new licensing round being compatible with the climate compatibility checkpoint and the UK’s climate objectives.
By contrast, the SoS maintained that the decisions were lawful on the basis that clear and reasoned judgments were made, with respect to the exclusion from the strategic environmental assessment of consideration of the end-use emissions.
What did the court decide?
The compatibility of granting additional licences with the UK’s net zero target is a political and not legal question
First, the court reiterated that it is solely concerned with determining questions of law. It is not responsible for making political and socio-economic choices. Decisions on those matters have been entrusted by Parliament to the SoS, which is answerable to Parliament, and the NSTA. Therefore, the court’s task was exclusively to ascertain whether the SoS had acted within the limits of their power.
The SoS had not acted irrationally or in breach of the Regulations or climate compatibility checkpoint by not assessing the end-use emissions
Second, citing the Court of Appeal case R(Finch), the court ruled that the SoS was not required to consider the environmental impact of the end-use emissions of the plan. Rather, the SoS was required to consider the necessary degree of connection between the plan’s development and its putative effects.
This is ultimately a matter of fact and evaluative judgment for the authority. As such, the court held that the SoS was entitled to find that there was an insufficient causal connection between end-use emissions and the plan based on the functional, spatial and temporal separation between end-uses and UK extraction.
Moreover, the court found that the climate compatibility checkpoint was a non-statutory agreement. It was only intended to be an informative, non-binding document intended to assist Ministers in deciding whether to support or not support a further licensing round.
It was therefore a matter of judgment whether the SoS considered it appropriate to take end-use emissions into account when considering whether or not to support a new licensing round. The SoS decided against including end-use emissions in their assessment. This is because there was no universally accepted approach to doing this and there was a risk of double-counting emissions if there were inconsistent approaches.
The SoS did assess the likely significant effects on the environment of reasonable alternatives and compared them with the plan
Third, the court found that the SoS had considered reasonable alternatives. It held that the SoS was entitled to come to the view that some of the additional oil and gas produced in the UK, as a result of the 33rd licensing round, would be consumed domestically and that the country would therefore import less hydrocarbons.
The court held that it was also reasonable for the SoS to regard that the alternative of importing more hydrocarbons would have a potentially negative impact due to the higher emissions intensity of most imports. This was a matter of judgment which could not be described as irrational.
The SoS was not required to provide reasons
Finally, since the climate compatibility checkpoint was a non-binding test that the SoS could choose to use or not, the court decided that the SoS did not have to explain how they applied it.
What are the implications of the case?
Judicial review applications are a common way for environmental campaigners such as Greenpeace and Uplift to challenge how environmental issues are considered by the government or regulators in licensing or approval processes. By and large, however, these challenges have been unsuccessful.
On the one hand, this case represents another significant victory for the Government and the oil and gas industry, as it confirms the legality of the 33rd licensing round and recognises the Government’s discretion and expertise in balancing the competing interests and objectives involved in the licensing decision. The judgment also reflects the deference and restraint that the courts tend to show towards the Government’s policy choices and judgments on complex and controversial matters of public interest, such as climate change and energy policy, especially when they are subject to ongoing review and scrutiny by the Government and Parliament.
On the other hand, the court’s judgment was underpinned by the Court of Appeal case R(Finch), which established that there is no general legal principle that the environmental effects of the consumption of an end product resulting from development must be considered in an environmental assessment.
Significantly, R(Finch) was appealed to the Supreme Court, and the decision is still pending. As such, whilst an environmental assessment process for oil and gas exploration and production does not currently require analysis of the emissions from downstream or end-use, this may change. There are, therefore, many potential developments to keep an eye on which will govern whether the court’s approach to this area changes in the future.
The opinions of guest authors are their own and do not necessarily represent those of SG Voice.