Court Battle Over North Sea Oil Fields Involves Billions

The extent of oil reserves and potential profits remaining beneath the waters surrounding the British Isles is currently a central question. The substantial legal representation observed this week at the Court of Session in Edinburgh suggests considerable financial implications. Seven advocates occupied the front row of courtroom number one, where environmental organizations are contesting the government’s authorization of the Rosebank and Jackdaw fields. Behind them, an additional three rows were also filled with legal professionals, engaged in typing on laptops and taking notes. Such extensive legal engagement clearly entails significant costs. Notably, all parties concur on one fundamental point: the Rosebank oil field in the Atlantic and the Jackdaw gas development in the North Sea received unlawful approval. However, the legal teams hold starkly differing views on what, if any, remedial actions should be taken. The individual tasked with rendering a decision is Andrew Stewart, known by his judicial designation, Lord Ericht, who is presiding over this judicial review concerning the UK government’s decisions to sanction these fields. The preceding Conservative administration and the oil and gas regulatory body granted consent for Jackdaw in summer 2022. Its owner, Shell, stated that the field would be capable of supplying gas to 1.4 million British homes. Rosebank, situated west of Shetland and estimated to hold between 300 and 500 million barrels of oil, received approval the subsequent autumn. Operated by the Norwegian state energy conglomerate Equinor and Aberdeen-based Ithaca Energy, Rosebank is considered the largest undeveloped field in UK waters. Its oil is slated for tanker transport and sale on the international market, with some gas being conveyed via pipeline to Shetland. Among numerous other stipulations, approval was contingent upon environmental impact statements submitted by the operating companies. In line with prevailing practices at the time, these assessments evaluated the climate impact of emissions generated during the extraction of oil and gas. However, they did not account for the greenhouse gases that would be released when the fossil fuels were eventually combusted, known as downstream emissions. With consent secured, the field owners rapidly advanced preparations for drilling, finalizing agreements with suppliers and recruiting personnel. Throughout the week, the court has frequently heard references to the immense sums of money being invested in these two ventures. Counsel for Equinor stated an investment of £2.2bn in Rosebank, projected to create employment for 4,000 individuals. Shell’s lawyer indicated an investment of £1.1bn in the Jackdaw gas field in the North Sea, anticipating jobs for “at least 1,000” people between 2023 and 2025. Production is slated to commence at Jackdaw in 2026 and at Rosebank in 2026/27. Nevertheless, a victory for climate campaigners in the UK Supreme Court this June caused apprehension among the three companies and the broader industry. In the case of Finch v Surrey County Council, which concerned a dispute over drilling oil wells near London’s Gatwick Airport, the court determined that an environmental impact assessment must incorporate downstream emissions. On the eve of the judicial review, Sarah Finch, the environmental campaigner after whom the Surrey case is named, conveyed that “the exact same thing happened at Rosebank.” She elaborated: “It was granted permission with no assessment of the impact of burning the oil or gas to come out of it,” adding: “So, a much bigger site, but exactly the same argument.” The three companies involved in the Court of Session acknowledge that the Finch ruling implies their licences were granted unlawfully in retrospect. However, they assert that they furnished all environmental information required at the time of their applications; they were instructed by the industry regulator not to assess downstream emissions; and they should not be “punished” for a Supreme Court decision which they claim they could not have foreseen. Lord Ericht appeared to summarize their position concisely on Friday, suggesting it amounted to them requesting him to state: “I accept this decision is unlawful but I give it lawful effect.” The advocacy groups Greenpeace and Uplift vehemently oppose such a proposition. They dispute the claim that the Finch decision was unforeseeable, with one lawyer suggesting the oil companies had simply lost a bet. Both groups now urge the judge to halt work on Rosebank and Jackdaw while the fields’ downstream emissions are evaluated. Subsequently, they contend, the Energy Secretary, Ed Miliband, and the government’s North Sea Transition Authority (formerly known as the Oil and Gas Authority), could render a new decision regarding the fields’ licences, informed by a more comprehensive understanding of their contribution to climate change. Even then, a complication might arise. Lawyers representing the government, who were also present in court, expressed doubts that Mr Miliband would possess the requisite legal authority to revisit the decisions at all under certain circumstances. Should Mr Miliband indeed have the power, and if the situation reaches a critical point, his course of action remains unclear. In court, the UK government’s lawyer was reluctant to elaborate on the matter. At times, his demeanor suggested that ministers strongly desired the entire issue to simply dissipate. After all, during its campaign against the Tories in the general election this summer, Labour had meticulously formulated a policy seemingly designed to minimize contention and avoid entanglement in the debate surrounding Rosebank. This policy stipulated that Labour was committed to addressing climate change by reducing greenhouse gas emissions but also recognized the significance of the oil and gas industry. Consequently, it would not issue any new exploration licences in UK waters but would permit existing projects – including Rosebank and Jackdaw – to proceed. Ministers underscored domestic energy production as crucial for maintaining affordable bills; contributing to the nation’s energy security; generating tax revenue; and aiding the transition from fossil fuels to renewable energy. Many of these assertions are disputed by environmentalists. Tessa Khan, executive director of Uplift, noted that 80% of the UK’s oil is exported. “There’s no world in which you could have a robust environmental assessment that takes into account those downstream emissions and decide that those environmental impacts are acceptable,” she stated. In Aberdeen, however, the nucleus of the UK’s energy industry, there is considerable apprehension regarding the potential ramifications of this case’s decision, and about the broader impact of government policy on the sector. Just last week, a US oil firm announced its intention to cease all North Sea operations by the end of 2029, citing high taxation levels. Currently, the attention of climate campaigners, politicians, and oil companies alike is fixed on Lord Ericht. Perhaps he will devise a compromise, for instance, by permitting the oil firms to continue with preparatory work – provided they do not extract any oil and gas – while simultaneously obliging them to furnish the government with information on downstream emissions to facilitate a re-evaluation of the decision. The companies’ legal representatives expressed discomfort with the characterization of their activities as gambling. However, in such a scenario, they might have little alternative but to wager that the political repercussions of halting the projects would be too severe for Sir Keir Starmer’s government. Late on Friday afternoon, the judge withdrew to deliberate his decision, a process that could span several weeks or even months. Expressing gratitude to the numerous lawyers for their “excellent contributions,” he concluded the hearing by remarking: “It’s a very difficult matter and it’s a very important matter,” adding, “I shall issue my judgment in due course.”