Opinion: Budget decommissioning tax reforms a missed opportunity

Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.
Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.

Whilst many industry commentators have quite rightly welcomed the recent budget decision on tax credit transfer, the fact remains that even with the new arrangement, decommissioning remains a very poor deal for the UK taxpayer.

The review of the credit transfer system was an opportunity for the Treasury to question the motivation for decommissioned asset removal. When I asked the Treasury to explain to the taxpayer the societal, economic and environmental benefits of removal I received a very bland response.

I was informed it was expensive and technically challenging work – oh, really?

I was also told that ‘The Government is committed to ensuring decommissioning is safe, in line with environmental regulations, and cost-effective”.

That of course presupposes that the environmental regulations are fit for purpose. In my opinion, which is supported by many environmentalists and industry professionals, there is no compelling environmental case for architecture removal provided it is left clean. So where is the Government case which supports the marine legislation?

The Treasury also pointed out that there is a “longstanding rule that decommissioning costs can be offset against previously paid tax, resulting in a repayment from the Government”. Which can be rephrased as – going forward the taxpayer will be down by around £20-£30billion, depending on the final decommissioning bill.

This is the crux of what I perceive as a huge misuse of taxpayers’ money. We are spending the equivalent of the Brexit bill on an endeavour that provides no environmental benefit, has little long-term societal benefit and is a drain on the economy.

So let’s plug and abandon the wells, make the architecture clean, leave in place and use the money saved to provide something of real benefit to society – green energy.

Would the oil companies align with this? I think they would bite your hand off.

Many commentators are suggesting that the new tax credits will prolong field life. What better way to prolong field life than to take this large, uncertain removal cost off the table. Field economics would be considerably improved allowing commercial extraction for much longer – a key tenet of the OGA’s maximising economic recovery remit.

Tom Baxter, Senior Lecturer, Chemical Engineering, Aberdeen University