Opinion: Change of approach to decom question, but same old response

Much of the money will go to overseas heavy lift, marine vessel and well plug and abandonment companies.
Much of the money will go to overseas heavy lift, marine vessel and well plug and abandonment companies.
Tom Baxter
Opinion by Tom Baxter

As many EV readers may be aware I have repeatedly asked Government Decommissioning Agencies to provide the taxpayer with the societal, environment and economic motivation that supports the current decommissioning plans. I have had no success in receiving a straight answer, so I wrote to Beis under the freedom of information banner.

I asked the following;

“As a taxpayer, the largest stakeholder in offshore oil and gas infrastructure decommissioning, I am very concerned that the taxpayer is receiving very poor value. Since the key motivation for removal is environmental benefit, I am asking the government to show the taxpayer the environmental basis that demonstrates the reasoning for removal. Previous requests for this information have resulted in a stock response; ‘Offshore oil and gas operators must decommission installations and pipelines at the end of a field’s economic life. This is done in accordance with UK and international obligations and is delivered in a safe, efficient and cost-effective manner for taxpayers, while minimising the risk to the environment and other users of the sea.’
That response does not address the question – what is the environmental motivation? Or indeed the societal or economic reason why the taxpayer is funding around half the removal costs. Can you please demonstrate to the taxpayer the environmental benefits from removal?”

Here are the responses I received to the above which unfortunately were a rehash of the same old rhetoric.

I was firstly informed that I had been previously told that -‘The UK’s international obligations on decommissioning are governed principally by the 1992 Convention for the Protection of the Marine Environment of the North East Atlantic (OSPAR Convention) and in particular Decision 98/3 on the Disposal of Disused Offshore Installations.’

I know that, but that doesn’t answer my question – where does the legislation demonstrate the environmental case for removal? If we are removing and thereby spending taxpayers’ money in doing so, surely there is a very clear reason. Simply referring to OSPAR does not justify the motivations to the taxpayer. Tell me what the motivations are and where is the science to support it?

I was also informed – “We further explained that the application of our international obligations means that we seek to achieve effective and balanced decommissioning solutions which are consistent with international obligations and have a proper regard for safety, the environment, other legitimate uses of the sea, economic and social considerations as well as technical feasibility.”

I have seen a number of decommissioning reports, none of which address the benefit or otherwise to the taxpayer. To my mind the government does not achieve a balanced solution.

By quoting international obligations the implication is that the obligations are serving the nation. Is it not incumbent upon the government to demonstrate to the taxpayer that the legislation is providing a positive outcome? If that can’t be provided then the legislation, although well intentioned, is not appropriate and should be challenged.

I was also told – “You are aware that this process entails an assessment of the environmental impact of decommissioning and that it is one of the factors that influences the final decision on a decommissioning solution. Ultimately if leaving the infrastructure in place would not have a significant detrimental effect on the environment then an operator may make a case to decommission in-situ.”

Which operator addresses the taxpayers’ options? It is not in the operator’s remit, it’s the Government.

I was further informed – “You may also be interested in the joint industry project to gather knowledge and experience in the decommissioning of offshore structures and pipelines, that has evolved into the lnfluence of Man-made Structures in the Ecosystem (lNSlTE) project. The project aims to enhance scientific understanding of the effect of man-made structures on the North Sea and thus support decision-making.”

I am familiar with INSITE. I have met with the project manager and discussed the programme. They are undertaking some fantastic science but it only serves to demonstrate that we are having to look harder and harder to find any evidence that supports removal. The fact the INSITE projects are being funded further demonstrates to me that there is no compelling environmental case for removal.

A further paragraph stated – “You have also raised concerns about the impact that the cost of decommissioning will have on the taxpayer. As decommissioning is an unavoidable cost for industry the government has set in place a system that allows companies to receive tax relief on their costs when they come to decommissioning. This is only available to those companies that have paid tax, and only at the rate that tax was paid. North Sea operators have paid over £330bn of tax since the 1970s at tax rates significantly higher than onshore companies, therefore allowing tax relief on decommissioning ensures a fair tax system that gives companies good incentives to maximise economic recovery.”

That is real smoke and mirrors; let me quote the recent Wood Mackenzie report – ‘US$32 billion of decommissioning worldwide over the next five years: is the industry ready?’ December 2017. Here it is stated ‘In the UK we forecast the government will spend around £25 billion on tax relief in the future (45% of the total remaining UK decommissioning bill)’. Hence, going forward the taxpayer does pay.

Also, why is decommissioning an unavoidable cost? Plug and abandon yes but removal is avoidable.

Furthermore, if a large part of decommissioning costs can be removed would that not be a better incentive to maximize recovery?

The Government response then went on to outline the work addressing reducing decommissioning costs with a target of 35%.

I would ask why we are spending money in the first place.

The Government finally stated that – “The UK remains committed to OSPAR and to the principles set out in OSPAR Decision 98/3 and as such there are no proposals to change the decommissioning process in operation, which has been developed in accordance with our international commitments as well as the guiding principles that underpin them.”

So where does that leave the taxpayer? The Government will follow legislation that they can’t demonstrate a case for.