Would you have guessed that the OGA has already been with us for six years? The extensive powers it was given in the Energy Act 2016 have been in force for nearly five years: those include the ability to impose sanctions on companies for breaching a licence or their obligations under that act, or for failing to comply with the OGA Strategy.
However, the investigation and sanctions powers have been relatively little-used until recently. For the first few years of its existence the OGA was at pains to stress that it saw its role as tripartite – as much to influence and promote the sector as to regulate it. A change of tone emerged in June 2019 when its head of regulation, Tom Wheeler, wrote to the industry noting that “too many issues were taking too long to resolve” and warned that “we will be progressively more proactive in using the OGA’s powers”. Recent evidence suggests they are doing just that.
It’s a little difficult to determine precisely how many cases of possible breaches the OGA has considered. Its overview in October 2020 indicated that between 2017 and July 2019 it had carried out 33 enquiries of which five had progressed to the more formal investigation stage and had issued no sanctions. However, its Overview published in March 2021 refers to 20 cases of which eight reached the investigation stage between 2017 and the end of August 2020 so it seems there has been some change in the basis of calculation. What is clear is that there has been a recent uptick in activity.
In February the OGA announced it had launched an investigation into a possible licence breach, related to reporting requirements. That resulted in the announcement in July that the OGA had issued a relatively small fine – of £50,000 relative to a potential maximum fine of £1 million – for a failure to report the progress and results of two extended well tests which took place in 2019. What is significant, however, is that this was the first time the OGA had used its powers to issue a financial sanction.
In June the OGA announced a further investigation into a possible loss of value as a result of a failure to collaborate and in August two investigations, one into a possible breach of field production consents and the other into a possible breach of a flare consent. Until the investigations have concluded, the OGA will not disclose which companies are being investigated, but four investigations in eight months compared to eight in the previous four years suggests the OGA has changed its approach significantly.
What can companies do to avoid falling foul of this more proactive OGA? The OGA’s Thematic Review into Industry Compliance with Regulatory Obligations published in October 2020 recognised that industry is improving, following earlier interventions, but stressed the need for a minority to catch up the high standards now achieved by the majority. In particular, the review noted that there remains room for improvement around managing production, flare and vent consents and the timeliness of licence extension requests. Based on the review and recent cases there are some basic steps which companies could take including:
· Ensuring appropriate internal training on managing OGA consents;
· Keeping clear records of and setting accountability for meeting consent requirements;
· Ensuring good internal communications on progress towards, and any issues with meeting, those requirements.
Jane de Lozey, the OGA’s head of disputes and sanctions, commented when issuing the fine that the OGA is currently considering other matters within the UKCS that may result in further regulatory action. It would not be surprising to see further investigations and possibly sanctions in the next few months.