Environmental Law News Update: Jan 10, 2022

In our first Environmental Law News Update of 2022, Christopher Badger, Mark Davies and James Harrison consider some environmental law predictions for the year ahead, climate compatibility checkpoint tests for oil and gas, and an agreement between the UK and Norway on fishing access and quotas.

Environmental law predictions for 2022

As ever, we begin the year with our predictions for environmental law in the forthcoming year.

Environmental targets

A draft of the statutory instrument containing regulations setting each of the targets required by section 1(2) of the Environment Act 2021 (long-term targets in respect of at least one matter in the priority areas of air quality, water, biodiversity and resource efficiency and waste reduction) as well as the PM2.5 air quality target required by section 2 and the species abundance target found in section 3 of the same Act is required to be laid before Parliament on or before 31 October 2022.

Targets will be set following a period of “robust evidence-gathering, consultation and engagement with experts, advisers and the public”. The Government has committed to a public consultation on new legal targets for PM2.5 and other pollutants in early 2022. The World Health Organisation stated in September 2021 that annual average concentrations of PM2.5 should not exceed 5mg/m³ considerably lower than the current legal limit of 20mg/m³. The species abundance target was a late addition to the Environment Act, only introduced in June as the Bill ping ponged its way through the Houses.

We predict:

• Biodiversity and water targets will largely mirror EU ambitions;
• The resource efficiency and waste reduction target will take the form of a ratio, most probably the ratio of GDP to raw material consumption;
• DEFRA will in fact set two targets for PM2.5 – a ‘population exposure reduction target’ and a concentration-based ‘limit value’ target. The latter won’t be as low as the WHO’s guideline limit, but will be ostensibly justified on a cost-benefit analysis and by linking the wider public health to the general population target;
• The data underlying species abundance will prove to be much more useful for frequently encountered and abundant species than species under threat, resulting in rather generic and general targets.

The Office for Environmental Protection

The strategy which the Office for Environmental Protection (“OEP”) is obliged to produce under section 23 of the Environment Act 2021 will be a key document of the organisation and will contain the enforcement policy relating to the OEP’s formal enforcement functions. The OEP will not be able to investigate or take enforcement action against every alleged breach of environmental law by public bodies – repeated reference is made for the breach to be ‘serious’ and the enforcement policy must set out criteria on how the OEP will determine that a breach is ‘serious’ or not.

Section 23(7) requires the OEP, in considering its enforcement policy to have regard to the particular importance of prioritising cases that it considers have or may have national implications, and the importance of prioritising cases that relate to ongoing or recurrent conduct, relate to conduct that the OEP considers may cause or has caused serious damage to the natural environment or to human health or that the OEP considers may raise a point of environmental law of general public importance.

However, this should not be considered to be an exclusive list of priorities and, arguably, given the multitude of factors that might be taken into account, the section supports a broad and flexible interpretation of what might be considered ‘serious’. We also detect more than a hint that the Chair of the OEP is quite prepared to be robust and independent in their own approach.

We therefore predict that:

• The enforcement policy to be published for consultation will take a broad approach to the types of cases that could legitimately be taken up by the OEP that will allow the OEP the flexibility it needs to start to assert itself. ‘Serious’ won’t be limited to serious impact on the environment but will include cases where the breach itself might be seen as serious even if environmental harm is limited and will include scope to take action against the cumulative impact of repeated small breaches of environmental law.

Environmental taxes

Green levies have been very much in the news recently following soaring energy prices and the Prime Minister is coming under increasing pressure to suspend them while gas prices remain high. The issue largely turns on who should bear the cost for raising money for infrastructure to support the growth of renewables and whether it is really fair to expect the consumer to fund infrastructure development when the cost of living is so high.

Looking elsewhere the plastic packaging tax comes into force on 1 April 2022, with a rate of tax of £200/tonne on plastic packaging that contains less than 30% recycled plastic, and which is manufactured or imported into the UK (including packaging on finished goods which are imported).

We predict that:

• Environmental ambition in the form of taxes and levies that result in higher consumer costs will take a significant back seat during 2022, the ‘year of the squeeze’. This is highly likely to influence any forthcoming producer responsibility schemes and impact on policy initiatives designed to ensure that companies achieve tangible environmental outcomes, rather than passing on costs. Government will shrink from taking any steps that might increase consumer costs.

Climate compatibility checkpoints consultation

There is an inherent difficulty faced by the Oil and Gas Authority (“OGA”) in working out how to reconcile continued oil and gas production and subsequent distribution, with governmental policy objectives relating to climate change. This is reflected in the Central Obligation of the OGA’s Strategy published in February 2021, which can be paraphrased thus: steps must be taken necessary to secure that the maximum value of economically recoverable petroleum is recovered from the UK Continental Shelf and in doing so, appropriate steps must be taken to ensure compliance with the UK target to achieve Net Zero by 2050. One might consider that these two sets of steps are contradictory. It is hoped that the implementation of ‘climate compatibility checkpoints’ will assist the OGA to square this circle.

The OGA currently operates a regime that grants licenses to operators, which are a pre-requisite before that operator can explore for, drill for, or produce petroleum. Licences grant the holder exclusive rights to explore for petroleum in the area covered by the licence. To go beyond exploratory drilling, operators must gain consent from the OGA, which is further subject to environmental assessments by the Offshore Petroleum Regulator for Environment and Decommission, and assessments by the Health and Safety Executive. Net Zero considerations are imposed by the OGA’s Strategy across all aspects of a project’s lifecycle.

Licences are typically awarded following a ‘licensing round,’ which occur at most once a year and consist of a tender process for a specified number of licence areas. It is proposed that climate compatibility checkpoints would be exercised before the OGA offers any new licensing round(s) to ensure that new licences are awarded only on the basis that they are aligned with the UK’s climate goals. In short, there must be industry-wide compliance because unless all new licensees are collectively able to satisfy the checkpoint no licences will be granted.

The consultation sets out seven potential tests, including domestic demand for oil and gas, the sector’s projected production levels, the increasing use of clean technologies such as carbon capture and hydrogen generation, and the industry’s progress against emissions reduction targets. A combination of these, and/or other tests proposed by consultees, will be used to assess new licences.

One of the apparent differences between the tests outlined in the consultation is which emissions they seek to address. It is stated within the consultation document that Scope 3 emissions are “many times greater” than emissions from Scopes 1 and 2. This is to say that indirect emissions including when hydrocarbons are combusted or used in other process such as the production of plastics or medicines, exceed those generated during the process of extracting the oil and gas, and any indirect emissions from energy purchased by the emitter. In devising a test that does not account for Scope 3 emissions there is a great risk that a huge amount of potential environmental impact is not accounted for. As is foreshadowed in the preamble setting out potential test five, there are inherent complexities in accurately calculating Scope 3 emissions given that the emissions are associated, not with the operator itself, but with fuel users up and down its value chain but this is surely a matter that consultees are likely to address in their responses.

The first potential checkpoint test – ‘Reductions in operational greenhouse gas emissions from the sector vs. commitments’ – is illustrative of some of the difficulties that the OGA faces. In the abstract it is a relatively simple test, which involves the assessment of both historical data, and emissions projections (other than Scope 3) in order to establish compatibility based on current performance, and on future risks to agreed objectives. The test compares the sector’s progress in reducing emissions to date with the commitments set out in the North Sea Transition Deal (inter alia 50% reduction in emissions by 2030), the operative Carbon Budget, the UK’s Nationally Determined Contribution, and with projected reductions in future. Given that a margin for error is factored into this test it would appear to be fundamentally workable and easily understood.

However, one could also say that the phraseology of the first checkpoint test hints towards the issue raised at the top of this post: the compatibility of environmental goals with the OGA’s obligation (or commitment) to encourage steps towards the extraction of the maximum value of economically recoverable petroleum. Moreover, even if this interpretation reads too much into the test, there is no reference to how the test would be reconciled with the OGA’s overarching objective, which could result in unsatisfactory uncertainty. This is an area congested with new policy documents and strategies (the OGA’s Strategy, the governmental review, the Consultation document, the North Sea Transition Deal, and the OGA’s ‘Stewardship Expectation 11 – Net zero’ have all been published since February 2021 and all consider the issues around Net Zero) and so it is presently unclear how they all interrelate and how the OGA will be able to carry out the appropriate balancing exercise.

We may soon gain clarity on this issue because of judicial review proceedings brought by climate campaigners (link here), which was heard on 8 and 9 December 2021 and should yield a decision early this year. In that case it was alleged that the OGA Strategy is irrational on that basis that it will result in increased oil and gas production because the profitability of operators is exaggerated as a result of the fact that government subsidies are not considered at the licence stage, which conflicts with UK Net Zero targets.

The consultation period runs until 28 February 2022. Responses can be submitted online here or via email to oilandgasconsultations@beis.gov.uk.

UK and Norway agree fishing access and quotas

Amidst all of the wrangling about the Northern Ireland Protocol, the Government announced on 21 December last year what, on its face, would appear to be some good news: the agreement with Norway as to fishing access and quotas in each other’s waters in the North Sea and Arctic.

The agreement is only for one year (2022) and permits the UK fishing industry to take 30,000 tonnes of whitefish stocks in the North Sea with 6,550 tonnes of cod allocated to the UK around Svalbard, an increase of 1,500 tonnes than in 2021.

Importantly, vessels wishing to fish in Norwegian waters in 2022 must still apply for an external waters licence via the UK Single Issuing Authority. Guidance is available on this process (see here).

Whilst Fisheries Minister Victoria Prentis announced the agreement as “[providing] opportunities for the UK fleet and [ensuring] a strong balance that will benefit both our fishing industry and the protection of our marine environment”, the agreed quotas have been criticised by those in the fishing industry with it seemingly possible that the UK’s biggest trawler (the Hull-based Kirkella) will remain mothballed with the figures reportedly only providing a week’s worth of work for its crew.

This announcement followed an earlier announcement in December last year when the Government concluded fishing catch limits with the EU and Norway. Interestingly, and noting the dismay expressed by those in the fishing industry, the catch levels for five of the six stocks were set in line with, or lower than, the levels advised by scientists at the International Council for the Exploration of the Sea, which would suggest that concerns surrounding overfishing are, perhaps at last, being taken seriously.

More information on the announcements may be found here

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If you have any comments or suggestions please contact Bridget Tough at bridget.tough@6pumpcourt.co.uk

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