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Publication - Research Publication

Unconventional oil and gas: decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities

Published: 8 Nov 2016

Research into decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities.

137 page PDF

2.6MB

137 page PDF

2.6MB

Contents
Unconventional oil and gas: decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities
Appendix A. Consultation

137 page PDF

2.6MB

Appendix A. Consultation

A.1 Scottish Environment Link

A.1.1 Introduction

A workshop with Scottish Environment LINK, AECOM, KPMG and British Geological Survey was held on 21 st March 2016 at KPMG's offices in Edinburgh.

Team introductions and brief description by KPMG of the objectives of the meeting and the work being conducted.

Scottish Environment LINK provided a brief overview of their functions. LINK informed KPMG, AECOM and BGS that there are numerous subgroups within Scottish Environment LINK. Some of these subgroups may want to input into this process. A summary of the stakeholder session will be fed back to these groups and responses will be collated and returned.

A.1.2 Objectives of the Research Projects

An overview of the scope of the research project was provided. KPMG, AECOM and BGS highlighted that the purpose of the study is to increase the evidence-base for the Scottish Government on unconventional oil and gas and no formal recommendations will be provided to the Government.

KPMG, BGS and AECOM provided an overview of the five work streams. One key point LINK highlighted was the lack of overall environmental study, which would combine all five work streams. LINK also stated that the five work streams should highlight any gaps in evidence or data.

A.1.3 Decommissioning Overview

AECOM gave an overview of the scope of the three phases of their work including the sources and case studies they would be drawing from. Two key reports they are looking at are the Scottish Task Force report on shale gas and the Independent Expert Report. LINK highlighted the concern that these were written by engineers, not environmental experts, and so do not consider the full externalities and costs.

AECOM/ KPMG discussed the interactions between their two respective studies.

There was a discussion about recent consultations on mine monitoring fees and opencast. LINK informed the group that there has been recent resource directed to this industry. LINK suggested AECOM should consult with the Scottish Government to identify whether it would be possible to engage with these parties as part of this project.

There was a detailed discussion between LINK and AECOM around the Scottish regulatory framework.

The need for a well-articulated broader regulatory picture was highlighted if it were to be included in any model. It was agreed that the current structure is not detailed enough to be included.

LINK also highlighted the issue of orphan wells (those that have been left by foreign developers and there is no way to get financial compensation from them) and the need to prevent them.

The permitting and regulation in Scotland is different to that in England. LINK particularly noted that this was true for the waste management industry. LINK highlighted the concern that the Scottish regulatory framework could allow much shorter sightedness than England.

The final topic discussed was that the implementation of certain guarantees that could affect the governing body responsible. Do these local authorities have the expertise and capacity to do this? One option discussed by AECOM/ LINK was a centralised planning unit e.g. an advisory group.

A.1.4 Consultation Response

Following the consultation meeting a written consultation response was provided by LINK. The main points are summarised in the table below, together with cross-references to where these issues are discussed in this document.

Summary of Issues Raised

Location in Document

  • LINK consider key issue is long-term methane emissions

Chapter 2

  • Written decommissioning plan approved by planning authority, SEPA, well examiner and secured by legal agreement

Chapter 3

  • Clarity on how landownership is relinquished by operator.
  • Robust measures to ensure decommissioning does not fall on public purse.

Chapter 6

  • Restoration should be to a minimum standard, which should enhance the local environment.

Chapters 3 and 5

  • Further research into interactions between fracking fluid and formation water required.

Not in scope

  • Appropriate post-decommissioning monitoring period should be agreed with the regulators and based on evidence.

Chapters 2 and 3

  • Cessation of monitoring should be contingent on no evidence of leakage or associated pollution

Chapters 2 and 3

  • Appropriate financial guarantees must be secured by planning authority covering whole cost of decommissioning in case of insolvency or non-compliance using funds in escrow

Chapter 6

  • There should be a decommissioning levy to cover shortfalls

Chapter 6

  • Environmental Liability Regulations require operators to provide insurance or other forms of financial security to provide effective cover for financial obligations

Chapter 6

  • Secure and cost-effective decommissioning dependent on on-going site maintenance, monitoring and enforcement action.

Chapter 3

  • Planning authorities and regulators should have the sufficient technical and staff capacity to monitor and undertake enforcement action.

Chapter 6

A.2 Convention of Scottish Local Authorities

A.2.1 Welcome and introductions

A workshop with COSLA, AECOM, KPMG and British Geological Survey was held on 22 nd March 2016 at a hotel in Edinburgh.

Team introductions and brief description by KPMG of objectives of the meeting, including data requests and purdah limitations.

COSLA provided a brief overview of their functions. COSLA informed the group that a summary of the stakeholder session will be fed back to the local authorities and responses will be collated and returned to us.

COSLA clarified that they do not take a particular political view regarding the potential development of unconventional oil and gas - currently they have a neutral opinion towards hydraulic fracturing.

A.2.2 Objectives of the research projects

An overview of the scope of the research project was provided. KPMG, AECOM and BGS highlighted that the studies will not make any formal recommendations. The group informed COSLA that there might be a formal consultation process by the Scottish Government after the completion of the five research studies and interested stakeholders might wish to engage with more formally.

COSLA were keen to understand who else had contributed at this stage. The group provided a description of the stakeholders that had been engaged at the request of the Scottish Government.

A.2.3 Decommissioning

AECOM gave an overview of the scope of the three phases of their work including some of the sources they would be drawing from and the case studies they will use. Two key reports they are looking at are the Scottish Task Force report on shale gas and the Independent Expert Report. AECOM/ KPMG discussed the interactions between their two respective studies.

There was a discussion on whether AECOM will consider creating a new funding mechanism or streamline existing mechanisms. The latter seemed to be the preferred choice. The heads of planning (HOPs) will have a concern about the resources that will be required due to tight budgets and the need for this to fall on properly resourced authorities. It was suggested in England it may have to rest at a government level.

A.2.4 Consultation Response - Decommissioning

Following the consultation meeting a written consultation response was provided by COSLA. The main points are summarised in the table below together with cross-references to where these issues are discussed in this document.

Summary of Issues Raised

Location in Document

  • There must be agreement form local community representatives and elected members prior to UOG exploration or activity.

Chapter 3

  • The principle of the "polluter pays" must be upheld in relation to UOG activity.

Chapter 6

  • The regulatory framework for UOG development should be agreed in advance between the local government, Scottish Government and industry advisers

Chapter 3

  • Highlighted concerns about water contamination and water use and disposal.

Not in scope

  • The decommissioning report should focus on work undertaken by the Coal Task Force around bank guarantees and other funding mechanisms.

Chapters 4 and 6

A.3 UK Onshore Oil and Gas

A.3.1 Welcome and introductions

A workshop with UKOOG, AECOM, KPMG and British Geological Survey was held on 22 nd March 2016 at a hotel Edinburgh.

Team introductions and brief description by KPMG of objectives of the meeting, including data requests and purdah limitations.

A.3.2 Objectives of the research projects

An overview of the scope of the research project was provided. KPMG, AECOM and BGS highlighted that the purpose of the study is to increase the evidence base for the Scottish government on unconventional oil and gas. This is not a project to make any formal recommendations. KPMG, BGS and AECOM provided an overview of the five work streams and the further public health study that is being produced.

UKOOG stated they would like the opportunity to discuss options and mitigations before they are included in the final report, however it was noted that stakeholder time has to remain equal among the different stakeholder groups. The regulatory structure for decommissioning is shared amongst the UK and UKOOG represents the whole of the UK, hence they would like to know any further developments in options and mitigation that could have a direct impact on England and Wales.

A.3.3 AECOM: Decommissioning

AECOM gave an overview of the scope of the three phases of their work including some of the sources they would be drawing from and the case studies they will use. Two key reports they are looking at are the Scottish Task Force report on shale gas and the Independent Expert Report. LINK highlighted the concern that these are written by engineer's not environmental experts and so do not consider the full externalities and costs.

AECOM/ KPMG discussed the interactions between their two respective studies.

AECOM informed the group that the Scottish government have not yet given any indication of what they will do about regulation or decommission but suspect this research will form a part of decision.

A.3.4 Consultation Response - Decommissioning

Following the consultation meeting a written consultation response was provided by UKOOG. The main points are summarised in the table below together with cross-references to where these issues are discussed in this document.

Summary of Issues Raised

Location in Document

  • UKOOG's understanding of decommissioning of UOG development

Chapters 2 and 3

  • UKOOG's understanding of the risks associated with UOG development

Chapter 2

  • UKOOG's understanding of regulation of UOG development by HSE, SEPA and the planning authority

Chapter 3

  • UKOOG's commitment to post-decommissioning environmental monitoring

Chapters 2 and 3

  • UKOOG's view that financial liabilities are best met by a combination of the guarantees within the licensing system accompanied by insurance.

Chapter 6

  • UKOOG are investigating whether mutual funds may take the place of some insurance products.

Chapter 6

  • The Scottish Government should ensure that its powers are devolved to cover the responsibilities of BEIS and the OGA

Chapter 3

A.4 The Broad Alliance

A.4.1 Objectives of the research projects

Representatives of the Broad Alliance were not available for the consultation events in March 2016.

An overview of the scope of the research projects was submitted by email to the Broad Alliance by KPMG, AECOM and BGS.

A.4.2 Consultation Response - Decommissioning

Summary of Issues Raised

Location in Document

  • The Broad Alliance does not consider UOG development has a place in Scotland and had no views on decommissioning of UOG developments.

Not in Scope

  • The Broad Alliance raised concerns about the historical failure to decommission extractive industries in Scotland - including coal, lead and shale oil as well as North Sea oil, steel and others.

Chapters 2, 3, 4, 5 and 6


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