3 Regulatory Framework in Scotland
The focus of this chapter is to outline the current legislative framework for regulating the decommissioning process associated with UOG developments in Scotland. This includes a general discussion of the regulations, planning system and guidelines, codes of practice and the organisations responsible for enforcement and monitoring. In order to set the context, an overview of the regulatory framework and associated interactions at each of the four key stages (exploration, development, production, decommissioning) involved in UOG developments is provided, however the specific focus is on decommissioning and restoration.
The following sections of the report identify the key statutory authorities involved in UOG development, outlining their responsibilities and the associated consenting regimes:
- Oil and Gas Authority ( OGA);
- the planning system;
- Health and Safety Executive ( HSE); and
- the Scottish Environment Protection Agency ( SEPA).
A regulatory route map is shown on Figure 6.
3.2 Oil and Gas Authority
Onshore and offshore oil and gas is regulated in the UK by the Oil and Gas Authority ( OGA), an executive agency of the Department of Business, Energy and Industrial Strategy ( BEIS) a UK government department that is responsible for a range of functions relating to the UK energy sector ( BEIS, 2016).
Oil and gas licensing in England, Wales and Scotland is governed by the Petroleum Act 1998, the Petroleum (Production) (Landward Areas) Regulations 2014, and the Hydrocarbon Licensing Directive Regulations 1995. The 1998 Act vests all rights and ownership of petroleum resources (oil and gas) in the UK government, which then grants a Petroleum Exploration and Development Licence ( PEDL) in competitive licensing rounds for the exclusive exploration, development, production and abandonment of hydrocarbons in the licence area. Licences apply to both conventional and unconventional exploration and production ( DECC, 2013a).
The OGA is responsible for issuing PEDLs. This licence confers exclusivity in a defined area as against other exploration companies, but does not exempt the company from other legal/regulatory requirements. The OGA therefore has a role to play throughout the UOG development lifecycle and critically at the start, by issuing licences and giving consent prior to drilling taking place on site. The licensing and consenting process managed by the OGA is explored further below. It should be noted that the responsibilities of the OGA in relation to onshore oil and gas in Scotland are to be devolved to the Scottish Government under the Scotland Act 2016. For the purposes of this report, it has been assumed that the same licensing procedure will be adopted by the Scottish government until such time as it makes any decision on the need for reform.
3.2.1 Petroleum Exploration and Development Licence
Obtaining a PEDL forms the first step in gaining the necessary permissions to undertake UOG development.
In order to obtain a PEDL, the OGA requires applicants to submit information outlining that the operator is technically competent, financially capable and has appropriate safety management systems in place. A well examination scheme is also required, as well as an environmental awareness statement; a requirement introduced in the most recent (14 th) landward licensing round.
Operators must also have clearly defined operational and environmental management systems in place in order for a licence to be awarded.
3.2.2 Environmental Risk Assessment
The environmental risk assessment is a first-stage risk assessment conducted specifically for proposed shale gas operations that involve hydraulic fracturing. In such cases UOG operators are required by the OGA to carry out an overview assessment of environmental risks, including risks to human health, covering the full cycle of the proposed operations (including well abandonment) with the participation of stakeholders (including local communities). One of the key purposes of this process is to inform the preparation of applications for planning permission and any accompanying Environmental Impact Assessment.
3.2.3 Consent to drill
Drilling consents will only be granted when the OGA has assessed operator competency and financial stability and once data reporting and monitoring methods for seismicity have been agreed. Where hydraulic fracturing is proposed, the Operator must also include the submission of a hydraulic fracturing plan for approval.
The following key provisions must also be in place prior to the OGA issuing consent to drill:
- the local planning authority has granted permission to drill and the relevant planning conditions have been discharged (see Section 3.3);
- all the necessary permits required by SEPA are in place, with a system for monitoring conditions and emissions (see Section 3.5); and
- the Health and Safety Executive ( HSE) has had notice of and is satisfied with the well design (21 days' notice must be provided) and the operator has arranged an examination of the well design by an independent, competent well examiner (see Section 3.3).
The locations of all wells including abandoned wells are held by the OGA and are publically available ( OGA, 2016). It is anticipated that those parts of the database relating to Scotland will be maintained and updated once the OGA's powers are devolved to the Scottish Government.
3.2.4 Surrendering and Determination of PEDL
Upon completion of production, there are two ways in which a UOG operator can give up, or "surrender", all or part of a licence ( DECC, 2015). A licensee may 'surrender' part of the licensed area while the licence continues over the remaining area, or 'determine' the entire licence. 'Determine' refers to the licensee giving up the entire acreage covered by the licence.
These processes require the completion of a Licence Determination Form, which includes information relating to the location and condition of the area to be surrendered or determined. Information on the status of the work programme and status of any wells within the area is required, including any plans for plugging and abandoning of wells ( OGA, 2015a).
Surrender of a licence requires the submission of a 'Relinquishment Report', which should be completed at any point that a licence is to be determined. The report must adhere to DECC guidance, the 'Revised Guidelines for Licence Relinquishment Reports' ( DECC, 2014) and must contain the following information:
- licence synopsis - Including the work obligations and any licence extensions agreed, and an outline of the prospectivity identified at the time of application and any undeveloped discoveries analysed;
- work programme summary - including details of seismic surveys and new wells drilled,;
- prospectivity update - review of prospectivity following seismic and/or drilling work;
- any further technical work undertaken; and
- resource and risk summary - a summary of recoverable resources associated with the remaining undrilled prospects.
3.3 The Health and Safety Executive
The Health and Safety Executive ( HSE) monitors oil and gas operations in relation to site safety and safe working practices, as required under the Health and Safety at Work etc. Act 1974, and regulations made under the following legislation:
- The Borehole Site and Operations Regulations 1995 - These regulations are primarily concerned with the health and safety management of the site for onshore wells. The regulations place a duty on operators of petroleum borehole sites to ensure that no operations that would make a significant alteration to the well or involve a risk of accidental release of fluids from the well are carried out unless they have notified the HSE at least 21 days in advance; and
- The Offshore Installations and Wells (Design and Construction, etc.) Regulations 1996 - This applies to all drilling regardless of whether they are onshore or offshore and are primarily concerned with well integrity and well control. The HSE will serve an improvement notice requiring modifications to the plan (well design and operation plan) if they are not satisfied with the well design and changes must be made before drilling operations can commence.
The objective of regulation by HSE is to prevent risks to health and safety associated with uncontrolled release of hydrocarbons potentially leading to risks of fire or explosion. This requires well construction to follow industry best practice (see Section 2.4) which also minimises the risk that fluids leak into the environment. The HSE also requires that wells are designed and constructed with well abandonment in mind.
HSE works closely with SEPA (see Section 3.5) and the OGA (see Section 3.2) to share relevant information on such activities and to ensure that there are no material gaps between safety, environmental protection and planning authorisation considerations, and that all material concerns are addressed.
The HSE initially scrutinises drilling activity and then monitors progress to determine if the operator is conducting operations as planned. During drilling activities, the HSE requires a weekly drilling completion and workover report focusing on well control and well integrity.
During assessment and inspection activities, HSE checks that the operator has independent well examination arrangements in place ( HSE, 2008).
The purpose of a well examination scheme is to cover the design, construction and ongoing maintenance of the well, continuously throughout its life from initial design to its final plugging and abandonment ( HSE, 2008).
Responsibility for the well examination scheme lies with the well operator. Responsibility covers all aspects of the scheme. The well operator is responsible for ensuring that the scheme is in place, for ensuring that the well examiner is both competent and independent, for ensuring that the scheme is and continues to be effective and that suitable action is taken on any recommendations that the well examiner may make. The UOG operator must ensure that their entire well inventory is covered by the scheme including any modifications ( HSE, 2008).
Interpretative guidance to the regulations, explains the degree of independence that well examiners must have from those responsible for the design construction and operation of the well. The guidance explains that the well examiner must be independent and separate from the immediate line management of the work that he is examining. Although it is permissible for the well examiner to be an employee of the well operator's organisation, the HSE considers it imperative that there is a high degree of impartiality and independence from pressures from the well operator, especially of a financial nature ( HSE, 2008).
The HSE also requires that the well examiner should be someone with sound knowledge and experience of the work to be examined. Competence must cover the full life cycle of the well from design to final abandonments and include any well servicing and change in use that may occur during its lifetime. The HSE recognises that not all the competencies required may reside with one individual and several individuals may be required to cover all of them ( HSE, 2008).
The HSE considers it to be essential that operators carry out audits of their schemes to verify the independence and independence of well examiners ( HSE, 2008). Oil and Gas UK produce guidance for operators on well examination ( OGUK, 2011a) and on the competency of well examiners ( OGUK, 2011b).
During the decommissioning phase, there is a requirement to notify the HSE when wells are abandoned and to show that the process complies with Oil and Gas UK guidelines.
The UK's current system of regulation for assessing well integrity has been assessed as being robust and effective (Insitution of Mechanical Engineers - Institute of Materials, Minerals and Mining, 2016).
HSE also work alongside SEPA in the implementation of the Control of Major Accident Hazards Regulations 1999 (as amended) with the main aim of preventing and mitigating the effects of those major accidents involving dangerous substances. These Regulations mainly apply to the chemical industry, but also some storage activities, explosives and nuclear sites and other industries, where threshold quantities of dangerous substances identified in the Regulations are kept or used. If it is determined that the Regulations apply, a number of steps would have to be taken by the Operator, including for example preparing a major accident prevention policy.
3.4 The Planning System
3.4.1 Planning application
The Planning Authority ( i.e. the planning department of the Scottish local authority area in which a UOG development is located) is responsible for granting planning permission for development related to exploration and production of UOG. Planning permissions are granted under the Town and Country Planning (Scotland) Act 1997, herein referred to as "the 1997 Act", (as amended by the Planning etc. (Scotland) Act 2006) and associated Regulations).
Any application for planning permission to carry out UOG development involving hydraulic fracturing is likely to be accompanied by an Environmental Impact Assessment ( EIA).
Schedule 1 and Schedule 2 of The Town and Country Planning (Environmental Impact Assessment) (Scotland) Regulations 2011 outline the criteria for determining whether an EIA would be required. Guidance published by the Scottish Government states that Developments falling within a description in Schedule 1 to the 2011 EIA Regulations always require EIA. Development of a type listed in Schedule 2 to the 2011 EIA Regulations will require EIA if it is likely to have a significant effect on the environment, by virtue of factors such as its size, nature or location (Scottish Government, 2015a).
UOG operators are likely to seek separate planning consents - potentially necessitating separate EIAs - for initial exploration works and for the subsequent production phase. Each planning consent, if approved, may include conditions specifically controlling decommissioning and aftercare to ensure the site is restored to previous use, or in some cases restored to an enhanced environmental use.
The Planning Authority therefore has a key role to play as the body, which both determines and issues planning consent for landward development works relating to UOG operations. The only exception to this would be if the planning application is appealed or is 'called in' by Scottish Ministers for their own determination.
As part of the planning application process, the Planning Authority is required to consult with statutory consultees. This process allows specialist organisations to inform the decision-making process, advice on potential mitigation strategies or conditions and, where possible ensure overlapping requirements for other regulatory regimes can be minimised.
All planning applications in Scotland are required to be determined against the Town and Country Planning (Scotland) Act 1997, which states (at Section 25) that all applications are to be determined in " accordance with the [development] plan unless material considerations indicate otherwise" .
The development plan will vary depending upon which local authority area the application site falls within, and may consist of both Strategic and Local development plans. The various development plans tend not to refer to onshore gas, due to their age, but all have general mineral works and environmental policies that would inform restoration and aftercare requirements and the financial contributions that would be applicable to an UOG planning application. In contrast, emerging development plans, do consider the industry to varying degrees and may offer more specific policy requirements.
Development plans are influenced by, amongst other things, the Scottish Government's national policy as contained within Scottish Planning Policy ( SPP), published in June 2014 (Scottish Government, 2014). Specific policies relating to mineral extraction developments that should be reflected at local policy level are outlined within SPP and should be referred to in relation to the principles underlying potential UOG development.
Planning Advice Note ( PAN) 64: Reclamation of Surface Mineral Workings (Scottish Executive, 2000b), provides guidance on the use of planning agreements in minerals applications, alongside aftercare/restoration considerations, and statutory timescales involved. Within the context of the decommissioning phase of UOG development, the Planning Authority is primarily concerned with the effective aftercare management of the site as a land use (for an initial period of 5 years at least, which is determined by Schedule 3, Part 2, Paragraph (7) of the 1997 Act) and ensuring sufficient financial guarantees and reporting procedures are in place to manage that process.
The Planning Authority would control the restoration and aftercare phases through conditions attached to any approved consent (for example requiring a Restoration Plan or Habitat Management Plan) and via Section 75 (s75) Agreements. An agreement under Section 75 of The Planning etc. (Scotland) Act (2006) consists of a contract between Planning Authority and landowner and is often used to secure financial contributions towards infrastructure, in this case restoration (see Chapter 6).
Other means of securing financial agreements can be utilised. For example, the Heads of Planning Scotland ( HOPS) 'Position Statement on the Operation of Financial Mechanisms to Secure Decommissioning, Restoration and Aftercare of Development Sites' ( HOPS, 2015) identifies a number of alternative methods of securing financial obligations such as surety bonds, bank guarantees, parent company guarantees and mutual funds. The Position Statement concludes that " if a financial guarantee is necessary it should be secured and controlled by a legal agreement, most appropriately a Section 75 Agreement" however the Working Group considered that it " could not endorse, at this time, the use of planning conditions as an appropriate or suitable means to fully secure, control and monitor such financial mechanisms".
3.4.2 Mining Waste Directive - European Community Directive 2006/21/EC1
The European Community Directive 2006/21/EC1 (the Mining Waste Directive) was transposed into Scottish legislation in the form of the Management of Extractive Waste (Scotland) Regulations 2010 (Scottish Government, 2010). These place a duty on Planning Authorities to consent activities relating to extractive waste areas and waste facilities as well as assigning additional requirements for category A (high-risk) waste facilities.
The Scottish Government document 'Guidance on the Management of Extractive Waste (Scotland) Regulations 2010' provides an outline of the underpinning principles of the directive and the requirements of these Regulations, although the guidance does not specifically consider UOG. The 2010 Regulations define extractive waste as " waste produced by the extractive industry and resulting from prospecting, extraction, treatment and storage of mineral resources and the working of quarries" (The Management of Extractive Waste (Scotland) Regulations 2010, p.4). This would include wastes arising from decommissioning.
Extractive waste excludes other waste streams arising at minerals development that remains under the control of the Waste Management Licensing (Scotland) Regulations 2011 regime and would be controlled and monitored by SEPA (see Section 3.5).
The main requirements of the Regulations are as follows:
- Waste Management Plans to be prepared by operators for all sites that manage extractive waste (usually considered as part of the planning application process);
- where the material involved is not inert, operators will also need to demonstrate compliance with appropriate environmental and health and safety regulation before commencing extractive waste operations; and,
- financial guarantees, major accident prevention policies, safety management plans and internal emergency plans should be prepared for the most hazardous facilities (Category A waste facilities). It is unlikely that the waste associated with UOG developments would result in any development being considered as a waste facility falling within Category A, therefore additional financial guarantees to those agreed through s75 would be similarly unlikely.
3.4.3 Part IIA of the Environmental Protection Act 1990
Land can become contaminated by a variety of substances associated with industrial operations and the environmental, financial and legal implications of this can be substantial. Ideally, land contamination associated with surface UOG development would be managed under the restoration obligations required by the Planning Authority under the planning permission and associated legal agreements; or as required by SEPA under the Environmental Permitting system in situations where this applies.
If remediation of land contamination by these routes does not occur, then the management and remediation of contaminated land that, in its current state, is causing or has the potential to cause significant harm or significant pollution of the water environment, is regulated by legislation contained within the Environmental Protection Act (1990) known as Part IIA. Part IIA is further established in Scotland by the Contaminated Land (Scotland) Regulations (2000), as amended (2005) and the Scottish Government's Statutory Guidance: Edition 2 (May 2006) (Scottish Government, 2006) which provides the detailed framework for the definition, identification and remediation of contaminated land.
Part IIA places a duty on local authorities, as the primary regulators, to identify and secure the remediation of contaminated land in their respective areas and to ensure land is suitable for use and does not cause harm to the public or the wider environment.
In fulfilment of Scottish Government objectives, it is each local authority's duty to:
- identify and remove unacceptable risks to human health and the environment;
- seek to bring damaged land back into beneficial use; and,
- seek to ensure that the cost burdens faced by individuals, companies and society as a whole are proportionate, manageable and economically sustainable.
Responsibility for paying for remediation will follow the "Polluter Pays" principle where feasible. Persons who caused or knowingly permitted the substances to be in, on or under the land will be liable, in the first instance. If none can be found, responsibility will pass to the current owners or occupier (Scottish Executive, 2000a). As discussed in PAN 33 'Development of Contaminated Land' (2000) (Scottish Executive, 2000a), where land is statutorily defined as contaminated land and the polluter or landowner is unwilling to pay for remedial works then the provisions of Part IIA allow for the recovery of the enforcing authorities remediation costs from the polluter or, if the polluter is unable to be located, from the owner or occupier of the land. However, remediation notices can only require that land is made suitable for its existing use. Where development is involved, it is expected that the remediation costs would be borne by the developer.
Although the regime is based on the 'polluter pays' principle, local authorities also have powers to carry out remediation work at their own cost where polluters/owners cannot be traced, cannot pay for remediation for reasons of hardship, or where the local authority owns the land.
3.5 Scottish Environment Protection Agency
SEPA is responsible for enforcing environmental legislation in Scotland, as well as being a statutory consultee in relation to the planning application process. SEPA's 'Regulatory Guidance: Coalbed methane and Shale' (Version 121119) suggests the following legislation is applicable to the onshore gas industry:
- The Water Environment (Controlled Activities) (Scotland) Regulations ( CAR) 2011 (as amended);
- The Pollution Prevention and Control (Scotland) Regulations 2012;
- The Control of Major Accident Hazards Regulations 1999;
- The Environmental Liability (Scotland) Regulations 2009;
- The Management of Extractive Waste (Scotland) Regulations 2010;
- The Waste Management Licensing (Scotland) Regulations 2011; and,
- Radioactive Substances Act (1993).
3.5.1 The Water Environment (Controlled Activities) (Scotland) Regulations ( CAR) 2011 (as amended)
The Water Environment (Controlled Activities) (Scotland) Regulations ( CAR) 2011 (as amended) arose from the European Community's Water Framework Directive ( WFD) (2000/60/ EC) (as amended by Directive 2008/32/ EC). The WFD was established to commit member states to the protection and management of the water environment and has been transposed into Scottish law through the CAR Regulations. To allow for proportionate regulation based on the risk an activity poses to the water environment, there are three types of CAR authorisation: General Binding Rules ( GBRs), Registrations, and Licences. GBRs represent a set of mandatory rules that cover specific low risk activities, wherein the operator does not need to apply to SEPA. Registrations cover low risk activities that could have a greater risk when considered alongside other small-scale activities. Operators must apply to SEPA to register these activities. CAR licences allow site-specific conditions to be set to protect the water environment from activities that pose a higher risk ( SEPA, 2011).
Licences can cover infrastructure projects that may be developed over an extended period of time and geographical area (such as multiple wellsites in a licence block) as well as single or multiple activities on a single site. Application fees apply to all licences, and subsistence (annual) charges may apply. SEPA has simple licences and complex licences for activities, for which different charges apply. For example, boreholes deeper than 200 m will require a complex licence under CAR.
In the context of UOG, the following activities are likely to fall within the CAR regulatory regime:
- injection of fracturing fluid;
- abstraction of water for injection purposes;
- abstraction of produced water and flow-back water; and,
Operators must submit a risk assessment and/or details of the drilling proposed to SEPA with their application for CAR authorisation to show that there would be no adverse effects on the water environment. The submission must also include any mitigation measures that will be used to address adverse effects. Any authorisation granted will specify conditions to limit impacts and may also require a monitoring plan.
During the decommissioning phase, CAR licence(s) are surrendered following SEPA agreement. Paragraph 27 of the CAR Regulations states that before determining whether to grant or refuse an application to surrender a licence, SEPA must:
"(a) assess the risk to the water environment posed by the cessation of the activity…and,
(b) take account of the steps (if any) that have been taken and identify any steps necessary to -
(i) avoid any risk of adverse impact on the water environment resulting from the cessation of the authorised activity; and,
(ii) leave the relevant part of the water environment affected by the authorised activity in a state which will permit compliance with any relevant requirements of the [wider] legislation."
Prior to accepting the surrender of any licence, SEPA therefore must have sufficient information to demonstrate that there would be no impact on the water environment that exceeds agreed regulatory standards. The duration and level of post operation monitoring must therefore be sufficient to demonstrate this and as a consequence cannot be explicitly quantified.
3.5.2 The Pollution Prevention and Control ( PPC) (Scotland) Regulations 2012
SEPA has regulatory powers under the PPC Regulations (The Pollution Prevention and Control (Scotland) Regulations 2012) for activities such as refining of gas, gasification or other heat treatments, combustion, or disposal of solid and liquid wastes. In the context of UOG proposals, only refining of extracted gas would trigger the requirement for PPC permitting. The exploration, appraisal and decommissioning phases would not therefore require to be permitted under this regime ( SEPA, 2016).
As per paragraph 48 of the PPC Regulations, any application to surrender a PPC Permit (Part A) must be accompanied by, amongst other things:
"A report describing the condition of the site affected by the surrender (the "closure report"), identifying in particular any changes from the condition of the site as described in the (i) site report, and (ii) where applicable, the baseline report…a description of the steps that have been taken to avoid pollution risks from the site, including any steps that have been taken to (i) return the site to a satisfactory state, and remove, control, contain or reduce any relevant hazardous substance in soil and groundwater".
3.5.3 Naturally Occurring Radioactive Material (Radioactive Substances Act (1993)
The accumulation and disposal of naturally occurring radioactive wastes ( NORM), present on pipework etc. recovered during decommissioning is regulated under the Radioactive Substances Act (1993) (RSA93). Unless the operator can demonstrate that concentrations of NORM in recovered materials are below the threshold values, all developments will require an authorisation issued under RSA93. While not stated directly in the SEPA's Regulatory Guidance on unconventional gas guidance ( SEPA, 2012), if authorisation is required under RSA93, monitoring and reporting would likely be required by operators in order to comply with the authorisation.
3.5.4 The Waste Management Licensing (Scotland) Regulations 2011
The management and disposal of any waste streams generated through operation (and not extractive waste) may require to be licensed by SEPA under the above Regulations. Under this regime, identified wastes would need to be stored, treated and disposed of appropriately and in accordance with an approved management plan ( SEPA, 2006).
3.5.5 Environmental Liability (Scotland) Regulations 2009
Under the Environmental Liability (Scotland) Regulations, operators who risk or cause sustained and significant damage to land, water or biodiversity will have a duty to avert such damage occurring or, where damage does occur, a duty to reinstate the environment. 'Significant' damage would relate to impacts from UOG development on biodiversity of European importance in terms of the Birds Directive (2009/147/ EC) and the Habitats Directive (92/43/ EEC), to water bodies ( e.g. pollution of surface water courses or aquifers) in terms of the Water Framework Directive and to land where public health is at significant risk of being adversely affected.
SEPA's Regulatory Guidance: Coalbed methane and Shale Gas ( SEPA, 2012) Confirms, "activities associated with unconventional gas extraction are likely to come within the scope of ELR". Operators must notify SEPA if they have caused land or water damage or if there is an imminent threat of such damage. Scottish Natural Heritage (or Marine Scotland for the marine environment) should be notified in cases where the "damage is likely to affect protected species and natural habitats" (para. 46).
In terms of cost recovery, Regulation 17 of the Regulations requires that (subject to paragraphs (2) and (3)), "the competent authority shall recover from the operator who has caused the damage or the imminent threat of damage, the costs it has incurred in relation to preventive or remedial measures taken under these Regulations".
3.6 The Coal Authority
The Coal Authority manages the effects of past coal mining, including subsidence damage claims that are not the responsibility of licensed coalmine operators (Coal Authority, 2016). It deals with mine water pollution and other mining legacy issues. The Coal Authority is an executive non-departmental public body, sponsored by BEIS.
Any activity that affects (intersects, disturbs or enters) a coal seam requires prior written authorisation from the Coal Authority. They will grant a Coal Methane Access Agreement in appropriate circumstances, but will only do so if the operator already holds the appropriate licence from the OGA.
Figure 6: Regulatory Route Map