Jackdaw oil field: UK Government could face legal action over decision to approve Shell project

Pictured: Campaigners protesting BEIS's decision at its London headquarters on Thursday 2 June. Image: Mothers Rise Up

The Department for Business, Energy and Industrial Strategy (BEIS) announced the decision on Wednesday evening (1 June). An original licence was granted for the project, off the coast of Aberdeen, in 1970, BEIS stated. However, regulator OPRED rejected Shell’s 2021 application to extract gas from Jackdaw on climate grounds.

Last week saw developer Shell receiving an up-to-date extraction licence and the project receiving final regulatory approval, paving the way for extraction to begin in the near to mid-term.

Shell’s environmental statement for the project outlines its intention to begin drilling wells by the end of 2022 and to begin the first production of oil and gas in the second half of 2024. Peak production is expected by 2026 in this timeline.

OPRED has changed its stance after attaching further environmental conditions to the licence under the UK Government’s ‘climate stress test’ regime.

BEIS Secretary Kwasi Kwarteng posted a Tweet as the Department made the announcement. It states: “We’re turbocharging renewables and nuclear, but we are also realistic about our energy needs now. Let’s source more of the gas we need from British waters to protect energy security.”

The Government’s Energy Security Strategy, published in April, stated that “even as we reduce imports, we will continue to need gas to heat our homes and oil to fill up our tanks for many years to come – so the cleanest and most secure way to do this is to source more of it domestically with a second lease of life for our North Sea”.

The Strategy confirmed plans for another licencing round for new oil and gas fields for Autumn 2022.

Many thought leaders in the energy space have pointed out that, because oil and gas are internationally traded commodities, increasing domestic production does not automatically increase domestic supply. The Strategy has been called a missed opportunity for increasing domestic supply from solar and onshore wind and improving energy efficiency. No new national targets or schemes were announced in these fields.

Campaign group Uplift’s director Tessa Khan said: “We need an energy strategy from this government that puts the public’s needs for an affordable, clean energy supply over Shell’s need to profit, which means a rapid acceleration of renewable energy and a massive energy efficiency programme. This is the only way we’re going to ensure people can afford to stay warm this winter and next, while not setting fire to our only home.”

There is also, of course, the question of the UK’s legally binding net-zero target for 2050. These are the grounds upon which Greenpeace UK is considering a legal challenge.

Greenpeace UK’s political campaigner Ami McCarthy said that Jackdaw won’t lower our bills, but will create massive emissions causing deadly flooding and wildfires, and mass migration from people fleeing the climate crisis”.

McCarthy said: “This Government has shown no regard for these emissions, or Jackdaw’s ultimate climate impact. We think that’s unlawful, we’re looking at legal action to stop Jackdaw, and fight this every step of the way.”

Greenpeace UK is already challenging BP’s permit for the Vorlich field on the same grounds as Jackdaw, namely that the Government has a legal duty to assess all emissions from new fossil fuel projects as well as the “cumulative impacts” of these emissions.

Greenpeace UK and other environmental groups, including Uplift, The Rise Up Movement and Fossil Free London, staged last-minute protests in London and Scotland last week, contesting the approval decision. However, no additional legal challenges beyond Greenpeace UK’s have been floated yet.

Against the advice of its own advisors

Building on the Energy Security Strategy, the Treasury last month announced a Windfall Tax on offshore oil and gas production, raising tax rates from 40% to 65%. The intention is to raise £5bn to help households pay for rapidly increasing energy bills, given that oil and gas giants have recorded record profits due to skyrocketing wholesale gas prices.

However, the tax was coupled with a new ‘super deduction’ – a 91% rate of tax relief for investment in oil and gas extraction. Both the tax and the deduction are set to remain in place until 2025.

This measure was clearly taken partly to get the Conservative Party on side. Prime Minister Boris Johnson and others had previously rubbished the idea of a windfall tax, arguing that doing so would discourage energy majors from investing in energy transition activities in the UK.

The Energy Security Strategy and the tax deduction have paved the way for the creation of a new generation of oil and gas fields beyond Jackdaw, climate campaigners and think-tanks have warned. The Strategy’s autumn 2022 licencing round is expected to see the approval of at least six projects.

Beyond this, Uplift has identified a total pipeline of 39 projects that could receive tax relief and licencing support. It claims that these projects could collectively produce 1.9 billion barrels of oil, capable of generating up to 899 million tonnes of CO2e. For context, the UK’s national annual emissions for 2020 were 405 million tonnes of CO2e.

Other organisations to have criticised the tax deducation include the Green Party, E3G, Green Alliance, The New Economics Foundation and WWF.

The Government has stated that it does not intend to extend the new tax deduction to renewable energy generation. A Government spokesperson said: “There are already numerous generous incentives available to bolster investment in renewable energy, including the super-deduction, the UK’s competitive R&D tax relief regime, and the Contracts for Difference scheme – making sure the UK continues to invest in clean energy too.”

The UK Government’s Climate Change Committee (CCC) recently sought to quantify the global climate impact of the UK’s decisions on North Sea oil and gas. However, it was unable to conclude, beyond doubt, that any and all new licencing would undermine the UK’s domestic climate goals and/or global efforts to deliver the Paris Agreement.

The CCC did, however, argue that the UK Government’s current approach to North Sea extraction is likely to lead to the permitting of new projects that will result in emissions that ultimately jeapordise the delivery of net-zero by 2050 domestically – and of adhering to the carbon budgets set out for the coming decades. It is calling for the Government to tighten requirements for climate “stress tests” on future projects, and widening the scope of the tests to cover production as well as exploration.