Sector News

Opinion: What do the OGA powers really mean for oil and gas firms?

July 15, 2015
News
The eagerly awaited Energy Bill was published on Friday, setting out the proposed new statutory powers anticipated by the Oil and Gas Authority (OGA) Framework Document published in April of this year.
 
The Bill sets out the details of the tools that the OGA will use to implement the MER UK Strategy, working in conjunction with other governmental departments and the oil and gas industry.
 
Undoubtedly it is the new powers to be conferred on the OGA – rather than simply the transfer of existing powers from the Secretary of State – that will be of particular interest to those in the sector.
 
Strengthening the role of the OGA in relation to disputes between and among operators was anticipated in the Framework Document but we now have a much clearer picture of how OGA’s remit is to be expanded.
 
The language of the Bill is, understandably, rather technical.
 
OGA is to be empowered to intervene in ‘qualifying disputes’. A qualifying dispute is one which relates to ‘qualifying issues’ and in which at least one of the parties to the dispute is a ‘relevant party’.
 
You will have a ‘qualifying issue’ if your dispute involves an issue that is relevant to the fulfilment of the principal objective (that is, the objective of maximising the economic recovery of UK petroleum or ‘MER’) or it relates to activities carried out under an offshore licence.
 
Relevant parties include holders of and operators under petroleum licences, owners of upstream infrastructure and those planning and carrying out the commissioning of upstream infrastructure.
 
Although there are some limited carve outs, the potential scope of the OGA’s jurisdiction in relation to disputes is clearly extremely wide.
 
The OGA will not have to accept every dispute referred to it: the Authority is to publish guidelines setting out how it will decide whether to accept, reject or ‘adjourn for further negotiation’ any given dispute.
 
In addition, the OGA will not have to wait to have a dispute referred to it before it takes action. It is to be entitled to decide ‘on its own initiative’ to consider a qualifying dispute.
 
However the dispute comes to it, once the OGA decides to accept a dispute it will be under a duty to consider that dispute and to make a recommendation for resolving it.
 
The framework within which the OGA is to deal with disputes is, from a legal point of view, fascinating.
 
The OGA is not a court and its recommendations will not be formally binding on oil and gas operators. No doubt one reason for that approach – avoiding the issuing of binding decisions – is to try to avoid the OGA becoming embroiled in arguments about whether its processes breach relevant legal standards, for example in relation to procedural fairness or interference with existing contractual rights.
 
Nevertheless, it is clear that the OGA is expected to have ‘teeth’.
 
It can reject a dispute referred to it if it “considers it unlikely that, in the circumstances, it would be able to make a satisfactory recommendation in respect of the dispute”.
 
In plain English, the OGA won’t waste its time dealing with disputes where it doesn’t think it can have a positive practical impact.
 
At the same time, while its recommendations are to be non-binding, the OGA will be able to exercise significant powers over the parties to a dispute before it.
 
Those powers include requiring the disclosure of information, directing parties to take particular action during a dispute and compelling attendance at meetings – all of which are subject to rights of appeal to the First-tier Tribunal.
 
Perhaps most significantly, the OGA is to be empowered to publish its recommendations – an acknowledgement that in the absence of a right to issue binding decisions, the ability to name and shame operators may be the next most powerful tool in the box.
 
These powers in relation to disputes are complemented by a range of other powers to be conferred on the OGA to penalise operators by issuing sanction notices, enforcement notices and financial penalties – all of which will require careful scrutiny.
 
Christine O’Neill is chairman of Brodies LLP and a partner in the firm’s public law & regulatory team and Clare Munro is head of energy & infrastructure at Brodies LLP.
 
By Christine O’Neill and Clare Munro
 
Source: Energy Voice

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