The Department of Energy Security and Net Zero (DESNZ) is willing to go into bat for renewable energy. But it is not so willing to take the step for hydrocarbons.

Given that, it seems like it is time for oil and gas companies to lean into the challenge of a realistic discussion on emissions.

DESNZ last week endorsed a Supreme Court decision that will require scope 3 reporting for new oil and gas projects.

UK producers often claim that they can produce lower emission products than others. Providing scope to include this in plans – and furnishing information comparing domestic production with foreign – should be a step in the right direction for the industry.

The ruling

The court ruling in June found that an oil project in Surrey had failed to take into account emissions from oil that would be produced. The court agreed the ruling in a split judgement, of three to two.

The majority decision went further than just saying it should include scope 3 emissions. Veering into editorialising, it said a true reporting of these emissions would show oil consumed from the Horse Hill Development work “could not have been dismissed” as negligible.

The Horse Hill environmental impact assessment (EIA) took into account scope 1 emissions (and it was found there were no relevant scope 2). The report did not include scope 3.

Local campaigners, led by Sarah Finch, complained that Surrey County Council had failed to consider the project’s emissions, in particular the ultimate impact of using the produced oil.

Against hydrocarbons

DESNZ said the ruling, referred to as Finch based on the environmentalist, had implications for assessing “new development consents”.

New EIAs will require a calculation of the scope 3 emissions.

The acceptance of the Supreme Court ruling marks a notable departure from the previous government. The Conservatives had gone in the other direction, taking steps to mandate, for instance, annual licensing rounds.

The former government took a pugnacious approach with a number of judicial decisions. For instance, considering options to leave the European Convention on Human Rights (ECHR) over disagreements on plans to deport migrants to Rwanda.

Labour, it is clear, appears more ready to go along with judicial decisions, at least in some regards. Secretary of State Ed Miliband was more willing to challenge official decisions from the Examining Authority when it came to approving the Sunnica Energy solar plant.

The DESNZ statement said it would not defend the Jackdaw and Rosebank plans against judicial review. This echoes a similar move to halt the defence of a planned coal mine in Cumbria.

Sleeves up

Even while conceding ground on EIAs, and stepping back from defending extraction plans, DESNZ attempted to shore up its North Sea credentials.

“The government is acting swiftly so that decisions on oil and gas development consents can be made,” it said.

In its efforts to find this elusive way forward, the DESNZ statement hailed the “brilliance” of the offshore workforce. Oil and gas would continue to be a “key component” for decades to come, it said.

Continuing this tone of go-getting breathlessness, the statement said “ministers’ sleeves are rolled up ready to support investment and projects”.

Working with industry, workers, unions and civil society, it aims to provide “clarity and certainty” for the industry.

*Mandatory Credit: Photo by Global Warming Images/Shutterstock (1994504a)*

Scoping it out

The DESNZ statement at least leaves the door open to industry in its attempts to find a middle ground.

What may the department require from a scope 3 calculation?

The Horse Hill plan would have produced around 3mn tonnes of oil. According to the Supreme Court ruling, using a conversion factor of 3.22 tonnes of CO2 per tonne of oil, this would cause scope 3 emissions of 10.6mn tonnes.

The effect of a project to produce oil is that the oil is used, it found. It is certain that the oil will be combusted, the judges ruled.

They rejected the proposal that ownership of the scope 3 emissions should lie with refineries. There is a “causal connection” between the production and its consumption.

The ruling also noted it was not necessary to attach the emissions to any particular country. Emitting greenhouse gases has a global impact, it found.

The ruling suggested, though, that including the amount of emissions would have an impact on how projects were perceived. The Horse Hill plan described its scope 1 emissions as negligible, in the context of the UK’s carbon budget.

The court disagreed. It did not pass comment on the impact of these emissions in the global context, though.

Had the court given this comparison, may it also have concluded these were quite so negligible?

Mounting up

Previously, courts have been more willing to push back against claims based on scope 3 grounds.

The Court of Appeal show down a case against UK Export Finance’s (UKEF) backing for Mozambique LNG in 2023.

A lower court had split on the question. Justice Thornton, wife of now Secretary of State for Energy Security and Net Zero Ed Miliband, said support of this LNG project was not aligned with the Paris Agreement.

A rough estimate from UKEF gave a figure of around 805 million tonnes of scope 3 emissions from Mozambique LNG. Despite this, the court gave it the thumbs up.

In 2021, a Scottish court rejected a move by Greenpeace to halt the Vorlich development. Unlike the Finch decision, Lord Carloway found an EIA was not intended to consider the consumption of refined products.

“Production of oil from Vorlich did not increase the use of oil,” Carloway said. “The issue is essentially a political and not a legal one.”

If the issue is a political one, DESNZ has ceded – at least temporarily – this ground.

As the publication of statistics from DESNZ, the same day as its response to Finch, show, the UK is importing more oil as domestic production declines. Production was down 13% in the first quarter of the year, from the same period in 2023. Imports are up 1.9%.

Investing in oil and gas companies to decarbonise is a hot topic — *Oil platform in the North Sea.*

Uncertainty

DESNZ may be seeking certainty, but the results of its consultation are due only in spring 2025. In the meantime, it will work with operators, it said, to “navigate the implications for individual projects”.

And while the focus is on oil and gas, it seems that developers of other projects will also have to consider their scope 3 emissions. A certain coal-mining project in Cumbria, for instance, is keeping a close eye on developments.

Courts have already begun rejecting plans based on the Finch ruling.

In an ideal world, the government would take this opportunity to set out clear requirements for new projects. It would specify quite how much detail the assessment of scope 3 emissions should be. Is the Supreme Court’s simplistic conversion factor sufficient?

In the Mozambique case, Wood Mackenzie concluded it was unable to provide any certainty over the scope 3 impact of the LNG project. In actual fact, emissions will depend on the type of crude, the slate of products and the refinery.

If the department believes that domestic hydrocarbons have a part to play, it has the opportunity to show that leadership.

But DESNZ could also highlight the context in which the UK continues to use oil and gas. And perhaps even assess whether domestically produced hydrocarbons do have lower emissions – and therefore should be developed over imports.

These are opportunities for DESNZ. But it is also an opportunity for industry to show what emissions are and how it can go about tackling them.

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