Energy Act 2008 – Offshore Renewable Energy Installations

On 6 April 2009, those provisions of the Energy Act 2008 (the “Act”) which relate to decommissioning of offshore renewable energy installations will come into force. The new provisions are intended to strengthen the existing statutory decommissioning scheme for offshore wind and marine energy installations.

The provisions will be important both for companies directly engaged in developing offshore facilities and their wider group companies, as the new legislation could potentially render parent companies and subsidiaries of developers and operators of offshore renewable installations liable for the costs of their decommissioning. These “associated” companies may also be required to provide information regarding their financial affairs to the Government if called upon to do so.

This article summarises the key changes to the regime for decommissioning of offshore renewable installations which will impact present and future developers and operators of such installations and companies associated with them.

Background

As a signatory to the United Nations Convention on the Law of the Sea, the Government has international obligations to ensure that redundant offshore installations are removed from the seabed in order to protect fisheries and the marine environment, as well as to ensure the safety of navigation.

The Energy Act 2004 introduced a statutory decommissioning scheme for offshore wind and marine energy installations. Under the scheme, the Secretary of State for Energy and Climate Change (“SoS”) has the power to issue notices requiring developers and operators of such installations to submit (and later carry out) a decommissioning programme. Recent statutory consents have required that construction of offshore renewable installations may not commence until a decommissioning programme has been submitted for approval.

The new Act supplements the existing statutory regime by introducing three key changes:

• The SoS will have the power to issue a decommissioning notice to an associate of a developer or operator
• Decommissioning funds will be protected in the event of insolvency and
• The SoS will have enhanced powers to request the provision of information from developers and operators and their associates.

Decommissioning Notices

If the SoS has served a decommissioning notice and is not satisfied that adequate arrangements have been made by the recipient of the notice to carry out the decommissioning programme satisfactorily, the SoS will have the power to serve a decommissioning notice on an “associate” of the developer or operator which requires it to submit a decommissioning programme. The SoS may also exercise this power where a developer or operator does not submit a programme as instructed or submits a programme which is rejected as inadequate by the SoS.

One body corporate will be “associated” with another if one of them controls the other or if a third body corporate controls both of them.

This brings offshore renewables broadly in line with practice in the offshore oil and gas sector by seeking to ensure that the taxpayer is not liable for decommissioning costs where the developer or operator does not have the means of meeting those costs but an associate does.

Decommissioning Funds

Under the Act, in the event of insolvency of a person responsible for decommissioning an offshore renewable installation, any funds that were set aside as security for an approved decommissioning programme will remain available for decommissioning and not available to the general body of creditors.

Any provision of insolvency or other legislation which might prevent or restrict the security being used for its purpose is disapplied by the Act.

The SoS will have the power to direct that information regarding the relevant security arrangements is published by the person responsible for a decommissioning programme. This is to ensure that existing and potential creditors are aware of the protected funds and can, therefore, make informed decisions.

The definition of “security” will also be widened to include insurance, so as to bring the definition in line with the regimes for nuclear and oil and gas decommissioning.

Provision of Information

Under the Act, the SoS will be able to require information about:

• the location where the offshore renewable installation is or will be situated
• the offshore renewable installation and an associated electric line
• details of “associates”
• financial affairs of a notice recipient or its associate and
• proposed security in relation to the decommissioning programme.

Such information can be requested from a recipient of a decommissioning notice, an associate of such a person or a person made subject to a decommissioning liability following a review by the SoS of a decommissioning programme.

Where a decommissioning programme has not been submitted or rejected and the SoS is to prepare his own programme instead, the SoS may require the provision of any information or documents necessary to enable it to do so (i.e. the SoS is not limited to requesting only the type of information listed above).

Failure to provide any information requested by the SoS without reasonable excuse shall be a criminal offence under the Act.