The long-awaited Energy Act 2023 (the “Act”) received Royal Assent on the 26 October 2023, more than a year after the original bill was first introduced to Parliament.
The UK government describes this Act as ‘the biggest piece of energy legislation in the UK’s history’, and it is significant in both size and scope. It covers a wide range of topics for the energy sector, aiming to ensure energy affordability for households and businesses, increase private investment in energy infrastructure and accelerate the development of energy transition activities and achievement of net zero targets in line with the North Sea Transition Deal.
Although the Act was enacted on 26 October 2023 with some provisions taking immediate effect, most provisions will come into force on 26 December 2023. Other provisions will be implemented through secondary legislation.
In relation to offshore activities, the key aspects of the Act are as follows:
Carbon Capture and Storage (CCS)
The Act provides for the creation of a licensing regime for CCS, and a storage and transport licensing framework. The licence is required to operate a storage site and to provide services for transporting CO2 by pipeline. These licences will be issued and regulated by the Office of Gas and Electricity Markets (Ofgem) and are distinct from the carbon storage licences for which a regime is already in place.
In relation to CCS, the Act also addresses decommissioning and financial security regimes, monitoring, reporting and storage requirements, retention of information and samples and amendments to the change of use regime (in relation to re-purposing of oil and gas infrastructure for CCS activities).
Hydrogen
As for CCS, the Act provides for the creation of a licensing regime for hydrogen transport, hydrogen storage and hydrogen production. The Act also provides for the licensing of projects involving the construction, alteration or operation of a pipeline for the purpose of the conveyance of hydrogen, by virtue of the granting of a gas transporter licence under the Gas Act 1986 to authorise the transportation of hydrogen through pipes (non-pipeline methods such as shipping, road and rail will be considered further in the future) for the purposes of the relevant project. In relation to offshore hydrogen pipelines, these licences will be issued by the North Sea Transition Authority (NTSA).
The Act also authorises the Secretary of State to appoint an administrator to regulate a new hydrogen levy scheme payable by relevant market participants for revenue support for hydrogen transport and storage.
Oil and Gas
The Act includes amendments to the both existing and future petroleum licences (and the carbon storage licences), which will require NSTA approval prior to a change of control affecting a license. This is not significantly different from current practice, as many buyers already seek comfort that the NSTA does not have any material concerns in respect of the proposed change of control. The date on which these provisions will come into effect is not yet known.
Additionally, the Act amends the Petroleum Act 1998 to provide powers for a new charging regime to be introduced in connection with the approval of offshore decommissioning programmes. The introduction of this regime requires further consultation before its implementation.
Offshore wind
The Energy Act provides for the creation of marine recovery funds which can be used by wind farm developers as an alternative for environmental compensation. The Act also provides for a strategic compensation fund, to allow developers collaboration to deal with adverse effects on the environment. It also enables the making of new regulations in relation to assessment of impacts on protected sites and compensation.
The introduction of this piece of legislation has been long-awaited by the industry and its enactment of legislation marks an important milestone on the path to net zero. Hopefully the secondary legislation and guidance that will provide more details on the implementation and operation of the new regimes will be forthcoming in short order to ensure momentum is maintained.
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