UK energy chief eyes an oil and gas loophole

LONDON — The U.K. government has quietly handed ministers new powers to reverse flagship climate promises and approve new drilling for fossil fuels. 

Under new guidance drawn up in Whitehall, Energy Secretary Ed Miliband can give weight to the “wider benefits to the interests of the nation,” alongside environmental concerns, when deciding the future of controversial oil and gas fields. 

Miliband has long insisted the U.K. must wean itself off high-polluting fossil fuels produced in oil and gas heartlands off the Scottish coast and embrace clean energy, like solar and wind power. But experts believe the new powers, buried in guidance published this summer by Miliband’s Department for Energy Security and Net Zero, provide a loophole to approve more drilling. 

The document says that, when deciding whether to approve oil and gas licenses, “the secretary of state will usually consider, amongst other matters … the government’s overall energy and environmental objectives, and the potential economic and other advantages of the project proceeding.” 

This hands Miliband the power to override objections and approve schemes, even if they breach environmental regulations, at a time when ministers are desperate to stimulate economic growth and get spiraling bills under control. 

Donald Trump is also piling pressure on the government to change tack, describing North Sea oil as a “phenomenal” asset while speaking alongside Prime Minister Keir Starmer during his U.K. state visit last week.

The U.S. president then raised the issue in his furious tirade at the U.N. on Tuesday, claiming to have repeatedly lobbied Starmer on the matter while he was in Britain. “I told it to him three days in a row. That’s all he heard: ‘North Sea oil, North Sea,’” he said.

With looming decisions on whether to allow drilling on the vast Rosebank and Jackdaw fields in the North Sea, the new powers risk setting up a row between the energy secretary, green campaigners, and his own backbenchers. 

Net zero sum game

Miliband’s political rhetoric hasn’t yet shifted an inch.   

“Unless we get on to clean energy, we’ll continue to be subject to that roller coaster of fossil fuels,” he told the BBC this month. Political opponents like Nigel Farage, who wants to drain the North Sea of all remaining oil and gas, are spouting “nonsense and lies to pursue their ideological agenda,” Miliband said.  

But some Labour MPs have noticed the guidance, and hope Miliband will now help out the drillers.  

Gregor Poynton, Labour MP for Livingston, a constituency in Scotland’s central belt, said the powers were the right option given the U.K. is set “to rely on oil and gas for some time yet.”  

Speaking before he was appointed as a Commons whip in September’s government reshuffle, Poynton told POLITICO: “That’s why I would encourage the secretary of state to use those powers carefully, including to approve projects like Rosebank and Jackdaw, because they support thousands of good jobs, particularly in Scotland and the north east, and they help ensure that what we do use is produced here to the highest environmental and safety standards.”  

Miliband is also under pressure to approve projects from other figures on the left.  

Green entrepreneur Dale Vince, who has donated over £5 million to Labour, says the government should “put its arms around the North Sea and support [oil and gas] operators with existing licences,” to ease the transition to clean energy.

Greg Jackson, boss of the U.K.’s largest energy supplier Octopus Energy, and a green lobbyist who advises Labour ministers, says the government should back North Sea drillers in order to limit imports of gas from other countries. Domestic production “is cleaner and it reduces the backlash against climate policy. I’ve got no problem with it,” Jackson told The Telegraph at the start of this month.  

Plenty in Labour’s ranks, though, would recoil from going soft on the mass-polluting oil and gas industry.   

“The path to decarbonization, energy security and not being reliant on rogue states like Russia for our energy supply is dependent on a huge expansion of domestic renewables which will create jobs in the UK and exports as a world leader. Any other path is leaving us stuck in an early 20th century paradigm,” said Alex Sobel, Labour MP for Leeds Central and Headingley.

“It is a simple truth that the North Sea basin is in terminal decline. … That is why this government are right to finally draw a line under new licensing and the illusion of endless new oil and gas,” veteran MP Barry Gardiner, a member of parliament’s Environmental Audit Committee, said this spring. 

The Department for Energy Security and Net Zero declined to comment.

All about the bills

Ministers know that voters, while broadly supporting Labour’s net-zero push, care much more about the state of the economy and sky-high energy bills.  

Polling from Merlin Strategy, conducted last month, shows 58 percent of Brits say the government should reverse any climate decisions that have led to higher energy costs. Almost two in three think the government should prioritize reducing energy costs over protecting the environment.   

“The key theme is people want lower energy costs as a priority,” said Julian Gallie, Merlin’s head of research.  

However, Tessa Khan, director of green campaigners Uplift, argues that, given U.K. extractions are sold on the global market, there is no direct link between drilling and bills. “There is just no reality in which we can drill our way to energy security or energy affordability,” she said.   

The new powers are set out in DESNZ’s guidance on how to handle so-called scope three emissions — the pollution created by fossil fuels after they have been extracted and used elsewhere. 

The High Court ruled earlier this year that scope three emissions must be considered in all future oil and gas developments. 

The North Sea Transition Authority (NSTA) regulator insists there is no change from current arrangements. The Offshore Petroleum Regulator for Environment and Decommissioning (OPRED), the NSTA said, will assess the environmental impact of projects as before.  

That involves a parallel process, where the NSTA assesses a project’s development plan while OPRED judges its environmental statement.

The NSTA can’t sign off the development plan or grant drilling consent, though, until OPRED has completed its assessment. During the OPRED process, the environmental statement has to be signed off by DESNZ, effectively giving Miliband a mechanism to overrule the regulator’s recommendations. 

That would give Miliband “in theory … lots of discretion to override regulator decision-making,” said Martin Copeland, chief financial officer at Serica Energy, one of the country’s largest oil and gas companies.   

Paul de Leeuw, an energy expert at Aberdeen’s Robert Gordon University, called the guidance “pragmatic” and “timely,” adding it provides “the secretary of state with the powers to make a balanced and informed decision, reflecting a wide range of considerations.” 

A second senior oil and gas industry figure — who has held talks with all major parties including the government and was granted anonymity to discuss sensitive lobbying — said they sensed “a split in government along the lines of environment and economic growth.”   

There are fresh political pressures on Miliband just as these new powers take effect, the same person said.  

“I think there has been winds of change blowing through Westminster in recent months. I think that’s due to a number of reasons. Obviously, the ‘Trump effect’ [backing aggressive fossil fuel drilling in the U.S.] is having a significant impact and it’s galvanizing the right. It’s galvanizing Reform and it’s galvanizing the Tories.”