UK High Court dismisses climate challenge to latest oil and gas licensing round

The UK High Court has dismissed two judicial review claims brought by environmental NGOs Greenpeace and Uplift in respect of government decisions relating to new oil and gas exploration and production in the North Sea (see R (on the application of Greenpeace Limited) v Secretary of State for Energy Security and Net Zero, Oil and Gas Authority [2023] EWHC 2608 (Admin)).

The claimants brought the challenges due to concerns over the compatibility of a further licensing round with the UK’s climate objectives. Continuing the judicial trend of deference toward government on how to address climate change, the High Court used some of its starkest language yet in dismissing the claims, holding that the issues in dispute were “plainly a matter of judgment and not law”: [13].

Key takeaways 

• UK courts remain willing to entertain judicial review claims against government climate/environmental decisions but continue to show great deference to decision-makers.
• While each case turns on its own facts, climate/environmental policy and decision-making will usually be matters of judgment for government rather than matters of law for the Court.
• Parties seeking to challenge climate/environmental decisions should be aware of the distinction between statutory and non-statutory considerations and how a decision-maker’s priorities might be affected by the nature of the documents on which they rely.
• With methodologies for assessing scope 3 greenhouse gas emissions likely to develop further, this judgment is unlikely to be the Court’s last on this topic.

Background 

The claims primarily concern decisions taken by the Secretary of State for Business, Energy and Industrial Strategy (now the Secretary of State for Energy Security and Net Zero (the “SoS”)) and the Oil and Gas Authority (“OGA”). 

Section 3 of the Petroleum Act 1998 permits the OGA to grant licences to search and bore for petroleum. A licence holder must also obtain the OGA’s consent before it commences a project, which cannot be given without the SoS’s agreement, usually following an environmental impact assessment.

The SoS’s policy for further licensing for offshore oil and gas exploration and production was contained in the Offshore Energy Plan (the “Plan”). Under the Environmental Assessment of Plans and Programmes Regulations 2004 (the “2004 Regulations”), the SoS was required to carry out a strategic environmental assessment (“SEA”) of the Plan. This assessment was referred to as OESEA4 and was announced in March 2021, along with the development of a Climate Compatibility Checkpoint (the “Checkpoint”) to ensure that the compatibility of any future licensing rounds would be assessed against the UK’s climate objectives.

A key issue for the Court was whether the SoS acted unlawfully by not considering, as part of OESEA4 or the Checkpoint, downstream emissions of greenhouse gases from the end use by consumers of oil and gas as a fuel (also known as “scope 3” emissions). In respect of the Checkpoint, a consultation on its design considered whether a further test should be added to assess whether scope 3 emissions from the combustion of UK oil would be expected to fall in line with UK climate objectives if further licensing rounds were approved (also known as test 5). However, the consultation document identified several issues with adding test 5, including that: (i) methodologies for tracking scope 3 emissions were “in their infancy” and that there was no “universally agreed approach” to measuring them; and (ii) there was a risk of double counting because scope 3 emissions from exported oil and gas produced in the UK would be covered by the destination country’s emissions accounting and targets. 

Following the consultation, the Department’s Oil and Gas Exploration and Production unit informed the SoS that it was inclined to advise against the inclusion of test 5. On 7 September 2022, the SoS adopted the Plan as assessed in OESEA4, approved the final design of the Checkpoint (omitting test 5) on the following day, and agreed that the Checkpoint should be applied ahead of the next licensing round. The SoS also decided that a further licensing round would be compatible with the UK’s climate objectives. 

Decision

The challenges brought by Greenpeace and Uplift failed on all seven grounds raised: 

• Issue 1 – The SoS’s decision not to assess scope 3 emissions from further oil and gas licensing rounds in OESEA4 was irrational and/or in breach of the 2004 Regulations: The Court relied on the case of R (Finch) v Surrey County Council [2022] PTSR 958 in which it was found that, when considering the necessary degree of connection between a development and its putative effects, there is no general legal principle that the environmental effects of the consumption of an end product resulting from a development must be treated as an indirect effect of that development: [100]. In this case, whilst the Department acknowledged that the processes and products associated with end use would result in greenhouse gas emissions, it was not considered that they were sufficiently closely causally connected to implementation of the Plan to be taken into account in OESEA4 and therefore did not constitute a likely significant effect of implementing the Plan itself: [93]. On this basis, the Court found that it was lawful for the government to decline to assess scope 3 emissions. However, the appellant in Finch has appealed to the Supreme Court, with judgment pending, which could alter the Court’s approach in future.
• Issue 2 – In breach of the 2004 Regulations, the SoS failed to properly assess “reasonable alternatives” by not properly assessing the option of not proceeding with further licensing rounds: The reasonable alternatives identified by the SoS included Alternative 1a which was “not to undertake any further seaward oil and gas licensing rounds”: [120]. The claimants asserted that the SoS was not entitled to assume under Alternative 1a, as he did, that UK demand would not reduce more quickly than had been projected for the Plan; therefore, the SoS was not entitled to assume that a greater proportion of oil and gas consumed in the UK would need to be imported. That was an important assumption underlying the ultimate decision. However, Holgate J found that this was a “matter of judgment” for the SoS and that the SoS was entitled to assume that some of the additional hydrocarbons produced in accordance with the Plan would be consumed in the UK, thereby reducing the need for imports, whereas Alternative 1a would involve an increase in imports: [131]. Holgate J also found that it was not irrational for the SoS to conclude that oil and gas imports under Alternative 1a would have a higher emissions intensity than UK produced hydrocarbons: [135].
• Issue 3 – The SoS unlawfully failed to publish any reasons for deciding that a further licensing round would be compatible with the Checkpoint and the UK’s climate objectives: Holgate J reminded the claimants that there is no general common law duty to give reasons for administrative decisions and that “whether such an obligation may arise is highly sensitive to the specific context”: [154]. In this case, the Court found that there was nothing to support the imposition on the SoS of a common law obligation to give reasons on the application of the Checkpoint, particularly in circumstances where the SoS was under no obligation to produce or apply the Checkpoint given that it was only indicative and non-statutory in nature: [157].
• Issue 4 – The SoS’s decision to approve the design of the Checkpoint was unlawful because it excluded test 5 for reasons which were unlawful and irrational: The Court again found that it was a matter of judgment for the SoS as to whether there was an appropriate test for taking scope 3 emissions into account and concluded that there was no basis upon which to find that the reasons given by the SoS for not including test 5 in the Checkpoint were irrational or tainted by any error of law: [149]. These reasons included the limited control that UK oil and gas producers have over scope 3 emissions and concerns previously raised at the consultation stage (and discussed above) regarding the risk of double counting: [139], [144]. This meant that the claimants also failed on Issue 5, which was an irrationality challenge to the SoS’s reliance on the Checkpoint.
• Issues 6 and 7 – The OGA’s decision to carry out a further licensing round was unlawful because OESEA4 was unlawful, and the decision was irrational because it relied upon the SoS’s adoption of the Checkpoint without test 5: As a result of the claimants being unsuccessful on the above grounds, the challenges under Issues 6 and 7 also failed. 

Discussion

This is yet another case where judicial review claims against government environmental decisions have proven to be unsuccessful (see also, for example, our analysis of the High Court’s recent decisions in similar cases here (concerning a gas storage project) and here (concerning Bristol Airport)). UK courts remain willing to entertain these types of claims: permission was granted and the Court appeared to have no concern about standing (unlike in some other cases). However, they continue to show deference to government on how to tackle climate change and declining to second guess their policy decisions. A central theme of the decision, which mirrors other recent cases, is that environmental policy and decision-making will usually be matters of judgment for the SoS, who is answerable to Parliament, rather than matters of law. In particular, Holgate J noted that the very nature of judicial review means that the Court is only concerned with determining questions of law and is not responsible for making political or socio-economic choices: [21]. 

The case also draws out the interplay between statutory and non-statutory considerations, particularly in respect of the Checkpoint. Rather than being a statutory plan or policy, the Checkpoint was instead an informative, non-binding document designed to assist the SoS when deciding whether to support a further licensing round: [142]. For this reason, the Checkpoint did not override the OGA’s primary statutory function of maximising the economic recovery of UK oil and gas: [35]. Parties should therefore consider how a decision-maker’s priorities might be affected by the nature of the documents on which they rely. 

Looking ahead, with the Supreme Court’s judgment in the case of Finch awaited and assessment of scope 3 emissions likely to develop further, this judgment, while highlighting the challenges for environmental NGOs, is unlikely to be their last.