Public Law

The Scottish Government on Tuesday issued a paper, setting out its proposals for the Scottish oil and gas industry in the event of a Yes vote in next year’s independence referendum.

The paper, and the accompanying speeches and interviews, covered a number of different issues.

The BBC’s report led with the proposal that an expert commission would be appointed to consider the best way to maximise returns from the North Sea, while its analysis commented on the lack of surprises in the proposals (noting among other things the Government’s apparent enthusiasm for retaining the UK’s world-leading offshore health and safety regime).

Bloomberg Businessweek emphasised the statements that there are no plans to raise North Sea tax rates, and the industry would be consulted on any future changes.

The Herald, meanwhile, focused on what may be the key issue for the industry, which is the Scottish Government’s commitment to replicating the UK’s existing decommissioning relief arrangements in the event of independence, regardless of whether the rest of the UK agreed to bear part of that cost. The status of those arrangements in the event of independence has been one of the key questions the industry has been asking, and something I mentioned in a piece that appeared in Oil Voice and Platform Oil & Gas earlier in the year.

While the current SNP-majority Scottish Government can of course not bind any future independent Scottish Governments (the political makeup of which would fluctuate over time) to honour those assurances, that is no less true of the UK Government in relation to the existing decommissioning commitments on which the industry relies.

As with most developments in the independence debate there was no absence of controversy, and a furore over the per-head value of North Sea oil was the Guardian’s focus. On the subject of numbers, the Scottish Government’s figures assume a “geographical” division of the North Sea, meaning the median line I referred to in my previous articles.

The Scottish Government’s report comments at paragraph 3.17 that

Other alternative methods of demarcation, such as the Civil Jurisdiction Order 1987, could result in a more favourable allocation for Scotland

but is silent on the possibility of a less favourable division, which would just as easily be on the cards given that any line would have to be decided in negotiations between the Scottish and UK Governments.

Paragraph 3.16 of the report suggests that the median line would likely be used because it has been used to determine other North Sea jurisdictions, but that is not the case for the German zone (as the illustration accompanying my Platform article shows). The borders of that zone were only decided after years of negotiation and eventually arbitration between the Germans, the Dutch and the Danes. This history illustrates that the potential division of the North Sea is very much not a settled issue, and will not be agreed prior to next year’s referendum given the UK Government’s ‘no pre-negotiation‘ stance.

In (sort of) related news, the BBC has obtained an apparently leaked document on the Scottish Government’s proposed energy policy. It is unlikely to come as a surprise to anyone familiar with existing policies that the focus of that is very much on renewable energy. The paper is said to be intended to contribute to the work of the expert commission set up by the Scottish Government to review energy policy in advance of the independence White Paper expected in the autumn. We can therefore expect to hear more about this issue as the debate progresses.

Charles Livingstone
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