Fossil fuel projects face higher bar in UK as legal challenges mount

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In an unforgiving stretch of the North Sea roughly 250km east of Aberdeen, Shell’s engineers have been drilling since last September to develop the vast Jackdaw gasfield, aiming to produce its first gas in 2026.

Yet in less than two months, lawyers for the FTSE 100 company will head to a courtroom in Edinburgh to try to defend the project from climate campaigners who want it shut down, after a judge ruled last week the case could proceed.

The legal challenge brought by Greenpeace will be the first involving an offshore oil and gas project to be heard in the wake of a landmark Supreme Court ruling in June that has emboldened activists and tightened the squeeze on fossil fuel projects.

The so-called Finch ruling, named after the activist and writer Sarah Finch who helped bring the case, means that planning officials considering allowing big developers to drill for fossil fuels need to factor in the emissions spewed out when the product is used by consumers.

It raises further questions for the UK’s oil and gas industry in the North Sea as the Labour government tries to ultimately wind down fossil fuels in favour of renewable energy, and position Britain as a global leader in tackling climate change.

There is also a push for planning officials to take into greater account climate goals when deciding whether to approve other projects beyond fossil fuels.

“One by one, spurious lines of defence are being knocked back,” said Niall Toru, senior lawyer at Friends of the Earth. “Developers have to own the climate impacts of their projects.”

The Finch ruling, a three-to-two majority judgment led by Lord Justice George Leggatt, quashed planning permission for onshore oil drilling in Horse Hill, Surrey. Two further projects have already been stymied in its wake.

Permission for onshore oil drilling in Biscathorpe, Lincolnshire, was knocked back by High Court judges in July, while in September they also quashed permission for a mine in Whitehaven, north-west England, to supply coal to steel mills.

The challenge to be heard in November against Shell’s Jackdaw gasfield will be the next test of the Finch ruling’s implications, as will a separate challenge brought by campaigners Greenpeace and Uplift to Equinor’s giant Rosebank oilfield in the North Sea. If the companies lose, they would need to decide whether to reapply for development consent or walk away. The government is not defending the cases.

Meanwhile, there are 14 UK oil and gas projects with drilling licences from the government that are at various stages of seeking development consent from the oil and gas regulator, and are now affected by the Finch ruling.

The judgment specifically covers fossil fuel projects, given the clear line between production and consumer emissions. But it is “not impossible” to imagine the ruling being cited in other carbon-intensive projects, noted Steven Wilson, senior associate at Vinson and Elkins. Airport expansions are an obvious target for climate campaigners.

“I think it will be fascinating to see how this will be applied in other types of projects,” said Matthew McFeeley, partner at Richard Buxton Solicitors, which represented South Lakes Action on Climate Change in its challenge to the Whitehaven coal mine. “It’s the million-dollar question.”

Approvals for oil and gas projects are not out of the question, however. The Finch ruling does not prevent authorities from approving projects, as long as they have considered their impact. The law does not specify what level of emissions is acceptable.

“That’s a hard question that will need to be taken case by case,” said Robert Meade, partner at Bracewell. “These [legal rulings] are about the procedure.”

At Edinburgh’s Court of Session in November, Shell’s lawyers will argue the energy security benefits of its Jackdaw project. It was approved at the height of the energy crisis in 2022, when gas prices soared in the wake of Russia’s full-scale invasion of Ukraine.

To help clarify what officials should do, the UK government said last month it would develop new environmental guidance for oil and gas projects. It is expected to set tough standards, given its approach towards the sector so far.

Planning policy beyond oil and gas projects is also evolving. The government is continuing to explore potential changes proposed by its Conservative predecessor to the national planning policy framework, which covers planning in England. Ideas include a “carbon impact assessment”, although a consultation raised doubts over the proposal.

In the meantime, the legal cases are likely to further undermine oil and gas drillers’ confidence in the UK following Labour’s decision to increase taxes on the sector and reduce investment allowances. It also plans to stop issuing licences for new exploration.

“You’ll get to the stage where investors would be doing a disservice to their shareholders if they were to allocate capital here,” warned one industry figure. Oil and gas still supplies 75 per cent of the UK’s total energy demand, but domestic production has been dwindling as the basin ages.

Climate campaigners, on the other hand, sense the growing opportunity for legal victories. “We are always looking [at potential legal cases],” adds Toru, at Friends of the Earth. “I wouldn’t rule anything out.”