UK made legal error in granting oil and gas licences, companies will admit

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Three oil and gas companies are set to concede that the UK government made a legal error in granting them licences for two major new offshore developments, at the start of a key case for future fossil fuel projects.

However, the three — the oil major Shell, independent producer Ithaca and Norway’s Equinor — will all say they should be allowed to press on with the two projects, Rosebank in the north Atlantic and Jackdaw in the North Sea.

The arguments are set out in documents seen by the Financial Times ahead of a hearing of judicial reviews brought by Greenpeace and Uplift, two environmental charities. The two have both challenged the government’s granting of permission for the projects because the environmental impact assessment considered only the emissions created in extracting the fuels and ignored the effects of burning them.

Both judicial reviews, which could lead to the projects’ cancellation, are being considered in a single hearing expected to last four days this week, starting on Tuesday at the Court of Session, Scotland’s highest civil court, in Edinburgh. The UK government in August announced it would not contest the review, leaving the oil companies to fight the case.

Rosebank, 80 miles north-west of the Shetlands, is being developed by Equinor and Ithaca, which have promised to invest $3.8bn in the first phase of the huge project. Jackdaw is being developed by Shell and will produce natural gas condensate — a very light liquid hydrocarbon.

The challenges come after the UK Supreme Court, in a case brought by environmental activist Sarah Finch, ruled that environmental impact assessments for oil and gas production facilities had to consider the effects of burning the products.

The cases will be closely watched for signs of how courts apply the Finch decision — which involved an onshore oil development — to offshore oil and gas.

Shell is expected to concede that the approval of Jackdaw, in 2022, was “unlawful”. Equinor is likely to admit it was an “error in law” for the government to ignore the end-use emissions when it approved Rosebank in 2023. Ithaca, meanwhile, is expected to accept it cannot defend the original approval process.

However, the three companies are likely to argue the assessments were undertaken in good faith under the law as understood at the time — before the Finch ruling. They will argue for the court to take only minimal or no action to remedy the error, pointing to the number of contracts already signed and the significant economic damage an unwinding would cause.

Shell on Monday said the Jackdaw project had been developed “in line with all relevant consents and permits”.

“We accept the Supreme Court’s ruling in the Finch case, but our position is that Jackdaw is a vital project for UK energy security and the project is already well advanced,” the company said.

Ithaca declined to comment.

Equinor declined to comment on the court case but said it “welcomed regulatory approvals for the Rosebank development in 2023 and will continue to work closely with all relevant parties to progress the project”.

The court could make decisions short of halting the developments, including ordering the government to make a new decision on the correct basis or reducing the projects’ scope.

The court is expected to take at least several weeks to reach its decision.

Philip Evans, a senior campaigner at Greenpeace UK, said the oil companies were trying to “con” the public, the courts and the government and called on them to stop the “reckless and unlawful” projects.