Oil and Gas Authority Challenge

This was a judicial review against the Oil and Gas Authority (“OGA”), alleging it had failed to properly consider whether allowing the sale of an oil & gas/fracking company would risk leaving UK taxpayers with liabilities for clean-up costs, and/or had misinterpreted its powers to robustly review the sale.

OGA, set up under the Energy Act 2016, was established to regulate, influence and promote the UK’s oil and gas industry. Its functions include administering licenses for the exploration for, and extraction of, petroleum. The case related to a licence held by Third Energy UK Gas Ltd, which was sold along with the licence in 2019. The purchaser was York Energy UK Ltd, a company with share capital of only £10 and offshore owners, which had been set up to facilitate the sale, but with limited financial information publicly available. Third Energy had been sold to the newly-incorporated York Energy by a subsidiary of Barclays, the banking group, and so Mr Thornton was concerned that the sale allowed Barclays to avoid the costs of clean-up and decommissioning of all of Third Energy’s oil and gas wells and infrastructure, potentially leaving taxpayers on the hook if York Energy failed. The sale was subject to review by the OGA which authorised the acquisition despite the regulator finding foreseeable risk that Third Energy UK Gas would be unable to pay for decommissioning activity if it was transferred to the purchaser, given York Energy’s relatively limited financial information. Against this backdrop, the claimant brought judicial review proceedings against the OGA’s decision to allow the sale on the basis that it had misinterpreted clauses within the licence relating to its reassignment. Furthermore, the claimant contended that the OGA had not adequately undertaken a financial capability assessment and failed to take into account the serious risk that a change of control would lead to Third Energy UK Gas being unable to pay for decommissioning activity. The case was heard by Mr Justice Knowles, who dismissed all grounds of claim. Mr Justice Knowles found that the OGA’s interpretation of the license provisions was correct and that the financial capability assessment undertaken by the OGA had been adequate.

Marc Willers QC of Garden Court Chambers and Estelle Dehon of Cornerstone Barristers were instructed.