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Government revokes Oil in Produced Water Trading Scheme

United Kingdom
14/07/2008
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Following issues with the analytical method on which the national allocation plan was based, the Government recently decided to terminate the UK Oil in Produced Water Trading Scheme. This scheme was originally introduced via The Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005 (OPPC) as one of the tools to help regulate the UKCS offshore oil and gas industry’s discharges of oil in produced water. These changes will impact operators and other stakeholders in the UK’s North Sea oil and gas industry.

The revocation means that operators are no longer required to surrender allowances with respect to discharges of oil in 2007 and can forego all trading activities with respect to discharges of oil in produced water that took place in 2007 and 2008.

However, despite the revocation of the Scheme, the Government intends to continue regulating discharges of oil in produced water via permits issued under the OPPC Regulations and all conditions of existing permits are to remain in force with the exception of those associated with the trading scheme. The Government is also expected to consult operators on revised permit conditions by the end of July 2008 to reflect the revocation of the trading scheme. The Government expects to issue new permits under the OPPC Regulations by 1 January 2009.

The revocation of this trading scheme could be seen as a set back for the viability of trading schemes to achieve environmental objectives. However, even with this revocation, trading schemes continue to be considered one of the most cost-efficient means to achieve environmental objectives as demonstrated by the growing EU Emissions Trading Scheme (EU ETS). The EU ETS, which started in 2005 to help curb CO2 emissions in the EU from various industry sectors, is now currently in its second phase (2008-2012) and is expected to be extended to a third phase starting in 2013, where the scheme may cover more industry sectors (such as aviation) and more greenhouse gases.

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