NSTA considers early identification of companies under investigation

Introduction

The North Sea Transition Authority (“NSTA”) has, to date, taken a relatively cautious approach to publishing information regarding regulatory compliance by individual companies – for example, by not identifying companies subject to sanctions investigations prior to conclusion of that process.  However, it has also indicated on several occasions that it can see the benefit in providing detailed and specific real life examples to help the industry understand precisely what it expects by way of regulatory compliance.  The NSTA is now considering a different approach, in particular whether it should identify at an early stage companies subject to investigation or that the NSTA considers are not meeting decommissioning obligations in a timely manner.

Before adopting a new approach, the NSTA has opened a public consultation to gather views on several key proposals relating to the timing and content of potential publications relating to (i) the enforcement function of the NSTA; and (ii) information around decommissioning obligations of entities regulated by the NSTA. Among the NSTA’s stated aims are enhancing transparency and accountability within the UK oil and gas, offshore hydrogen, and carbon storage industries by making more company-specific information publicly available.  The consultation opened on 29 August and will run until 31 October 2024.

Outline: Key Proposals

Enforcement Function Data

The NSTA’s enforcement function is a cornerstone of its regulatory framework. Currently, the public disputes and sanctions case register only identifies where a case has been opened, the part of the UKCS in which relevant assets are situated and the general focus of the investigation (such as a suspected breach of a consent, or commercial behaviours).  It does not identify the company subject to the investigation or detail the progress or subject matter of such an investigation until a Sanction Notice is ultimately issued (there are a very few exceptions where decisions to close an investigation without sanction have been taken, and a notice explaining that decision has been made public).

The consultation proposes that more detailed information about enforcement actions be published at the outset of an investigation, including the name of the company under investigation and details of the suspected breach.  That would then be updated in due course with details of any penalties imposed and corrective measures taken by companies. The NSTA considers that it is in the public interest to increase transparency around this as a means of enhancing accountability and ensuring that companies adhere to regulatory requirements.

Decommissioning Information

The second area of focus is the publication of data related to the decommissioning of oil and gas infrastructure. The NSTA aims to ensure that decommissioning is carried out cost effectively in accordance with regulatory requirements and in a manner consistent with the OGA Strategy in order to help the government to meet their net zero targets.  NSTA has increased its focus recently on companies where the NSTA considers that decommissioning work is not being undertaken sufficiently quickly.

The consultation states that the NSTA considers greater transparency regarding a company’s decommissioning obligations will assist in regulatory compliance by encouraging any named companies to meet their obligations. The NSTA also consider that transparency in respect of upcoming decommissioning projects would also be of benefit to the supply chain in the delivery of decommissioning programmes.  However, it is not clear whether in practice this would provide any additional insight beyond  that already afforded by the NSTA’s Supply Chain Action Plan process (which already includes decommissioning projects).

The Detail: Information to be Published

The consultation sets out the following company-specific information that is proposed to be published by the NSTA:

As regards sanctions investigations –

• Decisions to open investigations into breaches of petroleum-related requirements. Each of these would include the name of the operator, details of the regulatory requirement / petroleum related requirement the investigation relates to and a summary of the suspected breach. Information on this would be published on the NSTA’s website following the decision to open the investigation.
• Decisions to issue a Sanction Warning Notice. Each of these would include: the name of the operator/licensee, details of the NSTA’s case in relation to the alleged breach of a petroleum-related requirements, and would be published on the NSTA’s website following the decision by the NSTA board to issue the notice.

As regards decommissioning obligations –

• Well Operations Notification System (“WONS”) metrics in respect of (i) all inactive wells that require decommissioning; and (ii) wells with expired well decommissioning deadlines or no NSTA approved decommissioning deadline. Each of these would include: the name of the operator, the location and number of the wells and the current well decommissioning deadline date of each well. This would be published on the NSTA’s website and updated at least annually.
• Table specifying the progress relevant regulated persons have made in respect of their decommissioning obligations. This would include: the name of the operator, the numbers of wells that require decommissioning, are beyond well decommissioning deadline dates or do not align with NSTA guidance relating to well decommissioning timing. Historical data of fulfilment of decommissioning obligations by the operator would also be included. This would be published on the NSTA’s website and updated at least annually.

The consultation indicates that the NSTA also expects to publish other information which is not covered in the above where it considers that it will assist with delivering its regulatory functions and such publication is in the public interest. The NSTA proposes that in these cases, it will apply the public interest factors set out below as well as any other public interest factors it considers relevant to such decision whether to publish.

Balancing Act: Disclosure considerations

The NSTA asserts that one of the key reasons for publishing data is for the benefit of the public interest. The consultation sets out various factors the NSTA has considered in proposing publishing the information set out above; these are summarised in the table below.

The NSTA also proposes these factors are taken into account in deciding (i) whether to make an exception to (if implemented) its proposed policy to publish information about a certain matter and (ii) what information is included as part of that publication, including whether to publish some or all of the information the NSTA has proposed it would normally expect to publish. The NSTA has noted that it would normally expect to publish the information set out in the consultation unless it considers it appropriate to make an exception. It is not entirely clear however whether the NSTA is proposing that it would consider these factors on a case by case basis or whether these would apply more generally.

Comment

By focusing on enforcement and decommissioning data, the NSTA’s asserted aim is of transparency: to ensure the energy sector is provided with the information it needs to make informed decisions and to hold companies accountable. Whilst these may be considered  potential benefits, the NSTA must also address challenges related to data accuracy, confidentiality, and stakeholder engagement. The NSTA itself recognises that factors against publication include potential commercial and reputational risk if information is published too early which might be seen as creating a “name and shame” culture.  Although publication of more detailed information could potentially aid transparency across the industry, it may have a negative on stakeholder engagement.  There may also be concerns about what further information NSTA may seek to publish under any new regime in addition to enforcement and decommissioning information.  A fine balancing act will therefore be required, and it will be interesting to see respondents’ views on the factors that the consultation itself recognises need to be considered.

The industry is invited to submit their views and comments on the proposals by 31 October 2024.   The NSTA intends to implement any new approach in Spring 2025.

The full consultation can be found here Consultation on the publication of company specific information (nstauthority.co.uk).

Article prepared with assistance from Soha Ahmed, Trainee Solicitor in our Energy Disputes team and Stewart Watt, Associate in our Energy & Infrastructure team.