OIL AND GAS EXPLORATION AND THE NATURAL HERITAGE

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1 Guidance OIL AND GAS EXPLORATION AND THE NATURAL HERITAGE Policy Guidance Note 00/02 This paper describes licensing procedures for oil and gas exploration and explains the roles of SNH and the JNCC in considering applications. It outlines SNH s key objectives in relation to exploration and lists a number of strategic priorities to be addressed within the next three to five years, relating to licensing, seismic surveys, oil spills and environmental assessment. Contents Para Background 1 Licensing procedures 6 Seaward licences 7 Landward licences 13 SNH s role 14 Over-arching policy 21 Strategic priorities 23 Licensing 23 Seismic surveys 24 Oil spills 25 Environmental assessment 27 Background 1. Oil and gas exploration is the initial stage in the process of hydrocarbon exploitation in the waters around the UK, which may result in oil/gas production and, eventually, in the decommissioning of production installations and other infrastructure. (Production and decommissioning will be addressed in a further PGN.) Much of the North Sea has already been licensed, although with new technologies smaller previously uneconomic prospects are now being considered. Technological advances mean that the exploitation of deeper, more exposed areas to the west of Shetland - the Frontier Blocks - is also feasible and these are now the main areas of interest within the United Kingdom Continental Shelf (UKCS).

2 2. Oil and gas exploration and production affect SNH s interest mainly in relation to seabirds and wider marine biodiversity. Activities associated with exploration, if carried out inappropriately, could cause injury to seabirds and serious disturbance to cetaceans. Although the risks to the flora and fauna of the shore and the sea bed are small compared with those involved in production and transportation, there is a need to protect areas designated for nature conservation. Exploration and production should also comply with a general approach to sustainable development in the marine environment. 3. The prospect of exploration in the Atlantic Frontier Blocks in particular has generated significant resistance from some environmental bodies. This opposition to oil exploration is linked to the growing campaign against the use of fossil fuels and the resultant emission of greenhouse gases. The issues raised by some environmental organisations, although based partly on concerns about the direct impact of exploration and production, have to be viewed with this general opposition to fossil fuels in mind. 4. The process of bringing a find on-stream is a long term one and exploration (albeit at a reduced rate in recent years) has continued with a view to future developments, especially in blocks to the west of Scotland around and beyond the continental shelf break. 5. A recent legal case has clarified the geographical reach of the Habitats Directive to include both territorial waters and all areas over which the UK exercises sovereign rights viz the continental shelf and superjacent waters. This judgement has now been accepted by the UK Government although the full implications of this judgement in the context of the Birds and Habitats Directives have not been determined yet by Government and hence no action is being taken by Scottish Natural Heritage at this point in time. There may be a requirement for marine SACs (and possibly marine SPAs) to be identified which could have important implications for oil industry operations in the future around Scotland. Licensing procedures 6. The Petroleum (Production) Act 1934 gives the UK government the right to grant licences to explore for (and exploit) hydrocarbon resources in territorial waters. These rights are extended to the UK Continental Shelf (UKCS) by the Continental Shelf Act Seaward licences 7. There are two types of seaward petroleum licences: Exploration licences Production licences 8. Exploration licences are non-exclusive (i.e. can be granted to more than one applicant) and allow surveys to be carried out on those parts of the UKCS not already covered by a production licence. An exploration licence may be applied for at any time, is valid for 3 years and may be renewed for a further 3 years as appropriate. Exploration licences give the right to carry out seismic surveys and to drill wells not exceeding 350m deep.

3 9. Production licences are exclusive and issued for specific areas. The UKCS is divided up into quadrants of 1 of latitude by 1 of longitude, each quadrant is itself divided into 30 blocks, each of 10 x 12, resulting in an average block size of 250 km². Production licences are normally issued for individual blocks, parts of blocks or sometimes small groups of blocks (tranches). A production licence allows the holder to search, and bore for and get petroleum. It is important to note that a Production Licence for a specific block entitles the licensee to carry out targeted exploration drilling, further appraisal and subsequent production activities. The Government invites interested companies to apply for Production Licences through a series of licensing rounds. The procedures are undertaken on behalf of Government by the Department of Trade and Industry (DTI). 10. Production licences have attached duration and relinquishment terms (specific to an individual round). After the initial period of the licence during which a number of exploratory wells must be drilled, the licensee must submit a further work programme for the second term in order to carry out a further series of appraisal wells or relinquish the licence. After the second term the licence will be mandatorily relinquished although an area can be retained for a further term to undertake development leading to and including production. 11. Seaward licensing rounds are held at intervals, usually no more than one per year. However, at the discretion of government, applications for production licences outside the formal licence rounds may be invited. 12. The 17th Round was announced in 1997 and resulted in 25 exploration licences for the Frontier blocks to the west of Scotland. The 18th Round was announced in 1998 with 78 licences being issued for areas in the North Sea. A notional forward licensing programme has been agreed and the 19th Round is expected to be offered in early Landward licences 13. Landward licences (the Petroleum Exploration and Development Licence (PEDL)) are issued by a single stage licensing round process and cover all stages of the production cycle, namely exploration, appraisal and production. A block in this instance is a 10km X 10km square of the National Grid and it includes all territory above low water mark and within bay closing lines as defined in The Petroleum (Productions),(Landward Areas) Regulations As such many areas of coastal waters (including the whole of the Minch) are covered by the Landward licensing procedures. Once a licence is awarded, the licensee must obtain the appropriate planning permission, access rights, discharge consents, etc. SNH s role 14. Consultation on blocks being considered for licensing both for exploration and production is carried out by DTI. Prior to a Round being announced, the DTI consults with a range of departments and agencies including, DETR, EA, SEPA, MOD, SERAD, MAFF etc. and the JNCC on behalf of the nature conservation agencies. 15. Most of the current exploration is carried out in waters between the 12 nautical mile limit to territorial waters and the edge of the UKCS and is therefore mainly

4 within the advisory remit of the Joint Nature Conservation Committee. In any event, on receipt of a consultation, the JNCC copies the relevant papers to SNH and invites an input to the response to DTI. The response on specific blocks highlights any nature conservation issues that need to be taken into account, including important concentrations of seabirds, cetaceans and seabed communities and lists any indicative conditions we would wish to see attached to a block that is ultimately offered for licensing. These conditions might relate to timing of operations and the nature of activities such as control of discharges from rigs and the number of exploration wells that may be drilled. The implications for any adjacent European sites are particularly taken into account. 16. On the basis of the advice received from the JNCC and any other consultees, some blocks may be excluded from the final list that is offered to companies, others are offered with specific conditions attached. Any licence application submitted by a company must include the Company Environmental policy, their Environmental Management Systems and an Environmental Assessment for the block/s applied for. In addition it must demonstrate how the proposed work will take any specific environmental considerations into account. 17. When a licence is offered by the DTI it has conditions attached which may be the original indicative conditions or amended conditions based on the proposals put forward by the licensee. 18. Within the 12-mile territorial limit advice on any consequences for the natural heritage is SNH s responsibility and the DTI consults SNH in the first instance. SNH refers to the JNCC for advice on seabirds and cetaceans, but in relation to exploration in inshore waters, the impacts on coastal habitats, amenity and the landscape are more significant considerations, and Area staff will be involved in commenting on these aspects. 19. SNH is consulted on landward licence rounds in the same way as for seaward licences within the 12 mile territorial limits. 20. SNH recognises that the exploration for offshore oil and gas reserves is critical to both the national economy and local communities in parts of Scotland. Over-arching policy 21. In all cases exploration activities should be carried out with safeguards in place designed to prevent or minimise any impacts on the natural heritage. Furthermore such activities should not take place in areas designated for their natural heritage importance where they are likely to have a deleterious effect on those features and attributes for which the area is designated. 22. In support of this over-arching policy: In considering any proposed exploration, all the available information on the possible environmental consequences should be taken into account; Appropriate conditions for the protection of the natural heritage should be attached to licences granted for exploration;

5 In particular circumstances of high environmental sensitivity, the drilling of exploration wells and associated activities should be subject to a formal environmental impact assessment under the Offshore Petroleum Production and Pipelines (Assessment of Environmental Effects) Regulations Strategic priorities 23. The following issues arise from this over-arching policy objectives are those which SNH considers it is most important to address within the next three to five years. SNH is committed to working closely with other interests, and in addressing these issues it will seek to develop partnerships with the oil and gas industry. Licensing SNH will advise on the granting of licences by responding to consultations through the JNCC. Our comments will mainly relate to impacts on wildlife and biodiversity, but in inshore waters and for landward licences, there may be additional concerns about the impact of associated infrastructure on the landscape and of the implications for public access and recreation. SNH will work closely with the JNCC to establish relevant criteria for the granting of licences and associated conditions relating to protection of sea birds, cetaceans and other marine life. Where necessary, conditions should be applied to exploration licences in order to: - limit the control of discharges from rigs - limit the number of exploration wells - impose special conditions for the protection of designated natural heritage sites - limit the impact of underwater noise on marine wildlife In considering landward blocks the full range of natural heritage interests should be considered including landscape and recreation. Where designated sites are included in, or close to a block, SNH should advise on the effects on the site, taking into account direct disturbance, and the indirect effects of run-off, etc. Where oil exploration on an SSSI constitutes a Potentially Damaging Operation, the owner is required by law to notify SNH of proposals. Seismic surveys 24. This is the initial phase in all exploration programmes. It involves a vessel steaming in a grid across the block with an array of airguns and hydrophone streamers (up to 12) deployed behind it. The airguns emit low frequency sound and the echoes received by the hydrophones are used to determine the stratigraphy beneath the seabed to enable potential oil /gas bearing rocks to be identified. These seismic activities can especially disturb cetaceans and other marine mammals, although they can also affect fish and other animals in the immediate vicinity. In most cases the disturbance is temporary and short-lived

6 but where an area is known to be important for cetaceans, conditions relating to when and how seismic surveys are carried out are attached to the licence. Disturbance to cetaceans from seismic surveys should be reduced to a minimum by avoiding areas which are used by the species in question at certain times of the year. The JNCC guidelines on the protection of cetaceans should be followed. Oil spills 25. During the exploration phase the risk of oil spills is small. Any spillage that does occur is also likely to be quite small (i.e. gallons rather than barrels ( 35 gals.) or tonnes ( gals.)) and its impact is likely to be largely contained on the surface of the water or within the top 5-10 metres. Nevertheless, there are risks, and it is important that the likely impact of a spill is taken fully into account particularly in areas known to be important for seabirds. These areas have been thoroughly surveyed and the information is held by the JNCC. In all cases the impact of exploration activities on the environment should be minimised and wherever possible, operators should adopt a zero discharge policy. Licence conditions should be designed to minimise the risk of any accidental oil spillages affecting important seasonal seabird concentrations (by constraints applying to particular areas and to timing of operations). 26. When considering the impact of an oil spill it is important to take account of the proximity of any activities to land and hence the likelihood of any slick beaching. Only under exceptional circumstances is any oil spill resulting from exploration activity likely to cause long term, wide spread damage to marine life of the seabed. Environmental assessment 27. In addition to the initial consultation by DTI on the licence blocks, there is an opportunity to request an EA for all activities relating to the drilling of exploration wells and any subsequent activities. Through the PON 15 process (Petroleum Operations Notice 15) the Regulator is authorised to decide whether a proposed activity will require an Environmental Statement. The advice provided by JNCC/SNH on this matter takes into account the issues of timing and location, as considered in relation to licensing. A full EA should be undertaken for oil and gas activities either on or adjacent to sites designated under the EU Habitats and Birds Directives, or where they may have a significant effect on species protected by UK or European legislation or other International Agreements or Conventions.

7 First issued: February 2000 Contacts: Katie Gillham Policy and Advice Directorate Tel:

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