Warm wind-ustry welcome for new ‘oil and gas compensation’ for renewable developers


Michael Fallon MP, Minister of State for Energy
Michael Fallon MP, Minister of State for Energy

UK Energy Minister Michael Fallon has published a detailed agreement on how to provide compensation to renewable energy developers if oil or gas reserves are discovered in the seabed where their proposed project is due to be built.

The final guidance regarding the controversial ‘Oil and Gas Clause’ in Crown Estate leases now provides f or back-stop procedures for independent valuation where necessary. Fallon said that this should give developers the reassurance that a lease or agreement for lease ‘won’t be taken away without appropriate compensation’.

Originally, leases (or agreements to lease) could be unilaterally withdrawn – without compensation – by the Crown Estate under what became  known as the ‘Oil and Gas Clause’. Three  years ago the Government promised that a comprehensive system would be devised to ensure developers ‘weren’t left out of pocket’.

A detailed framework guaranteeing full compensation and an independent arbitration and valuation process – has now been issued by the Department of Energy and Climate Change following talks between the Government, the Crown Estate and trade associations representing the oil, gas and renewables industries.

A spokeswoman for Renewables UK said; “The Minister’s announcement of the details of this vital safeguard will reassure offshore wind developers that they are no longer being asked to take an unreasonable financial risk.

“The Oil and Gas Clause was a major barrier to obtaining finance in our sector. Now, after working on the issue for nearly 10 years, we are pleased to see comprehensive guidance in place which will guarantee full compensation if the need to terminate a lease should arise.

“This will increase the certainty that offshore wind investors need to deliver the industry’s healthy pipeline of projects for the decades ahead. That means the cost of offshore wind can fall even faster, so that it provides even better value for money”.

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