Offshore renewable energy: decommissioning guidance for Scottish waters

5. Submission, approval and review of decommissioning programmes

5.1 The process leading to the approval of a decommissioning programme is proportionate, transparent and subject to consultation. It should also take account of the need for modification and review, particularly where considerable time is expected to pass between the time of approval of a decommissioning programme and it ultimately being carried out.

5.2 The Scottish Ministers reserve the right to request independent technical advice on the draft decommissioning programme.

5.3 For developments wholly in an area of Scottish waters or in the Scottish REZ, the process in a typical case is expected to be as set out in Annex B.

Stage 1: Preliminary discussions

5.4 The Scottish Ministers would encourage the responsible person to take a design to decommission approach to development and to ensure decommissioning costs are considered from the outset (particularly in relation to funding applications for more novel technologies). In addition, the responsible person should enter into early discussions with the Scottish Ministers, to ensure that they understand their decommissioning obligations and can take account of them from an early stage. An indication of the decommissioning proposals should be included as part of the statutory consenting or licensing process so that the feasibility of removing the infrastructure can be assessed as part of the application process.

5.5 The Scottish Ministers expect that decommissioning programmes should be submitted for approval no later than six months in advance of construction, and that the first drafts should be submitted about 18 months in advance.

5.6 From 1 April 2017 onwards, where consents or licences are granted they shall contain a condition that construction cannot begin until a decommissioning programme has been submitted to and approved by the Scottish Ministers.

5.7 Decommissioning programmes must cover both the OREI and the offshore transmission works. In addition, costs for decommissioning both the renewable energy installation and the offshore transmissions works must be provided. These may be provided separately to assist during the transfer of the offshore transmission assets to the Offshore Transmission Owner ("OFTO"), which must occur within 18 months of the completion of construction.

Stage 2: Issue of a decommissioning notice by the Scottish Ministers

5.8 The Scottish Ministers will issue a Section 105 notice (under the Energy Act) requiring the responsible person to submit a decommissioning programme as soon as at least one of the statutory consents for installation relevant object has been issued. Nevertheless the responsible person is expected to start discussing requirements with the Scottish Ministers as early as possible. The Scottish Ministers may issue a Section 105 notice earlier, particularly where there is a tight timescale for project development.

5.9 The requirement to submit a decommissioning programme through service of a Section 105 notice may be imposed on more than one party. In some instances, the Scottish Ministers may also require that an associated corporate body who has control of the 'main' developer / owner of the site submits a decommissioning programme^[8].

Stage 3: Draft decommissioning programme

5.10 Having discussed the requirements with the Scottish Ministers (see Stage 1), the responsible person should prepare the draft programme, including proposed financial security provisions, using the template at Annex C as a guide. The measures proposed in the decommissioning programme should be in line with the standards set out in Chapter 7, the estimated decommissioning costs should be set out in line with Chapter 8 and the financial security proposed in the programme should be in line with the principles set out in Chapter 9. The programme should be informed an appropriate environmental impact assessment, as set out in Chapter 6 below.

5.11 Where the requirement to submit a decommissioning programme has been imposed on more than one person by the Scottish Ministers a joint programme should be submitted.

Stage 4: Consultation with interested parties

5.12 The process of preparing a decommissioning programme should be open and transparent. The responsible person is expected to ensure that the public is able to participate in the process by making decommissioning programmes publicly available and undertaking consultations with statutory consultees and interested parties In all cases, the responsible person should consult with key representatives of parties who may be affected by the decommissioning proposals. Current practice is for the Section 105 notice to include consultation requirements, as per Section 105(7) of the Energy Act.

5.13 The responsible person must take account of the comments received from the Scottish Ministers, as well as comments received during the responsible person's own consultations, in updating the decommissioning programme. A table should be included in the decommissioning programme setting out the comments that have been received from each consultee (including 'nil returns'). There must be an explanation of how the comments have been reflected in any updated drafting. The responsible person should ensure that each consultee named in the Section 105 notice issued for the project in question provides at least an acknowledgement of the receipt of the consultation document.

Stage 5: Seeking approval of decommissioning programme from the Scottish Ministers

5.14 Once the final draft of the decommissioning programme has been agreed with the Scottish Ministers, the responsible person should formally submit it to:

Mail: Licensing Operations Team
Marine Scotland
375 Victoria Road
ABERDEEN
AB11 9DB

Email: ms.marinerenewables@gov.scot

5.15 Once the responsible person has provided a decommissioning programme in accordance with the Section 105 notice issued under the Energy Act, the Scottish Ministers will consult with relevant Scottish Government Departments, the UK Government ("BEIS") (where appropriate) and the Crown Estate Scotland. The Scottish Ministers will then send the responsible person written comments on the draft decommissioning programme. The draft programme should then be updated in line with the feedback received. (This may be the final version submitted for approval as per Stage 5). Responsible persons should also note that financial agreements are also likely to be required to secure specifics around the timing and method of payment of securities.

5.16 Before granting any guarantees or indemnities, contingent liabilities may require to be notified to the Scottish Parliament's Finance and Constitution Committee or sent to them for scrutiny as outlined in Sections 3.12 and 3.13.

5.17 The Scottish Ministers may then:

a) approve the submitted programme as it stands;

b) approve the programme with modifications and/or subject to conditions (after giving the responsible person an opportunity to make representations on any proposed modifications or conditions);

c) reject the programme;

d) reject the programme and require a new one; or

e) reject the programme and prepare one themselves and recover the expenditure and interest incurred from the responsible person. Recovered costs may include payments made to a third party to draft the decommissioning programme, or any payments made to a specialist contractor to provide a quotation for decommissioning costs.

5.18 Where more than one person has submitted a decommissioning programme, different conditions (for example, in relation to financial security) may be imposed upon each of the different persons.

5.19 If the decommissioning programme is approved, the responsible person should make it publicly available. The confidential annex on costs and securities may be redacted. Any comments that are submitted by interested parties should be considered when the decommissioning programme is next reviewed.

Stage 6: In-operation updates and reviews

5.20 The provisions of the Energy Act require the Scottish Ministers to review approved decommissioning programmes from time to time.

5.21 It is in responsible persons' interests to review their decommissioning programmes at regular intervals, to consider whether the likely costs and methods or environmental impact of decommissioning have changed since the decommissioning programme received approval. The responsible person should, where relevant, modify their programmes to take into account:

• information gathered during the course of construction and operation
• changes in market conditions, international standards, the regulatory regime
• knowledge of environmental impacts, including any sediment shift since construction, or new species entering the area
• new technology
• any relevant changes in nearby infrastructure / navigational routes
• the latest cost estimates and the robustness of the financial security arrangements

5.22 The responsible person may also be formally required by the Scottish Ministers to modify their financial provision for decommissioning if reviews suggest that the financial security proposed or available is insufficient to meet their decommissioning liabilities or the risk of default by the responsible person has changed. Notification or approval of the Finance and Public Administration Committee may be required depending on whether the change is material, in line with the Scottish Public Finance Manual.

5.23 For long term projects (e.g. with asset lives ≥ 15 years) the following review points should be assumed as standard:

• post – construction report to be sent to the Scottish Ministers within one year of completion of construction. This should involve sending the Scottish Ministers any reports / studies / summaries of issues raised during consultation which may impact upon the eventual decommissioning methods and costs
• a comprehensive review 12 - 18 months before the first security provision is due, to identify any changes in assumptions on costs and risks where these might affect the size or timings of financial securities
• from payment of the first security onward the responsible person should review their decommissioning programme annually to make sure the financial security provision, and assessed level of risk, is on track to meet the expected costs of decommissioning. Any revisions to a decommissioning programme resulting from changes in costs, risk, securities or environmental or safety matters must be submitted for review and approval from the Scottish Ministers. In all circumstances written confirmation should be sent to the Scottish Ministers for review each year advising that a review has been undertaken, even if no changes are deemed necessary
• the appropriate person should start discussions with Marine Scotland and NatureScot about the impact assessment that will inform the actual decommissioning three years in advance of when the decommissioning is due to start. A final and comprehensive review of the decommissioning programme should begin at least two years ahead of when decommissioning is due to commence. This will allow for environmental and other studies to inform the responsible person's proposal to be submitted to the Scottish Ministers to modify the decommissioning programme to its final version prior to decommissioning. Within the two-year period, the Scottish Ministers will need to consider and consult on the proposal. It is possible the Scottish Ministers will have to undertake Appropriate Assessments or similar analysis to comply with any environmental legislation in place at the time. Separately, consideration should be given to the timing of any application for a Marine Licence that might be needed to permit the removal of the infrastructure in question. Late submission of such a proposal could result in the Scottish Ministers seeking to modify the approved programme and charging the responsible person for the cost of doing so.

5.24 Review periods for shorter term projects will be considered on a case-by-case basis. However, for all projects exceeding 12 months, the Scottish Ministers would expect a report / summary of issues discovered during construction which might impact on the decommissioning (this should be provided within six months of completion of construction for the Scottish Ministers to review), and a review prior to the actual decommissioning of the installation, to finalise the decommissioning measures envisaged.

5.25 For all projects, Scottish Ministers reserve the right to require reviews if significant unexpected events occur (for example changes to the timings of financial securities might be required in the event of a significant failure in performance of the infrastructure, a change in ownership, or a significant change in the financial position of the company). Following the review, the Scottish Ministers may propose their own modifications.

Changes in ownership

5.26 The responsible person may decide to sell all or part of their asset and seek a transfer of decommissioning liabilities to the new owner. Under the Energy Act, there is no automatic change in liability on transfer of ownership. The Scottish Ministers would need to approve any change and would, for example, take account of any potential increase in the risk of default on decommissioning liabilities that might arise from such a change.

5.27 It is important to note that the original responsible person will remain liable for decommissioning until:

• the Scottish Ministers have approved a variation to the decommissioning programme (or has approved a new decommissioning programme if the old operator did not have an approved version) which places the obligation to provide securities on the new operator(s) of the project in question
• the new operator has put in place the required securities
• written confirmation has been provided by the Scottish Ministers to confirm that the old operator no longer has any obligations under the decommissioning process set out in the Energy Act

5.28 Changes in ownership will be treated on a case-by-case basis. The Scottish Ministers retain the right to keep the original responsible person liable for decommissioning until the required securities have been fully accrued.

5.29 Where a change in ownership has arisen because the responsible person has been voluntarily wound up, the Scottish Ministers will seek in the first instance to make an associated corporate body such as any parent company liable for the decommissioning programme, if they had not previously been made jointly liable.

Deferral of decommissioning or repowering

5.30 The Scottish Ministers will be seeking to ensure that decommissioning of installations, or redundant parts of them, will be carried out as soon as reasonably practicable, and no later than the end of the marine licence or relevant Section 36 consent. The timing of decommissioning may be influenced by a range of factors. In general, though, the Scottish Ministers will not expect decommissioning to be delayed unless a robust case demonstrates definite re-use opportunities or justifiable reasons for deferring.

5.31 The Scottish Ministers require owners to follow the principle that any deferral from an agreed programme should not materially increase risk to the Scottish Government or the tax payer. Additional timescales should be short enough to avoid significantly adding to the risk of corrosion / deterioration of infrastructure that could make removal more onerous. Any deferral from an agreed programme would need to be timeously proposed as a modification to the decommissioning programme and approved by the Scottish Ministers. Amongst the factors to be taken into account in considering the case for deferral will be the condition of the installation, the presence of any hazards, the environmental impact and the impact on other users of the sea.

5.32 In the future, it is possible that certain projects will be repowered (subject to the necessary regulatory consents). Any amendment of decommissioning programmes as a result of a proposed repowering will be considered on a case-by-case basis. Early engagement with the Scottish Ministers on such matters is advised.

Residual liabilities

5.33 Any redundant infrastructure permanently left on the seabed or buried by exception as part of the decommissioning risks creating residual liabilities. The final version of the approved decommissioning programme should therefore set out the arrangement, made by the responsible person with Crown Estate Scotland as to how any residual liabilities will be managed in the long-term, in the event that a request for leaving infrastructure in place is successful. This may for example involve the responsible person:

• conducting ongoing surveys to confirm that no previously buried infrastructure has become exposed and taking any appropriate remedial action
• putting appropriate legal and commercial arrangements in place with Crown Estate Scotland for an extended period of time post-decommissioning and after any post-decommissioning monitoring period. Crown Estate Scotland may, for example, require financial security or participation in an insurance scheme. This would be separate to and distinct from the need to provide financial security to the Scottish Ministers as part of any approved decommissioning programme

Stage 7: Undertake approved final decommissioning programme

5.34 Where a decommissioning programme is approved by the Scottish Ministers, it shall be the duty of the person who submitted the programme to secure that it is carried out in every respect; and that all the conditions to which the approval is subject are complied with, in accordance with Section 109 of the Energy Act.

5.35 In instances where the project has been operated by a Special Purpose Vehicle ("SPV") (for example a company set up solely to manage that wind farm) or other legal arrangement that is intended to be dissolved following decommissioning then the Scottish Ministers should be notified in advance about which party or parties will become responsible for the monitoring of the site.

Stage 8: Submission of successful post decommissioning report and conclusion of the Energy Act process

5.36 The final stage requires the responsible person to implement arrangements for monitoring, maintenance and management of the decommissioned site and any remains of installations or cables that may exist. In Scotland, a post-decommissioning report will generally be required as part of a marine licence granted for the decommissioning of the development. The outcome of monitoring work should be reported to the Scottish Ministers, together with proposals for any maintenance or remedial work that may be shown to be required. Monitoring reports must (unless prior agreement provided by Marine Scotland) also be verified by a third party (for example, an independent contractor carrying out the survey for an independent observer), and published by appropriate means (for example, on the Internet). If necessary, the monitoring programme will be adapted with time. The Scottish Ministers will agree with the responsible person when the monitoring programme may cease, taking account of any environmental impacts and risks to navigation or other users of the sea which may be posed by any remaining materials.

Failure to comply with requirements of the Energy Act

5.37 Where a responsible person fails to submit a decommissioning programme within the required timescale, does not follow their approved financial security programme, or fails to decommission, the Scottish Ministers have powers to take remedial action and (where relevant) recover any expenditure incurred (see Annex A). Ultimately, failure to follow the requirements of an approved decommissioning programme could lead to the incurring of a criminal offence.