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The Labour government will not challenge a court bid by environmental groups to block the development of the Rosebank oilfield in the North Sea, which they said violated the UK’s obligation to target net zero emissions.
The government stressed that Thursday’s decision, which came a day before a court hearing in Edinburgh, did not mean that Rosebank’s licence, issued by the previous Conservative government, would be withdrawn.
But the decision casts doubt on the future of the project, one of the North Sea’s biggest, in which Norway’s state-backed Equinor and its partner Ithaca have committed to spend $3.8bn during its first phase.
It will also add to the woes of the UK’s oil and gas sector, which was hit by windfall taxes after Russia’s full-scale invasion of Ukraine in 2022 caused a surge in energy prices for consumers.
The Labour government has faced criticism from the industry after it decided to increase the windfall tax on oil and gas companies by 3 percentage points, even though oil and gas prices have fallen since peaking in 2022.
Campaigners had argued that approval of the Rosebank project by the North Sea Transition Authority was unlawful because it failed to take into account the effect on the climate of the burning, rather than just the extraction, of fossil fuels.
Uplift and Greenpeace in December separately applied to Edinburgh’s Court of Session, Scotland’s highest civil court, for a judicial review of the decision to allow the development of the field, which is about 80 miles off the coast of the Shetland islands.
The case had been suspended pending the outcome of a case in England in which activists challenged Surrey County Council’s decision to grant a licence for drilling at a site near Horley in 2019.
The Supreme Court ultimately ruled in favour of activists who argued that it was unlawful for the council to approve the project without requiring an assessment of downstream emissions.
The Labour government, which won a resounding majority at the UK general election in July, has also said that it would not approve new drilling licences in the North Sea and would also remove investment allowances that allow companies to offset their tax bills.
The government said on Thursday that its decision not to contest the case brought by the campaign groups “will save the taxpayer money”.
It added that it would begin a consultation later this year on its manifesto pledge not to issue new oil and gas licences, which will form the basis of “environmental guidance” that the government said would bring “certainty” to the oil and gas industry.
Mel Evans, climate team leader at campaign group Greenpeace UK, said the government’s move was “absolutely the right decision”.
Tessa Khan, executive director of Uplift, said the government had “rightly accepted” that the development of Rosebank could not go ahead without the full extent of the damage it will do to the climate being considered.
It was “astonishing that the massive emissions from burning oil and gas have been overlooked” until now, she added.
Equinor, which has an 80 per cent share in Rosebank, said: “We’re currently assessing the implications of today’s announcement and will maintain close collaboration with all relevant stakeholders to advance the project.”
The company previously said that the project, which is expected to start producing oil in 2026, would inject about £25bn into the UK economy over its approximate 25-year lifetime.