This is the second of two blog posts on this topic. The first post discussed the LURA 2023 and this post focuses on relevant provisions of the Energy Act 2023 (‘EA 2023’).

The Energy Act 2023

There are three main sections of the Energy Act 2023 interacting with existing protections under the Habitats Regulations 2017: section 291 (strategic compensation for adverse environmental effects), section 293 (assessment of environmental effects, etc.) and section 297 (habitats: reducing effects of offshore oil and gas activities, etc.)

Section 291 - Strategic compensation for adverse environmental effects

Section 291 seeks to modify how compensation for adverse environmental effects applies in relation to strategic offshore wind projects. It applies where a public authority is subject to “environmental compensation obligations” in relation to relevant offshore wind activities (section 291(1) EA 2023). “Environmental compensation obligations” are defined in section 291(2) EA 2023 as including (i) a statutory duty to secure that measures are taken to compensate for adverse environmental effects of an activity and (ii) a statutory condition requiring a public authority to be satisfied before granting consent that the person will take or secure measures to compensate for adverse environmental impacts.

One clear example of a statutory duty covered by section 291(2) EA 2023 is the duty in regulation 68 of the Habitats Regulations 2017. This requires an appropriate authority to secure compensatory measures to ensure that the overall coherence of Natura 2000 is protected (regulation 68) and applies in circumstances where there has been a negative assessment of the impact of a development on a European site but the authority is satisfied that there are no alternatives and the development must be carried out for reasons of overriding public interest (regulation 64(1)).

As for the operative provisions in section 291, subsection (3) provides that public authority may determine that measures taken or secured (or to be taken or secured) by the authority in the exercise of any of its functions are to count towards discharging the environmental compensation obligation or obligations to which the authority is subject. Subsection (5) also clarifies that such measures may be taken at the site or sites of the activities to which the measures relate or elsewhere.

As set out in the explanatory notes to the EA 2023, subsection (3) enables the delivery of strategic compensation, for example through the ‘banking’ of measures that have already been delivered, which can then be allocated against future relevant offshore wind activities.

Section 293 – Assessment of environmental effects etc

The second relevant provision is section 293, which gives an appropriate authority power to make regulations in connection with the assessment of environmental effects of offshore wind activities in relation to protected sites and in relation to taking or securing compensatory measures in relation to such sites.

Subsection (6) includes the following proviso which makes express reference to the Habitats Regulations 2017:

(6) But regulations under this section may not disapply or otherwise modify, or make provision which could undermine or circumvent —

[...]

(b) regulation 64 of the Conservation of Habitats and Species Regulations 2017

This section therefore expressly permits the making of regulations in relation to both the assessment of, and provision of compensation in relation to, protected sites that are currently protected under the Habitats Regulations 2017. A question also arises as to how effective subsection (6) will be at preventing the making of regulations that could weaken the protection of those areas. 

Importantly, subsection (6) only makes reference to regulation 64 of the Habitats Regulations 2017, which includes the overriding public interest exemption and sets out what should be considered as “considerations of overriding public interest” where the site concerned hosts a priority natural habitat type or a priority species. Thus, even if the safeguard in subsection (6) means the need for (and test of) “overriding public interest” remains unchanged, there is nothing in subsection (6) to prevent the regulations weakening the assessment or compensation requirements in circumstances where these public interest considerations arise.

Section 297 - Habitats: reducing effects of offshore oil or gas activities etc

The third relevant provision is section 297, which provides as follows:

(1) The Secretary of State may, by regulations, make provision requiring the Secretary of State to take into account the implications for relevant sites when deciding whether, or how, to carry out a function (including a function under other regulations under this section) which relates to—

(a) offshore oil and gas activities, or 

(b) offshore production or storage of gas.

[...]

(4) The Secretary of State may, by regulations, make provision— 

(a) authorising the Secretary of State to give a person directions to take steps, or to refrain from taking steps, and 

(b) requiring a person given such a direction to comply with it.

This section permits the making of regulations which would require the Secretary of State to take into account implications for “relevant sites” when deciding whether or how to carry out functions relating to offshore oil or gas activities. One issue, however, is that there is as yet no definition of “relevant site” in Act. This is to be defined in future regulations, which “must be framed so that relevant sites consist of natural habitats or habitats of species” (EA 2023, section 297(6)). It is therefore possible that these sites might include European sites but also other sites – or by contrast, could exclude European sites on the basis that these are already protected by the requirement of appropriate assessment as set out in regulation 63(1). As identified in the report of the House of Lords Delegated Powers and Regulatory Reform Committee when considering the bill, the powers conferred by this section “are very wide and open-ended”.

Conclusions

Overall, the EA 2023 may bring significant changes to the way in which harm to European protected sites affected by offshore wind projects need to be compensated and assessed. Moreover, the scope of the powers conferred on the Secretary of State in this area remains open-ended, creating uncertainty both for those involved in the offshore oil and gas industries and for those concerned about the impacts of any new developments in that area on “relevant sites”. 

Stephanie Bruce-Smith is a barrister at Francis Taylor Building, specialising in planning and environmental law. She has a particular interest in the law on biodiversity and habitat protection.

This blog post expands on a presentation given at Francis Taylor Building’s Quarterly Environmental Law update on 16 November 2023. The discussion of section 291 of the Energy Act 2023 in this post was amended on 16 January 2024 in light of insightful comments from Helen Mitcheson and Richard Broadbent of Freeths LLP.