Raising the bar: How Finch v Surrey is an opportunity to transform UK Oil and Gas Regulation
By Rachel Ardiff
The future of oil and gas licensing in the UK remains uncertain. While the Labour government has committed to not issuing new licences, Chancellor Rachel Reeves indicated last month that extraction will proceed at the Rosebank and Jackdaw oil and gas fields despite legal challenges - raising questions about the government’s commitments to fossil fuel phase-out in the UK.
No new oil and gas?
The Labour Party was elected on a commitment to end new oil and gas exploration in the UK while maintaining existing licences. Although the ban on new licences received support, the decision drew criticism for agreeing to honour the more than 100 oil and gas extraction licences granted by the last government, many of which have not yet begun extraction. When the government indicated last year that it would not defend legal challenges to oil and gas licences in court, this raised hopes for a potential acceleration of the UK’s fossil fuel phase-out.
Recent legal developments in the UK around oil and gas licensing seemed to build on this momentum. The Supreme Court issued a landmark ruling last year in Finch v Surrey, which invalidated the Environmental Impact Assessment (EIA) of an onshore oil project for excluding downstream or ‘Scope 3’ emissions – those generated when extracted fuels are ultimately burned. This precedent was subsequently applied to the North Sea projects Rosebank and Jackdaw in the Scottish Court of Session. The ruling does not revoke the sites’ extraction licences, but rather means that operators must resubmit their EIAs under updated environmental criteria that include the impact of downstream emissions. The regulator must now rewrite the criteria in response to the Court’s ruling. This shift to consider the environmental impacts of the use of fossil fuel products – accounting for 80-95% of oil and gas emissions - represents a substantial shift in the regulatory requirements for fossil fuel developers.
The need for stricter guidelines
Ensuring the phase-out of unabated fossil fuel production is especially urgent amid statements that the North Sea extraction projects will proceed, despite the overwhelming evidence of their catastrophic climate consequences. If the UK is to take its climate commitments seriously, it must go beyond empty rhetoric and impose clear, enforceable climate conditions on existing and future oil and gas extraction projects. Not doing so would not only imperil the UK’s remaining carbon budget, but would be inconsistent with Labour’s climate commitments, particularly as the extracted fuels are destined for export and won’t be used for enhancing domestic energy security or lowering household bills.
This blog will explore the implications of recent court decisions on oil and gas licensing, and summarise Carbon Balance’s recommendations to the regulator, OPRED, on how to strengthen Environmental Impact Assessment guidelines for any future oil and gas licenses.
Sarah Finch, campaigner against oil drilling in Horse Hill, Surrey, after Supreme Court backed her, 20 June 2024. Image: Planningresource
The Finch case: Expanding the Scope of Environmental Impact Assessments
The current conversations around the impacts of oil and gas licences in the UK were reshaped by the 2024 legal victory of Sarah Finch. In 2020, Sarah Finch, an environmental activist from Surrey, challenged Surrey County Council’s oil extraction licence on a nature reserve. Finch argued the Environmental Impact Assessment (EIA) for the project was inadequate for failing to include Scope 3 emissions – the emissions from burning the extracted oil - because they wouldn’t be emitted locally. These emissions would constitute most of the project’s emissions and would therefore constitute the project’s primary environmental impact, but had been excluded from the assessment.
The Supreme Court ruled in Finch’s favour, establishing a precedent that all future EIAs must include combustion (Scope 3) emissions from fossil fuels as “indirect” significant impacts of fossil fuel development in the UK. Significantly, the Court rejected arguments that emissions occurring outside the UK were irrelevant, even when oil was due for export, reiterating the transboundary nature of climate change.
This ruling was upheld by the Court of Session in Scotland in January 2025, invalidating the Environmental Impact Assessments of similar projects that also failed to include Scope 3 emissions, including the controversial oil and gas fields Rosebank and Jackdaw in the North Sea.
While the ruling does not necessarily mean a full cancellation of these projects, it placed their future in doubt while the Government updates its EIA guidance. The developers of Rosebank and Jackdaw are permitted to continue carrying out development work, but not to extract any fossil fuels until the EIA is rewritten and they submit a revised statement of environmental impact. This shift has slowed approvals and has raised existential questions over the future of North Sea extraction.
As part of this process, Carbon Balance joined leading academic experts from the University of Oxford and the University of Edinburgh in responding to a public consultation on the new Environmental Impact Assessment (EIA) guidelines. Our submission outlined key principles for future oil and gas licensing, grounded in the latest climate science. Crucially, we emphasised that the UK cannot afford any further unabated fossil fuel development if it is to stay within its legally binding carbon budgets.
Key Issues with Current EIA Guidelines and Our Recommendations
Our submission identifies key deficiencies in the current EIA framework and proposes the following improvements:
1. Evaluate Oil and Gas Projects According to Paris-Aligned Scenarios
Emissions Assessments must include transboundary impacts: In line with the Finch case, Environmental Impact Assessments must not be limited to the local project site, but must include the transboundary impacts of oil and gas production and use. We advocate for distinguishing between local and global assessments for oil and gas EIAs, to ensure there is no misinterpretation of effects.
Alignment with National & International Climate Commitments: The EIA framework must reflect the UK’s Paris Agreement commitments and domestic commitments under the Climate Change Act. Any new emissions must be avoided. If extraction does take place, all resulting emissions (scope 1, 2 and 3) must be fully balanced by permanent geological CO₂ storage to ensure credible net-zero compliance and demonstrate climate alignment.
OPRED should require oil and gas developers to demonstrate how their projects align with the UK’s environmental and climate commitments, including through demonstrating (1) measures to minimise lifecycle emissions, (2) strategies to support a managed transition and (3) how mitigation efforts are in line with international agreements.
There must be an assumption that all extracted fossil fuels will be burnt and release greenhouse gas emissions, unless project developers can provide robust evidence otherwise. All projects need to demonstrate climate alignment for scope 1,2 and 3 emissions.
2. Strengthen Oversight and Close Regulatory Gaps
Exclusion of substitution factors: we support OPRED’s existing advice of excluding substitution effects in EIAs, which prevents dilution of project-specific impacts through unverifiable claims about compensatory reductions elsewhere in the World. This approach preserves the credibility and intent of the EIA and is in line with the Supreme Court’s judgement and the UK’s international obligations.
Clearer Guidance on Scope 3 Emissions: Regulators must provide clear and standardised guidance on measuring Scope 3 emissions to ensure comprehensive and accurate reporting.
3. Enforce Robust Mitigation Standards with Full Producer Accountability
Any remaining extraction in the UK must be fully balanced with permanent geological CO₂ storage by 2050. Developers must demonstrate how their projects would contribute to this goal, explicitly excluding low-durability and low-quality carbon credits.
Any Scope 3 mitigation must meet rigorous standards for additionality, permanence, and monitoring, aligned with geological net zero.
Developers must submit detailed, project-specific mitigation plans. General company-wide targets or reliance on offsets cannot substitute for verifiable, site-specific strategies. Mitigation measures should:
Uphold environmental integrity
Prioritise direct emissions reductions
Ensure that polluters bear full responsibility for the environmental impacts of their operations
The Future of UK Fossil Fuel Licensing
The Finch ruling has provided an opportunity for a step change in how government and industry assess the impact of fossil fuel production in the UK. As our consultation highlighted, neither the UK’s domestic carbon budget nor legal constraints can sustain fossil fuel production without strict climate conditions. This must be central to discussions on the proposed Rosebank and Jackdaw developments in the North Sea. Any unavoidable extraction must fully account for all climate impacts, with responsibility borne by producers to ensure alignment with climate commitments.
The Chancellor of the Exchequer's statement that the Rosebank and Jackdaw extraction projects will proceed regardless of legal challenges starkly illustrates how the UK government risks failing to integrate the climate reality into its energy policy and vision of economic growth.
Ultimately, the Labour government must take the Finch ruling as a decisive signal: the path to energy security, economic prosperity and environmental protection lies not in prolonging fossil fuel projects, but in accelerating the transition to clean energy.
To read more, read Carbon Balance’s full submission to the Consultation here.