The Carbon Dioxide Transport and Storage (Financing of Costs of Offshore Decommissioning) Regulations 2026

Explanatory note

Reproduced verbatim from the instrument as published on legislation.gov.uk (Crown Copyright, Open Government Licence v3.0). The note is prepared by the responsible government department and is not part of the instrument itself.

These Regulations make provision for the establishment of offshore decommissioning funds to meet the decommissioning costs relating to offshore carbon dioxide-related infrastructure. Obligations in respect of the decommissioning and abandonment of such infrastructure are established in other legislation – for instance, Part 4 of the Petroleum Act 1998, the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010, and other licensing regulations applicable to different parts of the United Kingdom. These Regulations require security for the costs of such decommissioning obligations to be provided by way of an offshore decommissioning fund, and establish requirements for these funds in respect of the fund operational and post operations periods, as defined in regulation 2 and Schedule 1.

Regulations 3 and 4 determine the application of the Regulations and require an offshore decommissioning fund to be established. The term “covered offshore infrastructure” is defined in regulation 2. This is the offshore carbon dioxide-related infrastructure covered by a licence granted under section 7 of the Energy Act 2023.

Part 2 and Schedule 2 of the Regulations deal with estimates of decommissioning costs for covered offshore infrastructure. Estimates must be submitted by a section 7 licensee (regulation 5); revised at least 5-yearly and at other times when there is, for example, a material change (regulation 6 and Part 4 of Schedule 2); and must be approved by the Secretary of State (regulation 7). The approved fund estimate sets the overall decommissioning costs that the offshore decommissioning fund will need to meet. Within it there will be separate infrastructure estimates (Part 2 of Schedule 2) and a breakdown by cost categories (Part 3 of Schedule 2).

Part 3 of the Regulations deals with the holding arrangements for the offshore decommissioning fund. A section 7 licensee must submit a proposal for how the offshore decommissioning fund will be held under regulation 8. A proposal requires approval of the Secretary of State under regulation 9. The information in regulation 8(2) must be provided and the Secretary of State must assess a proposal against the matters in regulation 8(3) to (6). Regulation 8(9) allows some flexibility should the Secretary of State be satisfied that in a particular case, not all the information listed in regulation 8(2) needs to be provided. Once the holding arrangement has been approved the section 7 licensee must carry it out within a reasonable timescale (regulation 10).

Regulations 11 and 12 deal with changes affecting the approved holding arrangements. These will cover a variety of scenarios – including commercial transfers, UK court orders and administrative changes.

Regulation 13 and Schedule 4 make provision for the submission and approval of a funding and investment strategy. The purpose of that document is to meet the objectives in paragraph 3 of Schedule 4. It must include a fund accrual profile, with fund sufficiency targets, to demonstrate how the offshore decommissioning fund will accumulate sufficient assets to meet decommissioning costs at the time they need to be incurred. Decommissioning costs may be incurred at different times, for example, because one storage site closes sooner than another. Fund assets may be invested. The investment aspects of the strategy must meet the requirements in paragraph 7 of Schedule 4 and form part of the information approved under Part 4 of Schedule 4.

Regulation 14 imposes an obligation on a section 7 licensee to pay a monthly contribution during the fund operational period. The monthly contribution is one twelfth of the annual contribution figure in the approved funding and investment strategy. Regulation 15 clarifies that these Regulations do not preclude other lawful payments being made into an offshore decommissioning fund.

Regulation 16 imposes a number of restrictions relating to an offshore decommissioning fund. Regulation 17 imposes an obligation to manage a fund with reasonable care and skill in accordance with relevant laws of the United Kingdom.

Regulation 18 requires the submission of annual accounts to the Secretary of State, which may include separate infrastructure reports linked to specific infrastructure estimates. This enables the Secretary of State to see whether the offshore decommissioning fund is performing in accordance with the approved fund accrual profile. If not, the Secretary of State may require remedial measures under regulation 19, or recovery measures under regulation 20.

Part 4 makes provision for payments out of an offshore decommissioning fund. Regulations 21 to 25 require a payment request to be made to the Secretary of State, and impose requirements on who may receive a payment from an offshore decommissioning fund. In considering a payment request, the Secretary of State must apply the accounting principles in regulation 26 (unless a court order or transfer scheme provides otherwise). Those principles are linked to the requirements: in Part 2 of Schedule 2 for infrastructure estimates; and in regulation 18(3) for infrastructure reports. A payment request must be approved by the Secretary of State under regulation 27. Regulation 28 makes provision for ensuring a decommissioning action is carried out and reporting the costs incurred.

Regulation 29 deals with the planned closure of an offshore decommissioning fund. Regulation 30 makes provision for early closure of an offshore decommissioning fund in certain circumstances.

Regulation 31 clarifies that these Regulations do not affect a person’s decommissioning obligations under other legislation. Regulation 32 sets out the nature and extent of obligations on other relevant persons under these Regulations.