Norwegian court invalidates PDO approvals over climate assessment

The Court of Appeal found the Ministry of Energy's (MoE) decisions of 28 August 2024 and 20 December 2024 not to reverse the PDO approvals for Tyrving, Yggdrasil, and Breidablikk to be invalid. The reason was that MoE had failed to properly assess the climate effects of combustion emissions from the oil and gas to be produced from the fields.

However, the Court of Appeal did not order the activities at Tyrving, Yggdrasil, and Breidablikk to stop as a consequence of the invalidity. Instead, the court required the State to reprocess the PDO applications within six months of the judgment, or within two months after a final judgment.

The Court of Appeal concluded, following guidance from the EFTA Court, that greenhouse gas emissions from combustion of extracted oil and gas constitute "effects" of a project under the EU/EEA Project Directive. MoE therefore has a duty to obtain information about and assess the consequences of combustion emissions as part of the processing of an application to approve a PDO.

An assessment of consequences of combustion emissions must be based on gross emissions.  Considerations regarding net emissions can only serve as supplementary information and be relevant in the assessment of whether a PDO should be approved despite the negative environmental consequences. The assessment must also consider cumulative emissions from Norway's total petroleum activities, not only impact of individual projects.

The Court of Appeal found that the climate consequences of combustion emissions were not sufficiently assessed in connection with the PDO approvals, rendering the decisions invalid. MoE had also failed to provide a "reasoned conclusion" to approve the PDOs despite the combustion emissions.

Furthermore, the Court found procedural errors in the assessments, including lack of studies on total combustion emissions from Norwegian petroleum activities, no assessment against remaining carbon budget, and insufficient evaluation of global consequences.

It is likely that the State will seek to appeal the ruling to the Supreme Court. If an appeal is brought, the ruling from the Court of Appeal will not be final. 

However, as shown by the Court of Appeal's ruling, there is a risk that the Supreme Court will invalidate the PDOs. It may therefore be expedient that MoE prepare for that scenario by making the additional assessment to the PDOs for Tyrving, Yggdrasil and Breidablikk in accordance with the Court of Appeal's ruling.

A question arises, however, as to what will happen to other PDOs that have been approved by MoE without compliance with the Project Directive's requirement regarding assessment of combustion emissions, as ruled by the Court of Appeal for Tyrving, Yggdrasil, and Breidablikk.

The safe route will probably be to carry out additional assessments for such PDOs. Otherwise, there is a high risk that the validity of those PDOs will be challenged in court.

If you have questions about how this ruling may affect you and your business, our experienced oil and gas team follows the developments closely and is ready to help you navigate these changes and develop effective strategies for your contracts, operations and investments.