Norway’s economy was dominated by fishing until the discovery of oil in the Norwegian Continental Shelf (the “NCF”) in the North Sea. In October 1962, Phillips Petroleum sent an application to the Norwegian authorities for a licence to explore parts of the North Sea. This led to a declaration of sovereignty by the Norwegian government over the NCF and then agreements as to how to divide ownership of the shelf, primarily with Denmark and the United Kingdom. Drilling started in 1965 and the first major discovery was made in 1969, with Ekofisk.
The Norwegian state has since participated in petroleum operations in the NCF through the so-called State’s Direct Financial Interest (SDFI). Each government participation is decided when production licences are awarded, the amount of which varies. As one of several owners of each block, the State pays its share of investments and costs, and receives a corresponding share of the income from the production licence. This has resulted in Norway becoming the owner of the largest sovereign wealth fund in the world and Norway’s 5.4 million population benefitting from one of the planet’s highest standards of living. This is an enviable position to be in.
Despite being Europe’s second largest oil producer (after Russia) and the world’s 7th largest exporter, Norway has tried hard to portray itself as a nation of green credentials. However, a number of young Norwegian environmental activists – the Nature and Youth Group – are dissatisfied and have taken the state to court, claiming that oil and gas being extracted from Norway’s waters has contributed to climate change. The group claims that by issuing new licenses in 2016 for oil exploration in Norway’s arctic waters, the state breached its own constitutional obligation to ensure a clean environment for its citizens and future generations.
The Group lost the first round and are currently in Oslo’s Court of Appeal, together with their co-plaintiff Greenpeace Nordic. The co-plaintiffs are backed by the interveners Grandparents Climate Campaign and Friends of the Earth Norway. This coalition also accuses the government’s granting of the 2016 oil licenses to be in violation of the Paris Agreement within the United Nations Framework Convention on Climate Change (UNFCCC), adopted by 196 states by consensus in December 2015 and also signed in 2016.
This is an interesting legal battle between the rights of the state, the protection of the environment and the way in which the state provides for its people. Such legal disputes will help to define the way in which the world proceeds with energy production and the consequences for climate change over the coming decades.
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