In October 2015, following consultation with the industry, an industry levy was introduced to fund the OGA, in line with the established principle across regulation and service delivery of ‘user pays’, where the Authority recovers its costs from the companies benefiting from its services.
During the financial year 2016–17 the OGA was funded mainly by the OGA Levy (£21.3m), with a smaller amount (£1.4 million) of funding raised from application fees and charges. An additional £3m of funding was made available by DECC (now the Department for Business, Energy and Industrial Strategy) for administration, programme and capital expenditure.
There is a two-tier levy mechanism with the annual levy apportioned between pre-production (11%) and in-production (89%) licence holders, based on an assessment of the costs that the OGA occurs in relation to each group. This apportionment, which will apply again in 2017–18, will be monitored and where necessary updated as part of an annual consultation process.
For the purposes of the levy we consider ‘producing’ licences to be those licences to which the OGA has given consent to start production, i.e. where the licence has an approved Field Development Plan. Exploration licence holders and licence holders with no approved Field Development Plan are subject to a lower ‘non-producing’ levy rate.
The OGA levy does not currently apply to the onshore sector.
The levy of £21.3 million for the financial year 2016-17 was collected in full. There are no outstanding amounts owing. Any underspend of the levy received in 2016-17 will be paid back to the industry.
We remain very focused on delivering a high-quality service and providing value for money to the industry. We are committed to setting the levy in a fair and transparent manner and our intention is to reduce the running costs of the OGA over time.