OT27052 - Abandonment and Decommissioning

Buying out Abandonment obligations

Where a participator withdraws from a joint operating, unitisation or related agreement, either

1. a payment may be made to the remaining participators in respect of estimated future decommissioning and abandonment expenditure, or
2. a payment may be received if, exceptionally, anticipated scrap or reuse proceeds exceed estimated future decommissioning and abandonment expenditure.

No relief is due in respect of payments under a. as the conditions for relief under CAA90\s62, CAA90\s62A and CAA90\s62AA (CAA01\s26, CAA01\s164 and CAA01\s161C) are not met: it is presumed that the plant in question is not in fact demolished or decommissioned and carries on in use. Any case where refusal of relief is challenged should be referred to an Assistant Director.

When the actual demolition or decommissioning expenditure is incurred by the remaining participators in due course, there is no restriction of relief to them by reference to amounts previously received from outgoing participators. CAA90\s153(2)(b) (CAA01\s536(2)(3)) refers.

Cases under b. are likely to be rare. The payment in the hands of the recipient would be offset as disposal value against the pool of unrelieved expenditure on plant, whilst the payers would be entitled to an allowance on the expenditure as the cost of an additional interest in the plant.