How much of it will become “Scotland’s oil”?

Correction: I’ve been told that although the UN Convention on the Law of the Seas doesn’t explicitly state it, the equidistance principle is used as the starting point for resolution if a dispute reaches the international courts. A case where it was used in the final resolution is the 1992 Canadian – French case involving Saint Pierre and Miquelon a French territory near Newfoundland.

Note that this is a starting point for resolution, not necessarily the end point, so there would still be room for the lawyers to argue over if there is a border dispute on this issue.

My thanks to the poster soupdragon on scot.politics/uk.politics.misc for clearing this up.

 

I argue here that it is not safe to assume an independent Scotland will obtain the 90%+ share of oil revenues the Scottish government will claim they will get based on getting the geographic share of oil revenues.

A claim that the “Yes” campaign for Scottish independence makes much of is that Scottish tax payers have paid more than the UK average in taxes since 1980/81 (to a tune of a total of £222 billion extra), when you allocate a geographical share of North Sea oil revenues to Scotland. On this basis, the Scottish government further claims that, in terms of per capita GDP, Scotland is the 8th wealthiest country in the world compared to the UK’s 17th place. Similar claims are made in Scotland’s Future: Your guide to an independent Scotland, the Scottish government’s guide to independence, including a claim that 98.8% of UK oil production for the 30 years starting in 2011 would belong to Scotland (e.g. see page 104).

The work of Professor Alex Kemp at the University of Aberdeen is often cited, starting with the 1999 paper he co-authored with Linda Stephen “EXPENDITURES IN AND REVENUES FROM THE UKCS: ESTIMATING THE HYPOTHETICAL SCOTTISH SHARES 1970 – 2003” (UKCS here means UK Continental Shelf). This paper attempts to estimate how much revenue Scotland have received from oil if she were an independent country during this period. A key question is how to determine the boundaries of Scottish waters, and on this point Kemp and Stephen explain:

“For purposes of the study the UKCS had to be divided between Scotland and the rest of the United Kingdom. Over the years there has been considerable debate about how the boundary line might be drawn. A principle which has much merit on grounds of equity, legality and precedence is that of equidistance (1). According to this the dividing line is drawn starting from the onshore boundary point and extending into the North Sea such that the line is equidistant from the nearest points on Scottish and English territory (including relevant islands). Of course, many other procedures could be employed to determine the boundary, but they generally involve more value judgements, and political negotiation.” (section 2(b) paragraph 1, emphasis added).
Note that whilst equidistance is a plausible basis for determining the boundary, it’s not the only basis as the emphasised text asserts. It is also worth noting that the UK itself splits the continental shelf into Scottish and English sectors, for the purposes of determining the extent of the jurisdiction of Scottish law. As Wikipedia states:
“However due to the existence of two separate legal systems in Great Britain — that of Scots law pertaining to Scotland and English law pertaining to England and Wales, constitutional law in the United Kingdom has provided for the division of the UK sector of the North Sea into specific Scottish and English components.[5] The Continental Shelf Act 1964 and the Continental Shelf (Jurisdiction) Order 1968 defines the UK North Sea maritime area to the north of latitude 55 degrees north as being under the jurisdiction of Scots law[6] meaning that 90% of the UK’s oil resources were under Scottish jurisdiction.[7][8] In addition, section 126 of the Scotland Act 1998 defines Scottish waters as the internal waters and territorial sea of the United Kingdom as are adjacent to Scotland.[9] This has been subsequently amended by the Scottish Adjacent Waters Boundary Order 1999 which redefined the extent of Scottish waters and Scottish fishery limits.[10][11]

These seem to be plausible bases for determining the extent of Scottish waters, so does this mean that Scotland will automatically gain control over the bulk of North Sea oil revenues in the event of independence? It seems to me it’s not that simple. After a “Yes” vote,  Scotland will remain part of the UK until the relevant legislation and treaties have been created and have come into force. There will be the small matter of negotiating the terms of independence with the remaining UK government (rUK government from now on) to get through first.

Given how important North Sea oil is to the rUK government it would be foolish to expect them to give most of it up without a fight or trying to obtain some compensation for its loss. So what arguments could the rUK government produce to weaken the claim to the oil? It seems to me there are 2 lines of attack:

  • Question the whole notion of splitting the revenues by geographical share.
    • The argument here is quite simple: North Sea oil has been developed by the UK for the UK, and any taxes that went into developing the fields would have represented a contribution from each of the UK’s constituent parts that was split by population share.
    • Ergo they could argue the benefits should be split by population share, not geographical share, since Scotland would in the latter case be getting a disproportionate benefit compared to the resources invested so far.
    • The rUK could, on this basis, claim to be fighting for the interests of the people in the rUK to benefit from the oil fields and infrastructure that has been invested in using UK wide taxes.  This could be a popular move south of the border.
    • Note that if you allocate North Sea oil revenues by population share, Scotland will receive about 1/10th of the oil that the geographic share would give. The claim that Scotland pays more than the UK average per head in taxes also fails if you allocate it this way.
  • Question the drawing of the boundaries based on the equidistance principle.
    • The UN Convention on the Law of the Sea is often cited in these discussions, and it does use the equidistance principle when defining “territorial waters”.
    • The trouble is that “territorial waters” are defined as those extending out to just 12 nautical miles from the coast.
    • Much of the oil is located in the UK’s “Exclusive Economic Zone” (EEZ), which extends a maximum of 200 nautical miles from the cost.
    • When determining the boundaries of the EEZ, the treaty states (Article 74): “The delimitation of the exclusive economic zone between States with opposite or adjacent coasts shall be effected by agreement on the basis of international law as referred to in Article 38 of the Statute of the International Court of Justice, in order to achieve an equitable solution.”
    • As far as I can tell, the treaty stipulates procedures for conflict resolution but does not provide a basis for drawing up the boundaries as such.
    • Thus for the EEZ, the boundary is entirely up for negotiation, unless some other part of international law impinges here.

There thus seems to me to be plenty of room, both legally and practically, for the rUK to demand more oil than the claimed geographical share would leave. I would expect the rUK to play hardball on this, with the balance of power favouring the rUK in these talks. Therefore it is not safe to assume that an independent Scotland would get the 90%+ share of the oil that the Scottish government and others are proclaiming.

I would not be surprised to see this issue go to the international courts, in which case the safest bet is that the lawyers will get rich…

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