The Secretary of State for Energy and Climate Change (Chris Huhne)
I welcome you to your position, Mr Deputy Speaker. The House will wish to join me in expressing our deepest sympathy to those bereaved or injured in the explosion in the gulf of Mexico on 20 April, and to all the individuals and communities affected by spilling oil or fearing that they will be affected by it over the days and weeks to come. Our thoughts must be, first, with them.
On 20 April, an explosion and subsequent fire on board a drilling rig operated by Transocean under contract to BP in the gulf of Mexico tragically killed 11 workers. On 22 April, the rig sank. On the sea bed, 1,600 metres below, substantial quantities of oil were leaking into the ocean—the blow-out preventer, which should have sealed the leak, failed. The causes of the accident are now subject to a US presidential commission of inquiry, and to civil and criminal investigation.
There has never been such a large leak of oil so deep in the sea. Attempts by BP, under the direction of the US authorities, to seal the leak were not successful. The company then pursued a strategy of capturing as much oil as possible, and in recent days more than 15,000 barrels a day of oil have been recovered. However, it is also thought that the leak is worse than previously believed. The US Government’s estimate of the flow of the leak is now 35,000 to 40,000 barrels per day. BP hopes to be able to increase significantly the amount of oil that it is capturing, but a very large quantity of oil continues to be released into the sea. Moreover, the leak will not be fully staunched until August at the earliest, when the first relief well, which BP is already drilling, should enable the original well to be plugged.
An enormous operation is also taking place to address the environmental impact of oil that is already in the water. Working under Admiral Thad Allen of the US Coast Guard, more than 2,000 boats have been involved, skimming the water and using dispersant chemicals. Thousands of workers and volunteers onshore are removing oil and maintaining coastal defences. The House will wish to join me in paying tribute to those involved in that work.
We understand and sympathise with the US Government’s frustration that oil continues to leak at the rate that it does. In order for us to appreciate the scale of this environmental disaster, I should point out that each week a quantity of oil equivalent to the total spillage from the Exxon Valdez is escaping into the gulf of Mexico. The US Administration have said that BP is doing everything asked of it in the effort to combat the spill. We, of course, look to the company to continue in that, and we will do everything we can to help. The key priority must be stopping the environmental damage. In their telephone conversation at the weekend, President Obama reassured the Prime Minister that he has no interest in undermining BP’s value and that frustrations in America have nothing to do with national identity.
Hon. Members will remember that in 1988 the Piper Alpha rig in the North sea exploded, with 167 fatalities. Following that disaster, our regulatory regime was significantly tightened, and we split the functions of licensing and health and safety in the UK. The US has announced that, in future, separate organisations will deal with those functions in the US, and we hope that we have some experience to offer of building and operating such a system. Officials from my Department and from the Health and Safety Executive have been discussing that with their US counterparts.
It is my responsibility to make sure that the oil and gas industry maintains the highest possible standards in UK waters, and I have had an urgent review undertaken. It is clear that our safety and environmental regulatory regime is already among the most robust in the world, and the industry’s record in the North sea is strong. However, as exploration begins in deeper waters west of Shetland, we must be vigilant. Initial steps are already under way, including a doubling of the Department’s annual environmental inspections of drilling rigs. I will also review our new and existing procedures as soon as detailed analysis of the factors that caused the incident in the gulf of Mexico is available. That will build upon the work already begun by the newly-formed Oil Spill Prevention and Response Advisory Group. Given the importance of global deep-water production during our transition to a low-carbon economy, I will also ensure that lessons and practice are shared with relevant regulators and operating companies.
I shall now discuss the position of BP. It is hugely regrettable that the company’s technical efforts to stop the spill have, to date, been only partially successful, but I acknowledge the company for its strong public commitment to stand by its obligations, to halt the spill and to provide remedy and payment of all legitimate claims. As BP’s chairman has said, these are critical tasks for BP, and it must complete them in order to rebuild trust in the company as a long-term member of the business community in the United States, the United Kingdom and around the world.
BP remains a strong company. Although its share price has fallen sharply since April, it has the financial resources to put right the damage. It has exceptionally strong cash flow, and it will continue to be a major employer and a vital investor here and in the United States. In many ways, BP is effectively an Anglo-American company with 39% of its shares being owned in the US, against 40% in the UK.
There has been much speculation in the press about the impact on UK pension funds and about whether the company will pay a quarterly dividend. That is entirely a matter for BP’s directors, who will no doubt weigh all the factors and make a recommendation to their shareholders that is in their best interests, which of course include the best interests of many UK pension funds. Many citizens have real and legitimate worries about their pensions, but I would like to reassure the House not only that BP is financially sound, but that pension funds that hold BP shares generally hold a very diverse portfolio of assets and that their exposure to a single company, even a company as economically important as BP, is limited.
In concluding my statement, I wish again to express the Government’s profound sympathy to those in the US affected by this accident and its aftermath. The priority must be to address the environmental consequences of the spill, and our concentration is on practical measures that can help with that. The disaster is a stark reminder of the environmental dangers of oil and gas production in ever-more difficult areas. Coupled with the impact of high-carbon consumption, it highlights yet again the importance of improving the energy efficiency of our economy and the expansion of low-carbon technologies. We must and will learn the lessons of these terrible events. I commend the statement to the House.
Edward Miliband (Doncaster North) (Lab)
May I start by thanking the Secretary of State for the advance notice of his statement and for keeping the House informed of developments regarding the gulf oil spill? Let me join him in expressing deep sorrow for the 11 people who died in the accident and deep sympathy to their families. As he said, it is a reminder of the dangers that come with life in the offshore oil industry. We saw that ourselves last year with the tragic helicopter accident in the North sea. We should never forget the people who have lost their lives in this accident.
May I join the Secretary of State in expressing deep concern about the environmental impacts of the oil spill, which he summarised in his statement? I believe it is in the interests of the environment as well as the employees, shareholders and pension fund investors of BP that there should be a clear and co-ordinated response from the Governments of Britain and the United States. In that context, I want to ask him five specific questions arising from his statement. First, on the private sector companies involved in this accident, does he agree that all the companies involved in the Deepwater Horizon project—Halliburton, Transocean, Cameron and BP—should be subject to investigation, and that finger-pointing at BP in particular is not helpful?
Secondly, on regulation, does the Secretary of State agree that any process of learning lessons needs to look not just at the actions of private companies, but at the regulator—the United States’ Minerals Management Service—and at the general level of regulatory standards in place in the US and around the world for deep-water drilling? Will he also comment on his specific understanding—I appreciate that things are at an early stage—of the level of regulation in the US compared with that in the UK?
Thirdly, in terms of the implications for Britain, I welcome what the Secretary of State said about the licensing of drilling in deeper waters in the UK, including west of Shetland. Does he agree that it is essential to look at any lessons learned before beginning that deeper-water drilling?
Fourthly, and very importantly for the long-term future, does the Secretary of State agree that the central lesson of Deepwater Horizon is that we cannot, as a world, simply dig deeper and deeper for oil, plundering the world’s natural resources? The opportunity should be seized on both sides of the Atlantic by the Prime Minister and the President, in a way that has not so far happened, to send a louder and clearer message about the need to make the transition to a post-oil economy. It will take decades, but the transition needs to start all around the world.
Fifthly, in the same context, does the Secretary of State agree that, after the tragedy of Deepwater, the best thing that could happen is a renewed push towards low carbon and clean energy around the world, with Europe moving to a 30% emissions reduction, America passing a climate and energy Bill and the securing of an international treaty either at Cancun or as soon as possible afterwards? Does he also agree that domestically we need to play our part? That means maintaining industrial policy support for the low-carbon transition. Looking ahead to his right hon. Friend the Chancellor of the Exchequer’s Budget next week, if we are to make the low-carbon transition ourselves, and send out a clear signal, it is important that the investments promised by the previous Government to Sheffield Forgemasters and Ford, and for offshore wind, go ahead as soon as possible.
The gulf oil spill is an environmental wake-up call for the world. Just as the banking crisis changed the rules of the game for financial services, so this disaster must change the rules of the game across the world for energy policy. That requires strong leadership—including being tough with our allies—in defending British interests, in pushing the United States for a Bill on climate change and in charting a course towards the low-carbon transition. If the Government provide that strong leadership for BP employees, pension fundholders and our environment, we will of course support them.
Chris Huhne
I am grateful to the right hon. Gentleman, not least for the manner in which he has approached this matter. There is not a lot of difference in our approaches. We have seen some examples of what can happen if people attempt to flam up the rhetoric rather than dealing with the issues in a measured way.
The right hon. Gentleman is clearly absolutely correct to say that BP was involved with other partners in Deepwater Horizon. BP’s interest is 65%. In addition, the subcontracted rig was from Transocean, which is a well known and respected United States company, and was using technology produced in the United States. I understand that the blow-out preventer was produced by Cameron International to American petroleum industry standards.
All that said, it is absolutely crucial to let the full investigation take its course. We simply do not know exactly what the events were on Deepwater Horizon, not least because, tragically, so many of the people who could have told us what happened are no longer alive. We need a proper process of investigation if we are to learn the lessons.
I have already said something about the difference in the regulatory regime between us and the United States. The most important feature is the decision we took after the Piper Alpha disaster to separate licensing and operational regulation from the health and safety side, but that is certainly not the only lesson that will be learned from this disaster. When we have a clearer understanding of exactly what went on, I am sure that both technical and regulatory responses will be required. In the interim, we have taken the step of improving inspections.
Precisely because we have already announced an increased number of inspections, I do not believe it would be appropriate to stop the drilling west of Shetland. Our regime has been shown to be robust, but we need to go on learning the lessons.
On the right hon. Gentleman’s final point, I very much agree that we need to accelerate the move towards a low-carbon economy. Whatever the risks involved with, for example, offshore wind, onshore wind, tidal stream or indeed a future generation of wave technology, they are not in the same order of magnitude as the sort of risks that we are clearly running by drilling in increasingly hostile environments around the world, as we attempt to find the last hydrocarbons. That message is important. This is an environmental wake-up call. Hydrocarbons—oil and gas—do and will play a crucial part in our transition. We know from our economic history that we cannot suddenly switch off steam power, for example, and move to electricity—these things take time—but it is certainly an important warning to us that there is no time to lose in trying to make that transition as quickly as possible.
Malcolm Bruce (Gordon) (LD)
I thank the Secretary of State for his statement and for the tone in which he answered the right hon. Member for Doncaster North (Edward Miliband), which will give reassurance that we are operating in two different environments. As someone who represents a constituency that hosts BP’s North sea operational headquarters and more oil and gas-related jobs than any other constituency in the UK, may I say that we need to recognise that these mistakes in a very difficult environment are the responsibility of the whole industry, which will have to solve them in partnership with the regulatory authorities? The 25 billion barrels of oil and gas still to be got out of the North sea need to be got out, but we must ensure that that is done in circumstances where health and safety, the environment and partnership technology all work together.
Chris Huhne
I am grateful to my right hon. Friend for the question. He is absolutely right. This industry is crucial for us, and it is in everyone’s interest, not least the people who work and invest in the industry, that the standards of environmental safety and health and safety should be as high as we can possibly make them. I can assure him that we intend to make that the case.
Miss Anne Begg (Aberdeen South) (Lab)
At one stage last week, I had great fear that we were talking ourselves into a second crisis that would have undermined BP and, indeed, the whole offshore oil and gas industry, but I am glad that things seem to have calmed down over the weekend. Partly to restore faith, BP and its partners must know what they need to do to stem the flow of oil and what their responsibility is with regard to the clean-up, and understand and be able to quantify just how much it will cost to make the reparations that are obviously needed for those on the shore whose livelihoods have been devastated.
Chris Huhne
The hon. Lady is absolutely right. I spoke yesterday to BP chief executive Tony Hayward, and I spoke this morning to another board member, Iain Conn. Until those conversations took place, I had not realised the extent of the co-operative effort across the industry in attempting to find a technical solution. Frankly, it is in the interests of all the oil and gas companies that operate in the gulf of Mexico and, indeed, more widely to ensure that they can reassure their publics and the people who are affected in Louisiana and the other coastal states that there are genuine technical solutions. That is one of the encouraging signs of what is now going on.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I reinforce the Secretary of State’s welcome recognition of the human tragedy involved in this disaster. This tragedy has a human face as well as an environmental one. Although the President was reassuring us that he did not intentionally want to affect BP’s finances, he may have unintentionally done so. If we can ensure effective co-operation across countries to make sure that the focus is on finding a solution to the problem, that would be most welcome. Specifically, for the north-east of Scotland, his reassurance on the safety regime that applies to the North sea is most welcome—in particular, that our blow-out preventers are subject to rigorous testing and inspection to ensure that such an incident could not happen here.
Chris Huhne
My hon. Friend is absolutely right to draw attention to that. In fact, both in our regime and in the United States regime, blow-out preventers are checked regularly. One of the mysteries appears to be the fact that the blow-out preventer was checked within two weeks of the disaster and still failed. Clearly, that is one of the things that the investigation must get to the bottom of. One of the things that we will need to learn about operating at such depths and pressures is whether yet further fail-safe mechanisms need to be built into the blow-out preventers, and we will certainly look at that. He is also absolutely right to draw attention to the human tragedy and, indeed, the importance of maintaining safety for all those who work in the industry.
Mr Frank Doran (Aberdeen North) (Lab)
I welcome the Secretary of State’s statement, particularly the extra resources for technical investigations, but it is not only the technology that is important. BP has identified that three of the seven causes of the spill that it is aware of so far were the result of people ignoring warning signs. That tends to happen when people are badly trained, inexperienced or afraid to challenge their superiors, and it is one of the key lessons that we learned from the Piper Alpha tragedy. Is the Secretary of State aware that over the past few years we have made huge progress in the North sea in involving workers? There are three trade union representatives on the new body that has been set up to examine the spill, which is extremely important. However, there is a major problem in the drilling industry, which has—how shall I put it?—an outdated attitude to employment relations. Those employers include Transocean, which is involved in this issue. Until the problem of worker involvement in the drilling industry in the North sea is sorted out, we will continue to have problems.
Chris Huhne
I thank the hon. Gentleman for his question. I am certainly happy to look at the issues that he raises. It is important to have trade union oversight of these matters in cases where the companies are unionised; it provides another perspective and a guarantee to other employees that safety will be given the attention that it deserves.
Duncan Hames (Chippenham) (LD)
As with Railtrack and the Hatfield rail tragedy, is not a critical lesson from the explosion on this rig that companies who outsource environmental and safety-critical processes fail to take their responsibilities seriously when it really counts—before disaster strikes? Railtrack lost its licence to operate. What discussion will my right hon. Friend’s Department have with businesses in the energy sector to prompt them to review their corporate governance and get a grip on their direct environmental responsibilities, instead of simply spouting the rhetoric of corporate social responsibility?
Chris Huhne
I thank my hon. Friend for that acute and well directed question. There is an issue about the extent of outsourcing, which has certainly gone on apace in the oil and gas industry; for example, in subcontracting to companies such as Transocean. That may be one of the lessons that comes out of the inquiry. However, there is another side to the issue: the oil majors can argue that the level of expertise of a company such as Transocean may be higher than their own, precisely because it is operating so many rigs and contracting to so many oil majors. That will clearly be an issue for the investigation. All the big oil companies will be much more aware of the potential reputational damage that can be inflicted by an environmental disaster of this kind. I think that they will take that on board, and I hope that it will provide an additional incentive to make sure that corporate governance, including its ethical dimension, is strengthened.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I welcome the Secretary of State’s response to my hon. Friend the Member for Aberdeen North (Mr Doran). I draw his attention to a helpful written answer from the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry), on 7 June, in which he revealed that there are some 10 Transocean rigs registered and operating in UK waters. Two are registered in the Marshall Islands, two in Panama, three in Liberia and two in Vanuatu. Given the obvious public concern about where they are registered, has the Secretary of State considered ordering an immediate review of the safety of those rigs, and if not, why not?
Chris Huhne
I thank the hon. Gentleman for that question. That is precisely why, when we conducted the urgent review of our regime, we thought it appropriate to increase immediately the number of environmental inspectors who can go on to rigs and ensure that the rules and regulations that are set on safety, including environmental safety, are properly applied. That is exactly what we have done. Frankly, much of the world’s shipping is registered in what often seem to be exotic jurisdictions, but the key point surely has to be that anybody operating in UK waters, whatever the basis of the registration, should operate to UK standards and must be properly inspected, and we will not take any risks. That inspection is under way, and there is an increase in the pace of inspection as I speak.
Mr Jim Cunningham (Coventry South) (Lab)
I thank the Secretary of State for his statement. On a more positive note, has he, or a senior colleague of his, considered a visit to the area in question in the United States, to show a bit of good will, and to try to take the heat out of the situation between the United States and us?
Chris Huhne
I am grateful to the hon. Gentleman for his suggestion. I have to say that some of the reporting back that I have heard from the United States suggests that another British voice turning up on television screens might not, at this stage of the game, have quite the effect that he suggests. As he has probably seen in the press, BP’s efforts are now being directed by one of its American executive directors. We do not want any element of national identity to creep into the issue. BP is, as I have said, effectively an Anglo-American company. It was, after all, previously BP Amoco, and Amoco was an American oil company. It is important that any television viewer in the United States realises that BP will go on playing a very important part in the economy of the US, and the UK, for many years to come.
Ian Paisley (North Antrim) (DUP)
Congratulations to you, Mr Deputy Speaker.
I thank the Secretary of State for his statement and for bringing some calmness to the rather choppy waters of the last week. On the conversation that took place between the Prime Minister of this country and the President of the United States, was there any recognition, on the American side of the conversation, that deep-water drilling is partially a direct result of America’s insatiable demand for more and more oil, or that the commentary against BP was doing intolerable damage to a company here, and was grossly unfair? Was there recognition that, in the parlance of Northern Ireland, the Americans should wind their neck in and recognise that such comments are doing damage to our companies?
Chris Huhne
The hon. Gentleman has to understand what would happen in this country if there were an oil spill off the coast of Northern Ireland on the scale of that at Deepwater Horizon. He would be among the first to insist that we did everything that we could to stop it. It would be an absolutely enormous environmental disaster. Let me put the scale of the oil spill in some sort of perspective. I tried a comparison with Exxon Valdez, but we might think back to our experience with Piper Alpha. The situation was not exactly the same, because the problem was largely a gas well, but in Piper Alpha’s case, we were looking at 200 barrels of oil escaping a day. In the case of Deepwater Horizon, the latest estimate is 40,000 to 50,000 barrels a day. Given the sheer scale of the problem, we fellow politicians have to understand what our reaction would be if that were going on in our waters.
Paul Blomfield (Sheffield Central) (Lab)
May I press the Secretary of State for a fuller answer to the last question asked by my right hon. Friend the Member for Doncaster North (Edward Miliband) on investment in low-carbon technologies? Like my right hon. Friend, I welcome the Secretary of State’s statement of the importance of the expansion of low-carbon technologies, but that needs to be matched by practical action, particularly—in the context of Sheffield—by ending the uncertainty around the financial support for Sheffield Forgemasters. Does the Secretary of State support me in wishing to see a speedy end to that uncertainty and confirmation of that financial support?
Chris Huhne
I thank the hon. Gentleman for his question. When I was studying politics, philosophy and economics at Oxford somewhat before the hon. Gentleman, I was told that socialism involved the language of priorities. On the basis of the public expenditure commitments undertaken by the Government in the past six months, including in respect of Sheffield Forgemasters, I do not recognise a Government who were making choices about hard-earned taxpayers’ cash. As we have just heard from the Chancellor of the Exchequer, the Treasury had pencilled in £44 billion worth of cuts without finding a single one. It is inevitable that, having inherited the legacy that we have and the scale of the Budget deficit, this Government have to review our priorities and identify crucial projects to go ahead with and those that are less important. That is a process that we continue to undertake.
Mr Michael Meacher (Oldham West and Royton) (Lab)
Given that we are at or very near peak oil annual capacity, that conventional oil will increasingly be available only from very deep sites that are extremely risky such as the gulf of Mexico, and that unconventional oil such as Canadian tar sands involves unacceptable economic and climate change costs, what plans does the Secretary of State have to move the process forward, as I am sure he wants to do, to diminish oil consumption drastically before there is another horrendous catastrophe or the price of oil spikes uncontrollably?
Chris Huhne
I thank the right hon. Gentleman, who has a long and honourable record of interest in these issues. We share many instincts in our approach to them. We will present a series of proposals over the next year, which will attempt to accelerate the process of moving to a low-carbon economy. For my Department, the centrepiece of the Queen’s Speech is the energy saving Bill, which will attempt to put forward a comprehensive solution for retro-fitting in our existing housing stock. As the right hon. Gentleman knows, saving energy is by far the most low-cost means of closing the gap as regards our energy use and energy production. We also intend to accelerate the production of low-carbon sources of energy, including renewables, on which we will introduce measures. This is a time of transition, and nothing can be done overnight. We are talking about enormous investments that cannot suddenly be switched off; others cannot be suddenly switched on. We need a clear route map to a low-carbon economy which reduces our carbon emissions by the amount called for by the Climate Change Act 2008—80%—and we intend to make sure that we have a credible route for getting there.