Scotland Act 2016 and Wales Act 2017 (Onshore Petroleum) (Consequential Amendments) Regulations 2018

Lord Henley Excerpts

Thursday 21st June 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 30 April be approved.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, in line with the Smith and Silk commission agreements, the Scotland Act 2016 and Wales Act 2017 provide for the devolution of onshore oil and gas licensing to the respective Governments.

Today’s debate will focus on the devolution of Section 45A of the Petroleum Act 1998 to the Governments of Scotland and Wales. Section 45A provides the means of assurance to the relevant authority that the relevant person will be able to plug and abandon a well or otherwise provide the necessary funds for it to be done. As such, Section 45A is a key part of the licensing regime and needs to be devolved to enable Scottish and Welsh Ministers to ensure that licence obligations can be met and wells can be plugged and abandoned as appropriate. We intend to transfer Section 45A powers to Scottish and Welsh Ministers for their respective territories, using powers to make consequential amendments under the Scotland Act 2016 and Wales Act 2017.

As recommended by the Smith and Silk commissions, it was agreed that powers related to onshore oil and gas licensing, aside from those relating to royalties, would be devolved to Scotland and Wales. The Scotland Act 2016 and Wales Act 2017 will transfer legislative competence for onshore petroleum to the Scottish and Welsh Governments when fully commenced, with the exception of matters relating to setting and collecting licence rentals.

To aid devolution, in February this year we commenced Sections 47 and 48 of the Scotland Act 2016, which transferred the existing UK onshore licensing regime as it applies in Scotland to Scottish Ministers. This means that Scottish Ministers have the powers to administer the existing onshore oil and gas licensing regime in Scotland and to create a bespoke licensing regime if they wish. It has been agreed between Welsh Ministers and the Secretary of State for Wales that provisions that enable Welsh Ministers to administer the existing onshore oil and gas licensing regime in Wales, or to create a bespoke regime if desired, will commence on 1 October 2018. Therefore, we intend to make and lay negative regulations necessary to deliver this in early September.

I turn now to the detail of the affirmative regulations that we are debating today. The proposed consequential amendments included in this statutory instrument will make amendments to Section 45A of the Petroleum Act 1998. These amendments are consequential on the devolution of onshore petroleum licensing functions to Scottish Ministers under Section 48 of the Scotland Act 2016, and to Welsh Ministers under Section 23 of the Wales Act 2017.

The consequential amendments that these affirmative regulations make reflect the role of Scottish Ministers as the licensing authority in Scotland, and allow the licensing regime to work as intended in relation to onshore areas in Scotland. The regulations provide for the position both before and after commencement of the Wales Act 2017, which makes equivalent provision for devolution of onshore oil and gas licensing to Wales.

As I set out at the beginning, Section 45A is a power that allows the relevant authority to issue a notice requiring a person, once they have begun to drill a well, to provide information regarding their financial affairs. If the authority is not satisfied that the person will be capable of plugging and abandoning the well following the submission of financial information, Section 45A allows the relevant authority to issue a notice requiring the person to take action. This notice could include the provision of security to the relevant authority, to ensure that the costs of plugging and abandoning the well are covered. Although this provision has not to date been used onshore, we consider that the power applies onshore, and therefore Section 45A forms part of the regime which should be transferred.

A negative statutory instrument will follow these affirmative regulations to make consequential amendments to the onshore licensing regime in Wales. Transferring powers from the UK Administration to a devolved Administration does not count as a regulatory provision, so we are not required to do a regulatory impact assessment. Furthermore, there has been no specific consultation on these technical amendments as they are necessary to the effective operation of the provisions set out in the Scotland Act 2016 and Wales Act 2017, which were consulted on separately.

The regulations assist in giving the Scottish Parliament, the National Assembly for Wales and Scottish and Welsh Ministers greater control over their onshore oil and gas resources, complementing the provisions of the Scotland Act 2016 and Wales Act 2017. These affirmative regulations are an important step towards delivering a recommendation of the Smith and Silk commission agreements and to ensure a smooth devolution of powers for onshore oil and gas licensing in Scotland and Wales to Scottish and Welsh Ministers.

I commend the regulations to the House.

[Lord Bruce of Bennachie (LD)]

My Lords, of course I support the instrument, not least because, as the Minister said, it fulfils a pledge of the Silk and Smith commissions to transfer these powers to Scotland and Wales, but I have one question and a bit of context, because the transfer of these powers has generated a lot more heat than light in Scotland, where the Scottish Government claim that this gives them the power to ban fracking or any other form of onshore exploration, which the Court of Session says does not exist. In other words, the First Minister says that fracking is banned in Scotland, but the Court of Session says that it is not and is simply subject to normal planning considerations, so we are in a state of confusion, which is no responsibility of the Minister or the UK Government, having transferred that power.

This will become a significant issue only if there is a commercial desire to do significant onshore drilling or shale activity in Scotland, which Ineos has been preparing the ground for. It is entirely hypothetical, but it has been stated that if the future of Grangemouth, for example, depended on being able to extract shale oil that exists right underneath the plant, the issue would become politically more real, because you would be banning something that had a significant impact for Scotland, as opposed to current theological arguments about whether we should be doing that.

The only question I have for the Minister relevant to the regulations is on the section that says that everything is devolved except for the consideration—which is presumably the fee that might be involved. I completely understand that the administration and licensing of oil and gas energy is a reserved matter and therefore entirely for the UK Government, but I wonder, given the context that I have just outlined, whether adding to the pot the economic benefit of a licence—not only the commercial benefit but the revenue and royalties that might accrue to the Scottish Government—could change the tenor of the debate.

I have to make it clear that my party is not in favour of fracking and supports a ban. I personally do not agree with that; I think we should wait and look at the facts and the science rather than take a decision before it becomes a reality. Right now, it is purely theoretical; the whole thing is a power to do something that no one commercially is seeking to do and which the Scottish Government and public say that they do not want to happen. However, I can anticipate a situation in which reality will say that it is material and significant—that there are jobs and investment that matter—and the devolution of this power will become a problem, albeit one for Scottish politicians, not UK politicians. But I repeat what I said about transferring the consideration as well—not necessarily the licence, but the consideration. That would just be another factor that might realistically be put into the mix.

[Lord Grantchester (Lab)]

I thank the Minister for his explanatory introduction. As he says, this instrument devolves Section 45A of the Petroleum Act 1998 to the devolved Administrations of Scotland and Wales. As obligations for plugging and abandoning wells are included in the licence conditions, Section 45A, relating to the financial ability of the relevant party, is a key part of the licensing regime that needs to be devolved.

I have only one curiosity to be satisfied in agreeing to the regulations. The territories of Scotland and Wales are defined in area according to the Territorial Sea Act 1987, which defines the onshore area to include up to 12 nautical miles offshore. Could there be a situation whereby an offshore activity could be undertaken under onshore petroleum legislation? I am sure the Minister may reply that up to 12 nautical miles offshore is, in fact, onshore territory. May I follow that up with a further question? Should there be a well or field that straddles the border both within and without the 12-mile limit, who would have to apply the wisdom of Solomon to adjudicate on whether it was onshore or not? While the Minister puzzles over the question, I am happy to approve the regulations.

[Lord Henley]

My Lords, I thank the noble Lord, Lord Grantchester. I certainly puzzled over the question, and I imagine that those who advise me in these matters are also puzzled. The simplest thing would be to say that I will write to him in greater detail on the Territorial Sea Act 1987—an Act we all wish to know more about. I am grateful to the noble Lord for his assiduous study of it.

I am also grateful for the comments of the noble Lord, Lord Bruce. As he rightly says, there is not much that I can do in the way of commenting on this—I certainly cannot engage in theological discussions between the Executive north of the border and the judiciary. It will be a matter for them to resolve. All I can say is that, like him, and unlike his party—I have had this discussion with his noble friend, the noble Baroness, Lady Featherstone, on a number of occasions—I am a great believer in looking at the facts on these matters, and a great believer in the possible economic benefits to this country and north of the border for the extraction of shale gas. I hope he will continue to do his work within his party. I did not quite discover what the views of the noble Lord, Lord Teverson, were on this; he indicates that he wishes to remain silent on these matters. He can discuss that with the noble Baroness, Lady Featherstone, in due course.

There are great opportunities in the extraction of shale gas, and we should look at the facts when it comes to that. Obviously, with the passing of these regulations, that and all the other activities will become a matter for the Scottish Government, but I hope they will listen to the noble Lord, Lord Bruce, and not other siren voices, on this matter.

I think I have dealt with all the questions, other than the rather technical ones from the noble Lord, Lord Grantchester, on the Territorial Sea Act 1987.

Motion agreed.