Energy Bill [HL]

Debate between Lord Moynihan and Baroness Smith of Basildon

Monday 31st January 2011 Grand Committee

[Baroness Smith of Basildon]

I am very grateful to the noble Baroness; her contribution was extremely helpful. Certainly, it was not the intention that the time of applying for a licence should be the only time when financial capability was assessed. The insertion somewhere in the wording of “continuous” would be extremely helpful, as is her point about access to funds via insurance. The contrast I was trying to draw was with the Government’s policy on the nuclear industry. Currently it is the Government’s policy that a nuclear power company would have to be responsible for all the costs of decommissioning for some time—indeed, for the foreseeable future. In our previous debate we talked about 100 years or so. It seemed that equal responsibility should be taken by oil companies. I am grateful to the noble Baroness for her suggestions.

[Lord Moynihan]

My Lords, I was not going to intervene on this, but I have just watched, at some length, the follow-up proceedings in Congress on the first presidential commission report on the BP Deepwater Horizon disaster, which was published several weeks ago. Most of the cross-examination on this issue highlighted the fact that caution should be the order of the day in assessing the level of cover that an operator would require. Caution is needed because there is a massive difference between the majors and the independents. The representatives of the commission, when cross-examined in the last few days, highlighted the fact that they had not had the opportunity to discuss this issue, which is a valid and important one to raise. I welcome the fact that an amendment has been tabled so that we can consider it. However, the representatives had not had an opportunity to sit down with the insurance industry to look in detail at the exposure—the level of cover required—and the impact on the industry as a whole.

We in this country have a proud and, in my view, wise policy of encouraging independents to come on to licences alongside the majors to add further expertise and bring additional value to the table on safety, drilling expertise and well knowledge. I would be cautious about taking too much of a blanket approach to this at the moment—one which did not take into account the exposure that was being sought by the noble Baroness for different licence-holders and different companies on the same licence. The direction of travel in which she is heading is one that the industry will need to follow. This will inevitably be a major issue as the industry moves forward, both in the United States and elsewhere. It is a subject that will require detailed consideration between government, the industry and the insurers to come up with the best possible method of moving forward to ensure that, on the one hand, there is cover but, on the other, we do not end up with just a handful of majors and lose the independent sector. It has contributed so much to the development of the North Sea and has a commitment to safety that is as great as that of anybody else operating there. That is my only word of caution.

This is a highly complex area, which needs a good deal of further reflection, but I welcome the fact that the noble Baroness has brought this to the Committee. It is an important issue and she knows my interest in the subject. I hope the Minister responds equally positively about the importance of this issue and of continuing discussions between the Government, the insurance industry and the operators—and not just the operators but the drillers—to make sure that there is appropriate cover, but that cover is not required to the point at which we lose a significant section of the industry, which so far has contributed greatly to the development of the North Sea.