Energy Bill [HL]

Lord Teverson Excerpts

Wednesday 9th September 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I will now speak to government Amendments 33 and 34. Amendment 33 inserts a new Part 2A into the Bill which amends the third-party access to upstream petroleum infrastructure regime found in the Energy Act 2011. Specifically, it amends Section 87 of the 2011 Act, which relates to powers to require information, and inserts new Sections 87A and 87B, which make provision for appeals and sanctions respectively. This amendment requires that where the Oil and Gas Authority issues a notice under Section 87 of the 2011 Act requiring information to be provided, it must specify a time for compliance with that notice.

The amendment also provides an appeal right to the First-tier Tribunal against the issuance of a notice on the grounds that the information required is not relevant to the Oil and Gas Authority’s functions relating to third-party access or that the length of time given to comply with the notice is unreasonable.

Amendment 34 also allows for any requirements imposed by such a notice to be treated as petroleum-related requirements and therefore to be sanctionable under Chapter 5 of the Bill. However, the Oil and Gas Authority will not be able to revoke a licence or terminate an operatorship in relation to such breaches.

Amendment 34 inserts two new sections into the Energy Act 2011, which established the third-party access to upstream petroleum infrastructure regime. New Section 89A allows for applications for access to upstream petroleum infrastructure made under Section 82 of the 2011 Act to be assigned to another party. New Section 89B allows for a new owner of infrastructure to which an application for access has been made to be treated as a party to that application. The amendment also ensures that where ownership of infrastructure in respect of which a notice under Section 82(11) imposing access rights has been issued is transferred, the obligations under the notice transfer as well.

Once such an assignment or transfer occurs, anything that was done by the original party is treated as having been done by the party to which the application was assigned or the ownership transferred. The provisions allow for the third-party access regime to continue rather than having to restart on a change of party, facilitate the transfer of non-commercially sensitive information already provided to the Oil and Gas Authority and ensure that all new parties are aware of the relevant history of the application.

The amendments will increase the utility of the third-party access to upstream petroleum infrastructure regime, which is an important tool in the Oil and Gas Authority's pursuit of maximising economic recovery for the United Kingdom. I beg to move.

[Lord Teverson (LD)]

I thank the Minister for his explanation of a somewhat technical new clause. I think that the Minister went through liability, but very quickly. Clearly, all sorts of liabilities are potentially incurred by someone who has these access rights. If there is a change of ownership or the rights are assigned to a further party, who takes any legal liabilities that may not have been resolved or may be found after the date of transfer that relate to the period before? I wonder whether that is clear, because I imagine that such liabilities could in certain circumstances be quite onerous. I would be interested to hear the Minister’s remarks on that.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, perhaps I may ask the Minister a question relating to new Section 89A introduced by Amendment 34. I drew attention at Second Reading to my entry in the register of interests as a non-executive director of the Offshore Renewable Energy Catapult. I drew attention, too, to some interesting ideas that are developing about the use of decommissioned oil and gas facilities in the UK continental shelf for renewable energies, in particular in the area of offshore wind.

Given that the new sections introduced by the clause relate to the powers of the Oil and Gas Authority, would that be a limiting factor given that these renewable technologies are not hydrocarbons? I find it quite a complicated clause to work my way through. I am seeking to ascertain—it may be that the Minister cannot give me an answer today, but perhaps officials could take a look at it—whether there is protection of the possibility in future of previous hydrocarbon capabilities being used for offshore renewable energy. I took some comfort from the use of the word “facility”, which suggests that there might be some leeway there, but given that I am not a lawyer—although there are people in this Chamber who are—perhaps the Minister can give a slightly better answer to those of us who do not have that kind of expertise.

--- Later in debate ---

[Lord Howell of Guildford]

My Lords, I take it that the noble Lord, Lord Oxburgh, is referring to the very interesting paper put forward by Professor Stuart Haszeldine and his colleagues about the financing and development of CCS. The noble Lord, Lord Oxburgh, is himself always at the forefront of new thinking and developments in this important area, and this is certainly a very interesting set of thoughts. Basically, the idea in the paper, as I understand it, is to spread the costs of further CCS development away from falling exclusively on the already burdened consumer and also to spread them through time. The argument is that, as we get to the end of the 2020s and into the 2030s, the real crunch and crisis over CO₂ will come and that the burning of coal particularly is going to become absolutely decisive in shaping future influence on climate change.

Furthermore, the noble Lord, Lord Oxburgh, is absolutely right about the centrality that he gives to the whole carbon capture and storage task. When one considers that 2,117 new coal plants are now being planned or built around the world, one begins to realise the enormity of the task to somehow ensure either that they are diverted or that the coal plants operate in ways that reduce carbon emissions. Carbon capture and storage clearly is the most satisfactory technical answer to that, although there are problems of cost, but there are of course much cleaner ways of burning coal, which both the Chinese and the Poles are urging, using very advanced technology built on the conventional platform but also supercritical boilers and other devices to ensure that much more energy emerges from a tonne of coal. That way, by definition, you get more energy or electricity out of a coal-fired station but save on the amount of emissions that would otherwise result. So there are other techniques as well, which are obviously decisive.

Most coal stations will be built in India, Indonesia and Turkey—mostly in Asia, although some in Europe. The whole attempt effectively to keep global warming to a 2 degrees centigrade rise will stand or fall on what happens to that vast number of new coal stations and the huge commitment to increased coal burn. It is the official policy of the Government of India that there must be a doubling of coal production and a very substantial increase in coal burning there, because the primary aim is the reduction of poverty and economic development. Unfortunately, given the economics of the present and near future, coal is much the cheapest way to produce the essential cheap power that developing nations of that size and with those challenges must have.

This is the problem. The noble Lord, Lord Oxburgh, and the noble Baroness, Lady Worthington, are absolutely right to call our attention to this, but the question left in my mind is how relevant it is to the extraction of oil and gas in the North Sea. If we are to carry forward experiments effectively, we need to develop the storage techniques that go hand-in-hand with carbon capture and storage. That is very important and there is a lot of work to be done on that.

I will strike a slightly diversionary note from what has been said in the debate so far. The aim here is maximum economic recovery. The aim is to cope with an industry which is shrinking very rapidly. On the front page of the Times this morning I read that 65,000 jobs are about to go in the industry. The industry is under very great pressure. As I understand it, our aim in the Bill and that of the OGA is to ensure that gas and oil are extracted economically, commercially and successfully in these shrinking conditions. We know that gas is considerably lower carbon when burnt than coal, so if we are trying to sequester our coal carbon emissions or move from coal to gas, it is more gas we want, not less. Everything needs to be done—as I understand the OGA is trying to do—to encourage the extraction at economic prices of gas from the North Sea that can then be burnt, thereby saving considerable carbon emissions. We need to copy the American example, where there has been a huge reduction in carbon emissions—at least on the production side; consumption is another story, of course—because they have switched from coal to gas as a result not of government policy but of the shale revolution.

I leave a question mark over the amendment as to whether it really applies as directly as some have suggested to the North Sea offshore operations. It is clearly vital that something is done to halt the massive increase in coal burn lying ahead. I think that 46% of the entire world’s electricity comes from coal, and that is probably rising, not falling. That is decisive, but whether at this stage the additional obligations in the Bill should be placed on this particular industry, which is struggling in desperately difficult conditions in both a geographic and an economic and commercial sense, I am not so sure. I end my comments with this question, although it may be that this is not quite the right place to think about this vital issue.

[Lord Teverson]

My Lords, I am a great disappointment to the noble Lord, Lord Oxburgh, because over the years, I have become a CCS sceptic in all sorts of ways. The reason for that is not because it is not necessary or a good way to move forward the decarbonisation agenda but because, exactly as he himself said—I have been talking about this for the nine years that I have been privileged to be a Member of this House—we have got a very short distance in terms of making it happen. Obviously there has been important progress, with projects in the formative pipeline at the moment, but one reason for that is that CCS is large scale, demonstration projects are very expensive and it stands aside from the fossil fuel-based industry that it is trying to help. The two are not directly tied up.

What I like about the amendment, and why I have put my name to it, is that it tries to find a number of ways through that puzzle. First, it says that CCS is important, and is a future technology. I really welcome the Government’s positive messages about this. From where I stand, the decarbonisation agenda seems to be rather on the back foot and going in the wrong direction, but in this important area I really welcome the Government’s positive mood music. But there are a couple of other things. One was referred to strongly and effectively by the noble Baroness, Lady Worthington. If there is greater stakeholdership of CCS by the fossil fuel industry, there is likely to be more push for there to be a real effect and for something to happen. It is also an ongoing basis on which this technology can be funded, rather than on the erratic one-off mega-subsidies and funding systems that we have at the moment.

For those reasons, this is a really positive suggestion and a way in which we can start to move forward. It is also in line with the philosophy, with which we all agree, that the polluter pays—or it is in that ballpark, if not absolutely perfectly. For that reason, I was very pleased to put my name to the amendment, as it helps to bring that forward. But as other noble Lords have said, clearly this is the start of an idea. That is why it is absolutely right that the amendment talks about a consultation process, rather than saying that it should happen. So I very much welcome this amendment and welcome the Government’s positive view towards CCS, and I hope that this can be seen as a way of moving this agenda forward more practically than we have achieved in the past.

[Viscount Ridley (Con)]

My Lords, I apologise for not being here on Monday to take part in the debates then, and I hope that the House will indulge me in speaking today. I declare my interests in surface coal-mining in the north of England. None the less, and to their astonishment and probably horror, I would like to support the amendment in the names of the noble Lord, Lord Oxburgh, the noble Baroness, Lady Worthington, and the noble Lord, Lord Teverson. It has enormous merits and is a good suggestion, although they should not worry because I will disagree with them on things towards the end of my remarks.

I welcome the remarks of my noble friend the Minister that he wants to discuss CCS further, and I hope that he might be able to include me in those discussions. I want to suggest as an extra twist—and the noble Lord, Lord Oxburgh, touched on this—that we must link this to some kind of alleviation of the carbon imposts on the industry, which are throttling various British industries at the moment, in particular the carbon floor price. What I like about the suggested amendment is that it avoids the distortion of supporting carbon capture and storage through the contracts for difference, and that it should work at no cost to the taxpayer and makes use of market mechanisms.

I think that we now have to agree that the world needs fossil fuels during this century, if only to give the billion people in the world who have not got access to electricity the chance to have access. We cannot get emissions reduction without using CCS, if we are going to use fossil fuels. We are still searching for a way in which to get emissions down without hitting affordability and security, to solve the trilemma. So far, the two main ways in which we have tried that have not worked. Subsidising renewables has worked very poorly in getting emissions down and has done so at the cost of affordability. So far, wind and solar have managed to take 1.3% of global energy use, after billions of pounds invested in it worldwide, while having a minimal effect on emissions reduction. So the renewables agenda is putting affordability at risk without achieving its goals.

The other tactic that we have tried is simply to put heavier and heavier taxes on fossil fuels, and we can see the effect of that on our electricity supply in this country. Power station after power station is closing. In the Queen’s Speech debate on 4 June I suggested rather rashly that there was now a risk that Eggborough would close—and now that has come to pass. Therefore we are genuinely looking at a worrying lack of energy security in this country. The two mechanisms we have tried for cutting emissions have either hit affordability or security, so we are still searching for a way to do decarbonisation cheaply and without hitting energy security. The best way to achieve that would be to build more gas-powered power stations and to encourage the use of gas instead of coal, but that is not possible at the moment in this country, because renewables are making it uneconomic for anybody to build or open a new combined-cycle gas turbine.