Draft Offshore Environmental Civil Sanctions Regulations 2018

Angela Eagle Excerpts

Tuesday 15th May 2018 General Committees

[The Minister for Energy and Clean Growth (Claire Perry)]

I beg to move,

That the Committee has considered the draft Offshore Environmental Civil Sanctions Regulations 2018.

It is a pleasure to serve under your chairmanship, Ms McDonagh. The regulations will allow the Department for Business, Energy and Industrial Strategy’s Offshore Petroleum Regulator for Environment and Decommissioning to impose financial civil sanctions for contraventions of offshore environmental legislation, which we believe provides a more appropriate and proportionate enforcement option and will further encourage operators to do the right thing in ensuring that those limits are not breached.

The regulations will, moreover, bring OPRED in line with the onshore environmental regulators, which already have such powers. The regulations will provide the offshore regulator with the ability to impose financial penalties on operators that are breaching environmental legislation.

I have visited OPRED and want to pay tribute to the civil servants working so hard in the fair city of Aberdeen who are doing a marvellous job to ensure that our offshore industry adheres to among the highest environmental standards in the world. One problem they have, unlike onshore regulators, is that they do not have the power to impose fines when they uncover a breach. The regulations will allow that gap in their current enforcement options to be filled.

[Ms Angela Eagle (Wallasey) (Lab)]

I do not think that there is anything anyone could object to about having a civil penalty as well as a criminal one, but the Minister implies that there have been some breaches that her inspectorate has not considered to be serious enough to bring criminal proceedings against. Therefore, the companies perpetrating them have been allowed to get away with it. What kinds of breaches does the Minister think the new civil penalties will enable her inspectorate to get a handle on? Such breaches have, by implication, gone by the board because of the inflexibility of the current arrangements.

[Claire Perry]

I welcome that intervention. I will say a little more the sort of breach that will attract the new civil penalty. To reassure the hon. Lady, a series of enforcement actions are already taken and they will have the effect of removing any breaches as quickly as possible. Those include serving an enforcement or prohibition notice, revocation of a permit, and referral for consideration of prosecution.

The majority of contraventions tend to be quite minor and the only enforcement option available is a criminal prosecution, which is costly and time-consuming for all parties. Of course, OPRED does not determine whether those matters should be prosecuted; that is rightly for the judicial system to decide. Giving OPRED these powers, which are in line with those enjoyed by the onshore regulator, would allow it effectively to make that decision and impose a financial civil sanction. That would allow for a more timely and cost-effective response, and it would not lead to the criminalisation of operators that have committed only a minor breach that they are anxious to put right but for which there is currently no sufficient penalty regime.

[Ms Eagle]

I am just trying to find out how large this issue is, in terms of companies that have been in breach but whose actions the prosecuting authorities did not think serious enough to bring criminal charges against them. By implication, there has been a series of breaches that are not serious enough to merit criminal charges but which would fall under the Minister’s proposed civil prosecution structure. Will she give us an idea of how great an issue this is and what has been allowed to pass because we did not have flexibility for a civil rather than a criminal process?

[Claire Perry]

I will give the hon. Lady numbers, because she and I both like facts rather than opinions. Since 2016, there have been 4,178 total breaches of environmental regulation. That sounds a lot but many are very minor. Of those, 78 have been subject to investigation. The assessment of my officials is that 10% of those 78 would have reached the required standard of proof for receiving a civil sanction. OPRED’s view is that that number will not change dramatically. We are talking about tens rather than hundreds. Of course, the measure is almost a threat; it is unlikely to be the outcome. As the Minister responsible for oil and gas, I believe that we have, by and large, very compliant companies that are anxious to maintain the reputation of the North sea basin as the most environmentally well-regulated. I hope those data satisfy the hon. Lady, who asked an excellent question.

Returning to my opening remarks, the measure is the ultimate penalty. It allows the regulator to have more arrows in its quiver when it gets out there and ensures that enforcement notices are taken seriously. In addition to the civil sanction, the ultimate threat is the revocation of a permit, which means that an operator can no longer operate. It is felt that those and the prosecution option are perhaps too severe for some of the sanctions being investigated. I have mentioned the numbers. Although criminal prosecutions can carry substantial penalties, they are used relatively infrequently, because they are so resource-intensive to carry out.

The sanctions will be applied instead of, not in addition to, criminal prosecution for cases where the required criminal standard of proof is met. The fixed and variable civil sanctions that OPRED will have the ability to impose range from £500 to £50,000. Those recommendations follow a consultation that finished on 15 February, seeking views from the public, the hydrocarbon sector and other relevant stakeholders, such as nature conservation bodies and environmental non-governmental organisations. There were only 13 replies, the majority of which responded positively to the regulations. No additional substantive changes to the regulations were needed as a result of the consultation.

Concerns were raised about the potential overuse of powers, the burden of proof and, fundamentally, the legislation to which the civil sanctions would apply. My team published a response on 16 April that detailed all those points, should people be interested. Many of the issues raised are relevant to OPRED’s enforcement policy and civil sanctions guidance document, which is being produced alongside the regulations, rather than to the regulations themselves. Both the guidance document and the enforcement policy will be subject to consultation and published in final form before any civil sanctions are issued.

In summary, the objective of the regulations is to create an equivalent environment for onshore and offshore operators, which in many cases are the same company; maintain the UK’s position as having excellent environmental standards for hydrocarbon extraction; give OPRED additional powers to impose financial civil sanctions for contravention of specified environmental legislation; and provide an element of proportionality for a breach that is deemed sufficiently serious to invite a potential criminal process but without actually taking the operator to court, although that option is retained for the most serious breaches.

Our intention is a proportionate and measured approach that will ensure greater compliance by offshore operators and allow enforcement action to be taken swiftly. If agreed by the Committee, the regulations will enter into force alongside the supporting documents on the next common commencement date of 1 October 2018. I recommend the regulations to the Committee.

--- Later in debate ---

[Ms Eagle]

It is a pleasure to serve, for the first time, I think, under your chairmanship in this Committee, Ms McDonagh. I want to take a little of the Committee’s time to tease out a bit more information from the Minister about what is behind the changes she has put before us.

As my hon. Friend the Member for Southampton, Test pointed out, there is an existing system of civil penalties in operation. I have a few questions for the Minister, which I would appreciate her dealing with in her response.

As someone who used to be the Treasury Minister responsible for taxing oil and gas, I have not only fond memories but some personal experience of how well regulated the industry is in general. Because the oil and gas fields are closer to the end than the beginning of their lives, we have seen a range of new expert companies come in that are good at extracting the final drops of oil from existing facilities.

Quite a few of the big boys have moved on to easier pastures and left these different companies, which are generally much smaller, more buccaneering and newer to the industry, in charge of seeing whether they can squeeze the last few drops of energy out of existing wells. Clearly, we are dealing with a range of different people, very different from the companies that we see on petrol forecourt stations. That is one thing: it is a more complex group of companies in different circumstances from how it used to be.

In order to maintain the safety records out in the North sea, with that change in context, it is important that there is a regime that companies take seriously, that has teeth and is enabled to enforce the regulations as they are. Looking at the result of the consultation published by the Minister’s Department there is a list in answer to question 4. I suspect it is the same list, though I am not sure, as the table the Minister said she would make available to the Committee.

It is about the regulations and the level of sanctions. It ranges from failure to comply with enforcement notices to making false and misleading statements or obstructing inspectors in their work. Those all would attract £1,000 fixed-term penalties. That rises to much larger penalties of £50,000-plus for unauthorised discharges into the marine environment.

That could be quite serious, not only for health and safety but pollution. For such things, the variable monetary penalties go up to £50,000. Issues such as that—which could have an impact on health and safety and maybe even the lives of the people on the rigs doing the work—are important and serious. Being able to enforce strict regulations in those dangerous contexts, sometimes in marine environments that are quite fragile, is also key.

Does the Minister think it gives the right message on enforcement to move from criminal prosecutions to civil prosecutions but use the same level of criminal evidence requirements? It looks like we are watering down the implications of ignoring the regulations. Is moving from criminal to civil sanctions that are taken less seriously sending the right message to the companies that are operating in this complex environment?

The companies have to be prevented from cutting corners. In complex, competitive environments, the worst corner cutters can often put pressure on the better companies to cut corners to keep profitability. It is important to send the right message in that context. Is the Minister convinced that these changes do not give the wrong message?

Why is the burden of proof unchanged? If we are moving from a criminal penalty to a civil penalty, why is the burden of proof not less onerous? That would look like a tightening of the regulations to make certain that everything was being watched carefully. Why are we moving to a civil penalty with a criminal burden of proof, which looks like a watering down? Does that not give the impression that environmental breaches will not be taken as seriously as they were before? Will she reassure us about that, too?

Will the Minister also make an unequivocal declaration that the draft regulations are not an admission by the Government that enforcement of criminal law has become so expensive and bureaucratic that they have had to switch to much easier civil penalties to get anything done? As my hon. Friend the Member for Southampton, Test said, there are very few criminal prosecutions. Does she think giving that impression, perhaps because of cuts to the prosecutorial and judicial authorities, sends the right message to people who may not have the best interests of their workforce or the environment at the forefront of their mind and may be more interested in profits than in doing things correctly? I would be pleased to hear the Minister’s response to those questions, and to be reassured that the proposed changes will not send the wrong messages.

[Claire Perry]

I thank the hon. Members for Southampton, Test and for Wallasey for their good, probing questions, to which I will respond in three blocks.

The hon. Gentleman suggested in his tone that OPRED was making up the fact that it was really busy. He will know—the hon. Lady will, too; I am sure she has done the dunk test and been out to see the various rigs—that we now have 299 oil and gas installations. We have 20 inspectors, who are required to go out and inspect in the most awful conditions, and it is absolutely right that we give them the tools that they have asked for to do their job most effectively. Let me again put on the record my gratitude and admiration for what they do.

The hon. Gentleman made a good point, as he often does—he always does, actually—which helped clarify something in my mind. He is right to flag that we already have a civil penalties regime for breaches under carbon emissions legislation, which is dealt with by an entirely separate set of regulations. The draft regulations will bring the same suite of tools—enforcement notices, civil penalties and, for the worst cases, prosecution—to bear on non-CO₂-related breaches: in effect, in this case, oil and chemical spills. It was helpful for him to make those points, because that helped me to ensure that I was clear about what we are doing. In a way, the numbers that he pointed out show that this will be an effective way of dealing with lesser breaches, just as it is under CO₂ legislation, which requires civil sanctions and/or prosecutions for the most serious cases.

I defer to the hon. Lady’s long knowledge of this area. She is right to point out that the North sea, although it is probably past peak production, is in a period of real renaissance. That is partly because of what the Government have done in listening to the oil and gas industry—

[Ms Eagle]

indicated dissent.

[Claire Perry]

The hon. Lady shakes her head, but she will know that this Government proposed the transferrable tax history, which my hon. Friends north of the border campaigned for very strongly and the industry had been asking for. Along with investment in the Oil and Gas Authority, which is the oil and gas regulator, and the wonderful Oil and Gas Technology Centre in Aberdeen, which is co-funded by the Westminster Government and the Scottish Government, that has stimulated a whole wealth of new investment and interest, and asset transfers from the big boys—she was correct to call them that: they are mostly boys—to smaller, more nimble companies that are better able to exploit those assets. We should all be very proud of that.

I want to push back a bit on the idea that the regime is being weakened. There are some serious large breaches—in effect, oil and chemical spills—that are absolutely worthy of prosecution. Then there are a whole suite of lesser offences for which enforcement notices can be issued and, most importantly, remediation action can be taken, both in clean-ups and ensuring that it does not happen again. However, other than through an exchange of letters and conversations, there is no way to make it clear to that operator that that is totally unacceptable behaviour which must not happen again.

I argue that having a civil sanctions regime enables that message to be sent even more strongly. For operators who—knowingly or unknowingly—are effectively allowing smaller breaches to happen, a suite of sanctions that did not exist will exist and be in force thanks to the regulations. I say unequivocally to the hon. Lady that this feels like a tightening of the regulatory regime. She is right that we have an offshore sector that is capable of generating hydrocarbons into the future. Ultimately, we will get to a hydrocarbon-free world, but, in the case of gas, if we invest in carbon capture and storage technology as we want to do, we can keep that gas being burnt cleanly in the system for a long period of time. It is economically vital to this country that we do that, and we need a regulatory regime that enables good operators to do what they do.

The hon. Lady said there might be some rogue operators creeping in. I am not suggesting that—there is no evidence of that—but we do have to bear that in mind, and these are the sorts of regulations that will send a strong message. Sanctions can be applied and penalties, which can be reinvested in the industry, can be collected to ensure that that message is sent loud and clear.