Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2017

Baroness Vere of Norbiton Excerpts

Thursday 30th November 2017 Lords Chamber

Moved by

[Baroness Vere of Norbiton]

That the draft Regulations laid before the House on 19 July be approved.

[Baroness Vere of Norbiton (Con)]

My Lords, the Scotland Act 2016 implements the Smith commission agreement by devolving a range of powers to the Scottish Parliament and Scottish Government. As recommended by the Smith commission, it was agreed that powers related to onshore oil and gas licensing, aside from those relating to royalties, would be devolved to Scotland.

The Scotland Act 2016 transfers legislative competence for onshore petroleum to the Scottish Government with the exception of matters relating to setting and collecting licence rentals. It also includes provisions for Scottish Ministers to exercise powers currently held by the Secretary of State or the Oil and Gas Authority in relation to onshore licensing in Scotland. These consequential amendments complement the provisions of the Scotland Act 2016 and assist in giving the Scottish Parliament and Scottish Ministers greater control over their onshore oil and gas resources.

The intention is to transfer the existing UK onshore licensing regime, as it applies in Scotland, to Scottish Ministers. This will provide Scottish Ministers with the powers to administer the existing onshore oil and gas licensing regime in Scotland and to create a bespoke licensing regime if they so wish.

To implement the relevant powers in the Scotland Act, we need to make two statutory instruments. First, these affirmative regulations make consequential amendments to the taxation legislation. Secondly, negative regulations will make consequential amendments to the licensing regime. BEIS officials have been working closely with the Scottish Government, HMRC, the Scotland Office and the Oil and Gas Authority to prepare the regulations. Once the Scotland Act 2016 provisions concerning onshore oil and gas are fully in force, onshore oil and gas licensing in Scotland will be the responsibility of Scottish Ministers and they will be responsible for granting relevant licences. Currently there are four onshore oil and gas licences in Scotland. There is no production from any of the licence areas.

I turn now to the detail of the regulations. These affirmative regulations make minor consequential amendments to taxation legislation to reflect the role of Scottish Ministers as the licensing authority in Scotland in order to allow the tax legislation 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 recommended by the Smith commission, it was agreed that powers related to consideration payable for licences and related matters remain reserved and will therefore not be devolved to Scotland. This was set out in Sections 47 to 49 of the Scotland Act 2016.

Taken together with the forthcoming negative regulations, these provisions transfer responsibility for onshore petroleum in Scotland to Scottish Ministers, including responsibility for existing licences. The provisions provide Scottish Ministers with the powers necessary to administer the existing onshore oil and gas licensing regime in Scotland and to create a bespoke licensing regime. Furthermore, with the commencement of Sections 47 and 48 as part of the devolution of onshore petroleum licensing, mineral access rights will also be devolved, transferring responsibility for the process by which rights of access to private property are determined, delivering another key recommendation of the Smith commission.

This affirmative statutory instrument could be laid in Parliament only after the Wales Bill received Royal Assent in January 2017, as it makes amendments that anticipate amendments made by the Wales Act 2017. The negative regulations will follow these affirmative regulations to make consequential amendments to the licensing regime. There has been no specific consultation on these technical amendments, since they are necessary to the effective operation of the provisions set out in the Scotland Act 2016, which was consulted on separately. Additionally, 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.

To conclude, the regulations assist in giving the Scottish Parliament and Scottish Ministers greater control over their onshore oil and gas resources, complementing the provisions of the Scotland Act 2016. These regulations make minor amendments to legislation governing taxation to ensure a smooth devolution of powers for onshore oil and gas licensing to Scottish Ministers. This measure is an important step towards delivering a recommendation of the Smith commission agreement. I beg to move.

[Lord Fox (LD)]

My Lords, I broadly welcome the devolutionary nature of this instrument. I think that my noble friend beside me would not forgive me if I did not say that we prefer an expansion of renewable energies rather than hydrocarbons, whether in Scotland or in the rest of the United Kingdom, and that should be put on record.

I am slightly confused and I may have misheard, so perhaps the Minister can guide me. I thought that the Minister said that consultations in drawing up these regulations had gone ahead with the Scottish Government, but the briefing says that there was no consultation. I would hope that these measures have been brought forth with the full understanding and consultation of the Scottish Government and I expect that they have. In that measure, I have nothing else to add.

[Lord Grantchester (Lab)]

I thank the Minister for introducing this measure to your Lordships’ House. As she explained, it is consequential to the Scotland Act 2016, commencing further devolution to Scotland once we undertake a similar instrument extending such powers to Wales under the Wales Act 2017. These provisions are included in the Energy Act 2016. The regulations devolve licensing power for petroleum exploration and development to Scotland. It is noted that this includes fracking.

The regulations provide for the position both before and after the commencement of the Wales Act 2017, which makes the equivalent provision for devolution of onshore oil and gas licensing to Wales. There is no material change to taxation legislation and no direct cost to business from these regulations.

These Benches entirely support and agree with the regulations. My only question arises from the lack of a commencement date. Does the Minister have any prospective date in mind that the Scottish Parliament can look forward to?

[Baroness Vere of Norbiton]

I thank noble Lords for their contributions to this short debate. The noble Lord, Lord Fox, mentioned that the Liberal Democrats would like to see more renewable energy in Scotland. I echo that. It is a matter for the Scottish Government’s process. I ask the noble Lord to forgive me if I was unclear on the consultation process. There has been full consultation with the Scottish Government. There has not been a broader public consultation because that had already happened in the Scotland Act process.

On the point raised by the noble Lord, Lord Grantchester, onshore oil and gas includes hydraulic fracturing, which has been subjected to a temporary moratorium in Scotland for a little while now. When these powers go to Scotland, it will be for Scottish Ministers to decide whether they want to change the way in which they undertake the moratorium. That is a decision for the Scottish Government. On commencement, the regulations will commence at the same time as Section 48 of the Scotland Act, as soon as the negative regulations have been laid.

Motion agreed.