Energy Bill [HL]

Baroness Worthington Excerpts

Monday 7th September 2015 Lords Chamber

Moved by

[Baroness Worthington]

12: Clause 5, page 3, line 35, at end insert—
“( ) are necessary in order to inform the OGA’s role in developing and promoting carbon storage,”

[Baroness Worthington (Lab)]

My Lords, thank you for returning to Committee. Amendment 12 in Clause 5 relates to the Secretary of State’s abilities to give directions to the Oil and Gas Authority. Again, I fear that we are now retreading familiar territory in our discussion of the Bill and some of the concerns that we have with it. The amendments in this group are probing and designed to give the Minister an opportunity to respond on how he considers that these powers might be used by the Secretary of State. We revisit the two issues that we talked about earlier today, which are that the Oil and Gas Authority should have explicit mention of carbon storage and transportation in its objectives and in the matters to which it has regard. For consistency’s sake, we therefore believe that the Secretary of State should also have those powers.

The purpose of these amendments, particularly Amendments 12 and 14, which are in my name, is to ask the Minister whether he could give us a little more information about the circumstances under which he envisages the Secretary of State needing to use these powers. Perhaps he could also give us an example of what kind of direction he imagines the Secretary of State might be giving the Oil and Gas Authority in relation to its functions under these powers. There is clearly not much in the public domain to help me get a handle on the thinking behind Clause 5, so it really would be an illuminating contribution from the Minister if he were able to give us some examples of the circumstances, particularly the exceptional circumstances referred to in the Bill, and the examples of direction.

We had a discussion prior to the break about the primary purposes of the OGA. I remain convinced that there is a clean and very succinct way of doing this, which is to refer to the Oil and Gas Authority’s primary objectives and to include within them explicit reference to activities that go beyond maximising economic recovery, as it is perhaps formally or informally understood. At the moment, it is interpreted as meaning that we will extract the maximum volume of hydrocarbons from our natural resources which fall within our territorial waters offshore, and indeed onshore. But it may be that that definition of MER, while it still of course has cross-party support, needs to be revisited and revised.

In the previous discussion, we saw reference to new matters to which the OGA should have regard being added to Clause 4. The Minister’s response in that debate was that there is no need to be explicit about these matters and that climate change is taken care of elsewhere, as indeed is the need to decarbonise and CCS. But if that logic were to apply, it is the case that one of the matters stated in Clause 4 is the need to have regard to a secure supply of energy, so if we are being true to ourselves and saying that we should have a narrow focus for the OGA and do not need to reiterate these things, there is no need for any reference to security of supply in that part of the Bill either. However, I do not think that is correct. Indeed it was helpful that the noble Lord, Lord Deben, who is no longer in his place, made reference to the fact that to avoid doubt it is always better to be explicit about these things, for fear that people with slight imagination —he used that phrase but perhaps it should be “lacking in imagination”—might mean that there is a narrow interpretation of what the OGA is created to do and what is within its powers and remit.

That is a very lengthy way of saying that we look forward to hearing more from the Minister on Clause 5, which is clearly an important part of the Bill. However, as I read it, I am left wondering what these exceptional circumstances are and what these directions could look like. I look forward to hearing from the Minister in his response. I beg to move.

[Lord Whitty (Lab)]

My Lords, I have two amendments in this group, but I also want to apologise to the Committee because, due to my attendance at my Select Committee, I was unable to be here for the previous debate, during which, as my noble friend said, the case was made for ensuring that the OGA—while it may well have principal objectives—has to operate in the context of wider energy policies. Issues of climate change, energy security and affordability are relevant to how the OGA fulfils its main functions. Indeed, if its main function is in terms of maximum economic recovery, what happens on those other dimensions of energy policy affects the actual economics in MER. Therefore, it is important that the OGA, as set out in the earlier clauses, has some regard to those broader objectives of energy policy. It is also important that the Secretary of State can intervene in those areas.

Amendment 13 would allow the Secretary of State to give directions where it would be necessary to meet the terms of the Climate Change Act and the budgets promulgated under that Act. Amendment 15 relates to the Committee’s discussion before the break about carbon capture and storage, so that directions could relate explicitly to the storage of gas and oil and the storage of carbon dioxide as part of a carbon capture and storage scheme. The amendments previously discussed relating to Clause 4 need to be complemented with the ability of the Secretary of State to intervene on those same subjects. That is what these amendments would do.

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[Lord Bourne of Aberystwyth]

I am grateful to the noble Lord for that clarification. We will have another look at the position, and indeed I am probably using the term “environmental regulator” in something of a shorthand sense. We have legal concerns on this, but I undertake to take a second look and possibly we will come back to it on Report.

In the light of my comments and the undertakings that I have made previously, I respectfully ask the noble Baroness to withdraw the amendment.

[Baroness Worthington]

I thank the Minister for his reply and my noble friend Lord Whitty for his contribution to the debate. It is helpful to have specific examples of when the Secretary of State may need to take powers to direct the OGA. I have to say, though, that they do not really reassure me. I should like to read Clause 5 again in more detail because it seems that when it comes to the licensing of activities, competition and scientific evidence, it will give the Secretary of State quite a high degree of enabling power. I wonder whether the process as outlined in the Bill, which is just to notify Parliament with no debate, is sufficient in the circumstances. I could fast forward and imagine a time when there might be a part of, shall we say, a constituency which may not wish to have a particular oil and gas activity taking place. It might suit the Secretary of State to exclude that objection, and in these circumstances it seems that the Secretary of State could simply ask the OGA to do so without any debate about it.

The examples are helpful and it may be something we come back to on Report. However, before I withdraw the amendment I should like to reiterate my point that if we are going to take the line of defence that the OGA is narrow and does not need to have all these matters cluttering its mind, this seems to be a situation where it is being expected to have some sort of regard to security of supply, even though it is not a security of supply expert any more than it is a climate change expert. In terms of the trilemma, which we all know and love, of energy security, affordability and decarbonisation, to make explicit reference to security of supply in Clause 4 but not to affordability or climate change issues seems to suggest that one leg of the stool is more equal than the others. Again, we will probably want to come back to that, even if it is just to take out the reference to security of supply, which might be the most obvious solution.

At this stage I am happy to withdraw the amendment, but as I say, I will read Clause 5 with a greater degree of understanding and scrutiny now that we are back from the Recess. I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

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[Baroness Byford (Con)]

My Lords, first, obviously the details will be set out in the regulations. Does my noble friend have any idea when those regulations may be available, or if they are available already? That would be helpful to us in our discussions as we go through the Bill. Secondly, I particularly welcome the flexibility that has been given to the Secretary of State to make payments which might unexpectedly be needed. Having that sort of provision makes good sense.

[Baroness Worthington]

My Lords, I thank the Minister for his introduction of these government amendments and the noble Baroness, Lady Byford, for her contribution. However, I disagree with the noble Baroness slightly on her last comment. It may be necessary for the Government to make financial support available, but I worry that that creates yet another unbounded public spending commitment, and I know that the noble Baroness is very keen to try to constrain such commitments, as are the Government. I question the need for government Amendment 19, but at this stage I am not sufficiently briefed to know how extraordinary these clauses are. Maybe this is a very common thing, and we always create these abilities to give grants to quangos with no further detail, but perhaps we do not. I would be very grateful if the Minister could provide a bit more context, when he replies, about the need to provide for grants, loans and other financial provisions.

I ask because I am concerned about the growing costs of decommissioning, which we have talked about in previous debates. Similarly, I am slightly nervous about unbounded liabilities on the public purse at a time when so many people are being asked to tighten their belts. The profits of the offshore oil and gas industry are well known, and it would seem odd for it to be given special provision while everyone else is seeing their budgets cut. In particular, I am slightly worried that these unforeseeable events are not defined and that there would be, as I read it, very little in the way of opportunity for debate or questioning of the Secretary of State if such financial provisions were made. I would like further clarity on how much scrutiny there might be on that aspect. Those are the main points at the moment, and I look forward to a response from the Minister.

[Baroness Byford]

Perhaps I could express myself slightly more fully before the Minister responds. I looked at government Amendment 19 in terms of a national emergency—something out of the ordinary—and I was not quite sure, if it did not come in within the new clause, whether there was another way in which that sort of money can be accessed for the OGA. That was the presumed context within which I raised the issue. The noble Baroness is quite right that I am very keen to make sure that the Government live within their means. However, there are times—as we have seen in the international field when we have had major oil spills or something has gone really wrong—when emergency money has to be made available and I wondered whether that was within the context of the new clause in Amendment 19.

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[Baroness Byford]

My Lords, I have two amendments in this group, Amendments 26A and 30A. As we discussed earlier, the OGA may well choose to encourage small innovative companies to come into the business. The termination of rights under a licence, for whatever reason, may result in the failure of a company. The wording in the Bill seems to imply that the duty to retain information and samples will continue, but I am not sure how long that continues for. If a company ceases to continue in business for whatever reason, what happens to those samples? Is the implication of the clause that the OGA will be bound not to encourage innovation—which would be regrettable—other than in companies that are part of or allied to others and which would pick up the pieces in the event of bankruptcy? In other words, does this subsection of the Bill in practice restrict the OGA’s duty to have regard to,

“The need to encourage innovation”?

I turn to Amendment 30A, picking up on the comments from the noble Baroness, Lady Liddell, about data sharing. In many businesses, not just the oil business, people are very wary about data sharing, and in many cases I quite understand why. My amendment goes to the other end of the question: what happens to some of these data? Do they get passed on, and what restrictions are there on data being shared and pooled for the benefit of everyone? Over the years, Governments and businesses have been required to release data, which have then been passed on to third companies in a way I am sure the Bill does not intend. My second amendment refers to that. In his letter to me, the Minister stated that,

“information may be disclosed if any one of the factors listed under 27(5) applies”.

However, I still do not understand in what circumstances the OGA would disclose protected material simply because the person who had provided it had consented, although there was no need for disclosure under Clause 27(b), (c) or (d). Is there an implication that permission to disclose will be a standard part of any relationship with the OGA? Really, my amendment comes between the previous contribution relating to the concern that we should share data, which is quite right, and the question of how those data are used, not abused, in future.

These are two very simple amendments, and I am delighted to have spoken to them.

[Baroness Worthington]

My Lords, I shall speak to the amendments in my name and those of the noble Lords, Lord Teverson and Lord Oxburgh. Here again we have an example of a slight lack of communication at the end of the Recess, but I am certain that by the end of Report we will have all this ironed out.

We are addressing similar points to those addressed by the previous amendments, as described very eloquently by my noble friend Lord Whitty. This gets to the nub of our concern about the OGA’s remit not being sufficiently broad to ensure that it is able to carry out its functions in a rapidly changing world, in which conversations about carbon capture and storage may be happening more often than conversations about the exploration of new wells or life extensions of existing ones. It is about ensuring that there is nothing in the Bill to prevent the very sensible powers that have been taken to enable activities in the North Sea to be well organised from applying to those activities when they relate to carbon capture and storage.

We—and, I am sure, others—have received excellent representations from academics and the CCSA on the issue of information sharing and samples, which requires careful attention. I was very interested to find out about the issue of samples. Over the past 50 years of exploration and production in the North Sea, and indeed offshore all around the UK, the oil and gas sector has acquired rock core data. In the drilling and exploration of wells, a core of rock is extracted and then maintained, curated, labelled and well looked after. That core sample contains all sorts of information that might be relevant for people wishing to repurpose sites in the North Sea or to continue their use in other forms. I believe that at the moment there is an obligation to maintain these physical samples. However, if a company abandons a hydrocarbon field, that requirement is no longer in place, and I am told that those physical samples can therefore literally be landfilled. The samples have cost millions, if not billions, to acquire, and should be valued as such.

We would therefore like to see something in the Bill that acknowledges that, when it comes to information and samples, we are discussing a very great resource that has practical implications for the development of CCS when it comes to understanding rock strata, and this information should be available. The Minister might say that the British Geological Survey retains an archive of these rock cores, but that is only an archive: you are not able to take samples from it and cannot use it to do the kind of sampling or study and research that you might want to, so that would not be sufficient. There is a need for something that will keep these cores that are owned by the oil and gas companies in a good state and available for people who may find them useful in future.

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[Lord Bourne of Aberystwyth]

My Lords, in moving Amendment 31, I shall also speak to government Amendments 32 and 36. I am extremely grateful to the Delegated Powers and Regulatory Reform Committee for its consideration of the Bill and the detailed work it always does. These amendments are made to implement some of the recommendations set out in the sixth report of the committee.

Amendment 31 amends Clause 28 to include factors the Secretary of State must have regard to before making regulations under Clause 27(8). Such regulations would determine the periods of confidentiality that are to apply to protected material before it can be published or made public. When balancing these factors the Secretary of State must take into account the principal objective of maximising the economic recovery of United Kingdom petroleum. The regulations made under Clause 27(8) are to be subject to the affirmative procedure as a result of Amendment 36, which amends Clause 61 to this effect.

Amendment 32 amends Clause 40, subsection (2) of which requires the Oil and Gas Authority to issue guidance on the matters to which it will have regard when determining the amount of a financial penalty. In line with the committee’s recommendation, this amendment requires that the Oil and Gas Authority lays any guidance or revised guidance produced under Clause 40 before each House of Parliament. I am most grateful to the committee for its recommendations, but I should say that the Government have not additionally sought to apply any parliamentary procedure to the guidance, as that is not established practice; for example, we followed that practice in relation to the supermarkets adjudicator and the data commissioner.

Before I move these amendments, I should say that I have heard that the impact assessment with regard to the Oil and Gas Authority has in fact been published, which is good news. It should be available online now, but we will undertake to get it round to Peers who participated in this debate no later than tomorrow. I apologise for the lateness of that. I beg to move.

[Baroness Worthington]

My Lords, I am grateful to the Minister for introducing these government amendments. Indeed, we—Labour—had also tabled an amendment following the Delegated Powers Committee’s recommendation; of course, that will now be withdrawn in the light of the Government’s decision to table amendments. We are obviously pleased that the Government have listened to that committee and taken on board its recommendations in regard to the use of the affirmative resolution procedure. We think that is an important addition to the Bill and has improved it—we are grateful.

Before we conclude today’s debate, I am encouraged to hear that we will, finally, see an impact assessment. When we sit in Committee and we dedicate our time to scrutinising these important matters, having an impact assessment in front of us at the time is much more useful than having it after the Committee’s deliberations have concluded. We have a number of groups that we will talk to on Wednesday, so at least we will have some information for that. In the light of the impact assessment’s late arrival, I would not be surprised if some of the contributions on Wednesday revisit ground that we visited today without the benefit of the impact assessment. That aside, we look forward to seeing it and I am grateful to the Minister for confirming its arrival. These amendments, as I have said, are implementing recommendations that we support and we have no further comment.

[Lord Bourne of Aberystwyth]

I thank the noble Baroness very much for those comments—I fully understand and sympathise with her position on the impact assessment. I agree that it would have been much more desirable to have the impact assessment in considering the amendments today. I thank her for her support on the amendments in relation to the Delegated Powers and Regulatory Reform Committee’s recommendations.