Energy Bill [HL]

Baroness Worthington Excerpts

Monday 19th October 2015 Lords Chamber

Moved by

[Baroness Worthington]

19: Clause 5, page 3, line 41, at end insert—
“( ) Directions given under subsection (1) may require the OGA to postpone or prohibit decommissioning of oil or gas infrastructure until such time as the Secretary of State determines that a carbon capture and storage operator is in position to utilise the infrastructure.”

[Baroness Worthington (Lab)]

My Lords, the next group of amendments have been tabled under the heading of decommissioning and the risks associated with the,

“decommissioning of oil or gas infrastructure”,

and safeguards. In speaking to Amendment 19, I shall speak also to Amendment 77. As we have said previously, we are grateful to the Minister for listening to some of the concerns raised during the passage of this Bill. Under the previous group, we talked about carbon capture and storage and use. The other aspect of this Bill which we felt needed more attention was decommissioning. This afternoon, the noble Lord, Lord Howell, who is not in his place, kicked off by reminding us that the world is changing very fast. The very low prices, which look likely to be sustained, have had a big impact on the North Sea and the pipeline of investment into and operations within it. We are seeing a somewhat contracted timetable for decommissioning as a result of that change in the global oil price.

It is fair to say that the resource discovered in the North Sea in the 1970s has been an absolute mainstay of our economy and our public finance. It has paid a huge sum—some £300 billion, I think—in tax income since then. Obviously, it has helped to generate many jobs, to bring about world-class engineering and has been a considerable boon to the UK. However, all good things seem to come to an end and, particularly when it comes to fossil fuel reserves, that end can come rather more swiftly than one might expect. That is partly because of oil and gas prices and the commodity market, but also because we are now entering a world in which we know that we can no longer burn and combust oil and gas without paying heed to the fact that that is contributing to global warming.

Obviously, the recent oil price reductions have not yet been directly related to policy interventions on climate change, but they may be a foretaste of things to come as more nations move to a low carbon economy. I am thinking specifically of the US, China and Europe—the three big economic blocs where it is clear that the commitment to tackling climate change is real and the desire to move to cleaner energy systems is starting to be witnessed.

We are now seeing decommissioning occurring. In tabling these amendments, our concern is that this is happening on a more condensed timetable than we might have expected or perhaps wished. On the one hand, we have a desire to develop a new industry in the form of carbon capture, storage and utilisation, which obviously requires the fitting of equipment to capture the gases that are transported and potentially stored in areas of the North Sea, or onshore in saline aquafers and other locations.

The move to deploy these projects has been very slow. It was way back in 2005, under a Labour Government, when we first said that we were going to pay for such projects. There have been several iterations of that policy since and here we are, 10 years later, still awaiting the first sods to be turned and projects to go ahead. We know that we now have a funding mechanism—at least, we hope we do—in the form of the contract for difference. We expect those projects to be successful and to see at least two, or possibly three, demonstration projects in the UK, which will then result in relatively large volumes of CO₂ needing to be stored. But that is all taking rather a long time.

In the mean time, we see the major players in the North Sea wishing to withdraw. Therefore, the decommissioning of their infrastructure may happen sooner than we are able to reuse it through CCS, which poses quite a significant challenge. Our purpose in tabling these amendments is to explore the extent to which the OGA will have and should have powers to manage decommissioning, so that, if a large oil and gas operator wants to move out of the North Sea, it cannot simply begin the decommissioning process without giving due notice to government and considering the reuse of that infrastructure.

For avoidance of doubt, I am sure the Minister will explain that government Amendments 73, 74, 84 and 85 are relevant to this discussion and seek to address the misalignment between potential decommissioning and the need for that infrastructure, which is welcome. Our amendments are perhaps a little more explicit. Certainly, Amendment 19 would give the Secretary of State a specific power to direct,

“the OGA to postpone or prohibit decommissioning”.

--- Later in debate ---

This amendment, together with government Amendments 8 and 9—which I shall discuss further shortly—seeks to address this by ensuring that all owners of relevant offshore infrastructure are obliged to act in accordance with the strategy when planning and carrying out decommissioning of that infrastructure. Importantly, this amendment also clarifies that consideration of alternative uses of such infrastructure—including its reuse for purposes other than that to which the infrastructure was originally put, such as carbon capture and storage—plays a crucial role in this process.

[Baroness Worthington]

My Lords, I am grateful to the noble Lord, Lord Teverson, for speaking to Amendment 21 and to the Minister for speaking to the government amendments in this group. Part of the reason why I did not have a weekend is that these are quite substantial amendments to be bringing forward on Report. It is regrettable that we are considering this much detail on Report. However, on the positive side, they reflect that the Government have been listening to the concerns raised in this House. Those concerns have been consistently about the fitness of the purposes set for the OGA. We have tonight managed to win a vote that will look at again at those principal objectives.

I do not wish to go over old ground, but the fact that here we do need to change those objectives in order to add a new category of people into Section 9C indicates a need for those primary objectives to keep pace with what we are asking the OGA to do. Here we are making it clear that the decommissioning of the North Sea in particular is complex and is going to be a difficult job. Far from it being a distraction to make it clear that this is part of the OGA’s job, this recognises that maximising the usefulness of that infrastructure going forward is clearly a fundamental aspect of what the OGA has to do. The concept of maximising economic recovery has indeed changed. Some of these amendments do change it, so it is only right and proper that the objectives of the organisation have been changed and should change.

--- Later in debate ---

[Baroness Byford (Con)]

My Lords, I will contribute to this short debate by thanking the Minister for reconsidering this aspect of the Bill, which certainly caused me, and one or two other noble Lords, slight concerns as to what material was protected and how it should be protected. I welcome the amendment he has moved tonight. It is extremely important that the balance is right between the value of sharing information and the value of keeping protected, in a proper manner, information that really should be protected. I will not delay the House any longer but thank the Minister for having given thought to our discussions in Committee. I am happy to support this amendment.

[Baroness Worthington]

My Lords, I am grateful to the Minister for introducing Amendment 20 and to the noble Baroness, Lady Byford, for her comments. I am sure it is correct that material should be used only for the purpose for which it is provided, but I am left wondering what the concern or fear was. If the Minister will bear with me, I would like just one further clarification as to what, in real-world terms, we are avoiding here. Obviously we do not want unnecessary disclosure if the information is going to be misused, but I wonder what this is really for.

[Lord Bourne of Aberystwyth]

My Lords, I think I can answer that question. I thank my noble friend Lady Byford for her support. As I understand it, it is commercially sensitive information that would be protected in those circumstances, which seems entirely proper.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, the Oil and Gas Authority has been set up to maximise economic recovery of petroleum from the continental shelf. The new body will be funded by industry. That is consistent with the “user pays” principle as industry will be benefiting from the work and expertise of the regulator. The OGA is providing a range of services to industry. Those services include issuing licences as well as issuing relevant consents and permits: for example, to begin petroleum production. It is right, and in compliance with Managing Public Money, that the costs of these services be recovered via direct fees rather than the general levy. This will ensure that only those requiring the service and benefiting from it will bear its costs.

Licensing of onshore oil and gas within Scotland and Wales is to be devolved to Scottish and Welsh Ministers respectively. Amendment 23 ensures that the OGA does not have a concurrent power to charge a fee where the matter has been devolved. I beg to move.

[Baroness Worthington]

My Lords, I am grateful for that explanation, which answers my question: this involves only activities which relate to devolved Administrations. Obviously, the OGA can charge fees to people whose activities are caught by its functions even if the word “benefit” might be open to interpretation. The Minister said that those who were not benefiting could not be charged fees. Would everyone necessarily benefit from the OGA? It is a regulator, so it might not always be seen to be beneficial. Can he clarify that?

[Lord Bourne of Aberystwyth]

I am happy to try. The word “benefit” is probably interpreted objectively rather than subjectively—possibly in a slightly paternalistic way. Where a service is provided for somebody, they should pay for it. I hope that that provides clarification.

--- Later in debate ---

Moved by

[Baroness Worthington]

27: After Clause 11, line 7, leave out “three” and insert “one”

--- Later in debate ---

This amendment seeks to disapply the consultation requirement to any first exercise of each of the Secretary of State’s powers to make regulations that occurs within one year, beginning with the date on which the provision establishing the OGA comes into force. We do not think that disapplying this requirement would be a problem, because the OGA would initially be an executive agency of the department—that is, it is legally indistinct from the department. Officials in the OGA would therefore still have a key role in developing the policy which will be given effect by the regulations. I beg to move.

[Baroness Worthington]

My Lords, I did not intend to speak any more this evening. I thank the Minister for running through all these amendments. Amendment 82, on the disapplication of the requirement to consult the OGA, caught my attention. I am feeling slightly bruised by the Bill, and if the regulations that come from it are anything like this process, it will be a dreadful experience. I am therefore hopeful that any regulations made under the Act will receive due care and attention and that proper time will be made available for their development. Part of that would naturally mean that consultation would take place. I am left with the following question. If, in the first year, in which we can expect quite a raft of regulations to flow, we are not consulting the OGA, who will be consulted?

I know that the Minister will be tempted to say that there will not be any staff, and it will not be possible. However, we already have an OGA, which has been in existence for some time, and it clearly can and does offer advice. Indeed, representatives of the OGA attended a meeting with the Minister when we discussed CCS. Therefore, I do not follow the logic and I am slightly concerned about the issue of proper consultation for these regulations. For the majority of the Bill, we have not seen proper consultation, and I would hate that to be repeated with the regulations.

[Lord Bourne of Aberystwyth]

My Lords, we intend to bring in regulations as quickly as possible once the relevant powers are commenced. Because of this, the drafting and formulating of some regulations will have to be done before the OGA is established as a government company and functions and staff are transferred to it. The year timeframe will apply only to the first set of regulations made under each power within that period, so it will not necessarily apply throughout that period. A year is the outside limit that can apply, and it will apply to a set of regulations made under each power. That gives us the opportunity to pass regulations before the OGA is up and running effectively. I accept what the noble Baroness says about it already having staff. Yes, it has, but it is not really up and running and functional as yet, and that is what is intended.

[Baroness Worthington]

As I understand it, the Bill states that the company originally incorporated under the Companies Act as the Oil and Gas Authority Ltd is renamed the Oil and Gas Authority. Clearly it exists, it has staff and it performs functions, but I simply do not understand why there is a one-year period. Perhaps the Minister could write to me with further information. Furthermore, the idea that he is going to bring forward regulations quickly fills me with dread.

[Lord Bourne of Aberystwyth]

I do not think I said that it would necessarily be quick; I said it would be within the year. The noble Baroness makes a valid point, but I come back to the point not that it is not set up—I agree that it is—but that it is not fully functional as yet. I will gladly write to the noble Baroness and perhaps give some examples of what this is intended to cover. I beg to move.