Energy Bill [HL]

Lord Lilley Excerpts

Committee stage
Monday 16th January 2023 Grand Committee

[Lord Teverson (LD)]

I shall speak to my Amendments 223 and 232, but I am in sympathy with my noble friend Lady Sheehan’s amendments. On flaring, we are undoubtedly the dirty man of the North Sea. Although the Minister may say that over the past year we have reduced our flaring by some 20%—we are starting to get there—as my noble friend said, really it should be zero, as many North Sea neighbours have been able to do.

Amendment 223 effectively bans fracking. It is straightforward, in black and white. I shall go through a bit of modern history—this Government’s view of fracking. In November 2019, there was a moratorium on fracking. In September 2022, fracking was allowed. In October 2022, fracking was banned. Let us be clear about this: we need a little certainty and the firm smack of decisive government here. Let us put this to bed by putting a ban on fracking in primary legislation.

With the cost of energy from gas at the moment, the problem is that in the UK we are still overdependent on gas, but our production, even with fracking, would be minuscule in terms of global production, so it would have little effect on the market price. Looking back to last February, Kwasi Kwarteng tweeted

“UK producers won’t sell shale gas to UK consumers below the market price. They are not charities.”

Indeed they are not. Fracking in this country will make no difference to gas prices at the moment. It will take some years to develop it, and the time is past. Let us be decisive about this and make clear where the UK stands.

Amendment 232 is very similar; it concerns England, because this is a devolved area. We should end the licensing of new coal mines. I was quite shocked at the end of last year that the Whitehaven mine in Cumbria was approved, and that it was approved by the Levelling-Up Secretary, Michael Gove, who should know better, having invented the 25-year environment plan, knowing all about these issues and being one of the best Environment Secretaries we have had for many years and a member of a Government who have sufficient respect and leverage to say no to something that should not happen. We have become an international laughing stock in many ways. Our reputation has been straightforwardly destroyed by hypocrisy.

I looked at a BEIS press release from just over a year ago, on 3 November 2021, regarding COP 26. It says:

“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26, with countries such as Indonesia, South Korea, Poland, Vietnam, and Chile announcing clear commitments to phase out coal power … Business & Energy Secretary Kwasi Kwarteng said: ‘Today marks a milestone moment in our global efforts to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation. Spearheaded by the UK’s COP26 Presidency, today’s ambitious commitments made by our international partners demonstrate that the end of coal is in sight.’”


A year later, just after COP 27 has finished, we have the Government declaring that a coal mine should open in England.

[Lord Lilley (Con)]

Would the noble Lord remind the Committee that that coal mine will not produce power—all the pledges that he has just talked about concern the use of coal to produce power—but steel?

[Lord Teverson (LD)]

The noble Lord makes a very good point. One-fifth of that production is estimated to be going towards steel, an industry that needs to decarbonise and has said that it will do that itself. The other 80% is to be exported and will be used as energy. I cannot understand what else it would be used for.

[Lord Lilley (Con)]

Steel.

[Lord Teverson (LD)]

But that industry should be decarbonised. Whatever the noble Lord says, it goes exactly against what we as a nation have said about the future of coal. That brings disrespect, I am sad to say, on not just this Government but this country. That is why I believe this amendment is an important one to go forward.

If the Government cannot agree to the amendment from the noble Lord, Lord Lennie, on the name of the Oil and Gas Authority then there is absolutely no hope for the Bill. I also very much support the amendment by the noble Baroness, Lady Bennett. I remind the Committee that the International Energy Agency’s executive director, Fatih Birol, said at the end of last year:

“If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now—from this year.”

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I conclude by restating the point that I made at the start. Here we have a chance; the nation is listening, as perhaps it does not terribly often listen to our detailed debate in the Moses Room. What does each party represent in this Room? What is their position on new coal, oil and gas? If there is no answer to that question, the country will draw its own conclusions, and many people will highlight what is said in this Room today.

[Lord Lilley (Con)]

I shall speak to Amendment 226 and say a few words about Amendment 223 in the name of the noble Lord, Lord Teverson, and, by implication, Amendment 227 to which the noble Baroness, Lady Bennett, has just referred.

The noble Lord, Lord Teverson, said he is against just new supply and not fracking as such, in which case, why has he singled out fracking and not sought to ban new North Sea fields? If he were logical, he would be signing the amendment tabled by the noble Baroness, Lady Bennett of Manor Castle, which seeks to ban all new fields.

[Lord Teverson (LD)]

That is a very good question. It is partly answered by the fact that I put my amendment down first before the other amendment went down. The other answer is that in all legislative processes—the noble Lord, Lord Lilley, will know far more about this than me—you try to go for what might be possible, and I suspect that the Government are less keen on the amendment tabled by the noble Baroness, Lady Bennett, whereas all my amendment does is confirm present government policy.

[Lord Lilley (Con)]

So, had the noble Baroness, Lady Bennett, got her amendment in first, the noble Lord would have signed it. It is interesting to know that the Liberal Democrats are against any new fields in the North Sea.

What I want to try to get home to those members of the Committee who have not yet taken it on board is that up to now we have pursued a path to net zero which involves reducing demand for fossil fuels by replacing fossil fuels with renewable energy. That is a logical path to pursue. We have not been seeking to achieve it by reducing supply of fossil fuels. As a result, if people choose to produce more fossil fuels than there is demand, as demand falls fossil fuel producers will be left with stranded assets and lose money. It could not happen to a nicer bunch of people, but why should we think that our judgments are better than theirs or worry about them erring and producing too much, investing too much and not getting their money back? That is up to them.

[Baroness Bennett of Manor Castle (GP)]

My Lords—

[Lord Lilley (Con)]

May I pursue the point? When I have made it and made my own case, I look forward to the noble Baroness demolishing it.

We will continue to use gas, albeit in reducing amounts, for decades, probably alongside carbon capture and storage. That is accepted by almost everybody I know. If the UK bans production, which would be an absurd thing to do, given that we do not ban imports of natural gas, we will simply leave others to supply our needs and needs elsewhere in the world. If lots of countries decide to ban new supply, if they succeed in reducing supply faster than we reduce demand, there will be shortages. Prices will shoot up. There will be the same sort of crisis—and huge profits for the oil industries—and we will have done to ourselves what Putin has done to us by reducing supply more rapidly than demand. I want to know why the noble Baroness, Lady Bennett, and the noble Lord, Lord Teverson, want to introduce that sort of risk into the system. Why not just pursue the steady path of reducing demand until it is net zero?

[Baroness Bennett of Manor Castle (GP)]

It is interesting that the noble Lord’s analysis bears a great deal of resemblance to that of the fossil fuel non-proliferation treaty proponents, who point out that we have been seeking to reduce demand and say that they explicitly want to reduce supply. I think the noble Lord was making the case that the price will go up if there is not enough supply. Of course, the reverse is true: if there is too much supply, the price will go down. Indeed, we saw this during Covid, with petrol in the United States—gas, as they call it—where people were actually being paid to store and hold it, because you cannot switch these supplies on and off like a tap. Once you build a field, you are going to keep producing that stuff: you cannot suddenly switch it on and off. So, if you have overproduction, you have extremely low prices and those prices, of course, do not reflect the actual cost and the damage being done, either in terms of the climate or all the other damages that the WHO, signing up to this treaty, points out, in terms of the damage done to human health by burning fossil fuels.

[Lord Lilley (Con)]

If that the best argument against the thesis I put forward, I know I am on strong ground. The noble Baroness says that we might end up with cheap fuel and the oil companies losing money: well, I can cope with both those things.

[Baroness Sheehan (LD)]

Will the noble Lord at least agree that, when we are looking at supply and demand and prices going up and down, that will work only where we have a level playing field? Where you have a market that is skewed, with perverse incentives, such as tax reliefs in the example I gave on my first amendment, that really negates his argument: you cannot say supply is going to be one factor and then have it overridden by incentives to investment that reduce the risks for the people taking them.

[Lord Lilley (Con)]

I think that is a rather different set of arguments. My point is that we can approach net zero by reducing demand and let supply find its own level, with or without incentives. Incidentally, the idea that there are incentives to oil production, when the taxes at our pumps are a massive proportion of the price we pay and when oil in the North Sea pays double the corporation tax rate that other companies do in any other industry, is simple nonsense.

However, now I will turn, if I may, to my own Amendment 226, which would ensure that the conditions relating to vibrations from drilling for shale should not exceed those applied to other industries, for example under British Standard 5228. There is no reason that shale drilling should face different conditions as to the tremors it may cause from, say, quarrying, mining, construction or pile driving. In particular, there is no reason, other than environmentalist virtue signalling, why standards for shale as far as tremors are concerned should be stricter than drilling for geothermal or carbon capture and storage—other than that they get positive ticks from the green lobby whereas shale does not, even though we are going to continue using gas for many decades to come.

Indeed, recently, there was a 1.6 magnitude tremor in Cornwall as a result of drilling for geothermal. People could feel it. It did not do any damage, of course, and it is an order of magnitude higher than the maximum tremor that we allow without stopping production in shale. The level set by Sir Ed Davey when he was Secretary of State for Energy was a magnitude of 0.5 and the one in Cornwall was 1.6. Sir Ed Davey has since admitted that he was proud that, by setting this limit, he effectively stopped the fracking industry in this country. Of course, that was not what he said at the time.

At the time, he said that he was accepting the report that came out at the time. It was an excellent report, produced by the Royal Society for Science and the Royal Academy of Engineering, called Shale Gas Extraction in the UK: a Review of Hydraulic Fracturing. The opening paragraph states:

“The health, safety and environmental risks associated with hydraulic fracturing (often termed ‘fracking’) as a means to extract shale gas can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation.”


So it gave a pretty clear vote of support. It said that the

“magnitude of seismicity induced by hydraulic fracturing would be no greater than”

magnitude 3, which would be

“felt by few people and result in negligible, if any, surface impacts.”

So we are left with this absurdly low criterion, which is an order of magnitude more severe than that applied to any other industry.

It is not only an order of magnitude; it is entirely unreasonable. Natural earthquakes in this country can be several orders of magnitude greater than is permitted as a result of fracturing for shale gas, and these natural earthquakes occur with little damage. I can remember being woken up at midnight on 23 September 2002 in London. My whole house shook and the windows rattled and I was woken. It was the only time—no, I will not say anything about that. The earthquake was actually centred in Dudley in the Midlands and was a force 4.7 and had that effect in London. There were no reports of damage anywhere in the United Kingdom as result of it—and that was 500 times greater than the highest seismicity induced so far by fracking in the UK, let alone the low 0.5 standard set. Over the last 50 years, according to the British Geological Survey, there have been 25 natural earthquakes of greater than or equal to magnitude 4 and in the last 60 days we have had 29 minor earthquakes in the United Kingdom about which no one has complained at all.

The University of Liverpool produced a study using seismicity measurements which showed the impact of a whole range of household events. I have a copy of it here. It showed that, for example, a door slamming uses more vibration at its surface than the maximum magnitude permitted from fracking in the United Kingdom. So does sitting down suddenly on an office chair, or a building site piledriver 15 metres away. They are all similar orders of magnitude—they are 0.6—but you can find things which are an order of magnitude higher, and we should remember that this is a logarithmic scale. Dropping a large bag of shopping has a magnitude of 1.5 and a toddler playing on a wooden floor, I am astonished to learn, can produce seismicity of 2.1. So we are talking about having such a degree of security against any seismic shock resulting from fracking as to be completely ridiculous.

[Baroness Altmann (Con)]

I thank my noble friend for giving way. I have listened carefully to his arguments and would like to ask him whether he is excluding the other risks associated with fracking. Whether or not there are earthquake risks, surely we have the pollution of the groundwater, the toxic chemicals being released, the ground level ozone, air pollution and the use of large volumes of water in a country which had water shortages not that long ago and indeed where the geography seems to be rather different from that in other countries where fracking has been so successful.

[Lord Lilley (Con)]

I have good news for the noble Baroness, because those issues were covered in Shale Gas Extraction in the UK: A Review of Hydraulic Fracturing, produced by the Royal Society and the Royal Academy of Engineering. We are all constantly urged to follow the science, so let us follow the science in that review. She discussed water, and according to the review:

“Overall water use is important. Estimates indicate that the amount needed to operate a hydraulically fractured shale gas well for a decade may be equivalent to the amount needed to water a golf course for a month”.


That seems something with which we can probably cope. She then discussed the possible results leading to the pollution of aquifers. The review says:

“Concerns have been raised about the risk of fractures propagating from shale formations to reach overlying aquifers. The available evidence indicates that this risk is very low provided that shale gas extraction takes place at depths of many hundreds of metres or several kilometres.”


In the UK’s Bowland shale, it would be kilometres deep. The review continues:

“Geological mechanisms constrain the distances that fractures may propagate vertically. Even if communication with overlying aquifers were possible, suitable pressure conditions would still be necessary for contaminants to flow through fractures.”


When you have a kilometre or more of stone—impermeable rock—bearing down, you could not get a better seal.

Nevertheless, we do not have to worry about scientific analysis and theory, because we have practical experience. Over a million wells have been fracked in North America; not a single one has resulted in a building falling down from tremors or in a single person being poisoned by contaminated aquifers. So we are bound to conclude that lots of people have been spreading the sort of scaremongering that would make anti-vaxxers blush—even Andrew Bridgen would probably blush if he heard some of the stuff that has been put out by the friends of the noble Baroness, Lady Bennett, at their various camps around every conceivable attempt to get fracking going. We should rely on the science and the scientific reports and regulate the industry well, as we have done in the past.

[Baroness Bennett of Manor Castle (GP)]

Since the noble Lord addressed me directly on fracking, I ask him if he is aware of the article published in 2020 in Environmental Health Perspectives in the United States which showed that babies with low birth weight are significantly more common in families living close to fracking wells in the US. That demonstrates the practical reality of the outcome of fracking on health.

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[Lord Lilley (Con)]

What is the mechanism by which those babies are born with low health when they are near a well?

[Baroness Bennett of Manor Castle (GP)]

The scientists behind that study say that they cannot explain it, that it needs further examination and that there are a number of possible mechanisms.

[Lord Lilley (Con)]

I have not read the report, but I will read it. I have read similar reports, and almost all rely on the statistical phenomenon that random events are as likely to be bunched together as they are to be evenly spread; I say that as someone who studied statistics. This results in bunches of things; for example, you will get bunches certain cancers somewhere near Windscale, as it used to be called, yet there are bunches elsewhere not near Windscale but people do not worry about them. I very much doubt that there is any scientific basis—and indeed the authors of the article could not think of any scientific basis—as to why we should relate one thing to another in that case. It is the sort of thing that the anti-vaxxers say when they find a little concern. Obviously we should always be concerned about issues such as vaccination or drilling under pressure, but we should not exploit people’s fears to stop something we do not like for other reasons. I hope that my amendment will be adopted and that it will mean that we actually regulate the shale gas industry on exactly the same basis as we do all other industries which can produce similar environmental impacts.

[Baroness Worthington (CB)]

My Lords, I hesitate to speak on this fascinating group of amendments, because we have had a rather long debate already. However, as it is such an important aspect of energy policy, I hope that the Grand Committee will bear with me as I comment on the group of amendments. If I had more time and had not been overseas recently, I would have added my name to Amendment 222A tabled by the noble Baroness, Lady Sheehan, as it is absolutely critical that we have transparency.

Over a series of years, finance measures have allowed us to walk into quite a huge liability on the public purse in relation to decommissioning the oil and gas facilities that are already there. That should not be ignored; it could be huge and very significant, especially as the nature of the investment in the North Sea shifts away from the majors into much smaller, less stable and less financially competent entities. I fully support the amendment and look forward to hearing from the Minister in detail in his response, because it is very well drafted and concerns an absolutely critical issue.

I move to the rest of the amendments, which all relate to the supply side of energy as opposed to the demand side. The noble Lord, Lord Lilley, posed the question: why should we consider supply-side constraints alongside demand-side? There are a number of answers. The most compelling is that essentially to rely on one strategy would be reckless, given all that is at stake with climate change. It would also create conditions that would lead to a very unclear investment environment for those people still involved in the extraction of fossil fuels. That lack of clarity has real-world implications for us as consumers, since we will have spiky prices, and for those employed in the sector, who will have no real sense of whether they are working for a company that is about to go bust because of stranded assets or whether there will be an oversupply and prices will fall. That lack of clarity around the supply side is at the heart of why people are calling for a measured, organised and negotiated exit, so that we all know what we can do to stay within the planetary boundaries which we are so clearly barrelling into. That is one reason.

[Lord Lilley (Con)]

Will the noble Baroness give way?

[Baroness Worthington (CB)]

I will continue if I may, and perhaps the noble Lord will come back to me on all the reasons. Another reason is that there is a moral dimension to climate change. We should never forget that. It is not about number crunching and bean counting of carbon in one country or another. This is a common-action problem. The whole world needs to move. Arguably, we have had the greatest number of years of unfettered exploitation of fossil fuels of any country on the planet. Therefore, it is high time that we signalled an end to that, to allow those countries that have not had that possibility to potentially increase their revenues from their resources while we signal the direction for the whole planet. That moral leadership is what led to net zero and it is what will lead to us acting on the supply side, because we must do both. We cannot effectively do this by cutting with one side of a pair of scissors. We need to cut with both. It seems ludicrous that the only body in the world that discusses supply-side constraints is OPEC. We are a nation state and we should, as a group of countries, come together to negotiate a much more considered and appropriate mechanism for looking at the supply side.

Finally, there is an absolute imbalance of power in those incumbents currently involved in the extraction of fossil fuels. They do not sit by passively, waiting for demand to be destroyed. I can tell the Committee as a matter of fact that money is being put into disinformation and misinformation campaigns to slow down the demand reduction that we want sped up. I do not disagree that demand is a very good way of doing this, but it is not the only way. We must be clear-sighted and honest with ourselves when we look at this problem from the perspective of a single-member state. What influence can we have on the world? Standing up to these giant companies with huge budgets, massive legal teams and huge sophisticated communication exercises is not easy. If we in the UK took this on, we would have to do so in an international context.

Therefore, I am not putting my name to these amendments. They are not appropriate without that commitment to act on an international basis. Here I am echoing some of the comments made about the non-proliferation treaty. Something must happen on the supply side within the auspices of an international agreement. We can then have an orderly transition in which everyone understands what we are allowed to do and what we are not. The current situation, where coal mines can be approved in the UK in the 21st century—sending people underground to dig out coal that no one wants with high sulphur content—is ludicrous. We as a country should lead on this. We should introduce appropriate policy at this stage, not legislation, which leads us to an international agreement.

I am sorry that I have spoken at length, but I feel strongly that we should take this on as a nation, particularly for that moral reason.

[Lord Lilley (Con)]

I was touched by the concern expressed by the noble Baroness for giving people in the fossil fuel industry certainty about the future. I used to be an analyst in the City, analysing energy and trying to forecast. It was very uncertain. The oil, gas, coal and electricity companies all found it very difficult to forecast. It is now somewhat easier because we have spelled out a path to net zero. They know that there will be a decline. They may think that perhaps it will not as much as that, or a bit more, but they have a better trajectory than ever before. In any case, why is she so worried about people in the fossil fuel industry having certainty, which no one else has? Also, she said that it is a moral issue—that it is about signalling something. In other words, it is virtue signalling.

[Baroness Worthington (CB)]

I dispute that point completely. It is not about virtue-signalling; it is about moral leadership. There is a difference. When the UK stood up and passed legislation on climate change, and took those measures to pass net zero, the rest of the world took notice. We can do the same on this issue, and we will need to. It does not have certainty because it depends on who you talk to in the City. At the moment, many people in the City are saying, “Woohoo!” Everybody is piling on to fossil fuels, with record high profits and huge amounts of money to be made in the short term. That short-termism is going to send us as a society collectively off a cliff. We do not want to see that. What happens in that uncertainty is speculation. A huge amount of trading that goes on with these commodities creates a bubble that all of us then pay for. I do not want to see any more of that; I want it to become a regulated industry that is declining according to an agreed strategy. Otherwise, I have no doubt that they will push us off a cliff; arguably, they already have.

I turn to other amendments in this group. I do not want to get into a debate about fracking but, for the record, I remember being on the Front Bench when we debated fracking regulations in our debates on the energy Bill that introduced them. Why did the industry not spot this at the time? Perhaps it was a clever move by the Lib Dems that it did not spot, although I would find that surprising. There is a host of regulations that have been passed on this issue. I am not averse to us looking at these seismic limits again because nobody wants to hold the Bill back on that basis. However, my contention is that the time has passed and it will be too slow to make a significant contribution to our domestic gas supply. We would be far better off electrifying everything and reducing primary energy demand by at least a third in that process.

That brings me on to Amendment 224, tabled by the noble Lord, Lord Moylan. Surprisingly, I quite like this amendment because it would force us to think about how we could reduce our domestic reliance on gas. Within that timeframe, no fracking is coming online, I am afraid, so the only option left is massively reducing our dependence on gas. That means electrification, not just because it is abundant, clean and cheap but because it is much more efficient. It is an energy-efficiency measure to electrify, taking down primary consumption. I feel confident that, if we were to produce a strategy, we would see a huge amount of electrification being brought on. That may well be what we should be doing; in fact, Amendment 242, which we debated previously, would have asked the Government to do just that. Perhaps there is something here to come back to on Report.

I turn to Amendment 227A; it was not debated but I am sure that we will come on to it. I just want to say that I lend my support to that renaming.

On Amendment 227AA in the name of the noble Baroness, Lady Sheehan, flaring is absolutely ludicrous in the sense that we should not be allowing this resource to be burned without it being captured and brought to market. However, there is something worse than flaring: venting. I want to hear some reassurance on the banning of flaring—it has been banned at times, specifically for wildlife protection reasons as I remember it—because it can lead to venting. That means allowing methane to be released into the atmosphere, which would be far more damaging and much harder to track. I would not want to see this amendment agreed to unless that issue was addressed.

We have had a debate about coal. If we are looking at this Bill holistically—I offer the Minister this thought for free—there is a way through the apparent contradiction around allowing us to exploit in environmentally sensitive ways the continued use of our own fossil resources where that will avoid us bringing in more polluting sources from America, which I think is the case at the moment. What about a climate recovery fund? We have just created a marine recovery fund for the almost non-existent damage that the offshore wind industry creates. What about a climate recovery fund for the very real damage that the continued extraction and burning of fossil fuels causes? Why do we not innovate around that policy? It would be easy to implement it. It could become a condition of all future licensing of fossil fuels in this country. We could work out the price we think should be paid and give the industry an incentive to make CCS work. That is something the Government could look at; I would be happy to meet the Minister to discuss it but I have only just thought of it.