Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 6 months ago)
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“( ) for anything done by or in relation to a Minister of the Crown in connection with any functions transferred to be treated as done, or to be continued, by or in relation to the OGA, and( ) about the continuation of legal proceedings.”
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, before I speak to the government amendments to this part of the Bill, I thank noble Lords and others for their valuable contributions to the Bill.
Climate change is a threat to the environment, to our security and to our economic prosperity, and we are determined to tackle it. The Government will decarbonise the economy and will do so cost-effectively. A global deal is the only way both to deliver the scale of action required and to drive down the costs of climate action, so Paris this December is the opportunity to open up new avenues for low-carbon industries. The Government’s energy priorities are clear: keeping bills as low as possible for families and businesses; and powering the economy while decarbonising in the most cost-effective way.
Today, we are discussing amendments to the part of the Bill dealing with the Oil and Gas Authority. The United Kingdom oil and gas industry is of national importance and makes a substantial contribution to the United Kingdom’s economy, energy security and employment. This is compatible with our climate change targets. The 2011 carbon plan noted that Britain will still need significant oil and gas supplies while we decarbonise our economy and transition to a low-carbon economy. Any oil and gas that we do not produce ourselves has to be imported, resulting in additional transport costs and emissions. Maximising recovery, in terms of increasing both the levels and efficiency of production of the United Kingdom’s oil and gas, will help maintain security of supply as well as boost growth and jobs.
I was pleased to host a meeting in the House a couple of weeks ago with the noble Baroness, Lady Worthington, and the noble Lords, Lord Oxburgh and Lord Howell, to talk about the Oil and Gas Authority and its role in relation to carbon storage. We were joined by Professor Stuart Hazeldine of the University of Edinburgh and Andy Samuel, chief executive of the Oil and Gas Authority. This was an informative and useful discussion. Professor Hazeldine’s immense knowledge of carbon capture and storage was clear, and it was also clear that Andy Samuel, his team at the Oil and Gas Authority and the industry have CCS very much in mind as they plan for the future. Indeed, Andy Samuel committed that CCS will feature across the Oil and Gas Authority’s sector strategies.
There is a developing consensus on how the OGA will contribute to carbon capture and storage. I hope that we can continue this engagement and that through a collective effort we can drive this technology towards commercial implementation. We shall come on to talk about carbon capture and storage later today.
The Bill is consistent with the Government’s aims on climate change. We are committed to meeting our target to reduce greenhouse gas emissions by at least 80% by 2050, and it will be a priority for this Government to achieve an ambitious global deal on climate change. Once again, I thank noble Lords and others who have contributed to the Bill so far, and I look forward to a good debate today.
I now speak specifically to the first group of government amendments, which make provision for the transfer of staff and property to the Oil and Gas Authority and amend the schedule to the Bill in respect of the MER UK strategy and decommissioning. Amendment 1 amends Clause 2, which relates to the transfer of functions to the OGA, so that it is clear that regulations may make provision so that anything done by or in relation to a Minister in connection with any functions transferred is to be treated as done by the OGA. Because Amendment 3 confers on the Secretary of State the power to make the transfer scheme for the transfer of property rights and liabilities, the amendment makes the power in Clause 2 consistent with the transfer scheme power. It also makes provision so that it is clear that regulations made by the Secretary of State which are consequential on the transfer of functions may include provision for the continuation of legal proceedings. This mirrors the provision contained in the transfer scheme for property rights and liabilities.
Amendment 2 ensures that the definitions used in Clause 2 also apply to the new clause inserted by Amendment 3. Amendment 3 introduces a power for the Secretary of State to create transfer schemes enabling the transfer of property rights and liabilities from the Department of Energy and Climate Change to the OGA. This will enable property, including intellectual property, to be transferred to the OGA. It will also enable rights and liabilities under contracts to be transferred to the OGA. This is a standard provision where a new body is being established to which functions of the Secretary of State will be transferred. The transfer scheme will not cover the transfer of statutory functions from the Secretary of State to the OGA or functions under petroleum licences, for example. These functions will be transferred by way of regulations under Clause 2.
Amendment 4 introduces a general power for the Secretary of State to create transfer schemes to enable the transfer of staff from the Department of Energy and Climate Change to the OGA. As a result of the transfer of functions, civil servants currently employed by the OGA as an executive agency of DECC performing the relevant functions will be required, unless they object, to transfer along with those functions to the government company. We are committed to protecting staff conditions, and the transfer schemes will therefore ensure the same or similar protection to that afforded by the TUPE regulations. OGA management will work closely with the relevant unions and keep staff informed as the transfer schemes are developed. These transfer schemes will ensure that the OGA has the necessary skilled and experienced staff to perform its functions as an independent regulator. In addition to transferring existing staff, the OGA is conducting an extensive external recruitment campaign to ensure that the organisation has the right level of skills and expertise to perform its role as a more robust and proactive regulator.
Amendment 5 is to enable a scheme made by the Secretary of State for the transfer of property rights and liabilities or staff to the OGA to be modified, subject to the agreement of the person or persons affected. It also ensures that certain incidental, supplementary, consequential, transitory and transitional provision can be made in those schemes. This is a standard provision to be included in a power to make transfer schemes of this nature. It ensures that transfer schemes may be modified—for instance, where particular members of staff leave all new contracts are entered into in the transitional period. It also clarifies that the schemes may be detailed and make provision specific to individual cases, such as staff members with specialist allowances or the details of particular IT or property contracts.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords for their contributions. I will try to deal with the issues that have been raised. First, it is true that the Government have tabled many of the amendments before us, but I would argue that the most of them, certainly in this group, are technical. The nature of business means that some House of Lords legislation has to start in this place, and we should rejoice in that rather than think it should not happen. The noble Lord, Lord Foulkes, seemed to suggest that a lot of what we are looking at today regarding the Oil and Gas Authority is controversial. I do not agree, but I accept that some of the stuff we will look at on Wednesday is more controversial.
I take the points made by the noble Lords, Lord O’Neill, Lord Foulkes and Lord Teverson, and the noble Baroness, Lady Liddell. It is true that we have brought forward amendments, but it has to be said that this is a complex area and we are setting up a pretty substantial body. In seeking to allay the fears of the noble Baroness, Lady Worthington, I hope she will accept that I have no part in any conspiracy, and if this were not setting up a regulator, I would be very concerned. The first time I heard the word “privatisation” mentioned was by the noble Baroness, so I hope that she will accept that there is no such intention at all.
Baroness Worthington
The last time this legal form was used to create an agency was when the Highways Agency was created, and at the time numerous articles stated that this was a very convenient way to allow a future Government to privatise it. Therefore, there has been a previous discussion about this form of legal construct and this issue has been raised in that context. In addition, it is true that in the current form there would be nothing to stop the Government privatising without returning to Parliament to seek its approval.
Lord Bourne of Aberystwyth
I hope the noble Baroness will accept that that is not the intention. She also asked if there were other precedents. There are: the Prudential Regulation Authority is an example of a limited company that is a regulator.
Let me deal with some of the specific points that were raised. First, I reassure the noble Lord, Lord Foulkes, that I certainly did not take umbrage last week. I pointed out that, as was the case, I had been asked to seek an extra day in Committee and had been unable to get another day in Committee in the House. I offered a recommittal in the Moses Room to opposition parties, Cross-Bench Peers and Peers on my own side and had only one objection, from the noble Lord. I hope he will accept that. However, I certainly did not take umbrage.
My noble friend Lord Howell mentioned the immense pressure and the changing position. That is certainly true, but it underlines the importance of managing to secure this legislation, and the prime objective of maximising economic returns from the North Sea is very much in the interests of all parts of the United Kingdom and in the interests of decarbonisation. Therefore, I am not sure that I accept the underlying thesis of one or two contributions from noble Lords—that there is no urgency about this legislation. It is important, and there is an urgency attached to it. I accept the point about investment certainty and we have that very much in mind, as well as the need to ensure that we have a consensus at least on this part of the legislation. That would be of great importance for the industry, for our decarbonisation plans and for securing the best economic return from the North Sea.
I was asked about issues relating to the contracts of employment and whether these people would be civil servants. To address some points made by the noble Baroness, Lady Worthington, and the noble Lord, Lord Foulkes, many people will be transferred from the government service and it is entirely right that they can expect to see their conditions of employment continue in the same way as previously. It is obviously the desire to ensure that we have a scheme analogous to TUPE. I believe that they are also entitled to the same pension arrangements, and that is why these pension arrangements are in place. I do not know of any cases of employees who will be required to move. I think it is unlikely because the people who will be transferred will be in London and Aberdeen—the great bulk of them in Aberdeen. If any are to be moved, I will ensure that the noble Lord gets a response, copied to other Peers, but I suspect that it will be on the existing terms, because that is the aim with the transfer of staff.
On future staff, we felt it right that there should be only one set of pension arrangements, which is why the current arrangements will continue. Of course, there will be the freedom to operate them so that the OGA can recruit as it sees fit in the future. However, as I say, the current pension arrangements will continue so that there is not, as it were, a two-tier system going forward.
Baroness Worthington
So the Minister is happy to have a two-tier system for remuneration but not for pensions. It seems rather odd to insert a clause that carries forward many of the benefits of Civil Service remuneration packages for all employees—the Minister said that it could be for new employees, too—yet we are going to unlock the salary levels at the same time. This seems very imprudent.
Lord Bourne of Aberystwyth
We are setting up a separate body. The analogy the noble Baroness is pursuing is not perfect. Obviously, there are variations in salary at the moment, as there would be going into the future. The OGA will be given some operational freedom because we have set up a separate entity, which I think is entirely sensible. As I understand it, since the pension scheme operates on a percentage basis, that, too, would be variable. Essentially, it will be the existing one, and I think that is wholly defensible.
I believe that I have dealt with the relevant points. If I have missed any, I apologise, and I will pick them up after I have looked at the record. With that, I commend these amendments to the House.
Lord Hope of Craighead (CB)
I return to the point, which I believe the noble Baroness, Lady Worthington, responded to, of an apparent inconsistency between Amendment 6, which we have just been discussing, and Clause 1(2)(b), which says that
“members, officers and staff”
of the Oil and Gas Authority,
“are not to be regarded as Crown servants”.
There is a difference between somebody who is a Crown servant for the purposes of the law and somebody who is being paid as a civil servant. I cannot put my finger precisely on the point, but it would be helpful to be reassured that there is no such inconsistency, which, at first sight, rather springs off the page when you read these two provisions side by side.
Lord Bourne of Aberystwyth
I thank the noble and learned Lord. It is my understanding that there is no inconsistency. We are seeking to ensure that these people are treated in an analogous way where there is a transfer of staff and that they are not, going forward, civil servants, as I understand it.
“Transfer of property, rights and liabilities to the OGA
(1) The Secretary of State may make one or more transfer schemes transferring qualifying property, rights and liabilities of a Minister of the Crown to the OGA.
(2) A scheme made under this section may, in particular, make provision—
(a) for anything done by or in relation to a Minister of the Crown in connection with any property, rights or liabilities transferred by the scheme to be treated as done, or to be continued, by or in relation to the OGA;(b) for references to a Minister of the Crown in any agreement (whether written or not), instrument or other document relating to property, rights or liabilities transferred by the scheme to be treated as references to the OGA;(c) about the continuation of legal proceedings;(d) for transferring property, rights or liabilities which could not otherwise be transferred or assigned; (e) for transferring property, rights or liabilities irrespective of any requirement for consent which would otherwise apply;(f) for preventing a right of pre-emption, right of reverter, right of forfeiture, right to compensation or other similar right from arising or becoming exercisable as a result of the transfer of property, rights or liabilities;(g) for dispensing with any formality in relation to the transfer of property, rights or liabilities by the scheme;(h) for transferring property acquired, or rights or liabilities arising, after the scheme is made but before it takes effect;(i) for apportioning property, rights or liabilities;(j) for creating rights, or imposing liabilities, in connection with property, rights or liabilities transferred by the scheme;(k) for requiring the OGA to enter into any agreement of any kind, or for a purpose, specified in or determined in accordance with the scheme.(3) Subsection (2)(b) does not apply to references in an enactment or a relevant authorisation.
(4) In this section—
“property” includes interests of any description, and“qualifying property, rights and liabilities” means property held, and rights and liabilities arising, in connection with functions which were functions of a Minister of the Crown and as a result of this Act have or are to become functions of the OGA, but does not include rights and liabilities relating to an individual’s employment in the civil service of the State.”
“Energy Act 1976A1 The Energy Act 1976 is amended as follows.
A2 (1) Section 12 (disposal of gas by flaring, etc) is amended as follows.
(2) After subsection (2) insert—
“(2A) Disposal of gas by flaring, or by releasing it unignited into the atmosphere, does not require consent under this section if consent—
(a) is required under section 12A (disposal of gas by flaring etc: OGA’s functions), or(b) would be required under that section but for subsection (3) of that section.”(3) At the end of the heading insert “: Secretary of State’s functions”.
A3 After section 12 insert—
“12A Disposal of gas by flaring, etc: OGA’s functions
(1) The OGA’s consent is required for natural gas to be disposed of (whether at source or elsewhere)—
(a) by flaring, or by releasing it unignited into the atmosphere, from anything that for the purposes of section 82(1) of the Energy Act 2011 is a relevant oil processing facility or a relevant gas processing facility, or(b) by releasing it unignited into the atmosphere in connection with activities carried out under a licence granted under—(i) section 3 of the Petroleum Act 1998, or(ii) section 2 of the Petroleum (Production) Act 1934.(2) This section applies to all natural gas of the United Kingdom, whether obtained there or in territorial waters, or in areas designated under the Continental Shelf Act 1964, except gas conveyed through pipes to premises by a gas transporter within the meaning of Part 1 of the Gas Act 1986.
(3) Disposal of gas does not require consent under this section if—
(a) it is necessary in order to reduce or avoid the risk of injury to any person,(b) the risk could not reasonably have been foreseen in time to reduce or avoid it otherwise than by means of the disposal, and(c) it was not reasonably practicable to obtain consent under this section in the time available.(4) A person who disposes of gas in cases where the consent of the OGA would have been required but for subsection (3) must inform the OGA of that disposal as soon as practicable after the disposal takes place.
(5) The OGA’s consent under this section—
(a) may be given only by reference to particular cases, and(b) may be made subject to conditions which may, in particular, be framed by reference to the description or origin of the gas, or the quantities to be disposed of.12B Sanctions for failure to comply with section 12A
(1) The requirements imposed by subsections (1) and (4) of section 12A are to be treated for the purposes of Chapter 5 of Part 2 of the Energy Act 2016 (power of the OGA to impose sanctions) as petroleum-related requirements.
(2) But the OGA may not give an enforcement notice, a revocation notice or an operator removal notice under that Chapter by virtue of this section.”
A4 (1) Section 18 (administration, enforcement and offences) is amended as follows.
(2) In subsection (2)(a), for “9 and 12” substitute “9, 12 and 12A”.
(3) In subsection (3)—
(a) in paragraph (a), for “9 or 12” substitute “9, 12 or 12A”, and(b) in paragraph (b), after “Secretary of State” insert “or the OGA”.A5 In section 21 (interpretation), after the definition of “natural gas” insert—
““the OGA” means the Oil and Gas Authority;”.”
Lord Bourne of Aberystwyth
My Lords, I now turn to Amendments 7 and 22, which relate to further functions to be transferred to the Oil and Gas Authority.
The Energy Act 1976 contains important provisions relating to the giving of a consent for the flaring and venting of gas. Consent will be given by the OGA, rather than the Secretary of State for Energy and Climate Change, for the flaring or venting of gas by a relevant oil or gas processing facility within the meaning of Section 82(1) of the Energy Act 2011. The holder of a petroleum production licence will have to obtain the consent of the OGA rather than the Secretary of State to vent gas. Consent to the flaring of gas under a petroleum production licence is not covered by that provision, as it will be sought under the licence from the relevant licensing authority. The matters for which consent must be sought from the OGA are set out in proposed new Section 12A of the Energy Act 1976, which is introduced by Amendment 7.
In bringing these functions within the regulatory remit of the OGA, the amendments make provision to ensure that the OGA can issue a financial penalty notice for a failure to comply with requirements to seek consent before disposing of natural gas by flaring and venting. A financial penalty notice may also be issued where a person has failed to inform the OGA of the disposal of natural gas by flaring or venting where it was not possible to obtain the consent of the OGA because there was a risk of injury to a person and the relevant criteria were satisfied.
Amendment 22 would allow the OGA to charge fees for the issuing of consents in relation to the disposal of natural gas by flaring and venting. This is consistent with the “user pays” principle and is in line with Her Majesty’s Treasury’s Managing Public Money guidance. I beg to move.
Baroness Worthington
My Lords, I am grateful to the Minister for introducing these amendments. The extent to which operations across the UK can conduct flaring or venting is important, and it is clearly right that there should be an ability to issue a financial penalty if there is a failure to comply. Therefore, many of the provisions introduced here appear to make sense.
I have one question. Venting and flaring would require careful correspondence with the environmental aspects of the regulation of the North Sea, in particular, and indeed of onshore oil and gas operations. Has the Environment Agency been involved in and consulted on these amendments? How would the proposed arrangements work in relation to the requirement to include the venting and flaring of gases under the European Emissions Trading Scheme, which is administered by the Environment Agency?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness for her comments on these amendments, which, like me, she accepts are important in relation to fee-charging. I will have to write to her on the specific issue of whether the Environment Agency has been consulted—I would anticipate that it has—and on the related point about the European Emissions Trading Scheme. Of course, the Oil and Gas Authority would be bound, as are other institutions, by environmental law, and I anticipate that the proper liaison would therefore take place. However, as I said, perhaps I may write to her on the specific issues she raises.
“( ) in paragraph (b), omit the words from “to the extent” to the end,”
“(3) The Welsh Ministers may enter into an agreement with the OGA authorising the OGA to exercise any functions of the Welsh Ministers.
(4) The reference in subsection (3) to functions does not include functions of making, confirming or approving subordinate legislation contained in a statutory instrument.
(5) An agreement under subsection (3) does not affect the responsibility of the Welsh Ministers.
(6) An agreement under subsection (3) does not prevent the Welsh Ministers from exercising a function to which the agreement relates.
(7) The Welsh Ministers must arrange for a copy of any agreement under subsection (3) to be published in such manner as the Welsh Ministers consider appropriate for bringing it to the attention of the persons who, in the Welsh Ministers’ opinion, are likely to be affected by it.”
Lord Bourne of Aberystwyth
My Lords, I will now speak to the third group of amendments, which relates to the devolved Administrations, and will start with our proposal to enable Welsh Ministers to contract out functions to the Oil and Gas Authority before turning to a technical matter on the applicability of the objective to maximise economic recovery to Northern Ireland.
Amendment 10 amends Clause 3 on the contracting out of functions to the OGA in relation to Welsh Ministers. In establishing the OGA we have been careful to keep the devolution implications in mind. The OGA currently, as an executive agency of DECC, manages the onshore oil and gas licensing regime across Great Britain. Following the recommendation of the Smith and Silk commissions, onshore petroleum licensing is expected to be devolved to Scotland and Wales respectively. The Scotland Bill is currently being considered by Parliament and makes provision for the devolution of onshore petroleum licensing. The Government intend to publish a draft Wales Bill tomorrow.
Following engagement with the Welsh Government, I am now introducing these clauses which would enable the Welsh Ministers, should they choose, to enter into an agreement with the Oil and Gas Authority authorising them to exercise any of their functions. The aim here is to provide flexibility in the delivery of onshore oil and gas licensing functions once devolved. Equivalent provision is not being made for Scotland as Scottish Ministers are content that they may rely on the Deregulation and Contracting Out Act 1994 to achieve a similar effect.
I will, of course, continue close co-operation with the devolved Administrations on oil and gas issues in general and the implementation of the Wood review specifically. Our existing close working relationship is demonstrated through initiatives such as the PILOT group, of which the Scottish Energy Minister is a member. This aims to deliver a quicker, smarter and sustainable energy solution to secure the long-term future of the United Kingdom continental shelf and ensure full economic recovery of our hydrocarbon resources.
Amendments 75, 83 and 86 relate to MER United Kingdom and Northern Ireland. The Oil and Gas Authority will be formally established so that it is an effective, robust and independent regulator of the petroleum industry. The first steps in this direction were taken in the Infrastructure Act 2015, which made provision, among other things, for a strategy to maximise the economic recovery of petroleum from the United Kingdom territorial sea and the United Kingdom continental shelf. In relation to Northern Ireland, those provisions were created with a mismatch between their territorial extent and application. They apply to Northern Ireland’s territorial sea: however, they do not form part of the law of Northern Ireland. Amendment 75, therefore, amends the MER UK provisions so that they form part of the law of Northern Ireland as well as of England, Wales and Scotland, which is currently the case.
This also requires an amendment to Section 9H of the Petroleum Act 1998 so that a relevant upstream petroleum pipeline, a relevant oil processing facility or a relevant gas processing facility is included if it is situated in Great Britain, the territorial sea adjacent to Great Britain or the United Kingdom continental shelf. This is also achieved by Amendment 75.
We considered extending the third party access regime under Chapter 3 of Part 2 of the Energy Act 2011 to Northern Ireland’s territorial sea. However, this could not be done easily. This is because upstream petroleum infrastructure can be found onshore as well as offshore and the intention is for the third party access regime to be unified. We note that the onshore regime is a matter that has been transferred to Northern Ireland. However, we do not consider this to be a problem at the moment as there is currently no upstream petroleum infrastructure in Northern Ireland or the territorial sea around Northern Ireland.
Amendments 83 and 86 are consequential upon Amendment 75 and respectively ensure that Amendment 75 has the correct territorial extent and the short title of the Bill recognises this too. I beg to move.
Lord Foulkes of Cumnock
My Lords, I confess that I do not have an exact understanding of all the details in relation to this issue—I hope I will be forgiven by any Members who do, if there are any—especially in relation to the devolved Administrations which inevitably seem to complicate matters. Can the Minister answer one question in relation to fracking? What is the position of the Scottish Government in terms of permissions for and control over fracking now, and how will it change if we pass this Bill?
Baroness Worthington
My Lords, I am grateful to the Minister for presenting these amendments. I have no real questions on their detail, but I suspect that this is not the part of the Bill which has the most controversy in relation to devolution, and it is not Wales and Scotland that will be the most contentious aspects. However, I reiterate the question of my noble friend Lord Foulkes about fracking. If we could have an answer from the Minister, that would be welcome.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord and the noble Baroness for their comments. On the specific question about fracking, I have to confess that I am not certain about the position, but I am endeavouring to find an answer, and perhaps I may come back to it during the course of the debate.
Lord Foulkes of Cumnock
Perhaps I may expand slightly on what I said. Fracking is generally a very controversial issue in the United Kingdom, and it has become increasingly so following the recent conference of the Scottish National Party where there was a major debate about a moratorium on fracking. It is going to be a lively issue over the next few months and I think it is important that we know exactly what the current position is before the Bill gets to the House of Commons, and whether it will make any material changes to it.
Lord Bourne of Aberystwyth
My Lords, it has now been confirmed that the Bill does not do anything in relation to fracking, but that the Scotland Bill does. So I hope that the controversy and the heated debate on fracking can be transferred to the Scotland Bill rather than to this one.
I thank the noble Baroness, Lady Worthington, for her comments on this part of the Bill. I quite agree that this is not going to be the most controversial of its aspects. We have dealt with the devolved Administrations with what I hope is sensitivity and I think that we are going forward in a united way. With that, I urge noble Lords to support these amendments.
Lord Teverson
My Lords, I was pleased to add my name to this amendment. I agree with the noble Lord, Lord Spicer, that we do not want any more regulation than we need, but I do not see this as bringing forward greater regulation.
In my business career I learned three things in particular. The first was that you should concentrate and keep your mind on your core activity. I felt a certain resonance when the oil and gas industry wrote about this amendment that actually that was the imperative thing that needed to happen because—as I know from my extended family—at the moment that industry is under threat. There is great retrenchment and difficulty, so the OGA needs to concentrate strongly on its responsibilities for the oil and gas industry.
Having said that, the second thing that I learned from practice was that you can concentrate as much as you like on the business that you are in but the most important thing is to follow the market. That is not exactly what you can do here, but what is clearly true is that the future will be about carbon capture and storage. This is a core part of government policy and all of our policy on climate change and carbon emissions. Therefore there needs to be a real future for this sector and these facilities. That is why it is important that that element is brought into this part of the Bill and will be there for the future. I take perhaps the naive example of Beeching and the railways; now down in the south-west we are trying to reopen one or two of the lines that were closed back in the 1960s. If we thought more about future uses and what happens after our actions, we might moderate and think more about decisions for the longer-term future.
The third thing I learned from business was “right first time”, which is the best thing to remember as a principle for running any organisation. It seems to me that getting it “right first time” on this issue would be to make sure that we take into consideration carbon capture and storage, and what that offers in terms of solving our climate change issues, as well as to use the facilities, the network and the vital assets that are currently in the North Sea. We need to include that in legislation now rather than in the future.
Lord Bourne of Aberystwyth
My Lords, first, I thank the noble Baroness for setting out the non-government amendments relating to this part of the Bill. Amendment 11 would replace the principal objective in Part 1A of the Petroleum Act 1998 of,
“maximising the economic recovery of UK petroleum”,
with an objective to maximise the economic return on UK petroleum while, first, retaining oversight of the decommissioning of oil and gas infrastructure and, secondly, securing its reuse for the transportation and storage of greenhouse gases.
I understand the purpose of this amendment. Indeed, I have detailed significant positive amendments from the Government—which we will discuss more fully elsewhere—to ensure that both CCS and decommissioning are given a prominent focus in the Bill. Indeed, the amendments that I have tabled ensure that the OGA will have a strong role on decommissioning, to ensure both that costs are controlled and that reuse of assets, including for CCS development, is given full consideration before decommissioning begins. The Infrastructure Act 2015 refers to abandonment, which of course is the technical term used in the Act for decommissioning.
I hope that noble Lords will agree that the Government’s decommissioning amendments achieve the same effect as the reference to decommissioning in this amendment, rendering it unnecessary. I have tabled a large number of amendments to ensure that CCS developments will be a firm and important consideration for the Oil and Gas Authority. My noble friends Lord Howell and Lord Spicer, and others, referred to the fragile nature of the industry, and we do not want to add more costs to it. This will be particularly relevant in looking at some later amendments, but it is relevant here, too.
Bringing CCS into Clause 4 and maximising the potential synergies, as we have done with the amendments we have tabled, will be much more effective than trying to give the Oil and Gas Authority a new and separate objective on CCS. The amendments that I have tabled are meaningful, and I hope that they will be sufficient to satisfy noble Lords that Amendment 11 is not necessary. The noble Baroness suggested that the review was limited to the Oil and Gas Authority’s performance for each review period. That is not strictly true. Subsection (4) of the new clause in Amendment 26 says:
“A review must, in particular … assess how effective the OGA has been in exercising its functions, and … consider the OGA’s functions under … Part 2, and … Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide), with regard to their fitness for purpose and scope”.
Amendment 11 is therefore broader than the noble Baroness was suggesting. It would create a significant expansion of the OGA’s responsibilities, which would have consequences for the OGA and industry.
Notwithstanding the difficult challenges that the industry is facing, the recommendations of the Wood review remain as important as ever. They continue to attract strong industry support, and I have been pleased to note the continued cross-party support for them throughout the passage of the Bill. The Wood review envisaged an Oil and Gas Authority focused on maximising economic recovery, and the recommendations made by Sir Ian Wood hold that principle front and centre.
I have not spoken to Sir Ian Wood—it might be unhelpful to ask him to revisit the review and interpret it back to the House—but it is worth noting that he has chaired the interim advisory panel of the Oil and Gas Authority, which is looking into the functions and preparation of the authority before it achieves its enhanced status, so he is very much involved in the process.
Baroness Worthington
My Lords, I am grateful for that very thorough response from the Minister and for the contributions from noble Lords in this debate. I am afraid I am not reassured. Perhaps I did not make myself sufficiently clear in my introduction of Amendment 11 about the root of my concern. This is not to do with whether we can review the functions of the OGA or whether the performance of the OGA as set out in the Energy Bill is sufficient. I am referring to the primary objectives of the OGA as set in the Petroleum Act as amended by the Infrastructure Act. As I read out, those primary objectives are very odd for a regulator, for a body that is meant to be providing stewardship and oversight to an industry in the private sector part of the economy. It is that which causes me the greatest concern about this aspect of the Bill.
I am not reassured by the Minister’s references. In fact, I found myself questioning: which is it? Is it the case that this is not needed and that Amendment 11 is simply unnecessary? All these decommissioning references and CCS references were concessions we won from the Government in Committee. When the Bill appeared before us, there was no explicit mention of CCS or decommissioning. We had to extract that from the Government in Committee. Having done so, I contend that the primary objectives of this organisation do not fit those new powers.
Lord Bourne of Aberystwyth
I hope the noble Baroness accepts that the acceptance at Second Reading of the importance of CCS was not grudging. It was readily acknowledged, so there was nothing grudging about the concession, as she terms it. I hope she accepts that we have moved forward together on that.
Baroness Worthington
Absolutely. I pay tribute to the Minister for the manner in which he has conducted those discussions. However, it is true that the Bill that appeared before us read like something from a time gone by. There was no reference to future challenges or, indeed, present-day challenges. We have improved the Bill through the process of collaboration. We need to continue that process and look at the primary objectives.
Earlier today, the Minister was kind enough to give me an example of another regulator which is a private company with a single shareholder. It was the Prudential Regulation Authority. My understanding is that that is merely a temporary measure and that the Bank of England and Financial Services Bill, which will come before this House very soon, changes that temporary arrangement. It is therefore clear that regulators are not commonly private companies with very loosely defined objectives that do not refer to any kind of stewardship or regulatory function but merely refer to conducting, developing and investing in equipment and bringing people together to collaborate. Those are not the primary objectives I wish to see for a regulator of this size and complexity. It is for that reason that I am minded to test the opinion of the House.
The noble Lord, Lord Howell, agrees that decommissioning should be included in the primary objectives—it is not at the moment—but disagrees on CCS, so we are halfway to accepting that these primary objectives are not fit for purpose. The Government seem to be saying that the amendments are not needed and, at the same time, that to put them in the Bill would cause huge amounts of change. Those two things cannot be true. This is merely a way of making sure that the objectives match the functions we expect the OGA to undertake. This is such a significant issue for this aspect of the Bill that I wish to test the opinion of the House.
“Storage of carbon dioxide
The development and use of facilities for the storage of carbon dioxide, and of anything else (including, in particular, pipelines) needed in connection with the development and use of such facilities, and how that may assist the Secretary of State to meet the target in section 1 of the Climate Change Act 2008.”
Lord Bourne of Aberystwyth
My Lords, I will now speak to government Amendments 12, 16 and 17, which relate to the matters to which the OGA must have regard when exercising its functions. There has been informative and reasoned debate throughout the passage of this Bill about the role of the OGA in relation to CCS. I am glad that we have had the opportunity to discuss these matters more fully with many noble Lords since then. These amendments, along with others that we will be considering later today, are designed to ensure that the OGA’s important functions in relation to carbon storage, which support the Government’s overarching strategy for the decarbonisation of the economy, are at the forefront of the Bill.
I have spoken about the OGA’s role within the Government’s broader strategy to support decarbonisation. Within that context, I will now speak to government Amendment 12, which inserts an additional subsection into Clause 4. This requires the OGA, in the exercise of its functions, to have regard to the development and use of carbon storage facilities and of anything else needed in connection with the development and use of such facilities. This will create a duty upon the OGA when exercising any of its functions, so far as relevant, to give due consideration to not just the development and use of such facilities but to other necessary aspects of the carbon storage chain. Those functions include statutory functions relating to oil and gas, such as the OGA’s statutory activities on decommissioning, which we will discuss more fully elsewhere. When scrutinising an abandonment programme, which is submitted prior to decommissioning, the OGA will have a statutory duty to consider alternatives to decommissioning at every stage of a proposed decommissioning planning process. This amendment will crystallise and strengthen the need for the OGA to have regard, in particular, to the development of carbon storage facilities through its role on decommissioning.
Such duties will also read across to the OGA’s role in relation to the stewardship of upstream petroleum infrastructure, including upstream pipelines, which are important for the transportation of carbon dioxide and for the commercial viability of CCS projects more broadly. Part 2 of the Bill will give the OGA new regulatory powers that apply to owners of upstream petroleum infrastructure, including powers to attend key industry meetings. These regulatory powers will provide the OGA with a much greater insight into the asset stewardship of upstream petroleum infrastructure, and this amendment to Clause 4 will help to ensure that the OGA makes strategic links to the viability of such infrastructure for the transport and storage of carbon dioxide at an early stage.
This amendment will also read across to the OGA’s functions regarding information and samples. For example, when consenting to plans for the preservation of information and samples, the OGA will consider how such materials could be of interest to the development of CCS.
The amendment will also apply to the OGA’s non-statutory functions—for example, where the OGA is developing important sector strategies to support the oil and gas industry. This amendment will help to ensure that CCS will also form an important element of the OGA’s technology and decommissioning sector strategies, which I know are already under development. In producing these strategies, the OGA will consult the CCS industry to ensure that synergies between the industries are identified and exploited wherever possible.
The amendment will also have importance at an organisational level, and the OGA has already been examining how CCS fits into the operations of all of its directorates and has identified a key contact point for CCS at director level.
Furthermore, to make explicit the link between the OGA’s carbon storage functions and the Government’s priorities regarding decarbonisation, the OGA must consider how its work to develop carbon storage may assist the Secretary of State to meet the target in Section 1 of the Climate Change Act 2008.
Government Amendment 16 is intended to place beyond doubt that the OGA’s functions include functions in respect of the storage of carbon dioxide. It does so by expanding the definition of “function” as provided under Clauses 4 and 5 to include functions exercised under Chapter 3 of Part 1 of the Energy Act 2008, which comprise the OGA’s statutory functions in respect of carbon dioxide storage licensing. Amendment 17 simply ensures that the definition of “relevant functions” does not extend to any activity carried out by the OGA under an agreement made with the Welsh Ministers under Clause 3.
Amendments 12 and 16 are intended to formalise in the OGA’s functions objectives to support the development of carbon storage, and I have outlined the effect this will have. In many cases, this reflects work already under way and which I expect to develop further as the OGA builds capacity.
I know that many noble Lords met members of the OGA leadership team following the Committee debates. I hope they will agree that the organisation recognises and understands the benefits of CCS and will work to ensure that carbon dioxide storage is properly integrated into the OGA’s functions. Through these amendments, I have sought to place clear obligations on the OGA to support that approach. Moreover, I am tabling separate amendments to ensure that these matters will be continuously reviewed by government and scrutinised by Parliament—a point that we will discuss separately in more detail.
Government Amendments 34 to 40 seek to amend provisions on information and sanctions in Chapter 3 of the Bill to put beyond doubt that information and samples relevant to carbon dioxide storage licensees are within the scope of that chapter. Amendment 34 seeks to amend the definition of “petroleum-related information and samples”, which is used throughout Chapter 3, to explicitly include information and samples which are relevant to activities carried out under a carbon dioxide storage licence. This applies through each of the clauses within Chapter 3 and ensures that information and samples that would be relevant to carbon dioxide storage licensees can be required to be retained, dealt with as part of an information and samples plan, and later published or made public.
Clause 29(1) sets out a non-exhaustive list of what an information and samples plan may provide for. Amendment 35 seeks to include within this list an explicit provision stating that petroleum-related information and samples may be transferred to a carbon dioxide storage licensee as part of an information and samples plan. “Carbon dioxide storage licence” is defined by Amendment 38.
Clause 27(4) allows the Oil and Gas Authority, in certain circumstances, to impose on a relevant person an information and samples plan, which may include the transfer of information to others. Amendment 36 restricts this transfer without the consent of the relevant person. This provision is a necessary safeguard to ensure that the relevant person can retain control of their commercially sensitive and commercially valuable information and samples to the extent that they wish to do so.
Amendment 37 amends Clause 29 to clarify that sanctions can be imposed on any person who is party to an information and samples plan and who fails to comply with their obligations under it. This amendment also includes a provision to the effect that an information and samples plan may impose obligations on a person who is not a relevant person, such as a carbon dioxide storage licensee, only with their consent. This ensures that obligations are not imposed without that person’s knowledge or consent, which the original drafting would have allowed for.
Amendments 39 and 40 amend the Oil and Gas Authority’s power to acquire information to ensure that it is able to obtain any information and/or samples for the purposes of carrying out its functions which are relevant not only to the fulfilment of the principal objective but to activities carried out under a carbon dioxide storage licence. The oil and gas industry has a wealth of information and samples that we acknowledge would be of great benefit to CCS licensees. The amendments clarify the scope of the information and samples clauses and firmly set out that it extends to include information and samples that relate to activities carried out under a carbon dioxide storage licence.
I hope that noble Lords will agree that these government amendments address the concerns raised in Committee. I beg to move.
Lord Oxburgh (CB)
My Lords, I remind the House of my non-pecuniary interest in carbon capture and storage.
I both thank the Government and acknowledge the major steps they have taken in the amendments which have been presented. The Minister was clearly listening hard during Committee and now the Bill is much improved.
I do not need to remind the House that the Government have either spent or committed around £1 billion to carbon capture and storage and to get it going in two major projects which are under way. However, those projects were going nowhere unless there was relatively easy access to the continental shelves for the purpose of storing CO2. As other noble Lords have mentioned, it is not clear when and to what degree the extent of this will be required. It is difficult to put a time on it. There is one functioning carbon capture and storage operation in Canada and others are close to it. However, providing in this Bill for access as and when it is required is very important.
There is a second requirement. We need some kind of strategic framework within which private industry can operate in the CCS area. This is the focus of Amendment 72. Had there been more time—as a number of noble Lords have said, for a variety of reasons we have been rushed over this Bill—I would have liked Amendment 72 to have been made the subject of an informal all-party discussion with the Government and officials. I feel there is significant support for this idea both within the House and probably within the Government.
The fundamental requirement is for an overall structure for co-ordination, timing and funding. Carbon capture and storage with the present technology—which may not be the technology we will have in five or so years’ time—requires that you have a process for capture at the source of the CO2; that you have a process for transporting the CO2; and that you have a suitable repository in which it can be contained. Each of these are separate commercial activities requiring different expertise but all have the characteristic that they are relatively capital intensive. Getting these three elements available simultaneously is quite a challenge. You do not want a situation in which two are available but an operation cannot get under way because the third is not. You do not want two assets which are stranded until the third comes along. This would make it inordinately expensive.
There is an overriding and compelling argument for a degree of oversight and co-ordination, a topic which the amendment would make the Secretary of State and the Minister address. Otherwise nothing will happen. There will be a great deal of talk and we will continue, as we are at present, with a glacial rate of progress. We need a framework within which business can operate.
The other question that needs to be addressed is that of funding. In Committee I floated an idea which is very different from anything we have at present and which would effectively take the Government out of the funding loop, a possibility that in many ways must be quite attractive. But that is not the only way. Indeed, I hope that one of the advantages that this amendment might bring about would be a kind of study about other funding groups.
Before I conclude, let me just say that a few weeks ago I came across an anomaly when talking to the leader of a research group in Oxford. He pointed out that at present there is no way of remunerating an organisation which is actually carbon negative. He had tried to attain funding and support from what used to be the Technology Strategy Board and which I think is now Innovate UK, but he was told that there is no market for carbon negativity. That is an anomaly which we ought to do something about. What was presented to me was something that, while not certain, was a plausible way of building power stations that could remove CO2 from the atmosphere by a series of processes while burning natural gas as part of their activity. If this could be made to work, it would be very attractive indeed, but it is something for which it is difficult to find support at present, and is something that the sort of review and organisation I have been talking about could address.
Baroness Worthington
Thereby hangs the problem—it is put back into the atmosphere. These carbon-negative technologies would have to be permanently stored and would have to be over geological timescales, or at least decadal timescales, in order to help in tackling climate change. Of course, CO2 is part of the biosphere but we are talking here about fossilised CO2 that built up over millennia and is being released over a much shortened timescale—a massive chemical experiment that we do not yet know the consequences of.
This could be a rich seam for policymakers and the department, which has already moved a long way in improving the Bill. I certainly hope that if we carry on in this spirit, we will resolve these issues of how to get CCS and CCU deployed so that we can save our industries, attract inward investment and reuse infrastructure sensibly. We could do that through a strategy or the creation of a group—there must be many ways in which this can be done. An Energy Bill should be addressing these issues. They are urgent—we are losing our industrial players—but on the plus side many innovative engineers around the country are coming forward with great ideas. We need to capture that, turn it into something tangible, use it to comply with our obligations and show that we can do decarbonisation at least cost while preserving our industrial might. If we can do that, we shall have an example to show the Premier of China, whom I am sure is grappling with this too.
There is not a single industrialised country that does not now have in its mind how it is going to create steel in a low carbon environment. How is cement going to be produced? What about plastics? We cannot simply ignore that aspect of the decarbonisation challenge. I am not saying that the Government are ignoring it, but we do seriously need to get going now in thinking this through—sooner rather than later—so that we do not see any more unfortunate examples of employers in our heavy industries leaving these shores. We need to keep them here and we need to set incentives for reinvestment. CCSU is one of the few groups of technologies that enables us to do that successfully. We must press on.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords for their contributions. I shall try to deal with these and then come back to the amendments that I believe were addressed, namely Amendments 71, 72 and the manuscript amendment, 78A.
I thank the noble Lord, Lord Oxburgh, for his kind comments and reiterate the point about £1 billion being committed to CCS projects. His points on carbon negativity—also mentioned by the noble Baroness, Lady Worthington, and my noble friend, Lord Howell—are well made. I shall come on to those in a broader context later.
My noble friend Lord Howell asked about the need for the government amendment in the light of the item under Clause 4(1) which already refers to innovation and working practices in general terms. The point here is the need for specificity. Clearly in the context of the North Sea there is a particular point about CCS, hence the government amendments. These strike the right balance. Without picking winners, we need to recognise that there is a particular opportunity in relation to the North Sea and particularly in relation to decommissioning—an almost unique opportunity for the United Kingdom to ensure that we focus on CCS. That is something that the OGA and its director, Andy Samuel, recognise, too.
The noble Lord, Lord Foulkes, was at his disarming best. I find that that is when he is at his most dangerous, so I have to be careful. I thank him for his kind comments, share his upset about both rugby matches and recognise the particular point about Scotland being robbed. That is absolutely right.
The noble Lord asked about China and the meetings that the Secretary of State would be having during the course of the next couple of days. She already has met with the Minister for Energy to discuss particular issues. From what I can gather, that process will be going on over the next couple of days. Additionally, it is important to note that this contact with China is not isolated. Members of its rough equivalent of our Committee on Climate Change were here recently. The Secretary of State met with them, as did I and my noble friend Lord Deben. Clearly China is a massive player in relation to energy so it is important that we have this continuing dialogue. It is certainly happening. If I have any more specific points about the Green Grid alliance I shall write to the noble Lord.
The noble Lord, Lord Teverson, agreed with the thrust of the non-government amendments and the broader environmental considerations. As I have said, we have done our best. I shall deal with these more specifically to ensure, as I believe is already the case, that environmental considerations are covered. I shall touch on that shortly.
As I said previously, I wish the noble Baroness, Lady Worthington, well in her new role, as I am sure the whole House would want to do. I could sit and listen to her for a long while on energy because I think that she knows far more than any of us in this House. I am sure that her commitment and her knowledge will be a massive plus to the organisation to which she is going. I know that she will have a continuing important role in this House so that we will not lose her considerable, massive expertise in this area.
The noble Baroness referred to the steel issue. I was at the summit in Rotherham that the Government held on Friday. The steel issue in relation to the United Kingdom is very complex. At its root, perhaps, is overproduction in China, which is more than twice total EU production. That sums up the problem. There are many aspects to it, and one is procurement. The procurement rules in Europe have been relaxed considerably in our favour. We are the first country to sign up to those new rules, so I hope that we shall be in a position to benefit from that. However, I do not pretend that that is a silver bullet. It is not. There are clearly many issues there. I agree with many of the points that she was making.
The noble Baroness asked about decarbonising industry and particularly mentioned Teesside. We are currently reviewing the findings from the Teesside feasibility study that was published in July and will work with industry on the policy framework on that.
Let me turn to some specifics on Amendments 72 and 78A. I thank the noble Lord, Lord Oxburgh, for speaking to Amendment 72, which seeks to place a duty on the Secretary of State to produce and implement a CCS strategy. As the Government have set out, and as the noble Lord rightly underlines, CCS has the potential to play a vital role in decarbonising our power and industrial sectors. The Energy Technologies Institute estimates that CCS could halve the cost of meeting our 2050 emissions reduction target from £60 billion to £30 billion.
Plants fitted with CCS technology could reduce CO2 emissions from coal and gas power stations by around 90%, enabling clean, dispatchable power powered by coal or gas to play a role in a decarbonised UK economy. This would contribute to secure, resilient energy supplies for consumers. That is why the Government have in place one of the most comprehensive CCS programmes in the world, as recently recognised by the independent Global CCS Institute and to which allusion has been made. Our commitment to supporting CCS is clear. The CCS road map published in 2012 set out the long-term plan to support CCS through the CCS Commercialisation Programme, research, development and innovation, electricity market reform, a strong regulatory environment and international collaboration. Our CCS competition is potentially providing up to £1 billion support, as has been acknowledged.
We have invested over £130 million since 2011 to support research, development and innovation to foster the next generation of CCS technologies, including £2.5 million in a recent project to scope promising CO2 storage sites—key to developing a viable CCS industry here in the United Kingdom. We also recognise the real potential offered by CCS as a long-term route to help United Kingdom industries such as iron, steel and cement to decarbonise. We invested £1 million to explore the business case for industrial CCS on Teesside. We are also looking ahead. The CCS policy scoping document published last year set out the key issues for the medium-term development of CCS in the UK. We are actively engaging industry on the challenges facing future projects and how Government can best design a framework to overcome them.
I understand that noble Lords are keen to support the deployment of CCS in the United Kingdom. The noble Lord, Lord Foulkes, expressly mentioned the need for a government response. That is why, in one of the meetings that we held looking at CCS, I suggested setting up a CCS Peers’ group as a sort of ginger group. I have asked the noble Lord, Lord Oxburgh, to chair that group. That would be a good way forward. I should be happy to look at advice, obviously without commitment. It would be a way of feeding in the expert advice which the noble Lord, Lord Foulkes, has quite rightly said exists in this House. It would help to shape what is, as I think that we all agree, an important area of policy.
I hope I have reassured the House that we are serious about realising the potential of CCS in the United Kingdom and that we have in place a robust support framework. Our proposed amendments on the role of the OGA with regard to CCS underline this.
Baroness Worthington
By way of clarification, I do not think that I stressed enough that this would apply not just to UK operations but, significantly, to the increased importation of fuels in the oil and gas sector. Obviously, it would be excellent if the Treasury could use the funding that would flow from that to invest in UK infrastructure for decarbonisation. This is not intended as a punitive measure for UK operators but as a way of addressing the fact that an entire half of our economy—fuels that we use for heat and transport—is uncapped, with no explicit carbon price. This would be a way of dealing with that and having that money flow from the ultimate sources of these imported fuels, which are overseas, into UK infrastructure.
Lord Bourne of Aberystwyth
I thank the noble Baroness for the clarification. She identifies a problem that does exist. We are looking, as I think I indicated previously, at regulation in relation to the transport sector, which is probably more realistic and a more likely runner at the moment. I accept the spirit in which she has tabled the amendment, but I do not think that we are in a position where we can accept what I would see as additional cost burdens on industry at this stage. That said, I believe that the offer to the noble Lord, Lord Oxburgh, has been accepted, subject to his busy diary, and I hope that we can move forward with that. Perhaps in that context we can look at proposals like this and at possible developments in the industry. I urge noble Lords not to press these amendments.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 6 months ago)
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Lord Teverson (LD)
My Lords, I thank the Minister for the meetings that we have had. I found one of them particularly useful because we had a wide range of representatives, from both the department and the OGA. One of the issues that came up, which perhaps I should have understood more but did not, was that oil and gas infrastructure, particularly in the North Sea, was of particular importance, as well as the importance of managing that infrastructure in terms of decommissioning and making sure of other uses, such as CCS. What came out was that a lot of this infrastructure could well be critical to the nation, not just in the context of carbon capture and storage, but even in how the oil and gas market might move.
The question then came down to: if there was critical infrastructure and this decommissioning took place, what happened if the commercial sector— the industry—decided that there was no way that it wanted to keep particular assets operational and they should therefore be decommissioned, but the Secretary of State, the Government and the nation had a different view? Who carries the financial can for that in the future? If industry was not there, who else would step in?
I ask the Minister to forgive me for this: in a way our amendment is a probing amendment, which of course we should not really do on Report, but it is an important point to understand. My question is a fundamental one: if we have critical infrastructure in this industry—in the North Sea, say—and it is to be decommissioned, yet the OGA sees it as critical for future development, whether with greenhouse gases or the future of oil and gas itself, what happens when the private sector will no longer pay for that asset to remain operational, or at least be mothballed? Our amendment asks that question, but it also lays down that the OGA should have a specific responsibility to bring it to the attention of the Secretary of State, should such a situation arise. To solve that, the Secretary of State should be able to pay out of public funds for that critical infrastructure to remain.
I am not completely naive in this area. Clearly, if the private sector sees that the taxpayer is likely to underwrite an asset into the long-term future, perhaps not surprisingly people in that sector might be rather quicker to decommission, move out of these assets and move that cost across to the taxpayer. There is clearly that risk. However, we on these Benches seek through this amendment to obtain clarity on how we defend and preserve the national interest in terms of these assets while at the same time making sure that any taxpayer commitment will be protected—namely, that we keep these strategic assets when the OGA and the Secretary of State believe that they are critical for the nation’s future.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Teverson, for these amendments. I wish to speak to the non-government amendments before addressing the government amendments. Following discussions held during the dinner break, I am happy to revisit Amendment 72, which we looked at before the dinner break.
Amendment 19 seeks to amend Clause 5 to give the Secretary of State the power to direct the Oil and Gas Authority to postpone or prohibit decommissioning of infrastructure until such time as she determines that a carbon capture and storage operator is in a position to utilise the infrastructure. I must first clarify that it is not the intention that the Bill will give the OGA the power to prohibit or postpone decommissioning. The ultimate power to approve, or disapprove as necessary, a decommissioning plan lies with the Secretary of State under Part 4 of the Petroleum Act 1998, and will continue to do so.
In any event, taking a power to delay or prohibit decommissioning on an open-ended basis for the purpose suggested would appear to require an owner of relevant infrastructure to pay for the ongoing maintenance of the infrastructure on an indefinite basis until the CCS development is ready. These would be significant costs, running to tens of millions of pounds for ongoing maintenance every year, simply to keep the relevant infrastructure safe until such time as it might be reused for CCS. When, as we all hope will quickly become the case, CCS is a proven technology, we can be certain of how and when relevant infrastructure can be reused for CCS and a commercial deal is viable, preventing decommissioning of existing assets to make way for CCS may be sensible and permissible under the current proposals the Government have made. However, as we debate the merits of this amendment today, we cannot say with any certainty when or how such infrastructure could be reused for CCS. I fear that this amendment risks making the United Kingdom continental shelf less attractive to investors and jeopardising the vital investment we need for the future of the basin. This would put us in significant conflict with the recommendations set out in the Wood review, and would be perilous given the challenging economic realities in the United Kingdom continental shelf today.
I hope that this explanation is helpful in setting out why this amendment is not workable from a structural perspective, since it will be the Secretary of State, not the OGA, who will hold the key power to decide whether to approve or reject an abandonment programme. In addition, as I will outline shortly, the government amendments brought forward on Report today aim to strike the right balance between keeping the continental shelf open for business while putting rigorous checks in place to ensure that the preservation and reuse of North Sea infrastructure, including for CCS, is appropriately considered before any decommissioning can take place.
The Government’s proposals would allow the Secretary of State to ensure that decommissioning takes place in accordance with an approved decommissioning plan, enabling her to ensure that alternatives to decommissioning are taken into account and that the costs of plans are kept to the minimum reasonably practicable. The intention is very much to bring consideration of such reuse to the forefront of the process and ensure that opportunities are identified early, allowing for adequate commercial arrangements to be made between parties and preventing situations requiring a party to maintain an asset against their will.
I turn to non-government Amendment 21. This amendment seeks to insert a new clause after Clause 7. The new clause would require the Oil and Gas Authority to report to the Secretary of State if the operability of any element of critical oil and gas infrastructure is at risk due to the financial condition of the owner, or for any other reason. It would also enable the Secretary of State to provide financial support to maintain such assets, if she considers the asset is at risk of closure or becoming inoperable, and it is in the national interest for it to remain in operational order.
I, too, am concerned to ensure that critical oil and gas infrastructure is properly identified and safeguarded in the national interest. This is an area already being addressed by the Oil and Gas Authority. Its recent Call to Action: Six Months On report highlighted actions being taken to protect critical infrastructure. However, we will continue to monitor this work and provision in this Bill will already enable the Secretary of State to require action from the OGA if necessary.
“(3) The Secretary of State may use protected material only for the purpose for which it is provided.
(4) Protected material must not be disclosed—
(a) by the Secretary of State, or(b) by a subsequent holder,except in accordance with this section.(5) For the purposes of subsection (4)(b), “subsequent holder”, in relation to protected material, means a person who receives protected material directly or indirectly from the Secretary of State by virtue of a disclosure, or disclosures, in accordance with this section.
(6) Subsection (4) does not prohibit the Secretary of State from disclosing protected material so far as necessary for the purpose for which it was provided.
(7) Subsection (4) does not prohibit a disclosure of protected material if—
(a) the disclosure is required by virtue of an obligation imposed by or under any Act, or(b) the OGA consents to the disclosure and, in a case where the protected material in question was provided to the OGA by or on behalf of another person, confirms that that person also consents to the disclosure.”
Lord Bourne of Aberystwyth
My Lords, government Amendment 20 places controls on the disclosure of information. Clause 7 of the Bill as introduced provides the Secretary of State with the power to require information from the OGA for certain purposes which are listed in subsection (1). The Secretary of State may disclose such information onwards for these same purposes or if required to under legislation, or with the consent of the OGA and, where applicable, that of the original information holder.
This amendment applies restrictions on the ability of any subsequent holders of this information to further disclose such information. It will ensure that they may do so only if required under or by an Act of Parliament or with the consent of the OGA and, where applicable, of the original provider of the information. This will ensure that potentially commercially valuable information provided to the OGA cannot be disclosed by subsequent holders of information except in certain narrowly prescribed circumstances. I beg to move.
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.
“( ) on an application made to it under section 12A of the Energy Act 1976;”
“( ) The OGA may not charge fees under this section for the exercise of any function which it is authorised to exercise by virtue of—
(a) an order under section 69 of the Deregulation and Contracting Out Act 1994, or(b) an agreement under section 3(3).”
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.
Lord Bourne of Aberystwyth
My Lords, Amendments 24 and 25 amend Clause 9 to ensure that the costs payable to the OGA through the levy on licence holders include the costs incurred by Her Majesty’s Courts and Tribunal Service in relation to the setting up and running of the appeal right against the OGA’s sanctions.
The First-tier Tribunal is an established judicial body, but adding a new appeal right to its functions incurs administrative costs. It is normal practice for HM Courts and Tribunal Service to pass costs associated with setting up and running new appeal rights to the body for whom the appeal right is being established. The amendment ensures that such costs will be met by industry, as the regulated community for whom the appeal right is provided, through the levy. I beg to move.
“( ) the costs incurred in respect of that period by the Lord Chancellor in connection with the provision of Tribunals to consider appeals against decisions of the OGA, and”
“Review of OGA and guidance from Secretary of State
(1) The Secretary of State must review the OGA’s performance for each review period.
(2) The first review period—
(a) begins with the day on which section 1 comes into force, and(b) ends at the end of the three year period beginning with that day, or on such earlier day as the Secretary of State may determine.(3) Subsequent review periods—
(a) begin with the day (“the first day”) after the last day of the preceding review period,(b) end at the end of the three year period beginning with the first day, or on such earlier day as the Secretary of State may determine.(4) A review must, in particular—
(a) assess how effective the OGA has been in exercising its functions, and(b) consider the OGA’s functions under—with regard to their fitness for purpose and scope.(i) Part 2, and(ii) Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide),with regard to their fitness for purpose and scope.(5) As soon as practicable after a review period, the Secretary of State must—
(a) publish a report of the findings of the review for that period, and(b) lay a copy of the report before Parliament.(6) As a result of the findings of a review, the Secretary of State may give guidance to the OGA about any matter relating to the OGA’s functions.
(7) The OGA must take account of any such guidance in carrying out its functions.
(8) For the purposes of this section “function” does not include any function which the OGA is authorised to exercise by virtue of—
(a) an order under section 69 of the Deregulation and Contracting Out Act 1994, or(b) an agreement under section 3(3).”
Lord Bourne of Aberystwyth
My Lords, I now speak to government Amendments 29, 30, 33, 41 to 43 and 61 to 70, which create a new Chapter 6, titled “Disclosure”. This covers the powers of the Oil and Gas Authority to share information. This chapter consists of new clauses, which are described later in the Bill, and, for clarity, and on the advice of parliamentary counsel, we have consolidated the various existing information disclosure provisions in Chapters 2 to 5 of Part 2 of the Bill into this new Chapter 6.
Amendments 29 and 30 introduce the fact that there is a new Chapter 6 and make a consequential amendment at the start of Part 2.
Amendments 33, 41, 42, 43 and 61 remove the provisions dealing with the disclosure of information obtained under the current clauses—that is, Clause 21, “Disputes: disclosure”, Clauses 31 and 32, “Disclosure of information and provision of samples” and “Timing of disclosure”, Clause 39, “Meetings”, and Clause 58, “Sanctions”—which are now contained in Chapter 6. There is no change to their legal effect.
Amendments 62 to 70 consolidate into the new Chapter 6 the information disclosure provisions previously included in Chapters 2 to 5 of Part 2, and introduce the two new powers to enable the Oil and Gas Authority to disclose information to UK governmental bodies and for the purpose of legal proceedings.
Amendments 62 and 63 reinstate the general prohibition on disclosure of protected information by the Oil and Gas Authority, or a subsequent holder of such information, as applicable to the disclosure provisions of the Bill as introduced. These amendments are therefore required to consolidate the disclosure provisions into the new Chapter 6.
Amendment 64 inserts a new disclosure power permitting the OGA to disclose information obtained under specified chapters of Part 2 to certain listed UK governmental bodies to facilitate the carrying out of their functions. Owing to the possible inclusion of commercially valuable data within chapters of the Bill as introduced, the existing disclosure provisions in the Bill provide only narrow powers for information to be disclosed by the OGA, such as where required by an Act of Parliament or with the consent of the information owner. This may have prevented the OGA from disclosing information obtained under these powers to DECC and its agencies, such as the Office of Carbon Capture and Storage, other central government departments, the devolved Administrations and law enforcement agencies. These amendments will allow the OGA to disclose information obtained under Part 2 to such listed UK government bodies for the purpose of their functions.
I can advise noble Lords that any changes to the list of bodies or to the categories of information they may receive may be made only by affirmative resolution of both Houses of Parliament.
Amendments 65, 66, 67, 68 and 69 consolidate the disclosure provisions which were already included in the Bill covering, respectively, general disclosure required for the OGA to prepare returns and reports, disclosure in the exercise of its disputes and sanctions powers, release after a specified confidentiality period and disclosure with consent, or as required by legislation. The effect of these provisions is unchanged. Lastly, Amendment 70 provides authority for the OGA to disclose information if required for civil or arbitration proceedings or to law enforcement bodies for the investigation or prevention of criminal activities.
Lord Oxburgh (CB)
I thank the Minister for his comment earlier on Amendment 72. I have a specific question on Amendment 64. It relates to Clause 31(3)(b), which says that disclosures may be made to the National Environment Research Council,
“or any other similar body carrying out geological activities”.
My question is simply what those other similar bodies might be. For example, would they be universities carrying out geological activities?
Lord Bourne of Aberystwyth
I am grateful to noble Lords who have participated in the debate on this part of the Bill. I acknowledge the point, as I think I did previously, about the technical nature of these late amendments. I understand the point made forcefully and correctly by the noble Baroness, Lady Maddock. On the general point about consolidation, I think there is general welcome for that, to try to ensure that everything is all in one place.
There were then some specific questions about the sharing of information with foreign Governments. I think that the legislation will be subject to the Data Protection Act; that is quite true. My understanding is that disclosure to third parties is not appropriate. If there is a body that the information is being shared with, whether domestically or with an overseas Government, that is the limit of it for the function concerned, unless, for example, the treaty were to provide otherwise. I am trying to think of the type of information that might be shared. The examples that I gave of Norway, Ireland, the Netherlands and so on are probably in relation to interconnectors. There may be a need to share information about where pipelines are at the moment, and so on. That is the sort of thing, rather than anything of an operational nature; I do not anticipate there being anything in any way sinister about this. I will write to the noble Lord, Lord Grantchester, about the oversight of the Secretary of State. I think that she would have oversight of this, but I will check that point. I shall also check whether there is to be publication of the information concerned. I cannot see why not, in all honesty; as I say, this is a functional managerial thing rather than anything else.
The noble Lord, Lord Oxburgh, raised a point about Clause 31(3)(b) regarding the National Environment Research Council or other similar bodies. I anticipate that that would include universities. The other eventuality covered here is if for any reason the council were to cease to exist and something else were to take over its functions—it is most unlikely—that would then qualify as a similar body. I hope that that deals with the points that were made.
Noble Lords will be interested to know that arrangements exist in treaties to ensure that the Secretary of State is satisfied that adequate protection is in place. An example is the showing of protection measurement systems and production measurement for joint fields of exploration in the North Sea. In relation to the point made about consolidation, for which I think we have general support, it was parliamentary counsel’s advice to consolidate those disclosure provisions. That is not an attempt to take the credit for what we all think is a very good idea, but it is to give credit to the parliamentary counsel for that. I hope that helps.
“(6) Chapter 6 makes provision about the disclosure of information and samples which have been obtained by the OGA under this Part.”
“(a) under subsection (5)(a), or(b) by directions under subsection (5)(b),are sanctionable”
Lord Bourne of Aberystwyth
My Lords, I will now speak to government Amendments 31 and 32, 44 and 45, 47, 49 to 52, 54, 58 to 60 and 79 to 82. The majority of these make minor and technical changes to Chapters 2 and 5 of Part 2 of the Bill. Amendments 49 and 52 also provide for the effect of devolution. These amendments are either drafting improvements or are clarificatory in nature and do not alter the policy intent of the relevant clauses. Other amendments in this group make provision regarding the powers in the Bill to make regulations.
Amendments 31, 32 and 44 are intended to achieve the same aim. They make minor changes to Clauses 16 and 18 of Chapter 2 and Clause 42 of Chapter 5. They provide clarification so that there is no doubt that when the OGA gives a direction that imposes a requirement on a person, that requirement is a “petroleum-related requirement” within the meaning of Clause 41(3)(c). This makes clearer the policy intention that the OGA may give a sanction notice in respect of a breach of a requirement imposed by such a direction.
Amendments 47 and 52 are intended to achieve the same aim. They make minor changes to Clauses 46 and 47 of Chapter 5 to clarify the policy intention that the OGA should be able to give revocation notices and operator removal notices to a licence holder and an operator only in respect of a breach of a “petroleum-related requirement” imposed on the licence holder or operator in that capacity.
The Petroleum Act 1998 imposes a duty to act in accordance with the strategy to maximise economic recovery of United Kingdom petroleum. This acts upon various categories of persons, including licensees and owners of upstream petroleum infrastructure. Where a person acts in more than one such capacity, the amendment makes it clear that the OGA cannot, for example, give a licence revocation notice to an owner of upstream petroleum infrastructure in respect of a breach of the duty to act in accordance with the strategy imposed on the person as an owner of upstream petroleum infrastructure if that person also happens to be a licence holder.
Amendments 49 and 54 are intended to achieve the same aim. They amend Clauses 46 and 47 of the Bill to prevent the OGA giving an operator removal notice or revocation notice in relation to licences which, on the date the notice is given, the OGA would not have the power to grant. This amendment removes the possibility for the OGA to revoke a licence or remove the operator of a licence in circumstances where the OGA does not have the power to grant the licence. This reflects the proposed devolution through the Scotland Bill and the forthcoming Wales Bill—to be published in draft form tomorrow—of the licence-granting functions in respect of onshore licences under the Petroleum Act 1998.
Amendment 50 makes minor changes to Clause 46 to ensure that existing obligations binding a licensee remain in cases where the OGA issues a revocation notice under Clause 46. The amendment provides clarification and ensures certainty that the provisions of licences will apply following revocation of the licence under Clause 46 in the same way as they would apply if the licence were revoked under the terms of the licence. It does not alter the policy intention.
Amendment 51 makes a minor drafting change to the wording of Clause 46(8) for consistency with the wording of Clause 46(4). There is no change of policy. Amendment 58 makes a minor change to Clause 51 to place it beyond doubt that on an appeal against a revocation notice or an operator removal notice which is given by the OGA, the tribunal’s powers to vary the notice are limited to varying the date on which revocation of the licence or removal of the operator takes effect.
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.
“(2) In this Chapter, “petroleum-related information” and “petroleum-related samples” include information or samples acquired or created as mentioned in subsection (1) which are relevant to activities carried out under a carbon dioxide storage licence.
“(3) In subsection (2) “carbon dioxide storage licence” means a licence granted under section 18 of the Energy Act 2008.”
Lord Bourne of Aberystwyth
My Lords, I will speak to government Amendments 46, 48, 53, 55, 56 and 57. These amendments make minor changes to Chapter 5 of Part 2 of the Bill to harmonise the provisions relating to appeals against the OGA’s sanctions with the procedural rules for the General Regulatory Chamber of the First-tier Tribunal. The procedural rules are made by the Tribunal Procedures Committee. These rules govern the practice and procedure in the First-tier Tribunal and Upper Tribunal.
Amendment 55 deletes subsection (2) of Clause 49, which has the effect of removing the 28-day period for bringing an appeal against the OGA’s sanctions. The time period for bringing an appeal will therefore revert to that set out within the tribunal procedural rules, which is also set at 28 days but which allows the tribunal discretion to extend that time period beyond the 28-day period.
As a result of Amendment 55, Amendments 46, 48 and 53 make consequential amendments to the clauses dealing with financial penalty notices, revocation notices and operator removal notices, which currently cross-refer to the existing 28-day period referred to in Clause 43(2). This ensures that, notwithstanding the deletion of this 28-day time period, a financial penalty notice, revocation notice or operator removal notice still cannot take effect until 28 days after the relevant sanction notice was given. This ensures that, regardless of the removal of the 28-day period referred to in Clause 49, a person is still given an appropriate opportunity to appeal before a sanction takes effect.
Amendment 56 amends Clause 49 to make it clear that, where an appeal is made to the First-tier Tribunal against a sanction notice and the sanction notice ceases to have effect, the effect of that suspension lasts until the tribunal confirms, varies or cancels the notice.
Amendment 57 adds a new subsection to Clause 49 to provide that, where an appeal is brought against a sanction imposed by the OGA, either the First-tier Tribunal or the Upper Tribunal may further suspend the effect of that sanction for the duration of any further appeal to the Upper Tribunal. I beg to move.
Lord Grantchester
I thank the Minister for providing the details of the amendments. They seem minor in nature and largely clarificatory—that is rather a long word at this time of night—and therefore they should raise no objection.
Lord Bourne of Aberystwyth
My Lords, I am most grateful to the noble Lord. It is a long word at this time of night or indeed at any other time.
“( ) A revocation notice may be given only in respect of a failure to comply with a petroleum-related requirement imposed on a licensee in that capacity.”
“( ) An operator removal notice may be given only in respect of a failure to comply with a petroleum-related requirement imposed on an operator under a petroleum licence in that capacity.”
(a) confirm the decision,(b) vary the decision by changing the revocation date or the removal date, as the case may be, or(c) quash the decision, andconfirm, vary or cancel the sanction notice in question accordingly.”
“( ) If the sanction notice given is a financial penalty notice which does not require compliance with the petroleum-related requirement, no further sanction notices may be given in respect of the failure to comply.”
“6 DisclosureGeneral prohibitionProhibition on disclosure
Protected material must not be disclosed—(a) by the OGA, or(b) by a subsequent holder,except in accordance with this Chapter.”
“Abandonment of offshore installations
Schedule (Abandonment of offshore installations) makes provision about the abandonment of offshore installations.”
Renewable Energy: Solar
Lord Bourne of Aberystwyth Excerpts(8 years, 7 months ago)
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Lord Young of Norwood Green
To ask Her Majesty’s Government what assessment they have made of the recent collapse of Mark Group, a solar energy company, in the light of their decision to reduce the subsidy on domestic rooftop solar installations.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, we are currently consulting on revisions to the feed-in tariff for solar. The consultation ends next week on 23 October. I encourage anybody with evidence to submit into that consultation. Of course, any job losses resulting from the Mark Group going into administration are regrettable, as indeed are all job losses. I strongly sympathise with those affected.
Lord Young of Norwood Green (Lab)
I thank the Minister for his reply and declare an interest. This year I finally persuaded my local primary school, where I am a governor, to utilise a large area of flat roof to install solar panels; with the current feed-in tariff, the payback time for investment is about seven years—with, of course, a significant saving in the electric bill. Does the Minister appreciate that the proposed massive reduction in the feed-in tariff will cause many organisations and residential home owners not to install solar panels, with resulting job losses and company closures in an industry that is vital to our renewable energy programme? Why did he not consider a phased reduction of the feed-in tariff, as the industry suggested, which would have given solar companies time to adjust?
Lord Bourne of Aberystwyth
My Lords, I repeat that the consultation is still very much open. It is true that social housing and community projects—the noble Lord referred to a school—look to feed-in tariffs as a reliable source of revenue. That is why the review specifically seeks views on this. I encourage the noble Lord to feed in to that review and to others.
Lord Howell of Guildford (Con)
My Lords, is it not worth explaining that there has to be a limit to the amount that the taxpayer and the consumer is prepared to put in to subsidise these important renewable industries? Would it not be the best advice to future investors and firms in this area to seek to develop their technologies without subsidy, as is happening in other parts of the world?
Lord Bourne of Aberystwyth
My Lords, keeping bills down for hard-working families obviously is a vital part of the Government’s policy—and it very much remains so. It is true that the costs of solar and of other renewables are falling significantly. Solar is on the fastest trajectory downwards. We are very keen to reduce the cost of solar panels by, for example, supporting lifting the ban on minimum price restrictions on the import of solar panels from China into the EU, as we are doing.
Lord Stoneham of Droxford (LD)
Is the reversal of the incentives for long-term investment in the renewable energy sector not in complete contradiction of the warning given by the Governor of the Bank of England that climate change is a threat to our financial resilience and long-term prosperity?
Lord Bourne of Aberystwyth
My Lords, extremely important at the moment are the climate change negotiations that are taking place, or will take place, in Paris at the end of the year, as I am sure all noble Lords will agree. The most significant thing that is raised internationally is the generosity of the contribution from the United Kingdom of £5.8 billion towards resilience and mitigation. That is what the discussion is about: taking international action. That remains extremely important.
Lord Bach (Lab)
My Lords, is the Minister aware that the Government’s boast earlier about today’s employment figures will be treated with at best ridicule and at worst the contempt that it deserves in the city of Leicester and the county of Leicestershire, where 900 hard-working workers are set to lose their jobs? This seems to be a direct result of government policy. Is the Minister not a little bit ashamed at what the Government’s policies, or policy aims, have already come to? What are the Government going to do to help?
Lord Bourne of Aberystwyth
My Lords, perhaps I may first correct the noble Lord. Most of the jobs that are lost are those of installers who are not based in Leicestershire—I know the city of Leicester very well. However, it is important to note that the Government are very alive to this fact. I am surprised that the noble Lord—in all the circumstances of the success of the market economy, though contradicted by the present leadership of the Labour Party—does not welcome the delivery of some of the best employment and unemployment figures, with unemployment coming down and employment going up. I would have thought that the noble Lord would welcome that; it is very significant.
Viscount Ridley (Con)
My Lords, will my noble friend confirm that the efficiency of solar panels in this country, which is a rather cloudy country, is somewhere below 10% of nameplate capacity? Most of that happens in summer and in the day time, and seems not to happen often in the winter evenings.
Lord Bourne of Aberystwyth
My Lords, sadly it is a feature of life that we do not get as much sun as some countries. The good news on solar panels is that of course they can deliver significant advantages in Africa—which my right honourable friend Justine Greening is looking at through international development funds—and are delivering significant advantages in China and India as well.
Baroness Worthington (Lab)
My Lords, is the broader point not about investor confidence? Perhaps the Minister could tell us in which of the zero-carbon technologies the Government want to see investment and which of those will deliver UK jobs rather than ones potentially in France or China?
Lord Bourne of Aberystwyth
My Lords, it is refreshing to see the noble Baroness talking about British jobs and investor certainty in view of the difficulties that she must be having with her leadership in another place. I know very well that she supports new nuclear. Her leader does not.
Lord Bourne of Aberystwyth
If I have a chance I will answer it. The noble Baroness does support new nuclear; her leader does not. That is significant for investor confidence. It is also significant in terms of delivering what we need to deliver for an international agreement in Paris. It will be interesting to hear where the Labour Party is on that rather important issue.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 7 months ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I start by speaking to government Amendments 1 to 13, which seek to amend and supplement Clause 66. I thank noble Lords for extending this debate and allowing us the time for a fuller and thorough discussion.
Lord Foulkes of Cumnock (Lab)
I am sorry to interrupt but may I put on record in the Grand Committee what I said in the Chamber? It would have been better for all of us if this debate had taken place in the full Chamber rather than in the Grand Committee.
Lord Bourne of Aberystwyth
I thank the noble Lord for his intervention but I make the same response as I gave previously. I know that is the noble Lord’s view but I have heard contrary views, and not from the Conservative Benches, that Members prefer this Bill to be in the Moses Room. However, the point is noted.
As previously set out in the Secretary of State’s announcement on 18 June regarding the early closure of the renewables obligation, we proposed a grace period to protect investor confidence in the wider renewables sector. A grace period was proposed that would provide for those projects which had, as of 18 June this year, planning consent, grid connection and land rights. The grace period was designed to allow for projects that meet certain criteria to continue to accredit under the renewables obligation until the original closure date of 31 March 2017. Following this announcement, we undertook a significant period of engagement to understand better the views of industry and other stakeholders on our proposals.
I recognise that the Government’s amendments, which were tabled last week, are somewhat technical and have the potential to be seen as complex. I reassure noble Lords that, from the outset, the Government have been alive to the issues of investor certainty and clarity, which is why the provisions have been drafted to reflect the approach taken in existing renewables obligation legislation, in particular the Renewables Obligation Closure Order 2014 and the 2015 closure order relating to large-scale solar. This approach aims to ensure consistency and ease of understanding for industry. Following our previous Committee debate on 14 September, we have now carefully reviewed the feedback and evidence provided during the engagement exercise. We have since developed amendments to our original policy to ensure that it strikes the right balance. The amendments aim to protect consumer bills and ensure the right mix of energy, while balancing this against the interests of onshore wind developers and the wider industry.
I am also pleased that the amendments and the revised impact assessment were made available to noble Lords on 8 October in advance of today’s debate and as promised at our last sitting. I hope that noble Lords have had time to review the amendments and that they go some way towards addressing concerns raised during the debate in our previous Committee sitting on 14 September.
Amendments 1 to 13 amend the Bill to introduce the proposed grace period criteria for the early closure policy as outlined in the announcement on 18 June and make a number of additional supplementary amendments.
Amendments 1 to 12 make a number of changes to Clause 66, which introduces a new provision into the Electricity Act 1989 to implement the early closure of the schemes to new onshore wind in Great Britain. The amendments seek to remove the delegated power with a view to setting out the terms of the grace period in the Bill. Amendment 13 sets out the detail of the grace period in the Bill. I hope that these amendments will be welcomed by noble Lords, as initial feedback from the industry to the department following the publication of these clauses has indicated.
I again apologise for the delay in bringing these amendments forward, but hope noble Lords understand the complexity of the policy that has been drafted and appreciate that we will now have an appropriate amount of time in which to debate them today.
I turn first to the terms of the initial grace period criteria as outlined in the Secretary of State’s announcement in June. The proposal was—and, following detailed industry engagement, remains—to offer a grace period to those projects which, as of 18 June 2015, already have, first, relevant planning consents; secondly, a grid connection offer and acceptance of that offer, or confirmation that no grid connection is required; and thirdly, access to land rights.
In addition to this, in certain circumstances, projects that have been granted planning permission following a successful appeal will also be eligible for the grace period. In particular, those projects which have, via an appeal or judicial review, had a negative planning decision that was made on or before 18 June overturned, should be eligible for the grace period. This is because had the correct decision been made in the first instance, they would have had planning consent on or prior to the 18 June cut-off date. These key grace period terms are referred to in the amendments as the “approved development condition” and are referred to in proposed new Section 32LJ.
I turn now to investor confidence. At the time of the announcement outlining the initial grace period, the Secretary of State also said that she wanted to hear the views of industry and other stakeholders before framing the terms of the legislation. The department engaged with hundreds of stakeholders, including the devolved Administrations, supply chain, investors and developers, over the summer. The evidence gathered during that engagement exercise demonstrated the views of individual developers and the wider industry. Evidence was collected though online representations, individual meetings, representations from trade bodies and investor round-table sessions.
Following this engagement, we now have evidence that certain projects which already meet the proposed grace period criteria are experiencing difficulty securing finance. Feedback has shown that a number of financiers may be unwilling to lend to projects due to legislative uncertainty created by the parliamentary Bill process. Therefore, to ensure that projects which meet the grace period criteria and would have otherwise been able to commission and accredit under the renewables obligation by 31 March 2017 are not frozen out of the process, we are offering those projects which meet the approved development condition additional time to seek accreditation. The extension available is broadly equivalent to the period between the date of the Secretary of State’s announcement—18 June—and likely Royal Assent to the Bill, which is approximately nine months. To be eligible for this extra time, projects must be able to provide evidence that they have been impacted by a lack of investment during the period to Royal Assent.
This investment freeze condition I have just described is intended not to increase the pipeline of onshore wind projects that are able to accredit under the renewables obligation but rather to ensure that those projects which were intended to be protected by the grace period, as proposed on 18 June, are afforded this protection.
To provide a consistent approach to all onshore wind projects eligible to accredit under the renewables obligation, we also ensure through these amendments that a pre-existing grid and radar delay grace period applies here. This entitles projects affected by unforeseen grid and radar delays an additional 12-month period in which to accredit.
We are confident in our amendments and the proposed grace period. We have actively listened to stakeholders and worked to ensure that the final policy strikes the right balance between the interests of onshore wind developers and those of the wider public. I beg to move.
Baroness Maddock (LD)
My Lords, I wish to add my voice to some of the points that have been made this afternoon. I particularly want to talk about parliamentary process. I have done this before. For the duration of the coalition Government, I was a party Whip and I am still a party Whip. We have never had to deal with the situation that we had with this Bill where we had the Second Reading on the last day of business. We had the first day of Committee when we came back for two weeks. We then went away for two weeks. We were promised that we would have the amendments to the Bill on 7 October. We got them on 8 October. They were several pages of very technical amendments.
I feel a great deal of sympathy for the Minister because it is probably not his fault that this has happened. But to have to deal with this Bill in this way? This is his first Energy Bill and I have great sympathy for him, so I am not necessarily having a go at the Minister, but at the process. We really need to get our act together.
We have heard today about how this is affecting people outside; about how important it is and how people want to talk to us. I made the point before that we are now a very big House. If we make technical changes like these at the very last minute, it is very difficult for Back-Benchers to get involved. A lot of us get bombarded by people from outside who are worried about what is going on, and what time have we had to deal with that? I would like to send the message—I am very pleased the government Chief Whip is in his place—that we try to avoid this in the future. It is not a good, efficient way to work and it is not the way the House of Lords has worked in the past.
The other point that I want to support is the issue of certainty. In the last Parliament, we had the promise made by the noble Baroness, Lady Verma—I was there, working on that Bill. We again spent hours on technical stuff, going through an Energy Bill, trying to make sure that in the future people who invest in energy across the board would have certainty about what was happening. We are already into the uncertainty around this Bill. I read with horror in one of the newspapers—I am afraid I cannot find the article again—that the funding for one of the gas turbines had been withdrawn because of the uncertainty about what the Government were doing in the whole of the energy sector. This is an important point that the noble Lords, Lord Deben and Lord Foulkes, have also talked about.
We are where we are and the uncertainty is very difficult for industry. We have heard about businesses going under and so on. We are between a rock and a hard place on these Benches because in some ways we do not particularly like the way in which the Government have carried on, but we want to try to make sure that the amendments are as good as we can get them. My noble and learned friend, Lord Wallace, is much more able than I am and has explained them all beautifully to the Committee. I hope that the Government can respond to these, because it is important that the uncertainty does not go on any longer if we can possibly help it. I thought that the noble Lord, Lord Deben, had a wonderful phrase for the things that we are trying to sort out—examples falling the wrong side of the lines. I think that is the sort of thing that we are trying to put right. I hope that between us we can reach a reasonable conclusion and we do not have uncertainty any longer in this industry.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have participated in this debate and raised some salient points. I congratulate the noble Baroness, Lady Worthington, who was good enough to take me into her confidence some time ago. I am delighted about her prospect, and we all wish her well in that new role. She will bring considerable knowledge and massive commitment to that task. We share objectives, and I wish her every success in that role. I know that she will continue to have a vital part to play in the House of Lords.
I also pay tribute to the noble Lord, Lord Purvis, who is not in his place. He handled part of the Bill as well as leading for the Liberal Democrats on some of these issues. That role has been taken over, but he had tremendous brio and contributed massively to some early consideration of the Bill.
I shall deal with the point about the recommital before I move on to say something about the amendments. I listened very carefully to what the Labour Front Bench, the Liberal Democrat Front Bench and some Cross-Benchers were saying. I went to considerable lengths to get this recommital organised. The only option for doing the recommital was in the Moses Room, otherwise it would have disrupted business elsewhere in a way that noble Lords would not have wanted. There was little option for recommital other than to have it in the Moses Room. It was a genuine and considerable effort to get organised.
There is obviously a difference of opinion over the amendments that have been put forward. There is clearly a difference between noble Lords about the desirability of what we are doing. I point to the manifesto. We may have different views about whether this is desirable but there is a commitment in the manifesto in relation to onshore wind, and that is why we are pursuing it. I understand that other parties would deal with it in a different way, but there is a democratic process and there has been a general election.
In view of what has been said today in this Committee, I am minded to withdraw these amendments to represent them next week, having considered very carefully some good points, particularly from the noble and learned Lord, Lord Wallace, which were echoed by the noble Baroness, Lady Worthington. There are some very serious points that I would like to look at. Some of them clearly merit looking at in the way that the noble and learned Lord, Lord Wallace, approached them in terms of improving what the Government are committed to doing. Others do not like what we are doing. As far as I am concerned, that matter was settled in broad terms by the general election. There are going to be democratic differences between the parties. This is the way things happen. However, I am very happy to go away and reflect on the points that have been made. We have come a long way and I thank the noble Baroness, Lady Quin, and my noble friends Lord Howell and Lord Deben for what they said about the amendments. I agree with the commitment to renewables that was put very forcefully by my noble friend Lord Deben. They are vital and are something we are pledged to, as we are pledged to the climate change negotiations that are going on in Paris and are moving at great speed, with 149 countries yesterday, and probably more now, having made commitments regarding their contribution. There is a great prize there internationally.
I will reflect on what was said today and, having considered the points that have been made, will bring these amendments back on Report. I hope that in the light of what was said by some noble Lords that that is considered a reasonable approach.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 8 months ago)
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Lord Bourne of Aberystwyth
That the Energy Bill [HL] be recommitted to a Grand Committee in respect of Part 5 of the Bill (Clauses 65 and 66).
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, perhaps I may deal first with the so-called extra day in Committee and, for the first time, I thank the noble Baroness for getting back to me. I hope she accepts that twice over the weekend I tried to contact her and left a message. It would have been good to hear from her that the situation is fine—only now am I am hearing for the first time that it is.
Baroness Worthington
I communicated through our Whips this morning that it was acceptable. They are in communication with the noble Lord’s Whips. Therefore, I have gone through the normal channels.
Lord Bourne of Aberystwyth
We had corresponded directly earlier but I accept that the situation is fine. Technically it is not another day in Committee, which I believe is causing the clerks consternation; it is a day for recommital in the Moses Room, and I think that that is understood. I hope that noble Lords will accept that we have endeavoured to accommodate people’s wishes in relation to the subsidies that we will be looking at.
It is very good to see the noble Baroness still in her place. I suspect that she and I will be agreeing much more than she will be agreeing with her leader, and we will perhaps come to that later. We will come on to decarbonisation in relation to nuclear policy. It is important that we have a responsible Opposition because they are an alternative Government, so we will come on to that and it is absolutely right that we do.
Lord Foulkes of Cumnock (Lab)
I wonder whether the Minister can tell us how that relates to Clause 59.
Lord Bourne of Aberystwyth
The noble Lord has made a fair point but I am coming on to Clause 59 and will happily do so. Of course it has an effect on energy policy across the board.
I thank noble Lords who have participated in this debate and I will seek to answer their points, which have properly been raised. The issue obviously affects the energy mix that helps us to reach our decarbonisation targets. I should say that there is no way that we will reach them if we do not have new nuclear, so my point certainly is relevant.
Clause 59 seeks to amend Section 36 of the Electricity Act 1989 by removing the obligation to obtain consent from the Secretary of State for Energy and Climate Change to construct, extend or operate an onshore wind farm in England or Wales. To be clear, this requirement relates to new wind farms with a capacity greater than 50 megawatts. Smaller wind farms, including those owned by the community, are already consented by the relevant local planning authority.
The change, alongside further proposals to make secondary legislation amending the Planning Act 2008 and the Electricity Act 1989, will have the combined effect of removing the requirement for planning consent to be obtained from the Secretary of State for the construction of new onshore wind farms. Instead, developers will need to apply for planning permission under the Town and Country Planning Act 1990, where the primary decision-maker is the local planning authority.
The Government were elected with a clear commitment to give local people the final say on whether to have a wind farm in their area. This should not have taken anyone by surprise. These changes help deliver just that, as was stated in our manifesto. This is important. The majority of the population do not live in the vicinity of a wind farm. For those who do, we have seen many examples of local community groups vigorously opposing wind farm developments because of local impacts relating to noise, amenity and visual changes. It is against that background that the proposal appeared in the manifesto. By transferring decisions to the local level, we are putting local communities in the driving seat. Onshore wind farms should get the go-ahead only when local people have said they want them, and where. That said, onshore wind will continue to be important to help us deliver our renewables targets. It will certainly not disappear and we anticipate that there will be new onshore wind farms—community wind farms and so on.
I turn to some of the specific points raised. The noble Lord, Lord Teverson, mentioned paragraph 130 of the memorandum. It remains the case that all electricity applications are caught by the policy. I believe that all existing Electricity Act 1989 applications have been decided, and the issue should therefore not arise. If I am wrong, I will write to the noble Lord, Lord Teverson, and to the other noble Lords opposite. We will consider this issue soon when the Electricity Act order comes before us.
The noble Lord, Lord Teverson, and the noble Baroness, Lady Young, also raised the issue of planning authority and neighbourhood plans. There is a transitional arrangement for when a valid planning application for a wind energy development has already been submitted to a local planning authority and the development plan does not identify suitable sites. In such instances, local planning authorities can find the proposal acceptable if, following consultation, they are satisfied that it has addressed the planning impacts identified by local communities and therefore has their backing. This is set out in the ministerial Statement made by my right honourable friend the Secretary of State for Communities and Local Government in another place, and I will make sure that it is circulated to noble Lords so that they are aware of it. That should cover the point.
My noble friend Lord Howell made some powerful arguments on onshore wind, the ongoing situation and the potential—or almost certain—overdeployment of onshore wind, even following this action, in terms of both the budget and the plans for onshore wind. Onshore wind is becoming cheaper. My right honourable friend the Secretary of State for Energy and Climate Change has met with some developers who are happy to carry on deploying without the subsidies. I appreciate that we are not being specific about this at the moment, but we anticipate the continuing importance of onshore wind. However, it is important to look at the whole range of renewables, not just onshore wind.
It would be interesting to know the Opposition’s position on fracking. It is legitimate to ask that because the issue has been raised. We are obviously trying to encourage new energy sources in order to reduce costs and increase energy security. However, local communities, across the range, must be fully involved in planning decisions—be it shale or onshore wind—and we proceed on that basis. There should and will be a full public consultation for both. On that basis, I believe that Clause 59 should stand part of the Bill.
Lord Teverson
My Lords, I thank the Minister and everybody else who has taken part in this debate.
First of all, I absolutely agree with the noble Lord, Lord Howell, that where subsidy—whether it be through tax breaks, ROCs or whatever—starts to be excessive, we must cut that back. Indeed, when he was Secretary of State, Ed Davey took a number of very tough decisions around solar and wind energy that did exactly that. None of us, certainly on these Benches, want profiteering from this area. That is not really what we are getting at in this debate. Clearly, value for money is important; the more that we can make it competitive, the better.
I press the Minister to tell us the challenge there still is to get neighbourhood plans across England, so we can understand; perhaps he will not be able to come back on it now. Whether this mechanism decided on by the Government works or not, I would still be very interested to hear where we are on it. Only by that being effective can even this system, as revised by the Government, really work. I would be pleased to get further feedback on that.
Clearly it is not appropriate to have a vote here, but I am very concerned that we have government policy going in one direction on one form of energy and in completely the opposite direction on another. That means inconsistency and a lack of confidence nationally and internationally in terms of finance. However, based on the Minister’s reply, I withdraw my opposition to the clause.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving the amendment and noble Lords who have participated in the debate.
First, I shall set out the Government’s position and then deal with the points raised by noble Lords. The purpose of the amendment is to enable Scottish Ministers, rather than the United Kingdom Government, to close the renewables obligation in Scotland in relation to onshore wind.
For background, the legal powers for the Government to close this, as has been rightly said, were included in the Energy Act 2013. The reason for that was to ensure that consumers and the industry had clarity on the closure arrangements associated with the renewables obligation as part of the transition to the contracts for difference regime, and the confidence that closure would take place consistently across Great Britain during this process of transition—a point made by my noble friend Lord Ridley. The energy situation is on a GB basis and it is best that we move on that basis. These reasons still hold firm today.
Furthermore, energy policy across Great Britain is reserved to the United Kingdom Government. We are committed to implementing the recommendations of the Smith agreement, which are forthcoming in the Scotland Bill, and we are doing that throughout that Bill. We are doing it based on the Smith agreement and the agreement within that process of the five political parties of Scotland—the Conservative Party, the Labour Party, the Scottish National Party, the Liberal Democrats and the Greens. However, transferring legal authority to close the renewables obligation in Scotland to Scottish Ministers goes considerably further than this. My department has engaged and will continue to engage with Scottish Ministers and officials, as I do, throughout the development of this policy, in line with the spirit of the Smith agreement.
Finally, this proposed change could prevent the United Kingdom delivering on its ambition to end new subsidies for onshore wind. I appreciate that this is not popular throughout the House but it is, after all, based on a change of Government and on policy enshrined in the manifesto at the other side of a general election. It could also have wider impacts on the management of low carbon spend with possible increases to consumer energy bills.
To deal with the points made on the history of this, I appreciate that they were made absolutely correctly by the noble Baroness, Lady Worthington. I thank the noble Lord, Lord Foulkes, of whom I am a considerable disciple on devolution issues, as he knows. The noble Lord was at his disarming best, which is considerable, and I appreciate what he was saying about the need to keep Scottish Ministers involved. I also thank the noble and learned Lord, Lord Wallace of Tankerness, for his kind words on consultation and what he said about the need to keep the Scottish Government involved. It is common ground between the Scottish Government and the United Kingdom Government that the currently integrated GB-wide energy arrangements are in the interests of everybody, with Scotland being a net beneficiary of that. That is very much at the forefront of our thinking on this issue and it influences our thinking.
I take seriously the points made absolutely correctly by my noble friend Lord Ridley—I am very pleased that he is here today—on the importance of acting on a United Kingdom basis. That is what is behind this amendment. It is certainly not to do down Scotland—far from it. As noble Lords appreciate, this party—as are others here—is very much committed to ensuring that Scotland gets more than a fair deal within the United Kingdom. That is clearly important. With that, I respectfully ask the noble Baroness if she will withdraw her amendment.
Baroness Worthington
My Lords, I am grateful to the Minister for his response, and for the contributions from other noble Lords in this debate.
This is an issue that will not go away; it will come back and be debated with different amendments. As I said, this is a probing amendment, which is designed to enable us to have this debate. It is a very important debate. I know that the noble Viscount, Lord Ridley, has well-known views on this, but surely it is a matter of some subjectivity whether one considers the landscape to be ruined. Perhaps we should be weighing that against the economy being ruined by destabilising a very important, growing industry in a country that desperately needs inward investment and jobs. Comments were made, but it is the job of government to run the country in a way that tries to enable a good and sound policy environment that people can understand and act on in good faith.
We will spend the rest of the afternoon discussing these clauses—there is plenty to get at—so I will not make some of the points that I will make later, but I will flag in particular that the Minister has talked about a transition. I have sufficient concern that we are transitioning to something very uncertain. We do not know when the next round of CFD auctions will be held. We have seen a departure from the expected schedule already, very soon into the new Government. That will cause considerable concern and we will come to it.
The justification is that this is about an orderly transition. That masks the political nature of these clauses. As my noble friend Lord Foulkes said, this is quite a political amendment and quite a political part of the Bill. I do not think the Government will be able simply to brush this off and say that it is all for the good of the UK. Clearly, we have the Scottish Parliament for a reason. When it comes to these matters, where it has had powers in the past, it seems to go completely against the trend that there should be no concession from the Government on the Scottish Parliament having some say in this, particularly in this case, where the Government have taken the Salisbury convention and stretched it to its maximum. It is true that there is nothing specific in the Government’s manifesto about the sudden alteration of a policy that was discussed at length following a great deal of consultation not that long ago.
On the basis that we will return to this, I am happy to withdraw the amendment at this stage.
Baroness Byford
I fully understood what the noble and learned Lord said and I took it on board, because clearly one wants to avoid that if we can. Nobody wants to end up there—not only because of the litigation but because of the delays it incurs, which other noble Lords have spoken to.
At the moment, I have slightly mixed feelings on this. In principle, I am quite supportive of what the Government are trying to do. In considering whether the approach should be different, in that a Scottish Minister should be able to decide, we should note that three out of four of these onshore wind farms are based in Scotland, so three-quarters of that money would be coming from England to support what Scottish Ministers might or might not decide to do. That is another debate we could have, but I hope the Minister can tell us more about the grace periods and when we are to receive more information.
I suspect that, like me, other noble Lords—and the Minister and his department—have found it difficult dealing with the Bill after the Recess in what is not the formal, long period for debate. We deserve greater clarification and, if the Minister cannot give it to us tonight, I hope it will be provided quickly in another of his wonderful letters that have kept us up to date with government thinking.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving the amendment. I hope to explain a bit about the Government’s thinking on this area and then to address the points reasonably raised by noble Lords.
Clause 60 introduces a provision to close the renewables obligation to new onshore wind farms in Great Britain from 1 April 2016—a year earlier than originally planned. There are two key reasons why I believe that that is the right approach. First and foremost, I and the department are committed to delivering the Government’s ambition to end any new subsidies for onshore wind while continuing to combat climate change. I appreciate that that is not something that all political parties or all noble Lords want, but I return to the point that there has been an election. I accept that things were said under the previous Government, but they were a different Government. It may be that the transition is more difficult because they were a coalition Government, but it should not have taken noble Lords entirely by surprise that this Government sought to make a change in this area. Secondly, the Government are committed to keeping domestic energy bills as low as possible.
With that context in mind, let me turn to the amendments. Their purpose is to clarify the terms of the grace period applying to the closure of the renewables obligation to onshore wind, specifically allowing those projects which had applied for planning permission as at 18 June—the date of the policy announcement—to continue to be able to accredit until the original renewables obligation closure date of 31 March 2017. In addition, the amendments would provide further detail about how the grace period would operate in certain planning scenarios and propose extra time for projects that have encountered difficulties in securing financing.
When my right honourable friend the Secretary of State announced the early closure of the renewables obligation to onshore wind, she also proposed a grace period to protect investor confidence, as I think noble Lords are aware. The proposal was to offer a grace period to those projects which, as of 18 June 2015, already have relevant planning consents, a grid connection offer and acceptance of that offer—or confirmation that no grid connection is required—and access to land rights.
At the time of her announcement, the Secretary of State also said that she wanted to hear the views of industry and other stakeholders before framing the terms of the legislation. As such, my department has been conducting an engagement exercise to understand whether our proposed grace period draws the line in the right place. This means balancing the interests of onshore wind developers with those of the wider public. That is what we are considering at the moment. We are still reviewing the feedback and evidence provided by stakeholders in order to inform our final policy position.
I am not in a position today to frame the final terms of the grace period, and it is not right that I should trail a running commentary on where we are, as I have been invited to do by noble Lords who, as I can understand, want to hear more. I must wait until the final terms of the grace period are fully thought through, following the conclusion of the department’s analysis.
I appreciate the understandable wish that all this had happened earlier. The noble Baroness, Lady Worthington, the noble and learned Lord, Lord Wallace, the noble Lord, Lord Cameron, my noble friend Lady Byford and the noble Lord, Lord Foulkes, all expressed frustration at the fact that we do not know what the grace period proposals will be. I understand why I am being pressed on this, and I will ensure that the House has reasonable notice of the Government amendments.
I agree that 48 hours is insufficient and hope and believe that we can do better than that. If I may, I will provide a commentary on where we are on this by the usual letters if there is any difficulty with bringing the amendments forward in a timely way. I quite understand that the House wants to know exactly what the Government are doing or seek to do in this area. I confirm that we will endeavour to give appropriate, reasonable notice of the amendments ahead of the day and recommittal in the Moses Room.
Baroness Worthington
My Lords, I am grateful to the Minister for his comments and for the contributions from other noble Lords. As I said, we will have the opportunity in the next debate to discuss the principle of this clause. Here, though I am tempted not to, I will keep my comments to the grace period issues. I am very grateful to the Minister for giving us an assurance that he will give us sight of those amendments with more than 48 hours’ notice. That would be absolutely correct. The noble Lord may find it annoying to keep us posted with a running commentary but it is not as annoying as we find having to respond to huge amounts of information that is very delayed and late.
Lord Bourne of Aberystwyth
I hope I did not give the impression that I find it irritating to give a running commentary. I do not. It is absolutely appropriate that I should and, as I indicated, I am very happy to do so on where we are on the grace periods. I indicated that I will seek to ensure that the House has reasonable notice of those amendments. Furthermore, I will give an indication that we are or are not on course for that. I hope it will be the former case.
Baroness Worthington
I thank the noble Lord. The grace period is incredibly important. We are talking about sunk costs of hundreds of millions of pounds that people have put in, in good faith, on the back of the Energy Act 2013, which has been changed rather intemperately with very little notice and no consultation. You can see why people are concerned about getting the detail and getting it early. We have had two months since the Bill was introduced in which to have these amendments come forward, and it is regrettable that we still do not have them.
As I said, the next debate will give us the opportunity to discuss the broader context and particularly the impact assessment and what it tells us about the logic and rationale for this more generally. Given that we will have the opportunity to discuss these amendments in the Moses Room after we come back from recess, and that we will have good early sight of them, I am happy to withdraw this amendment.
Lord Bourne of Aberystwyth
I thank the noble Baroness, at least for her very last point about how she is looking forward to my response. I thank the noble and learned Lord, Lord Wallace, for tabling his opposition to the clause, as it provides me with the opportunity to explain why Clause 60 should stand part of the Bill. I will then turn to specific points made by noble Lords during the debate.
Clause 60 would close the renewables obligation to new onshore wind projects in Great Britain a year earlier than originally planned. On the one hand, we had some noble Lords saying that it is only a year; on the other hand, we had some talking about it as though it were the end of civilisation as we know it. Therefore, there is something of an inconsistency in some of the arguments being deployed.
There are two key reasons why I believe that closing the RO is the right approach. I should say, first, that onshore wind will remain important and will remain massively deployed. We will spend more on onshore wind next year than we are spending this year, so, again, that needs to be accepted. Jobs are, and will continue to be, provided by that industry. Perhaps I may pick up on one point about jobs uncertainty. It is because we are still considering the situation in relation to the grace period that we are unable to say with any degree of certainty what the jobs position will be.
First and foremost, I am committed to delivering on the Government’s ambition to halt the spread of onshore wind while continuing to combat climate change. Secondly, it is essential that the Government keep domestic energy bills as low as possible for consumers and act when necessary to ensure that costs are contained and remain within our low-carbon spending cap. That is not to say that the Government do not recognise the need to strike the right balance in taking developers’ interests into account when implementing this policy. I have indicated what we are doing in relation to the grace period and the engagement exercise that my right honourable friend the Secretary of State is engaged in. I will explain this further in due course.
Let me set out why the Government are taking the necessary steps to close the renewables obligation to new onshore wind projects. The Government’s ambition for onshore wind was made very clear within our manifesto. I know that many noble Lords understandably regret the outcome of the general election, but there was a general election; it was a manifesto commitment and, of course, we remain committed to implementing it. That is what democracy is about. The essence of that is choice and people made their decision. As such, we now have the mandate to halt the spread of subsidised onshore wind. Clause 60 aims to deliver part of this pledge by closing the renewables obligation to new onshore wind from 1 April 2016—a year earlier than originally planned.
I would like to provide reassurance to noble Lords that by taking this step, the Government are not shying away from their commitment to tackle climate change. We are confident that we can meet our 30% renewable electricity ambition by 2020 without additional onshore wind, other than that already deployed. Indeed, we are running ahead of the projections.
Baroness Worthington
We will consider this matter later but it is simply not true that we are ahead of our European renewables target. That target relates to all energy and we are not on track in regard to it.
Lord Bourne of Aberystwyth
I hope the noble Baroness will agree that we are on track in relation to the electricity ambition.
Lord Teverson
The obligation relates not to electricity but to energy. There is no electricity obligation of any kind.
Lord Bourne of Aberystwyth
My Lords, onshore wind has deployed successfully to date and is an important part of our energy mix. Our analysis demonstrates that when we take early closure of the renewables obligation into account we still expect total UK deployment of onshore wind to fall within our Electricity Market Reform Delivery Plan projections of between 11 and 13 gigawatts by 2020. This is our best estimate of what we would need to meet our 2020 targets and what we can afford under our low-carbon spending cap. In fact, the department’s projections relating to the 18 June announcement estimated that by 2020 onshore wind deployment, in the absence of intervention, could be between 12 and 15 gigawatts. The upper end of this range is significantly higher than the 11 to 13 gigawatts set out at the time of the delivery plan. Without any action, we could deploy beyond this range. As the 18 June announcement made clear, we therefore considered it appropriate to curtail further deployment of onshore wind, thereby balancing the interests of onshore wind developers with those of the wider public.
This takes us on to my second point: affordability. My noble friend Lord Ridley referred to the trilemma and the fact that the Government are seeking three things, as the previous Government did: to ensure affordability, security and carbon-free. That very much remains the aim. Tackling climate change must be done in a cost-effective way. We want to ensure that consumer energy bills are kept as low as possible while we cut carbon emissions.
The Government have provided vital financial support to the renewables sector, which has helped new and innovative technologies, reduced our emissions and increased the amount of low-carbon electricity that powers homes and businesses across the United Kingdom. In short, subsidy is necessary to give some impetus to development, and that is what we have done, but we have to keep the costs under review and control.
However, the Office for Budget Responsibility’s latest projections show that subsidies raised from consumer bills are currently set to be higher than expected when the schemes were set up under our low-carbon spending cap, the levy control framework. This is due to a number of uncontrollable factors, including lower than expected wholesale prices and greater than expected renewable generation. The revised levy control framework forecasts indicate that spending in 2020 is projected to be £9.1 billion in 2012 prices for low-carbon generation. The Government set a limit of £7.6 billion. As such, the current forecast is £1.5 billion above that limit. These additional costs could be met through increases in consumer energy bills. It is therefore only right that we now look at ways to protect value for money and affordability under the levy control framework. My department has announced a package of measures to deal with the projected overallocation of renewable energy subsidies. The onshore wind measures are therefore part of a co-ordinated approach to managing spend under the levy control framework.
Baroness Worthington
I am sorry to interrupt but this is an important part of the Bill. Can the Minister explain how it will be possible to spend less under the levy control framework by removing the ability for more and cheaper renewables to come forward? Either we miss our European targets or we will be using more expensive renewables to hit our targets, which will run through the levy control framework even faster. I simply do not understand how one can use the framework as a reason to remove one of the cheaper forms of renewables. If affordability is our goal—which I agree it should be—then surely we should enable technologies to compete fairly on price and not rule out some of the cheapest versions.
Lord Bourne of Aberystwyth
On that specific point, the noble Baroness will know that the costs of deploying some renewable technologies is falling. That is certainly true of onshore wind; it is also true of solar. It is important but I have to say to the noble Baroness that, in reaching our decarbonisation targets, nuclear remains a vital part of the mix. I see that she agrees and it would therefore be interesting to hear at some stage whether the Opposition are committed to backing the Government in relation to that important point, as they have done previously.
That brings me to the issue of investor confidence. It is a fair point to make. I can understand that there is a need for certainty but it must be balanced against the need to get it right in relation to the grace period. That is why we have taken somewhat longer than expected and why we are to have recommittal to a fourth day in the Moses Room to consider that issue. We cannot rush engagement on the grace period and get the intention right in relation to investor confidence. I come back to the point that no one should have been taken by surprise that the Government were going to alter the position in relation to onshore wind; it was in the manifesto. I do not therefore accept the uncertainty argument that somehow people are taken by surprise. I have indicated that we will bring forward amendments on grace periods and will ensure that noble Lords receive them in a timely manner, ahead of the recommittal stage in the Moses Room.
I shall seek to deal with some of the points made by noble Lords. The noble and learned Lord, Lord Wallace, rightly said that business confidence was an important part. I agree and I hope that I have dealt with how we regard that as important, but we want to get it correct.
My noble friend Lord Ridley made telling points about how we have to balance interests in relation to the trilemma and our commitment in the manifesto. He reminded us of the fact that there are sometimes no easy ways in which to deliver, even in relation to onshore wind. As he said, there are carbon costs and costs in relation to the manufacture of turbines and so on. There are no easy answers.
My noble friend Lord Howell correctly reminded us of the need for back-up facilities, which takes us back to nuclear. Many renewables are intermittent in nature and we therefore need back-up to them. That point was well made.
The noble Lord, Lord Teverson, correctly said that there were things to be done on the demand side that were not in the Bill. I accept that but I can reassure him that work is continuing in the department on innovation, improvements in white goods and regulation. The important programme of smart meters, which started under the previous Government, is continuing apace. All these are important points that we take on board.
I accept the point that the noble Baroness made: this is a political position—there is no doubt of that. It was a difference between parties in their manifestos. On that basis, I remind noble Lords that it was in the manifesto and therefore respectfully beg that this clause should stand part of the Bill.
Lord Wallace of Tankerness
The Minister has indicated that a justification for the position is to reduce domestic consumer bills. That is not an unreasonable thing to try to do. However, I just want to make sure that I understand the impact assessment. On the second page, it says:
“Reduced risk to LCF from over-allocation of renewable energy subsidies, and benefit to consumers from reductions in consumer energy bills (in 2016/17 average household electricity bills could be up to £3.40 (0.6%) lower, with a central estimate of around £0.30 (0.05%), compared to the Do Nothing option) (2014 prices)”.
I am more than ready to stand corrected, but am I right in thinking that the central estimate of the Government in this is that this measure will save 30p in an annual domestic electricity bill?
Lord Bourne of Aberystwyth
The noble and learned Lord has correctly identified the part of the impact assessment that deals with this. It could be a saving of up to £3.40. I accept that that is not a massive amount, but it has to be taken account of in the context of the fact that we are seeking to keep within the deployment estimates that we put forward. I do not think it should be sniffed at: this does not appear, on the face of it, to be a massive amount, but it makes quite a considerable difference to some consumers that we are reducing bills by that amount. That is what we are seeking to do and I make no apology for it. However, that is only part of the consideration.
Baroness Worthington
As I said, the impact assessment is really rather lacking in detail. It may make those assumptions, but it does not give any detail as to what the ingoing parameters are on those numbers. If instead of onshore wind we build offshore wind to compensate for the lack of delivery on the target, there will be a net increase to customers’ bills under this clause.
Lord Bourne of Aberystwyth
I accept that obviously there is a question about what is used instead. However, I remind the noble Baroness and the House that, even with this action, we are well above the deployment estimates that were made in relation to onshore wind.
Lord Wallace of Tankerness
My Lords, I am very grateful to all noble Lords who took part in this debate and, indeed, to the Minister for his response. He has set out the position that the Government are coming from.
It is important that we look at this clause in detail. Like the noble Baroness, Lady Worthington, when I saw that there would be no new public subsidy, I took it to mean that there would be no “new” subsidy, as opposed to an old one—ROCs are certainly quite old. However, I hear the interpretation that the Minister and his Conservative colleagues place on it. One can only speculate as to whether they ever thought they would have to deliver this policy.
The noble Lord, Lord Howell, with wonderful understatement, thanked the Minister because he thought that we were hearing an evolution in government thinking. The noble Baroness, Lady Worthington, said that it was like building an aeroplane as it was taking off along the runway. Some might say that it is making it up as you go along. The lack of clarity in some areas of the impact assessment and the fact that we do not yet know what will happen with the grace periods gives some indication that perhaps this was a policy that had not quite been fully thought through, if I can just leave it at that. However, some concerns continue.
I can understand why the Minister said at the outset of his remarks that, on the one hand, people say it is just a year but, on the other hand, people say it is the end of civilisation as we know it. I take the political point that the Government won an election, but to change an important policy less than a year—just over 10 months—from when it will come into effect is causing considerable concern in the industry and calls into question whether such a change could take place in other spheres of renewable policy.
I have always supported the idea that there should be a balance; a mix of different renewable sources. If one source is seriously challenged because there is a sudden change of policy, it begs the question as to whether others will follow.
I cannot quite yet get my head round the cost. I do not quibble with the fact that, for some people, 30p a year, or just over half a penny a week, might make all the difference—although I find it difficult to buy that. However, the other part of the equation that I cannot quite follow is this: if renewable onshore electricity generation is not going to qualify and therefore its future is more under question, and the others, including nuclear, are going to be more expensive, how can that lead to benefits in the longer term for the domestic consumer? The noble Baroness made that point in her final intervention. That has not yet been explained to us, and perhaps a reworking of part of the impact assessment might highlight some of these issues.
The noble Viscount, Lord Ridley, asked whether any use of onshore wind had led to carbon emissions. I just look at the Government’s impact assessment—I may have been slightly critical of it but I will now use it. Paragraph 4.26, on environmental issues, says that option 2, which is the proposal,
“will lead to lower levels of onshore wind deployment and hence increased carbon emissions within the UK power sector relative to the Do Nothing option”.
So the Government themselves believe that it will lead to increased carbon emissions by having lower levels. The impact assessment goes on to say that,
“these will be offset by decreases in emissions elsewhere in the EU within the capped EU-ETS traded emissions sector”.
We must polish up this sentence. Here, the Government say that what they are doing will actually increase carbon emissions but that Europe is going to come to their aid. It is not very often we see a Conservative document saying that the European Union is going to come to our aid. It is probably worth it just for that.
I will share with the noble Viscount, Lord Ridley, figures that come, I think, from a briefing by the RSPB and which make reference to this. I saw this only this afternoon and have not had a chance to check out the reference, but it suggests that a modern wind turbine has a capacity of 2 megawatts and is expected to avoid emissions of over 1,880 tonnes of carbon dioxide in an average year. I will share that reference with him and, as with all these things, we will trade statistics. However, that and the Government’s own impact assessment suggest that there will be a reduction.
I am not going to press this, but it has been useful to flush out some of the Government’s thinking on this. No doubt we will return to some of these issues when we come to look at periods of grace.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lords, Lord Grantchester and Lord Whitty, for proposing this amendment, and the noble Lord, Lord Teverson, for his timely comments, which I will come to. I found some of the contribution of the noble Lord, Lord Grantchester, reassuring in that he is pushing us on the Hinkley state aid issue. I hope he is in a position to confirm that it is still the Opposition’s policy to encourage new nuclear because that is what it sounds like to me. I am able to give him the reassurance that we remain confident that the commission’s decision that Hinckley is compliant with state aid rules is legally robust. But of course, on decarbonisation in general, I return to the point that new nuclear is a vital part of the mix. Without it, we would be nowhere near achieving our goals. Therefore, I hope we can get some sense of what the Official Opposition’s policy is on new nuclear—and on new coal. Some things that the new leader has said indicate that he is in favour of regeneration of the coal industry in the United Kingdom, which would undermine what we seek to do. Some clarity on that would certainly be welcome.
The Government are already obliged and will report in the coming months on their progress towards decarbonisation of the energy supply, the development of renewables and the development of energy efficiency. We have obligations under the Climate Change Act, the EU renewable energy directive and the EU energy efficiency directive to report on these topics in the coming months. Therefore, the Government cannot support the amendment, which could lead to unnecessary duplication. You do not fatten a pig by continuously weighing it and we already have these three obligations, which I will refer to in more length.
The Committee on Climate Change reports annually on the Government’s progress towards meeting carbon budgets, which includes an assessment of progress towards decarbonisation of the energy supply. Under Section 37 of the Climate Change Act, we are obliged to respond to the Committee on Climate Change’s annual progress report by 15 October each year. That remains true this year. We will publish our response to the Committee on Climate Change’s 2015 progress report by that date, and that will specifically address progress towards decarbonising the energy supply.
On renewables, the 2013 Electricity Market Reform Delivery Plan—which I think is what the noble Lord, Lord Teverson, was referring to—set out our ambition of achieving at least 30% of electricity from renewables in 2020. We are on course to achieve that, with renewables representing almost 20% of generation in 2014. We will also report by the end of this year on progress against our 2013-14 interim targets as part of the EU renewable energy directive.
Finally, we are committed to energy efficiency as a vital element of meeting our statutory goals on fuel poverty and climate change. We set out our strategy in 2012 and updated it in 2013. We will report by the end of April 2016 on progress achieved towards national energy efficiency targets, as part of the EU energy efficiency directive. In the light of those already substantial obligations and the reassurance that I have given, as well as the work that is done in the department, which takes considerable time, I hope that the noble Lord proposing the amendment will feel able to withdraw it.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Whitty, for moving the amendment, but perhaps I may turn first to the opening comments of the noble Baroness, Lady Worthington. Although I am, as she will know, her great admirer in the area of climate change, I cannot allow the allegation to go unchecked and unanswered that we are in the business of nationalising the energy supply. It shows considerable chutzpah to come up with such an argument in view of what happened at the weekend. It is far from the truth. The area is certainly highly regulated but I make no apology for that. It needs to be so.
We are committed to ensuring that the United Kingdom continues to do its part to tackle climate change in line with the Climate Change Act, which, of course, has legal backing and legal obligations. As I indicated earlier, we will respond to the progress report; as the noble Lord, Lord Deben, mentioned, we will do so by 15 October, as we do annually.
Decarbonisation remains a clear goal of the Government. Emissions from carbon intensity fell by 12% in 2014, according to the Committee on Climate Change, and we are very much wedded to that. The noble Lord, Lord Teverson, referred to the commitment of the Prime Minister and our obligations in relation to unabated coal. I agree with the noble Baroness, Lady Worthington, when she said that there is a part for all forms of energy except unabated coal. That is certainly right and I would not dissent from it. We must do this as cost effectively as possible to ensure that our energy is secure and affordable as well as low carbon, as I indicated previously.
Locking ourselves into an expensive and inflexible target for the power sector is not the way to do that. There are just too many things that we cannot predict about how the energy system will develop up to 2030. The costs of getting it wrong would be picked up by consumers for decades to come. The amendment as set out would, in effect, require the Government to introduce an additional power sector target, in the form of an obligation on electricity suppliers in England and Wales. The manifesto on which the Government were elected clearly stated that we will not support additional power sector targets.
Noble Lords will know that the subject of setting a decarbonisation target has previously been debated in this House, as has been indicated, on at least two occasions: during the passage of the Energy Bill in 2013 and of the Infrastructure Bill in 2015. I therefore know that noble Lords will be familiar with the arguments against setting a target such as this. I agree that investors want to know that we have clear, credible and affordable plans. However, the CBI has said that clarity on future financial support for low-carbon electricity will be more important in driving investment than targets. That is why we have said that we will set out totals for the levy control framework beyond 2020, providing a basis for electricity investment into the next decade. That is why we have also said that we will set out plans in the autumn on future contracts for difference allocation rounds.
For those reasons I cannot accept the amendment. I hope that the noble Lord will withdraw it.
Lord Teverson
The Minister will forgive me if I did not catch this properly, but are the Government saying that they will not undertake the clause in the Energy Act 2013 that says that the Secretary of State “may”—with the presumption that the Secretary of State “would”—set a decarbonisation target for the electricity sector for 2030? Did he say that the Government will not do that?
Lord Bourne of Aberystwyth
No, my Lords. I was saying that we would not support additional power sector targets. As I understand it, that target is already in existence.
Baroness Worthington
The target is not in existence. The power was created in the Energy Act to allow the Secretary of State to set a target, but it prevents the Government setting a target until 2016. That is the only thing on the statute book. I encourage the Minister to be very precise in his wording. I will have to read back over Hansard. The expectation is that the Government will set a target, but they certainly are not required to. We would like clarity on what the intention is.
Lord Bourne of Aberystwyth
My Lords, I appreciate that point. On the clause as set out, I have made it clear that we will not come forward with this additional obligation. The manifesto is absolutely clear that there will be no power sector target. That is the position of the Government.
Lord Whitty
My Lords, if I understand that right it is very disappointing. I can understand the objection, or at least the querying by the noble Lord, Lord Deben, as to whether we need a detailed mechanism for setting carbon intensity coefficients by supply, but he argued very persuasively, and has done before, for a decarbonisation target for 2030. That is why that was written into the 2013 Act and why there was an expectation and general indication from the Minister’s predecessors that there would be a target set in 2016, but only in the context of the carbon budget, which they are obliged by the Climate Change Act to come forward with. I did not accept that argument, but I understood it in terms of the timing. There was some considerable debate about that during what became the passage of the 2013 Act.
It is very disappointing, not only to us in this House but to the various industry operators, including the supply companies, that there seems to be an abandonment of that commitment in what the Minister has interpreted from the Conservative Party manifesto. As I well know, manifestos are pretty flexible things. I hope that he can consult with his colleagues as to whether it actually meant that, or whether there was some more room—
Lord Whitty
My Lords, I am not quite such a conscientious and diligent reader of the manifestos of various parties—even my own—as the noble Lord, Lord Teverson. The best thing we can ask the Minister to do is to go back and talk to his colleagues—whether it was in the manifesto or not—about whether they are definitely now not going ahead with what was allowed for in the 2013 Act. If that is the case, there are ramifications. I understand why the Minister is opposed to the mechanism proposed in the amendment. I would have thought that having set the 2030 target for decarbonisation would be a useful addition to the armoury, as the Committee on Climate Change and the noble Lord, Lord Deben, advocated. If the Minister feels that that would be too much interference in the market mechanisms, I understand that. It would still be up to the supply companies how they met that obligation and what kind of technologies and contracts they entered into. The market is still operating there. I understand and accept that the Minister is not prepared to go along with that.
Lord Bourne of Aberystwyth
To be helpful, in view of the fact that there is a degree of uncertainty about what the manifesto says specifically—not least with me—I am happy to go back and have a look at it. We can come back to it on Report to ensure that I have understood the position correctly. I undertake to do that and we can pick it up on Report if that is helpful.
Lord Whitty
My Lords, that was very generous of the Minister. I thank him very much, as I think the Committee will as a whole. Before I withdraw the amendment, I will just comment on something that the Minister said on markets and nationalisation. When the then Energy Bill of 2013 first came before us, the noble Lord’s colleague, the noble Lord, Lord Lawson of Blaby, described it as “Gosplan”. There is something in that. There is nothing from any element in the Labour Party that goes as far as that. I beg to ask leave to withdraw the amendment.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving this amendment. She is right: we are continuing to make progress towards the 2020 renewables target of 15% of final energy consumption from renewable sources. The provisional figure released on 25 June showed 6.3% of final energy consumption for 2013 and 2014 came from renewable sources, against a target level of 5.4%. The Government set out their plan to meet the target in 2010. We are on track to meet the next interim milestone. In fact, as I say, the provisional figure indicates that we are ahead of it. We have a clear plan for meeting the target. I wish to say something about the specific areas of heat and transport which the noble Baroness mentioned, where there certainly are challenges. First, in relation to heat, under existing schemes the Government have supported almost 33,000 homes and 10,000 businesses, schools, farms and other organisations with new renewable heating systems. That is on top of the generation of 3.4 terawatt hours of eligible heat—enough to heat the equivalent of more than 225,000 United Kingdom homes for a year.
On transport, the Government are investing more than £500 million over the next five years in making ultra-low emission vehicles more accessible to families and businesses across the country. I think our record on this bears comparison with other EU countries, and across government departments we are putting in a lot of effort on this. As noble Lords will appreciate, the lead department on ultra-low emission vehicles is the Department for Transport but the Department of Energy and Climate Change is, of course, represented in that process and we are pushing forward with it.
We have a clear plan for meeting the target and already have many reporting requirements. I cannot accept the amendment and I hope that the noble Baroness will withdraw it.
Baroness Worthington
My Lords, I am grateful to the noble Lord for his response although I do not believe that it adequately addressed the points that I raised, particularly on vehicles and fuel which are obviously two separate things when it comes to energy. We can have as many zero-carbon vehicles as we like but if they are powered by electricity that is generated at 400 grams per kilowatt hour, that is not a solution. Equally, it is true that the escalator is frozen. I heard nothing about whether or not that will be lifted in order for us to hit the 10% figure. I hope the Minister will write to me giving a detailed response to the points that I made. I do not believe that I got the detail I sought.
Lord Bourne of Aberystwyth
I will certainly write to the noble Baroness on those points.
Baroness Worthington
I thank the Minister. On the basis that we will continue this discussion and I will be in touch on the impact assessment and the absence of detail within it, I am happy to withdraw the amendment at this stage.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness, Lady Worthington, for moving this amendment. She will know that, as I indicated by my letter of 6 September, we are looking at decommissioning on Report, so there may be an opportunity to look at some of the specific points that she raises then. I am certainly happy to do that.
In relation to Amendment 35C, I acknowledge that it is important that developers and investors have some foresight as to the frequency of contracts for difference allocation rounds. However, this must be balanced with the levy control framework budget available, which, as noble Lords know, is funded by a levy on consumer bills. The United Kingdom continues to make progress towards the renewables target, but the interaction of those two is important.
Committing to annual contracts for difference allocations rounds, even only in certain circumstances, would inhibit the Government’s ability to respond to evidence on levels of deployment in renewable electricity generation, costs to consumers and opportunities in other sectors. That said, as the noble Baroness rightly said, we are committed to a statement in the autumn, so that decisions on any future allocations of contracts for difference will be taken in due course. On the specific point on state aid approval, we remain consistent with the contracts for difference state aid approval. If our future plans should have an impact on our state aid clearance, we would seek an early discussion with the European Commission. However, as I understand it, that is not the case at the moment.
The noble Baroness’s amendment would unnecessarily commit the Government to a course of action which would neither benefit the consumer nor provide any certainty to renewable energy generators or investors. I have indicated that I am happy for us to look at the specific point about decommissioning on Report. We are committed to our energy targets and continue to make strong progress towards meeting them. I do not know the specific date of the statement we will be making in the autumn—indeed, I do not think it has been fixed at this stage—but I hope that gives reassurance that we will be making a statement about the contracts for difference regime. Our intention is to set out plans in the autumn in respect of the next contracts for difference allocation round, but we do not believe that an annual round is necessarily appropriate.
For those reasons, I am unable to accept the amendment and respectfully ask the noble Baroness, Lady Worthington, to withdraw it.
Baroness Worthington
I thank the Minister. I find it quite curious that an amendment asking for greater certainty in CFD allocations is described as creating more uncertainty yet the Minister’s statement, which contains no information at all about when we might expect another round of allocation, supposedly increases certainty. I just do not understand how that works. The autumn is arguably already upon us. I hope that the Government’s interpretation of “autumn” does not mean 31 December and that we will see the information come to us while we are still considering the Bill, in the autumn. That statement needs to be made in respect of and is highly relevant to the Bill.
I am grateful to the Minister for picking up on the point about decommissioning. However, given that we now have an extra day in which we will recommit to Grand Committee in the Moses Room, I wonder whether we could have those amendments in time for then. It will be only a matter of days before Report. If those decommissioning amendments could at least be made available for that day, it would certainly help to alleviate some of the pressure on Report. I feel that we are stacking up quite a lot of issues for Report.
Lord Bourne of Aberystwyth
On that point, I am happy to endeavour to make the amendments available. What I cannot do, and I had given due notice to Peers who participated in the debate, is undertake that they are debated on that day. That was not in the agreement we have in relation to the recommittal day. I will of course endeavour to table the amendments as soon as possible.
Baroness Worthington
Given that the Minister has been so excellent in communicating with us in Committee, I am happy to take it in good faith that he will do his very best. I am sure that will produce results and on that basis, and on the basis that we will revisit this after Recess, I am happy to withdraw my amendment.
“(aa) regulations under section 27(8), or”
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“( ) The OGA must lay any guidance issued under this section, and any revision of it, before each House of Parliament.”
““Part 2AInfrastructureRequirements to provide information
(1) The Energy Act 2011 is amended as follows.
(2) In section 87 (powers to require information), after subsection (5) insert—
“(5A) A notice under subsection (1), (2) or (3) that imposes a requirement on a person must specify when the requirement is to be complied with.”
(3) After that section insert—
“87A Appeals against requirements to provide information
(1) Any person on whom a requirement is imposed by a notice under section 87(1), (2) or (3) may appeal against the notice to the Tribunal on the grounds that—
(a) the information required by the notice is not relevant to the exercise by the OGA of its functions under this Chapter, or(b) the length of time given to comply with the notice is unreasonable.(2) On an appeal under this section the Tribunal may—
(a) confirm, vary or cancel the notice, or(b) remit the matter under appeal to the OGA for reconsideration with such directions (if any) as the Tribunal considers appropriate.(3) In this section “the Tribunal” means the First-tier Tribunal.
87B Sanctions for failure to provide information
(1) A requirement imposed by a notice under section 87(1), (2) or (3) is to be treated for the purposes of Chapter 5 of Part 2 of the Energy Act 2016 (power of the OGA to impose sanctions) as a petroleum-related requirement.
(2) But the OGA may not give a revocation notice or an operator removal notice under that Chapter by virtue of this section.””
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I will now speak to government Amendments 33 and 34. Amendment 33 inserts a new Part 2A into the Bill which amends the third-party access to upstream petroleum infrastructure regime found in the Energy Act 2011. Specifically, it amends Section 87 of the 2011 Act, which relates to powers to require information, and inserts new Sections 87A and 87B, which make provision for appeals and sanctions respectively. This amendment requires that where the Oil and Gas Authority issues a notice under Section 87 of the 2011 Act requiring information to be provided, it must specify a time for compliance with that notice.
The amendment also provides an appeal right to the First-tier Tribunal against the issuance of a notice on the grounds that the information required is not relevant to the Oil and Gas Authority’s functions relating to third-party access or that the length of time given to comply with the notice is unreasonable.
Amendment 34 also allows for any requirements imposed by such a notice to be treated as petroleum-related requirements and therefore to be sanctionable under Chapter 5 of the Bill. However, the Oil and Gas Authority will not be able to revoke a licence or terminate an operatorship in relation to such breaches.
Amendment 34 inserts two new sections into the Energy Act 2011, which established the third-party access to upstream petroleum infrastructure regime. New Section 89A allows for applications for access to upstream petroleum infrastructure made under Section 82 of the 2011 Act to be assigned to another party. New Section 89B allows for a new owner of infrastructure to which an application for access has been made to be treated as a party to that application. The amendment also ensures that where ownership of infrastructure in respect of which a notice under Section 82(11) imposing access rights has been issued is transferred, the obligations under the notice transfer as well.
Once such an assignment or transfer occurs, anything that was done by the original party is treated as having been done by the party to which the application was assigned or the ownership transferred. The provisions allow for the third-party access regime to continue rather than having to restart on a change of party, facilitate the transfer of non-commercially sensitive information already provided to the Oil and Gas Authority and ensure that all new parties are aware of the relevant history of the application.
The amendments will increase the utility of the third-party access to upstream petroleum infrastructure regime, which is an important tool in the Oil and Gas Authority's pursuit of maximising economic recovery for the United Kingdom. I beg to move.
Lord Teverson (LD)
I thank the Minister for his explanation of a somewhat technical new clause. I think that the Minister went through liability, but very quickly. Clearly, all sorts of liabilities are potentially incurred by someone who has these access rights. If there is a change of ownership or the rights are assigned to a further party, who takes any legal liabilities that may not have been resolved or may be found after the date of transfer that relate to the period before? I wonder whether that is clear, because I imagine that such liabilities could in certain circumstances be quite onerous. I would be interested to hear the Minister’s remarks on that.
Baroness Maddock (LD)
My Lords, I am delighted to hear that some noble Lords have received the impact assessment, but I wonder if the Minister can tell me how it was distributed, because it has not come my way yet.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, perhaps I may deal with the last point first. I certainly gave instructions that the impact assessment should be sent out in hard copy form and by email. I take the inference from what the noble Baroness says that she has not received a copy in one of those two ways. She should have done so, and I can only apologise for that. I hope that no one else is in that position.
I shall now deal with the issue of impact assessments. I apologised on Monday for the fact that the impact assessment had not been circulated earlier. It was held up through processes in government—documents are cleared by a particular Minister, but that is not the end of the process, as I am sure the noble Baroness is aware. I can only confirm that it is the case that the assessment was not cleared until Monday. I think I indicated then that that was when it was cleared, and it was only then that we were in a position to notify noble Lords. I hope that I can offer some reassurance because all morning I have been chasing the remaining impact assessments, and indeed a note was passed to me just as the debate opened that they have now been cleared and will be circulated, it is hoped, by the end of the day. However, I will add a word of caution by saying that we will ensure that they are sent around by tomorrow. Once again, I apologise.
I will focus on the general points made by the noble Baroness, Lady Worthington, in relation to carbon capture and storage. I thought, as she did, that on Monday we made considerable progress on this issue. There is a shared feeling across the parties that these issues are important and on Monday I gave an undertaking that we would be looking at them between Committee and Report. Letters are going out today to noble Lords who spoke on Monday, as well as to the noble Lord, Lord Judd, who indicated that he could not be here. I have asked that he should be sent a letter. Moreover, anyone who speaks today but who did not speak on Monday will also receive a letter asking about their availability between now and when the House returns on 12 October so that we are able to call a meeting, or potentially a series of meetings. We will ask everyone to the same meetings so that we can thrash these issues out.
My own feeling is that we want to do something; I have not changed my view and I hope that noble Lords will accept my good will on this matter. I am keen that we should move forward, but I do not think that this is the stage at which to talk about exactly how that is going to happen because it is not something that can easily be done. Carbon capture and storage is important to the Government. We committed a significant sum of money to it in our manifesto and that remains very much government policy. We have a good story to tell in that as a country we have the important potential of the North Sea for carbon capture and storage, so I am keen that it should be incorporated in the Bill in a way that it is not at the moment.
My next point will, I hope, address points quite rightly made by my noble friend Lord Howell, and I thank him for his thanks in relation to the impact assessment. Work has started but, in relation to the focus of the Oil and Gas Authority, it is important that we do not load too much work on the authority and diffuse what it seeks to do. There is a balancing act: we are very keen to ensure maximising economic recovery from the North Sea at the same time as realising the great potential that we have from carbon capture and storage. They remain very much our objectives.
I turn to the more technical points, quite validly raised by the noble Lord, Lord Teverson, and the noble Baroness, Lady Liddell, as to what this clause does and what these amendments seek to do to the clauses in the Bill. Although I am a lawyer, that does not mean that I perhaps have any greater insight. Therefore, I tread with trepidation and have spent some time on this. I believe these provisions seek to ensure that, on an assignment of ownership or rights by a party, there is no delay in them being able to take up the rights that were previously enjoyed by the transferor, if I can put it that way. We will have a look at that and I will write to noble Lords on this issue to ensure that it is not any more complicated than that and that it does not prejudice the issues that the noble Baroness, Lady Liddell, and the noble Lord, Lord Teverson, raised. That is certainly not the intention and I do not believe that it creates difficulties in the way that they indicated might be the case. But I will certainly confirm that.
I hope that that answers the points raised by noble Lords and therefore ask noble Lords to support these amendments.
“Applications to use infrastructure: changes of applicant and owner
(1) The Energy Act 2011 is amended as follows.
(2) In section 82(13) (contents of notice securing rights to use infrastructure), omit paragraph (b).
(3) In section 87(6) (circumstances in which information may be disclosed)—
(a) omit the “or” at the end of paragraph (a), and(b) after paragraph (b) insert “or(c) the disclosure is made under section 89A or 89B.”(4) After section 89 insert—
“89A Assignments and assignations of applications
(1) This section applies where—
(a) there is an assignment or assignation of an application made under section 82 from one person (“A”) to another (“B”), and (b) the following are notified of the assignment or assignation—(i) the owner of the pipeline or facility that is the subject of the application, and(ii) the OGA.(2) A notice under subsection (1)(b) must—
(a) be in writing, and(b) specify the date of the assignment or assignation.(3) For the purposes of this Chapter, anything done (or treated as done) by or in relation to A in connection with the application is treated after the assignment or assignation as having been done by or in relation to B.
This subsection is subject to subsections (4) and (5) and does not apply for the purposes of subsections (6) and (7).(4) Any provision of this Chapter that requires the OGA to give the applicant an opportunity to be heard has effect after the assignment or assignation as requiring the OGA to give B an opportunity to be heard (whether or not the applicant was heard under that provision before the assignment or assignation).
(5) Subsection (3) does not apply in relation to any notice given under section 87 before the assignment or assignation (and, accordingly, the person to whom the notice was given remains under an obligation to comply with it).
(6) Any information relating to the application obtained by the OGA before the assignment or assignation from any person who at the time was the applicant may be disclosed to B.
(7) Before disclosing any such information to B, the OGA must remove any information which the OGA considers may prejudice the commercial interests of the person from whom the information was obtained.
89B Transfers of ownership
(1) This section applies where the ownership of a pipeline or facility that is the subject of an application under section 82, or to which a notice under subsection (11) of that section relates, is transferred from one person (“C”) to another (“D”).
(2) For the purposes of this Chapter—
(a) anything done (or treated as done) by or in relation to C in connection with C’s ownership of the pipeline or facility is treated after the transfer as having been done by or in relation to D, and(b) any obligations imposed or rights conferred (or treated as imposed or conferred) by or under this Chapter on C in connection with C’s ownership of the pipeline or facility are treated after the transfer as imposed or conferred on D.This subsection is subject to subsections (3) and (4) and does not apply for the purposes of subsections (5) and (6).(3) Any provision of this Chapter that requires the OGA to give the owner of the pipeline or facility an opportunity to be heard has effect after the transfer as requiring the OGA to give D an opportunity to be heard (whether or not the owner was heard under that provision before the transfer).
(4) Subsection (2) does not affect the obligation to comply with any notice given under section 87 before the transfer (and, accordingly, the person to whom the notice was given remains under an obligation to comply with it).
(5) Any information relating to the application obtained by the OGA before the transfer from any person who at the time was the owner may be disclosed to D.
(6) Before disclosing any such information to D, the OGA must remove any information which the OGA considers may prejudice the commercial interests of the person from whom the information was obtained.””
Baroness Maddock
I was going to congratulate the noble Lord, Lord Oxburgh, on introducing an amendment that has actually brought together both sides of the climate change argument. Unfortunately, that was rather spoilt by the latest comment of the noble Viscount, Lord Ridley. We were spared that on Monday, when we debated carbon capture and storage. However, I do hope that the Minister will take this proposal and this amendment seriously.
The final point I want to make, which I made on Monday, is that I am concerned that, in our rush to make sure that we keep the oil and gas industry as profitable as it can be in the circumstances, we do not put anything in the Bill that will prevent us developing carbon capture and storage. We have heard how slow and difficult progress has been, so I welcome these proposals, which we should look at. I hope we can have a good discussion of the issue, but I point out that, other than next week, it is very difficult for me to get together here in London to discuss it before we return in October.
Lord Bourne of Aberystwyth
My Lords, we have been treated to a veritable tour d’horizon on this amendment, going far beyond the amendment itself. I certainly do not criticise that; I think that in a sense it is important, and it has been a very good debate. I shall try to pick up the points that were made.
To echo what the noble Baroness, Lady Maddock, has just said, there is an attraction in getting everybody on the same side, including my noble friend Lord Deben, who is not in his place today—he is just in his place; I am sorry. Getting everybody on the same side of the argument as my noble friend Lord Ridley in relation to CCS is indeed seductive, if for no other reason than that this matter certainly demands close attention, although it demands close attention for many other reasons.
The noble Lord, Lord Oxburgh, introduced his amendment with great authority. He spoke widely about something being in the air and the challenges that we are facing as a global community, as well as the Conference of the Parties that is taking place in Paris at the end of this year. I associate myself entirely with what he says about the challenge there and the fact that there are positive moves and ambition in the air. However, I would not want anybody to think that this is a done deal. There is a lot of hard work going on. Our own Secretary of State, my right honourable friend Amber Rudd, is spending most of her time on this, working around the clock. She has been given a major role on finance by the French President to try to bring countries together. That, again, is a good thing for us as a country and for all concerned, as she is the right person to do that. It is important to try to keep the 2 degrees centigrade increase in sight, and that is a real challenge. However, it is right that there is ambition in the air and many positive things are happening.
The noble Lord, Lord Oxburgh, was right when he said that this is a germ of an idea, and the noble Lord, Lord Teverson, said that it was the start of an idea. I agree with that. This is very much a nascent amendment and it certainly deserves attention in the broader context of looking at carbon capture and storage, which, I repeat, we are very happy to do within the context of this Bill.
The noble Baroness, Lady Worthington, spoke with great passion—and understandably so—about the narrow focus of this legislation. It is narrow in many ways but I understand that we have the support of the Opposition in ensuring that the Wood review becomes law. That is important. I am very aware that we do not want to lose sight of the central focus, which I think my noble friend Lord Howell referred to with words of caution. The jobs are important, as is gas, in our move to a carbon-free environment. Maximising the economic return in getting gas and oil from the North Sea is vital and we do not want to lose sight of that.
That said, we are very keen to ensure that CCS features centrally within the legislation. The Government have in place one of the most comprehensive programmes in the world on CCS, as recognised recently by the Global Carbon Capture and Storage Institute. This includes a carbon capture and storage competition, with up to £1 billion capital, plus operational support for up to two commercial-scale carbon capture support projects and a £125 million research, development and innovation programme. That said, my noble friend Lord Ridley is absolutely right that it is only Canada that we can look to as somewhere where this is working commercially. DECC officials have spent a lot of time looking at that. They have visited Canada on many occasions and will continue to do so.
I am keen that CCS remains very central to what we are thinking about. I repeat the undertaking that all Peers are invited to join in this process, and all Peers who have spoken will receive a letter inviting them to indicate their availability. If it is difficult to get one meeting because of lack of availability then we will put on two, but we will not be splitting them on a party basis, because I think that there is a genuine cross-party feel on this issue. I do not think that there is any real difference between people on this, which is a very good thing.
I am very keen that we should move forward in relation to this carbon capture and storage issue. I appreciate the debate that we have just had. It has been very helpful, although, as I said, it was much more wide-ranging than the amendment. However, I respectfully ask the noble Lord to withdraw the amendment on the basis that the Government have given an undertaking to look at carbon capture and storage in relation to the Oil and Gas Authority and to do so between Committee and Report.
Lord Wallace of Tankerness (LD)
My Lords, when we return on Monday for the third day of Committee, we know that we will be dealing with some of the more controversial parts of the Bill, not least on Clause 60. The Government have announced that a grace period will be incorporated into the legislation, and have been seeking views on the draft proposals. Can the Minister indicate to the Committee that, before the next Motion that the House do resolve itself into a Committee upon the Bill, we will have an opportunity to see the amendments? They are important, of course, not only to the industry but to your Lordships’ House if we are to carry out our proper job of scrutiny.
Lord Bourne of Aberystwyth
I am grateful for prior notice of this question from the noble and learned Lord, Lord Wallace. I can update the Committee on this. I have been chasing the impact assessments over the last period. As things stand, and I think I probably indicated this in passing in the debate on Monday, we are carefully reviewing the feedback and evidence provided during the engagement exercise to ensure that the final policy strikes the right balance between public interest and the interests of developers and the wider industry. I am sure noble Lords appreciate the importance of that. I will aim to bring forward any government amendments in relation to this policy as soon as possible. If I have any more information on the dates when that will happen, I will share it with noble Lords, but I do not think that that will be ahead of the debate on Monday.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 8 months ago)
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Lord Bourne of Aberystwyth
That the House do now resolve itself into a Committee upon the Bill.
Baroness Worthington (Lab)
My Lords, I rise briefly before the House commences Committee to raise a very serious objection and concern that relates to the Bill. At present we do not have the impact assessment for the Bill, which we were promised before our deliberations began, and they begin now. I would like to hear from the Minister why this delay has happened—in fact, why the Bill was not published with an impact assessment in the first place. I also seek assurances that when the impact assessment is published, it will contain full details of the assumptions on which the Bill is based. Namely, there is the Government’s continued assertion that we are on track to meet our renewables targets, which relates to Part 4. That is incredibly important and sensitive, since we have had many representations from industry about the impact of the Bill. It should be recalled that those elements of the Bill were not subject to public consultation, so the impact assessment is incredibly important for us to be able to consider the impact of the Bill. The other assumption that the Government now seem often to quote is that the levy control framework is spent and there is no more money left. We need to see details of those assumptions and the figures that underlie them but we do not have an impact assessment. I am very concerned about this issue and I look forward to a response from the Minister.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, perhaps I may address the points raised quite fairly by the noble Baroness, Lady Worthington, in relation to the Energy Bill and the impact assessment. I had anticipated that we would have an impact assessment on the Bill by this stage, to be published ahead of Committee. I have been chasing the matter through the Recess, including this morning. I heard just before I came in that it has now been cleared on the Oil and Gas Authority. We have instructed that it be separated because the issue that caused the delay was the dialogue about the grace period on wind. No later than tomorrow, we will publish the impact assessment, which the noble Baroness has rightly been chasing. I hope that satisfies the noble Baroness.
Baroness Maddock (LD)
My Lords, we on these Benches very much share the concerns voiced in all parts of the House today about this Bill. It may have two main parts—on the oil and gas industry, and onshore wind—but I agree with the noble Lord, Lord Oxburgh, that we have been asked to deal with it in a very unsatisfactory way. We had Second Reading on the last day of Parliament before the summer recess, and here we are in Committee today. I find that quite difficult.
In addition, amendments were tabled in the middle of last week and we still do not have some of the information we need to look at the Bill properly in Committee—and it is not just me saying this. Other people may have big offices to help them, but the beauty of this House is that we have lots of Back-Benchers with expertise who would like to take part in debates such as this; if we treat Bills in this way, it is very difficult for them to take part. I feel particularly strongly about energy Bills. Some of us have dealt with several energy Bills in this House, and we often find that very few people take part. That is partly because such Bills are often technical and, if Back-Benchers are going to take part, they need time to look at what the amendments mean and to get advice on them. I hope the House authorities will look seriously at this issue. I can understand some of the reasons why this has happened, but the situation is very unsatisfactory.
As I said, we agree with many of the things that have been said today. In setting up the Oil and Gas Authority, the Government are proposing, as we heard at Second Reading, to give some of their powers to this body. The Oil and Gas Authority will have ownership of carbon dioxide storage licensing but the responsibility for policy and strategy is going to remain, as I understand it, with DECC. The problems associated with this were highlighted by the noble Lord, Lord Deben. I understand from briefings I have received that DECC and the Oil and Gas Authority have been rather reluctant to consider applying the authority’s expertise to support future strategy development. I hope the Minister will tell us a little more about that. As the noble Lord said, the main reason seems to be that it is beyond the authority’s licensing remit. The problem is that if people do not think that something is within their remit, they do not think outside the box and they will not do anything else. The authority said that it was not very keen on that happening; it thinks that it is outside the scope of its remit and it is not willing to fund it. I hope the Minister will reassure us on this issue and that, as we scrutinise the Bill not just in Committee but on Report, we can deal with some of these matters. I have also received a rather interesting letter from Professor Stuart Haszeldine of the University of Edinburgh on how we might go forward, and perhaps there will be a chance to discuss that at a future date.
It seems to me and my colleagues on these Benches that there is a danger—I am not the only person to say this today—that the Bill might create institutional barriers to the development of carbon capture and storage. Other noble Lords have said today that that does not help us with the purpose of the Oil and Gas Authority, which is to make sure that we make the best of what is in the North Sea. I am sure that the Minister will try to respond to that.
Many of the amendments before us today cover these issues—as everybody has said, we have a whole series of amendments on the same area—and had we not been so rushed into considering the Bill, we might have been able to address them more logically. However, I hope that the Minister will sense the feeling of the Committee and be able to respond positively. I hope he will assure us that he and the department are considering these matters, so that we can put such concerns to rest and come forward with something a bit more sensible on Report.
Lord Bourne of Aberystwyth
My Lords, perhaps I may first pick up on a point made by the noble Baroness, Lady Worthington on the impact assessment. It is only by splitting the impact assessment between the parts of the Bill dealing with oil and gas, and those dealing with wind, that we are able to publish tomorrow the impact assessment relating to the Oil and Gas Authority. I will update the Committee on Wednesday on where we are on the wind issue and on the dialogue about grace periods.
I thank noble Lords for the amendments and for the non-partisan way in which points have been made. I do not think there is a material difference—certainly not from the speeches I have heard today—between the Government’s position on the importance of CCS and points made by noble Lords today. The best way forward might be if I go through where we stand at the moment in relation to the various amendments, and where we might be by Report.
My noble friends Lord Deben and Lord Howell, the noble Lord, Lord Oxburgh, the noble Baronesses, Lady Worthington and Lady Liddell, and various others spoke about the non-partisan nature of getting it right on energy for this country and for the planet—that is a very useful way forward and we certainly have a shared interest in it.
Let me address the pot pourri of amendments in this group. On Amendment 1, I acknowledge that it is important that regulatory measures be kept under review and for Parliament to be informed of the outcome of such activities. I also acknowledge the point made about the rapid nature of change in this area and in many other areas.
The noble Baroness’s amendment would require a review to be undertaken within one year—rather than the six months that she mentioned; perhaps I misunderstood her—of the coming into force of Clause 2. Neither I nor the department think that such a period is sufficient to enable an effective review of the Oil and Gas Authority’s activities, it being a new body in a new area. For this reason, I am not able to accept the amendment. However, the noble Baroness and others have raised interesting and valid points about a review which my officials are already considering, and we will return to this topic on Report. I hope that that addresses the immediate concerns. It is clear that we need to see how the legislation is working, how effective it is and whether there may be a need for a touch on the tiller or more. I accept that there is some need to look at how the legislation is working.
I thank those noble Lords who spoke to Amendments 3 and 23, which are significant and would extend the maximising economic recovery principal objective and, in the case of Amendment 3, the subsequent strategy to include transportation and storage of carbon dioxide. I accept that CCS is central to what we are seeking to do on decarbonisation, but I reassure noble Lords that things are happening—it is not as though we are not doing anything on this issue. The Office of Carbon Capture and Storage is already committed to comprehensive programmes on CCS, perhaps the most comprehensive anywhere in the world, to support the commercialisation of the technology and develop the industry.
My noble friend Lord Howell mentioned Norway, which is indeed important. However, Canada—where it is working on a commercial basis—is especially important in this context. Officials from DECC are going out to look at this on a fairly regular and sustained basis.
It is not as though no work is happening on carbon capture and storage. We are committed to a competition with up to £1 billion capital—that is current, and we will make an announcement on it early in 2016—plus operational support for large carbon capture and storage projects and a £125 million research and development and innovation programme. That is already happening.
I accept that we need to ensure that this dovetails with the work done by the Oil and Gas Authority. From my study of it, the Wood review—I accept that things move very quickly—said only two things about CCS, which perhaps illustrates how quickly it is moving, and both those are being picked up. The review suggested that the Oil and Gas Authority should work with industry to develop a technology strategy that will underpin the UK strategy of maximising economic return, and should include enhanced oil recovery and carbon capture and storage. A draft is already being prepared on that, and it is going to happen. Page 49 of the Wood review goes on to say that the Office of Carbon Capture and Storage should continue to work closely with the Oil and Gas Authority and oil and gas licensees,
“to examine the business case for the use of depleted reservoirs for carbon storage and possibly EOR”—
or enhanced oil recovery. That, too, will be happening. I am sure that that provides some reassurance to the noble Lords who raised this issue.
If I may, I will come back to the purpose of the Bill, which seeks to incorporate all the key proposals of the Wood review into legislation. The Wood review has therefore to some extent tested and explored the new regime envisaged for the oil and gas industry, and the justifications for such changes are set out in the document. There has been no such exploration of how such an extension would affect carbon capture and storage, so I believe that more time is needed to consider fully how the OGA can take forward its role—it does have a role—in supporting carbon capture and storage.
Lord Deben
Would it not therefore be valuable if we give the new authority specifically the powers to do precisely that, rather than say that we will work on it and then do it? After all, if we give it those powers, work on it, and then find that it is not necessary, it will not do any harm. I always wonder why we do not do the things that will not do any harm when they might do some good.
Lord Bourne of Aberystwyth
As my noble friend I think knows, I am always in favour of doing things that would do good and against things that would do harm. Therefore, I will, I hope, be coming on to some points that may provide some reassurance.
Amendments at this stage could cause delays to the strategy that is set out in the Wood review and the legislation enabling the Oil and Gas Authority to carry out the vital functions that we have set out in regulating and stewarding the United Kingdom continental shelf. That said, the Oil and Gas Authority will have a key role in relation to carbon capture and storage. It will issue carbon dioxide storage site licences and approve carbon dioxide storage permit applications. We are also considering—this is important—how carbon capture and storage may be considered as part of a proposed decommissioning plan. The Oil and Gas Authority will take into account the viability of utilising captured carbon dioxide in enhanced oil recovery projects. I am very happy to engage with noble Lords between Committee and Report, along with officials, to see how we can do that. I hope that that provides some reassurance.
In addition, the transfer and storage of carbon dioxide is an important technology, which is why it is likely to form a key element of the technology and decommissioning sector strategies that will be developed by the Oil and Gas Authority in consultation with industry. These strategies will help to underpin the overarching strategy related to maximising economic recovery. I can therefore reassure noble Lords that we are certainly open to looking at how we move this forward, but I do not want to give the impression that we will change the principal thrust of the primary object of the Act, which is to maximise economic recovery. Certainly, we can explore ways of seeing how we can ensure that carbon capture and storage is incorporated within the remit of the work done by the Oil and Gas Authority.
I hope that I have covered the key points. One point was made by my noble friend Lord Oxburgh and echoed by the noble Baroness, Lady Liddell, which as a Minister I have much sympathy with. That is making sure that we have some clear reference points on legislation. I hope that we can let noble Lords have that because it is a point well made in this area as no doubt in many others—taxation, company law and pensions spring to mind as just three areas that would benefit very clearly. With my assurance that we are happy to look at how we can move this forward on both of the points made—a timely look at the legislation and how we can ensure that carbon capture and storage is not forgotten, and we certainly do not intend that it should be—I hope that the noble Baroness will be willing to withdraw her amendment.
Lord Howell of Guildford
Can I press the Minister a shade more on something that we tend to forget when we debate these great issues of carbon capture and the future of the industry, and that is cost? It has been estimated that about £40 billion will be required to handle the decommissioning of outdated, redundant infrastructure in the North Sea. This whole process may be greatly accelerated if, as I earlier predicted, oil prices stay well down or go very much further down than they are already in the next four or five years. There is a huge cost there.
There is obviously vast cost involved in the piping of CO2 into the North Sea, if that is the technology used, although brilliant minds like those of my noble friend Lord Oxburgh have thought of new ways of handling carbon without having to pipe it away into the North Sea into reservoirs. In some cases, reservoirs have to be suitably designed both to enhance oil production and to store the CO2. All of these involve huge sums, which have not been mentioned. On top of that, the Government appear to be thinking in terms of further tax reliefs of all kinds in the North Sea, and I hope a great simplification of tax—it has been obvious that we have needed that for the past five or six years and I am glad that it is coming now, but again that is a lost revenue. Should we not give a little attention, as we push forward with this major reorganisation of the administration of North Sea and UK continental shelf affairs, to the enormous sums and where they will come from? I imagine that the answer is probably from the consumer and energy prices, but the Government have a duty to the public to explain some of the implications of what is now unfolding before us, including that colossal figure for decommissioning.
Lord Bourne of Aberystwyth
My Lords, my noble friend makes a valid point about the decommissioning costs and costs in general, which are very much at the forefront of the Government’s thinking. He will be aware that the Oil and Gas Authority is essentially being paid for by the industry. Other than initial seed- corn support of a small amount from the Government and the Government conceivably stepping in in an emergency situation, it is self-financing. But there are aspects that we will come to later in the legislation that talk about the public purse, this being one consideration that has to be borne in mind in relation to relevant activities. I need no persuading that costs are central to what we are looking at here.
Baroness Byford (Con)
My Lords, the Minister has said that he is unhappy about having a review within a year, which is too soon. I can understand that, but can we press the Minister to come back with a suggestion of two years? Having followed other Bills through, I fear that this period will get extended. I hope that serious thought can be given, between now and Report, to putting forward a time before the final stages of the Bill are considered.
Lord Bourne of Aberystwyth
I thank my noble friend. I do not want to give a figure on the hoof; I am sure noble Lords would appreciate that that would be dangerous. We can look at this clearly between now and Report. If we are going to have a review we will have to say when it should take place. I would not anticipate coming back without a definitive idea of that.
Baroness Worthington
My Lords, I thank all noble Lords who have contributed to this debate, which has demonstrated the breadth of opinion and the cross-party consensus on the need for the Bill to be amended to ensure that carbon capture and storage—or certainly the storage and transportation elements of it—is on the face of the Bill, for the avoidance of all doubt. On these Benches, we will not be content for the Bill to leave this House without that issue being addressed. That said, I am grateful to the Minister for his response. I look forward to sitting down and engaging in the discussions he offered with officials and interested parties to see if we can come to an agreement on the review period for the legislation and the objective of the OGA. I understand the points that have been made, but if you create a body that has licensing powers over the storage of CO2, which may well involve itself in meetings in relation to storage and transportation and which may be charging fees, how can this all be possible unless its primary objective includes a reference to that? The potential for judicial reviews or objections from industry would be much wider if we do not make it crystal clear from the outset that this is what we intend the OGA to do. The noble Lord has referenced the fact that this will be self-financing, but government amendments to be tabled today would mean that public money was potentially being given to the OGA. I reiterate that we will not be content unless something appears on the face of the Bill, but I look forward to sitting down with the Minister and his officials and, on that basis, I am happy to withdraw the amendment.
Lord Oxburgh
I join the noble Baroness, Lady Worthington, in thanking those who have participated in the debate and the Minister for his reply. I have one final question for him. Have the officials in his department conducted a study of how the Bill might impact CCS? There are serious questions there: if they have not done that, could they do so? It would be extremely useful as a lead-in to the next stage.
Lord Bourne of Aberystwyth
In answer to the noble Lord, officials have certainly been looking at how CSS fits in and dovetails with the Bill. We will continue to consider that and look at it if we are able to engage in discussions between now and Report. I am grateful for the noble Lord’s comments.
“( ) Omit paragraph 1(2).”
Lord Bourne of Aberystwyth
My Lords, Amendments 1A to 1F and Amendment 43 seek to amend the Schedule to the Bill to make amendments to other Acts and the Title of the Bill. Because the power for the Oil and Gas Authority to charge fees is provided for in Amendment 16, Amendments 1A to 1D are required. In particular, we amend the power to charge in Section 188 of the Energy Act 2004 and remove some other powers to charge fees. This illustrates the points that were made about the need for a destination table.
Amendment 1E amends the Schedule to insert a definition of the Oil and Gas Authority into the Energy Act 2011. This is consequential on government Amendments 33 and 34 relating to access to upstream petroleum infrastructure and on the transfer of functions to the Oil and Gas Authority in relation to access to upstream petroleum infrastructure. Amendment 1F amends the Schedule to remove the levy provisions from Section 42 and Schedule 7 of the Infrastructure Act 2015. These will be set out with amendments to this Bill—noble Lords should see Amendments 17 and 18—so that those using the legislation can find all the Oil and Gas Authority provisions in one place. I hope that that is helpful.
Amendment 43 amends the Title to include,
“to make provision about rights to use upstream petroleum infrastructure”,
in consequence to Amendments 35 and 36, which insert new clauses on this topic. I beg to move.
Baroness Worthington
My Lords, as these are largely technical amendments bringing into line various pieces of legislation, I have no real objection and we support the government amendments.
Lord Bourne of Aberystwyth
My Lords, I am most grateful to the noble Baroness for that.
“Energy Act 2004(1) Section 188 of the Energy Act 2004 (power to impose charges to fund energy functions) is amended as follows.
(2) In subsection (7), omit paragraphs (b), (h), (m) and (n).
(3) In subsection (8), omit paragraphs (da), (db) and (f).
(4) In subsection (12), in the substituted subsection (7A)(b), for “mentioned in subsection (8)(db)” (in both places) substitute “for which a licence under Chapter 3 of Part 1 of the Energy Act 2008 is required”.”
Lord Howell of Guildford
My Lords, in case any eyebrows were raised over the apparent difference between the noble Baroness’s figure of £9 billion and my figure of £40 billion, which are slightly different, I should make clear that I think the noble Baroness was talking about the next five years whereas I was talking about the next 25 years, over which time it is estimated that £40 billion will have to be spent removing redundant platforms and pipelines as well as plugging spent oil wells.
My noble friend said that the companies would fund all this. I wonder whether that makes reassuring sense in the light of what the noble Baroness, Lady Worthington, said about these companies being increasingly strapped for cash. If we are only half right about the evolution of world oil and gas prices—and it looks as though we are going into a period of prolonged glut in that field—the North Sea companies will have very tight budgets. This additional cost—whether it is £9 billion over five years or £40 billion over 25 years—will have to be found from somewhere. As we advance into this era and ask the OGA to take on these new responsibilities, and as we work out the practicalities of CCS, which have not yet all been solved, and the costs of it, we must be careful that we do not store up colossal financial problems for the future that will lead people in years to come to ask why we did not make clearer preparations. I wish to make clear the difference between the two figures of £9 billion and £40 billion and suggest yet again that we focus very carefully on where the money will come from.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness for her amendment and my noble friend Lord Howell for his comments. Without wishing to be too much of a doomsayer, I appreciate that there is always the chance of any business going into bankruptcy or company going into insolvency. The legal position is that decommissioning costs are picked up by industry under the Petroleum Act 1998—and industry does, of course, get tax relief.
I will address the noble Baroness’s points on Amendments 2 and 9. Minimising the costs of decommissioning in the North Sea to both industry and the taxpayer will be a central focus of the new legislative landscape. It is essential that we create an environment that encourages collaboration and co-operation in order to bring down overall costs. The reuse of viable North Sea infrastructure is a top priority for the Oil and Gas Authority. As I outlined earlier, the Wood review suggested that the Office of Carbon Capture and Storage would work closely with the Oil and Gas Authority in moving this forward. That, indeed, is what is happening in line with the recommendations made by Sir Ian Wood in his review.
That said, I understand the thrust of what is being said and can confirm that decommissioning is high on the Government’s agenda. Obviously there are costs associated with it and it is essential that we do it in the most cost-effective way, bringing in the possibility of reusing decommissioned sites in relation to CCS. I hope that noble Lords have had a letter indicating that the Government will bring forward amendments on decommissioning on Report. Unfortunately, it has not been possible to bring them forward earlier, but it is my intention that these amendments will address the issues of decommissioning costs and the viable reuse of infrastructure in the North Sea. On that basis, I hope that the noble Baroness will feel able to withdraw the amendment. I look forward to debating decommissioning in more detail on Report when government amendments on these issues will be brought forward.
Baroness Worthington
My Lords, I thank the noble Lord, Lord Howell, for his clarification. He is absolutely correct that, obviously, over a longer time period we will incur higher costs. I thank the Minister for his response. Possibly I did get the letter about the decommissioning amendments. I have to confess it has been a rather chaotic last few weeks so I will look again in my inbox. I would welcome that and I think that this issue must be addressed in the Bill. It is clearly a subject that we are going to see a lot of parliamentary time devoted to. Could the Minister write to me or give me clarification, as soon as possible, about the nature of the liability that taxpayers will face and about any safeguards that will be put in place to prevent it becoming an unlimited liability?
I notice from the industry side that the tax breaks that were granted have been underwritten by private law contracts to avoid any reverses being introduced by subsequent Governments. That seems to be quite a nice safeguard for the industry. As we know, Finance Bills are famous for being quite changeable. In fact, we saw quite a shift from the 2011 Budget where what were described as disastrous tax regimes brought in for the oil and gas sector were rapidly reversed and changed over subsequent Finance Bills. Therefore, one can see why the industry is keen to have these things underwritten and uses private law contracts now for those tax breaks. However, where are the reassurances for the public purse that this will not be a ballooning cost for us over decades to come?
I understand that it should be the industry that pays, but it does receive tax breaks, which amounts to a subsidy from the public purse. However, on the basis that there are amendments coming forward and that we will have another opportunity to debate decommissioning in full, I beg leave to withdraw my amendment.
Baroness Young of Old Scone (Lab)
My Lords, I also support Amendments 4 and 6 in respect of the matters to which the OGA must have regard, particularly climate change. The Climate Change Act set a statutory target to reduce greenhouse gas emissions by at least 80% from 1990 levels by 2050. In the shorter term, the Committee on Climate Change, under the noble Lord, Lord Deben, has recommended that the UK should have a virtually carbon-free electricity sector by 2030. We are clear that many of these targets will not be met under current scenarios, and this is an area in which it will be pretty strenuous to try to achieve them. Every tool in the toolbox will need to be used.
However, we are at a point where the Government seem to be removing some of the tools from the toolbox. We see in the Bill proposed changes to planning for onshore wind, changes to planning for low-carbon homes, the feed-in tariff support and the renewables obligation, and changes to proposals on tax incentives for low-emission vehicles. There is a concern, certainly in my mind, that if we remove too many tools it will become an even more strenuous and difficult task. That is why management of the oil and gas industry in the future is absolutely vital. It is important that the matters to which the OGA must have regard take account of UK and international obligations for greenhouse gas reduction, decarbonisation of energy and the carbon budgets set by the noble Lord, Lord Deben.
The Minister may say that the OGA already has a prime objective of maximising economic recovery, although I have not heard it put quite that way before. Indeed, one of the matters to which the OGA must have regard is minimising future public expenditure. It would be a bit of a stretch to say that that was a nod towards climate change. So, I ask the Minister to consider whether an explicit reference to having regard to climate change should be added to this list. If we do not make sure that all bodies involved in the energy business also have climate change at their heart, we will see huge effects on public expenditure from the impact of climate change in the future.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords who have spoken on this group of amendments, which seek to amend Clause 4, in Part 1, and Clause 9, in Part 2, of this Bill. Those amendments are Amendments 3A to 11—excluding Amendments 7 and 9 which are grouped separately—and Amendments 20 and 21.
Amendment 3A, moved by my noble friend Lady Byford, seeks to insert provision into Clause 4 of the Bill which would require the Oil and Gas Authority to have regard to the need to minimise public expenditure relating to, or arising from, its existence. Clause 4 already places an obligation on the Oil and Gas Authority to have regard to,
“The need to minimise public expenditure relating to, or arising from, relevant activities”.
The concept of “relevant activity” is intended to capture activities such as petroleum extraction or gas or carbon dioxide storage in relation to which the Oil and Gas Authority has statutory functions and functions under licences. For example, when taking decisions under licences, it is intended that the Oil and Gas Authority should have to consider whether a licence holder will be able to meet liabilities under a licence if these are liabilities that might otherwise have to be met by the taxpayer.
The question of how the Oil and Gas Authority should spend its own resources is dealt with by other means. However, there are arrangements in place to ensure that the OGA’s spending is controlled. As accounting officer, the OGA’s chief executive is responsible and accountable to Parliament for the organisation of, and quality of management in, the authority, including its use of public money. The chief executive has responsibility for ensuring that the OGA operates in accordance with the guidance set out in the Cabinet Office’s Managing Public Money.
Furthermore, the Department of Energy and Climate Change is establishing a robust governance framework to oversee its relationship with the OGA. This will ensure that any issues which may have a financial impact on government are reported to the Secretary of State at the earliest opportunity. The framework requires the OGA to have the prior written consent of the Secretary of State before it takes any action which will, or is likely to, give rise to an additional funding requirement from the department or gives rise to obligations or liabilities which are not expected to be affordable in terms of expected levy income. The Secretary of State will be the sole shareholder of the OGA and her role in this regard includes assessing and approving the business plan developed by the authority, among other things, to ensure its long-term viability and sustainability and its ability to deliver value for money in light of the strategies of the department and wider government. I hope that this explanation is reassuring.
I turn now to Amendments 4 and 6, which each make reference to responsibilities under the Climate Change Act 2008. While the OGA will be bound by any environmental legislation that relates to the exercise of its functions, it is purposely not an environmental regulator. Perhaps I may refer noble Lords to Clause 4, which refers to those matters to which the OGA must have regard—
“include the following, so far as relevant”—
so, obviously, any pre-existing legislation would be binding in relation to the OGA, and that would include the Climate Change Act.
Environmental regulation responsibilities under the Climate Change Act 2008 will continue to sit within the Department of Energy and Climate Change, which has expertise and experience in this field. There are synergies between the two forms of regulation, and the existing strong relationships between the OGA and DECC will continue. However, it is important that these regulatory functions remain separate, ensuring that the correct focus is placed on each by the different regulators. Noble Lords will also be aware that the amendments raise issues of compliance with the offshore safety directive, which requires a separation of oil and gas licensing and environmental functions, so I am not sure that it is legally possible either. I cannot agree that it would be appropriate to provide the OGA with additional environmental functions, and I hope that noble Lords will not press the amendments.
Amendment 5 includes reference to the development of carbon storage. I thank noble Lords for proposing these amendments because, as I have indicated, between now and Report I should like to look at the whole issue of carbon capture and storage to ensure that there is dovetailing between the existing regime for control of carbon capture and storage and the way that the Oil and Gas Authority will move forward on the matters in the Bill. Clause 4, as I have said, sets out a non-exhaustive list of matters to which the OGA must have regard when exercising its functions. The functions of the OGA include functions relating to carbon capture and storage. A number of the matters refer to “relevant activities”, which is defined as activities in relation to which the OGA has functions. As things stand, the relevant activities therefore include CCS. These matters include the need to collaborate with industry and foster innovation, which should help the CCS sector to achieve its aims. In addition, reference is made under the heading “System of regulation” to encourage “investment in relevant activities”, which once again should include CCS. No other sectors in relation to which the OGA has functions are explicitly referenced by this clause. Making the OGA’s mandate and associated powers on CCS explicit when other sectors are not mentioned could have the effect of prioritising CCS over other areas, which the Government would be against. An example would be maximising the delivery of economic recovery. I hope that on that basis, and with the assurance that we will look at the whole issue of CCS between now and Report, the noble Baroness will be content not to press the amendment.
Baroness Worthington
Before the Minister sits down, although I thought that we had been making quite good progress in this debate in recognising the need to address the OGA’s powers in relation to CCS, I felt that the comments in response to this amendment seemed to be very narrow in their interpretation of what we are going to be considering before Report. I reiterate that our not moving the amendments in this group does not preclude the fact that we want a full and deep discussion about which of those OGA powers need to be amended to address CCS. As we will come on to discuss, that will involve access to meetings, information samples and a whole raft of things that will be needed to facilitate CCS. Although I will not be moving those amendments, I reiterate that we should not be sliding back and we should be looking at the whole issue holistically before Report.
Lord Bourne of Aberystwyth
I thank the noble Baroness for that intervention. I am happy to do that, as I have indicated, but I do not want to give the impression—I do not want to commit us to this—that we are undermining the focus of the Oil and Gas Authority, which is to maximise the economic return from the North Sea.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 8 months ago)
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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.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I shall speak to the amendments in this group and I thank noble Lords who have participated in the debate for speaking to their amendments. Amendments 12 to 15 relate to Clause 5 of Part 1 of the Bill, which concerns directions the Secretary of State may give to the Oil and Gas Authority. As the noble Baroness, Lady Worthington, said at the outset of our consideration in Committee, most of what we are looking at in the non-government amendments relates to carbon capture and storage. That is certainly a point well made. As I have indicated, we have undertaken that we will look at the issues relating to carbon capture and storage prior to Report.
As has been said, Clause 5 gives the Secretary of State power to direct the Oil and Gas Authority in the exercise of its functions if the Secretary of State considers the directions in the interest of national security or otherwise in the public interest. The noble Baroness, Lady Worthington, asked for examples of that and I will try to provide a couple. First, if a licence is applied for by a person who is suspected of corruption and whose possession of a licence the Secretary of State thinks would lead to reputational embarrassment or political damage to the United Kingdom, the intention is that the Secretary of State should be able to direct the Oil and Gas Authority not to issue a licence to such a person.
Secondly, another instance may be if there are other competing uses for a particular area of the seabed in respect of which the Oil and Gas Authority may grant licences. The intention then is that the Secretary of State should be able to give a direction to the Oil and Gas Authority as to over which areas it should or should not exercise its licensing powers so as not to prejudice those other uses.
Finally, another example may be that the Secretary of State should be able to direct the Oil and Gas Authority not to grant further consents for development in the face of public concern about the scientific evidence in relation to the methods used or a change in government policy. Clearly, that is not an exclusive list but those are some situations that may be covered by it.
The amendment makes it clear that the power in Clause 5 can extend to the Oil and Gas Authority’s functions in relation to the carbon capture and storage sector. We believe that it is unnecessary to do this because the Secretary of State’s power to give directions to the Oil and Gas Authority as to the exercise of its functions already applies to the carbon capture and storage sector in so far as it is in the ambit of the Bill.
Baroness Maddock (LD)
I thank the Minister for allowing me to ask a question on this issue. At Second Reading I asked how much the Government had looked at the way Norway had organised its oil and gas industry. When Norway looked at these areas, I wondered how far it looked at carbon capture and storage and whether we have learnt anything from that in relation to what we are discussing at the moment.
Lord Bourne of Aberystwyth
I have no direct knowledge about lessons we have learnt from Norway, but I can certainly reassure the noble Baroness that we look closely at the Norwegian experience and the Canadian experience of carbon capture and storage. If I may, I will drop her a line on that and copy it to other Peers who have participated in today’s debate.
We believe this amendment is unnecessary as the Secretary of State’s power to give directions to the Oil and Gas Authority in the exercise of its functions already applies to the carbon capture and storage sector, as I have said. On that basis, we do not see the need for this amendment. Similarly, Amendment 15 makes it clear that the Secretary of State’s directions to the Oil and Gas Authority may include requirements on the development of storage facilities for gas and oil, or storage of carbon dioxide, as part of a carbon capture and storage scheme. Once again, the Secretary of State’s functions of licensing the storage and unloading of gas and the storage of carbon dioxide are being transferred to the Oil and Gas Authority by the Bill. As such, the Secretary of State’s power to give directions to the Oil and Gas Authority in the exercise of its functions already applies to these sectors. Were additional functions to be added to the Bill, they, too, would be covered by this provision and an amendment would not be necessary.
Turning to Amendments 13 and 14, the Oil and Gas Authority will be established formally so that it is an effective, robust and independent regulator. As part of this, it will deliver on the strategy to maximise the economic recovery of petroleum from the United Kingdom continental shelfs. The Oil and Gas Authority is purposely not an environmental regulator and environmental regulation will continue to sit within the Department of Energy and Climate Change, which has the expertise and experience in this field. There are synergies between the two forms of regulation and the existing strong relationship between the Oil and Gas Authority and the department will continue. The department will continue with its vital mission of seeking secure and diverse energy supplies, including renewables, nuclear and indigenous resources. The United Kingdom has adopted ambitious climate change targets, committing us to an 80% reduction in emissions from 1990 levels by 2050. Emissions are already down by 29% on those levels.
As I indicated on a previous amendment that was brought forward on environmental concerns, these amendments also raise issues of compliance with the offshore safety directive, which is legally enforceable against us. This requires a separation of oil and gas licensing from environmental functions. So it may not be legally possible to do this either.
Lord Whitty
I do not believe that either my amendment or the other amendments intend to designate the OGA as a drafter or an enforcer of environmental legislation. They seek to ensure that anything the OGA does will not jeopardise—preferably, they would further—the broader objectives of the Government. This does not mean that it is a regulator; rather, that the Secretary of State would have the ability to intervene if some of the economic decisions taken by the OGA jeopardise its legal obligations under the domestic climate change Acts, or indeed jeopardise its international legal obligations under EU or any global climate change agreements. We are not arguing that the OGA should be an environmental regulator.
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.
“Powers of the OGA to charge fees
(1) The OGA may charge fees—
(a) for making a determination under Schedule 1 to the Oil Taxation Act 1975; (b) on an application made to it under section 3, 15, 16 or 17 of the Petroleum Act 1998;(c) on an application of a prescribed description made to it by the holder of a licence granted under—(i) section 3 of that Act (searching for, boring and getting petroleum), or(ii) section 2 of the Petroleum (Production) Act 1934 (licences to search for and get petroleum);(d) on an application of a prescribed description made to it by the holder of an authorisation issued under section 15 of the Petroleum Act 1998;(e) for carrying out or attending any test, examination or inspection of a prescribed description;(f) on an application made to it under section 4 or 18 of the Energy Act 2008;(g) on an application of a prescribed description made to it by the holder of a licence granted under section 4 or 18 of that Act;(h) for the storage by it of samples or information in accordance with an information and samples plan (see section (Information and samples plans: supplementary) (2) of this Act).(2) The fees—
(a) are to be determined by or in accordance with regulations made by the Secretary of State, and(b) are to be payable by such persons as the regulations may provide.(3) The OGA must pay into the Consolidated Fund any amount which it receives in respect of fees charged by it under this section.
(4) Subsection (3) does not apply where the Secretary of State, with the consent of the Treasury, otherwise directs.
(5) Where in relation to any matter the OGA has a function mentioned in subsection (6), that function is treated for the purposes of this section as carried out pursuant to an application made to the OGA (whether or not there is any requirement to make such an application).
(6) The functions are—
(a) extending the term of a licence;(b) giving its consent or approval in relation to any matter;(c) objecting in relation to any matter.(7) The Secretary of State must consult the OGA before making regulations under this section.
(8) In this section “prescribed” means prescribed by regulations made by the Secretary of State.”
Lord Bourne of Aberystwyth
My Lords, I will now speak to the government Amendments 16 to 19, which relate to the funding of the Oil and Gas Authority, including the provision of payments and financial assistance to the authority. The Oil and Gas Authority will be formally established so that it is an effective, robust and independent regulator of petroleum recovery. As part of this, it will deliver on a strategy to maximise the economic recovery of petroleum from the United Kingdom territorial sea and the United Kingdom continental shelf. The new body will be funded by industry. This is consistent with the user pays principle because industry will be benefiting from the work and expertise of the regulator.
The Oil and Gas Authority is providing a range of services to industry. These services include the issuing of licences as well as issuing relevant consents and permits, for example, to begin petroleum production. It is correct and in compliance with the Treasury’s Managing Public Money remit that the costs of these services should be recovered via direct fees rather than via the general levy. This will ensure that only those who require and benefit from the service will bear its costs.
Amendment 16 inserts a new clause into the Bill which will ensure that the costs of the relevant services provided by the Oil and Gas Authority may be recovered via a direct fee. Details of the fee mechanism and the method of calculating the full cost of the service will be set out in regulations. Amendments 17 and 18 insert new clauses allowing the Secretary of State to make regulations providing for a levy on industry to meet the costs of the authority; that is, the indirect costs of administration and so on. These new clauses are in similar terms to the levy provisions set out in Section 42 of and Schedule 7 to the Infrastructure Act 2015, but they reflect the fact that the functions will be carried out by the Oil and Gas Authority as a government company rather than as an executive agency, where in law the functions are with the Secretary of State. We thought it would be more helpful to those using the legislation to find the levy provisions in this Bill, and I hope that noble Lords are reassured by that. The noble Lord, Lord Oxburgh, who is not now in his place, and the noble Baroness, Lady Liddell, both referred to the need to simplify access to some of the provisions in this area, so I hope that the fact that they will all be contained in this Bill rather than in the Infrastructure Act 2015 is helpful.
To allow the regulator to recruit and retain the best candidates, particularly those with specialist experience, we need to ensure that the regulator has financial flexibility and sufficient funding. Amendment 17 enables the Secretary of State to provide by regulation for a levy on the holders of specified licences. The levy will fund the costs of the regulator, but it must not exceed the costs incurred in carrying out the relevant functions. The amendment also allows the levy to be imposed to cover the costs of the Oil and Gas Authority exercising its functions, including those relating to the new powers we are conferring on it, such as dispute resolution, data acquisition and enforcement. Amendment 18 sets out illustrations of the way in which the levy power may be exercised. This is in similar terms to Schedule 7 to the Infrastructure Act 2015. Regulations will set out the detail, including the amount payable by different categories of licence holders. Just by way of explanation, it is intended that those licence holders who are actually exploiting the area will be paying more than those who have not yet taken up the opportunity.
Some consequential amendments to the schedule are necessary, such as Amendment 42, which amends the schedule to the Bill to remove the levy provisions from the Infrastructure Act 2015 as set out in Section 42 of and Schedule 7 to that Act. These amendments are covered separately with Amendment 1, which seeks to amend Clause 2, which introduces the schedule. In fact the amendment has already been dealt with, so I fear that my notes are out of date.
I turn now to Amendment 19, which provides a general power for the Secretary of State to make payments and provide financial assistance to the Oil and Gas Authority. The power is not restricted to the specific functions of the authority, and therefore payments may be made at the discretion of the Secretary of State to fund any of its functions. As well as covering statutory functions, it will cover those which are contracted out to the Oil and Gas Authority. The authority will be funded through a levy on the holders of certain energy industry licences and by fees which will be paid for the carrying out of particular services. The Secretary of State may also need to provide funds to the authority to cover any unforeseeable events. The amendment will allow the Secretary of State to provide financial assistance to the Oil and Gas Authority in the form of grants, loans, guarantees and indemnities. I beg to move.
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 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.
Lord Bourne of Aberystwyth
My Lords, I will try to address the points raised by the noble Baroness, Lady Worthington, and my noble friend Lady Byford. The first was about when the regulations for the charging regime will be laid. They will need to be in force when functions transfer to the Oil and Gas Authority next summer, assuming the passage of the legislation. We have an indication of how much the levy will cost industry and the distinction to be made between those that are currently exploiting oil and gas fields and those that are not. The cost of the levy for the first six months for licence holders that are not exploiting is £2,759.30p—which seems pretty precise—and for those that are exploiting, it is £30,422.92p. I am sure we would reserve the right to vary that somewhat, but it gives an indication of how much the levy will cost. I think the regulations relating to the activities that are subject to the direct costs have not yet been laid, but I will restate the point that the aim is to recover the costs: it is not make a profit, but to ensure that the costs are covered. That should provide some reassurance.
The noble Baroness, Lady Worthington, and my noble friend Lady Byford both raised points in relation to Amendment 19, on financial assistance. I think this is intended to cover two situations—if there are others, I will make sure that I deal with them in writing. First, it is intended to cover any shortfall in the levy and charge regime in the short run. I suppose this relates to cash-flow issues and is to ensure that things are kept running. That would presumably be a short-term measure and not involve a great amount of money in the scheme of the authority.
The second point relates to unforeseeable situations. The noble Baroness, Lady Worthington, asked for examples. In a sense, it is difficult to give examples because they are unforeseeable, but it could include some massive oil spillage where immediate funding is necessary or, God forbid, some terrorist incident where money is needed. That is the sort of situation. Those are two examples, but there will clearly be others, as this is about the unforeseeable. The unpredictable nature of the scenarios is clear there, but in addition there is the cash-flow element. I think it is fairly standard in these situations to have something of this nature. I hope that provides reassurance and that I have satisfied the noble Baroness.
“Levy on licence holders
(1) The Secretary of State may, by regulations, provide for a levy to be imposed on, and be payable by, one or more of the following kinds of persons—
(a) persons who hold licences (other than excluded licences) granted under section 3 of the Petroleum Act 1998 (searching for, boring and getting petroleum);(b) persons who hold licences (other than excluded licences) granted under section 2 of the Petroleum (Production) Act 1934 (licences to search for and get petroleum);(c) persons who hold licences granted under section 4 of the Energy Act 2008 (unloading and storing gas);(d) persons who hold licences granted under section 18 of the Energy Act 2008 by the Secretary of State or the OGA (storage of carbon dioxide).(2) The Secretary of State must exercise the power conferred by subsection (1) so as to secure—
(a) that the total amount of licensing levy which is payable in respect of a charging period does not exceed the costs incurred by the OGA in exercising its functions in respect of that period, and(b) that no levy is payable in respect of costs incurred in the exercise of functions—(i) for which fees are charged under section (Powers of the OGA to charge fees), or(ii) which the OGA is authorised to exercise by virtue of an order under section 69 of the Deregulation and Contracting Out Act 1994.(3) In determining for the purposes of subsection (2)(a) the total amount of licensing levy payable in respect of a charging period, an amount of levy payable in respect of that period may be ignored if (during that period or subsequently)—
(a) having been paid, it is repaid or credit for it is given against other licensing levy that is payable, or(b) having not been paid, the requirement to pay it is cancelled.(4) The amount or amounts of licensing levy payable by licence holders must be—
(a) set out in the regulations, or(b) calculated in accordance with a method set out in the regulations.(5) The licensing levy is payable to the OGA.
(6) The OGA must pay into the Consolidated Fund any amount which it receives in respect of the licensing levy.
(7) Subsection (6) does not apply where the Secretary of State, with the consent of the Treasury, otherwise directs.
(8) The Secretary of State must consult the OGA before making regulations under this section.
(9) Section (The licensing levy: regulations) does not limit the provision that may be made by regulations under this section.
(10) In this section and section (The licensing levy: regulations)—
“charging period” means a period in respect of which licensing levy is payable;“excluded licence”, in relation to a charging period, means a licence that, if granted at the beginning of the period, would fall to be granted by the Scottish Ministers or the Welsh Ministers (and for these purposes a licence within subsection (1)(b) is to be treated as granted under section 3 of the Petroleum Act 1998);“licensing levy” means the levy provided for in regulations under this section.”
Lord Bourne of Aberystwyth
My Lords, these amendments seek to amend Chapter 3 of Part 2 of the Bill, relating to information and samples. This is another smorgasbord of amendments and I shall attempt to do justice to the contributions that have been made.
Amendment 24 seeks to broaden the definition of “petroleum-related information” that is used throughout Chapter 3 of Part 2. The broadening of this term is to include information acquired by relevant persons in the course of carrying out activities that were once, but are no longer, relevant to fulfilment of the principal objective. I confess that we are not certain what the gap is that the amendment seeks to fill, but I am very happy to engage with the noble Lord, Lord Whitty, to see specifically whether there is a gap and whether we need to fill it. We feel that, as drafted, the clause provides the Oil and Gas Authority with the power to acquire all the information that it is likely to require to fulfil its role.
Amendment 25 seeks to ensure that the two definitions of petroleum-related information are not interdependent. It is our view, having looked at this and having had lawyers look at it, the provisions, as drafted, are not interdependent. Any information that an offshore licensee acquires or creates that is relevant to the principal objective will fall within paragraph (a) and anything a licensee acquires in the course of carrying out activities under their licence which is not relevant to the principal objective would fall within the scope of paragraph (b). This is clarified in the final part of that paragraph, which specifies that in order to fall within paragraph (b) the information cannot also fall within paragraph (a). So I do not think that they can be interdependent, but I am happy to have another look to make sure that we are right. We feel that the clause allows the Oil and Gas Authority to access any information that licensees acquire under their licences, including information which is not relevant to the fulfilment of the principal objective.
I thank those noble Lords who spoke on Amendment 26, which seeks to insert a new subsection into Clause 19 for the purpose of confirming that the provisions within Chapter 3 of Part 2 of the Bill, relating to information and samples, apply for the purpose of data sharing with carbon capture and storage operators. The noble Baroness, Lady Worthington, made some telling points on samples in general. We will look at the points she made about access to the archive and so on—however, we believe that nothing within Chapter 3 prevents the Oil and Gas Authority disclosing information and samples to carbon capture and storage operators, outside the general restrictions provided for in Clause 27. These general restrictions apply to the disclosure of all protected information acquired by the Oil and Gas Authority under its powers in Chapter 3, to any person. Similarly, carbon capture and storage operators are given no special treatment by the clauses, in so far as there is no provision allowing disclosure to them and not to others. Once restricted information is publishable it may be disclosed to any person, including any carbon capture and storage operator.
Amendment 26A relates to Clause 21, which provides a power for the Secretary of State to make regulations imposing obligations on offshore licensees to retain information and samples where there has been a termination of rights under the licensee’s licence. This information can be of significant importance to the Oil and Gas Authority and the rest of the UK continental shelf, and it is therefore important that the Oil and Gas Authority can continue to access this information and samples after a licence is terminated. Clause 21 states that regulations may provide for the requirements to retain information to continue following a termination of the licensee’s rights under the licence, but the amendment would nullify these obligations if the licensee whose licence rights had been terminated ceases to be in business.
The most frequent ground for termination of a licensee’s rights under a licence is where a licensee transfers interests in a licence to another party. In that case, the rights granted under the licence continue for the party to whom they have been transferred but are automatically terminated in respect to the transferring party. Where a licence is revoked, the obligations and liabilities in respect of that licence continue, even in cases where a licensee becomes insolvent. This is done to protect the regulator from acquiring onerous and costly liabilities which may result from that licence.
This amendment is particularly relevant to information and samples plans, as provided for by Clause 23. These plans are intended to safeguard petroleum-related information and samples during licence events, such as the revocation of a licence after a company becomes insolvent. In such a case it would be imperative for the rights and obligations requiring the retention of information and samples to continue past the termination of rights and until the information and samples plan can be put in place. The amendment would prevent this and allow those companies which cease to be in business legitimately to dispose of the petroleum-related information and samples which they hold. This would be a significant and severe loss for the Oil and Gas Authority and the UK continental shelf as a whole. That is something to which we cannot agree and I am sure that it is not the intention of the amendment. I hope, in those circumstances, that that point will be taken on board.
Amendment 27 seeks to specify that an information and samples plan, as provided for by Clause 23, may provide for the transfer of petroleum-related information or samples to a new licensee or a new carbon dioxide storage licence holder. The policy intent of the information and samples provisions is to ensure that petroleum-related information is accounted for and safeguarded against loss during licence events, such as the surrender and expiry of licence rights. That said, nothing within the existing provisions would prevent a plan providing for the transfer of information to any other person, including a carbon dioxide storage licence holder, and for that person to take on the obligations that are imposed by that plan. The amendment makes presentational but non-material changes to the Bill and I therefore undertake to take it away for further consideration.
Amendment 28 seeks to insert a new subsection into Clause 25 for the purpose of confirming that information and samples plans shall also provide for the sharing of petroleum-related information with carbon capture and storage operators. As I have explained, the information and samples provisions are intended to ensure that petroleum-related information is accounted for and safeguarded against loss during licence events. They are not specifically intended to facilitate the sharing of information between parties. However, I confirm that nothing within the existing information and samples provisions prevents petroleum-related information being shared with carbon capture and storage operators.
Amendments 29 and 30 seek to broaden the scope of the Oil and Gas Authority’s power to acquire information and samples as set out at Clause 26 by either removing the requirement for the Oil and Gas Authority’s function for which the information is requested to be relevant to the fulfilment of the principal objective, or to add an alternative requirement that the function is relevant to the promotion and development of carbon capture transport and storage. Clause 26 is in response to recommendations made in the Wood review, which noble Lords will be aware focused virtually solely on oil and gas exploration and production offshore. The clauses are therefore drafted very specifically to cater for offshore oil and gas, and the focus on the principal objective and offshore licences reflects that. This is an important focus, and any expansion of these powers beyond it may have significant repercussions for other areas of the Oil and Gas Authority’s functions. Much of the information acquired under this power, although relevant to maximising economic recovery in the United Kingdom, will also be of interest and importance to other industries, such as carbon capture and storage. Nothing within the Bill restricts access to that information by any person once it has been published under the disclosure provisions.
The noble Baroness’s Amendment 30A requires that the cases in which protected information may be disclosed by the Oil and Gas Authority, which are detailed in Clause 27(5), must apply in defined circumstances. Clause 27(5) seeks to set out a clear set of circumstances in which protected material may be disclosed under Chapter 3 of Part 2 of the Bill. I feel that we do this, but I will be happy to write to my noble friend Lady Byford to seek further to clarify this issue.
Furthermore, Clause 27(8) provides that protected material may be published or made available to the public at such times as may be specified in regulations made by the Secretary of State. I therefore consider that there is sufficient detail within the clause to ensure that the circumstances under which protected material may be disclosed are understood.
On the point made by the noble Baroness on stifling innovation, we do not believe that that will happen. The obligations continue indefinitely or until an information and samples plan is put in place. If a company ceases in business, the plan can provide for the ongoing obligations to end, and the information is then handed to the Oil and Gas Authority.
I will look closely at the proceedings in Hansard to ensure that we have looked in detail at those points. As I say, with regard to the one point where the matter seemed to be largely presentational, I will have a look at that to consider whether an amendment is advisable. However, with that, I hope that the noble Lord will be able to withdraw his amendment.
Baroness Byford
My Lords, before the noble Lord, Lord Whitty, comes back on his amendment, perhaps I may return to Amendment 26A. It certainly was not my intention to make things very difficult. My question was on the samples. If a company goes out of business and is not taken over or linked to another, I understand that parts of the samples that are taken are held by the British Geological Survey. However, in response to my earlier inquiry, I was told that the remainder of the sample is required to be retained by the company. I tabled this amendment because of the problem of how that will happen if the company no longer exists. The amendment was not meant to be disruptive but concerned a practical issue: if the company no longer exists, how can it continue to hold a sample? How would that work? Again, I would be very happy for the Minister to take that away to consider it. I did not know the answer to what seemed a very ordinary question.
Lord Bourne of Aberystwyth
I know that my noble friend was not seeking to be difficult or disruptive in any way; I know her too well to think that. I am happy to write further on the issue, but if the company goes into liquidation, basically, proceedings under the Insolvency Act would apply, and the liquidator—I believe this is the case, although this is on the hoof—would then have to act in response to any request from the Oil and Gas Authority to make the samples or the information available. However, I will write to my noble friend on that issue and will ensure that other noble Lords are copied in as well.
Lord Whitty
My Lords, I am grateful to the Minister for such a detailed response to my amendments and the others in this group. Obviously, I will have a very close look at what he said in Hansard and will consult those who were concerned about these issues. Certainly there is concern that the overlap between “principal objective” and “petroleum-related” could exclude things that were not currently related to the extraction—or exploration of the extraction—of petroleum, and therefore could exclude carbon capture and storage. However, the Minister has given various reassurances on that, some of which I will require some legal advice on. I am quite happy to arrange for a meeting with him or his officials. However, I repeat that I am very grateful that he has taken these amendments seriously and I hope that we can reach some accommodation on this. I beg leave to withdraw the amendment.
“(4) In determining the time to be specified in respect of protected material in regulations under section 27(8), the Secretary of State must have regard to the following factors—
(a) whether the specified time will allow owners of protected material a reasonable period of time to satisfy the main purpose for which they acquired or created the material;(b) any potential benefits to the petroleum industry of protected material being published or made available at the specified time;(c) any potential risk that the specified time may discourage persons from acquiring or creating petroleum-related information or petroleum-related samples; (d) any other factors the Secretary of State considers relevant.(5) In balancing the factors mentioned in subsection (4)(a) to (d), the Secretary of State must take into account the principal objective.
(6) For the purposes of subsection (4)(a), the owner of protected material is the person by whom, or on whose behalf, the protected material was provided to the OGA under this Chapter.”
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.
Energy Bill [HL]
Lord Bourne of Aberystwyth Excerpts(8 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, your Lordships’ House has had several opportunities to debate energy issues this year, and I know that the debate on this Bill will be as full and rigorous as it has always been in the past.
The Government’s energy priorities are clear: keeping bills as low as possible for families and businesses, and powering the economy while decarbonising in the most cost-effective way. These are challenging and critical objectives, but the Government have a long-term plan, underpinned by carbon budgets, to meet our responsibilities.
Keeping the lights on is non-negotiable. Our modern technological society cannot function without power. A diverse energy mix, including homegrown sources, provides the most resilient system. Tackling climate change is also non-negotiable. Your Lordships know that climate change is a threat not just to the environment but to our national security, global security and long-term economic prosperity. A global deal is the only way both to deliver the scale of action required and to drive down the costs of climate action, so the global conference in Paris this December is a serious opportunity to avoid its catastrophic effects and open up new avenues for low-carbon industries.
Going for clean energy makes economic sense, and it makes business sense: clean energy is a boom market, bringing jobs, investment and growth. But it makes sense only if we keep costs pinned down. The vital financial support that has been provided to the renewables sector has helped new and innovative technologies, while increasing the amount of low-carbon electricity that powers homes and businesses across the United Kingdom. Financial support has already driven down the costs of renewables significantly and these are continuing to fall, making it easier for the industry to thrive without subsidies.
To work for everyone, decarbonisation has to be affordable and sensitive to the impact it has on people’s pockets and wider economic circumstances. The Government have today announced a package of reforms to take control of the costs of renewable electricity subsidies under the levy control framework. This is part of the Government’s commitment to control energy bills for hard-working British families and businesses as we continue to move to a low-carbon economy and make progress towards our carbon reduction and renewable energy targets. This will provide the basis for a more sustainable approach to future low-carbon electricity investment. Consistent with this, in the autumn the Government will set out their plans in respect of the next contract for difference allocation round.
In line with keeping bills as low as possible and ensuring that markets work for consumers, we are proposing to introduce competition to the way our networks deliver electricity, which will open up the energy market to innovation and could potentially save British bill payers £390 million over 10 years. The role that United Kingdom businesses can play in meeting the United Kingdom’s climate change targets is undoubted. By incentivising reductions in energy consumption and emissions, the Government are giving business the tools to achieve that goal. Likewise, by cutting red tape and bureaucracy and creating a simple energy tax system that rewards energy and carbon saving, we are empowering businesses to increase productivity, support growth and ensure their place in a competitive global market. We want to collaborate with industry and the wider green economy sector to ensure that we develop a framework for simplicity and stability.
With regard to North Sea oil and gas, the Bill will complete the work started in the previous Parliament to implement fully the recommendations of Sir Ian Wood’s review into United Kingdom offshore oil and gas recovery and its regulation. The Bill is evidence of our continued commitment to support development of North Sea oil and gas. The United Kingdom’s oil and gas industry is of national importance and makes a substantial contribution to the United Kingdom’s economy, energy security and employment.
The Bill will build on the establishment of the Oil and Gas Authority—OGA—on 1 April 2011 as an executive agency of the Department of Energy and Climate Change, and the powers taken in the Infrastructure Act 2015 to establish the principle of maximising economic recovery in the United Kingdom continental shelf. The Bill has been welcomed by Oil & Gas UK, the trade association for the industry. The chief executive, Deirdre Michie, recently said:
“The OGA is a critical catalyst for the work being done to sustain offshore oil and gas activity and the Bill aims to provide the new regulator with the tools and capabilities it will need to do the job effectively and efficiently so we support its swift passage through Parliament. The provisions contained in the Bill complete the implementation of Sir Ian Wood’s recommendations for MER UK – Maximising Economic Recovery from the UK Continental Shelf”.
The Bill will formally establish the OGA as an independent regulator, which would take the form of a government-owned company, and transfer regulatory powers and functions to the OGA, providing it with new powers to be an effective steward and regulator of petroleum recovery.
Implementing the Wood review recommendations will be done in a way that is compatible with our climate change targets. The 2011 Carbon Plan noted that Britain will still need significant oil and gas supplies while we decarbonise our economy and transition to a low-carbon economy. Maximising recovery by increasing efficiency of production, as well as increasing levels of production of the United Kingdom’s oil and gas, will help to maintain security of supply as well as boost growth and jobs. In 2014, oil produced on the United Kingdom continental shelf was equivalent to around 56% of United Kingdom oil-product demand, while gas produced in the United Kingdom was equivalent to just over half of United Kingdom gas demand. Any oil and gas demand that we do not produce ourselves has to be met by imports, at significant extra cost to the economy. The falling oil price makes effective stewardship of North Sea oil and gas all the more important, as the oil and gas industry in the United Kingdom supports an estimated 375,000 jobs. With industry collaboration and facilitation by the OGA, we will help to drive down costs and improve efficiencies across the sector.
Your Lordships may recall that the March Budget also introduced a number of measures that will help encourage more than £4 billion of additional investment in the United Kingdom’s oil and gas industry over the next five years. Petroleum revenue tax is to be cut from 50% to 35% to support continued production in older fields, while the existing supplementary charge for oil companies is to be cut from 30% to 20%, backdated to January. The Government will also invest in new seismic surveys of underexplored areas of the United Kingdom’s continental shelf.
The Bill will make retrospective provision protecting the taxpayer from liability for historic fees which have been charged, and prospectively enable more comprehensive charging of the offshore oil and gas industry for permits and licences for environmental and decommissioning activity. I thank the Select Committee on the Constitution for its recent report on the retrospective power in the Bill. The Government believe that it is right to protect the taxpayer from the costs of regulating the industry, under the “polluter pays” principle, and will respond to the Select Committee’s report before Committee stage.
Moving to onshore wind, decarbonisation must work in particular for the local communities where infrastructure is built. So the Bill makes provision, alongside new planning guidance, to give local people the final say on new onshore wind development applications in their area. The Government made a manifesto commitment to change the law so that local people have the final say on onshore wind applications and the Bill is part of the Government’s delivery of that commitment, alongside forthcoming secondary legislation and the new considerations for applications for planning permission announced by the Department for Communities and Local Government.
The Bill also helps to deliver the Government’s manifesto commitment to end new public subsidy for onshore wind by bringing forward the closure of the renewables obligation to new onshore wind in Great Britain one year earlier than previously planned. This was a clear and unambiguous manifesto commitment. We have made a great start with renewable power and we will want to be in the best possible position to decarbonise the economy in a cost-effective way, so we will be pushing for an ambitious deal in Paris. We have made excellent progress so far. In 2014, 19% of electricity generation was from renewable sources. We are on track to meet our ambition of 30% of electricity from renewable sources by 2020, and the Bill will not change that.
In 2014, operational onshore wind farms in Great Britain received in the region of £800 million under the renewables obligation. We would expect this to increase to £1.1 billion per year if, as expected, a total of around 11.6 gigawatts of onshore wind comes forward under the renewables obligation. We are therefore taking action to provide us with better control of spending on subsidies and we will ensure that bill payers continue to get value for money as we move to a low-carbon economy.
In conclusion, this Bill seeks to reform onshore wind subsidies and put more power in the hands of local people to make decisions on the development of new wind farms in their area. This Bill will help to support jobs and growth by reinvigorating our domestic oil and gas industry. I believe that the measures in the Bill will keep Britain on the road to economic recovery and secure our energy supplies. I thank noble Lords for their engagement in this progress today. I look forward to a good debate today and throughout the progress of this Bill. I beg to move.
Lord Bourne of Aberystwyth
My Lords, first, I thank your Lordships very much indeed for what has been a debate of extremely high quality with some important contributions, to which I shall try to do justice, on subjects ranging from the Oil and Gas Authority and wind to the old chestnut of the East Ayrshire coalfield. I am very grateful for the advance notice of that question, otherwise I might not have been able to deal with it; I will certainly try to as I address the points raised within the suggested time.
Let me begin by dealing with two general points. The first was raised by the noble Lord, Lord Purvis, at our meeting yesterday, when I also met the noble Baroness, Lady Worthington. I was of course aware of the likelihood, although not of the certainty, of announcements today at that stage, but I could not share anything because of market sensitivity. The only conversations that Ministers are allowed to have are with devolved Administrations—which brings me on to the second issue. We have very good avenues of communication, and such things continue to be shared, as they were yesterday, with Scotland, Wales and Northern Ireland. That does not mean that we agree, but we of course continue to do what previous Governments have done.
I will try to deal with the issues in the way that they were set out—the Oil and Gas Authority, wind and then miscellaneous. I am not in any way denigrating the importance of the miscellaneous questions, but they are not directly represented in the Bill. I will try to do justice to the contributions that have been made. I start with a general point about what will be forthcoming as we go through the Bill. We are certainly hoping for an impact assessment by Committee stage. We very much trust that that will happen, as we trust that there will be a settled position on the grace period, an issue raised by many noble Lords and by the noble Baroness, Lady Maddock, in a briefing meeting. As soon as I am in a position to give information on that, I will ensure that it is circulated to all noble Lords because I am cognisant of the fact that they will need to be aware of it in the Recess.
Turning to the Oil and Gas Authority, the noble Lord, Lord Grantchester, raised the question of how the environmental importance issue will be dealt with. DECC will continue to be responsible for that in relation to the Oil and Gas Authority, but it will of course work alongside it. The decommissioning strategy will be delivered; indeed, it is the prime issue that will be dealt with by amendments that we will introduce. That is not yet in the Bill and we hope to come back in Committee with more detail on that.
Many noble Lords raised the issue of carbon storage—I have it under the heading of oil and gas, but also under miscellaneous—including the noble Baroness, Lady Worthington. I thank her for her kind comments and I understand her passion and share many, if not all, of her climate change goals, so I am sure we will have a good working relationship. The noble Lords, Lord Grantchester, Lord Oxburgh, Lord Whitty, and Lord O'Neill, the noble Baroness Lady Worthington, and others raised the issue of carbon storage, which it is important we look at. It would be a responsibility of the Oil and Gas Authority, although not its core responsibility. I hope we will be able to look at that as the Bill proceeds through Committee and beyond.
On Norway and Scandinavia, again, I agree that a lot of this draft legislation is based on the experience of Scandinavia, which is a good example for us. I am sure that we will continue to learn lessons from there and exchange good practice.
Moving on to a general point about the Oil and Gas Authority and the tribute to Sir Ian Wood paid by noble Baronesses, Lady Worthington and Lady Liddell, the noble Lords, Lord O’Neill and Lord Purvis, and others, I quite agree. We have not really done anything other than present the report as it is. We believe that it is a good report and we are giving it legislative strength. The timing—2014—might not have been of our choosing, I agree, but we are where we are and we have to make sure that the authority is smart, nimble and able to take on new challenges as they develop.
I am happy to look at and engage with the example of transferable skills and research given by the noble Baroness, Lady Liddell. It was a helpful suggestion, so we will be in touch and make sure that noble Lords are aware of what we are doing in that regard.
The noble Lord, Lord Oxburgh, asked about the number of staff who would be transferred. The current figure is 103, which is an increase from the figure I was given earlier this morning, so we are obviously recruiting at a rate of knots. The majority will come from the Department of Energy and Climate Change, but expertise is retained in the department and of course we are continuing to recruit. There was a suggestion that the industry was trying to do this on a small budget, but that is not the case. We will obviously continue to recruit.
My noble friend Lady Byford raised some specific issues about the stable and predictable regulation regime set out in Clause 4 and asked for more information about that. I am happy to write her and copy noble Lords in on the detail that we have.
The noble Viscount, Lord Hanworth, talked about the regulatory role of the Oil and Gas Authority. Yes, it is of course the regulator and is subject to controls, but the oversight will be with the Secretary of State, who will be the sole shareholder of the company. No doubt we can look at that as the Bill goes through Committee. Those are the prime points on the Oil and Gas Authority. It seemed to receive a general welcome, and no doubt we can look at the detail as we proceed.
Obviously, we will not all agree about wind. There are differences even within party groups. I notice that some are more enthusiastic than others about onshore wind. Clearly, the fundamental point is that industry should not have been taken by surprise by the attitude of the Conservative Party to wind. One thing we cannot be accused of is ambiguity: the manifesto made our stance very clear.
A general point was made about the affordability of bills. My noble friends Lord Howell and Lord Ridley rightly said that affordability is an issue. Looking at the figures, the action we have taken has trimmed bills by £7 annually, which is not something that we should dismiss. But there is a concern and we should not categorise it as tawdry. We may disagree with it, but there are people who feel that there are sufficient land-based wind farms and they affect the quality of their lives, so let us put that in perspective. We have just had an election in which that was an issue.
To return to planning, developers can obviously still appeal against a decision from the local authority as they can in relation to shale. The point was made that somehow, the planning regime is fundamentally different in relation to shale. It is not. As we know from the decision recently taken in Lancashire, a decision is taken at local level and then there is the potential for appeal. In a similar way—although not identical because they are different planning regimes—there is a local element and then an appeal in both cases.
Reference was made to the certainty that is needed for British industry and investors regarding the supply chain. I agree. We need a sustainable approach to decarbonisation to 2020 and beyond. There was a Written Ministerial Statement this morning outlining these changes, which I hope that the noble Lord, Lord Purvis, has. There was a press release, too, as is customary practice, but this was not announced only by press release. It makes it clear that there is a levy-controlled framework beyond 2020. I reassure noble Lords that in the autumn, we will say what we will be doing about contracts for difference.
My noble friend Lord Ridley questioned the need for Clause 60(3). It is simply there to ensure that generators who do a credit before the closure date will not be affected. A general concern was expressed about the grace period. There is an ongoing dialogue on that issue, which is why it was not dealt with in the Bill and we will return to it in Committee. That dialogue will finish at the end of July. We will then study the representations made to us and come back with something. I will make sure that noble Lords have sight of any decision as soon as it is made. That is why the measure has not been included in the Bill. I know that noble Lords will want us to look at these considerations with some care.
The number of projects affected is in the region of 250. It is not a precise figure—we cannot be absolutely certain which projects will proceed, so to that extent it is a best guesstimate. Again, that will be covered in the impact assessment. The noble Lord, Lord Cameron, also talked about the grace period and the need for dialogue, which I quite agree with. The noble Lord, Lord Judd, stressed the importance of areas of outstanding natural beauty, and I agree. Some people may well say that some wind farms are already in such areas, but I thank the noble Lord for his thoughtful speech. He asked how the costs were determined. I think they are published, as we will be able to see as we go through the Bill, but they are determined by the Office for Budget Responsibility.
Lord Purvis of Tweed
I hope that the Minister will forgive me for bringing him back to the issue of planning. Just after he received clarification from the Box, I took the opportunity of looking again at page 57 of the Conservative Party manifesto, which says that it would,
“change the law so that local people have the final say on windfarm applications”.
The Minister confirmed at the Dispatch Box a few moments ago that that was not the case. The current practice of developers being able to appeal to the planning inspectorate will carry on, so that is not being implemented. Is that true?
Lord Bourne of Aberystwyth
Noble Lords will understand that I am approaching this constructively. I am not going for the party knockabout, so let us leave that for another occasion. I am trying to be constructive and explain how we can take this forward.
The noble Lord quite rightly raised a point on public interest and national security grounds; perhaps I may get back to him on that with examples. The two go together. The national security point will be fairly evident, the public interest one perhaps less so. Thinking on my feet, it could involve something like piracy, but that word has connotations of the old type of pirate. However, it could mean someone taking over one of these installations, which, while it might not represent a threat to national security, may demand urgent action in the public interest by the Secretary of State. It could be something like that, and I will certainly write to the noble Lord with more precise information.
As I understand it, coming back to the announcements on solar made this morning, we do not need primary legislation for any action that is taken consequent on that consultation, and therefore I do not think that we will need to amend this legislation. If I am wrong about that, I will write to noble Lords, but I think it can be achieved through secondary legislation.
I shall move on to the miscellaneous points, although that is not to say in any way that the issues are not important. A regular theme of the debate was energy efficiency. It was raised by the noble Baroness, Lady Maddock, and the noble Lords, Lord Oxburgh, Lord Teverson, Lord Judd and Lord Foulkes, among others. It is a vital issue and a lot is already happening that does not demand legislation from us now. I refer to the smart meter programme, the delivery of which in 2020 will make a massive difference. Since April 2010, we have delivered the installation of more than 1.5 million measures such as boilers, insulation and so on which have made a material difference. That links to another area of responsibility, namely fuel poverty. We are currently looking at how to ensure that our fuel poverty measures are more closely allied to improvements in energy efficiency than perhaps they have been in the past. That is something we are looking at and it is certainly important.
On nuclear, a matter raised by my noble friend Lord Howell and touched on by the noble Lord, Lord O’Neill, and others, we are expecting the contract to be concluded at the end of the year. I think my right honourable friend the Secretary of State mentioned this yesterday to the Select Committee in the House of Commons. We are certainly looking at small nuclear, as I think I have indicated previously; it is important. Progress is being made on Wylfa and I discussed it again yesterday with the devolved Administration in Wales. Those matters are progressing. I think I have dealt with carbon storage.
Lord Foulkes of Cumnock
Could the Minister deal with the question of whether insurance will be available?
Lord Bourne of Aberystwyth
I am coming to that; I had not forgotten. I think the noble Lord has also tabled a Question for Written Answer on this and I hope he has had a response because I have it here, although I will not read it out. I think he will be reassured that we believe there is sufficient cover at the moment. The Government will continue to monitor the insurance market for capacity in this area and to encourage insurers to enter the nuclear insurance market. I offer the noble Lord my apologies if the response has not yet arrived, but it is certainly on its way to him.
On contracts for difference, raised by the noble Viscount, Lord Ridley, the noble Lords, Lord Whitty, Lord Oxburgh, and others, I have indicated that we will be announcing our approach. Of course it is important that we look at the totality of the position on renewables; I totally agree with that.
The noble Lord, Lord Teverson, raised issues around the automotive industry. He is absolutely right to say that there is a massive opportunity for the United Kingdom in this area. We are working across government on this with the Department for Transport and there is a certain urgency. It is an important issue and it would be great to see British industry have an edge in the area.
The security of the national grid was raised by noble Lords. That was one of the first visits I made, and obviously there are connections with other countries such as Norway and France. I think security of supply is in place.
The Competition and Markets Authority was touched on by the noble Lord, Lord Foulkes, in relation to switching. He will be aware that we are currently studying, and will soon be responding to, the preliminary findings of the Competition and Markets Authority, which had a default mechanism in those preliminary findings for those people who do not switch and are on an expensive tariff. They are put into a default mechanism tariff, which will be better for them. I hope he is reassured by that. The noble Lord also raised the issue of smart grids, which are very important. We are looking at them as part of the smart energy programme.
Finally, I turn to the East Ayrshire coalfield. We are aware of the issues, as the noble Lord indicated, and at the moment the Treasury is looking at the Hargreaves and Banks proposals he mentioned. We will come back to him on that; it certainly has not been forgotten.
Baroness Worthington
In anticipation that the Minister is about to finish, I want to touch briefly on two points. I hope I will be forgiven if the noble Lord has already mentioned them. On the European targets, I should like some clarity on the statement from the Government that we are on track. We are not on track. We would like to see some information about how we will compensate for failing to meet the targets for the other two aspects of the energy policy. Related to that, I should like some reassurances because, as I understand it, to have an auction for the CFD, as was planned, the Government would have to be making decisions in August, not in the autumn. Can we assume from this that the planned CFD auction for this year will not take place, and what will that mean in terms of our being able to make progress with our targets?
Lord Bourne of Aberystwyth
I thank the noble Baroness for those two points. On the European targets, we are certainly on track, as I think she will accept. Indeed, I think she said that in relation to the electricity target, which is the one that wind directly affects. The other targets are certainly challenging and we are seeking to address them. I have mentioned what we are doing on cars, but I accept that they are challenging. However, I am sure she will agree that the track record of the United Kingdom in meeting our targets is, in European terms, very good, and I am sure it will remain so. On the auction, as I say, we will be making a statement in the autumn about the future of contracts for difference, and I have indicated that there is a future for the levy control framework, but I cannot really add to that at this stage.
Once more, I thank all noble Lords for a wide-ranging debate, which has gone far beyond the narrow remit of the Bill, but that is no bad thing. I hope that, as we go through the Bill, we can engage in the constructive way we have today.