Edward Miliband
Main Page: Edward Miliband (Labour - Doncaster North)
The Secretary of State for Energy and Climate Change (Chris Huhne)
I welcome you to your position, Mr Deputy Speaker. The House will wish to join me in expressing our deepest sympathy to those bereaved or injured in the explosion in the gulf of Mexico on 20 April, and to all the individuals and communities affected by spilling oil or fearing that they will be affected by it over the days and weeks to come. Our thoughts must be, first, with them.
On 20 April, an explosion and subsequent fire on board a drilling rig operated by Transocean under contract to BP in the gulf of Mexico tragically killed 11 workers. On 22 April, the rig sank. On the sea bed, 1,600 metres below, substantial quantities of oil were leaking into the ocean—the blow-out preventer, which should have sealed the leak, failed. The causes of the accident are now subject to a US presidential commission of inquiry, and to civil and criminal investigation.
There has never been such a large leak of oil so deep in the sea. Attempts by BP, under the direction of the US authorities, to seal the leak were not successful. The company then pursued a strategy of capturing as much oil as possible, and in recent days more than 15,000 barrels a day of oil have been recovered. However, it is also thought that the leak is worse than previously believed. The US Government’s estimate of the flow of the leak is now 35,000 to 40,000 barrels per day. BP hopes to be able to increase significantly the amount of oil that it is capturing, but a very large quantity of oil continues to be released into the sea. Moreover, the leak will not be fully staunched until August at the earliest, when the first relief well, which BP is already drilling, should enable the original well to be plugged.
An enormous operation is also taking place to address the environmental impact of oil that is already in the water. Working under Admiral Thad Allen of the US Coast Guard, more than 2,000 boats have been involved, skimming the water and using dispersant chemicals. Thousands of workers and volunteers onshore are removing oil and maintaining coastal defences. The House will wish to join me in paying tribute to those involved in that work.
We understand and sympathise with the US Government’s frustration that oil continues to leak at the rate that it does. In order for us to appreciate the scale of this environmental disaster, I should point out that each week a quantity of oil equivalent to the total spillage from the Exxon Valdez is escaping into the gulf of Mexico. The US Administration have said that BP is doing everything asked of it in the effort to combat the spill. We, of course, look to the company to continue in that, and we will do everything we can to help. The key priority must be stopping the environmental damage. In their telephone conversation at the weekend, President Obama reassured the Prime Minister that he has no interest in undermining BP’s value and that frustrations in America have nothing to do with national identity.
Hon. Members will remember that in 1988 the Piper Alpha rig in the North sea exploded, with 167 fatalities. Following that disaster, our regulatory regime was significantly tightened, and we split the functions of licensing and health and safety in the UK. The US has announced that, in future, separate organisations will deal with those functions in the US, and we hope that we have some experience to offer of building and operating such a system. Officials from my Department and from the Health and Safety Executive have been discussing that with their US counterparts.
It is my responsibility to make sure that the oil and gas industry maintains the highest possible standards in UK waters, and I have had an urgent review undertaken. It is clear that our safety and environmental regulatory regime is already among the most robust in the world, and the industry’s record in the North sea is strong. However, as exploration begins in deeper waters west of Shetland, we must be vigilant. Initial steps are already under way, including a doubling of the Department’s annual environmental inspections of drilling rigs. I will also review our new and existing procedures as soon as detailed analysis of the factors that caused the incident in the gulf of Mexico is available. That will build upon the work already begun by the newly-formed Oil Spill Prevention and Response Advisory Group. Given the importance of global deep-water production during our transition to a low-carbon economy, I will also ensure that lessons and practice are shared with relevant regulators and operating companies.
I shall now discuss the position of BP. It is hugely regrettable that the company’s technical efforts to stop the spill have, to date, been only partially successful, but I acknowledge the company for its strong public commitment to stand by its obligations, to halt the spill and to provide remedy and payment of all legitimate claims. As BP’s chairman has said, these are critical tasks for BP, and it must complete them in order to rebuild trust in the company as a long-term member of the business community in the United States, the United Kingdom and around the world.
BP remains a strong company. Although its share price has fallen sharply since April, it has the financial resources to put right the damage. It has exceptionally strong cash flow, and it will continue to be a major employer and a vital investor here and in the United States. In many ways, BP is effectively an Anglo-American company with 39% of its shares being owned in the US, against 40% in the UK.
There has been much speculation in the press about the impact on UK pension funds and about whether the company will pay a quarterly dividend. That is entirely a matter for BP’s directors, who will no doubt weigh all the factors and make a recommendation to their shareholders that is in their best interests, which of course include the best interests of many UK pension funds. Many citizens have real and legitimate worries about their pensions, but I would like to reassure the House not only that BP is financially sound, but that pension funds that hold BP shares generally hold a very diverse portfolio of assets and that their exposure to a single company, even a company as economically important as BP, is limited.
In concluding my statement, I wish again to express the Government’s profound sympathy to those in the US affected by this accident and its aftermath. The priority must be to address the environmental consequences of the spill, and our concentration is on practical measures that can help with that. The disaster is a stark reminder of the environmental dangers of oil and gas production in ever-more difficult areas. Coupled with the impact of high-carbon consumption, it highlights yet again the importance of improving the energy efficiency of our economy and the expansion of low-carbon technologies. We must and will learn the lessons of these terrible events. I commend the statement to the House.
Edward Miliband (Doncaster North) (Lab)
May I start by thanking the Secretary of State for the advance notice of his statement and for keeping the House informed of developments regarding the gulf oil spill? Let me join him in expressing deep sorrow for the 11 people who died in the accident and deep sympathy to their families. As he said, it is a reminder of the dangers that come with life in the offshore oil industry. We saw that ourselves last year with the tragic helicopter accident in the North sea. We should never forget the people who have lost their lives in this accident.
May I join the Secretary of State in expressing deep concern about the environmental impacts of the oil spill, which he summarised in his statement? I believe it is in the interests of the environment as well as the employees, shareholders and pension fund investors of BP that there should be a clear and co-ordinated response from the Governments of Britain and the United States. In that context, I want to ask him five specific questions arising from his statement. First, on the private sector companies involved in this accident, does he agree that all the companies involved in the Deepwater Horizon project—Halliburton, Transocean, Cameron and BP—should be subject to investigation, and that finger-pointing at BP in particular is not helpful?
Secondly, on regulation, does the Secretary of State agree that any process of learning lessons needs to look not just at the actions of private companies, but at the regulator—the United States’ Minerals Management Service—and at the general level of regulatory standards in place in the US and around the world for deep-water drilling? Will he also comment on his specific understanding—I appreciate that things are at an early stage—of the level of regulation in the US compared with that in the UK?
Thirdly, in terms of the implications for Britain, I welcome what the Secretary of State said about the licensing of drilling in deeper waters in the UK, including west of Shetland. Does he agree that it is essential to look at any lessons learned before beginning that deeper-water drilling?
Fourthly, and very importantly for the long-term future, does the Secretary of State agree that the central lesson of Deepwater Horizon is that we cannot, as a world, simply dig deeper and deeper for oil, plundering the world’s natural resources? The opportunity should be seized on both sides of the Atlantic by the Prime Minister and the President, in a way that has not so far happened, to send a louder and clearer message about the need to make the transition to a post-oil economy. It will take decades, but the transition needs to start all around the world.
Fifthly, in the same context, does the Secretary of State agree that, after the tragedy of Deepwater, the best thing that could happen is a renewed push towards low carbon and clean energy around the world, with Europe moving to a 30% emissions reduction, America passing a climate and energy Bill and the securing of an international treaty either at Cancun or as soon as possible afterwards? Does he also agree that domestically we need to play our part? That means maintaining industrial policy support for the low-carbon transition. Looking ahead to his right hon. Friend the Chancellor of the Exchequer’s Budget next week, if we are to make the low-carbon transition ourselves, and send out a clear signal, it is important that the investments promised by the previous Government to Sheffield Forgemasters and Ford, and for offshore wind, go ahead as soon as possible.
The gulf oil spill is an environmental wake-up call for the world. Just as the banking crisis changed the rules of the game for financial services, so this disaster must change the rules of the game across the world for energy policy. That requires strong leadership—including being tough with our allies—in defending British interests, in pushing the United States for a Bill on climate change and in charting a course towards the low-carbon transition. If the Government provide that strong leadership for BP employees, pension fundholders and our environment, we will of course support them.
Chris Huhne
I am grateful to the right hon. Gentleman, not least for the manner in which he has approached this matter. There is not a lot of difference in our approaches. We have seen some examples of what can happen if people attempt to flam up the rhetoric rather than dealing with the issues in a measured way.
The right hon. Gentleman is clearly absolutely correct to say that BP was involved with other partners in Deepwater Horizon. BP’s interest is 65%. In addition, the subcontracted rig was from Transocean, which is a well known and respected United States company, and was using technology produced in the United States. I understand that the blow-out preventer was produced by Cameron International to American petroleum industry standards.
All that said, it is absolutely crucial to let the full investigation take its course. We simply do not know exactly what the events were on Deepwater Horizon, not least because, tragically, so many of the people who could have told us what happened are no longer alive. We need a proper process of investigation if we are to learn the lessons.
I have already said something about the difference in the regulatory regime between us and the United States. The most important feature is the decision we took after the Piper Alpha disaster to separate licensing and operational regulation from the health and safety side, but that is certainly not the only lesson that will be learned from this disaster. When we have a clearer understanding of exactly what went on, I am sure that both technical and regulatory responses will be required. In the interim, we have taken the step of improving inspections.
Precisely because we have already announced an increased number of inspections, I do not believe it would be appropriate to stop the drilling west of Shetland. Our regime has been shown to be robust, but we need to go on learning the lessons.
On the right hon. Gentleman’s final point, I very much agree that we need to accelerate the move towards a low-carbon economy. Whatever the risks involved with, for example, offshore wind, onshore wind, tidal stream or indeed a future generation of wave technology, they are not in the same order of magnitude as the sort of risks that we are clearly running by drilling in increasingly hostile environments around the world, as we attempt to find the last hydrocarbons. That message is important. This is an environmental wake-up call. Hydrocarbons—oil and gas—do and will play a crucial part in our transition. We know from our economic history that we cannot suddenly switch off steam power, for example, and move to electricity—these things take time—but it is certainly an important warning to us that there is no time to lose in trying to make that transition as quickly as possible.