Clause 8
Energy Bill
2:00 pm

Malcolm Wicks (Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform; Croydon North, Labour)

To ensure that the Department, as the licensing authority, can keep tight control of activities undertaken by licence holders, the clause sets up penalties for breaching certain key licence conditions. There are also penalties for misrepresentation and non-disclosure in relation to licences. The offences attracting criminal penalties under this clause include carrying out an activity, such as a drilling operation, without first obtaining the prior consent specified by the licence; breaching any conditions attached to a consent; or failing to keep records, give notice, or make a return or report, as required by the licence. Anyone found guilty of such offences will be subject to a fine not exceeding the statutory maximum on summary conviction or an unlimited fine on conviction on indictment. The licensee, as the person responsible for the licence, will be liable for all  offences under the licence even where they are not directly responsible, for example, where the unauthorised activity is carried out by a subcontractor.

However, it is recognised that licence holders may not always be at fault. Subsection (2) accordingly ensures that licence holders will have a valid defence, if they can show that they exercised due diligence in trying to comply with the licence conditions. In the case of a contractor, due diligence could include appropriate monitoring and supervision of a contractor who was acting on behalf of a licensee even if the contractor subsequently still failed to comply with conditions. Subsection (1) provides for the Secretary of State to specify, by order, further kinds of breaches that will amount to an offence. That will allow the Department to put in place new criminal sanctions for conditions that may be needed in the licence in the future in response to changes in the industry. The penalties for non-compliance with licence conditions are, we believe, proportionate and sufficiently strong to deter licence holders from committing the offence.

Charles Hendry (Shadow Minister, Business, Enterprise and Regulatory Reform; Wealden, Conservative)

In general we are happy with the clause but would like a little clarification from the Minister on the phrase “ought to know” in subsection (4), line 17 on page 5:

“It is an offence for a person to fail to disclose information which the person knows, or ought to know, to be relevant to an application”.

That sounds like the sort of language that I use towards my children, when I say “you ought to have known that if you didn’t eat your lunch, you wouldn’t be getting a chocolate bar in the afternoon” or “you shouldn’t have got up in the middle of the night and played on your PlayStation”. I do not know the legal groundings of it; it sounds vaguely Rumsfeldian—there are the things that we know that we know, the things that we know that we do not know and the things that we do not know that we know. When one introduces to that the things that we know that we ought to know that we do not know and the things that we do not know that we ought to know, it becomes a recipe for chaos. I will be grateful if the Minister can give us further guidance and clarification about the legal definition of those few words.

Malcolm Wicks (Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform; Croydon North, Labour)

I ought to know really, but I know someone who does know. Would the hon. Gentleman seriously mind if I wrote to him on the matter? That would be the best way of dealing with it.

Martin Horwood (Shadow Minister (Environment), Environment, Food & Rural Affairs; Cheltenham, Liberal Democrat)

I am a little concerned about subsection (2). It may be following standard legal wording, for all I know, but I will be grateful for clarification on it. It says that

“it is a defence for the person”—

which I now understand can mean a body corporate—

to prove that due diligence was exercised to avoid committing the offence.

That becomes important because of the issue that I have raised before of the long timescales over which this is operating. If we are talking about decades, it is plausible that evidence of environmental damage or  public health risk may only emerge over time. We are talking about serious issues: gasses that may prove very toxic to wildlife or potentially or mixtures of methane, butane and propane, I am not a chemist but if that was bubbling to the surface, I would not put a match near it. If we had a serious explosion or another environmental disaster resulting over long term from the operation of these facilities, and the body corporate was able to say that 15 years ago a completely different management operation had done due diligence at the time, what is the consequence of that? Who picks up the tab? Who picks up the liability for any damage done, for the clean up operation or for whatever would be necessary? Would it be the taxpayer? Would there be a giant loophole that allowed the company responsible to get away with the environmental disaster, if it were to happen?

Malcolm Wicks (Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform; Croydon North, Labour)

Of course, I agree with the hon. Gentleman that we are talking about very serious matters, both substantively and also because of the need to reassure the public, as he indicated earlier. I will reiterate what we mean by due diligence. Due diligence will be found where the licence holder has done everything it can reasonably be expected to do to avoid a breach of the licence. Where a contractor is used to carry out a particular operation, due diligence will be shown where proper steps have been taken to select a competent contractor and there has been an appropriate level of supervision of the contractor’s operation. I am not a lawyer but it is common on the one hand to specify penalties but to be sensible about what we mean about responsibility through due diligence procedures of different kinds.

I think the hon. Member for Cheltenham stepped into different but related territory which we touched on earlier today, namely how to monitor these facilities—geologically and so on—over a long time. The proper responsibility will be with the company but our Department, where necessary with technical experts, will also be in the business of inspection. That is the major way we tackle the concern raised by the hon. Gentleman.

Martin Horwood (Shadow Minister (Environment), Environment, Food & Rural Affairs; Cheltenham, Liberal Democrat)

I do not think this quite tackles the issue. Over a long time, with the way that companies shift, change, merge and sell parts of themselves, it is almost inevitably going to be a different company. Could companies exploit this clause or regulations relating to it as a giant loophole to evade liability for some environmental consequences which might genuinely not have been foreseen but for which they should be responsible—or someone should? There is a big question mark over who is liable 20 years down the line.

Malcolm Wicks (Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform; Croydon North, Labour)

The best way I can deal with this is to say that when we are drawing up appropriate regulations and when we are consulting we should look at this issue. Obviously, in this territory we are talking about the long term. I mentioned the period of possibly 40 years to the hon. Member for Wealden when questioned about, say, gas storage. It could be longer. When it comes to carbon capture and storage, which we are coming to later, we are talking about millennia, which raises interesting issues of different kinds. On the other  hand, the issue about what to do 30 years on when a company at fault has gone bust or been merged, is presumably familiar in law. I suspect it is not unique to this circumstance. It is an important point and we will consider it as we move forward in terms of regulation.