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Report (3rd Day)

Part of Infrastructure Bill [HL] – in the House of Lords at 7:30 pm on 10th November 2014.

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Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 7:30 pm, 10th November 2014

My Lords, I note the clause stand part amendments and the amendment proposed by the noble Lord, Lord Wigley, regarding the application of the right to use deep-level land for the purposes of exploiting petroleum or deep geothermal energy in Wales. The Government support the development of shale gas and oil. Natural gas from shale could play a crucial role in supporting UK energy security, as well as an important role as a part of the transition to a low-carbon economy, and that was well debated previously. The carbon footprint of UK-produced shale gas would likely be significantly less than coal and lower than imported liquefied natural gas. Domestic shale gas could also benefit the UK in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea.

However, it has become clear that difficulties in obtaining underground access pose a barrier to exploring this new industry. The same problem also applies to the deep geothermal industry, which is likewise at an early stage of development in the UK. New lateral drilling methods that can cover much larger areas underground mean that existing processes for obtaining underground access can be disproportionately costly and time consuming in relation to the potential benefits. Currently, companies must negotiate rights of access with every landowner living above underground drilling. If these negotiations fail, an oil and gas operator can make an application to the Secretary of State, who may refer the matter to the courts. This process gives a single landowner the power to delay a development significantly and, in the case of geothermal, it is likely to stop the project entirely.

The right to use deep-level land would help unlock exploration for shale gas and deep geothermal as we move towards a low-carbon economy. However, let me be clear that we are not proposing any changes to the regime for surface access, and the regulatory system that deals with the potential risks associated with drilling and hydraulic fracturing will remain the same. I can reassure noble Lords that a company looking to develop shale or geothermal would still need to obtain all the necessary permissions, such as planning and environmental permits. The onshore oil and gas industry has committed to engage with communities at the early stage of operations, as well as consulting through the planning application process. Our robust regulation will protect residents while allowing this source of homegrown energy to develop in a way that is fair to communities.

EY has estimated a thriving industry could mean 64,500 jobs nationally. Locally, that could mean cementing contracts, new facilities and jobs for local companies. Communities that host shale development could see a share of this, which is why we welcome the developers community benefit package, similar to other technologies such as wind. This will pay communities £100,000 per hydraulically fractured well site at exploratory stage and 1% of revenue if it successfully goes into production. As with wind farms, wider communities will benefit too, as local councils will also be able to retain 100% of the business rates that they collect from productive shale gas. Therefore, there are many potentials of this industry to communities in Wales if shale production takes place.

Petroleum extraction is a non-devolved matter. As such, the proposals for oil and gas will apply across England, Wales and Scotland. The proposals on deep geothermal energy also cover England, Wales and Scotland, where in Scotland deep geothermal energy is exploited for the sole, or main purpose of electricity generation. Schedule 7 to the Government of Wales Act 2006 sets out the conferred subjects over which the Welsh Assembly can exercise legislative competence. Oil and gas are clear exemptions from the conferred list of economic development and, furthermore, the exploitation of deep geothermal resources could not be considered to have been conferred under any of the subjects in Schedule 7.

Although deep geothermal and oil and gas activity may impact upon conferred subjects such as environmental protection, that is not what they properly relate to for the purposes of the legislative competence test in the Government of Wales Act 2006. In addition, the right of use clauses are not removing any existing regulatory requirements. We therefore see no ground on which this measure would be within the legislative competence of the Welsh Assembly. On that basis, there is no rationale for requiring approval by the Welsh Assembly before the section can apply in Wales.

It is also worth noting that, while oil and gas are non-devolved matters, all existing planning authority procedures and powers will remain in place. As such, the different UK planning regimes will continue to regulate shale gas or geothermal developments according to their existing planning procedures. I have reflected on the noble Lord’s amendment and in response to his concerns I have offered him a government perspective. Therefore, I hope that the noble Lord, Lord Wigley, will withdraw his amendment.