Report (1st Day)

Energy Bill [HL] – in the House of Lords at 3:07 pm on 19th October 2015.

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Relevant documents: 6th and 7th Reports from the Delegated Powers Committee

Clause 2: Transfer of functions to the OGA

Amendment 1

Moved by Lord Bourne of Aberystwyth

1: Clause 2, page 2, line 19, leave out paragraph (c) and insert—

“( ) 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.”

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Amendment 6 will allow civil servants who transfer to the OGA continued access to either the Principal Civil Service Pension Scheme or the new alpha pension scheme, which was introduced in April 2015 and, in some cases, both schemes, depending on the date when they joined the Civil Service and their anticipated date of retirement. This is part of our commitment to ensuring that staff retain their current terms and conditions on transfer to the OGA. The amendment will also ensure that non-civil servants recruited by the OGA have access to the alpha scheme in future, which will avoid having a two-tier workforce, whereby new joiners work alongside existing employees but with different pension benefits, with a view to encouraging recruitment of staff to the OGA.

Amendments 8 and 9 amend the schedule to the Bill, reinstating the obligation on the Secretary of State to act in accordance with the strategy to maximise economic recovery of UK petroleum when exercising her functions under Part 4 of the Petroleum Act 1998, which sets out provisions on the abandonment of petroleum infrastructure, in so far as they relate to the reduction of costs, and slightly tweak the scope of those obligations. Section 9B(b) of the Petroleum Act 1998 currently imposes a duty on the Secretary of State to act in accordance with the strategy when exercising functions under Part 4 to the extent that they concern reduction of the costs of decommissioning. However, paragraph 3 of the schedule to the Bill as introduced amends Section 9B so that the duty is transferred to the OGA on Royal Assent.

It is of vital importance that all parties to the decommissioning process, including the Secretary of State and the OGA, act in accordance with the strategy when carrying out their respective roles. As such, to ensure that the Secretary of State remains under an obligation to act in accordance with the strategy, Amendment 9 introduces a new section which reimposes the duties with minor modifications. These amendments also slightly modify the duty that will be transferred to the OGA under Section 9B(b) to ensure that the OGA’s duty to act in accordance with the strategy when exercising its new functions under Part 4 is not limited to the reduction of costs but will include all the aspects of its new functions under the revised Part 4. I beg to move.

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour 3:15 pm, 19th October 2015

My Lords, perhaps the Minister could tell the House why the provisions in these amendments, which all seem to be worthy and sensible, were not included in the original wording of the Bill. That would have saved us a great deal of time, because I do not think that any of us are going to complain about any of them. Equally, the additional information should have been taken account of when the Bill was drafted. I do not want to take any more time, because I am accusing the Government of wasting our time by doing this now when we could have had these provisions in the Bill at First Reading.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

My Lords, my noble friend makes a very important and relevant point. This illustrates a great feature of this Bill, which is that we are having foisted on us all sorts of detail at short notice and at the last minute. As my noble friend said, this kind of thing should have been included in the original Bill. If it is true, as the Government claim, that they had planned this and that it is all included in their manifesto—that they had thought a lot about it and they knew exactly what they were up to—it ought to have been included in the original Bill. It is clear that they did not know what they were up to. We found this the other day when the Bill was recommitted, when we looked at pages and pages of detail that were foisted on us at the last minute. As I understand it, we still do not know some of the amendments that we are going to be discussing and approving, or otherwise, in two days’ time—major amendments with huge implications.

The Minister took a little bit of umbrage in Committee, but I do not blame the Minister personally. I would say he is piggy in the middle, except that we must not use that kind of expression anymore; he is the meat in the sandwich—you know what I mean—and is getting squeezed. He is between the devil and the deep blue sea—I am trying to think of metaphors that do not bring in animals. We are rightly demanding more details and advance notice; the industry, even more so, should know well in advance exactly what the Government’s intentions are. It is really quite unacceptable that such important things are dealt with at short notice on Report. No doubt even more will come in at a later stage in the other place.

That raises the question of why the Bill was commenced in the House of Lords. My understanding is that only non-contentious Bills are dealt with first in the House of Lords, but this is one of the most contentious Bills that has been considered for some time as a House of Lords starter. An unfortunate result is that we are having so much debate and discussion at this early stage. The Bill has to go to the House of Commons where, no doubt particularly in relation to things that affect Scotland, there will be some even more acrimonious debate and amendments will be proposed, and then the Bill will come back to us. This is really going about it in a cack-handed way.

In relation to staff who are being transferred, what happens to those who are required to move as part of the new arrangements? How many will be asked to move from one part of the United Kingdom to another? Will there be any? Will there be many? It is very important that we should know that. If there are some, we should know exactly how they are being treated and whether they will be helped with their removals from one area to another and be given other assistance in relation to that. For example, if they are moved from a rural area in the United Kingdom to London, their expenses will be far greater. If they are moved from England to Scotland, there are important implications in relation to the differences between provisions in one part of this United Kingdom and the other. It would be very helpful if the Minister in his reply can indicate the situation with regard to staff moving between different parts of the United Kingdom.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative

My Lords, I fully understand why these amendments are necessary, because we are dealing with the setting-up of a gigantic and very important new authority. The usual problems of pensions and the transfer of staff are major administrative problems and inevitably they always require some adjustment and amendments in legislation.

We are dealing with a rapidly changing world situation and national situation. At this moment, thousands of people are being laid off in the North Sea and North Sea-related firms. The industry is under immense pressure. It has even been described as one of the worst crises facing the North Sea industry since the high days of the 1970s, 1980s and 1990s. Are any of the amendments relevant to this enormously changing scene? What account is being taken, even while we are taking this Bill through Parliament, of the immense blows inflicted on the North Sea by the prospect of far lower oil prices for a long time to come combined with many other difficulties? A newspaper yesterday said:

“North Sea oil producers face a perfect storm”.

There are difficulties and challenges that they have never had to face before. Over the years, costs have been allowed to rise, and suddenly revenues have collapsed. Will the Minister explain what, if any, changes in the Government’s mind were triggered by the fact that we are dealing with a situation that has totally changed since the Bill was first printed and which, if any, of these amendments relate to that? That would be very helpful.

Photo of Baroness Liddell of Coatdyke Baroness Liddell of Coatdyke Labour

My Lords, it seems to be “Kick the Minister” time, but I do not particularly want to do that, since I know how he feels—I once had to take through a utility Bill that ended up with 1,000 amendments. However, I think everyone would acknowledge that this Bill has been a bit of a dog’s breakfast.

Further to the points made by the noble Lord, Lord Howell, the uncertainty facing the North Sea oil and gas industry is considerable at the moment, and there is speculation about perhaps another 10,000 jobs being marked to disappear. I ask the Minister to get some indication of certainty about what is going to happen about the OGA. We cannot go on with this miasma of uncertainty, with changes to amendments and perhaps even further amendments going through to the House of Commons, at a time when there is such a feverish atmosphere around the North Sea.

While I am on the issue of uncertainty, is the Minister aware of the comments by Professor Jacqueline McGlade from the United Nations this morning about the impact of uncertainty on those who are investing? She was talking primarily about the renewables industry, but it also has an impact on oil and gas, particularly in relation to decommissioning.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change)

My Lords, I echo the comments by the noble Lords, Lord O’Neill and Lord Foulkes, surrounding the tsunami of amendments that we have had to the Bill so far, with more to come on Wednesday, with very little notice indeed. That makes it very difficult for this House to do what it sees as its core activity in this sort of legislation.

I have no issue at all with the managerial nature of the amendments, but I echo the comments by the noble Baroness, Lady Liddell. While I agree wholeheartedly with the Minister that the key factor here is that we should be able to continue to benefit from our own oil rather than import it, which is important with regard to both energy security and the environment, I hesitate more and more as we go through these energy conversations when it comes to the Minister’s and the Government’s confidence about our ability to meet our own climate change targets, which we all passed into law with the Climate Change Act with cross-party agreement in this House and the other place, and which we all still say we support.

We are far from being able to be confident about achieving those targets a few years hence, let alone by 2050. We have to look at all these debates on Report as part of that challenge, whether it is from the United Nations special scientific advisers or from our own Committee on Climate Change. The writing is on the wall that we are moving in the wrong direction, and I think that we should take this concern very seriously.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

My Lords, I am grateful to the Minister for his introductory comments. As we start the first day of Report on the Bill, it is welcome to hear from the Government a reiteration of their commitment to action on climate change and to decarbonising the UK economy.

I add my voice to those of noble Lords who have spoken ahead of me in reflecting on the way in which the Bill has been conducted. I am probably not alone in not having had much of a weekend; I am sure that the Minister has had similar issues to deal with. I take these issues incredibly seriously, as people know, and it makes me genuinely unsettled and discomfited to know that I am not able to do the best job that I can because of the timescales that we are working under. I think that many noble Lords share that feeling. As I have said before at the Dispatch Box, we are where we are—but it could have been so different.

In these opening comments on Report, I want to reflect on the question of why we are making such haste. Why is such an important body as the OGA being created in such a piecemeal way, with amendments coming forward and new issues arising in a very febrile and fast-changing environment? There seems to be no time for the Government to take stock and review. It is because the timing of the Bill is not about the major portion of it, which is the OGA, but Clause 66 which closes the RO a year early. It was closing anyway in 2017, so we are in rather a rush to make that deadline in order for this not to be a complete waste of our parliamentary time. That is why we are racing through. That is why we have not had enough pre-legislative scrutiny and why there are so many fundamental issues that have not been properly addressed in Committee. That is why we are facing an inundation of amendments now. It is a very regrettable situation and one that I personally take very seriously, as I am sure the Minister does, too. I only wish that perhaps people in other parts of the Government took this issue as seriously as those who are represented here today, because it is not good enough.

Turning to the amendments that we have begun to discuss under the first grouping, we should remind ourselves that Clause 1 of this Bill begins by creating a limited company that shall be named the Oil and Gas Authority. The words that are used in relation to the OGA often describe it as a regulator or a body that is there to do a job for government, yet when you look at its legal structure it is a private company in which there is only one shareholder—the Government. That is a very odd structure for a regulator. A private limited company with one shareholder is not—to my knowledge—the usual way to set up a regulator whose job is not simply to disburse funds but to engage in activities on behalf of the department to oversee a very complex and rapidly changing environment in the North Sea. That is where my disquiet really resides. It is not clear what this body is being set up to do: nor is it clear why the Government have chosen this particular legal structure.

This is illustrated by Amendment 6, one of the amendments that the Minister has tabled today. Here we are being asked to agree that the staff of this body should have access to Civil Service pensions and compensation packages. I will just reread part of Clause 1(2), which states that,

“the Oil and Gas Authority is not to be regarded as acting on behalf of the Crown, and … its members, officers and staff are not to be regarded as Crown servants”— because of course this is a limited private company with one shareholder. The Minister alluded to the fact that this is a body that will be going out to recruit new members of staff and will be hoping to attract the best in industry. What will the remuneration packages be for those staff? If this body is not to be seen as a representative of the Crown and its staff are not Crown servants, is it free to set whatever remuneration packages it wishes or will it be governed by the remuneration packages of civil servants? In government Amendment 6, however, we are being told that despite not representing the Crown or being civil servants, staff will have access to the pension schemes—which seems to reopen the idea that maybe it is in fact a regulator that is seen as an arm of the Government.

I suspect that the answer to my disquiet and questions is all to do with how the Treasury is currently overseeing its budget spend commitments and that the desire is that this should be off balance sheet and therefore that the expenditure or costs or activities will not be counted towards government spending. I am asking the Minister: what is the rationale for this legal structure and what will the status of the staff be? It certainly cannot be the case that on the one hand you are allowed to offer private sector salaries to attract the best in the industry while on the other you are also able to offer Civil Service pension provisions.

We will get on to the primary objective of the OGA a little later, in the fourth group, but my fundamental concern is that it is not at all clear why this body is being established, or that it is fit for purpose. The amendments in this group appear on the surface to be rather administrative yet they touch on a very real issue: is this a regulator? Should it be considered as a non-departmental public body or is it, in fact, a body that is being created with the potential to be privatised and sold off in the future? That would lead to a very different discussion and to a whole host of other concerns being raised by noble Lords scrutinising this legislation.

The Minister might say, “That is mere speculation, and why would the Government seek to set something up in public statute and then privatise it?”. I simply remind Members of the House that we have had exactly that situation with the Green Investment Bank, and this week we will see amendments brought forward which will mean that the Green Investment Bank will be changed by primary legislation so that it can be privatised. Therefore it is not too much of a conspiracy theory to think about the future of the OGA and where it might be going and to ask the Minister to give us complete reassurance that this is intended to be a regulator and to remain something of which the Government have oversight, and that the single share that they own will not be diluted nor sold to the private sector. I would like to hear that reassurance from the Minister today.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales 3:30 pm, 19th October 2015

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.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Photo of Lord Hope of Craighead Lord Hope of Craighead Convenor of the Crossbench Peers

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Amendment 1 agreed.

Amendment 2

Moved by Lord Bourne of Aberystwyth

2: Clause 2, page 2, line 25, after “section” insert “and section (Transfer of property, rights and liabilities to the OGA)”

Amendment 2 agreed.

Amendments 3 to 6

Moved by Lord Bourne of Aberystwyth

3: After Clause 2, insert the following new Clause—

“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.”

4: After Clause 2, insert the following new Clause—

“Transfer of staff to the OGA

(1) The Secretary of State may make one or more transfer schemes under which persons who hold employment in the civil service of the State become employees of the OGA (but this is subject to any provision contained in the scheme that allows a person to object to becoming an employee of the OGA).

(2) A scheme made under this section—

(a) may make provision for giving full effect for a person’s transfer into the employment of the OGA as a result of the scheme, and

(b) may (in particular) include provision that is the same as, or similar to, the provision made by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246) (whether or not those regulations would otherwise apply in relation to the transfer).”

5: After Clause 2, insert the following new Clause—

“Transfer schemes: supplementary

(1) A scheme made under section (Transfer of property, rights and liabilities to the OGA) or (Transfer of staff to the OGA) may—

(a) contain incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(c) make different provision for different purposes;

(d) make provision subject to exceptions.

(2) Subject to subsection (3), the Secretary of State may modify a scheme made under section (Transfer of property, rights and liabilities to the OGA) or (Transfer of staff to the OGA).

(3) If a transfer under the scheme has taken effect, any modification under subsection (2) that relates to the transfer may be made only with the agreement of the person (or persons) affected by the modification.

(4) A modification takes effect from such date as the Secretary of State may specify; and that date may be the date when the original scheme came into effect.”

6: After Clause 2, insert the following new Clause—

“Pensions

(1) The persons to whom section 1 of the Superannuation Act 1972 (persons to or in respect of whom benefits may be provided by schemes under that section) applies are to include the employees of the OGA.

(2) Accordingly, in Schedule 1 to that Act (employment to which superannuation schemes may extend), in the list of other bodies, at the appropriate place insert—

“The Oil and Gas Authority.”

(3) The employees of the OGA are to be treated for the purposes of paragraph (1)(b) of regulation 3 of the Public Service (Civil Servants and Others) Pensions Regulations 2014 (S.I. 2014/1964) as persons—

(a) to whom the scheme established under that regulation may potentially relate by virtue of paragraph (2) of that regulation, and

(b) in respect of whom the Minister for the Civil Service has made a determination under section 25(5) of the Public Service Pensions Act 2013.

(4) The OGA must pay to the Minister for the Civil Service, at such times as the Minister may direct, such sums as the Minister may determine in respect of any increase attributable to this section in the sums payable out of money provided by Parliament under the Superannuation Act 1972 and the Public Service Pensions Act 2013.”

Amendments 3 to 6 agreed.

The Schedule: Transfer of functions to the OGA

Amendment 7

Moved by Lord Bourne of Aberystwyth

7: The Schedule, page 41, line 4, at end insert—

“Energy Act 1976

A1 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;”.”

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales 3:45 pm, 19th October 2015

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.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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?

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Amendment 7 agreed.

Amendments 8 and 9

Moved by Lord Bourne of Aberystwyth

8: The Schedule, page 41, line 10, at end insert—

“( ) in paragraph (b), omit the words from “to the extent” to the end,”

9: The Schedule, page 41, line 14, at end insert—

“3A After section 9B insert—

“9BA Exercise of certain functions of the Secretary of State

(1) The Secretary of State must act in accordance with the current strategy or strategies when exercising the functions mentioned in subsection (2).

(2) Those functions are functions under Part 4 to the extent that they concern reduction of the costs of abandonment of offshore installations and submarine pipelines (including the reduction of such costs by means of the timing of measures proposed in abandonment programmes and by the inclusion in such programmes of provision for collaboration with other persons).””

Amendments 8 and 9 agreed.

Clause 3: Contracting out of functions to the OGA

Amendment 10

Moved by Lord Bourne of Aberystwyth

10: Clause 3, page 3, line 11, at end insert—

“(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.”

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

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?

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Amendment 10 agreed.

Amendment 11

Moved by Baroness Worthington

11: After Clause 3, insert the following new Clause—

“Transportation and storage of greenhouse gases

In section 9A(1) of the Petroleum Act 1998 (the principal objective and the strategy), for “recovery of UK petroleum” substitute “return of UK petroleum, while retaining oversight of the decommissioning of oil and gas infrastructure, and securing its re-use for transportation and storage of greenhouse gases”.”

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

My Lords, in moving Amendment 11 I shall speak also to Amendments 27 and 28 and to government Amendment 26, which is in this group. The Government’s Amendment 26 is a welcome concession. It is obviously a response to the debate held during the passage of the Bill where a number of noble Lords from different sides of the House raised the very important issue of whether the OGA’s powers, and indeed from my perspective its principal objectives, were fit for purpose. There was a strong sense that a review ought to be provided for in the Bill which the Government would undertake and then report back to Parliament. We are pleased to see that an amendment which would at least introduce a review has been tabled. I would say, however, that the review is of performance alone and not of purpose, and certainly makes no mention of a review of the primary objectives of the Bill. It is those primary objectives which are causing me the most concern. If noble Lords will bear with me, I should like to spend a little time articulating why that is, which will explain why we have brought forward Amendment 11 to change the principal objective of the OGA.

Noble Lords will be aware that the OGA was first created as a temporary executive agency under the Infrastructure Act 2015, and the intention was to implement the recommendations made by Sir Ian Wood as set out in the Wood review, which coined the phrase, “maximising economic recovery”. The eagle-eared among us will note that often when the Minister refers to MER, he actually describes it as “maximising economic return”, which is quite a significant difference. It may just be one word, but it indicates a subtle shift in focus that has happened since we received the Wood review in 2013. It has been eloquently alluded to on many occasions by the noble Lord, Lord Howell, and my noble friends Lady Liddell and Lord O’Neill, and others. There has been a significant change in the North Sea in particular since the Wood review was published and now, when we find ourselves looking at the detail of the OGA and how it will go about meeting the objectives of MER.

I want to take some time to go back to the principal objectives as defined in law. They do not occur in this Bill but are in the Petroleum Act 1998, as amended by the Infrastructure Act. To get the full context of what we are discussing today, one has to go back through two layers of legislation to find out what the OGA is set up to do. Section 9A of the Infrastructure Act provides two objectives. The first is,

“maximising the economic recovery of UK petroleum”, which is subdivided into,

“development, construction, deployment and use of equipment used in the petroleum industry (including upstream petroleum infrastructure)”.

That does not sound like the object of a regulator. It sounds more like the object of a company that might be seeking to invest in technical infrastructure and construction. I repeat that the legislation refers to,

“development, construction, deployment … of equipment”.

It is an interesting object for a regulator.

The second part of this section is subdivided to include,

“collaboration among the following persons”.

The word used is “collaboration”, and not regulation, dispute resolution or licensing. There is no reference to any of those in this legislation. The collaboration is among,

“holders of petroleum licences … operators under petroleum licences … owners of upstream petroleum infrastructure … persons planning and carrying out the commissioning”— let us note that it refers only to commissioning and not decommissioning—

“of upstream petroleum infrastructure”.

That is the collaboration that was imagined. There is no reference to people who may seek to reuse the infrastructure for carbon capture and storage or any reference, significantly, to those who might be decommissioning infrastructure.

The legislation goes on to refer to a strategy which the Secretary of State must produce and that it “may”—I repeat “may”, so there is no real lock on what has to be done in the strategy—

“relate to matters other than those mentioned in subsection (1)(a) and (b)”.

Those are the objectives of the OGA.

As I have said, that does not strike me as a very clear set of objectives or a very comprehensive set of objectives. Nor does it strike me as a set of objectives that sounds like it applies to a regulator. The objectives sound awfully like they might apply to a company that might be established to attract investment into the North Sea and to oversee the deployment of that investment—hence, my reference to privatisation in the previous debate. Although it may be the first time the Minister has heard that phrase, that is not necessarily very comforting. That is not to say that the Minister is not across his brief. Of course, he is but he is very new to his position. I suspect that if it has been talked about, that will have been not in his department but in the Treasury, which, as we know, is obsessed with making sure that overall commitment to spending is kept at an absolute minimum, and that all new bodies are kept at arm’s length and do not appear on the Government’s balance sheet. That is despite the fact that in this Bill clauses have been improved to give the OGA the ability to have grants from the Government. Indeed, the word is “grants” and not loans.

One can see why we have a concern about the primary objectives and why we have raised it in this Bill in the way that we have. This has led us to put down Amendment 11, which seeks to change those principal objectives to make them much more in line with what we now know to be the set of activities that will be undertaken by the OGA. I have no doubt that when Sir Ian Wood wrote his review in 2012-13, he had a great vision of simply needing a little government intervention to make sure that investment was happening in a logical way, which would keep the oil and gas flowing, and that some element of dispute resolution would be needed, but that by and large everything would be relatively rosy if people would just get talking to each other, and that is what led to those objectives.

However, now we know that that is not the situation in the North Sea—far from it. We have a crisis. We have people exiting and not investing. It is an economic problem, for the country as a whole and for public receipts, and a social problem. As we heard from noble Lords, people are losing their jobs. There is a great deal of uncertainty. It is not at all clear what the strategy now is in the North Sea.

We tabled Amendment 11 to change the fundamental objective of the OGA: to make it fit for purpose, comprehensive and a little bit closer to what we would expect a regulator representing the Government’s interests in the extraction of oil and gas to be interested in; and to maximise economic return from our resources, not necessarily just the economic recovery of fossil fuels.

Amendments 27 and 28 are amendments to the Government’s Amendment 26. As I mentioned, the Government have come forward with a review of performance that we think does not get to the nub of our problem. It would be at least useful to have a review, but it is not appropriate to delay for another three years before that review reports to Parliament. It should be one year. We should have a proper review of the OGA’s fitness for purpose.

As I said in my introductory comments to the first group of amendments, this could have been so different had proper time been allocated to this very important piece of legislation. Had we had the chance to have pre-legislative scrutiny, I am sure that many of these issues would have been flushed out and we would have found ourselves with a far better Bill than the one we face today. As I say, we are where we are and we are doing what we can to encourage the Government to take another look at this—to have a proper assessment of whether this is fit for purpose for the challenges facing us now, not the challenges that Sir Ian Wood was asked to look at three years ago.

I have one question for the Minister: when was the last time he had a conversation with Sir Ian Wood? His name is often used; it is almost as if he were Moses, handing down his diktats in stone and we have been enforcing them. Has Sir Ian Wood been engaged with by the Government? What are his views on what is now happening in the North Sea? What does he think about the OGA, with the benefit of being able to see what has happened to our oil and gas infrastructure over the last 24 months?

I am afraid that the Government have no strategy for energy in this country and are out of their depth when they consider what should be done in the North Sea in particular. I am concerned that we are establishing in statute a body that simply is not fit for purpose, neither in future-proofing for the challenges of the 21st century, nor in reflecting what is happening now. I hope that the Government will give me their reassurances that they will accept the amendment, because we feel very strongly that it is an important aspect of the Bill that has been overlooked.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative 4:00 pm, 19th October 2015

My Lords, although I sometimes agree very much with the words of the noble Baroness, Lady Worthington, with her enormous expertise in these fields, on this occasion I have some doubts about the amendment and what it tries to do. We all agree that the scene in the North Sea is changing very rapidly and that there is colossal uncertainty. I do not find any difficulty with the suggestion that the new authority should oversee decommissioning of oil and gas infrastructure. Frankly, there will be a lot more of that. We are already hearing of whole fields being made redundant and major problems of finance with existing operations. That the authority should have oversight of decommissioning oil and gas infrastructure seems to me merely common sense. That will happen anyway.

It is this extra bit that is added on about transportation and storage of greenhouses gases; we need to think very carefully about what we are saying. We are talking about very elaborate and interesting new technologies, which, if they could be developed commercially, would be a godsend, both to the global movement to reduce CO2 emissions and our contribution to it. It would allow the burning of fossil fuels, but in ways that did not emit CO2 and did not damage the climate. But this technology is not very far advanced. It is working in one or two places around the world. Billions have been spent on it, but the difficulties and sheer size of the engineering—of getting pipes into the North Sea and into the redundant oilfields, or areas where enhanced recovery will be enabled by higher pressure, delivered through the injection of CO2—is very much in the future and costs a lot of money.

What is necessary at this stage is to think clearly in terms of the possibilities for the future handling and sequestration of carbon emissions from carbon-generating activities rather than commit the authority to thinking about a particular aspect of it which may, frankly, never become a commercial reality and could impose colossal burdens on an industry in enormous difficulties. I have in mind two technologies. I defer here to the noble Lord, Lord Oxburgh, who is sitting not very far from me and is a far greater expert on the future handling of CO2. It is, of course, a very valuable gas. Indeed, an article in this morning’s papers by my noble friend Lord Ridley reminds us that, if handled correctly, CO2 has huge potential for improving the climate and our standard of living, bringing greenery to desert areas and encouraging all kinds of industries. One of the two technologies combines CO2 with CO2 already in the atmosphere, the phrase for which escapes me for the moment. It can then be turned very rapidly into carbon, which is an immensely valuable material used in many products. If we can get cheaper carbon, we can make huge advances in all sorts of materials and products and reduce the cost of those products.

The other technology, which again is still in its infancy but is very interesting, enables carbon to be sequestered and transformed into solid forms and eventually be used to produce lime-structured bricks and other building materials. All this obviates the need for pipelines and huge elaborate systems taking this material out into the North Sea into oilfields, former gas fields and other areas. Although it will not necessarily escape as it is not that kind of gas, there are problems with leakage containment in the future, all of which implies huge extra costs on somebody’s part.

I repeat that we are dealing with an industry that is at the moment, frankly, running out of money, is very short of funds and in a contractionary phase, so it would be most unwise to add this additional imposition to the objectives and activities of the authority. It would add to costs and create further uncertainty. We should concentrate on the areas that we know about. Powers exist in the Bill to alter the OGA’s objectives in practical ways according to ministerial requirement, if I am completely wrong and what is now a very remote and expensive technology, involving vast engineering and additional costs, suddenly becomes economic due to some unimagined technical breakthrough. That is always possible, and the Bill has the flexibility to allow for that. We do not need it in this amendment.

Photo of Lord O'Neill of Clackmannan Lord O'Neill of Clackmannan Labour

I am very pleased to follow the noble Lord, Lord Howell, because we had a conversation some time ago about how, as a young Back-Bencher in the early 1980s, when the noble Lord was the Secretary of State for Energy, he advocated the gas-gathering pipeline, which would have been of great significance to people in my former constituency who at that time worked in Grangemouth. Much of the energy debate is about purpose, being not just retrospective but prospective, and looking at technological advance and the possibilities this offers to facilitate greater efficiencies and better exploitation of the resources we have. Therefore, it seems very strange that we have a piece of legislation recalibrating—we might say—the Oil and Gas Authority, and that one of its main purposes is to be retrospective rather than prospective. I back my noble friend on the Front Bench because I think that we would be missing a trick here if we simply imposed on this authority in its new form the business of conducting retrospective triennial reviews. A review of past performance is desirable. You could argue that in the first instance three years might be appropriate, but thereafter I think it would be far more appropriate to have annual reviews so that we would have an annual report and perhaps an annual debate.

Certainly, in my days as chair of a Select Committee one of whose major responsibilities was looking at energy matters, we would have been very keen to have an annual discussion with the OGA about what it was doing and where it was going, and in preparation for such a meeting—I would not say confrontation, simply a meeting—I would have thought that the staff would carry out a review. Therefore, I think the work within the OGA probably will involve annual reviews. I am not one of those people who says that we should have them from the word go, subject to the closest scrutiny. Fledgling functions and organisations take time and sometimes mistakes are made that are not necessarily too embarrassing but you do not need to have a battle about, “We’ve got the first year wrong”. It is when you get to year three, four or five that reviews are really critical. Also, when you are dealing with reviews and you are learning lessons, you have to review not only the past performance but whether or not the authority is capable of doing the job it has been set up to do. Then matters of purpose come into play. It would be better if we were able to do that.

We have an infrastructure in the North Sea, perhaps not as logical and sophisticated as the kind that was envisaged some 30 years ago and, sadly, rejected by the then Government; nevertheless, we have this fantastic asset in the North Sea which we could be making use of in a variety of ways, which would not necessarily be only in relation to CCS. I have my misgivings about CCS. In some respects, it is beginning to become the carbon version of fusion—“It will be all right in 35 years’ time”. In fact, the experts tell us that it may be only 20 years for fusion, but one gets a little impatient with the advocates of CCS, who keep telling us it is just round the corner. I was in Australia a couple of years ago and the Australian press was confidently saying that it would be 25 years. You might argue the Australians have an excuse for that, given their Government’s attitude towards climate change and the influence of the coal lobby there; they are quite happy to see it in the long grass. It would be good if we could get it earlier, but to put a substantial part of our money on that particular area of activity for the OGA is a wee bit overoptimistic. Therefore, I would strike a cautionary note on that.

One of the great successes of the British economy has been our ability to harness the resources of the North Sea. It has always been difficult and because of that it has always been expensive. When the price of oil and gas is high, such investment is possible, but with the price of a barrel now being no more than $53 or $54, at least into 2016, we are talking about very high risks and therefore we need to have the best information. We need to have another voice, which can give reasonable forecasts and another opinion, not necessarily from within government but at arm’s length from government. We would be missing an opportunity were we not to take advantage of this creature we are dealing with at the moment—the OGA—and giving it better-defined functions with a greater degree of ambition, rather than the rather limited, retrospective function we are endowing it with in this clause, if we do not amend it along the lines my noble friend has suggested.

Photo of Lord Spicer Lord Spicer Conservative 4:15 pm, 19th October 2015

I have not spoken on this subject for 25 years. I do not intend to make up for it now—in fact, my intervention will be very short. The reason that I have not spoken for 25 years is that I have been rather too close to the industry for comfort. I was a Minister for Energy in the late 1980s and took through the Electricity Bill. Subsequently I have been chairman and president of Energy UK and of the Association of Electricity Producers. I have therefore been close to the industry. It is not until now, when I have been released from those happy burdens, that I feel that I can say at least a short work about energy matters.

In the present context, two things matter to the energy industry, particularly the petroleum industry in the North Sea. They are, first, certainty and stability, particularly in government policy, and, secondly, less rather than more regulation. On the question of certainty, we have to recognise that the petroleum industry in the North Sea is very fragile. My noble friend Lord Howell has mentioned that at the moment it is also very poor. There are questions as to how many more burdens it can bear.

I was thinking about the question of certainty just now when it comes for instance to the nuclear industry. We have now got the Chinese beginning to enter the fray. My mind goes back to when I talked to the Americans about flogging off bits of our privatised nuclear industry to them and got into terrible trouble with the Prime Minister at the time, Lady Thatcher. It is slightly ironic to me that we are now talking to the Chinese about the same subject.

Be that as it may, the question of certainty is terribly important. That brings me to the amendment. The noble Baroness fears the threat of privatisation. I do not see the point of setting something up for the purpose of privatisation. We have already been told that there are probably too many players in the industry in the North Sea at the moment and that they are too stretched. Therefore, my suspicion is that we are talking about more regulation. I cannot understand the argument of the noble Baroness at all on this point. I hope that it is not about more regulation and that the Minister will tell me that it is not. However, I think that it has to be about regulation. That is why I agree with my noble friend Lord Howell that if, as I think, it is about more regulation we have to be fearful about whether the industry can sustain the costs, particularly in the North Sea. Therefore, I have the opposite view to the noble Baroness and I hope that my noble friend will be able to reassure me on this point.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change)

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

I fear that expanding that principle to cover decommissioning and carbon capture and storage specifically would create significant knock-on effects for other aspects of this Bill and the Infrastructure Act 2015, particularly the strategy to maximise economic recovery of United Kingdom petroleum. It would also have repercussions on at least the meetings-access powers and the dispute-resolution powers in the Bill by opening them up to a raft of additional industry activity. It would also cut across many of the amendments that we have tabled in relation to the information and samples powers, which I will discuss later, which clearly and specifically address CCS, rendering them of uncertain effect. I fear that by expanding the OGA’s remit to those new and significant areas of regulatory activity, we risk weakening the overall approach that the organisation can take towards supporting the industry for the short, medium and long term.

Clearly, the oil and gas industry is facing major challenges, but it is an industry which remains critical to the United Kingdom economy by satisfying just over half of the United Kingdom’s oil and gas demand and supporting approximately 350,000 jobs. We will still need significant oil and gas supplies over the next decades while we decarbonise and transition to a low-carbon economy.

The OGA’s key actions are providing urgent support to industry through developing exploration, promoting new ways of working and protecting key infrastructure in the North Sea. The reality is that, without the OGA’s focus on maximising economic recovery in the United Kingdom, we risk premature decommissioning of the United Kingdom continental shelf and loss of assets, infrastructure and skills, including those which could in time help to promote the longevity of the industry through carbon storage projects.

I believe that carbon storage is vital. I note the points made by the noble Lord, Lord O’Neill. Clearly, it is not the whole of the answer, but carbon capture and storage has been regarded across the House as of key significance. That is why I have taken away and responded to what was said at earlier stages and come up with the amendments.

Premature decommissioning creates the very real prospect that infrastructure and skills disappear from the UK continental shelf before the CCS industry is ready to take advantage of them. Maintaining the OGA’s focus on maximising economic recovery of United Kingdom petroleum and extending the lifetime of key pieces of infrastructure will therefore benefit the CCS industry.

I reiterate that I have made extensive and meaningful amendments to the Bill to incorporate a significant role for the OGA on both CCS and decommissioning. Furthermore, as has been noted, I have tabled amendments which demonstrate a firm commitment that the OGA’s powers, including those on carbon dioxide storage, will be regularly reviewed by the Secretary of State.

Ultimately, this process of review will provide an opportunity to review the OGA’s principal objective if in future this was considered necessary.

I hope that the approach that I have set out avoids the need for this amendment, which would create a significant extension of the Oil and Gas Authority’s functions and also directly impose new and unquantified obligations on petroleum licence holders, operators and owners of upstream petroleum infrastructure. I therefore hope that the noble Baroness will be content to withdraw the amendment.

I turn to government Amendment 26, which inserts a new clause after Clause 11, requiring the Secretary of State to carry out a review of the Oil and Gas Authority’s performance and functions on an ongoing basis. As I said in Committee, it is important to put in place measures to ensure that the OGA remains well equipped to address the diverse challenges which are faced by the oil and gas industry. The amendment requires an initial review to take place no later than three years after Clause 1 comes into force and subsequent reviews every three years thereafter, although the Secretary of State will have discretion to conduct more frequent reviews if necessary and an earlier review if that is felt appropriate. A review, of course, will consider both the OGA’s effectiveness in exercising its functions and the fitness for purpose and scope of its functions under Part 2 of the Bill. Importantly, a review will also give consideration to the fitness for purpose and scope of the OGA’s powers under Chapter 3 of Part 1 of the Energy Act 2008, which sets out the OGA’s functions in respect of the storage of carbon dioxide.

Read in conjunction with the amendments to Clause 4 of the Bill, this will ensure that the OGA’s role in relation to carbon storage is given due prominence and regularly evaluated. It will also ensure that Parliament can effectively scrutinise the outcomes of any review—and, in particular, those functions relating to carbon storage. This is achieved through the requirement in subsection (5) of the clause for the Secretary of State to lay a report of the findings of the review before Parliament as soon as possible.

In tandem with the extensive amendments which I have tabled relating to the OGA’s role on CCS, I hope that noble Lords will agree that this represents a considerable step towards ensuring that an appropriate focus upon carbon storage is incorporated throughout the Oil and Gas Authority’s functions. I have tried to strike a balance in relation to the debate and the consideration that we have had here between excessive review, in terms of disrupting the activity of the Oil and Gas Authority, and, clearly, a need to review the functions, which will include CCS and decommissioning.

I now turn to non-government Amendments 27 and 28. I thank the noble Baroness for proposing them. These amendments relate to my own Amendment 26, which I have just described, and which inserts a new clause after Clause 11 of the Bill requiring the Secretary of State to carry out a review of the OGA’s performance and functions on a more frequent basis. These amendments seek to reduce the time period for carrying out a review given in subsections (2)(b) and (3)(b) respectively of government Amendment 26. The effect of Amendment 27 would be to reduce the time period within which the Secretary of State must carry out an initial review from a maximum of three years after Clause 1 of the Bill comes into force to a maximum of one year after such time. Similarly, Amendment 28 would reduce the maximum time period within which the Secretary of State must carry out subsequent reviews from three years to one year.

Although I have reiterated that the OGA’s functions should be kept under review, I believe that a mandatory requirement for a review to be repeated on a frequency of yearly—rather than the three-year period proposed in my own amendment—would be too onerous for government, the OGA and industry, and would have unintended consequences. It is a more frequent review than is generally the case; it is almost universally the case that it is not held on that frequency. The amendments as proposed would also be out of step with other regulators and risk conflicting with the OGA’s status as an independent regulator.

Let us consider the practicalities of these amendments. Each review would need to evaluate the effectiveness of the OGA’s functions, which include statutory functions within multiple pieces of legislation and non-statutory functions. It would also need to specifically consider the fitness for purpose and scope of the OGA’s functions under Part 2 of this Bill and Chapter 3 of Part 1 of the Energy Act, which relates to the OGA’s functions in respect of the storage of carbon dioxide. This evaluation would need to be assessed against external factors, such as changes in the regulatory landscape, changes in operational practices across the UK continental shelf, and environmental and economic factors.

After a review period, the Secretary of State would need to consider the findings and prepare a copy of a report of the review to be laid before Parliament. This would be a significant piece of work, and I am concerned that for a review to be repeated every year would subject the OGA to an almost continuous process of evaluation by government. This would create significant resource burdens both for the OGA and for government and risk obstructing the work of the OGA. It would also weaken the ability of the OGA to act as an independent regulator which is free from government intervention.

Noble Lords may consider that a three-year period is too long, but in the amendment that I have tabled it is explicit that three years is the maximum period within which a review must be carried out. If the Secretary of State deemed it necessary to carry out a review within a shorter period, then this is possible through the amendment that I have tabled. It is worth also noting that there will be other mechanisms in place to ensure that the OGA is held to account over its performance and functions. It will publish, on an annual basis, a refreshed five-year business plan and an annual report of accounts. This latter report will also be laid before Parliament.

An arm’s-length body charged with the effective stewardship and regulation of the United Kingdom continental shelf was a central recommendation of the review. I believe that these amendments would conflict with that recommendation by subjecting the

OGA to an onerous and almost continuous process. I hope that this explanation will satisfy the noble Baroness and that she is content to withdraw the amendment.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change) 4:30 pm, 19th October 2015

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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.

Division on Amendment 11

Contents 251; Not-Contents 179.

Amendment 11 agreed.

Division number 1 Energy Bill [HL] — Report (1st Day)

Aye: 249 Members of the House of Lords

No: 177 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Clause 4: Matters to which the OGA must have regard

Amendment 12

Moved by Lord Bourne of Aberystwyth

12: Clause 4, page 3, line 20, at end insert—

“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.”

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales 5:00 pm, 19th October 2015

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.

Photo of Lord Oxburgh Lord Oxburgh Crossbench

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.

Photo of Lord Howell of Guildford Lord Howell of Guildford Conservative 5:15 pm, 19th October 2015

My Lords, carbon negativity, which the noble Lord, Lord Oxburgh, has just mentioned, is the concept I was groping for in an earlier amendment and is of course all part of the picture that is emerging: one of several very rapidly technologies for handling the carbon issue in ways that may not involve heavy pipelines into redundant oilfields and gas fields in the North Sea or anywhere else. However, that is an aside.

The question I have about this amendment is as follows. I suppose, having criticised the last amendment—our criticisms have been slapped down by the vote of your Lordships’ House and the amendment has been passed—I ought to be consistent and raise an eyebrow about this amendment. Can my noble friend explain why it is necessary and why it is not covered by Clause 4(1) of the Bill? There is an item in it on innovation:

“The need to encourage innovation in technology”.

This is a requirement already in the Bill and seems sufficiently open to allow all the vast variety of new technologies to come along. I have no quarrel with the other amendments from my noble friend about samples and information and I am sure that they are totally right, but this amendment again focuses on carbon emissions and the storage of carbon dioxide in the North Sea. I would just sound a warning note that we are again close to a dangerous tendency to pick winners, something which has led to so much grief and sorrow in the past because it led to a huge waste of resources and delayed the moves that we all want to see towards a more efficient energy industry and one more in line with meeting our climate obligations. Why does subsection (1) of Clause 4 not meet that, and why is the amendment necessary at all? The amendment states at the end that its aim is,

“to meet the target in section 1 of the Climate Change Act 2008”.

That of course is the point. There are many paths to meeting our carbon budget in the climate change obligations. Earlier, I think the noble Baroness, Lady Liddell, mentioned the UN official Professor Jacquie McGlade, who was given airspace on the radio this morning about the UK’s energy and climate policy. She seemed to be talking complete nonsense and seemed to believe that renewables targets were more important than our emissions targets, and that subsidising particular renewable technologies, regardless of their contribution to CO2 reduction, was the key aspect of our commitment. That is precisely the trap into which the European Commission and European Energy Commissioners have fallen into in the past; namely, trying to lay down the precise pattern of renewables to be backed and not backed. They have been trying to extricate themselves from the mess that they caused by that perception ever since at great cost, with great difficulties and with much uncertainty for the industry. When I see this kind of addition I realise why the Minister has probably put it in.

However, we have some real dangers to avoid. From the previous coalition we have inherited a legacy of considerable confusion, although I admit that I was part of that coalition. We have a legacy in the energy sector which is not at all happy and is leading to considerable ructions and many more difficulties ahead. I will pass over the fact that the targets have not been meet at all when one takes into account per capita carbon emissions, let alone the other trilemma targets of affordability and reliability. That is for another debate, but can we please be careful that we leave open the path for all kinds of innovation in the future to meet our climate obligations, and that we do not get trapped into overemphasis on one particular path in order to meet the enthusiasms of those who believe that CCS is essential to be brought into everything? Perhaps it is or perhaps it is not, but let us be careful not to overegg this particular pudding.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

My Lords, I want to take up a point made by the noble Lord, Lord Oxburgh, with which he reinforced our concern about this Bill being rushed through and consideration not being made. We have just heard from the noble Lord, Lord Howell, about whether renewables can be equated with carbon production, which he challenges. As the noble Lord, Lord Oxburgh, said, these are the kind of things that could be and should be dealt with in pre-legislative scrutiny in the kind of get-together that he suggested.

I am not a fan of this non-elected House. I want to see a move towards a senate of the nations and regions. When we eventually get a Labour Government, we will move in that direction. However, again and again I hear from those who do like this nominated House that we have lots of experts on various subjects, and why do we not make use of them and get them together to provide that experience, insight and knowledge into the legislative process. If we get things rushed through in the way in which this is being rushed through, we are not able to do that.

We saw that again today at Question Time. Members who were present will have heard my intervention when I got really irate concerning the noble Lord, Lord Prior. I think that it was the noble Baroness, Lady Maddock, who said that it was not for the first time. The noble Lord seemed to be acting like a disinterested observer of what is happening in social care, which is being reduced enormously, and it was as if he could do nothing about it. He seems to forget that he is a member of the Government who is supposed to report to us and supposed also to take our views back to the Government to try to influence what they do. Ministers are not here just to read out the instructions that they get from the Civil Service and from down the corridor. They are here to listen to what Members of the House of Lords say, to take account of it and to pass it on. To be fair to the noble Lord, Lord Bourne, as my noble friend Lady Worthington said, he has taken account of some of the specific aspects that have been raised. But there are others that have been overlooked and I fear that there will be others that will be overlooked. I hope that I am proved wrong on Wednesday and that some account will be taken.

The noble Lord, Lord Howell, is about to disappear but I think even he would agree that, if not a direct equation between CO2 emissions and renewables, renewables have a high correlation between their development and their expansion, and the reduction of CO2. Not every renewable energy source is perfect and does not have some carbon emissions in the production of the equipment that it uses and so on, but producing this clean energy must be considered much better than the alternatives and all the ones that we have had in the past.

Incidentally, I should have declared an interest right at the start; I did so on previous occasions. I am a trustee and treasurer of the Climate Parliament. We argue very strongly at every opportunity we have in every parliament around the world to try to ensure that all countries, including the United Kingdom, are doing as much as possible to reduce carbon emissions.

Before I ask a specific question, I must say that the Minister is an eloquent man. As a Welshman, he is, like me, grieving at what happened over the last few days with the rugby results; in our case we were cheated out of a great victory. I have had dealings with him before he became a Minister and I have great respect for him, but even he, with all his Welsh eloquence, cannot argue that there has not been a deep depression in the renewable energy sector with what has happened over the last few months in solar energy—where we have seen and are seeing job losses because of the cutbacks—and now in onshore wind. We will talk more on this on Wednesday.

I ask the Minister one particular question: tomorrow we will hear the wit and wisdom of the President of China. It has been suggested that we should make all sorts of representations to him on human rights and discuss with him a range of issues concerning trade and co-operation in a variety of fields. Specifically, will we talk with him about energy in general, and in particular about the Green Grid alliance? At the United Nations, the Chinese President said that he is in favour of a global energy network for clean energy. The Chinese corporation dealing with this has put a lot of resources and thinking into developing a grid that takes energy from areas where it is produced cheaply and regularly, such as the deserts where solar energy is produced, and channelling it through a green grid to areas where it is used and needed.

I hope that at some point in his visit, Ministers—if not the Prime Minister—will raise with the Chinese President how the United Kingdom Government can co-operate with the Chinese Government on this. They are very far-thinking. They have great resources, a great number of people and great knowledge. I hope that we will pursue this with them, that we will take the opportunity to raise it with him when he is here and follow it up in the weeks and months to come.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change)

My Lords, I shall speak to my Amendments 15 and 18, and to Amendment 72 in the name of the noble Lord, Lord Oxburgh. I am very pleased that the noble Lord, Lord Foulkes, mentioned the President of China because tomorrow we have to interrupt an Economic Affairs Committee meeting. I suggested that we might ask the President to be a witness on some of these issues, but unfortunately I do not think that that got anywhere.

I welcome a number of the government amendments in terms of their nod to the environment. My amendments look to try to place the OGA and this part of the Bill in the context of the broader climate change and environmental debate. We do not have those amendments completely right. In fact, I rather prefer the amendment of the noble Baroness, Lady Worthington, although I am not sure how far she will press it. As I said previously, although the OGA needs to focus on its prime areas in doing its day-to-day business, it needs to operate within this broader environmental area, as does the whole regime.

Certainly, in the days of the coalition Government, there were four aspects of energy policy to which both parties involved were fully committed. One was low carbon, partly renewables but also nuclear energy. That just about staggers along on the nuclear side, as we have discussed. The renewables have suffered a number of quite severe setbacks over this year since the election. Secondly, there was energy efficiency, which as we all know satisfies all three elements of affordability, decarbonisation and energy security. Certainly, the Green Deal needed changing a lot but to opt out of that was most unfortunate. However, taking away the zero-carbon homes trajectory for 2016 was an act of gratuitous violence on a low-carbon agenda. Thirdly, the carbon tax floor has now been frozen by the Treasury. I think it rather enjoys the revenue coming from it, although that has to be combined with the reimbursement process for high-intensity users. Fourthly, there was carbon capture and storage. That is why this measure is so important in making sure that at least that fourth part of the energy strategy goes forward. That is why I have added my name to the amendment of the noble Lord, Lord Oxburgh.

As I said on Second Reading, I became rather sceptical about carbon capture and storage because, since I have been in the House, it has been very difficult to make progress on it. Although the Government say that the fact that Drax has withdrawn from the White Rose project is not fatal, as the facilities can still be used and the other investors are still there, it seems to me to make the task even more difficult. This measure provides a key way forward in delivering a carbon capture and storage strategy that investors, industry and people involved in the energy sector more generally need to provide them with certainty and a trajectory for the future.

The noble Lord, Lord Howell, mentioned not picking winners. I agree with that in principle. Indeed, contracts for difference were set up in that way. However, the whole area of decarbonisation and decarbonisation targets is technology neutral. That is why I am particularly disappointed that we were given to understand in Committee that the Government would not seek to implement the decarbonisation targets set under a previous Energy Act. That provided an opportunity to adopt technology neutrality and I regret very much that another part of the jigsaw of moving towards our climate change targets has been taken away.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change) 5:30 pm, 19th October 2015

My Lords, I am grateful to the noble Lord, Lord Oxburgh, for introducing his amendment, to the other noble Lords who have spoken in this debate, and to the Minister for introducing the government amendments starting with Amendment 12.

I do not wish anything that has happened today to undermine our great welcome for the way in which the Minister responded to our debate on CCS. The amendments that we are debating are testimony to how much the Minister has listened and taken on board the comments that were made. We very much welcome the measures, specifically the changes on making explicit the use of sampling and on the sharing of information and, indeed, the addition of government Amendment 12 to Clause 4, which sets out the matters to which the OGA must have regard. The amendment has both an explicit reference to carbon dioxide and the meeting of climate change targets. This is indeed very welcome and I certainly support the amendment being added to the Bill.

Because the Government’s amendment is comprehensive, we will not pursue Amendments 13 and 14 any further. We are delighted that those measures will now be included. I wish to speak also to Amendment 72, which the noble Lord, Lord Oxburgh, tabled and to which I was very pleased to add my name; and to what was my own Amendment 78, to which the noble Lords, Lord Oxburgh and Lord Teverson, have added their names, which is replaced by a manuscript amendment. I apologise for that but we felt that it was important to clarify a change of wording for that amendment. I shall come on to that.

As we are considering in more detail the environmental and climate change aspects of the Bill, I should declare a potential future interest, as I did in Committee.

As many noble Lords may be aware, I shall be stepping down from the Front Bench in a matter of weeks. I am in negotiation with a charity that works on climate change issues, so I felt that I should declare that potential future interest.

Amendment 72, in the name of the noble Lord, Lord Oxburgh, would require the Government to undertake and develop a national strategy for carbon capture and storage. This amendment has a great deal of merit. It was excellent to meet the Minister and officials from his department. As has been mentioned, Stuart Haszeldine from Edinburgh University was present. It was a very good meeting and it became clear in the debate that there is an awful lot to do in the world of carbon capture and storage. However, “carbon capture and storage utilisation” is possibly the phrase we need to start using. That addresses some of the points made by the noble Lord, Lord Howell, about the fact that there is not just one version of carbon capture and storage but potentially many with different attributes, in the same way that there are many renewables technologies with very different attributes.

Carbon capture and storage is a grouping of technologies with different aspects, technologies and uses and different storage end points, some of which are stored underground, some of which might be onshore and some of which might be offshore in disused oilfields or, indeed, in oilfields that continue to be used through enhanced oil recovery. However, there may be other forms of storage, including in mineralised aggregate and as a chemical feed into various other processes. I sense a mood change within industry towards wanting to have a much more in-depth discussion about the use of CCS going forward.

As we face our climate change targets going forward, and in particular the embodiment of those targets in the emissions trading scheme, which creates a hard cap on our industrial sectors that declines over time, we will have to develop a technology to enable us to maintain primary production in this country to keep a thriving and, we hope, growing industrial base. It is going through some difficult times at the moment, but we need to find a policy that will enable us to attract inward investment into industry to help it decarbonise, in the same way as we have done for renewables in the power sector. A strategy is definitely needed, particularly for those industrial players. Although it is welcome that we hope to have two demonstration projects proceeding in the power sector, which will potentially open up useful infrastructure that can be reused, there is very little in the way of policy for industrial players that helps them to decarbonise. They have an incentive to decarbonise in the shape of the carbon price but that is often softened by receiving compensation payments. However, there is no carrot. There is a stick and then there is compensation but there is no bankable, investable policy that would cause them to make a positive investment.

That is an urgent challenge for the UK to get its head around; otherwise, my fear is that we will see more closures, as we have seen at Redcar with SSI, which was meant to be a big element of the Teesside decarbonisation cluster. That closure removes one of the elements of that strategy, which would have led to a carbon capture and storage hub, which would have decarbonised our industrial bases there and, I am certain, would have attracted investment from Europe and elsewhere because it would have been future-proofed. You could locate there, reinvest in industrial manufacturing and production, and be confident that you had a place to store your CO2 and therefore not just be compensated but actually avoid the need to pay carbon prices. So a strategy is definitely needed for industrial sectors.

Some ideas have been floated. One is that, just as we have a contract for difference in the power sector, it would be possible to have a contract for difference in the industrial sectors. You would not be able to do it off the power price, clearly, but you could do it off the carbon price. You could give some investor certainty that you will be compensating for the fluctuating carbon price and give a degree of confidence so that an investor could go to the bank and say, “On the back of this I am going to receive compensation from these contracts and we should go ahead and invest”. Those are the sorts of things we need to see in this strategy as we go forward.

Our strategy on the capped sectors—those subject to the EU ETS cap; that is, power and industrial—still leaves more than half the economy’s emissions uncapped and very little in the way of a wholesale comprehensive policy to decarbonise those sectors. Those uncapped sectors are largely serviced by the oil and gas industry; that is, the transport and heating sectors, in so far as heating is used in buildings, as opposed to primary manufacture and production. Those uncapped sectors, which affect the oil and gas industry, are a very important part of what we need to get our heads around and what we need to address as we look at our targets, because clearly our targets are economy-wide. They are set out in the carbon budgets we have set ourselves to meet our requirements under the Climate Change Act.

In the way we currently treat the carbon budgets, the uncapped sectors actually cause us the greatest difficulty because we do not have an EU-wide emissions trading scheme or low-carbon incentives in the form of CFDs, and we have fewer levers. We have the renewable transport fuel obligation and the renewable heat incentive, both of which, as the names suggest, incentivise investment only into renewables. They do not do anything for carbon capture and storage in those transport and heat sectors, and nor would they for nuclear. I happen to believe that in the future, we will probably be able to deliver nuclear into those sectors. We are not there yet, but we are close to being able to see how CCS could contribute in those sectors. I should say again that CCS is the broad technology that includes CCU, which would give us a number of technologies to work from.

We have a curious situation where we have a relatively challenging target on the uncapped sectors but almost no comprehensive policies to incentivise decarbonisation. This is where Amendment 78A comes in. This idea was discussed in Committee. It may be ahead of its time and we may need some more discussions. I very much look forward to the department facilitating such discussions after the Bill leaves this House. The fundamental question is: how can we get to a more market-based form of incentive to help decarbonise heat and transport? I do not think we can rely on renewable heat incentives paid for by taxpayers, and nor is the renewable transport fuel obligation is the answer. There has to be something much more technology-neutral and market-friendly, whereby industries and the private sector can find and select the best projects to help with that task.

The idea we debated in Committee was that we would ask providers and importers of fossil fuels into the UK—whether they are extracting here from the North Sea or onshore, or importing from overseas—to invest in projects which permanently stored and reduced emissions. We have come back with Amendment 78A as a reworked version of that. It is not the perfect wording by any means—it is still a probing amendment—but we felt it important to re-table it because there is the germ of an idea here which will help the Government, and the UK in its move towards economic growth, to harness the power and ingenuity of the private sector in delivering us least-cost decarbonisation.

The idea, simply put, is that we would require a very small portion of the emissions embedded in those oil and gas products to be certifiably stored, and that would then rise over time. It would be entirely up to the importers and extractors to decide how they would meet that obligation and it would certainly not apply just to UK extractors; it would also apply to imported fuels so as not to distort. I think there is a great deal of merit in exploring that idea further. As I said, Amendment 78A is still a probing amendment but I hope that, following on from the Bill and in the spirit of collaboration that has now emerged on this issue, we can look at that and perhaps incorporate it into the strategy referred to in Amendment 72, which is intended to be a comprehensive strategy.

I am delighted that carbon negativity has come up, and I am grateful to the noble Lords, Lord Oxburgh and Lord Howell, for mentioning it. It is an anomaly. As I mentioned, we have these carbon budgets, and both the inventory submitted at international negotiations and our own budgets would credit negative emissions if we had the right mechanism to do so. We could be helping to meet our targets through the use of carbon-negative technologies, both domestically and internationally, if we could just find a way to certify that and make sure that it was done well. It is certainly not beyond our wit to be able to certify such things. If you move in the world of engineering solutions to climate change, as I do, you meet many people who already have or are very close to having projects that deliver carbon-negative emissions. One I am particularly fond of—it is near to where I live in Cambridgeshire—is the Carbon 8 company, which takes hazardous waste from an incinerator, combines it with CO2 derived from a biomass plant and turns it into a permanent aggregate which is then made into building materials that can be used to build buildings and infrastructure.

Photo of Viscount Ridley Viscount Ridley Conservative 5:45 pm, 19th October 2015

Does the noble Baroness agree that those of us who are farmers take carbon dioxide out of the air as much as we can every summer—and then unfortunately put it back into the air by feeding it to people in the winter?

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change)

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

I thank the noble Baroness for her explanation of manuscript Amendment 78A, which seeks to insert a new clause into the Bill that would require the Government to consult on measures requiring extractors and importers of petroleum to contribute to the development of reduced carbon emissions technologies in the United Kingdom. Noble Lords will know that the regulatory measures in this part of the Bill result from a specific set of challenges highlighted in the Wood review. These have been endorsed by industry and are given increased urgency by the fall in global oil prices.

Were Amendment 78A to be accepted, a consultation would need to take place on measures the industry would be required to take to contribute to an as-yet unquantified and uncosted obligation. To be fair, I accept that the noble Baroness set out that this was a rough-hewn amendment. However, it would, as framed, involve additional burdens on industry at a time when it faces unprecedented challenges and would risk diluting the objective of maximising the economic recovery of offshore United Kingdom petroleum. It is vital for the UK economy and our energy supplies that the continental shelf remain competitive in a global market. Introducing additional costs to the industry would reduce the attractiveness of the continental shelf and would pose a significant threat to all of the positive work that is being done.

Photo of Baroness Worthington Baroness Worthington Shadow Spokesperson (Energy and Climate Change) 6:00 pm, 19th October 2015

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.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales

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.

Amendment 12 agreed.

Amendments 13 to 15 not moved.

Amendments 16 and 17

Moved by Lord Bourne of Aberystwyth

16: Clause 4, page 3, line 32, leave out “does not include any” and insert “means any function of the OGA, including any function under Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide), other than a”

17: Clause 4, page 3, line 34, at end insert “or an agreement under section 3(3).”

Amendments 16 and 17 agreed.

Photo of Lord Geddes Lord Geddes Deputy Chairman of Committees, Deputy Speaker (Lords)

I should advise noble Lords that Amendment 18 has been placed incorrectly in the Marshalled List—it is an amendment to Clause 5.

Clause 5: Directions: national security and public interest

Amendment 18 not moved.

Consideration on Report adjourned until not before 7.04 pm.