Clause 3

Energy Bill – in a Public Bill Committee at 9:45 am on 21 February 2008.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I beg to move amendment No. 19, in clause 3, page 3, line 21, at end insert—

‘(4) (a) The Secretary of State shall consult with relevant environmental bodies, particularly in relation to marine plans, when granting licences.

(b) “environmental bodies” are defined as government departments and their agencies with particular responsibility for environmental issues.’.

Photo of John Bercow John Bercow Conservative, Buckingham

With this it will be convenient to discuss amendment No. 20, in clause 17, page 9, line 20, at end insert—

‘(4) (a) The Secretary of State shall consult with relevant environment bodies, particularly in relation to marine plans, when granting licences.

(b) “environmental bodies” are defined as government departments and their agencies with particular responsibility for environmental issues.’.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

We now move on to the part of the Bill that deals with the licensing process. Our amendment relates to the conditions that must be satisfied before a licence is issued. Amendment No. 19 relates to gas licences. Amendment No. 20 is identically worded and relates to carbon storage licences. It was very sensible and wise of you, Mrs. Humble, to group them together, so that we do not have the same conversation twice.

The amendments would ensure that, when the licensing arrangements for the offshore storage of natural gas and, subsequently, CO2 are made, they take full account of the environmental risks and, in particular, that they are integrated with future legislative arrangements for protecting the marine environment. What we are driving at is the fact that we have this Bill and then a marine Bill. Clause 3 talks about the regulation of the marine environment, on which will follow further legislation later this year. How will those interrelate? Should we be concerned that this Bill might not deal with things that are not then picked up in the marine Bill?

As I understand it, the marine Bill will not cover the sort of issues before us today, such as gas storage. Therefore, if we do not get that right in this Bill, it might not be done at all. That is why we tabled these two amendments, which would simply require that, before a licence is granted, the licence issuing authority should consult other Departments with an environmental interest, of which DEFRA is the most obvious. It would also be required to consult different environmental agencies, including those with responsibilities for the marine environment.

I hope that the Committee will forgive me for returning ad nauseam to my main theme, which is that energy and the environment are the responsibilities of different Departments. With the best will in the world, the incentives, interests and focus of those two Departments are not identical; they could not be. The danger is that the body that decides whether to grant a licence under the Bill will have a raft of considerations, such as safety—that consideration would be common to both Departments—and energy considerations might be given greater weight than environmental ones where there is a potential trade-off between the two. Obviously, if they go hand in hand, it is not an issue. However, if, for example, a big leap forward in energy security or supply could be achieved at some modest environmental cost, there would be a trade-off.

Without our amendment, the energy Department might be inclined to grant a licence where the environment Department might give greater weight to consideration of the environmental damage and say no. To give an imperfect analogy, we had a meeting with the Secretary of State for Business, Enterprise and Regulatory Reform about the Severn barrage—a clear case in which energy issues might point one way, but consideration of the environmental damage the other. A trade-off must be sought, and if the energy Department has the lead and has no environmental duty under the Bill, the worry is that environmental considerations might, at best, be secondary.

Photo of Stephen Ladyman Stephen Ladyman Labour, South Thanet

I very much understand what the hon. Gentleman is saying, which is why I asked the Minister the same questions. However, my understanding is that the habitats directive already imposes on the Government the obligation to carry out consultations, so I do not understand why the hon. Gentleman wants to include such a provision in the Bill.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I am grateful for that and I noticed that the hon. Gentleman’s intervention was consistent with the points that I wanted to make. Many of the environmental organisations that have been in touch with us, such as the WWF and the Royal Society for the Protection of Birds, are keen to have some reassurance from the Minister on the point that the hon. Gentleman raises. They seek reassurance on not only present technologies, but novel technologies, which my hon. Friend the Member for Cheltenham mentioned. In other words, we want to be confident that there will be, for example, a full strategic environmental assessment where novel forms of extraction or storage are applied. I am not absolutely sure that such an assessment would follow from the habitats directive—I do not know enough about it to know whether that would be the case—but that is the sort of assurance that those groups seek from  the Minister. Where novel extraction or storage activities are licensed under the Bill, will they be subject to a full strategic environmental assessment?

The question is whether such considerations should be dealt with as part of the licensing process at all, or whether the proposed marine management organisation, which is obviously germane to this issue, should have oversight. The worry is that the Government’s plan is that it should not. If so, we would have a Bill covering the licensing of offshore gas storage and supply, but the separate marine management organisation that is to be introduced in legislation later this year would have no duties at all. Most people would think it rather strange to create a body called the marine management organisation when that body has no remit over the extraction and storage of gas and energy in the marine environment. I hope that the Minister can clarify the relationship between that body and the licensing authority and why the marine environment organisation will not be given oversight over such issues.

Finally, I should like some clarification of spatial planning in the marine environment, to which these proposals relate. Currently, there is not a robust set of protected marine areas to guide the location of new activities at sea, but the licences that we are talking about should be granted in accordance with a strategic overview. We have heard mention of local planning authorities, and individual planning applications that were made on land would fall within a strategic plan. If the Government do not accept the amendment and if the marine management organisation does not have responsibility for such issues, we might end up with—I was about to say a gold rush, but that is not the right analogy—people making licence applications on an ad hoc basis that do not fit into an overall planning environment, as they would on land.

Our preference would be for the marine management organisation to have responsibility for environmental oversight over such issues. However, if the interest is in regulatory simplicity and in having only one body, not two, and if the marine management organisation is deemed not to be the right body, we would, at the very least, want there to be consultation of the sort envisaged in the amendments with the relevant environmental bodies before licences were granted.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I seek your guidance, Mrs. Humble, on whether the intention is to enter into a clause stand part debate after we have considered the amendments, or whether I should address all my remarks to the amendment. The best thing is probably to proceed and see whether you ask me to sit down.

Regardless of whether the amendments are accepted, the clause refers to not only the question of whether Departments should issue a licence for gas storage, but the fact that a licence is subject to the provisions of a Crown lease that may have been granted or may be granted subsequently. To take up the comments by the hon. Member for Northavon, there are not two partners in this enterprise but at least three. That is the extent to which the licence that is granted by the Secretary of State is subject to an entirely separate body, over and above any other considerations pertaining to DBERR, DEFRA and other Departments.

The Crown Estate is not a reactive organisation in the way that is sometimes implied by references to it; nor, in fact, is it particularly responsible to the Crown. It was split into two some while ago—I believe in the 1960s—whereby the personal possessions of the Queen went in one direction and the commercial activities that relate to those things that were relevant to the Crown went in another direction. The Crown Estate is now a separate organisation with a board of directors and managers. It is responsible, apparently—although not accountable to anybody, as far as I can see, least of all to Parliament—for the deposits of money that it makes to the Treasury, and it is subject, in theory, to an intervention notice by the Treasury if its activities go seriously off the rails.

It is interesting that no intervention notice has ever been issued by the Treasury to the Crown Estate since it was set up, and it is not clear whether the intervention notice would be compatible with, for example, policy on the charge that was decided for a licence. The possibility more than theoretically exists that, in pursuit of its wish to maximise the money that it deposits in the Treasury’s coffers, the Crown Estate could take a view on the issuing of a licence that would be completely incompatible with the aims of providing a licence, given the idea that, for national strategic purposes, a licence might be granted for gas storage. It is also more than theoretically possible that, under those circumstances, the Crown Estate could simply refuse a licence or put such conditions on it that totally negated the intent of the licence that was issued by the Department.

Those may be regarded as fairly arcane considerations. I accept that members of the Committee are looking at me as though they were rather arcane. [Hon. Members:“No, no.”] Nevertheless, they are important, because, as far as I can see, the clause contains no leverage whatsoever that the Department that issues the licence can use on the next procedure to make the licence real. I may not have understood the process properly, or it may be that the procedures that have been followed over so many years give reliability to a process that, theoretically, is not perfect. Nevertheless, that is how matters stand as far as the Crown Estate is concerned, and I would value the thoughts of my hon. Friend the Minister on whether the arrangements that I have described are sufficient and reliable enough to ensure that the clause has the effect that I am sure we all want it to have.

Photo of John Bercow John Bercow Conservative, Buckingham

Before calling the next speaker, I advise Members that I would not anticipate a separate stand part debate, given that clause 3 is narrowly phrased and the discussion so far on the amendment has been wide-ranging. If Members wish to address the clause in addressing the amendment, this is their opportunity to do so.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 10:00, 21 February 2008

Thank you, Mrs. Humble. I think that I will be on that procedural territory.

It is always a pleasure to follow the hon. Member for Southampton, Test with whom I often find myself in agreement. He often points out problems in policy that the rest of us have not spotted. He has outdone himself on this one.

The issue that I want to raise is one that was mentioned in passing by my hon. Friend a minute ago. It is about the tension that is reflected in this clause as to whether this is a natural area of responsibility for DBERR or DEFRA. Do we see this as principally a business activity and, therefore, naturally in the domain of DBERR or is it about the disposal of a toxic substance? That question involves an important principle. Surely, one of the main purposes of energy policy should be to reduce the production of CO2 and not to accept it as a natural part of the energy process. We ought to be thinking of the disposal of CO2 as analogous to landfill.

The operation of a landfill site can be a profitable business activity, but it is not something that we would want to encourage, or see as a long-term growth activity. Such an operation is clearly the responsibility of DEFRA. If one was a conspiracy theorist, one might see something slightly suspicious in the relative timings of this Bill, the Planning Bill and the marine Bill. The latter Bill had widespread support when it was proposed some years ago, but it has not yet made it to the House. Now it is being pre-empted by this Bill in an important respect that is highlighted in my hon. Friend’s amendment. The marine management organisation may well have some of its anticipated responsibilities removed from it before it has even been set up, which must be some kind of a record.

Perhaps the Minister could reassure the Committee that such a conspiracy theory is not well founded and that there has been adequate consultation on the issue of the responsibilities of the marine management organisation and that he has had discussions with DEFRA on this. Perhaps, also, he could tell us what conversations his Bill team in DBERR have had with the Bill team working on the marine Bill in DEFRA.

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

This is an important discussion on a matter of principle. How can we have development while at the same time protecting the natural environment? How do we balance the two? These are important amendments, particularly, as the hon. Member for Northavon has said, with the introduction of long-anticipated legislation on the marine environment.

I say to the hon. Member for Cheltenham that I do not think that there is any conspiracy here at all. He is right to say that there has been a long gestation period for the marine Bill. It is a difficult issue. Let me remind him that the Bill appeared in Labour’s last manifesto; it has not been forgotten. A White Paper was published last March and I anticipate that the draft Bill will be published in April. We will have to wait and see what is in the draft Bill. Clearly, it will bring forward an enhanced series of marine protected areas and, for the first time, it will introduce the notion of marine spatial strategy. As has already been said, there is the notion of a marine management organisation. There needs to be considerable discussion about the powers of such an organisation and we shall have to wait to see what is in the draft Bill. Clearly, it is not possible now to table amendments on a Bill that is not yet in existence, but there is a point of discussion here.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman raises an extremely important point with which I agree. I accept that we cannot know the content of the marine Bill until it is published, but does he expect the marine spatial strategies that are envisaged to encompass gas storage agreements of the sort that we are discussing today?

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

I am not in the position to answer that question, because I have not seen the draft Bill. However, having followed such matters closely for a long time, I know that there have been substantive discussions between DEFRA and DBERR. My hon. Friend the Member for South Thanet will remind us that the Department for Transport has been involved fundamentally in the preparation of this Bill. It is a difficult issue, but the essential point made in Committee today is that, whatever the powers under the Bill, they must link clearly to the future attraction—an attraction that we have had a trailer about, but we do not yet know what is in the film. I look forward to the Minister’s response to that point because I anticipate that the marine Bill may be highlighted in the next Queen’s Speech, and the Bill now under discussion must be in sync with larger legislation on the marine environment.

I wish to pursue briefly the arcane point made by my hon. Friend the Member for Southampton, Test. Those of us who have had dealings with the Crown Estate know that it is an arcane body; it is unique. My hon. Friend referred to having leverage on the Crown Estate, but I do not know how we can have any leverage on it at all. I look forward to hearing what the Minister says about the role of the Crown Estate. It chooses to maximise profit and income from the Treasury. It is in a powerful position. We need assurances that it is on board with the general policy set out in the Bill.

Photo of Brian Binley Brian Binley Conservative, Northampton South

I thank you for your guidance on clause 3, Mrs. Humble. I had my doubts about certain points, and you have clarified the position for me.

I wish to set my remarks about climate change against the issue of China and India because carbon storage impacts particularly on that debate. If we go ahead in Europe alone, the cost throughout the next 20 or 30 years will be enormous to European industry and the only way in which we can take a proper approach to climate change is to ensure that we have a global agreement with both China and India. The whole matter of gas storage impacts on that particular area.

The Bill provides a dual lease and permit system of licensing, which adds sizeably in the minds of the industry to the bureaucracy of licensing, regulation and inspection. It is concerned about adding to cost, for example, at a time when cost is in the early days and very much an investment that is reliant on income at a later date. A licensing exercise will be more expensive because of its dual purpose. The lease part of the process is related to the Crown Estate and, as the hon. Member for Sherwood said, there is much worry about control and the ability to understand the machination in that regard.

Later in the Bill, particularly under clause 12(3), reference is made to the regulatory and inspection powers. It suggests that they will be lodged with  another body. That will make the matter of licensing and regulation particularly difficult for an industry that is in the relative early stages of development and needs all the help it can get.

My real plea is to ask the Minister whether we can reconsider the whole matter. I know we cannot do so in this Bill, but there will be later opportunities. Indeed, we could bring the whole of licensing, inspection and all the regulatory matters under the control of a central body rather than splitting it between the two bodies, as suggested by the Bill.

Photo of John Robertson John Robertson PPS (Dr Kim Howells, Minister of State), Foreign & Commonwealth Office

I, too, welcome you to the Chair, Mrs Humble. Could I follow on from the hon. Member for Northampton, South on the question of licensing in general? Although, it will crop up in various places in the Bill, it is important to raise the issue now. At our third sitting I asked Mr. Paul Dymond, the director of operations of Oil and Gas, about licensing. He said:

“There are a number of parts in the Bill asking to tighten up certain pieces. Licensing has been going on since 1964, and there are hundreds of licences. Within each licence, there are tens of part-licences, so the licensing process today is exceedingly complex

When I asked him whether he thought it was more or less complicated, he replied:

“Because the process has been going on for so long, companies have commercial and legal mechanisms to cover this for themselves. What is really important is that some of the new powers that the Secretary of State will have as a result of the Energy Bill do not work against, but with those mechanisms that are there.”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 105, Q205-6.]

I am not concerned about costs, because I think that these companies can afford a few bob or two. I will not worry about how much it costs them to get the licences and how many people they employ. But if there is one thing that has been a feature of many Bills over the time of this Government, it is that we try to streamline bureaucracy. I ask the Minister to take a look at this and see whether we can do that here. Although we must ensure that security and safety are paramount in everything we do, if we introduce more hurdles for people to get over, sometimes the process just becomes too cumbersome. At the end of the day, the only people who make any money are the lawyers.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

This has been a useful and well informed debate and we are all indebted to the hon. Member for Southampton, Test for the knowledge that he has brought to some of these considerations. We all agree that this should not simply be a matter of transferring environmental damage from one aspect of the energy process to another in an attempt to reduce CO2 emissions. Doing massive damage to our marine environment in the process is not an appropriate response to the issue.

We have to go into the whole CCS debate with our eyes open and understand the consequences. It is easy at the moment for it to be seen as the panacea for all our ills that will enable us to go on burning fossil fuels for all time to come. People have not yet fully understood how it might work and what the consequences might be. But I should be interested if the Minister could take this debate a little further and look at the legal responsibilities of where liability lies in these matters, particularly in relation to things like statutory nuisance.

It is quite possible that if one of these installations was put in place, it would be deemed to be a statutory nuisance to fishermen or to shipping lanes. Who then has responsibility? Clearly there is the operator, who is in charge and who owns the installation, but he has a lease from the Crown Estate. So does the Crown Estate also have some of the legal duties for statutory nuisance? But it is operating under licences partly from DBERR and partly from DEFRA, so do they have any legal responsibility for statutory nuisance in these areas?

We need some clarity here and not just in relation to such activities, but in relation to a whole load of others too. Offshore turbines are in a different part of the Bill, but the same issue will apply if they have a licence from the Crown Estate and it is deemed that they are making a statutory nuisance by obstructing other people’s legitimate right to go about their business. Who will be responsible for that?

I have a couple more general questions, which I should be grateful if the Minister could answer. Who will be responsible for assessing the geological safety of the proposed storage area? Will it be officials from his own Department, the inspectors who are referred to in a subsequent clause and who will carry out subsequent assessments? We all know that the terrain of the Earth changes gradually over time in certain areas, so who will be responsible for making sure that, in decades to come, they are still satisfied about the geological safety of the areas that are being proposed for these activities?

Photo of Albert Owen Albert Owen Labour, Ynys Môn 10:15, 21 February 2008

I want to bring a Welsh dimension to this issue. We heard in the discussions on the amendments talk about environment groups and agencies but, in Wales, the statutory consultee is the Welsh Assembly Government. I know from my experience—and my constituency is surrounded by sea so the issue affects me considerably—that with some applications in the past, we had the old Department of Trade and Industry giving licences, using the Welsh Assembly Government as a consultee. However, they had certain responsibilities themselves and there was often duplication and delay because both bodies were involved.

Now we have the move to liquefied natural gas, and I prompt the Minister on this point because there is a proposal in my constituency, or off my constituency, for the unloading of LNG. I want to know whether the Welsh Assembly Government have responsibility for that because of the short distances involved. The planning authorities are responsible for what happens ashore, the Department for Business, Enterprise and Regulatory Reform is responsible for what happens off the territorial waters, but who is responsible for what takes place a short distance offshore and not on land, but not outside territorial waters? Do the Welsh Assembly Government have responsibility for this? Would he deal with that question in his winding up?

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

This has been a useful discussion, including the question of who is responsible for longer-term geological monitoring, and I hope to have an answer to that before too long.

Let me just set the scene on this clause by saying that clause 3 empowers the Secretary of State to grant licences for the purposes of offshore gas storage or unloading and related activities. The licences will contain a number of terms and conditions, details of which will be decided following consultation. Perhaps we can leave the details of such terms and conditions until we move on to clause 5.

Because the exclusive rights to exploit the sea, the sea bed or spaces under the sea bed for these purposes will be vested in the Crown under clause 1, an operator will in addition have to obtain lease or authorisation from the Crown Estate. Subsection (2) therefore makes provision for the geographical co-ordinates covered by the gas storage licence to be linked to those covered by the lease or authorisation from the Crown Estate. This is a sensible arrangement as both are required before any activity can take place and it will reduce bureaucracy for both the licensing authority, in this case the Secretary of State, and the operator.

We hope to convince the mover of the amendment that it is unnecessary, but that is for him to judge. However, it is a useful and important amendment and has led to an important discussion. The hon. Member for Northavon has raised the important point of the interaction of environmental regulators when granting licences for offshore gas storage and carbon dioxide storage activities. There is also the important theme of the advent of marine spatial planning and the marine Bill, to which I will return, although hon. Members will understand that until we have a marine Act, some of the specifics cannot be decided.

Through this amendment, hon. Members are seeking to introduce a requirement that before issuing offshore gas unloading and storage or carbon dioxide storage licences, the Secretary of State shall consult with relevant environmental bodies, particularly in relation to marine plans, when granting the licences. One key aspect of the provisions in the Bill is the protection of the environment. We have therefore ensured the regulatory framework for offshore gas unloading and storage and carbon dioxide storage builds on existing environmental legislation. There already exists a tried-and-tested environmental regime for the oil and gas industries in the North sea and this is set out in a number of pieces of legislation. I assure hon. Members that it is because we take these issues so seriously that we will also provide for legislation to cover offshore gas unloading and storage and carbon dioxide storage activities. That will ensure that proposals for installations of that type are subject to appropriate controls to protect the environment. Where necessary, environmental approvals granted in respect of a project would also contain conditions to protect the environment. We will extend the requirements of EU environmental laws to the offshore gas unloading and storage, and carbon dioxide storage, regimes.

The relevant environmental protection laws provide for and, indeed, require consultation with the relevant environmental bodies, such as Departments and their agencies that have a particular responsibility for the environment. The hon. Member for Northavon may find it helpful if I explain some of the environmental  protections that will be in place once the regime is implemented. Those obviously cannot be specified in the Bill.

First, under legislation implementing the environmental impact assessment directive, certain aspects of any offshore gas unloading and storage of CO2 will require an environmental impact statement. I hope that that reassures the hon. Gentleman in that respect. The environmental impact assessment will be undertaken by the potential developer and assessed by the Secretary of State or, in the case of CO2 storage, the relevant licensing authority. The assessment will determine the extent of any potential impact of the proposal on the environment, and, where necessary, will propose options for minimising such impacts. By virtue of the public participation directive, the public will be able to participate in and be consulted on any proposal.

Where necessary, an appropriate assessment will also be undertaken under the habitats directive. That will determine whether the proposals would have any adverse effect on the integrity of Natura 2000 sites. I do not think that there are any of those in my constituency, but I am sure that Opposition Members have them in their constituencies.

I shall speak briefly to the specific point about marine plans. As hon. Members will know, the concept of marine spatial planning is one that the Government are considering in the context of the draft marine Bill that we expect to publish later this year—as it says here, more cautiously than my hon. Friend the Member for South Thanet: I shall give him more lines to take in the future.

We expect that once the marine management organisation is established, the Secretary of State will work closely with the organisation in considering the potential for offshore gas unloading and storage and carbon dioxide storage projects in UK waters. That will replicate the existing relationship between the Secretary of State and the Marine Fisheries Agency in the context of existing oil and gas licensing rounds. There is already a good deal of experience of the need for such consultation and collaboration.

I appreciate the commendable intention of the amendment, but I consider that because of the existing environmental protections that I have just outlined, it is unnecessary. In my view, the relevant matters should be dealt with under existing environmental laws; they can and will be amended as appropriate.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

Perhaps I should just briefly share some of the thought processes behind the drafting of the amendment, which refers to environmental organisations in general. Of course, the reason it had to do so was that the maritime management organisation does not yet exist. It was the maritime spatial aspect of the matter that particularly concerned us.

The Minister has given a reassuring indication of the direction of policy, but surely the Government are the Government and they must know whether the maritime management organisation will be a statutory part of the process in due course. If the Bills had been presented to Parliament the other way round, that matter would have been sorted out. Surely the mere timing of the Bills does not mean that the Government do not know the  answer to that question. Will the Minister give an absolute assurance that the organisation will be part of the statutory process?

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

For reasons that my hon. Friend the Member for South Thanet outlined, one cannot be as specific as the hon. Gentleman wishes, because the question of what the marine Act will look like at the end of the day is subject to the will of Parliament. The hon. Gentleman surely understands that discussions are already going on, and will continue, about the precise and important arrangements that need to be made.

As I have said, in relation to offshore oil and gas, agreement has been reached with the Department for Environment, Food and Rural Affairs that that is a reserved matter, and that therefore the Department for Business, Enterprise and Regulatory Reform should be the licensing authority. Perhaps I did not say that earlier, but it shows that we are already discussing in my Department the interaction of oil and gas with marine spatial planning.

It being twenty-five minutes past Ten o’clock, The Chairmanadjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.