Clause 30

Energy Bill – in a Public Bill Committee at 4:15 pm on 26 February 2008.

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Termination of licence: regulations

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

I beg to move amendment No. 15, in clause 30, page 16, line 3, after ‘facility’, insert

‘and about the examination by inspectors of the closing of the facility.’.

This important amendment concerns the way in which facilities will be closed, and the examination by inspectors of such closures. It reaffirms the role of inspectors in examining a facility that has been closed for any reason, and says that the operator should be responsible for all such costs. The Bill does not make it  clear that when inspectors need to go in to ensure that work has been done properly, that cost will be reimbursed by the operators. I seek the Minister’s assurance that they will be required to pay for that.

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

Again, I thank the hon. Gentleman. My speaking note always says thank him before seeking to persuade him that I cannot possibly accept his amendment, however well intentioned. As he knows, a key area covered by the regulatory framework in the Bill is the closure of carbon dioxide storage facilities. Operators, as commercial entities, cannot be responsible for carbon dioxide storage facilities indefinitely because of the geological time scales involved, as we discussed this morning. Clause 30 provides the Secretary of State with the power to make regulations specifying requirements for the termination of licences and the arrangements for the long-term stewardship of those closed stores. We expect licences to include provisions requiring the carbon dioxide store to be monitored for a period of time after closure to ensure its safety and security. That is provided for in clause 19. During that time, responsibility and liability for the store will remain with the licensee. Only when there is sufficient evidence to confirm that it is safe and secure would we expect to consider terminating a licence. I made that clarification earlier.

The amendment would include in the clause express provision to allow inspectors to examine closed carbon dioxide stores. That is not necessary, because there are already powers in the Bill that will allow us to deliver that aim. First, requirements for the inspection of carbon dioxide stores during both the operational phase, when carbon dioxideis being injected, and the monitoring phase could be included in the specific licence terms and conditions of any carbon dioxidefacility. The power for the licensing authority to prescribe such conditions is contained in clause 19, which governs the terms and conditions of licences.

Secondly, the amendment would duplicate powers in clause 26, which gives the Secretary of State powers to appoint inspectors and make regulations prescribing their powers and duties. It allows the Secretary of State to specify their inspection responsibilities regarding both operational and closed carbon dioxide stores, and in relation to any inspections that might be needed prior to the termination of a licence. In summary, I am confident that the provisions in the Bill will provide the necessary environmental, safety and financial protection properly to regulate the inspection of closed carbon stores prior to, or as part of, the termination of licences. I therefore ask the hon. Gentleman to consider withdrawing his amendment.

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

Given the Minister’s assurances, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

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

I am glad to have the opportunity to raise a couple of additional questions.

Clause 30 talks about the circumstances in which a licence may be terminated. Would the Minister clarify the circumstances? Would he give us examples of what he has in mind? Operators need to have that level of guidance, given that they are to invest tens of millions of pounds in these facilities. They need to know in what circumstances the licence could be removed from them. We are not looking for an exhaustive list but some indication of the level of offence that would result in such a draconian step.

The Minister said earlier that one did not include the obvious in the Bill; one only included the unusual and less obvious. The challenge to him is to come up with a range of less obvious activities and offences that might require the licence to be revoked in these ways. It would be important for those being asked to invest to have greater clarity.

What about compensation where a licence is withdrawn? Licences could be withdrawn because a new technology comes forward which gets rid of CO2 in a different way—maybe a science which we do not yet understand. The hon. Member for Bolton, South-East may say it is impossible that this might be developed, based on his own scientific knowledge but, on the grounds that we should not rule things out, it could be that a day will come when the Government deem that capture and storage is no longer the appropriate way to deal with CO2.In such circumstances would it not be right for operators to be entitled to compensation where they have invested millions of pounds in good faith but the Government have changed their policy for dealing with CO2?

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

I will see how far I can progress in tackling the hon. Gentleman’s specific questions in the time allowed.

Operators as commercial entities cannot be responsible indefinitely for carbon dioxide storage facilities, as we have discussed, due to the time scales and the geology involved. We expect licences to include provisions requiring the carbon dioxide store to be monitored for a period after closure to ensure their safety and security. Only when there is sufficient evidence to confirm that the stores are safe would we expect to consider the termination of licences.

Carbon dioxide storage licences provisions under clause 19 of the Bill may stipulate the procedure for terminating the licence after certain requirements are satisfied, relating, for example, to the safety and security of the store or the payment of a surrender fee. I might be able to answer quite quickly. However, where the licensing function is being carried out by another authority, the Secretary of State may wish to restrict by regulations that authority’s discretion in accepting termination of licences, for example, by placing the licensing authority under an obligation not to agree to the surrender of a licence until it is satisfied that the store is safe and secure. The regulations may also prescribe circumstances additional to those stipulated in the licence in which termination may be accepted.

It is important to provide that, after termination, the long-term stewardship of the carbon store is undertaken by a responsible entity in order to ensure  that risks associated with such stores, if any, are minimised. The Crown Estate has agreed to take on this function, which is an inherent part of its ownership of the rights of the geological space in which the carbon dioxide is stored. The regulations would allow the Secretary of State or another body to which this function may be transferred—for example, the Crown Estate—to undertake commitments both of a non-financial and financial nature in relation to the stores that are no longer subject to a licence. Such commitments may include the duty to carry out monitoring or to remediate any leaks.

The Crown Estate may have to be reimbursed for any costs incurred in carrying out the long-term stewardship of the closed carbon dioxide stores. This clause gives the Secretary of State the power to take on financial obligations in relation to such stores, which may include providing an indemnity to the Crown Estate.

There may some misunderstanding about the meaning of termination. This clause relates to the surrender of a licence. We would consult on when the termination takes place but it is likely to be when it is safe and secure.

The hon. Gentleman asked me about compensation for licences that are withdrawn, and the clause deals with the termination of licences at the end of their operating periods. Compensation falls outside the scope of the clause, so we must consider the matter a little further. I see the point of his question, and, with his permission, it may become part of the increasingly impressive letter that I will write to him.

Question put and agreed to.

Clause 30 ordered to stand part of the Bill.

Clauses 31 to 33 ordered to stand part of the Bill.