Clause 71

Energy Bill – in a Public Bill Committee at 1:00 pm on 6 March 2008.

Alert me about debates like this

Transfers without the consent of the Secretary of State

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

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

“Disgruntled of Tunbridge Borehole” has a certain ring to it, but we had better not go there.

It is a term of existing petroleum licences that a licence cannot be transferred without the Secretary of State’s prior consent. That is to ensure that interests in a licence are not transferred to a party or parties who would not have gained the Secretary of State’s consent for such a transfer had he been asked. The Secretary of State needs such powers for situations where, for example, the licences transferred to parties who will not or cannot put enough time and resource into recovering oil and gas from the area. It is important that licensees’ objectives are aligned with the Government’s aim of maximising production from the UK continental shelf. However, despite the requiring of the Secretary of State’s consent to transfer a licence, experience has shown that there can be circumstances where a licence interest has been transferred without it. In such situations, under current provisions, the Secretary of State could accept the transfer—although if it has already been decided that the new licensee is unsuitable, that would not rectify the problem—or revoke the whole licence, although that would mean that any new licensee would need to wait until the next licensing round to get the licence, which could significantly delay production. However, the Secretary of State could not force the parties to transfer the licence back.

We believe that the Secretary of State’s having the power to direct that a transfer revert back to the transferor is a better solution because the transferor would then have the option of transferring the rights under the licence to a more suitable person. In turn, that would mean that production on the field could continue. The clause allows the Secretary of State to direct that the licence interest revert back to the transferor, should he think fit. I believe that that creates an important safeguard and an effective incentive for licensees to comply with the existing requirements of a licence and to seek the Secretary of State’s consent before going ahead with any potential licence transfers. I reiterate that this does not change any of the existing obligations about seeking prior consent for transfers from the Secretary of State; rather, it creates an effective system for addressing any such transfers if the Secretary of State believes it appropriate to do so.

In order to ensure that the Secretary of State has the information necessary to identify whether an unconsented licence transfer has taken place, the clause also allows the commissioners for Her Majesty’s Revenue and Customs to give specific information to the Secretary of State for the purposes of determining whether that has taken place. That ensures that any actions that the Secretary of State may wish to take are fully informed.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

Given that the clause gives the Secretary of State new powers relating to the uncontested transfer of rights or benefits under petroleum licences, why is the Secretary of State being granted these new powers at this point? What has gone wrong in the past which has led to this need for additional legislation?

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

I hoped that I had touched on that in my opening remarks, but I will try to give greater clarity in a few moments.

It is important to protect the information and the people to whom it refers. That is why the clause sets out that the information supplied by the commissioners at HM Revenue and Customs must be limited to that necessary for the Secretary of State’s decision. There are also restrictions on the purposes for which the information can be used. The clause also, in line with the rules on sharing information between Government Departments, makes it an offence for information to be further disclosed without the permission of the commissioners of Her Majesty’s Revenue and Customs, the people identified in the information, or in pursuance of a court order. If found guilty of that offence, a person will be liable, on summary conviction, to a fine up to the statutory maximum and, on indictment, to a fine, imprisonment of up to two years, or both.

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

May we have clarification on a couple of issues? In what circumstances is the Secretary of State’s consent required? Is it always required if a licence is being transferred? Will the Minister clarify the rules regarding the trading of licences? Are people allowed to trade licences, subject to the consent of the Secretary of State, and in what circumstances might he use his powers to revert the licence to the transferor? Would it happen automatically if it were an unconsented transfer, or only if the Secretary of State had additional concerns about the consequences of that transfer?

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

Let me deal first with the question from the hon. Member for East Devon. As I have explained in the context of one or two other clauses, the circumstances in the North sea UK CS are changing. Whereas in the past it was dominated by relatively few big players—the well-known names—the field is maturing as some of the big players give priority to fields elsewhere in the world and there are opportunities for new enterprise companies to come forward, and issues of security have arisen. A number of smaller players are active on the continental shelf. That is welcome, but the other side of that coin is that they are potentially less financially viable. We therefore thought it important to use the Bill as an opportunity to introduce new safeguards.

The hon. Member for Wealden asked several questions, and I may not be able to answer them all at this precise moment. He asked in what circumstances consent is required and whether it is always required. The answer is that it is always required. Moving on—seamlessly, I hope—he also asked whether licences can be traded if the Secretary of State agrees. Yes, they can. Indeed, that is now an important part of the market. However, licensees can also transfer the benefits without his consent, and that causes a disparity between the benefits and the obligations of a licence. Perhaps that was not so seamless. I need to clarify that point, as I muddled myself.

On the question of whether the Secretary of State will always revoke the licence of unconsented transfers or do so only if there are other concerns, some unconsented transfers are acceptable, but we would use the powers only if there were concerns about one of the parties involved in the transfer—for example, about their financial health. If I can clarify other matters later, I will do so.

Photo of Anne Main Anne Main Conservative, St Albans

Perhaps I was not listening as closely as I should have been and what the Minister said was brilliant, but I thought that he said that the parties could transfer the benefits but not the obligations. Is that something on which he is seeking clarification?

Question put and agreed to.

Clause 71 ordered to stand part of the Bill.