Clause 37 - Levy on holders of certain energy industry licences

Infrastructure Bill [Lords] – in a Public Bill Committee at 9:25 am on 13th January 2015.

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Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy) 9:25 am, 13th January 2015

I beg to move amendment 67, in clause 37, page 43, line 31, at end insert—

“(j) encouraging the development of CO2 storage potential.”

I am grateful, Mr Hood, for your ruling on new clause 20, which we will come on to later. Amendment 67 continues where we finished on Thursday, on carbon capture and storage. As Members will recall, we discussed an amendment to include CO2 storage in the competences of the new Oil and Gas Authority. This amendment would ensure that the Oil and Gas Authority was able to raise levies against CCS-relevant activity. Last week the Minister argued that changes to include CCS in the remit of the OGA were premature and that it was envisaged to include CCS at a later date. My concern is that leaving the levy-raising powers of the OGA to a later date may be too late.

The amendment does not distort the core functions of the OGA. Following on from our discussions last week, it leaves plenty of room for the OGA to be amended to included carbon capture storage during the next Bill. It ensures that, if and when the time comes and the Oil and Gas Authority turns its attention to CCS, it can raise the necessary revenue to be able to do so. I do not think there is any good reason that the Government would want to deny the OGA this power, to be called upon when necessary.

Clause 37 sets out functions that can be supported through the use of levies. Subsections (1)(c) and (5)(a)(vii) both refer to CO2 storage; however, there are a series of activities listed under subsection (5) which are highly germane to the development of CO2 storage in the UK—for example, access to the information and data covered in paragraph (b). The wording in the clause  implies that the OGA would not be able to recover costs for these activities from CO2 storage projects if they do not directly contribute to “maximising…economic recovery”. This would cover all CO2 storage activities that did not contribute to enhanced oil recovery.

My concern is that that risks creating a strong disincentive for the OGA to work on CO2 storage matters and could slow the development of that technology—again, the discussion that we had last week. The amendment would address this concern by making it clear that the OGA can recover costs for such activities at the point at which it takes on those responsibilities and that focus in future.

Photo of Amber Rudd Amber Rudd The Parliamentary Under-Secretary of State for Energy and Climate Change

It is a pleasure to serve under your Chairmanship, Mr Hood.

I thank the hon. Member for Rutherglen and Hamilton West for moving this thoughtful amendment, which would broaden the scope of activities undertaken by the Secretary of State which could be funded by a levy on licence holders to include activities that encourage the potential for carbon dioxide storage. I share the hon. Gentleman’s desire to ensure that the potential for carbon dioxide storage is realised. I would like to reassure him that the UK has one of the most comprehensive programmes anywhere in the world to support the commercialisation of CCS technology and to develop the industry. We have created a regulatory framework to encourage and enable the development and deployment of CCS, and have set aside up to £1 billion of capital plus operational support for commercial scale CCS projects. We are also supporting R and D, including providing £2.5 million of funding to accelerate the development of the UK’s strategic storage capacity.

However, the Government see no need to amend clause 37 as the amendment proposes. The clause intentionally focuses the scope of the levy to enable the Wood review recommendations to be implemented so that the urgent challenges, which we discussed last week, facing the oil and gas extraction industry can be addressed. The Government have set out their intention to bring forward legislation to establish an arm’s length body, to be called the Oil and Gas Authority, to act as regulator, steward and licensing authority over the UK’s oil and gas reserves, as well as to undertake licensing activities in relation to carbon dioxide storage.

The levy-raising powers set out in clause 37 are not intended to limit the OGA’s role beyond the petroleum production sector. While we are keen to ensure that the OGA’s focus is firmly on maximising the economic recovery of offshore UK petroleum, it is our intention that its activities will be able to benefit other offshore activities, including CCS, where appropriate.

The hon. Gentleman questions whether it would be “too late”—in his phrase—if that is done later. I would like to reassure him that it would not be. The clause allows what he desires to take place, but we do not feel that now is the right time, or that this is the right place, to set that out. Our intention is to establish the OGA with its role, functions and powers in legislation early in the next Parliament. We will do so with the close input and involvement of the respective industry trade associations to ensure that appropriate arrangements are in place to encourage CCS potential. I hope that reassures the hon. Gentleman that now is not the time to do this and that when it is done, it will be done in consultation with industry members, so that we get it absolutely right.

The difference between the hon. Gentleman’s proposal and the Government’s is that we feel that CCS, vital though it is to our industry, is still a nascent technology and does not yet merit the same powers when it comes to maximising oil and gas recovery. I hope that he has found my explanation reassuring and will consider withdrawing his amendment.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I thank the Minister for her explanation. I do not want to be unduly uncharitable, but I am afraid that the stance she has taken only serves to reinforce the concerns I expressed in moving the amendment. She refers to CCS as a “nascent technology”, yet as we discussed last week and as she is aware, it is now a commercially operating technology in Canada and is increasingly likely to become one in China soon. It is moving from being a nascent technology to being something that is achievable.

As we discussed last week, in the UK we have the competition, and there are two projects undergoing FEED—front-end engineering design—studies. However, it is important to make sure that CCS is something that the Oil and Gas Authority can push now. The danger of returning to this later is that there may well be a delay before the OGA can take on those functions and ensure an agenda that is clear about the desire for CCS to be properly achieved.

As we discussed last week—and as we discussed with the Minister’s colleague, the right hon. Member for South Holland and The Deepings, who is sitting alongside her, when he was in her Department—a number of Members from across the parties, including both Government parties, have put a lot of attention on the importance of CCS. My concern is that the Government’s attitude to this amendment is indicative of a wider attitude that still says that CCS is something that may well be somewhere in the future, rather than preparing all the ground, so that if the progress that we want to see in both FEED studies is achieved, we can get on and make progress as soon as possible. As we have reflected before, without carbon capture and storage technology, the opportunity to properly reduce emissions from a balanced energy mix and a number of industrial processes is, if not impossible, then very difficult indeed. I am afraid that I am therefore not convinced by the Minister’s response to the amendment, and I intend to push it to a vote.

Question put, That the amendment be made.

The Committee divided: Ayes 8, Noes 10.

Division number 6 Decision Time — Clause 37 - Levy on holders of certain energy industry licences

Aye: 8 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 37 ordered to stand part of the Bill.

Schedule 6 agreed to.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

On a point of order, Mr Hood. I would like to raise the issue of the availability of a report that is very important for the Committee to make effective decisions on the clauses we are about to debate. The report is by the rural communities policy unit at the Department for Environment, Food and Rural Affairs and is entitled “Shale Gas: Rural Economy Impacts”. However, it is not available to the Committee or other Members in unredacted form. Indeed, in its present form, it has over 70 redactions concerning the issues of shale gas, rural communities and, in particular, the accumulation of drilling in those communities. The availability of the report was raised recently in the Liaison Committee, and the Prime Minister indicated that he would look into it and give an answer about whether the report could now be published unredacted. Are you able to use your good offices, Mr Hood, to ensure that the report is available to the Committee in unredacted form in the very near future, so that we can undertake an informed discussion of these clauses?

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

I thank the hon. Gentleman for his point of order and for giving prior notice that he would raise it. I have to tell him and the Committee that it is not a point for me; however, I am sure that the Minister has heard his comments. I will leave it with the hon. Gentleman to see what develops from it.