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The OGA

Part of Energy Bill [Lords] – in a Public Bill Committee at 9:45 am on 26th January 2016.

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Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change 9:45 am, 26th January 2016

Amendment 7 would add a new requirement for the Secretary of State to undertake an assessment of whether the OGA’s powers are fit for purpose within one year of clause 2 coming into force. The provision should be read in conjunction with clause 17, to which I have tabled my own amendments to overturn the amendments made in the other place. My amendments reinstate the original wording of clause 17 to require the Secretary of State to carry out a review of the OGA’s performance and functions on a no more than three-yearly ongoing basis

Amendment 7 returns to the notion that a review of the OGA’s powers should be carried out within one year of the Bill coming into force. Moreover, it would seek a much wider review than that specified in clause 17, covering all the OGA’s powers. I remain of the view that the amendment is not necessary and risks damaging the OGA’s effectiveness. The hon. Gentleman puts it very well when he says he does not want to pull the plant up the roots to see if it is growing, and I fear that that is exactly what would happen.

For such a wide-ranging review to be undertaken within one year, it would have to begin almost immediately, diverting significant OGA and Government resources from the urgent task at hand. It would also leave no time for the OGA to operate within the powers that it will have, making it difficult to reach any view on whether they are effective. It would also cut across Sir Ian Wood’s recommendations, which remain crucial. Government and industry have made it clear that, more than ever, we need a robust and well resourced regulator to support the North sea oil and gas industry. It is crucial that the OGA is given the space it needs to fulfil that role as a new regulator with new powers. The amendment risks stifling the OGA and creating uncertainty over its functions at a time when it needs to be resolutely focused on providing urgent support to industry, so I hope that the hon. Gentleman will be content to withdraw his amendment.

Government amendments 2 and 3 overturn Opposition amendments made in the other place and reinstate the original wording of clause 17 to require the Secretary of State to carry out a review of the OGA’s performance and functions on a no more than three-yearly ongoing basis. There is broad consensus that measures are needed to ensure that the OGA remains well equipped to address the diverse challenges faced by the oil and gas industry, and that its role and scope, particularly in relation to carbon dioxide and storage, is appropriate, sufficient and regularly evaluated. As such, the Government introduced provisions requiring a review of the OGA’s effectiveness in exercising its functions, as well as a review of the fitness for purpose and scope of such functions. However, as I said, Opposition amendments made in the other place require an initial review to take place no later than one year after the Bill comes into force, and then annually for subsequent reviews. These time periods were reduced from the three-year periods that the Government had introduced.

I have already set out how a mandatory annual review would be an incredibly onerous process for the Government, the OGA and industry, and is likely to have myriad unintended consequences. It would require the almost continuous evaluation of the effectiveness of the OGA, with very little time to implement the recommendations from each review. Reviews would be extensive, needing to cover both statutory and non-statutory functions, and an assessment of effectiveness against external factors, such as changes in the regulatory landscape, operational practices across the UK continental shelf, and environmental and economic factors. All of this would be required as part of the review to enable the Secretary of State to produce a report setting out the findings of the review, which is to be laid before Parliament. This would create significant resource burdens for the OGA and the Government and risk obstructing the work of the OGA. The process would be inefficient and would therefore risk producing an ineffective review. It would weaken the ability of the OGA to act as an independent regulator free from Government intervention. It would also create a review process significantly out of step with those to which other regulators are subject.

It is worth noting that other mechanisms will be in place to ensure that the OGA is held to account for its performance and functions. It will publish, on an annual basis, a refreshed five-year business plan and an annual report and accounts. The need for an arm’s length body charged with effective stewardship and regulation of the UK continental shelf was a central recommendation of the Wood review. I believe the original three-year review periods introduced by Government must be reinstated to avoid conflict with that recommendation.