Powers to charge fees

Energy Bill [Lords] – in a Public Bill Committee at 9:25 am on 2 February 2016.

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

With this it will be convenient to discuss clause 78 stand part.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

It is a pleasure to serve under your chairmanship again this morning, Mr Bailey.

This provision reminds us that the theme of fees runs throughout the Bill. I am also reminded of a sketch in the well known Marx Brothers film “A Day At The Races” where Chico Marx is allegedly selling ice cream but is actually selling form guides to the races and Groucho Marx has to keep buying form guides in order to understand which horse is running in the race, with the result that he ends up purchasing about 20 form guides from the ice cream truck. I commend the film to hon. Members who wish to understand this section. [Interruption.] I wanted to get a mention of Marx into proceedings and that particular one is important.

The provision relates to the Secretary of State’s power to charge fees. It does so by inserting clauses into other pieces of legislation, hence my reference. It is necessary to look at the proposed new clauses to understand how the fees actually work. In the first instance, fees relating to recuperation of costs associated with functions relating to petroleum licences are laid down in part 4 of the Energy Act 2008. The clauses amend that Act to enable the Secretary of State to charge for functions in part 4. A further provision relates to the Marine and Coastal Access Act 2009, and allows the Secretary of State to charge for marine licence functions as they relate to oil and gas regimes.

That effectively means, returning to our earlier discussions on clause 13, that the following regime appears to apply: if an operator in the North sea is considering an application for a licence to explore for petroleum, a consideration of that licence by the Oil and Gas Authority is chargeable with a fee. It is, indeed, part of the remit of the OGA to charge a fee for that purpose. If, however, there is an actual licence, then the Secretary of State charges fees, not the OGA, under this arrangement. If there is a licence arrangement relating to the Marine and Coastal Access Act, a different Secretary of State, the Secretary of State for Transport, provides the licence and presumably charges a fee, which goes to the Department for Transport. As far as activities relating to petroleum and oil exploration activities are concerned, the Secretary for Energy and Climate Change charges for the licence. After transferring a number of people working for the Department of Energy and Climate Change to the OGA for the purpose of putting the organisation on a proper footing, a regime would presumably be developed in the OGA to charge for the consideration of licences under clause 13. Another group of individuals, remaining in DECC—not going to the OGA—would charge for a separate number of licences which are associated with the original arrangement on licences for exploration, but are now charged under those auspices.

A third set of remaining civil servants presumably collaborates with the Department for Transport to charge fees relating to the licences as they pertain to the requirements under clause 77(2) which are taken by this Secretary of State into the purview of the Department of Energy and Climate Change and away from the Department for Transport. To the best of my ability, that is my understanding of how this regime will work.

It raises the question, following our previous discussion about the remit of the OGA relating to fees: why has this arrangement been placed in this particular way in this particular Bill? Far from simplifying the licensing regime, it appears to make it more complex for different agencies issuing licences and charging fees for the scrutiny of the application of particular licence arrangements.

If I were a North sea operator, I would find not only navigating around the North sea but navigating those fee arrangements quite a complex procedure. From the point of view of the Department, I would find the relative inefficiencies of having at least three centres of fee and licensing arrangements in the OGA, DECC and possibly an association with the Department for Transport, not only a bureaucratic problem, but a problem of efficiency and interfacing with operators in the North sea.

Will the Minister elucidate for the Committee the thinking behind these clauses and how they are sited in the Bill? Had it been considered, for example, whether the OGA itself might have taken on some of the fee-charging arrangements? What was the rationale for keeping fee-charging arrangements for licences within the Department? Does the Minister agree that in an ideal world it might have been a better idea to concentrate on the various fee arrangements relating to licences under one authority, which, among other things, would immensely simplify the process for operators?

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change

Good morning, Mr Bailey. It is a great pleasure to be back in Committee for what I hope will be a very interesting day. I assure the hon. Gentleman that this clause relates only to oil and gas functions, not to the functions of other Departments. These functions relate to a separate arm of DECC. As he will appreciate, it is an established practice, accepted by the oil and gas sector, that the costs associated with the provision of regulatory services should be recovered from industry. That is based on the well established “polluter pays” principle that exists across several sectors, ensuring that the taxpayer does not bear the burden of funding regulatory activities.

The clause simply permits the Secretary of State to make regulations, allowing her to recharge functions carried out under part 4A of the Energy Act 2008 and part 4 of the Marine and Coastal Access Act 2009. Those are set out in secondary legislation, which includes the overall fee and calculation, and an impact assessment will be prepared before the regulations are finalised. The clause specifically relates to oil and gas functions. It has been discussed closely with industry and is based on the widely understood principle that the polluter pays and recharges are made, so that the cost does not fall to the taxpayer.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Energy and Climate Change)

I thank the Minister for her response. I understand that these fees relate to oil and gas exploration activities and that the industry is au fait with them. My point was this: why can the OGA not be responsible for this particular licensing arrangement, since it relates to petroleum and gas exploration and exploitation and the OGA has the overall function of regulating that whole area? Would that not be simpler?

As far as the structure is concerned, there might have been a one-stop shop for the process of obtaining licences and paying the relevant fees, with consideration of the licences in the various interfaces those licences have with other considerations in the North sea. Would it not have been a better idea for all of that to be placed under one roof—the OGA—rather than have this dissipated arrangement, whether or not that is something the industry thinks it can, in general, work with? What we have in the Bill is effectively a three-way split in terms of how licences are considered, paid for and granted in relation to other activities in the North sea.

Photo of Andrea Leadsom Andrea Leadsom The Minister of State, Department of Energy and Climate Change

I am grateful to the hon. Gentleman for raising those points, but I would like to assure him that the clause goes to the heart of the OGA’s purpose. As he will be aware, it is the responsibility of the Department of Energy and Climate Change to cover the environmental protection of the North sea, whereas the establishment of the Oil and Gas Authority aims to enable it to manage the licensing of oil and gas exploration and extraction in the North sea. That separation of duties seeks clearly to maximise the recovery of reserves, while minimising the impact on the environment. That is why those roles are kept separate, and the charging for different activities within those responsibilities is therefore also kept separate.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clause 78 ordered to stand part of the Bill.

Clause 79