Fourth Standing Committee on Delegated Legislation
Tuesday 13 March 2001
[Mr. Eddie O'Hara in the Chair]
Draft Offshore Combustion Installations (Prevention and Control of Pollution) Regulations 2001
The Minister for Energy and Competitiveness in Europe (Mr. Peter Hain): I beg to move,
That the Committee has considered the draft Offshore Combustion Installations (Prevention and Control of Pollution) Regulations 2001.
The regulations before the Committee will apply the provisions of EC directive 96/61 on integrated pollution prevention and controlcommonly referred to as the IPPC directiveto offshore oil and gas combustion installations. They follow last year's similar regulations, which implemented the IPPC directive on onshore emission sources. Both sets of regulations are made under the Pollution Prevention and Control Act 1999.
The purpose of the directive, and consequently of the regulations, is to enhance protection of the environment as a whole by preventing or reducing emission of pollutants to air, water and land. Although the primary intention of the directive was to introduce controls on onshore sources, a number of large offshore oil and gas installations require, and have, their own power generation plant in order to operate. The regulations therefore seek to introduce a similar level of environmental protection for power production offshore plant.
Offshore emissions are quite significant, accounting for more than 4 GW about 4,000 MWof power used offshore, which is approximately 6 per cent. of all generation connected to the grid. In 1997, emission levels were 43,200 tonnes of nitrogen oxide, 4,500 tonnes of sulphur oxide, 14,900 tonnes of carbon monoxide, 3,500 tonnes of unburned hydrocarbons, and 12.44 million tonnes of carbon dioxide.
Unlike for onshore regulations, there is no existing system of permits on which to build. The regulations therefore set in place a new permitting system to meet the requirements of the directive. Under the regulations, operators of offshore combustion installations will require permits to be issued by the Secretary of State to cover emissions from combustion installations such as gas turbines and diesels that generate electricity or provide power for pumps and similar equipment.
The purpose of the permits is to prevent or reduce pollution to water and landin this case, the sea bedbut mainly to air. That will be achieved by operators using the concept of best available techniques, which takes proper account of the need to assess appropriately the costs and benefits of introducing such technology. In that respect, factors that are peculiar to the offshore situation will have to be considered, not least the harsher operation conditions and the space restrictions on offshore platforms. Moreover, the quality of the fuel gas used can vary greatly, because offshore plant use the unprocessed gas produced in their operation. Such raw gas restricts the technology that can be applied to control emissions, and the harsher environment and space limitations have an obvious effect on the cost implications of introducing such technology.
Initially, permits will be required only for new combustion installations that exceed a specified thermal threshold50 MWor for existing combustion installations that undergo substantial change. In accordance with the provisions of the directive, existing installations that do not undergo substantial change will not require permits until late 2007.
In practice, we expect to issue permits in the normal way for individual platforms where the combustion installation ormore usuallyinstallations exceed the threshold. Currently, more than 60 platforms fall into that category, but none would need permitting until 2007 unless they were to undergo substantial change in the interim. However, at this stage we estimate that 10 to 15 platforms currently in use may have ceased production by then, but I should emphasise that that is purely an estimate. We also estimate that one or two new fields with combustion installations that exceed the threshold will require permitting each year.
One of the main comments arising out of the consultations was what constitutes substantial change. The regulations define it as a change in operation that may have significant negative effects on human beings or the environment. When assessing whether substantial change has taken place, it is difficult to be more specific about considering all the effects rather than just the net environmental effects. However, I assure the Committee that in administering the regulations we shall be careful to reach balanced conclusions in any cases of this type that are presented to us, and we are committed to an approach that is entirely consistent with that which applies onshore.
Another main comment related to costs. Costs to the operators affected will mostly involve substantial sums. However, they must be considered in the context of the overall costs and profits of our oil and gas production. In those terms, the costs arising will be more than justified by the improvements to the environment that they bring about.
The regulations, which are the product of extensive consultation with those in the industry and others, strike a proper balance between protecting the environment and ensuring that the legitimate concerns of the offshore oil and gas industry have been addressed. I shall be happy to respond to any points that are put to me, and I commend the regulations to the Committee.
Mr. Nick Gibb (Bognor Regis and Littlehampton): I start by declaring an interest. I made an oil industry-funded visit to the United States last summer, where I was able to go on a rig in the Gulf of Mexico and meet oil company representatives, regulators and the Secretary of Energy, Bill Richardson.
The Opposition will not object to the regulations, which have the support of the offshore oil industry. In drafting the regulations, the Government worked closely with industry representatives. However, they have one or two queries, which I shall raise in a moment.
I have been on oil rigs in the North sea, Morecambe bay and the Gulf of Mexico, and it is evident that all their operators have a paramount concern about safety. Moreover, they make huge efforts in dealing with the environment in order to minimise pollution and emissions. I have always been impressed by their professionalism, whether in respect of marine preservation, marine enhancementthe rig acts as a shelter for many specieswater emissions or gas emissions.There are two broad methods of state regulation of the offshore industry. One option is to trust the professionalism of the operators and the engineers that they employ. The regulator leaves it to the professionals as to how they achieve the objectives set by the regulations in terms of safety and the environment. The role of the regulator is to assess methodologies and to monitor outputs.
The alternative approach is for the regulator to set down in detail precisely how operations are to be conducted in order to achieve the objectivesfor example, ``You will have a cylinder this size fixed by tungsten brackets 6 ft away from X.'' That approach is mistaken, given the professionalism displayed by offshore operators. The state does not know best, and it will lead to antagonism between the regulator and operators. It is far better to conduct matters with co-operation in a working environment, paying heed to the professionalism of the operators and their engineers. Can the Minister assure me that that will be the approach taken by the Department of Trade and Industry, the Environment Agency and the Health and Safety Executive in regulating the offshore industry?
The Minister mentioned best available technologyBATand said that that would take proper account of costs and benefits. Another acronym is BATNEECbest available technology not entailing excessive costs. Will the Minister explain the difference between those two acronyms? Does BAT necessitate using the most advanced and expensive machinery, even if slightly less advanced and cheaper machinery does the job as well or almost as well? Should that methodology be used if it means using equipment that is three times as expensive in order to achieve an improvement of only 1 per cent?
The UK Offshore Operators Association has concerns about the use of dry low-emission combustion systems. It would like to know what the Government's attitude is to applying that relatively new technology to existing and new gas turbines offshore.
UKOOA also sought clarification on another matter. I shall quote from its briefing:
``The issue of satellite field tie-backs is of critical importance to the industry. As the UK continental shelf reaches a mature state much of the future development will be through sub-sea tie-backs to existing surface platforms and will be key to full exploitation of UK continental shelf reserves. Clarification about sub-sea tie-backs of existing fields in development and brand new satellite fields being tied back via existing infrastructure would be useful.''
UKOOA also have concerns about the appeals procedure. Regulation 17 gives the right of appeal to the High Court for what is, in effect, a judicial review of the Secretary of State's decisions. The industry is concerned about whether the Department of Trade and Industry will be flexible in response to its representations about the way in which the aims of the regulations can be achieved. Can the Minister give us an assurance on that? It ties in with the need for a consensual approach to regulation.
Will the Minister comment on the cost of implementing the regulations? Although he touched on that briefly, he failed to mention any figures. The following question was asked in the UKOOA briefing:
``Noting the regulatory assessment contains only the cost of implementation for a single unit, what cost did the Government estimate would be the total cost to the industry to implement the regulations offshore, and was the industry comfortable with the Government's estimate?''
The figures involved are not small. If I understand the regulatory impact assessment correctly, the cost of a single unit is near £1 million to £2 million per turbine. Major retrofits are approximately £5 million to £7 million per turbine. A total repowering is about £12 million to £15 million per turbine. As an avid reader of regulatory impact assessments, this is probably the worst that I have seen. It is inadequate and proves how important it is to have an independent outside body to prepare assessments, which is the policy of the Conservative party.
As with much of today's law, the regulations are driven by a new directiveEC directive 96/61. Can the Minister say under which EU jurisdiction with offshore industries similar regulations have been implemented or are about to be implemented? Will he give the conclusion of the Department of Trade and Industry's assessment of the legislation in non-EU Norway? How will the regulations affect the competitiveness of the UK offshore industry, compared with that of Norway? We do not oppose the regulations but await his responses to those points.