Clause
6
Model
clauses
Question
proposed, That the clause stand part of the
Bill.
Malcolm
Wicks:
I thought that at this stage the
Committee might like me to make a short speech again. The clause makes
provision for the Secretary of State to
make regulations that will set out model clauses that could be applied
to all licences—that is, standard terms and conditions. Some of
our discussion already applies to this clause as well. However, to
ensure that the terms and conditions relate to the activities being
undertaken, it will be possible to set out different model clauses for
different cases, which follow from the general provisions contained in
clause 88(2). For instance, it may be appropriate to have a different
set of model clauses for offshore gas storage than for the unloading of
LNG.
The Secretary of
State will also have the power to modify or exclude particular model
clauses when granting a particular licence, should the need arise.
Furthermore, amended sets of model clauses may be laid down by making
further regulations under the clause. Those new model clauses would
apply only to licences granted after the amending regulations came into
force. Such amendments would, of course, be made only where it was
necessary in the light of experience or changed circumstances. We will
consult fully on the draft regulations to give interested parties an
opportunity to comment on those standard terms and conditions before
the regulations are made. Once made, the regulations will be laid
before Parliament, and will be subject to annulment for a period of 40
days. To further improve transparency, the model clauses will also be
published on the DBERR website.
Question put and agreed
to.
Clause 6
ordered to stand part of the
Bill.
Clause
7
Offence
to carry on unlicensed
activities
Charles
Hendry:
I beg to move amendment No. 7, in
clause 7, page 4, line 29, at
end insert—
‘(c) has a
decommissioning programme for the facility, which has been approved by
the Secretary of
State.’.
Clause
7 relates to the offence of carrying on unlicensed activities. As it
stands, it looks at the how a facility should be operated during its
lifetime, but it does not look at how that facility should be
decommissioned once it has stopped being used. My contention is that
decommissioning needs to be included from the outset, so that we can
put it on a level playing field with other activities in the energy
sector—for example with wind farms, which have to have a
decommissioning programme in place when they are established. Indeed,
the hon. Member for Copeland has spoken about the need for a level
playing field in relation to the requirements that the Government are
proposing for nuclear facilities.
A failure to decommission a
site effectively would lead to significant hazards, especially to
shipping, if part of the rig or the injection system is left in
position. Such facilities will inevitably decay over time if they are
not being used or well maintained, especially in the rough seas that
they are being proposed for. Amendment No. 7 would simply require that
before a facility could start to be used for the importation or storage
of combustible gas, there would need to be an approved decommissioning
programme in place, which has been signed off by the Secretary of
State. This could include, for example, a decommissioning programme to
state what needs to be removed at the end of the period of use; the
establishment of a
decommissioning fund, and perhaps in that fund, a charge on the parent
or associated company—as is being proposed with the nuclear
decommissioning programmes. It would seem that this is a
modest change, but it would avoid the need to address this issue at a
later stage when a facility has perhaps stopped being used, and the
original users have ceased to exist in their current
form.
Martin
Horwood:
The intention behind this amendment seems,
sensibly, to make decommissioning a de facto part of the licensing
process. My only qualification would be that there might be neater ways
to do it than are in the amendment—perhaps even slightly less
aggressive ways. It could perhaps mirror what is present in other parts
of the Bill where the decommissioning programme seems to be more
closely tied in with the licence application process, rather than
creating what seems to be a new offence in operating without a
decommissioning programme. That seems to be a rather punitive approach
from Conservative Members, but perhaps that simply represents a
temperamental difference between Liberals and Conservatives.
There also
does not seem to be much detail about what actually constitutes a
decommissioning programme. In the nuclear part of the Bill, it is
referred to as a “funded decommissioning programme”. Of
course, this may reflect the general consensus that nuclear waste
having to be disposed of is environmentally bad—and an
environmental risk in a much more serious sense than the gas being
stored on this occasion, which is at least economically, if not
environmentally, good. Perhaps there is a rationale to having a
different basis, but I wonder whether the hon. Members for Wealden and
for Billericay, who are proposing the amendment, or the Minister have
considered how a decommissioning programme for these installations
would be funded, and how those funds might be protected.
In general, I am sympathetic
to the intention of the amendment, which incorporates decommissioning
into the licence regime. I would be interested to hear from the
Minister why this part of the Bill differs in that respect from other
parts of the
Bill.
Mr.
Swire:
I thought for one moment that the hon. Member for
Cheltenham was going to suggest that the decommissioning programme or
plan could be funded by a windfall tax on the existing companies, but
that money has been pledged by the Liberal Democrats to so many
different areas that probably the pot is, as we speak,
empty.
This
is a good proposal from my hon. Friends the Members for Wealden and for
Billericay. I do not see how it is draconian. Decommissioning is just
as interesting as the commissioning of these activities and licensing,
and it is something that exercises hon. Members on both sides of the
House in this day and age. Indeed, there are those of us—myself
included—whose reservations, particularly about the nuclear
programme, concern the aftermath and what happens to the material once
it has been processed and so on. There are those of us who care
passionately about the environment and want to see plans in
place—before any commissioning is undertaken—that would
show how a redundant plan could be implemented at the given
time.
Dr.
Stephen Ladyman (South Thanet) (Lab): I could understand
us having this debate if it was on the next part of the Bill about
carbon storage. But surely a decommissioning plan for a gas storage
unit is to sell the gas and not put any more
in.
Mr.
Swire:
Indeed, that may well be the case, but we are not
just talking about gas storage. We are saying that written into the
Bill should be the principle that there is a plan or a fund set aside
that could be used in decommissioning. I think it is a fairly
uncontentious amendment and I hope the Minister will address it, given
the fact that it has been supported by the Liberal Democrats as
well
Malcolm
Wicks:
This has been a useful discussion. I hope to
persuade the hon. Member for Wealden that for the reasons I am about to
outline the amendment is not required. I think that the problem can be
tackled in another way.
The hon.
Member for East Devon drew the comparison with nuclear decommissioning
and I suspect that there may be an opportunity later to discuss that
subject. I do not anticipate that the nuclear clauses will go through
on the nod, so I hope that he will forgive me if I do not go down that
path at the
moment.
We
need to ensure that the activities we are seeking to license through
the gas unloading and storage regime are subject to a robust procedure
for managing the final stage of the process, in other words
decommissioning. Through this amendment the hon. Member for Wealden
appears to be seeking a provision that would make it a criminal offence
not to have a decommissioning programme approved by the Secretary of
State at the time the offshore gas storage or unloading facility is
operational. Although I agree with his sentiments, I cannot agree to
this amendment for two reasons.
First, we
are extending through schedule 1 of this Bill the existing
decommissioning provisions in part 4 of the Petroleum Act 1998, to
include offshore gas storage and unloading and related activities. This
means that operators will be required to draw up and carry out an
approved programme for the decommissioning of their installations. Such
obligations can also be placed on certain other interested parties such
as companies associated with the operator. This amendment would in
effect create a different regime for gas unloading and storage from
that which will apply to oil and gas developments.
We are
proposing a number of changes to the decommissioning regime in the
Petroleum Act under chapter 3 of part 3 of this Bill. These changes
will allow the Secretary of State to require decommissioning security
at any time during the life of an oil and gas field if the risks to the
taxpayer are assessed as unacceptable.
We are also
looking to protect the funds put aside for decommissioning so, in the
event of insolvency of the relevant party, the funds remain available
to pay for decommissioning and the taxpayer’s exposure is
minimised. Once the Bill is passed the Petroleum Act regime, including
the changes I have mentioned, will also apply automatically to offshore
gas unloading and storage facilities. Changing the requirement for
decommissioning projects on a piecemeal basis, which would be one of
the implications of this amendment, would lead to inconsistencies
across the different applicable licensing regimes. By linking
offshore gas with the existing regime we provide a single, consistent
approach to decommissioning, with any changes made to the Petroleum Act
regime flowing through to the offshore gas licensing regime. However,
if the amendment were accepted a different requirement would be put in
place for offshore gas unloading and storage, and regimes would start
to diverge. Secondly,
this amendment could create confusion over which penalty regime would
apply to decommissioning. For instance, part 4 of the Petroleum Act
1998, which will apply to offshore gas unloading and storage, provides
a penalty in the case of a conviction on indictment of a term of two
years’ imprisonment and/or an unlimited fine. However, the
penalty for the part of the Bill where the amendment is suggested is in
the case of conviction on indictment an unlimited fine. That is a
lesser penalty regime than that of the relevant part of the Petroleum
Act 1998.
I hope I
have provided some reassurance to the hon. Gentleman that the
provisions around decommissioning facilities are appropriately covered
under this regime and explained the drawbacks to having a piecemeal
approach to decommissioning obligations. I thank him for introducing an
important debate on the significant topic of decommissioning but wonder
whether he might consider withdrawing his
amendment.
Charles
Hendry:
I thank the Minister for that extremely helpful
response to the issues we have raised in this debate.
It is clear from the
explanation that the Minister has given us that there are other
elements of the Bill that address these issues in a consistent way and
will provide the sort of coverage and protection that we were seeking
to achieve through this amendment. It has essentially been a probing
amendment to try to make sure the Committee had a full understanding of
what is being proposed.
In the light of the assurances
the Minister has given we do not wish to pursue this further. I beg to
ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
2
pm
Charles
Hendry:
I beg to move amendment No. 8, in
clause 7, page 4, line 35, at
end insert—
‘(4) A person
guilty of an offence under this section is liable to be subject to a
bar on future licence applications, for a period of time to be
determined by the Secretary of
State.’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 9, in clause 8, page 5, line 24, at end
insert—
‘(6) A person guilty
of an offence under this section is liable to be subject to a bar on
future licence applications, for a period of time to be determined by
the Secretary of
State.’.
Charles
Hendry:
The two amendments relate to clauses 7 and 8. We
are seeking to ensure that we have effective deterrents in place so
that people do not breach this part of the Act.
The explanatory notes set out
the penalties available, which are a fine of up to a statutory maximum
of £5,000 in England, Wales and Northern Ireland and
£10,000 in Scotland on summary conviction or an unlimited fine
for conviction on indictment. The high penalty is contained in the
proposals, but I think it is worth including an extra penalty, which
would be a bar on that organisation or person applying for a licence to
import or store combustible gas for a time to be determined by the
Secretary of State if they fall foul of this part of the Bill. The
companies developing these facilities are very large with deep pockets
for paying fines if they decide that they want to operate in breach of
the law if it comes into force.
John
Robertson (Glasgow, North-West) (Lab): They have a bob or
two.
Charles
Hendry:
They have a bob or two where
necessary for dealing with these issues, although they will need a few
more bob in Scotland because the fine is rather more expensive than it
is in other parts of the Kingdom. The activities being carried out are
potentially very dangerous and if anything goes wrong, there is a very
serious risk to life, sea life and the environment. The Bill sorts out
the activities that would not be permitted. These include, in clause 7,
acting without a licence, or in clause 8, acting without prior consent
where it is necessary to have such consent, or a failure to keep good
records. Those penalties would rarely, if ever, be used, but would add
an important further measure to discourage breaches and I hope that the
Minister will consider
them.
Martin
Horwood:
I am all for effective
deterrence, especially when people and the environment are at risk, but
I do see a potential problem with the way the amendment is framed,
which perhaps reflects a weakness in the way clause 7 is framed. By
holding individuals responsible, these fines or punitive measures could
easily be evaded if the individual cannot be identified. Since we have
a clear trend towards corporate responsibility, it seems odd that in
this obviously corporate area, we are holding only individuals
responsible. It is difficult to imagine a private individual
surreptitiously indulging in a bit of gas storage on the side. There
are visions of “Trotter’s Combustible Gas Storage
Limited”—I think that we can all imagine how that episode
would end. If the argument is that the corporate fines would never be
large enough to act as a deterrent to large companies, who have a bob
or two, we simply have to make the fines sufficiently cripplingly to
make sure that they are a
deterrent.
Amendment
No. 8 has an unsatisfactory delegation once again of complete
discretion to the Secretary of State. No disrespect to Ministers, but
this an unfortunate trend in the legislation—everything seems to
be left to the Secretary of State or to Ministers to determine at some
later stage, instead of being in the Bill. It is crucial, because if
the period envisaged is six weeks, that amounts to a slap on the wrist;
if it is a lifetime ban on applying for a licence, that would close
down the business. Clearly that is a critical consideration and I would
be interested to hear what the Conservative spokesman feels might be
the relevant time scale.
Amendment No. 9 seems more
useful and is a logical extension of amendment No. 8, but again, there
is a problem with the way it is framed in that it could be avoided if
an individual was not identified as culpable. I see shortcomings with
these amendments, but I am interested to hear the response of both the
hon. Member for Wealden and the
Minister.
Malcolm
Wicks:
In response to the hon. Member for Cheltenham, I
should say that when we talk about “a person” in clause
7, that could include a company and any corporate body. I think that
that does ground it in corporate
responsibility.
I am
grateful to the hon. Member for Wealden for raising such an interesting
and pertinent point with his suggested amendment. As hon. Members may
know, clauses 7 and 8 relate to the enforcement provisions of the new
offshore gas storage and unloading regime. In particular, clause 7
stipulates that it is an offence to undertake any of the activities set
out in clause 2, such as the unloading of gas to an installation or
pipeline, without a licence granted under clause 3. Meanwhile, clause 8
specifically covers offences once a licence has been granted, such as
the breach of certain specified licence conditions.
The clauses
form part of a suite of provisions designed to ensure that a licence is
obtained for the activities listed in clause 2 and that the terms and
conditions governing the licence are adhered to. Adherence to the terms
and conditions of licences will ensure that the necessary safety,
environmental and other protections are in place for the offshore
storage of gas, and, indeed, the unloading of liquefied natural
gas.
The
currently proposed penalties for failing to obtain a licence, or for
non-compliance with licence conditions, are, we believe, proportionate
and sufficiently strong to deter licence holders from committing the
offence. The penalties for any person found guilty under either clause
7 or clause 8 consist of a fine of up to the statutory maximum, which
is currently £5,000 in England, Wales and Northern Ireland, and
£10,000 in Scotland, on summary conviction, or an unlimited fine
for conviction on indictment.
The hon. Member for Wealden
suggests that we should add to the existing offences and provide the
Secretary of State with the power to stipulate that a person guilty of
an offence under the gas unloading and storage regimes should be barred
from applying for future licences for a period to be determined by him.
Perhaps I can provide some reassurance that we have already given those
issues a great deal of thought. I am confident that we have the right
penalties for the offences, without the amendment.
The penalty provisions in
clauses 7 and 8 are based on an existing enforcement regime, which has
worked successfully to date: the penalty provisions of the submarine
pipelines regime in the Petroleum Act 1998. I believe that the
liability to a potentially unlimited fine will act as an effective and
proportionate deterrent to operators engaged in offshore gas or carbon
dioxide storage.
If in the
future it should be felt that a broader range of penalties was
necessary, including a bar on persons who had been found guilty of an
offence from holding a gas storage and unloading licence, the Bill
would already
provide for such a scenario. The power afforded to the Secretary of
State by clause 4(a) allows for regulations to be made detailing who
may apply for such a licence. I hope that that goes some way to
answering the point made by the hon. Member for Wealden about the
responsibilities and duties of the
corporation. The
regulations could therefore adequately provide for a measure of the
kind in question, should we deem that necessary. Our intention is to
consult on the regulations, and the requirements for applying, prior to
the adoption of the regulations. In conclusion, therefore, I do not
consider that the amendments are necessary, first because I am
confident that we have adopted the right balance in our offence
provisions, and secondly because the amendments would duplicate powers
that we already propose to give to the Secretary of State under clause
4. I therefore ask the hon. Gentleman to consider withdrawing his
amendment, which, again, has teased out a useful
discussion.
Charles
Hendry: I am grateful to the Minister, as always, for the
clarity with which he has responded to the debate. I understand exactly
what the Government have been seeking to achieve in the other
provisions of the Bill. I think that there would be interesting legal
challenges if it should be decided at some future date that a
particular person or organisation might not apply for a licence because
the Government had been unhappy with their performance elsewhere.
However, that would be a matter for debate and legal challenge at the
time in question.
In
the light of what the Minister says, there would appear, in current
circumstances, to be enough protections and penalties in the Bill,
should those be required. However, if it were to emerge over time that
those were not satisfactory, Parliament would clearly have to return to
that issue subsequently. In the light of the Minister’s
assurances, I beg to ask leave to withdraw the amendment.
Amendment, by leave,
withdrawn.
Clause
7 ordered to stand part of the Bill.
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