Energy Bill

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Clause 8

Offences relating to licences
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: To ensure that the Department, as the licensing authority, can keep tight control of activities undertaken by licence holders, the clause sets up penalties for breaching certain key licence conditions. There are also penalties for misrepresentation and non-disclosure in relation to licences. The offences attracting criminal penalties under this clause include carrying out an activity, such as a drilling operation, without first obtaining the prior consent specified by the licence; breaching any conditions attached to a consent; or failing to keep records, give notice, or make a return or report, as required by the licence. Anyone found guilty of such offences will be subject to a fine not exceeding the statutory maximum on summary conviction or an unlimited fine on conviction on indictment. The licensee, as the person responsible for the licence, will be liable for all offences under the licence even where they are not directly responsible, for example, where the unauthorised activity is carried out by a subcontractor.
However, it is recognised that licence holders may not always be at fault. Subsection (2) accordingly ensures that licence holders will have a valid defence, if they can show that they exercised due diligence in trying to comply with the licence conditions. In the case of a contractor, due diligence could include appropriate monitoring and supervision of a contractor who was acting on behalf of a licensee even if the contractor subsequently still failed to comply with conditions. Subsection (1) provides for the Secretary of State to specify, by order, further kinds of breaches that will amount to an offence. That will allow the Department to put in place new criminal sanctions for conditions that may be needed in the licence in the future in response to changes in the industry. The penalties for non-compliance with licence conditions are, we believe, proportionate and sufficiently strong to deter licence holders from committing the offence.
Charles Hendry: In general we are happy with the clause but would like a little clarification from the Minister on the phrase “ought to know” in subsection (4), line 17 on page 5:
“It is an offence for a person to fail to disclose information which the person knows, or ought to know, to be relevant to an application”.
That sounds like the sort of language that I use towards my children, when I say “you ought to have known that if you didn’t eat your lunch, you wouldn’t be getting a chocolate bar in the afternoon” or “you shouldn’t have got up in the middle of the night and played on your PlayStation”. I do not know the legal groundings of it; it sounds vaguely Rumsfeldian—there are the things that we know that we know, the things that we know that we do not know and the things that we do not know that we know. When one introduces to that the things that we know that we ought to know that we do not know and the things that we do not know that we ought to know, it becomes a recipe for chaos. I will be grateful if the Minister can give us further guidance and clarification about the legal definition of those few words.
Malcolm Wicks: I ought to know really, but I know someone who does know. Would the hon. Gentleman seriously mind if I wrote to him on the matter? That would be the best way of dealing with it.
Martin Horwood: I am a little concerned about subsection (2). It may be following standard legal wording, for all I know, but I will be grateful for clarification on it. It says that
“it is a defence for the person”—
which I now understand can mean a body corporate—
to prove that due diligence was exercised to avoid committing the offence.
2.15 pm
Malcolm Wicks: Of course, I agree with the hon. Gentleman that we are talking about very serious matters, both substantively and also because of the need to reassure the public, as he indicated earlier. I will reiterate what we mean by due diligence. Due diligence will be found where the licence holder has done everything it can reasonably be expected to do to avoid a breach of the licence. Where a contractor is used to carry out a particular operation, due diligence will be shown where proper steps have been taken to select a competent contractor and there has been an appropriate level of supervision of the contractor’s operation. I am not a lawyer but it is common on the one hand to specify penalties but to be sensible about what we mean about responsibility through due diligence procedures of different kinds.
I think the hon. Member for Cheltenham stepped into different but related territory which we touched on earlier today, namely how to monitor these facilities—geologically and so on—over a long time. The proper responsibility will be with the company but our Department, where necessary with technical experts, will also be in the business of inspection. That is the major way we tackle the concern raised by the hon. Gentleman.
Martin Horwood: I do not think this quite tackles the issue. Over a long time, with the way that companies shift, change, merge and sell parts of themselves, it is almost inevitably going to be a different company. Could companies exploit this clause or regulations relating to it as a giant loophole to evade liability for some environmental consequences which might genuinely not have been foreseen but for which they should be responsible—or someone should? There is a big question mark over who is liable 20 years down the line.
Malcolm Wicks: The best way I can deal with this is to say that when we are drawing up appropriate regulations and when we are consulting we should look at this issue. Obviously, in this territory we are talking about the long term. I mentioned the period of possibly 40 years to the hon. Member for Wealden when questioned about, say, gas storage. It could be longer. When it comes to carbon capture and storage, which we are coming to later, we are talking about millennia, which raises interesting issues of different kinds. On the other hand, the issue about what to do 30 years on when a company at fault has gone bust or been merged, is presumably familiar in law. I suspect it is not unique to this circumstance. It is an important point and we will consider it as we move forward in terms of regulation.
Question put and agreed to.
Clause 8 ordered to stand part of the Bill.

Clause 9

Secretary of state’s power of direction
Question proposed, That the clause stand part of the Bill.
Malcolm Wicks: The purpose of this clause is to provide the Secretary of State with a direction-making power.
I agree with the Liberal Democrat spokesman that the Secretary of State is a pretty busy character in this. Knowing Secretaries of State, they do occasionally delegate. You appreciate the formal use of this term.
It is to provide the Secretary of State with a direction-making power to direct a licence holder to take appropriate steps in the event of a breach of licence conditions. For example, if the licence requires equipment to be maintained to a good standard, a direction may require the equipment to be repaired or replaced. This provision is an important part of the suite of enforcement provisions and enables the Secretary of State to take a lighter-touch approach to remedy the breach before considering criminal proceedings, if he considers such an approach would be appropriate.
Moreover, it may not always be sufficient simply to punish the licence holder for breaching a licence provision. The Secretary of State may wish to direct the licence holder to comply in a way that minimises any damage already caused. Before issuing a direction, the Secretary of State must consult the licence holder. This will provide the licence holder with an opportunity to explain why the breach has occurred. If the licence holder fails to comply with the direction, the Secretary of State will have the power to ensure that the necessary action is taken and to recover the costs with financial interest from the licence holder.
The Secretary of State may also make arrangements for any person to comply with the direction on the licence holder’s behalf. Subsection (9) ensures that this clause does not affect any provision made by the licence itself. For instance, the licence may already include a power of direction in certain circumstances. Again, Mr. Amess, it touches on the importance of regular inspection to see whether things are going badly wrong in this respect, so that these directions can be made.
Dr. Brian Iddon (Bolton, South-East) (Lab): I am sorry I have not raised this matter with the Minister previously but it has only just occurred to me during this session. I do not know whether the drafting agents have considered this either, but I think it is worth raising.
In the 2002-2003 session of Parliament, I steered through a private Member’s Bill which became the Marine Safety Act 2003. I had the pleasure to work with the late Lord Donaldson and learned a lot about safety at sea. My point is that, undoubtedly, some of these transfers of gas will occur using shipping and could be transferred to an onshore facility—it could even conceivably be transferred to an offshore facility such as a spent oil rig or gas rig.
Lord Donaldson’s two major reports on safety at sea led to the setting-up of a person called SOSREP—the Secretary of State’s Representative, representing the Secretary of State for Transport. Together with my legislation and Lord Donaldson’s legislation, that has given SOSREP the powers to direct captains of ships to do whatever it is intended they should do to avoid a catastrophe at sea. These are enormous powers and we are further advanced in this country than any other in the world.
My point is that, if this Bill is giving this Secretary of State powers of direction, is there going to be any conflict with the powers of direction that SOSREP has—who is currently Robin Middleton, based in Southampton. I can conceive of situations where these powers of direction may, indeed, conflict with the powers of direction of SOSREP. I realise the Minister may have difficulty giving me an answer today, but I think this matter should be considered seriously before the Bill becomes an Act of Parliament.
Mr. Swire: May I just second what the hon. Member for Bolton, South-East has just said? In my own constituency in East Devon, there has been tremendous concern about ship-to-ship transfers of heavy oil, particularly from Russian ships. More recently, we have had a marine tragedy which could have been a lot worse—that of the ship the MSC Napoli, which the Minister and other members of the Committee will be familiar with. That experience was very interesting, because I first encountered the SOSREP, Robin Middleton, in that capacity, and he did an extremely good job.
At the beginning of that situation, members of the Committee may remember the almost 19th or 18th century wrecking scenes on the beach. There was confusion at the time as to who the lead agency was. In the aftermath of the Napoli having been grounded, there was a misunderstanding or a lack of clarification as to which was the lead agency—whether it was the Devon and Cornwall Constabulary or whether it was SOSREP, in the form of Robin Middleton. On clarification, it was SOSREP who then really took the lead in all this.
I think it is important; I agree with the hon. Member for Bolton, South-East that it does need to be clarified as to the respective roles so that in the event of an emergency, such as the one I have just alluded to, the emergency services—and indeed, all those agencies involved—know who takes the lead position.
Malcolm Wicks: I must confess that, until recently, although I knew about the Secretary of State regulations, in my ignorance I had never heard the term SOSREP before—although, come to think of it, I often feel that I am a SOSREP in various work that I have done in a number of different departments.
The short answer to the questions raised is one that I hope will content the hon. Members, as the SOSREP regulations will apply in the offshore gas regime.
Question put and agreed to.
Clause 9 ordered to stand part of the Bill.

Clause 10

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

Failure to comply with a direction under section 9
Malcolm Wicks: This clause will ensure directions issued by the Secretary of State will, if they are not complied with, attract the same maximum penalties as would an infringement of a licence, which leads to criminal sanctions under clause 8. It is therefore a central part of the regulatory enforcement arrangements proposed by this Bill. As with clause 8, it will be a valid defence if the licence holder proves that due diligence was exercised in trying to avoid committing the offence, and we have had a useful discussion about due diligence. In the case of a contractor, due diligence could include appropriate monitoring and supervision of a contractor acting on behalf of a licensee, even if the contractor subsequently still failed to comply with conditions. I move that this clause stand part of the Bill.
Question put and agreed to.
Clause 10 ordered to stand part of the Bill.

Clause 11

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

Offence to carry on unlicensed activities (Offshore Gas Storage)
Malcolm Wicks: I think I will take this one on. This clause gives the Secretary of State the power to apply to the court for an injunction to prevent, or require the cessation of, activities prohibited under clause 2. For example, if there is evidence that a gas-unloading activity is taking place, or is about to take place, without a licence, the Secretary of State may apply for an injunction requiring the operator to cease the activity immediately. This is a further safeguard to ensure the integrity of the licensing regime. Given that such unlicensed activity would be a criminal offence under clause 7, we expect this power to have to be used only rarely. However, it is a useful power to have in reserve. I therefore move that this clause stand part of the Bill.
Question put and agreed to.
Clause 11 ordered to stand part of the Bill.
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Prepared 22 February 2008