Clause
14
Interaction
with the petroleum licensing
requirements
Question
proposed, That the clause stand part of the
Bill.
Malcolm
Wicks:
Where a gas storage development intends to use a
geological feature that contains hydrocarbons, in addition to a gas
unloading and storage licence, a developer will also need to obtain
rights under a petroleum production licence. That is due to the
inevitable production of indigenous hydrocarbons, which will be mingled
with the stored gas when it is recovered. Where the intention is not to
use a geological feature containing hydrocarbons, such as a salt
feature, no rights would need to be obtained under a petroleum
production licence.
However, in
some cases, a developer with a gas unloading and storage licence may
discover trace amounts of hydrocarbons that could not in any way be
considered as suitable concentration for their production. In such
cases, the gas storage licence holder can seek a direction for the
avoidance of legal doubt, stating that a petroleum production licence
is not required. The clause empowers the Secretary of State to make
such a direction where he is persuaded that the concentration of
hydrocarbons is insignificant.
Dr.
Iddon:
I am a little concerned about subsection
(4):
“A
direction may be given only if the Secretary of State is satisfied that
the amount of petroleum which exists in its natural condition in the
relevant stratum is so small that it ought to be disregarded for the
purposes of that Part.”
My question is: how will the Secretary
of State know? Will the evidence come from the company that has
previously been extracting petroleum oil from the reservoir, or will
independent soundings be taken—that will obviously be more
difficult?
When
the Science and Technology Committee carried out an investigation into
carbon caption storage and published a report in February 2006, we
discovered that enhanced oil recovery is the only way of clearing out
considerable oil reserves that are in the interstitial cavities of the
rocks. That is the only way to ensure that the oil is completely
evaporated, or that it is as evacuated as possible of petroleum oil. If
enhanced oil recovery has not been carried out, there will be
substantial petroleum oil reservoirs down in those cavities.
During the
evidence-taking session I had a conversation with Mike Tholen, the
Director of Economics at Oil & Gas UK—that is at columns
105-6 of the transcripts for 19 February 2008. He gave the impression
that enhanced oil recovery is very common these days, and that most of
the reservoirs that would be used for the storage of gas, and later
carbon dioxide, would be empty of petroleum oil. However, the evidence
that we took in this report suggests otherwise. It is important that
whoever polices subsection (4), is aware of those
facts.
Martin
Horwood:
I hesitate to follow the hon.
Gentleman, who clearly speaks from a very expert and knowledgeable
perspective. However, I too, was intrigued to know how on earth this
could literally be done. We have talked about the powers of the
Secretary of State being very wide, but the power to give a direction
in respect of a “relevant stratum” of a geological
storage area, seems an extraordinarily technical power to give to a
Secretary of State. I would be interested to know in respect of
subsection (3)—I am not sure that the Minister quite explained
this and I am not familiar with the Petroleum
Act— [Interruption.] perhaps my researcher is not familiar
with it. What exactly is the significance of being regarded or not
being regarded as
“
resulting in the boring for or getting of
petroleum”
for these
purposes? What is the practical relevance of that? If the extraction of
oil from a geological area of this type constituted boring for
petroleum, what would that mean in practical terms for the operation of
this facility?
That
reflects an underlying worry that this is an example of
gold-plating—that there is a rather extreme level of detail in
the provision that might be better dealt with in more flexible
regulation. The worry is that we run the risk that if, for instance,
enhanced oil recovery becomes viable unexpectedly in the course of the
operation of one of these facilities, the Secretary of State will have
almost boxed themselves into a situation in which a particular regime
applies to that and there is not sufficient flexibility to allow it to
take place on a viable or commercial basis. I would therefore welcome
clarification if possible of exactly what the implications are of this
near overlap with the petroleum licensing
requirements.
Malcolm
Wicks:
My hon. Friend the Member for Bolton, South-East
has introduced an important discussion. However, as he knows, we have a
great deal of expertise in this type of territory. I recognise that in
relation to carbon capture and storage—we shall move on to that
aspect of the Bill shortly—it is relatively new territory.
However, I am advised that the companies themselves will be required,
under the terms and conditions of their licence, to provide the
information that he seeks. Tests and drilling information will provide
the company with the relevant information.
Earlier,
I said that certain powers would not come into effect where the
Secretary of State was persuaded that the concentration of hydrocarbons
was insignificant. It might be helpful if I say that if circumstances
change and the amounts of hydrocarbons increase substantially, the
Secretary of State must issue a notice to the licence holder revoking
the direction. Again, this comes down to the proper and appropriate
management and inspection of what is happening over what is often a
very long period. The prime function is for the companies themselves,
but I reiterate the importance of the inspectorate that we are putting
in place.
Question
put and agreed
to.
Clause 14
ordered to stand part of the
Bill.
Clause
15 ordered to stand part of the
Bill.
Clause
16
Prohibition
on unlicensed
activities
Question
proposed, That the clause stand part of the
Bill.
Malcolm
Wicks:
We now move on to carbon capture
and storage. The debate has often been ahead of me on this one and,
indeed, ahead of the Bill, although there have been one or two cases in
which it has been appropriate to discuss CCS alongside other activities
relating to gas. Therefore some background will perhaps be
helpful.
CCS
with power generation involves capturing carbon dioxide that would
otherwise be released from fossil fuel power stations and storing it
permanently in geological formations such as depleted oil and gas
fields. Although CCS is considered a promising climate change
mitigation measure, it has yet to be demonstrated in relation to a
commercial-scale power station. CCS has the potential to reduce
CO2 emissions from fossil fuel power stations by up to 90
per cent., which is a key reason why it has created such interest, not
least in
Parliament.
Steve
Webb:
Will the Minister give
way?
Malcolm
Wicks:
I am willing to concede that it is 90.5 per
cent.
Steve
Webb:
I have not put my anorak on yet today. No, my
question for the Minister is this. Does he know whether that 90 per
cent. figure is broadly the same for pre-combustion and post-combustion
technologies, or does one have greater potential than the
other?
Malcolm
Wicks:
Let me see whether I can return to him later with
the answer, as I do not have it in my
head.
The
Government, as the Committee knows, have announced their commitment to
the development of CCS by supporting one of the world’s first
commercial scale demonstration projects. We had a useful evidence
session on that very subject. This chapter of the Bill is intended to
provide the regulatory framework for storing CO2 under the
sea bed. The next 20 clauses that we shall be debating relate to this
important part of the Bill, which will enable this important technology
to go forward here in the UK.
The
Committee will notice some similarities with the provisions of offshore
storage of natural gas and the unloading of LNG. We have these
provisions as a different part of the Bill because CO2
storage is a separate issue from offshore natural gas storage or the
unloading of LNG. Moreover, there are some differences between the
regimes and some additional clauses that reflect the specific issues
relating to CO2 storage. These provisions are necessary
because existing legislation is not suited to licensing an underground
storage of CO2.
The
provisions in this chapter are intended to address these shortcomings.
They provide a comprehensive and adaptable legal basis for regulating
the storage of CO2 in the offshore area. The offshore areas
thought to have particularly promising geology for the storage of
CO2 are the depleted oil and gas reservoirs of the North
sea. This clause prohibits the storage of CO2 and related
activities beneath the UK sea bed potentially out to 200 nautical
miles, unless it is carried out under a licence and in accordance with
the provisions of that licence. In addition to the storage of
CO2, the prohibition also extends to the exploration of a
site to assess its suitability for storage, the conversion of a site to
make it suitable for such storage and the building of relevant
installations.
Martin
Horwood:
The Minister has raised the important point of
the appropriateness of the geology. That is clearly an important
potential advantage for Great Britain in pursuing carbon capture and
storage technologies because we have a great deal of experience in
exploiting these kinds of geological features. But he will recall that
it was pointed out during the evidence session that some of these
geological features, such as the Miller field, are exhausted. Unless
they are exploited for carbon capture and storage on a relatively quick
time scale, they will be capped and lost as a potential facility. The
time scale of this is critically important. If we have a regime that
extends the time scale too far, we will find that that advantage from
geology starts to reduce quite sharply with geological features
becoming less available as they are capped and effectively removed from
the possibility of exploitation for these
purposes.
Malcolm
Wicks:
I do not understand why the hon. Gentleman feels
that this regime—presumably the one we are discussing now and in
the forthcoming clauses—will unnecessarily extend the time
scale. We are all anxious to tackle global warming and reduce
CO 2 emissions here in the UK and worldwide just as quickly
as possible. Time is not on our side. I certainly wish that CCS had a
history of 20 years and we would be talking more about its universal
deployment. But we are not there yet scientifically and
technologically. The costs, as we noted the other day in Portcullis
House, are obviously considerable. Perhaps the hon. Gentleman can
return to this theme on another occasion. I do not want to stop him
intervening again, but we have hours of delicious debate on this
subject ahead of
us.
Martin
Horwood:
I am extremely grateful to the
Minister and you will guide me, Mr. Amess, if we veer too
far off the immediate clauses before us. The Minister talked about the
necessity of getting CCS on stream as soon as possible. The competition
regime that the Government are considering and which is relevant to the
Bill will not bring it on stream as fast as possible. As
fast as possible would be projects like the Peterhead project by BP,
which would have been on stream by 2011, which is a good three or more
years ahead of the competition outcome. In fact, the Carbon Capture and
Storage Association told us in evidence that there were potentially
four or so other projects, which I think the association will provide
details of to the Minister, which could be on stream ahead of the
competition regime. Surely, if the Minister means what he has just
said—he pointed out that he wants carbon capture on stream as
fast as possible—there is a major flaw in the
Government’s thinking on carbon capture and storage, which is
presumably reflected in the Bill’s
approach.
3
pm
Malcolm
Wicks:
I will return to the clause in a
moment, but with your permission, Mr. Amess, I feel that I
should answer that point. The Liberal Democrats are asking for more and
more and for more and more money to be spent because of urgency. I am
genuinely proud that the United Kingdom, alongside only a few other
countries— Norway and perhaps the United States—is ahead
of the game. I think that I said in the evidence session that I wish
that we were not ahead of the game and that there were 15 or 20
countries with us, given the urgency of climate change policy. No one
has demonstrated the whole project—the whole chemistry set. We
have useful evidence from around the world and examples of good
practice, and we have mentioned Sleipner gas fields where
CO 2
has been stored successfully. As I understand
it, and I think that I do understand this part, no one has built a
power station with CCS technology and then demonstrated the stripping
out of the CO 2, the transportation and the successful
storage.
Although,
to some extent, I share the frustration of the hon. Member for
Cheltenham about the time scales, it is important that we in the United
Kingdom, on behalf of the taxpayer, have said that we will spend
considerable amounts. His colleague, the hon. Member for Northavon,
teased out of me that we are probably talking about a total of hundreds
of millions of pounds—not a few shillings or a few bob—to
demonstrate the technology. Even the Liberal Democrats have to have
regard to costs from time to
time.
Malcolm
Wicks:
I will give way to find out whether that is
true.
Martin
Horwood:
I completely accept that we
need to have careful regard to costs when dealing with such projects.
The Peterhead project alone could have requested a subsidy of hundreds
of millions of pounds over a long time, so we have to be cautious about
cost. We have heard the phrase “as soon as possible”.
Does the Minister dispute that BP and others expected that the
Peterhead project would have been online by 2011, which would have been
at least three years ahead of the time scale envisaged under the
competition now planned by the
Government?
Malcolm
Wicks:
I am not technically in a
position to support or dispute what the hon. Gentleman says about
BP’s time scale. We have a demonstration project that is using
hundreds of millions of pounds of taxpayers’ money and I do not
think that it would have been fair to
have said to BP or anyone else ahead of a competition, “Okay,
we’ll support you.” We want to demonstrate this with
coal, and a coal-fired power station was not the Miller field,
Peterhead, project. We want to demonstrate it with coal because of the
worldwide significance of coal in contributing to the rising
temperatures of our planet and climate change. I do not think that the
hon. Member for Cheltenham has understood
that.
We are not
being insular in terms of post-combustion, which we have chosen, and
coal. We are looking at global problems. Of course, if money were no
object, it would be wonderful to have four or five projects, but given
that we are among one or two in Europe that are ahead of the game, I do
not think that we are doing too badly. I hope that in the hon.
Gentleman’s fairer moments, which I know are many, and the
fairer moments of his research assistant, that point will be
recognised.
Mr.
Jamie Reed (Copeland) (Lab): The Minister said in the
evidence session the other day that we have no choice other than to go
for CCS, irrespective of the state of the technology at the moment.
Does he agree that this issue is about the status of the science and
the ability of industry to achieve and effect those solutions? It is
not about the regulation, as we were discussing under the previous
clause.
Malcolm
Wicks:
Yes, of course I agree with that, but we need to
set up an appropriate regulatory position in anticipation. We are ahead
of the game—perhaps alongside one or two other Governments and
some Australian states, I believe. The useful collaboration with the
Norwegians is important here because we are doing a lot of technical
and important work with them. Anyway, we will not say how we look
forward to the Liberal manifesto commitment on expenditure on the
matter, although I think that Liberal Members now understand how
expensive the technology is, given the current state of the science and
technology.
I know
that you would encourage me to move forward with discussing the clause,
Mr. Amess. I am told that there will be a Division at some
stage—not here, I hope, because this clause is so wonderful, but
elsewhere in the
building.
The
clause applies to operators who carry on carbon dioxide storage
activities. The provision does not apply to the suppliers of carbon
dioxide. Those persons who provide CO2 to the operators of
carbon dioxide storage facilities will not require a carbon dioxide
storage licence. We recognise that with the advent of the single
electricity market across Ireland, there are increasingly different
considerations in respect of proposals in Northern Ireland from
proposals that might come forward in the rest of the UK. To reflect the
differences, therefore, I believe that it would be prudent for my
Department and for the Department of Enterprise, Trade and Investment
in Northern Ireland to pursue a formal memorandum of understanding
setting out how we would work with the relevant authorities in Northern
Ireland before granting any consents for carbon dioxide storage
facilities in Northern Ireland territorial waters. That rather
complements an earlier proposal that I made about a memorandum of
understanding with our colleagues in Northern Ireland.
The
provisions in the clause are similar to those covering combustible
gases in clause 2, which concerns the licensing of offshore gas storage
activities for the purposes of offshore gas storage and LNG
unloading.
Charles
Hendry:
We are moving on to one of those parts of the Bill
on which there will be the greatest amount of discussion, not because
of inherent flaws in the clauses, but because of the background of the
debate that we need to have to understand their implications. While I
have some particular concerns about this clause, it highlights what I
would call the failings of the Government’s general approach
towards carbon capture and
storage.
None of us
is in any doubt that carbon capture and storage could be the great hope
for energy in the 21st century, or could be the great white elephant.
It is quite possible that in 10 years we will have established that it
is, as we all think, technically feasible to capture and store carbon,
but we might have decided that it is not economically viable to make
that happen without masses of taxpayers’ money or a very high
price for carbon. Our primary concern is that the Government would be
issuing licences that focus on one type of CCS technology, rather than
looking at the whole range of CCS technology that is out
there.
In
one evidence session, Tom Burke had a few words to say about carbon
capture and storage—no doubt they greatly pleased the people who
pay his salary—and its role in enabling us to get electricity
and energy from fossil fuels without the damaging carbon
emissions.
Steve
Webb:
On a point of order, Mr. Amess, I wonder
if you could advise me, but I think that the hon. Member for Wealden
implied that one of the witnesses before our Committee was prejudiced
in what he said to us and was favouring his paymasters. As we know, his
interests were before the Committee, and I hope that the hon. Gentleman
might be asked—or encouraged—to withdraw that
allegation.
The
Chairman:
I was listening carefully to what the hon.
Member for Wealden said and I do not think that he impugned the honour
of the gentleman mentioned. I think that he was in
order.
Charles
Hendry:
I am grateful for your guidance,
Mr. Amess. I think that the spokesman for the Nuclear
Industry Association did a fine job for the nuclear industry. The
spokesman for the British Wind Energy Association did a fine job on its
behalf, and the spokesman for Rio Tinto Zinc did a fine job on its
behalf,
too.
Martin
Horwood:
Mr. Amess has made it clear that up
until now the hon. Gentleman has not been out of order. It was quite
explicit in briefings that we received, and from the remarks by
Mr. Burke, that he was not acting as a spokesman for Rio
Tinto, but in a personal capacity. I think that it would be gracious of
the hon. Gentleman to withdraw that
allegation.
Charles
Hendry:
I am not going to prolong this discussion. I
understand where the hon. Gentleman is coming from. I perceived
Mr. Burke’s remarks in one way, but if he perceived
them differently, we will have to disagree. This is a bit of
distraction from clause 16, on which we should be focusing.
Most of the witnesses from whom
we heard in the evidence sessions were quite clear about the way
forward. It is worth reminding ourselves of what some of them said. The
spokesperson from the Trades Union Congress, Mr. Philip
Pearson,
said:
“We
believe that all options should be explored. There is a question about
resourcing, and if there are limited Government resources then the
Government have clearly made a particular kind of decision. If
resources are that thin, you could argue for post-capture, pre-capture
or a regional network, if only one of three major options is to be
chosen. The trouble is that the CO2 challenge is too
enormous to restrict to the development of one option
only.”
Those views were
echoed by Mr. Roger Salomone, of the Engineering Employers
Federation, who
said:
“For
example, we do not know exactly what the competition criteria are right
now, but we could have had criteria around retro-fitting and global
applications and there could be other important ones such as
cost-effectiveness. I do not see how narrowing that down now does the
situation any favours.”——[Official
Report, Energy Public Bill Committee, 5 February 2008; c. 11,
Q21-22.]
Malcolm
Wicks:
I did not want to interrupt the
hon. Gentleman so early on, but does he recognise that although a
perfectly proper and reasonable debate is to be had about whether we
were right to choose post-combustion technology for our demonstration
project, this Bill is technologically neutral in that respect? It sets
up a regulatory framework for the storage of CO 2 that does
not depend on whether it is pre or
post-combustion.
Charles
Hendry:
I agree with the Minister.
However, that should be seen against the background of what the
licensing regime will achieve. Owing to the way in which the Government
are going about the programme, it will achieve less than if the pilot
scheme had been done in a more all-embracing manner. I am not going to
continue quoting from the evidence sessions because I think that you
would rule me out of order, Mr. Amess, for straying away
from the clause. However, similar representations were made by
Centrica, Scottish and Southern and others. The only people who spoke
in favour of the Government’s approach were from E.ON and
Npower, which indicated that they wish to bid for contracts under the
proposed pilot
scheme.
I
understand the Government’s argument, which the Minister has
just made, about the importance of the export potential to China.
However, we are doing that at the expense of our nation’s
domestic interests. There would be massive potential for exporting
pre-combustion technology. It is one of the most exciting energy
technologies around. To some extent, we are closing the door on that
opportunity because of the Government’s approach. Their message
seems to be, “You might be developing one of the most exciting
energy technologies on the planet, but do not expect any help from us
in doing so”. Through pre-combustion, CO2
can be captured in its totality at much less expense than can be
the case for post-combustion. However, as we have heard in
interventions, the pilot scheme in Peterhead closed down through lack
of support.
The point
that I am making was made clear recently by the chief executive of
Shell, Jeroen van der Veer. He has argued that there are two approaches
to the current energy challenges: what he called
“scramble”, where we all do what comes into our heads
first and think about
what is right for our narrow domestic interest; and what he called
“blueprint”, where we co-operate to maximum effect. That
absolutely should be the way forward for carbon capture and storage. As
the Minister said, other countries are getting involved in that process
as well. Very few are as far ahead as we are. However, we should be
working together and learning from each other’s work, rather
than ploughing our own furrows. We should be trying to achieve the most
in the shortest possible
time. Time
is not on our side—literally, I see, looking at the clock. The
pilot scheme is unlikely to be up and running before 2014. It will then
take us some years to evaluate and learn the lessons, so commercial
exploitation of the technology is unlikely before 2020—five
years after we will get hit by the energy gap. What that means in the
short term is that we will be seeing applications for new dirty
coal-powered plants being brought forward—they will be
significantly cleaner than their predecessors, but still very
dirty.
3.15
pm
In many cases,
those plants will be replacing the 10 GW of coal that will be going out
of commission by 2020, but we should be trying to move away from
burning coal where we can. We are understandably concerned that that is
the way in which we are going to go.
The truth is that we will be
in a mess if we cannot get carbon capture and storage to work. We
should be looking at how we can work with others to make that happen,
and that is the background against which these clauses need to be
considered. There are many hon. Members who, on Second Reading and
during our discussions in the evidence sessions, have made
it clear that they want a broader approach to be taken on
this.
I also have
concerns about the general licensing approach. The witnesses from the
Carbon Capture and Storage Association said that they need a single
licensing agreement. How will the Government help them to achieve that?
In their written submission they
said:
“Recognising
that offshore CO2 storage will have many technical and
operational parallels with current hydrocarbon exploration and
production activities, for which substantial regulatory expertise
already exists within the Department for Business, Enterprise &
Regulatory Reform (BERR), the Association would strongly favour a
comparable ‘one stop shop’ licensing arrangement for CCS
projects over which BERR has singular
responsibility.”
Will
the Minister give us assurances that the approach that he is putting
forward in this Bill will help to achieve that? Oil and Gas UK made the
same sort of
representations:
“On
the issue of carbon capture and storage (CCS) and natural gas storage,
Oil & Gas UK is concerned that the new licensing scheme does not
properly take into account the interaction with the existing petroleum
licensing regime or respect the legal rights already conferred,
especially on any transfer of a petroleum licence. We believe there
needs to be a clear and unambiguous statement within the Bill on the
primacy of vested rights under existing Petroleum Production Licences
in the event of any conflict between these and the terms of new CCS or
gas storage licences.”
I hope the Minister can give some
clarification on
that.
In clause
16(3), there is a reference to waters in gas importation and storage
zones. Does that potentially
include anywhere in the wider 200 mile limit around our shores and
outside the 12 mile limit? What is the process of identifying and
establishing those
zones? Will
the Minister say something about the use of saline aquifers on land?
Subsection (3) defines a controlled place as being at sea, but some of
the witnesses indicated that the best use of saline aquifers would be
where most of the potential storage would take place. I think they said
that 14 billion gigatonnes of CO2 could be held there out of
a 24 billion gigatonnes storage requirement. Some of that would be on
land. How do the Bill and the licensing arrangements relate to
land-based saline
aquifers?
Finally,
will the Minister say something about enhanced oil recovery? At the
moment, carbon capture and storage applies where there is an enhanced
oil recovery capability. There are international treaty obligations
that tie us into that and stop us from simply using the sea bed as a
dumping ground for carbon dioxide. What are the Government proposing to
relax those treaty obligations so that this technology can genuinely
move forward and we can achieve the most from
it?
The Minister will
be aware that we are supportive of the general principle, but we are
disappointed by the narrowness of the Government’s approach.
There is more that we could achieve in a shorter time scale than will
happen as a result of the Government’s approach. I hope that it
is not too late to make some corrections to these
failings.
Steve
Webb:
I feel that my pearls of wisdom may be interrupted,
but I will give it a go.
I start by
asking a general question about this chapter of the Bill on the storage
of carbon dioxide. I would like to ask the Minister what I call my
idiot’s question. Carbon dioxide is one greenhouse gas.
Presumably there are other greenhouse gases that could possibly be
captured and stored. I appreciate that this is the biggest one and the
one we are talking about now, but would it not be better to legislate
generally rather than to legislate for this gas and then find ourselves
coming back when we have some technology for liquefying or storing
methane, or whatever else it happens to be? Why did the Minister
not—and why does the Bill not—legislate in general terms
because presumably the structural issues of licences and so on would
apply to any other greenhouse
gas?
If I may digress
a second, I think that I should put on record my concern about the
remarks that were made about one of the witnesses. I have a lot of time
for the hon. Member for Wealden. I do not know him very well, but when
I have come across him, I have found him to be very fair minded and
constructive. I hope that when he leaves today he will reflect on
maligning a witness. I think that suggesting that he was special
pleading is really not appropriate and I hope that the hon. Gentleman
will reflect on
that.
The
Chairman:
Order. I understand the point that the hon.
Gentleman is making, but I should have been much firmer earlier. I will
not allow us, when we are debating clause 16, to revisit arguments that
were dealt with in private. There was eventually full disclosure of the
interests of the gentleman concerned. I know that the hon. Gentleman
was making his remarks in a placatory fashion, but I would now ask him
to leave the matter there.
Steve
Webb:
Thank you, Mr. Amess. I am very happy to
do that. The interest was in fact declared up front, as you rightly
say, before the evidence was
given.
3.21
pm
Sitting
suspended for a Division in the
House.
3.37
pm
On
resuming:—
Steve
Webb:
In the debate so far, Mr. Amess, you have
allowed us to start off a whole section on carbon capture and storage
and to range somewhat more freely than I am sure we will do on
subsequent clauses. In that spirit, I have a couple of observations
triggered by the Minister’s comments and by the thoughts of the
hon. Member for Wealden on carbon capture and storage.
The important context for the
Liberal Democrat position is, and I hesitate to say this, from a
European Union briefing that makes the following interesting
assertion:
“While
energy efficiency and renewables are in the long term the most
sustainable solutions both for security of supply and climate, EU and
world C02 emissions cannot be reduced by 50 per cent. by 2050 if we do
not also use other options such as carbon capture and
storage.”
That is a
clear statement from an organisation that presumably has no commercial
axe to grind that carbon capture and storage is absolutely essential to
meeting these targets. I was genuinely interested in the comment made
by the Member for Wealden that in a few years time, we might decide
that carbon capture and storage is uneconomic. I suppose that it
depends on what is meant by “uneconomic”. The Stern
report said that unless we tackle the problem now, it will be far more
expensive to tackle it in the future. I am not aware of a plan B on
this and although the costs that we are talking about may be
frightening, the costs of not acting may be more frightening still.
That is why we need to get the licensing regime right.
I take the
Minister’s point that the licensing regime in the Bill is
technology-neutral. The Bill itself does not favour one technology or
another, but clearly Government policy has done so, and he referred to
the competition that the Government have initiated. He said that we
need to get on with CCS as quickly as possible. What my hon. Friend the
Member for Cheltenham was saying—and I do not really think that
the Minister has addressed this point—is that Government policy
has actually obstructed getting CCS up and running sooner. That is
demonstrably true. The Minister shakes his head, but the Carbon Capture
and Storage Association said in evidence to the Committee that not only
the Peterhead project, but four others—all of them
pre-combustion technologies—are now on “go slow”
because they are not eligible for the competition. Had the Government
included those projects within the competition, there would have been a
strong incentive to get going, get moving, get them in competition and
then we could have been applying the licensing regime to post- and
pre-combustion technologies.
Charles
Hendry:
Does the hon. Gentleman agree that it is not right
for there to be a race between individual countries in this area, with
each trying to win some sort of championship at the end? The scale of
these projects
is so huge that countries ought to be working together internationally
to decide which is going to work on pre-combustion and post-combustion
and how we ensure that a range of technologies is tried so that we can
work out which has the most
promise.
Steve
Webb:
I absolutely agree with the hon. Gentleman: I know
that the Conservatives are great on European co-operation,
internationalism and on Governments co-ordinating things rather than
just leaving them to the markets. I agree that what he has just
described is necessary in this case. It is another example of why
constructive co-operation across Europe is such a good thing. That is
the approach that we need.
The Minister
will probably tell us repeatedly during the course of the
Committee’s proceedings—he already has twice—how
good Britain is, but does he not realise that the consequence of the
policy that he has just described has been to drive CCS projects out of
Britain to other countries? For example, I asked BP what it will do now
that the Government have scuppered the Peterhead project, and it said
it would move them to Abu Dhabi. In other words, the projects will go
elsewhere, as will the technology, potentially, and Britain will lose
out.
The problem
with carbon capture in that regard is that the licences that we are
talking about will effectively only be implemented in the first
instance on the Government’s demonstration post-combustion
project—if the Government think that that is the first thing
that will happen, I presume that it is the first application we will
have. Our worry relates to the time scale.
Malcolm
Wicks:
I want fully to understand the argument. I am not
sure whether the hon. Gentleman is saying that we should have abolished
the idea of a fair competition between companies and given it to one
company—and I think that he has BP in mind. Is he arguing that
we should have done that, or that we were wrong to make that judgment
between pre and post? Given that considerable amounts of money from
companies go into those exercises, we felt that it was only fair to
make our judgment about the technology, and we choose post. Does he
think that we should have kept all of them going, given that we could
only fund one project? Maybe the Liberal Democrats could fund five, but
because we can only fund one, at some stage a judgment has to be
made.— [
Interruption.
] And he will start
receiving notes from the
researchers.
We
received advice that the rate at which coal power stations are being
built in China means that they will hopefully one day require
post-combustion, so does the hon. Gentleman think that that advice was
wrong and that the Government were wrong to follow it and to reflect on
the global issues, not least of which is China? Does he think that we
should have reflected only on the UK? Those were difficult judgments,
and I think that we made the rights ones. I will be interested to hear,
in the real world, what judgments he would
make.
Steve
Webb:
I am grateful that the Minister anticipated a day
when I shall have ministerial responsibility, so I shall practise now.
In answer to his question on whether it should have just been given to
one company, it clearly should not. However, my critical point is that
I do not
think that the Government’s approach is up to the scale of the
problem. The Minister’s argument is, “We are a bit
strapped for cash. We will fund one, but we could not possible fund
two, so we had to choose one technology.” His argument is that
there is not enough money to have a look at two major
technologies.
Although the Carbon Capture
and Storage Association told us in evidence quite how exciting the
potential for pre-combustion technology is, I do not dispute the
potential benefit of the other technology and the international
dimension, which is clearly also important. However, I shall give an
example of where money might come from to enable both technologies to
be pursued. There might be two competitions or two approaches. In our
evidence sessions, we talked about the £9 billion that the
energy companies are getting from the European decision to hand them a
free emissions trading permit, which the Government had a part in. A
person as sober and grounded in the real world as the director general
of Ofgem has said that that was a £9 billion windfall. That is
not the hundreds of million that the Minister talked about for the
Government’s competition on post-combustion, but a £9
billion windfall.
Given that the Minister thinks
that the companies should—I almost quote—get off their
backsides and do some of this stuff themselves, why do not the
Government not ensure that, having given them that windfall, some of
the money is used precisely for that purpose? That way, we would not
have to make this false choice between two technologies, both of which
could be critical, dare I say it, to the future of the planet. My point
is that if, as their planet slowly fries, our grandchildren say,
“If you had gone for two technologies that were actually up to
the scale of the problem, we might not be in this mess. But you
couldn’t find the money so you only chose one and, as a result,
we haven’t achieved the critical improvements we need”, I
think that they would hold us
responsible.
Mr.
Binley:
In the light of what seems to me to be a sizeable
declaration in favour of a windfall tax on energy companies, would the
spokesperson for the Liberal party consider saying that it would forgo
that, provided that the companies spent the money on working out a
project—
3.45
pm
The
Chairman:
Order. The hon. Gentleman is
making an interesting point, but I am afraid that it has absolutely no
relevance to the clause that we are
debating.
Mr.
Binley:
Point of order, Mr. Amess. It is
relevant to the greater world outside, and I wonder whether you might
reconsider so that I might
finish.
The
Chairman:
I have heard what the hon. Gentleman has said,
but my ruling is
final.
Steve
Webb:
I am more than happy to be bound by your strictures
on that point, Mr.
Amess.
Without
referring to the intervention, the general, important point remains.
That point is that the difference between our approach and the
Minister’s is that the Government say that they will put public
money into one technology but not another; they hope that the private
sector will fund the other. That is essentially the Government
position, rather like how they hope that
the private sector will do something about fuel poverty instead of the
Government making it do something. The same issue applies to carbon
capture and storage. The Government could—via a mechanism that
we might consider—make the private sector do those things or
threaten it with some penalty if it did not, but they have not chosen
that route. This section of the Bill and this set of technologies are
so vital and Mr. Burke, the expert witness, said powerfully
that if we did not get it right, we would be in real trouble. My worry
is, therefore, about the Government picking one technology over
another. I want to
ask the Minister about another closely related aspect and that is the
work—which the Minister mentioned—that the Government are
doing in co-operation with China. That work is the UK-China near-zero
emissions coal project with which I am sure he is very familiar. I do
not know whether he was on the plane with the Prime Minister when he
went to China; I do not know whether he gets to go on those
jaunts.
My
understanding is that the EU and China are working together on a
near-zero emissions coal agreement, which incorporates demonstrating
and building carbon capture and storage technology in China. I wonder
how that squares with what the Minister says. I am not suggesting it is
inconsistent—I think it is great. The Minister seems to be
saying that we need that approach in the UK because we can sell it to
the Chinese, but are we not already working jointly with the Chinese,
separately on the demonstration projects that he talked about? How do
those two things fit together? Does he know—I do
not—which CCS technologies are being considered for the UK-China
near-zero emissions coal project? I think that somebody in the room
probably does, which is a help. Can he clarify how all of those things
fit together?
My
specific question on the clause is: we are doing a whole section just
on CO2; are there other gases that we would want to bring in
at some point, and could we be doing that now rather than having to
legislate again? My general contextual question is to try to stress
that our view is that although competition and public money are
welcome, the scale of the problem means that picking one technology and
putting all the public’s eggs in that basket with no public
money in the other basket is profoundly
mistaken.
Dr.
Iddon:
I will try to be as brief as possible. I am a
chemist and so I start from the premise that I would not be burning
fossil fuels in the first place, because particularly coal, but also
oil, are sources of chemicals for generations well into the future.
Petroleum oil will run out far earlier than coal. I accept that we have
enormous coal resources throughout the world, particularly in places
such Australia but also of course in this country.
On the question of pre-capture
or post-capture, I am also slightly worried about what the Government
are doing. I will read out the conclusion that the Science and
Technology Committee came to in its February 2006 publication, HC 578
volume
1:
“Although
it is clearly important that pre-combustion, post-combustion and
oxyfuel capture technologies be developed, we believe that for new
plant pre-combustion capture offers a significant advantage, in a
carbon constrained world, as a
potential source of hydrogen. As the technology develops, the Government
should take into account the potential strategic importance of
polygeneration systems based on pre-combustion capture technology and
consider the case for putting in place incentives to promote the use of
this technology in new build
plant.” I
emphasise that that is “in new build plant”. Obviously it
will not be cost-effective to retrofit post-carbon capture technology.
That would be too expensive in a plant that has only a few years to
live. We therefore dismiss those because Britain will be closing its
older plants shortly. I do not know about China or the rest of the
world; I suspect that in the rest of the world, particularly in
developing countries, those plants will be made to last as long as
possible. Perhaps post-carbon capture on older plants in other
countries is a
possibility.
We are
by no means sure about the relative costs of post-carbon and pre-carbon
technologies. Post-carbon technology relies on the fact that the carbon
dioxide coming out of the plant is separated from all other gases, such
as oxygen and nitrogen, by forming a complex diamine carbonate, and
then heating the solvent, as it is often called, which boils off the
carbon dioxide so that it can be transferred to storage. Diamines are
not cheap chemicals and large amounts will be necessary to capture the
huge volumes of carbon dioxide coming out of a coal-fired generating
plant. Those are getting bigger and are not the small plants that we
had post-1940. They are huge and one can see them when driving around
the countryside. The cost of that will not be insignificant in my
view.
The Select
Committee was also quite clear about pre-carbon capture technology. If
we are building new plants anywhere in the world, especially in this
country, they should be carbon capture-ready. The Science and
Technology Committee, after taking a lot of evidence, recommended that
pre-carbon capture technology is the only answer because it generates
hydrogen. Anyone who went to the Hitachi “Inspire Life”
exhibition either yesterday or today will have seen how the Japanese,
who are leaders in all technologies, regard the hydrogen technology for
driving cars in
particular.
I
think that hydrogen will be one of the transport fuels of the future
because it does not produce carbon dioxide. The Japanese have realised
that and are developing the hydrogen economy quite significantly. If we
do not jump on this opportunity and encourage pre-carbon capture
technology now, I do not think that the hydrogen economy in this
country will be kick-started. Therefore, our transport economy will
still rely on hydrocarbon fuels to generate the electricity that drives
the cars. We will miss a trick and will lose out in competition to the
Japanese if we do not kick-start the hydrogen economy. The only way to
do that is to have pre-carbon capture technology on all new fossil fuel
burning
plants.
Martin
Horwood:
I am very grateful to the hon. Gentleman for the
very expert argument that he is making. From his point of view or from
the Select Committee’s report, is there any comparable project
on post-combustion carbon capture and storage that is as advanced as
Peterhead, Immingham, Hatfield or any of the pre-combustion projects in
terms of planning or implementation?
Dr.
Iddon:
I can tell the hon. Gentleman that pre-and
post-carbon capture technologies are not new. In the Algerian desert,
oil is being extracted with huge quantities of carbon dioxide in it. It
is called the In Salah field and that carbon is now being captured and
stored in the desert in the way that I have described. Pre- carbon
capture technology is also well known in the chemical industry. The
technologies are not new, but using them in the electricity generating
industry with coal burning plants is. I do not know—I suspect
that nobody knows—whether post or pre-carbon capture technology
will win out, but the difficulty with the Government’s decision
is that we are not going to be able to test that, as the hon. Member
for Northavon said. I would have preferred, as I said in the
evidence-taking sessions, at least parallel competitions, if not one
competition involving pre and post-carbon technology.
As a
scientist, my difficulty is that, if we take the line that the
Government are obviously taking—I agree that retrofitting of
existing plants is extremely important and I do not disagree with what
the Government say about it—it will send the wrong signals on
the other technology. As has been said, the danger is that the
technology will go elsewhere, but we cannot afford to lose it, because
it produces
hydrogen.
Malcolm
Wicks:
I was listening with such care to my hon.
Friend—he is clearly a great expert on science. I am merely a
relatively ignorant former science Minister, so I learned a great deal
from him.
I shall not
trespass too much at the moment into the pre and post-combustion
discussion again—I have made my comments on that. If it is
appropriate, I might say more next week. I shall respond to a number of
the remarks in the limited time available in no particular order. I
suspect that I shall continue with my dissertation in response next
week.
The
hon. Member for Wealden asked about international collaboration. The UK
plays a significant role in a number of international initiatives with
the aim of accelerating the deployment of CCS technology. For example,
we have a memorandum of understanding with the United States that
provides for working together on joint R and D projects, and we expect
that the relationship will lead into CCS demonstration, co-operation
and sharing. We are also actively participating in the carbon
sequestration leadership forum, which is led by the
USA.
Co-operation
within the EU is wide-ranging and includes work on the zero-emissions
fossil fuel power plant technology platform. As has been mentioned, the
UK has an energy memorandum of understanding with China, under which we
are jointly developing R and D projects. The near-zero emissions coal
initiative was announced as part of the EU-China partnership on climate
change at the EU-China summit in September 2005. Also, co-operation
with the North sea states, particularly Norway, focuses on the work of
the North sea basin task force. There is quite a strong international
dimension to what we are doing.
The hon. Gentleman asked about
the European Union. We hope that other member states step into the
arena, as it were, on carbon capture and storage. The EU has spoken of
the need for perhaps 10 to 12
demonstration projects, which it aims to deliver by around 2015; as we
know, we have promised to deliver one of the projects. I repeat that
we, alongside Norway, are very much leading on such matters in the
continent of
Europe. I
obviously welcome the fact that a number of companies have a strong
interest in the different technologies. The point I made in the
evidence session the other day was that it does not need to be
Government alone who demonstrate the project. It would be good for
corporate social and environmental responsibility if one or two of the
world’s big energy companies could demonstrate
projects.
Martin
Horwood:
Will the Minister give
way?
Malcolm
Wicks:
Perhaps the hon. Gentleman has details of the
projects.
Martin
Horwood:
The Minister made the point that the energy
companies should be prepared to put their own money in, but BP put tens
of millions of pounds into the Peterhead project. The truth is that
none of the projects will be viable without some measure of public
support. They will clearly ask for the largest possible amount of
public support and we might want to minimise it, but it is important to
recognise what they put
in.
4
pm
Malcolm
Wicks:
I suspect that in certain parts of the world
companies will do that without Government support in future, and we
will be able to test that hypothesis. In clause 1(5), there is a power
to designate one or more areas as gas importation and storage zones. In
exercising that power, it will have to be considered whether to
designate a single zone covering the whole of the relevant offshore
area or adopt a step-by-step
approach.
I
was asked about other greenhouse gases, which was a perfectly
reasonable point. CO2 is the most applicable greenhouse gas
in the context of fossil fuel burning, including in power generation,
but we do not rule out the need to consider measures for emissions of
other greenhouse gases. Given the challenge of climate change, CO2
is public enemy No. 1, if I can put it like
that.
I
was asked about the overall regulation of carbon dioxide storage. The
Bill intends regulation through the Secretary of State but allows his
powers to be transferred
to an appropriate agency. We have not yet decided which will be the
appropriate authority. We have some time to think about that, but
whichever is chosen, it will have the appropriate expertise to regulate
carbon dioxide storage
effectively. We have
talked about offshore storage, but the hon. Gentleman asked me about
onshore storage. I am advised that it is currently prohibited by the
European Union. [Interruption.] Was it the hon. Member for
Wealden? There are so many Euro-enthusiasts on the Opposition Benches
that I could not quite recall. We hope that a forthcoming EU directive
will remove that prohibition; the use of a saline aquifer on land will
be assessed when the directive comes
forward.
I was asked
about enhanced oil recovery, which is important and helps to make CCS
more cost-effective. The development of the emissions trading scheme
and a higher price for carbon is another important development, but
enhanced oil recovery is critical. Through clause 32, we will have the
power to define the circumstances under which it will require a
CO2 storage licence, and we expect to use
it.
I
was asked about the need for a clear statement in the Bill about the
primacy of vested rights under existing petroleum production licences.
The Bill is an enabling framework, and it would therefore not be
appropriate for it to contain the detail of our proposed regulatory
arrangements, on which, as hon. Members know, we shall shortly consult.
We expect the consultation to cover, among other things, the proposed
interaction between petroleum rights and CO2 storage
licences, but in any event, there is no possibility of taking away
vested rights. For instance, if a petroleum licence holder already has
consent to drill in a particular area, we could not take it away by
granting a gas storage licence over the same area. We are, however,
amending section 47A of the Petroleum Act 1998 to ensure that, in
deciding to give such a consent, we can take into account gas storage
and CCS activities. That is already the case for wind farm activities,
and we shall consult on guidance that we will issue in relation to the
new activities.
I
apologise if there were other questions that I have not dealt with, and
I hope that I have persuaded the Committee to support the
clause.
Question
put and agreed
to.
Clause 16
ordered to stand part of the
Bill.
Further
consideration adjourned.—[Alison
Seabeck.]
Adjourned
accordingly at five minutes past Four o’clock till Tuesday 26
February at half-past Ten
o’clock.
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