Clause
19
Terms
and
conditions
Charles
Hendry:
I beg to move amendment No. 12, in
clause 19, page 10, line 27, at
end insert—
‘(i) provision
about obligations of a licence holder to advise the Secretary of State
of any accidents, near accidents or leakages relating to the
facility.’.
This
clause sets out the terms and conditions that can be attached to a
licence, and they are mostly sensible, nuts-and-bolts things. However
there is nothing here about the rules relating to an accident. The Bill
sets out an inspection regime, but an inspector will presumably make
visits either at a given time or unannounced, but that will not
necessarily coincide with something untoward happening at the facility.
This amendment puts the onus, indeed a legal requirement, on the
operator to advise if there have been accidents or near-accidents. We
recognise that there could be legal difficulty in defining a
near-accident, but it is right to be concerned about things that go
wrong even if they did not actually result in a formal accident. They
might indicate poor working practices that should be
investigated.
We all
recognise that we are entering uncharted waters with this technology
and will be on a learning curve for many years to come. We do not know
from whence the risks to the public or environmental safety might come,
so we do need to take adequate precautions. Safety, of course, comes
with experience and from learning from mistakes—where things
have gone wrong, what steps have been put in place to make sure they do
not happen again? Lessons learned in this way are so fundamental that
they are, of course, the way we make sure that we make adequate
precaution for the future.
It would be naive to think we
could build in every conceivable safety element from the outset, so we
need a precautionary approach in which the onus is on the operator to
advise of accidents and near-accidents. Operators will be very
concerned about safety, but in the early years of such technology, they
will also be concerned about driving costs down, and cost reductions
must not be allowed to win over safety. Similarly with leaks, the
technology for identifying leaks is in its infancy. Mechanisms to
identify leaks can be put in place, but it should be the responsibility
of the operator to report any leaks that take place so that they can be
fully
investigated.
11.45
am
Steve
Webb:
The hon. Gentleman’s amendment ties in with
my comment earlier this morning about the omission from clause 19 of
matters relating to leaks. I know that Government policy on leaks is
normally to have a review that never reports, but I think that we need
something better in this case. Therefore, the idea of a reporting
requirement, as far as it goes, is not one I have a problem
with.
This amendment,
however, highlights a more general set of omissions from the terms and
conditions set out in clause 19—and indeed, this part of the
Bill—which relate to the whole issue of monitoring the security
of the storage. We do not just want a report—that there is a big
CO2 leak and the licensee reports it to the Secretary of
State. That is fine, but does not quite seem to go far
enough.
What other
models are the Government looking to? Are they considering existing
models that regulate, for example, mining, oil and gas, pollution
control and waste disposal? A number of parallel activities have their
own monitoring reporting regimes and which of them, if any, is being
looked at—or is there a completely new approach being taken to
the regulation of CCS?
I have no problem with the
amendment, although I do not feel that it goes far enough in simply
requiring reporting of accidents—and if they are as catastrophic
as has been suggested, we will know anyway—but we need to go a
lot further than it suggests.
I am puzzled, really, by the
absence of much more detail in the Bill about the liabilities of
operators and why the list of things a licence may include under clause
19(3)(a) to (h) has nothing about not only reporting requirements, but
about penalties and monitoring in the event of leakages. I hope that
the Minister can give us a fairly full response to the issues that have
been raised by this amendment and clause
19.
Malcolm
Wicks:
I will do my best. Certainly the issue around
accidents of different kinds is crucial, so I would like to thank the
hon. Members for Wealden and for Billericay for tabling the amendment.
I recognise that they raise an important point in relation to carbon
dioxide storage. Given the nature of likely CO 2 storage in
our seas, I will not say more about the use of the term
“uncharted waters”—I do not think that the hon.
Member for Wealden meant that technically but I know what he means. I
hope, however, that some of these waters are charted.
Existing legislation is not
suited to licensing the storage of carbon dioxide under the sea bed,
and chapter 3 of the Bill is intended to provide a comprehensive and
adaptable legal basis for regulating such storage in the offshore area.
I would like to explain why we have drafted the provisions in the way
we have, and set out why we think the amendment to include a provision
about notification of accidents, near-accidents or leakages relating to
a CO2 storage site is
unnecessary.
The
clause allows licences for CO2 storage and related
activities to be granted on such terms and conditions as the Secretary
of State, or an authority to which the licensing function is
transferred, sees fit. The power will allow the licensing authority to
include case-specific requirements in relation to each carbon dioxide
store. The clause provides a non-exhaustive list of examples of the
sorts of conditions licences may contain, including financial security
provisions; the right for the Secretary of State to modify the licence;
and provisions about closure of the storage site and termination of the
licence. In addition, we expect that all licences will include
provisions relating to monitoring and remediation, reporting,
record-keeping, notification obligations, and the requirement to have a
valid lease from the Crown Estate for the relevant
site.
The clause
therefore gives the Secretary of State, or another licensing authority,
unfettered discretion to grant licences on such terms and conditions as
it considers appropriate, subject to any regulations about the terms
and conditions of licences that may be issued under clause
20.
Steve
Webb:
Will the Minister give
way?
Malcolm
Wicks:
I think it would help the hon. Gentleman—and
I like to be helpful, from time to time, anyway—if I made
progress.
It would not
be necessary to have express provisions in the Bill because subsection
(3) is a non-exhaustive list. Our approach in subsection (3) is to set
out examples of some of the less obvious provisions that may be
contained in licences. Notification obligations, on the other hand,
will be included in every licence as a matter of course, due to the
importance of keeping the regulatory authority informed of any leaks or
accidents or other significant developments in relation to the storage
site.
Indeed, clause
22(1) specifies that that it will be an offence to fail to notify the
regulatory authority as required by licence, which necessarily implies
that notification requirements may be included in a licence. The
Committee may also wish to note that my Department will be consulting
on the licence arrangements
shortly.
Consequently,
I hope that I have provided some reassurance to the hon. Member for
Northavon that provisions concerning the notification of accidents or
leakages are sufficiently covered in this part of the Bill, without the
need to add to the non-exhaustive list under the clause. I must confess
that I can see why he raised the matter, but I am advised that it is a
list of unusual provisions to be contained in the licences and that, by
contrast with mediation and notification, will
be included as standard. I apologise if that has led to confusion on his
part but, as my speech progressed, my own confusion started to
evaporate.
Steve
Webb:
The Minister has brought forward an interesting
doctrine whereby the Bill contains things that people might not have
thought of, and omits the obvious, which is novel for Government
legislation. Will he clarify as a set the status of the eight things
under the clause? Is he really asking us to believe that they are in
the Bill simply because we might not have thought of them, such as that
the Secretary of State could review the licence, whereas reporting is
so blindingly obvious that it does not need to be mentioned? Is that
the Department’s strategy for legislating these
days?
Malcolm
Wicks:
That statement does not quite summarise our
approach. I have conceded to the hon. Gentleman that I can understand
why he is confused. Our approach was such that some things were so
blindingly obvious—for example, concern about accidents and
leakages—that reference need not be made to them, but I hope
that he is now reassured. My experience with the Department working
with the oil and gas industry, which is an obvious comparator, through
our partnership with the industry known as PILOT, which I attend
regularly, has impressed on me the fact that the industry takes
accidents most seriously. We have only to go on an oil rig to
experience a 20-minute safety speech first. That takes place perfectly
properly, and we are not complacent about it. I am convinced that my
Department and many of the big players that are likely to be involved
in carbon dioxide storage have accidents as well as leakages uppermost
in their minds. I hope that I have reassured the hon. Gentleman to some
extent.
Martin
Horwood:
The Minister has explained in general terms why
some things as obvious as the environmental consequences are not set
out in the Bill, although that might have been a good measure given
that, when discussing earlier clauses, he suggested that environmental
consequences would be paramount to the granting of licences under other
parts of the Bill’s regime. He might therefore wish to comment
on how important they are to the licensing regime that we are
discussing.
My
specific question is about whether the granting of licences will
involve the calculation of the future cost of climate change. That is a
relevant consideration at the moment, because it was used in the
consultation on the third runway at Heathrow, when a strange new number
invented by the Department for Environment, Food and Rural Affairs
called the shadow price of carbon was used to calculate the future cost
of climate change from carbon emissions on that project. That shadow
price of carbon was three times lower than the one recommended in the
Stern report for calculating the future cost of climate change. The
difference was based on the assumption as to whether the various
measures to tackle climate change would be successful. Stern was
pessimistic, but realistic, about the prospects of that happening. Will
the future cost of climate change be factored into the granting of
licences for the facilities? If so, will we be committed to using the
rather dubious number that was invented by DEFRA perhaps to fiddle the
outcome of the Heathrow consultation, which that would have changed, or
will there be the potential for DBERR to plan a more realistic path on
its own and use calculations based more closely on the Stern
report?
Malcolm
Wicks:
If I did not know that the hon. Gentleman was one
of the most disciplined parliamentarians in the House, I might have
thought that he was trying to use my Bill as a little peg to make a
point about Heathrow and DEFRA. I am sure that that is not the case.
The importance of climate change is one of the reasons why issues about
carbon dioxide storage are in the Bill. Tackling climate change is one
of the major purposes of the Bill. If we are to stand any chance of
tackling climate change—and we stand a good chance—we
need to bring forward such technology. At this point, I think that I
will leave the hon. Gentleman on the
runway.
Charles
Hendry:
I am afraid that the Minister’s
response is not good enough, although we have great sympathy for him.
He was reading through his text and suddenly realised that he did not
understand what he was saying. We have all been there before. I find
that that can happen to me even when I have written my own speech
notes. Alongside Murphy’s law and Parkinson’s law, we now
have Wicks’s law which says, “Do not put in legislation
anything that is
obvious.”
If
the Minister looks at the elements that could be included in the
licence, they could scarcely be considered to be unusual or less
obvious, which were the words that he used. The hon. Member for
Cheltenham talked about the provision
“enabling the Secretary of State
to review the licence”.
We also have the
provision
“enabling the
Secretary of State to modify the licence”.
There is also the
provision
“about closure
of a carbon storage
facility.”
Those are very
obvious elements to include. Therefore, the Minister’s main line
of defence does not stand up.
In relation to what we do with
the amendment next, will the Minister assure us that included in the
licence—even if it is not in the Bill—will be an
obligation on the operators to advise of an accident or a leakage? If
they do not have that obligation, how will we know if one has taken
place? If they do not have the duty to tell the Minister or the
Secretary of State, how will anybody know that something has happened
and how can we be in a position to enforce good
practice?
Malcolm
Wicks:
I am happy to assure the hon. Gentleman that the
issue of accident and leaks will be a very significant part of the
Bill. I was slightly teasing myself about considering the question
about the less obvious things in the Bill.
The hon. Gentleman made a quite
good debating point. The substance of the matter is that this issue of
accidents, relating both to personnel and to potential leaks, is
crucial and will be a major component of the
licence. Is he reassured? I do not want him to be disappointed in me in
relation to anything that I say in this
Committee.
Charles
Hendry:
Indeed, I would hate ever to be disappointed by
the Minister. Given the Minister’s assurances that the licences
will include that point, I will not push the amendment to a vote. I beg
to seek leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Question
proposed, That the clause stand part of the
Bill.
Charles
Hendry:
I raise a small point in relation to clause
19(3)(d), which talks about the provision
“enabling the Secretary of State
to modify the licence in specified circumstances (with or without the
consent of the licence
holder.”
I understand why
the Government do not necessarily need the consent of the licence
holder because the licence holder may object to what the Government
want to do but the Government may feel that it is right to do that.
Will the Minister assure us that such a decision will be made following
consultation with the licence holder so that it will have a chance to
ensure that its views and concerns are taken into
account?
Mr.
Hugo Swire (East Devon) (Con): I put it to the Minister
that brevity is everything.
Further to the point made by my
hon. Friend the shadow spokesman on clause 19(3)(d), will the Minister
say what the legal situation could be as regards somebody who has been
granted a licence and suddenly the Secretary of State takes unto
himself the powers to modify a licence that has already been granted in
good faith? Is that feasible under
law?
12
noon
Malcolm
Wicks:
Clearly, as this debate shows, the licence is a key
means of ensuring that the environmental impacts of the carbon dioxide
stores are minimised. That, combined with the fact that this is an
emerging industry in which technical and regulatory experience is still
evolving, means that a degree of flexibility in prescribing and
modifying licence terms must be retained. For example, much of the
basis of the initial licensing of a store will be predictive modelling
of the behaviour of carbon dioxide in natural geological formations. If
those models prove to be inaccurate, the regulatory authority may need
to modify the licence. I mentioned that we know a little about the
behaviour of CO 2 through the Sleipner project in Norway, but
it is early days scientifically.
The draft EU directive on
carbon dioxide storage also requires the regulatory authority to have
the power to review and, where necessary, modify the licence. Existing
offshore licensing arrangements contain similar provisions, for
example, licences issued under part 2 of the Food and Environmental
Protection Act 1985 include the right of the regulatory authority to
attach additional conditions, where there is a risk of adverse
environmental impacts.
I understand the hon.
Gentleman’s concern, because someone signs a licence and they
need some certainty, but I hope that he will also understand that in
this new territory, when we are on the frontiers of a new science, a
new engineering and new technology, some flexibility is required. I
assure him, as I assured his colleague the hon. Member for Wealden,
that consultation is important in this area and will be
standard.
Mr.
Swire:
I do not want to labour the point, but if the
Minister retains the right to modify the licence, there could be cost
implications for the organisations or companies that have taken out
that licence. In some cases the modifications, which are not specified
in any great detail, could have a negative financial effect on the
licensee.
Malcolm
Wicks:
I understand that there could be financial
implications. Clearly, we want these new businesses to develop in the
future, but I do not think that at this stage I can give the hon.
Gentleman any assurances or reassurances on the financial implications
of a modification of a licence.
Anne
Main: Given that queries about certainty for licence
holders are now entering the debate, does the Minister think it
advisable to have a licence for a permitted period, which he might
specify, rather than what seems to be a somewhat open-ended commitment
to a licence, but one that can therefore be modified without the
licensee’s
permission?
Malcolm
Wicks:
I would need to reflect on that. This is a
long-term business, is it not? I think I said earlier that we might be
talking about something of the order of 40 years for CO 2
storage. I keep repeating myself, but it is such early days, who knows
what the length of these projects will be? They will be long projects.
We have plenty of time to reflect, but I would need to reflect on what
the hon. Lady is saying. Is she saying that it would be sensible to
only grant a licence for 10 years, with clear details, as
opposed to granting one for 40 years that might need flexibility
later?
Anne
Main:
I just wanted to tease out the Minister’s
thoughts. There are so many vagaries, not because anybody intends to
make life vague, but because there are imponderables about the future.
It may be that there will be a rolling programme of renewing, so that
there is a guaranteed certainty unless the licences have been operated
in an unacceptable fashion. Perhaps the Minister should look at that
rather than putting into the Bill something which, depending on the
political climate of the time, allows him to alter the licence at will
or on a whim. With that vague possibility of future costs, the licensee
would be left uncertain or unwilling to
invest.
Malcolm
Wicks:
As I say, there will be time to reflect on such
matters. No doubt when we reach that point—and I hope that we
will reach it with our demonstration project, although that will be for
one rather special project—we will consult with the relevant
company or consortium. In the longer term, there will be opportunities
for consulting with the new and
emerging industry. We certainly have flexibilities in the North sea with
regard to oil and gas, which we want to ensure are being properly
exploited. Where appropriate, we can take licences away and reallocate
them to newer, often smaller, companies. I am not certain whether that
is a useful comparison, but I understand the question. We are in very
early days and I understand that companies need as much certainty,
including financial certainty, as they can get. There will be great
opportunities to explore these issues and consult with the companies
concerned.
Anne
Main:
I thank the Minister for his answer. He spoke about
taking licences away, and touched on oil and gas. If there are
parallels, does he feel that there is enough detail about licensing to
make a judgment as to whether to remove a
licence?
Malcolm
Wicks:
No, of course I do not. It is a bit like talking
about urban development on Mars when we have not even lit the fuse, or
whatever we do. I am not saying that the hon. Lady is being
unreasonable, but it is reasonable to say that these are early days and
there will be time to consider these issues. We should look at this as
a new industry that will emerge globally, with opportunities for
companies to prove themselves and show that they are technically and
financially on top of the job when seeking other contracts around the
world. I think that many companies will understand that we need
flexibilities. They will want to prove that they can be adaptable as we
learn more about science, technology and engineering, so that they can
win contracts in the future. Trying to look into the crystal ball, I
doubt that companies will object to flexibility for licences, because
they will want to prove themselves commercially adaptable to the
emergence of technology as the decades roll
past.
Malcolm
Wicks:
I think that I have provoked the hon.
Gentleman.
Mr.
Swire:
Far from that, I may be coming to the
Minister’s rescue on this point as he seems pretty unclear at
the moment. The Minister referred to existing technologies and licences
in the North sea with respect to the oil and gas projects. He said that
the Secretary of State has the right to remove licences and reallocate
them. Does the Secretary of State have the right to modify North sea
oil licences, and can the Minister give any example of where such a
licence has been issued and can be modified? That is the crux of the
matter.
Malcolm
Wicks:
I will have to come back to the hon. Gentleman on
the issue of modification, and I will do so. We do have some
experience. Earlier I referred to what some call the, “Lose it
or use it” approach to the North sea, which the industry as a
whole rather accepts. Some big companies have decided that their
priorities lie elsewhere in the world in terms of oil or gas
exploration, and we now make those potential fields available to what
are often smaller and
enterprising companies. That is possibly a little off course, but I
repeat the point: there will be time to look at all those
matters.
We must, of course, be careful
to ensure that a company that takes on the
responsibility of CO2 storage recognises that it is in the
business for the long term. It is not a commercial activity for a year
or two, and indeed, the ultimate responsibility for decommissioning
lies with the company. If there were any transfer of a licence, we
would have to make sure that all the financial certainty was there in
agreeing to that. This is looking
ahead.
Charles
Hendry:
The Minister appears to be slightly disagreeing
with his own argument. Just now he was arguing for flexibility. Now he
is arguing for some degree of certainty. Perhaps I can help the
Minister.
The people
applying for these licences are going to be those companies looking to
operate a fossil fuel facility. If they are going to put in the many
millions in costs for the carbon capture and storage facility to be
adjacent to or an integral part of their power plant, and then
potentially hundreds of miles of pipeline to a storage facility, they
will want to know that the licence will apply for as long as they are
running that power plant. If there were a risk that after 25 years they
could lose the right to deposit the carbon they had captured in a
facility that may stop them going for it in the first place. They would
end up with a facility that they could not operate because by then the
rules might have changed or the price of carbon would be so high.
Surely they are looking above all for certainty rather than
flexibility.
Malcolm
Wicks:
I think that we have said that this is a long-term
project. I mentioned 40 years. Who knows whether that is an
underestimate? Time will tell. This is the long term. The company
investing will want to know that.
I have explained, however, that
it is important that the Secretary of State has certain powers for
flexibility, not least as we learn more about this technology. I could
also envisage that a company might feel that after a number of years it
did not want to stay in this business, and that its commercial priority
had changed. Then, subject to lots of appropriate safeguards in terms
of another company taking over the contract—all the financial
safeguards that we could think of in terms of the ultimate costs of
decommissioning and the financial arrangements that would be necessary
between one company and another—I would not rule out the
possibility of another company taking on not only the task and the
commercial opportunity but also, subject to arrangements with the first
company, the appropriate
safeguards.
Question
put and agreed to.
Clause 19 ordered to stand
part of the Bill.
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