 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Energy |
Energy Bill |
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
Public Bill CommitteeThursday 6 March 2008(Afternoon)[Mr. David Amess in the Chair]Energy BillClause 70Information
about decommissioning of
wells
Question
proposed [this day], That the clause stand part of the
Bill.
1
pm
Question
again
proposed.
The
Chairman:
When the Committee adjourned this morning, the
Question was that clause 70 stand part of the Bill, and the Minister
was reaching his peroration.
The
Minister for Energy (Malcolm Wicks):
Good afternoon,
Mr. Amess. I was certainly in full flow, and about to
respond to my hon. Friend the Member for South Thanet on whether the
power in clause 70 to require information on action from a licensee
arises too late in the process. I do not believe that that is the case,
and I am reassured by my Department’s lawyers, who agree with
me. I believe that it happens in a timely way, and I hope to explain
why in reasonably plain English.
If
the Secretary of State was uncertain about a licensee’s ability
to plug an abandoned well at the time that the licensee requested
consent to drill, he would not grant consent. In other words, financial
scrutiny at the beginning is crucial. However, the power to require
information to be provided and action to be taken can be exercised at
any time after drilling has been started. The provision is designed to
cover situations where we believe that the licensee, having started to
drill a well, will start to or has started to run into financial
difficulties; or, further down the line, where we believe that the
licensee, after suspending a well, will start to or has started to run
into financial difficulties. We would then require the licensee to take
specific action, including providing financial security, which could
involve the licensee giving a letter of credit. However, if a
licensee’s financial capacity comes increasingly into doubt, the
aim is to take the necessary action before he loses the necessary
capacity. Besides protecting the taxpayer and giving the Secretary of
State greater assurance that wells will be plugged and abandoned, it is
worth noting that the power will give him greater flexibility in
accepting small companies’ business plans. He will be able to
consider allowing wells to be suspended in cases where he might
otherwise have no choice but to require immediate abandonment. I hope
that that deals with the point raised by my hon. Friend the Member for
South Thanet.
I want to
clarify a couple of other points raised this morning. I thank the hon.
Member for Wealden for asking about the difference between a well and a
borehole.
We think that a well and a borehole are broadly the same. The definition
in the clause follows that used in model clauses for licences granted
since at least 1934, perhaps internationally. However, usage over time
may vary. I may be wrong, but I think that the reason behind that
question was the hon. Gentleman’s memory that in
1923—[
Laughter.
] I do not mean his personal
memory but his sense of history. As most members of the Committee will
know, in 1923 the oldest extant licence was granted to the Duke of
Devonshire for what was then described as a borehole. I wonder whether
the hon. Gentleman’s historical literacy was behind the
question; I am sure that he was not trying to catch me out.
I wish to provide clarity on
what I said in response to my hon. Friend the Member for Southampton,
Test about what would happen if existing oil and gas wells were to be
used for the purpose of CO2 storage. There is flexibility on
whether such wells would need to be capped and redrilled—it
would depend on the needs of carbon storage.
The hon.
Member for Wealden asked whether entire structures should be
decommissioned, including everything below the seabed and the
associated pipelines. An international convention—the OSPAR
convention, to which the United Kingdom is a signatory—requires
that redundant installations are removed to shore for re-use, recycling
or disposal. To be more specific, the structures will be cut off below
the seabed, the wells will be sealed at the reservoir, and the pipe
work will be removed to a depth usually of 2 m or 3 m below the seabed.
A small number of installations may be given exemptions allowing them
to be left in place, because that is the most practicable option.
However, cutting them off at that distance below the seabed should help
in relation to the issue that was raised about
fishermen’s—or fisherperson’s—nets,
dragging and so on. I hope that that is a useful response.
Pipelines may
be decommissioned by removing them to shore for recycling of the steel
or, if they are already buried and therefore not a hazard, they may be
left in place. The Secretary of State’s powers under the 1998
Act enable him to control the choice of decommissioning options, having
regard to the international convention and the impacts on safety,
environment and other users of the sea—and, of course, the
taxpayer.
Charles
Hendry (Wealden) (Con): I thank the Minister for that very
helpful response and for the additional detail that he has been able to
give us. I would certainly never seek to catch him out—he is far
too nimble-footed for that. My interest was much more parochial than he
suggests. My constituency is adjacent to Royal Tunbridge Wells, and I
have always wondered why it is not called Royal Tunbridge Borehole. I
am grateful to him for making the distinction so
clear.
Question put
and agreed
to.
Clause 70
ordered to stand part of the
Bill.
Clause 71Transfers
without the consent of the Secretary of
State
Question
proposed, That the clause stand part of the
Bill.
Malcolm
Wicks:
“Disgruntled of Tunbridge Borehole”
has a certain ring to it, but we had better not go
there.
It
is a term of existing petroleum licences that a licence cannot be
transferred without the Secretary of State’s prior consent. That
is to ensure that interests in a licence are not transferred to a party
or parties who would not have gained the Secretary of State’s
consent for such a transfer had he been asked. The Secretary of State
needs such powers for situations where, for example, the licences
transferred to parties who will not or cannot put enough time and
resource into recovering oil and gas from the area. It is important
that licensees’ objectives are aligned with the
Government’s aim of maximising production from the UK
continental shelf. However, despite the requiring of the Secretary of
State’s consent to transfer a licence, experience has shown that
there can be circumstances where a licence interest has been
transferred without it. In such situations, under current provisions,
the Secretary of State could accept the transfer—although if it
has already been decided that the new licensee is unsuitable, that
would not rectify the problem—or revoke the whole licence,
although that would mean that any new licensee would need to wait until
the next licensing round to get the licence, which could significantly
delay production. However, the Secretary of State could not force the
parties to transfer the licence back.
We believe that the Secretary
of State’s having the power to direct that a transfer revert
back to the transferor is a better solution because the transferor
would then have the option of transferring the rights under the licence
to a more suitable person. In turn, that would mean that production on
the field could continue. The clause allows the Secretary of State to
direct that the licence interest revert back to the transferor, should
he think fit. I believe that that creates an important safeguard and an
effective incentive for licensees to comply with the existing
requirements of a licence and to seek the Secretary of State’s
consent before going ahead with any potential licence transfers. I
reiterate that this does not change any of the existing obligations
about seeking prior consent for transfers from the Secretary of State;
rather, it creates an effective system for addressing any such
transfers if the Secretary of State believes it appropriate to do
so.
In order to
ensure that the Secretary of State has the information necessary to
identify whether an unconsented licence transfer has taken place, the
clause also allows the commissioners for Her Majesty’s Revenue
and Customs to give specific information to the Secretary of State for
the purposes of determining whether that has taken place. That ensures
that any actions that the Secretary of State may wish to take are fully
informed.
Mr.
Hugo Swire (East Devon) (Con): Given that the clause gives
the Secretary of State new powers relating to the uncontested transfer
of rights or benefits under petroleum licences, why is the Secretary of
State being granted these new powers at this point? What has gone wrong
in the past which has led to this need for additional
legislation?
Malcolm
Wicks:
I hoped that I had touched on that in my opening
remarks, but I will try to give greater clarity in a few
moments.
It is
important to protect the information and the people to whom it refers.
That is why the clause sets out that the information supplied by the
commissioners at HM Revenue and Customs must be limited to that
necessary for the Secretary of State’s decision. There are also
restrictions on the purposes for which the information can be used. The
clause also, in line with the rules on sharing information between
Government Departments, makes it an offence for information to be
further disclosed without the permission of the commissioners of Her
Majesty’s Revenue and Customs, the people identified in the
information, or in pursuance of a court order. If found guilty of that
offence, a person will be liable, on summary conviction, to a fine up
to the statutory maximum and, on indictment, to a fine, imprisonment of
up to two years, or both.
Charles
Hendry:
May we have clarification on a couple of issues?
In what circumstances is the Secretary of State’s consent
required? Is it always required if a licence is being transferred? Will
the Minister clarify the rules regarding the trading of licences? Are
people allowed to trade licences, subject to the consent of the
Secretary of State, and in what circumstances might he use his powers
to revert the licence to the transferor? Would it happen automatically
if it were an unconsented transfer, or only if the Secretary of State
had additional concerns about the consequences of that
transfer?
Malcolm
Wicks:
Let me deal first with the question from the hon.
Member for East Devon. As I have explained in the context of one or two
other clauses, the circumstances in the North sea UK CS are changing.
Whereas in the past it was dominated by relatively few big
players—the well-known names—the field is maturing as
some of the big players give priority to fields elsewhere in the world
and there are opportunities for new enterprise companies to come
forward, and issues of security have arisen. A number of smaller
players are active on the continental shelf. That is welcome, but the
other side of that coin is that they are potentially less financially
viable. We therefore thought it important to use the Bill as an
opportunity to introduce new
safeguards.
The
hon. Member for Wealden asked several questions, and I may not be able
to answer them all at this precise moment. He asked in what
circumstances consent is required and whether it is always required.
The answer is that it is always required. Moving on—seamlessly,
I hope—he also asked whether licences can be traded if the
Secretary of State agrees. Yes, they can. Indeed, that is now an
important part of the market. However, licensees can also transfer the
benefits without his consent, and that causes a disparity between the
benefits and the obligations of a licence. Perhaps that was not so
seamless. I need to clarify that point, as I muddled myself.
On the question of whether the
Secretary of State will always revoke the licence of unconsented
transfers or do so only if there are other concerns, some unconsented
transfers are acceptable, but we would use the powers only if there
were concerns about one of the parties involved in the
transfer—for example, about their financial health. If I can
clarify other matters later, I will do so.
Anne
Main (St. Albans) (Con): Perhaps I was not listening as
closely as I should have been and what the Minister said was brilliant,
but I thought that he said that the parties could transfer the benefits
but not the obligations. Is that something on which he is seeking
clarification?
Question put
and agreed to.
Clause 71 ordered to stand
part of the
Bill.
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