Examintion of Witnesses (Question Numbers
60-70)
MR STEVE
JENKINS, MR
ALAN BOOTH
AND MR
MARTYN MILLWOOD
HARGRAVE
11 MARCH 2009
Q60 Sir Robert Smith: To clarify,
that is only up to the 12-mile limit; beyond the 12 miles it is
UK where most of your operations are.
Mr Booth: Yes.
Q61 Anne Main: It is a migratory
path. Best practice is sometimes questionable, in terms of leading
the industry to follow best practice, surely! Are you happy that
there are enough guidelines on this?
Mr Booth: Absolutely. When we
get awarded a licence we get a document this thick to say
what the environmental rules are around that specific licence,
and we have to follow them, otherwise we do not get permission
to drill. We do not make the rules up ourselves; we follow the
guidelines given to us. The UK is one of the most heavily environmentally
regulated hydrocarbon provinces in the world.
Q62 Chairman: In some of the submissions
there was a claim that some of the promises, particularly on environmental
monitoring, made by the companies, have not been kept to. Is that
a fair criticism?
Mr Jenkins: I do not think it
is. As Alan said, it is very highly regulated. We have to make
reports on any activity whatsoever. From a small company point
of view, we tend to employ experts to represent us, specific Health
and Safety Executive experts—and that is all they do. When
we apply for a licence, they would carry out our environmental
assessment of the wildlife and flora and fauna in that licence,
and help us monitor. We will not get permission to drill if, for
instance, our Health and Safety Executive policies are found lacking
by, say, Lloyds, who endorsed and approved them. We not only stick
to the letter of the law but we probably exceed that. The oil
industry operates within the guidelines, and in fact is very careful
when it comes to any operations.
Q63 Dr Turner: To what extent are
the environmental constraints placed on companies a factor in
deciding where to invest? Does it happen that requirements in
the UK are so stringent that companies move elsewhere?
Mr Booth: No, I do not think so,
because once you know the rules you know what your operating environment
is so it will not put off companies, because it is very straightforward
to operate within those guidelines—it is being a responsible
citizen.
Q64 Dr Turner: What are the challenges
facing the industry when it comes to decommissioning in terms
of satisfying environmental requirements?
Mr Jenkins: Decommissioning is
not something that our members are really familiar with.
Q65 Chairman: There would be a cost,
presumably, that you have to factor in!
Mr Booth: There is clearly the
issue of the cost and what we are supposed to do. As I say, it
is not something we are deeply familiar with, and perhaps it is
more a question for Oil and Gas UK. There are a couple of things
here: tell us what the rules are; tell us what the playing-field
looks like, and we will live within it. As the North Sea is changing
its make-up we need to better understand a predictable, transparent
environment in which to work. That comes down to decommissioning
or funding our share of decommissioning. What is it we are supposed
to fund? Is it the entire cost or the after-tax cost, because
of course the pre-tax cost in the current regime is at least twice
what it is actually going to cost, so we have to put up security
for the whole lot.
Q66 Dr Turner: You have to carry
out an environmental impact assessment specific to any project
that you are seeking consent for; but it has been put to us by
the RSPB that there should be a strategic environmental assessment
over the whole area. How would this affect you?
Mr Booth: I think the SEAs have
already been done. We have had a number of years, five or seven
years, where each area has been out of bounds until that strategic
environmental assessment has been done, and each area has been
released through time. I would be interested to know what they
mean by that.
Q67 Dr Turner: That is my understanding.
Mr Booth: SEAs have been done
for each area. In addition, once we have a licence we then have
to demonstrate that what we want to do is acceptable. In certain
areas, because there is not any data they tend to assume the worse,
and then we have to go and demonstrate that either it is like
that, or perhaps it is not quite as bad as they envisaged. That
gets fed back in to the system.
Q68 Dr Turner: What would you wish
to see the Government do to make it easier for your industry to
invest in CO2 storage, in your hydrocarbon reservoirs or your
saline aquifers? What does Government need to do to facilitate
it?
Mr Booth: It needs to have a regime
that is in place. How do I get a licence? I do not know. Hydrocarbon
or gas storage is difficult to fund at the moment. I do not think
there is much the Government can do about that—it is just
the nature of the market.
Q69 Sir Robert Smith: On the gas
storage, could they not charge you tax on the cushion gas?
Mr Booth: Thank you, Sir Robert!
Absolutely, yes. That was not pre-ordained! Our company has also
tried to develop gas storage, and the issue is that you have to
put gas into the reservoir to maintain a pressure, which you never
produce, except we are expected to pay tax on that. It could be
helpful that because the gas has come from somewhere it has paid
tax when it is produced so why have to pay tax again when it is
put in the ground? It is effectively a piece of the infrastructure.
That would be extremely helpful.
Q70 Dr Turner: If the Government
is serious about exploiting CCS, it has got to put a proper regime
in place and it has not done so.
Mr Booth: And quickly, or at least
get us a bridge to when that is in place.
Mr Millwood Hargrave: That is
a very good point. There are some pilot schemes going on, as the
Committee will know, but no-one has done this—is it a commercial
business? To what level is it commercial and to what level is
it public service? What is the interrelationship between the two?
That is not clear at the moment. Probably the first number of
times this will be done in the UK, there will inevitably—and
there is certainly talk among the academic community of large
amounts of money around there, but it is just not clear what the
rules are and the focus. Getting a focus and policy would be extremely
useful.
Chairman: Thank you very much. There
are certainly some issues there we would like to give some thought
to.
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