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General Committee Debates
Delegated Legislation Committee Debates
|©Parliamentary copyright||Prepared 3rd March 2011|
Publications on the internet
General Committee Debates
Delegated Legislation Committee Debates
Draft Offshore Petroleum Activities
The Committee consisted of the following Members:
Mark Oxborough, Committee Clerk
† attended the Committee
Draft Offshore Petroleum Activities (Oil Pollution Prevention and Control) (Amendment) Regulations 2011.
As the Committee will recall, the draft regulations were to be debated on 17 November 2010, but they had to be withdrawn and the debate postponed when it became apparent, while updating the guidance to be published alongside them, that some types of pipelines were not adequately covered. The draft regulations have been revised to include a new definition of “offshore installation” that now encompasses all pipelines.
From the documents already available, the Committee will have seen the background to the original regulations—the Offshore Chemicals Regulations 2002 and the Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005—so I shall repeat only the salient points about why we are debating the two sets of amending regulations. I shall refer to the Offshore Chemicals (Amendment) Regulations 2011 as the 2011 chemicals regulations, and the Offshore Petroleum Activities (Oil Pollution Prevention and Control) (Amendment) Regulations 2011 as the 2011 oil regulations.
There are not many significant points to make because, as Committee members will doubtless have concluded, notwithstanding the revised definition of “offshore installation”, only one major change is required, and that relates solely to the 2002 chemicals regulations, which currently apply only to the use and discharge of chemicals as part of day-to-day operational activities relating to oil and gas exploration, production and decommissioning. That framework mirrors the international commitment implemented by the regulations, made under the OSPAR convention, whereby operational uses and discharges must be the subject of an application and assessment; if approved, they will be allowed to occur in accordance with the terms set out in a permit.
When bringing the 2002 chemicals regulations into force, it was considered that they provided powers relevant to all emissions of offshore chemicals. However, those regulations do not cover unintentional events, such as spills or leaks of chemicals, because they cannot be
The purpose of the 2011 chemicals regulations is to extend the scope of the 2002 chemicals regulations by creating a new distinction between a discharge and a “release”. In simple terms, a discharge will be an intentional emission of an offshore chemical—essentially one that is planned or deliberate. Such an emission will be lawful if it is made in accordance with the terms and conditions of a permit and, as a result, does not pose a threat to the marine environment. Any other emission of offshore chemicals will be treated as a release, and will be unlawful. This will ensure that all unauthorised emissions are liable to enforcement action, including possible prosecution, which creates a new offence.
Oil spills and leaks are already covered by the 2005 oil regulations, and the concept of release is being introduced also in the 2011 oil regulations solely for the sake of regulatory conformity, given the similarity of purpose between the two regimes for controlling emissions of chemicals and oils. Powers to take enforcement action, including, if necessary, bringing a prosecution, have always been available to my Department for oil spills and leaks. Such powers are contained in the Prevention of Oil Pollution Act 1971, but they were superseded by the 2005 oil regulations in relation to offshore installations.
The Committee may be assured that my Department has to be notified of spills of chemicals and oil. Fortunately, in the UK, they have generally been minor. Between 2005 and 2009, there was an average of 157 notifications a year of chemical spills, involving an average total of 735 tonnes of chemicals, none of which, I hasten to add, posed an environmental threat. For the purposes of offshore oil and gas activities, chemicals are defined in their broadest sense, and include substances such as brine.
From 2005 to 2009 an average of 283 oil spills were reported annually, resulting in about 51 tonnes of oil being spilt at sea, of which 6 tonnes was crude oil, the remainder being diesel and hydraulic fluid. Putting it into context, that equates to approximately two road petrol tankers or 1.5% of the water contained in an Olympic size swimming pool. I stress that none of the reports related to a loss of well control, and no environmental impact was noted as a result of the spills.
There have already been prosecutions under both sets of original regulations as a result of the notification process. In 2005, an operator was fined £3,000 for an offence under the chemicals regulations, and in 2008, two operators were each fined £2,000 for a spill of crude oil. There were three incidents under the chemicals regulations, which may have been the subject of prosecution had the new power been available.
As they stand, the 2002 chemicals regulations do not allow for enforcement action or prosecutions associated with unintentional events. That is unique to the chemicals regulations; as I said, that omission does not exist in the 2005 oil regulations. I therefore regard the amendment to the 2002 chemicals regulations as essential. Although our focus should remain on prevention through our
In addition to dealing with the unintentional release of chemicals, the enforcement provisions of the existing chemicals and oil regulations have been strengthened by the proposed 2011 chemicals regulations and 2011 oil regulations to allow my inspectors to require preventive action to stop spills from occurring in the first instance.
A number of minor amendments to the existing regulations are being introduced by the 2011 chemicals regulations and 2011 oil regulations to simplify the two regimes and to create more consistency, to make it easier for offshore operators to understand and comply with the regulatory requirements. Changes are made to both regimes to simplify the process for renewing and varying permits or transferring them to a new permit holder. The information-gathering powers have also been strengthened by the respective 2011 regulations so that information can be obtained from a wider range of persons and in relation to a wider range of incidents capable of affecting the environment.
The draft amending regulations were consulted on between July and October 2009. Oil and Gas UK, the trade association that represents the oil and gas industry, made a number of helpful comments. It agreed that the main amendment was necessary and raised a few detailed points, but they were satisfactorily resolved. None of those points required amendments to the draft regulations, but they have been taken into consideration in updates to the relevant guidance notes. We intend to publish the revised guidance notes when the amending regulations come into force.
As I said, the amendment to the 2002 chemicals regulations creates a new offence. However, that does not mean that there will be a significant number of additional prosecutions. Indeed, it is expected that there will be few, as both sets of regulations allow for various enforcement actions to be taken before prosecution. I am sure that everyone hopes that these new prosecution powers will never need to be used. Nevertheless, I believe that extending the scope of the offences is essential in order to give my Department strengthened enforcement and pollution prevention measures. I therefore commend both sets of amending regulations to the Committee.
It is a pleasure to serve under your stewardship, Mr Streeter. In respect of these regulations, the Minister and the Committee will understand if I say that it seems like déjà vu all over again—that it is groundhog day, rather than St David’s day. The regulations are nevertheless very welcome. I recognise the Minister’s great experience and personal background in this sector. Although I cannot hope to compete with his detailed knowledge, I hope that I can give the Committee some additional insight.
First, it is worth mentioning the background to the two sets of regulations, as it will help us to understand the importance of the oil and gas industries to the UK, and how important the highest standards of operation
We saw a massive increase in investment last year. That is relevant to our debate because, for the first time in five years, investment has increased to £6 billion. That is the result of the many new approvals, including many in much more challenging environments, where the prevention and control of pollution is commensurately more difficult. That includes the west of Shetland, and the central and northern areas of the North sea. That investment will increase in coming years from £6 billion last year to £8 billion next year—that is a 60% increase—and it could rise to more than £40 billion over the next five years as ambitious plans to exploit known reserves and new reserves come to fruition.
The industry is feeling good about its prospects, and by and large that is good for UK plc—and, of course, for the Treasury coffers. It will help the Chancellor with his deficit reduction plans; there is something of a fixation on that, but it will certainly help. Based on current projections, by 2011, the industry could provide about a quarter of total UK corporation tax receipts, employing about 500,000 both directly and in the supply chain. That is no mean thing.
Our colleagues who represent areas with significant employment and economic interests in the oil and gas sector will be particularly pleased with that performance and with future projections, as will others benefiting from the industry’s investment. In the context of the regulations, however, those areas will be equally interested in the industry’s safety and pollution control record, and its future expansion prospects. That is especially so given the stark demonstration of the appalling inadequacies that caused the Gulf of Mexico spill, which resulted in negative environmental, social and economic costs across the entire region. Nor should we forget the Macondo blowout, which cost 11 lives.
The Minister regularly and rightly praises the UK industry for its high safety standards, which are partly the result of the rigorous inspection regime and of training and skills. That echoes the findings of the recent investigation by the Select Committee on Energy and Climate Change. As always, we are indebted to the members of that Committee for their scrupulous work. In response to the Gulf spill, Oil and Gas UK, together with the unions and the regulators, set up the oil spill prevention and response advisory group—OSPRAG—which reviewed the UK’s regulatory regime. It showed a high degree of confidence in our regime. The European Commission, too, has commented favourably on the UK framework. It is clear that we need, and must demand, the highest standards, given the fine tolerances of deep-sea drilling in the most demanding and the most marginal fields of the North sea and west of Shetland. We cannot, and should not, tolerate any managerial or operational ineptitude, or a lack of preparedness for foreseeable eventualities.
In the haunting and oft-repeated words of Donald Rumsfeld, but in a different context, there are “known knowns”—things that we know we know. For instance, there are known challenges and known solutions toI will not ask the Minister to comment on Donald Rumsfeld’s “unknown unknowns”—the risks that we do not even know about—because that would be unreasonable, but there is fourth consideration, the “unknown knowns”. They are the risks that we do not know about, or which we intentionally refuse to acknowledge that we do know about. I should like the Minister to reassure the Committee about those unknown knowns—that there is nothing hidden in the deepest recesses of official papers and briefing that might cause the Committee to pause and reflect further on safety and pollution control and prevention standards. I am sure that there are not; otherwise they would have been brought to the attention of the Energy and Climate Change Committee recently. However, it would be good to hear from the Minister that there are no partial or nascent concerns about the ability to respond to a deep-sea drilling pollution incident, given that he has the benefit of full access to official information and relevant discussions.
Beyond those broad, but vital assurances, I have a number of other specific questions. The Minister has explained briefly why the SI was laid, then withdrawn and then laid again. I know that his Department is working hell for leather on so many things at the moment, so it is not surprising that the occasional item is overlooked, however regrettable that is. However, can he assure us that no further features have been overlooked in the revised SI before us? In short, can he assure us that we will not have to come back here again, taking up the Committee’s time? Secondly, what is the current state of play on access between oil and gas and renewables, especially in terms of joint or separate access to areas leased by the Crown Estate? Does that have any bearing on our consideration of the measure before us? Is there any increased risk? Has the Minister had any discussions with his officials about the possibility of any increased risk as a result of shared operations space? Has that been taken into account in the SI? Does it cover those eventualities?
On a similar but more immediate issue, we share the Minister’s ambitions to make sure that smaller companies can gain access to pipelines—those companies are often at the cutting edge in new exploration and new fields. They should not face undue barriers because of a series of monopolistic owners of infrastructure or pipeline. The Energy and Climate Change Committee reported on this in July 2009, and I think that we are on the way to resolving the general issues in the Energy Bill currently in the other place. What will the SI do to ensure that safety standards apply equally right across all operators, big and small, new and established, including those that share infrastructure?
What assessment has the Minister made of the adequacy of the skills and training base in the industry? He knows that organisations such as OPITO have been
The Opposition welcome the fact that the regulations will come into force on the very day after being laid, which, although unusual, is justified in the explanatory memorandum in terms of the high level of awareness of the proposed changes among those affected, to which the Minister has referred, and the consultations involved. We are glad to see the measures that the Minister will take to inform chemicals permit holders and others. Because of that heightened awareness and extensive consultation, is the Minister confident that he and his Department will not face any challenges, legal or otherwise, on the SI from any legal person who may be unaware of the proposed changes? He seems very confident about that, and it would be good to put that on the record categorically.
The explanatory memorandum refers to a relatively small number of operators in the sector. Will they be informed individually and promptly, rather than just via a trade body or websites? Crucially, have those operators been party to the same level of consultation on the revised SI that has been laid today, as they had on the original measure? Are they up to speed, and do they know the detail of the changes in the new SI? If so, the Committee will be assured that everybody knows about it.
We welcome the newly amended definition of “discharge” in the chemical regulations, which, as the Minister said, now covers not just operational releases but any intentional release of an offshore chemical. We also welcome the new definition of “release”, which now catches all other emissions. We hope that they are a watertight set of definitions, just as we hope that it is a watertight pipeline infrastructure. We note and approve of the amendment to the Oil Regulations 2005 under the 2011 regulations to mirror the effects in terms of discharge and the release of oil.
In respect of prosecutions, would the Minister confirm that he expects one or two prosecutions a year? In the light of that, what would be a reasonable defence from an operator? I am not asking him to double-guess the independence of the judiciary, but it would be good to get on record before the Committee his take on how rigorously the statute should be enforced on individual operators. He spoke of a relatively small number of discharges over the past few years, and I noted that he said they roughly equated to 1.5 % of the contents of an Olympic-sized swimming pool. I would not necessarily want 1.5% of such discharges in such a swimming pool, but I understand what the Minister is trying to get across.
That said, penalties of £1,000 or £2,000 are, if you will excuse the pun, a drop in the ocean. They are neither here nor there. Can the Minister say whether higher penalties will be imposed? Will there be an element of discretion in their exercise? Are the penalties unlimited? Perhaps he could illuminate the Committee on that. Obviously, we do not want the penalties to be crippling, and the biggest disincentive is the fact that the regulations are on the statute book, but those penalties must reflect the impact of serious discharges, given their cumulative total, and the effect on the environment.
Do the changes in the SI reflect the expressed will of the Labour-led coalition in Wales, or was the Minister asked to do more, or even less? It is good to be discussing this on St. David’s day. It is only two days before the referendum on the transfer of power to Wales, and even though the Minister does not have a vote, will he support in spirit the Yes for Wales campaign, alongside Nick Bourne, the leader of the Conservative group in the National Assembly for Wales? It will be a great boost to know that we have his support in spirit, as he makes this SI fit for the devolution settlement.
Well done to the Minister and his officials for laying the SI again, albeit slightly delayed, and we hope for the last time in the foreseeable future. We also hope that, given the Minister’s responses to my questions, and his assurances, we will be able to offer him our strong support in taking forward this important, but somewhat technical SI.
The oil and gas industry is vital to my part of the world, but so is a clean marine environment, because there are many competing uses for it ranging from industry to fishing. The explanatory memorandum says:
and that no proposal is made to change that definition. Can the Minister assure me about what that definition covers, because the marine environment in the North sea is changing greatly? Where once we just had oil and gas rigs, now large offshore wind farms are being planned—three off the coast of my constituency alone, both inshore and in deeper waters. Rather than extracting things from the North sea, there are plans to put things into it through the carbon capture and storage project that is being developed at Longannet in Fife. That will use old aquifers and oil fields in the North sea for storing carbon captured from the plants. Carbon dioxide is stored in that manner, so it would seem to be a chemical that would fall under the regulations. I would like some reassurance that the regulations will cover those installations. Although such developments are moving fast, it may be some years before a lot of them are operational, but if they are not covered by the regulations, we will have to return to them to offer protection to the marine environment from such installations.
As the hon. Member for Ogmore said, the regulations are due to come into force the day after they are passed. I understand the reason for that, but can the Minister assure us that sufficient discussions have been held with the oil and gas companies, and that they all understand their obligations from day one. Has any thought been given to discussing the regulations with the wind farm operators and those responsible for the new carbon capture and storage project, so that they also know about their new obligations?
The hon. Member for Ogmore started off by referring to Groundhog day. I am not sure what the official flower is for that day, but I am sure that there will be one in collection boxes on the streets around the country. At times, it seemed rather more like the film “Face/Off”, in that people had the face I recognised, but there was a different person behind it, because the hon. Gentleman gave a brilliant speech for a Government Minister to say how well the industry had been doing over the past year, the great improvements that had been achieved in 2010, and how things are looking even more promising as a result of policies that we are pursuing. I would very much like to agree with everything that he said in that respect. It is a very encouraging time for the North sea, we are seeing extremely high levels of interest, and the extent to which new players want to come in and be an important part of that future is extremely positive. As he said, this is a matter of our direct national interest, not just in terms of our energy security, because we have an obvious national interest in extracting as much oil and gas from our own resources as we possibly can, but, as he rightly pointed out, in terms of the impact on the Exchequer. I warmly welcome his contribution, and I know that many others will be pleased to hear what he said.
The hon. Gentleman made his comments in the context of the Gulf of Mexico incident last year. I know that there is no difference between us in our belief that Britain has in place some of the toughest safety regulations anywhere in the world. Norway and the UK would share that view in terms of how the North sea is governed. The way in which the European Commission has looked at our system and recognised it as the gold standard to which the rest of the world should aspire is encouraging. The presidential commission response to the Macondo incident also referred to the safety measures that are in place for the UK continental shelf and in the North sea more generally, and said that the American system should respond to those measures.
Our system developed post Piper Alpha, when we separated licensing from safety regulation. As the Government Department responsible for licensing, we are not involved in safety regulations. That is done independently through the Health and Safety Executive, although we are responsible for environmental matters. That change has put this country in a good position.
In the light of evidence, we decided to increase the number of inspectors, and the number of inspections that take place annually. We are now considering the responses from the United States to see whether there is anything more that can be done. We are absolutely clear that if there is more we can do, we will not be complacent about acting in the national interest.
The regulations are specific, and make a small change to the previous regulations, but it is right that we should implement them as quickly as possible, having become aware of the discrepancy. I am grateful for the support for their quick introduction from the hon. Gentleman and the hon. Member for Angus.
The hon. Member for Ogmore asked about shared access. That in itself will make no difference because the companies involved in this area have a legal responsibility to advise us of any leakage, be that deliberate or inadvertent. Unlimited fines can be imposed on them for breaching the rules and regulations. The fact that they may be sharing the space with wind operators should make no difference whatever to their responsibilities.
We are looking at how to strike the right balance in the use of the seabed by oil and gas companies and renewables companies, and changes are being made through the Energy Bill, which is in the other place and will be coming before this House shortly.
The hon. Gentleman asked whether safety standards apply equally to large organisations and small companies. They will absolutely apply to everybody. As I said, there is a legal responsibility on any company to inform us if there is a leak, no matter how small. We have the ability to inspect at very short notice, so we can keep a close eye on what is going on. There is also the ability to impose unlimited fines on companies for breaching those rules. One should also remember that even those companies that we consider small are multibillion-pound companies. They may not be major international oil or gas companies, but they are all very sizeable companies with significant regulatory departments to make sure that they adhere to any regulations that are in place.
Huw Irranca-Davies: I thank the Minister not only for his generosity in giving way but for his detailed answers. Where there is a fault in a pipeline that has been leased by one operator to another because it is redundant for the first operator’s purposes, and an unintentional leak ensues, which company is held responsible: the one with exploratory rights that is actually pumping the oil, or the one that owns the pipeline? What has been the experience of previous prosecutions in this area?
Charles Hendry: My understanding is that it is the operator who is using the pipeline infrastructure and installations who has the legal liability. [Interruption.] In fact, the legal responsibility rests with the pipeline operator, not the user of it. I apologise if I was inadvertently in the process of misleading the Committee; I was rescued just in time.
The hon. Gentleman asked about safety training. We should celebrate the contribution that Britain makes in terms of global safety standards and training. OPITO is internationally recognised. The international offshore safety standards are those that are set in Britain. It is not just OPITO, but other operators, some of them
We have also been looking at what more we can do to protect people who blow the whistle because they are concerned about safety operations on the installations on which they work. Partly in response to the Select Committee, which highlighted this issue, we are seeing what more can be done to ensure that people who feel it necessary to draw attention to areas where safety is not as good as it should be can do so knowing that they will not be personally affected by having expressed that concern.
The hon. Gentleman asked whether I can be completely confident that there is no likelihood of a legal challenge. I take the view in politics that one should be wary of being completely confident. We have taken every feasible step to ensure that this is watertight. That is why we took the measure back and reintroduced it today, to make sure that we could respond as effectively as possible to something of which we had become aware. There has been full consultation. We have written to all the companies involved—as I said, they are large players, even if they are not the biggest players in the world—and they actively engage with representative organisations, and we have involved them in the process, too.
The hon. Gentleman asked how many prosecutions I expected. I hope that there are none at all—that should be the aspiration—and I would not consider one or two a year as good as it ought to be. We hope that by tightening the standards we achieve a position in which there are no prosecutions. He asked what would be an appropriate defence in court. The grounds are very narrow, and would arise only if the company could not reasonably prevent the emission, or it was done as a matter of urgency to secure personal safety. I hope that he will understand why it would not be appropriate to set out a raft of conditions, because in every court case people would be popping up, saying, “The Minister indicated this,” which would impede the independence of the judiciary in dealing with the matter. As I have said, unlimited fines can be imposed, and historically, that situation has applied in the United Kingdom.
The hon. Gentleman asked about the situation in Wales. The measures that we are enhancing today apply from 3 miles offshore with regard to Wales. Within that 3-mile distance, it is a matter for the Welsh Assembly Government to decide whether it wishes to put in place similar measures. By definition, however, most of the work we are looking at will be further out at sea, and as he suggested, often in deeper waters.
The hon. Member for Angus, who speaks with great authority on these matters, asked about the 2008 regulations. Regulations evolve, and in the Energy Bill, which is
Mr Weir: I understand what the Minister is saying, but I am slightly concerned, because CCS requires long-term storage underground. What is the definition of “installation” for a CCS field? The installation—where it goes in in the sea—is obvious—but what about leakage from the storage cavern itself?
Charles Hendry: The regulations apply to gas unloading and storage, and to carbon dioxide storage activities, so we are taking account of that. Whatever the nature of a pipeline for some sort of installation—it does not matter whether it is an installation primarily established for extraction or, in future, for pumping in below the seabed—it will be affected by the regulations. If new activities are developed that would require a tightening of those regulation to make them more specific, the hon. Gentleman can be reassured that safety is paramount in our consideration, and we would not hesitate to act further if it became evident that those activities required new regulations.
The hon. Gentleman also asked about our discussions with the oil and gas companies. Oil and Gas UK is the primary representative body for most of the companies involved, and we have actively engaged with it to ensure that we take account of its concerns. As I said, that has not resulted in any change to the regulations themselves,
Huw Irranca-Davies: May I pick up a point made by the hon. Member for Angus? While I accept that the Minister has had extensive dialogue, right up to this late hour, with the oil and gas industry, has he had similar conversations with those involved in potential carbon capture projects? Are they aware of the implications of the measure, and the need rigorously to apply it to their operations, as they will need to factor that into their economic and financial models?
Charles Hendry: The changes with regard to CO2 and CCS were made in a change to the order last year. Before that was done, there was detailed consultation with the industry. As we have seen, relatively few key players are involved in that sector, and they were fully aware of the changes, which are fully in force. I hope that that deals with the issues that have been raised, and that we can approve the proposed regulatory changes.
|©Parliamentary copyright||Prepared 3rd March 2011|