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General Committee Debates
European Committee Debates
|©Parliamentary copyright||Prepared 24th March 2011|
Publications on the internet
General Committee Debates
European Committee Debates
Offshore Oil and Gas
The Committee consisted of the following Members:
Alison Groves, Committee Clerk
† attended the Committee
The following also attended, pursuant to Standing Order No. 119(6):
The document seeks to draw the first lessons for the EU from the damage caused by the oil leak at the Deepwater Horizon drilling rig last year. In particular, it observes that, although a number of European countries have introduced strict safety requirements in recent years, a fresh look needs to be taken at them, given also that exploration is now being carried out in more challenging environments. It goes on to identify a number of areas where it is necessary to maintain appropriate safety and environmental standards, and it sets out ways in which that can be achieved.
The Commission says that improved safety cannot be achieved by self-regulation and that steps are needed to ensure that industry complies with clear and robust rules in the future. It notes that the situation is currently determined largely by national regimes and that they vary, thereby slowing down a co-ordinated response. It therefore proposes to work towards a single new piece of specific legislation to govern offshore oil and gas activities, including licensing, liability regimes, industry responsibility and enhanced public oversight. It also examines the measures that might be taken pending the outcome of the Deepwater Horizon investigation, as well as issues arising from offshore safety outside the European Union’s waters.
The Government have correctly pointed out that oil and gas are still major UK resources and that the UK has considerable experience in this area, including the lessons learned from the Piper Alpha incident, resulting in a robust, proven national regime. Consequently, the Government are not convinced that there would be added value from another layer of regulation, particularly if that were to raise subsidiarity issues.
As the document deals with a subject that has substantial, political, economic and environmental ramifications and could raise subsidiarity issues, the European Scrutiny Committee took the view that it should be debated by the Committee.
The Minister of State, Department of Energy and Climate Change (Charles Hendry): It is indeed a privilege to serve under your chairmanship, Mrs Main. I think that this is the first time that I have had the pleasure of doing so, and I am delighted to welcome you to your new role.
The Deepwater Horizon accident was a most serious and tragic event. Eleven people died and an estimated 4.9 million barrels of oil were released to the ocean before the leak was halted. There have been huge consequences for the gulf of Mexico, for those who live and work there and for the oil and gas industry worldwide.
The European Commission acknowledges that a number of European countries already have strict safety requirements and regulatory regimes. However, the experience of the Deepwater Horizon incident, along with the increasing tendency for exploration to be carried out in more challenging environments, requires a reassessment of whether the current regulatory framework and practices in Europe are adequate.
The communication proposes ways in which the risk of such an event occurring in the EU can be minimised. Initially, the Commission was minded to propose a moratorium on deep-water drilling, which we lobbied hard against, and I am pleased that the communication leaves any decision on the suspension of offshore drilling operations to member states.
The UK has a robust regulatory regime, with a clear allocation of responsibilities for safety and environmental protection and for responding to any incident. The UK is one of the first areas worldwide in which offshore exploration and production took off, and we now have over four decades of experience. More than 10,000 wells have been drilled in UK waters, including more than 300 in water depths of over 300 metres. Our regulatory system has been developed to meet the evolving challenges. In particular, following the Piper Alpha disaster, safety regulation was brought under the Health and Safety Executive umbrella, to get the benefit of its expertise in regulating major hazards.
The UK’s high standards have been acknowledged by both the Select Committee on Energy and Climate Change in its report on the implications of the gulf of Mexico oil spill and in the report of the US national commission on the BP Deepwater Horizon oil spill and offshore drilling, where it is recommended that the US safety regulations be expanded to be at least as stringent as those in the UK. In particular, the American report recommends the development of a risk-based performance approach similar to
the safety-case approach in the North sea. It also recommends the development of plans and procedures for responding to a spill of national significance, which is an approach already reflected in our UK national contingency plan and recognises the need for adequate environmental assessment, which is covered in the UK by a comprehensive suite of measures, including strategic environmental assessment and project-specific environmental impact assessment and habitats directive assessments.
We are not complacent, however, and in light of the emerging information from the many investigations into the disaster, we have taken action to enhance, where we have considered it appropriate, what is already one of
We are also working with the industry in OSPRAG—the Oil Spill Prevention and Response Advisory Group—to develop new technical solutions, which could be deployed to bring any uncontrolled blow-out under control as rapidly as possible. OPOL—the Offshore Pollution Liability Association—liability pool, which is unique to North sea operations, has increased its cover from $125 million to $250 million. OSPRAG is further reviewing the implications of Macondo for the scale of liability cover that would now be appropriate to conditions on the UK continental shelf.
We are currently considering the detail of both the Select Committee report and the report from the US Administration to determine the implications for the UK industry. Our own UK review has now begun. It will take into account the findings of those documents and report later this year.
The communication points to a number of areas where the Commission might make legislative or other proposals, including the licensing regime for oil and gas in member states, the extension of the environmental liabilities directive and the evaluation of the performance of national regulators. Although the Commission’s paper contains a number of welcome suggestions, such as the sharing of information and the desire to level up standards in some member states to ensure best practice, we need to guard against the risk of another layer of regulation that might not add value and could diminish the effectiveness of our own robust, proven national regime should that layer be less stringent than our existing regime.
At this stage, the communication does not propose any specific legislative change. Proposals are likely in mid to late 2011 and a public consultation by the EC seeking views on what those proposals should be commenced last week. Given the UK’s substantial experience and the development of a proven and robust environmental and safety regime, I believe that we can provide a strong contribution to the Commission’s work.
We have been working, and will continue to do so, with European counterparts and the Commission to ensure that high standards of health and safety and of environmental protection are maintained across Europe in respect of oil and gas operations. In doing so, we will ensure that any subsidiarity issue is carefully scrutinised and that full justification is provided for any new legislative instrument from Europe. On that basis, I urge all members of the Committee to support the motion in due course.
The Chair: We now have until 5.30 to question the Minister. I remind Members that questions should be brief and that it is open to my discretion to allow Members to ask related supplementary questions.
Huw Irranca-Davies (Ogmore) (Lab): It is a pleasure to serve under your stewardship, Mrs Main. May I ask the Minister about the people who work on our deep-sea oil and gas rigs and installations—an issue that he has not touched on, perhaps because there is such depth in the proposals? One of the recommendations is that the EU should review directive 92/91/EEC on the minimum protection of workers in mineral extraction industries. That review would touch on the possible psychological effects of isolation on rigs. Another recommendation is that member states should also review and update as necessary the safety and health documents that apply to their workers. That seems quite a sensible approach, but I wonder whether the Minister will comment on those suggestions.
Charles Hendry: I am grateful to the hon. Gentleman for raising that issue. We certainly accept that the directive should be reviewed after the Deepwater Horizon investigations have been completed. Our initial understanding, though, is that we would be concerned if work were undertaken on psychological issues at the expense of other work that we would consider every bit as important—for example, on well integrity co-operation, safety culture and asset integrity. The Health and Safety Executive already requires a review of the safety case at least every five years, and it will consider the findings of the review, which will require the duty holder to act on the review’s findings. So we would need to clarify what is meant by establishing
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Will the Minister clarify whether the EU recognises that one of the key lessons from the gulf is that existing safety procedures and devices must be operated and maintained properly, so that we do not need to deal with a blow-out?
Charles Hendry: My hon. Friend makes an important point. The Commission had undertaken a process: having started with a fairly strong recommendation that we should consider a moratorium, it has used an evidence-based approach to recognise the quality of the safety regime that already applies to our side and, similarly, to the Norwegian side of the North sea. We therefore believe that it is much better to focus on preventing spills from happening, rather than on dealing with them afterwards, which is inevitably challenging at the depths that we are often talking about. A great deal of work has been done in the United Kingdom to ensure that we prevent such spills. We are pleased with the engagement that we have had with the Commission to try to ensure that it learns from the successful process that we have implemented.
Michael Connarty (Linlithgow and East Falkirk) (Lab): Will the Minister comment on the fact that this appears to be the beginning of a direction of travel for the Commission back to the energy clause in the Lisbon treaty that we got taken out? The Commission tried to insert an energy clause that would have given it control over the way that we treat our resources, and it was rejected. I am concerned that the Minister has not tabled a robust motion; it does not refer to resisting that direction of travel.
Charles Hendry: Perhaps I can reassure the hon. Gentleman that subsidiarity clearly applies: energy policy is a matter set by nation states. Therefore, in our discussions with the Commission to date, we have reminded it that there are benefits to setting European standards, but that that should involve co-ordinating work to establish best practice. Given that we believe that we have something approaching a gold standard in our North sea safety regime, it would be a matter of profound concern to us if common standards were to diminish that. When trying to find common standards, it is sometimes easy to end up with the lowest common denominator, rather than the highest achievable level. We are in no doubt whatever about the limitations on the Commission’s powers to act in this area. We believe that one of the reasons why we have such tight regimes and such high safety standards in the North sea is that national Governments have a clear vested interested in driving up those standards.
Michael Connarty: Do we have the competence? Clearly, the European Commission has shown that it aims to claim competence in areas where we have competence at the moment. If it sees this as a market matter, will it therefore claim competence, or does it accept that we have competence in this matter? We might wish to work alongside other countries and the Commission, or is it trying to move in the direction of stealing the competence from us? The terminology that it has used is deeply concerning. It talks of legislation. Does that mean further directives, which might end up with the European Court of Justice? Will we lose our competence?
Charles Hendry: Perhaps I can try to reassure the hon. Gentleman further. We are in no doubt that such legislation should be left to member states. We have argued for that position. The Commission can certainly bring benefits in spreading good practice and ensuring that people understand what needs to be done, but given that a small number of EU member states are active in the North sea—others are active in the Mediterranean—the expertise in dealing with these matters rests with the member states’ Governments, and we have made it clear that that is the right level at which to address them. We believe that the Commission can provide some additional support, but primacy in determining such legislative issues rests with member states.
Michael Connarty: The Minister has referred to expertise and knowledge, but he has not said where the Government stand on the question of competence. Can he assure the Committee that the Government will not give up the UK’s competence in this area in any way to the EU by passing or supporting directives that would give the European Commission the right to go the European Court of Justice and overrule our decisions on these matters?
Charles Hendry: In which case, yes, I can give the hon. Gentleman that assurance and I apologise if I was not clear enough before. We believe that this is a matter for nation state Governments and that absolutely remains our position.
Huw Irranca-Davies: I compliment my hon. Friend on his doggedness in pursuing the Minister, in a very nice way, to get that clarification. One of the things that we cannot escape and which is difficult in terms of Cabinet responsibility relates to environmental issues, particularly the water framework directive. I understand that it is difficult, but the Commissioner makes clear his observation that the impact of installations on the environment does not currently have adequate safeguards. What are the Minister’s views on that? What message will he take to the Commissioners in arguing that case? We must ensure that we comply with the water framework directive, and there is some risk of spillages whether small or large, so how do we satisfy our environmental concerns at the same time as dealing with our energy security issues?
Charles Hendry: There is already very stringent environmental legislation in place. The UK already applies the strategic environmental assessment, an environmental impact assessment, the habitats directive and the birds directive. They provide a robust framework. On top of that, we have our own standards. One of the most important aspects to bear in mind is the separation of powers. The Health and Safety Executive drives forward on the health and safety side, so there is no compromising there. My inspectors reporting to DECC deal with the environmental side so they can focus purely on the environmental consequences without being diverted in other directions.
Huw Irranca-Davies: I thank the Minister for that response. Reassuringly for my hon. Friend the Member for Linlithgow and East Falkirk, he has said clearly that competence lies with the UK as an entity to apply its own environmental safeguards, in compliance with European directives. We have the competence to do it. Is he confident that the regulatory structure in the UK, as a member state, is adequate to ensure that in an accidental spillage from an installation we could not only measure the effect on the immediate environment and the rescue operation but the impact on biodiversity, special conservation areas and marine protected areas? Are adequate safeguards in place in the UK now?
Charles Hendry: Further to the hon. Gentleman’s initial point, there is no direct connection between this communication and the water framework directive. The powers that we have are very stringent indeed. We can look not just at the immediate consequences of a spill in relation to the area where it happened but at what would happen in coastal and sensitive areas. That can already be done. We have the powers already and we exercise them. We have the Secretary of State’s representative who deals with an issue when an emergency arises. I am satisfied from our investigations that we have very substantial powers to look at the wider ramifications.
On installations, particularly those in very challenging environments such as deep sea and west of Shetland, is DECC, as a matter of course, ensuring that environmental considerations in the consenting regime are far more than in a typical––not that there is an average––historical drilling operation in the North sea? Are additional
Charles Hendry: I can give the hon. Gentleman a very clear answer: yes, we are satisfied that that is the case. One reason for increasing the number of inspectors is so that we can carry out more regular inspections. That applies to mobile rigs as well, so there is a much tighter approach. We have already learned some of the lessons from the gulf of Mexico. We already had some of the tightest regulations in this respect but have tightened them further.
Sir Robert Smith: While Norway is not in the EU, a large chunk of the North sea is obviously in Norwegian waters, and Norway works closely with the EU. What dialogue has there been with the Norwegians on the impact of trying to change the safety regime in the North sea?
Charles Hendry: We have very close working relations with the Norwegians. I discussed this matter with my Norwegian counterpart in Stavanger at the Offshore Northern Seas conference last August and there have been various meetings in London. The Norwegians often sit in at European Ministers’ meetings on relevant issues such as this and specifically when we were focusing on the lessons we needed to learn from the gulf of Mexico. Work is ongoing between our officials to ensure that we address this comprehensively. We have been keen to have very high standards on both sides of the divide. It would not be appropriate to have different standards, and I am satisfied that the quality of the Norwegian standards is similar to those we already have.
What exactly is the Commission looking for? What are we being asked to see, once again, as the direction of travel, since we have not yet arrived at legislation? I have several questions on similar statements it has made about what it wants to do.
Charles Hendry: We have indicated that we are willing to look at whether further measures are necessary. We have carried out our own initial investigation, we have a review to see whether there is anything we need to learn, particularly from the US presidential commission report but also taking into account anything that comes through from the European level, and we are working very closely with the industry. We remain open-minded. If we believe that additional measures are necessary to maintain the position of being one of the tightest regimes in the world, we will not hesitate to put them in place. I emphasise that this an area of very close co-operation with the industry, which, through OSPRAG, has been doing important work to develop capping and containment devices. We are looking at how that work can be taken forward. We accept that this is inevitably an evolving process and that we cannot reach the point
Charles Hendry: The industry has been extremely helpful in trying to address this issue. It understands, first and foremost, that it has been put in the dock globally as a result of what happened in the Gulf of Mexico and it wants to learn those lessons fast. That is why OSPRAG has been such an important part of the process. After the terrible helicopter tragedy in the North sea, it was the industry itself that then came up with the tightest rules possible for helicopter safety and travel. It decided that it needed to look at where the rules had not been as strong as necessary and it responded very constructively and positively. Its work on capping and containment devices is important too. Our working relations with the industry are extremely close. We need to understand what it can bring additionally to this but it understands that if our independent review identifies areas where we wish to take things further, we will not hesitate to do so. It is an area of genuine joint co-operation.
Huw Irranca-Davies: May I ask one final, final question, Mrs Main? Does the Minister agree that the biggest learning experience that the UK oil and gas industry, good as it is in many respects, could have would be to be proactive and forward-thinking in anticipating what I referred to in a previous debate with him as Rumsfeld’s known unknowns and unknown knowns? Perhaps we should not go down that line. There are foreseeable eventualities. Historically, for all its good points, while the oil and gas industry has been good at learning by mistakes and hard experience, it has not been good at preparation and planning. That is one of the biggest improvements the industry could make, and it is starting to make it.
Charles Hendry: I am glad the hon. Gentleman added the final sentence to that question, because I think the industry has been trying to make big strides in this way. The emergency plans that we require it to put in place have been tightened, and it now has to do more to show what it would do in the event of an emergency, and it has been very willing to take those extra steps.
In the course of the process of granting licences, we also have various stop positions. For example, various things have to be provided by those applying for the licence, even though they may not ultimately be the same people who do the drilling or development work. Right the way through the process, there are stop points where we need to be satisfied that the right work has been done.
At the end of the day, Government must take the lead on these issues. We are there to protect the public interest and the national interest, and we have sought, through that spirit of partnership, to ensure that there is a close working relationship that looks ahead and determines what we can learn from what happens elsewhere in the world. I draw the hon. Gentleman’s attention
The deep-water sub-sea industry in the United Kingdom is absolutely world-beating, and many of the international contracts come back to British companies with expertise in the sector. They have really stepped up to the plate with the contribution that they can make and their determination to pre-empt rather than respond to a crisis. It is our job to push and harry and always raise the level of ambition, but from working with them as a Minister for nearly a year, I have found a real readiness to respond to that, and to deal with an issue before it becomes a crisis.
Charles Hendry: I am glad that the hon. Gentleman asked a slightly longer question than he might originally have been planning, as it gave me the chance to get some inspiration for my answer. The issue here is that oil is categorised technically as waste. It is that categorisation that brings it within the directive, and that is why it is relevant in this case.
My question is this. Once again, the European Union is recommending the establishment of a joint facility. The history of joint facilities is that they often end up in countries where the Commission thinks it owes somebody—a country—a headquarters. For example, it headquarters something in Crete that has absolutely no relevance to Crete. Since the UK both has the technology and has challenges that are very similar to those in the deep water in the gulf of Mexico, is the Minister active in pressing that, should we ever have such a combined facility for the EU, it should be based in UK waters?
Charles Hendry: Perhaps, first, I should clarify my earlier answer. Spilled oil is considered to be waste. Otherwise the hon. Gentleman might think we had a new energy-from-waste strategy. I hope that will provide greater clarity. I cannot, however, give him guidance on whether spilled coal also counts as waste.
On where the facility would be based, we need at this stage to be persuaded about the role that it would play, how it would work, and how it would tie in with member states’ Governments. I totally understand that sometimes these facilities are popped in countries where one cannot immediately see the relevance, and perhaps sometimes one thinks it might be the Buggins’ turn principle—someone has not had something for a while, so let us give them this important facility.
We want to ensure that the work that we do in the United Kingdom is robust and heading in the right direction, as I believe it is. That is our priority. If there are things that we can learn on a pan-European basis, of course we will do so, but nothing should be done in that institution that undermines the work that should be done at nation state level. If it can add something, we would of course push for it to be brought to where there is already a great centre of excellence and expertise, but our priority is to ensure that the work we are already doing in the United Kingdom is at the level that it should be.
That the Committee takes note of European Union Document No. 14768/10, relating to a Commission Communication on Facing the challenge of the safety of offshore oil and gas activities and Addendum 1; agrees that the UK has a proven, robust offshore environmental and safety regime, and supports the Government's intention to work closely with the Commission and EU Member States to ensure that high standards of health and safety and high levels of protection for the environment are maintained across Europe in respect of oil and gas operations.— (Mr Hendry.)
At the outset, there is a consensus on the need progressively to wean ourselves off oil, to use that horrible phrase. That is a progressive aim, but we must follow it with clear ambition and a long-term vision, because we are not alone in finding ourselves held hostage to the vagaries of international oil prices. In turn, that affects national and international growth and competitiveness, and individuals who find the price of items in their day-to-day shopping basket, as well as their heating and petrol bills, out of their control. They look to the Government to help in the short term, and we will see what can be done in the Budget, but in the long term we must rebalance our demands from fossil sources of fuel towards renewables. Our climate change ambitions depend on that. In doing that, we also recognise that the energy security of the UK, not forgetting the significant income to the Treasury, as well as thousands of jobs, is aided by maximising the output of oil and gas from our indigenous production. It would be futile to restrict the supply from our own oil and gas production if that were simply to result in substitution with additional imports. In respect of UK and European energy security, we surely have an obligation to ensure the optimal exploitation of our oil and gas reserves, but that can
I will not rehearse the hard-learnt lessons of the Macondo incident—the loss of life and its devastating impact on livelihoods, the environment and regional economies. We have rightly discussed it in Committee, on the Floor of the House and in the other place on numerous occasions. Just like Banquo’s ghost, it is a presence at our every discussion of the topic. We are indebted to the Energy and Climate Change Committee for its excellent recent report on UK deep-water drilling. Its recommendations assist our deliberations today, and help to inform our debate. At the outset, it would be wise to start from the premise that we cannot rule out any risk, but we must reduce the risk to an acceptable level.
Before us today we have the Commission’s communication on facing the challenge of the safety of offshore oil and gas activities, and the addendum. Although the Commission accepts that a number of examples of best practice are already in place in parts of the industry in member states—as the Minister has said, much of that best practice is within the UK—the Commission understandably wants to see that applied across the board to
We would not disagree with that. We also agree that that would not just be right for EU members, but, if we got it right, that would have a knock-on effect across international waters where many of the same operators work.
What is the best way to achieve that end, with minimum duplication and without unnecessary costs and administrative burdens? Which of the Commission’s proposals does the Minister believe offer added value, and which offer added cost and bureaucracy? To pick up what my hon. Friend the Member for Linlithgow and East Falkirk said, how much centralised European intervention is needed? Where exactly will that be applied to ensure best practice? How will the benefits of member state competence, the national best practice and expertise to which the Minister referred, which has built up cumulatively, together with licensing and regulation that is responsive to local and national conditions, and the broad principle of subsidiarity be maintained? That must be considered against the backdrop of the UK being the largest offshore oil and gas producer in the EU and having the greatest expertise not only in the industry but as a licenser and regulator. We have something significant to contribute. We have not only a vested interest, but a great deal of expert knowledge in the Government and the industry. I hope that the Minister is making that point with all due strength to the Commission.
One proposal involves overhauling all existing legislation in order to bring forward a specific new piece of overarching legislation at EU level. In the light of that, my question to the Minister is threefold. Is that major task necessary, in the light of the well established national and international legislation that underpins best practice, or is there a better way to ensure uniformly high standards—by ensuring compliance with the existing framework, with some adjustments and improvements? What assessment has the Commission made of the downside of its proposal, including the risks of jeopardising the established best
The explicit aims of the Commission’s proposals include industry benefits through simplification and levelling of the playing field, giving legal certainty and satisfying the needs of “better regulation”. Will the Minister comment on that and whether he supports the overall aim as well as the Commission’s proposals for a single unifying piece of legislation? This is the “one ring to bind them all” scenario, and we all know the problems that that caused.
My understanding, which I would be happy for the Minister to correct, is that the industry fear, which it has articulated to me, of a centralised, dominating EU approach superseding or eliminating the case-by-case approach is misplaced, as the Commission has made explicit its wish to make binding the presentation of a full safety case and associated health and safety documentation and so on. It seems to me that that is part and parcel of the proposals. We might have issues with the necessity for overarching legislation—for a clean sweep of the legislation—but embedded within this seems to be the principle of the site-specific, case-by-case approach that we have had in the UK for some time. Otherwise, it would philosophically fly in the face of the Cullen report following the Piper Alpha disaster in 1988. That put in place a regulatory approach based on a case-by-case method for the operation of every installation. Cullen recognised that a much more prescriptive, top-down approach, either at EU or national level, might give legislators confidence that they had done a good job, but it risked taking away the imperative for individual operators on individual sites to ensure that they were doing the very best job on safety, right down to the individual level.
A prescriptive approach, no matter how well worked out and no matter how much detail is provided, risks allowing operators to shelter under the excuse that “We did what was required—no more, no less” when something goes wrong. It fails to recognise the stark differences between operations and the need to apply the highest standards on a case-by-case basis, with no hiding place. If there is a need somewhere to tighten procedures, I will understand that, but perhaps the Commission is looking through the wrong end of the telescope. Will the Minister, as well as responding to the point about overarching legislation, respond to industry fears that the case-by-case approach is in jeopardy? I do not think that it is, but if it were, I would be concerned.
The Commission’s suggestion that relevant guidelines be introduced is quite helpful, as long as the guidelines form part of a member state’s enforceable and properly enforced regulatory framework. With that approach, we can take the very best practice and roll it out across member states, respecting subsidiarity but also respecting and working with the accumulated knowledge in the best of the member states’ governance and industry. Will the Minister advise the Committee on what progress he is making in ensuring that the UK best practice underpins that guidance? If we do have the best practice in the EU, let us ensure that we build on it, rather than reinventing the wheel, because we do not want any
One aspect that the Commission might be wise to examine, as part of the proposed reforms, is the explicit separation of the safety and the licensing aspects of the regulatory regime across member states. Rather than destroying the expertise that already exists in some member states, including the UK, and replicating it in a new body at an EU level, why not ensure that every member state separates the economic and safety functions of licensing and introduces reforms in consultation with other member states and industry to improve those established functions?
As the Minister will know, the Energy and Climate Change Committee believes that the offshore oil and gas industry is, as I said in a question, good at responding to disasters, rather than at anticipating and planning for
The Government’s response to the Committee gave reassurance because of the safety-case approach that I described earlier, but also because of the oil pollution emergency plans and the reference to the spill-response toolkit, which, as the Minister said, came out of the OSPRAG review group. However, may I ask the Minister specifically for an update on the development and availability of the new capping device, which has been developed under the OSPRAG technical review? Is it suitable for the most challenging deep sea operations? How will it be made available at short notice right across our oil and gas fields?
Welcome though that innovation is, the fact that it evolved only in response to the Macondo incident is, as the Committee highlighted, symptomatic of a response-led approach in the industry, rather than of a forward-thinking, proactive and planned approach. I would therefore welcome the Minister’s comments on whether we have reached a point where the culture in the industry, good though it is in many respects, is becoming forward-looking, with the industry anticipating and planning for the worst-case eventualities—those with a low probability of happening, but whose consequences will be massive.
Time allowing, will the Minister give the Committee an update on the national contingency plan exercise scheduled for May 2011 and the related deployment exercises for the new device? Those will see best practice in operation if they work, and we should be sharing such things once we have tested them adequately.
The Commission’s paper suggests a need for an amendment to the environmental liability directive, including the consideration of mandatory financial security—something that UK oil and gas operators take issue with, based on the rationale that it does not take into account different risk levels, geological conditions, reservoir conditions and so on. Will the Minister expand further on his views on that proposal in the Commission’s papers? Equally, will he address the Committee’s view that the Offshore Pollution Liability Association limit of $250 million is inadequate, because it covers only
“see the case for potentially high impact wells in the West of Shetland to have an additional ‘top up’ cover in addition to OPOL. DECC already has the power to request such a top up under existing regulations.”
This is a question of best practice, so has it been done? Will it be done as a matter of course? Will the Minister tell us the additional top-up levels that are being requested on each well? What criteria will he use to decide which wells require a top-up and which do not? How will he ensure, on this case-by-case basis, that the bare economics do not trump safety?
Are we to assume that the Minister is indeed supportive of the Commission’s proposals to amend the environmental liability directive so as to include the impact of oil and gas drilling on the environment to all marine waters, as defined in the marine strategy framework, and the inclusion of specific guidance in the waste framework directive?
The Government’s aspiration to be the greenest Government ever will be tested against their commitment and delivery on several critical green directives, including whether they are divorced from the marine strategy framework directive. I therefore ask the Minister for a detailed response—he could reply in writing—on how, in the light of those considerations, the Government will address the threat of environmental pollution.
I could go on, Mrs Main, but the look on your face suggests that I should not. I shall not detain the Committee overnight, but I have only scratched the surface of the Commission’s extensive proposals. I urge the Minister—I know that he will do so—to work with the oil and gas industry in making his case to the Commission, but not to work exclusively for them. The duties of Her Majesty’s Government involve providing the optimal framework for exploiting our natural resources of oil and gas, but equally for meeting our obligations to safety and the natural environment.
There are improvements to be made. Too often in the past, improvements were made at a cost and hard lessons had to be learned. We have improved. I look
Michael Connarty: First, I record my non-financial interest in this matter. I represent the town of Grangemouth, where Scotland’s only refinery is sited. In that environment, many people are offshore workers; they work onshore or offshore, depending on where the best rates of pay are to be found. Sadly, they have been affected by the tragedies that occur again and again in the North sea, many of them losing their lives not from oil spills but from bad safety practices.
I am also the secretary of the all-party group on the offshore oil and gas industry. I have been involved in that organisation for 18 years, ever since I became a Member. One of the Grampian Members, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), is also a member of the all-party group, and I thought that he might have stayed and spoken.
I have made many offshore visits, sometimes to scenes of tragedy. The Piper Alpha was mentioned in the note from the Committee. Sadly, we have had too many experiences in this country of failures in safety and technology that cost lives. They were not all on the scale of the gulf of Mexico, but they were equally tragic for those involved. Piper Alpha was a terrible tragedy, and many of the families of those involved—including the fathers, but particularly the mothers—have gone to their own deaths not having had a satisfactory answer from the industry or the Government that enough had been done to let them put the matter to rest. However, we have learned many lessons.
There was the Torrey Canyon spill and there have been many smaller spills, particularly in the difficult passages around the north of Scotland where bulk oil was carried, and we have had lots of debates recently about ship-to-ship transfers of oil in the Forth estuary and the south-east of England, which pose their own danger to the environment, if not for those who work there. We have had deaths on rigs, including the terrible deaths on the Shell rig, with workers on the platform legs, and mention has been made of helicopter deaths. We have learned from our mistakes for many reasons, but the human element is always tragic.
The European Scrutiny Committee was concerned by the European Commission’s attempt to put in the constitution and to force into the Lisbon treaty an energy clause giving the EU competence over our ability to exploit our resources and that of the UK industry to act independently. We must strongly resist anything that threatens that, but the motion is weak because it does not put down any red lines. The European Scrutiny Committee believes that the Minister can win with quite a bit of strength in his arm and his arguments, but it will not allow anything to threaten existing subsidiarity arrangements.
If the energy clause had been included in the Lisbon treaty, we could not have signed the tax deal with Norway whereby it raises tax on oil from its sector of the North sea but sends oil down pipelines to look after our energy needs. If our competence had passed to the EU, that deal would not have been possible, and it must be recalled that in the short term 60% of our gas needs will be met from the Norwegian fields.
Proportionality was mentioned. We might overcome the subsidiarity element only to find that what the European Commission is doing is not proportionate to needs or to its statements on safety. History shows that when the Commission gets a toehold it then gets two handholds and another toehold, eventually climbing up to a higher level of power. It did that in a specific case on pollution in the North sea. The Commission made us pass a criminal law—
Michael Connarty: Not too far, although this matter is very important. The document, which was included in the European Scrutiny Committee’s statement, is quite clear about a proposal to work towards a single new piece of specific legislation governing offshore oil and gas activities, including licensing, liability regimes, industry responsibility and enhanced public oversight. That is quite a bit more than would be proportionate, and we should resist fairly hard and say, “We’re quite capable of doing this ourselves. We have a good arrangement in our industry. We have the ability to transfer skills and work co-operatively with other EU countries, but we’ll not do anything that will give the Commission a joint competence.” If we did so, it could go to the European Court of Justice and claim to represent our competence. That is happening in case after case and it was the purpose of the Lisbon treaty. We will be outvoted under qualified majority voting in the Councils of Europe, and that will become the normal method of legislating. This must not be stage 1 of an approach to an energy control system by the European Commission. Although the Minister has not commented on that, that is the danger, which is why the European Scrutiny Committee called for this debate.
It is said, in another obvious statement, that self-regulation is not enough. What is meant by that? If the intention is that companies should not regulate their own fields, I agree, but if the intention is that countries cannot have the competence to regulate themselves we are in danger, because it is being said that country by country regulation is not enough.
Following Piper Alpha, worker safety representatives built into the first stages of every project their experience of what happens when things go wrong on a platform or in the field. The massive spills in the gulf began with a danger to human life, and in Piper Alpha people lost their lives when safety systems fell apart. Those who work in the field, those who invest in it and those who are responsible for its infrastructure must be the beginning and the end of the Government’s approach to what is in the interests of the UK.
My final point is that there is a real danger that an overarching rule that governs all might be sited in a country that has a powerful interest in what happens in the fields around the North sea or most of Europe. It is an irony of the EU that most of the votes in the fishing industry lie with countries that do not have any fish, because that is in the competence of the Commission. We must not move away from a situation in which people who have an interest in safety and the effects of spills on this coast have the say, because they can out-vote people in the European Council.
Will the Minister assure the Committee that he is listening to the concerns in the debate? Will he assure us that, although it is not written in the document, there will be no question of our giving away competence to the EU in any of those matters?
John McDonnell (Hayes and Harlington) (Lab): I am not a member of the Committee, but am exercising my right as an individual Member of Parliament to raise issues of relevance and concern. I refer to my entry in the Register of Members’ Financial Interests—I convene the cross-party group that meets to discuss issues in the transport sector with the National Union of Rail, Maritime and Transport Workers, which also organises many workers in the offshore industry.
Picking up some of the issues raised by my hon. Friend the Member for Linlithgow and East Falkirk about safety, the motion before us relies on the argument that the UK has a proven and robust offshore environmental and safety regime. The Government submitted evidence to the Select Committee on Energy and Climate Change inquiry into UK deepwater drilling and the implications of the gulf of Mexico oil spill:
“The UK offshore oil and gas industry…has a somewhat different safety culture than that in the Gulf of Mexico. Here, there is greater workforce engagement in safety issues, which is supported by regulatory requirements.”
That is true, and that situation arose, as my hon. Friend has said, as a result of the tragedy of Piper Alpha, after which the Offshore Installations (Safety Representatives and Safety Committees) Regulations 1989 SI 971 were introduced. Those regulations governed the powers of safety representatives in the industry itself and were a major advance. As my hon. Friend has said, although concerns have subsequently been expressed about overall safety, those regulations were the first step in ensuring the full involvement of safety representatives in discussion about the development of the industry.
In the 20 years since those regulations, ample evidence has shown the need to complete their vision, specifically on the enhancement of the powers of elected safety representatives. If the Government and we are to rely on the argument that our existing regulations are sufficiently robust—which is as a result of the involvement of members of the work force and safety representatives—it is critical to review them regularly. Such reviews would ensure the full involvement of safety representatives in the security and safety of the industry as of right.
In July 2008, after a parliamentary debate, the then Secretary of State for Work and Pensions commissioned the Health and Safety Executive to conduct a review of the industry’s progress on the safety of installations. “Key Programme 3—Asset Integrity: A review of industry’s progress” was published in July 2009. A significant section of that report considered work force involvement, on which the Government have relied in their evidence to the Select Committee and in some of the proposals with regard to the rejection of the EU directive today.
The report emphasised the need for greater work force involvement and, to that end, the HSE began an inspection programme to look specifically at how the industry complied with SI 971—the post-Piper regulations.
Recommendation 10 of the Committee emphasised the concerns that it had about bullying and harassment on rigs, particularly with regard to whistleblowing on safety issues. Although I appreciate that the motion before us relies on the argument that we have a more robust regime and that argument itself relies upon a robustness based upon the full engagement of the work force, an issue still has to be addressed, as the Committee pointed out. That is in terms of not only harassment and bullying, but a review of a recognition of the rights of health and safety representatives in the industry. Many who work in the industry point to the Norwegian model, which is based on more of a right to representation. In fact, there is an election on every installation of a full-time safety representative to be involved in all safety decisions. Safety representatives are involved not only on the shop floor on the individual installations, but all the way up to the boards of the companies themselves.
Ben Gummer (Ipswich) (Con): Is the hon. Gentleman aware of the significant legal case that has been going through the Norwegian supreme court recently on the failure of health and safety legislation to protect deep-sea divers in the Norwegian oilfields?
John McDonnell: I am aware of that. I hope that the hon. Gentleman will elaborate a little, so that other hon. Members will be aware of it. There are issues in the Norwegian regime that need to be addressed. Nevertheless, our trade unions want the recognition that the Norwegian regime gives to the rights of safety representatives to be replicated in this country. Doing so would enhance our health and safety regime.
These matters need further consideration. I would welcome the Minister meeting trade union representatives to discuss further some of the problems in our regime, in particular the issue of harassment and bullying raised by the Select Committee, and to review other regimes. In that way, we can reassure ourselves, as well as the Commission, that we have a robust regime that will stand the test of time and is based on the full involvement of the work force in securing safety.
Charles Hendry: We have had a fascinating and expert debate. I am grateful to all Members who have taken part for their understanding of the issues that they brought to our attention this afternoon. That is one of the most important things about how these Committees work; they enable people with substantial understanding, whether or not they were selected to be on the Committee, to contribute to our deliberations. I join the hon. Member for Ogmore in paying tribute to the Select Committee on Energy and Climate Change for its work, and its thorough investigation and helpful report.
The hon. Member for Ogmore began by talking about the need to move away from hydrocarbons to a low-carbon economy. We agree with him in that respect, and he and I would be as one in recognising that there is a physical limit to the process. We also recognise that for some decades to come oil and gas will be integral to our energy reserves and resources. It will be important to maximise the returns that we can get from the North sea and the UK continental shelf more generally. There could be more than 20 billion barrels of oil equivalent left, which is worth £2 trillion to the British economy at current prices. This is not academic, but goes to the heart of the future prosperity of our country. We are grateful for the hon. Gentleman’s support on our policies.
The hon. Gentleman rightly said that one cannot eliminate risk completely. One can have an approach that minimises risk and puts in place measures to respond quickly when something goes wrong, but inevitably, given the sort of work involved in drilling for new resources, there is an element of risk. However, I must say that I have never been anywhere where the safety standards are higher or the full involvement of the entire work force in enforcing the standards is greater than on an offshore oil or gas rig.
The hon. Gentleman asked where we believe the Commission’s proposals can add value or may have added costs. On costs, I would be concerned if we were to have an additional layer of regulations over and above anything else. It could be a distraction to businesses that have put in place strong policies to address such issues, if they find that they are required to do extra. I would also be concerned if the proposals made it more difficult for smaller players, which are still multi-billion-pound companies, to play a role in the North sea. Their current role in significantly depleted oil and gas fields and their approach to ensure that we optimise resource return are important parts of the approach here.
I also want to ensure that the proposals do not look to harmonise existing standards when they perhaps should be focusing on where the standards are needed in the first place. We are concerned that that could occasionally undermine the gold standard approach that we have aspired to and largely have in place in the North sea. It would be worrying if anything happened to make that more difficult. However, if we can learn from the ideas of others and the expertise of other countries, it is absolutely right that we do so.
The hon. Gentleman asked about the overall aim. In our discussions with the Commission, we are looking at what we can do better, what we can understand from the expertise of other countries and the industry, and how we can improve still further. We will never be complacent, just as I know that he would never be complacent, in such matters. If there are things that we can learn about how we can tighten that further, we will do so.
The hon. Gentleman asks whether the case-by-case approach could be in jeopardy. There is a close working relationship; our officials work actively with those in the European Commission. Inevitably, when the Commission looks at those who have the most understanding of such issues, it looks at the countries that are already involved, and I pay tribute to my officials for the expertise that they bring to that process. We believe that the gold standard perspective is the right way forward. It should not be more prescriptive, and that is our understanding of the direction of travel.
The hon. Gentleman rightly draws attention to the separation of the health and safety and environmental sides from licensing. That is one of the most important lessons that I think the Americans have learnt. They are now looking at the regime that we have put in place in the United Kingdom over many years following Piper Alpha, where there is no direct benefit to the licensing department, preventing people from cutting corners because that is done totally independently. That is one of the reasons why the standards in the United Kingdom have been so strong, and we would certainly not be prepared to compromise on that. It would be worth while for countries to look at that approach.
The hon. Gentleman asked about the timing of a cap becoming available and where it would be located. There are two separate initiatives. The first is the OSPRAG development, which we hope will be in place by mid-2011 and will be situated probably somewhere such as Aberdeen. There is a separate Chevron development for a cap for its Lagavulin field, which the company says is deployable within nine days. We recognise that wherever the cap is located, there would be some inevitable time delay. However, we also recognise the nature of those technologies and the speed with which they move forward. I think the industry itself recognises that more of that should have been done historically, but the speed with which it has been developing capping devices in a little over a year since the Macondo incident shows its determination to address that effectively.
The hon. Gentleman asked about the national contingency plan exercise. It is an extremely important development. It was due to be held in 2013 but it has been brought forward to this May, enabling us to ensure that the emergency plans are properly tested and that we can see whether there are areas where further measures may be needed.
The hon. Gentleman asked how OPOL would be taken forward. The OPOL regime is unique to the North sea, and it already provides compensation on the basis of strict liability. Unlike the US, there is no limit on companies’ individual liability for clean-up and compensation. Operators on the UKCS maintain insurance or make other provisions to cover drilling and other operational risks, together with the legal liabilities associated with clean-up or other remediation. As I said in my opening remarks, the level of liability has been increased to $250 million, and additional assurance is required on top of that. In addition, OPOL members collectively provide a back-up mechanism in the form of a guarantee that, in the event of an operator default, they will meet claims for clean-up and associated damages up to the same financial limits. It is worth noting that there has been no call on OPOL during its more than 30 years of operation in the UKCS.
Huw Irranca-Davies: I thank the Minister for the detail of his answers. I assume from what he is saying that there is no eventuality in which the burden of the clean-up operation—no matter how large—will fall on the UK taxpayer. My interpretation of his explanation is that, under both the OPOL provisions and the top-up, the wider umbrella of operators will—in any foreseeable eventuality—carry the cost of a complete clean-up, including all environmental aspects of it. Am I correct in that reading?
Charles Hendry: The hon. Gentleman is absolutely correct that there is no limit on the individual liability of the operating companies. It is also our expectation that the levels of those liabilities are likely to have been reduced as a result of the development of capping and containment devices. The problem in the gulf of Mexico was that the oil leak was not stopped and brought under control for many weeks, but the possibility of that happening in the United Kingdom has been significantly diminished by the development of such capping devices. There is absolutely no limit on the liabilities of the companies involved.
Stephen Phillips: Picking up on the question raised by the hon. Member for Ogmore, one circumstance in which the taxpayer might end up being responsible, if there was a very large spill, is the insolvency of any of the companies and the exhaustion of such insurance coverage as is carried.
Charles Hendry: That is the purpose of the OPOL scheme. I am grateful for the chance to reassure my hon. Friend that OPOL is there in the event of a company failure, as the other members of the OPOL scheme would come forward to make up for that. They do not have unlimited liability, but we already have a tighter regime in place than ones planned for elsewhere—for example, in the United States. Inevitably, in such an area, unforeseen situations can arise. The conditions in the North sea and west of Shetland—the nature of the waves and how they would break oil spills—also has to be taken into account. Whereas some of the most important tourism and fisheries or seafood areas in the United States were affected, that would not be the case in the north of Scotland. Nevertheless, we considered the nature of OPOL and we decided that it was appropriate to increase the level of liabilities. I hope that having unlimited liability for individual companies will provide additional assurances.
Huw Irranca-Davies: My apologies for going backwards in time through the Minister’s remarks. He referred to the deployment of new capping devices—the OSPRAG one will be available from mid-2011, and the Chevron one will be deployable anywhere in the fields within nine days—but it strikes me that a nine-day deployment for a catastrophic, large-volume spillage of the type that we have seen would make quite an impact on the environment. The two devices will be available for the North sea and west of Shetland, and everywhere in between, but are the Minister’s officials analysing how long it will take for the devices to get there and to be successful in the worst-case scenario?
Charles Hendry: The Chevron facility is specifically intended for its Lagavulin field, and it believes that that can be deployed within nine days. For what happens elsewhere, clearly it would depend on where the cap would be located. What is also evident is the extent to which the industry wishes to work together. It is not that one company has a resource of which it says, “I simply won’t let you use it if there is a problem.” There is a real intention that it should be shared so, given a problem elsewhere, others will come in support. The issue with Macondo was that it flowed for three months, so being able to stop something in just over a week
Charles Hendry: We now have two containment devices based in the United Kingdom, and we are developing two capping devices, which is a massive improvement on where we had been historically. As I said, we will not compromise on safety. Given any reason to believe that we need more, we will look to going further forward, but we are not looking at every individual company having to have its own capping and containment devices, because the likelihood of more than one ever being used at one time is obviously, we hope, incredibly small. However, we are not complacent, and if any relevant evidence emerges we will look at the issue further.
The hon. Gentleman asked whether we had areas of disagreement with the industry. In most such areas, we have set the challenges and targets and made sure that we work together constructively towards them. OSPRAG has been a good example of the industry taking a lead in such respects. We do not have issues on which the industry wishes to compromise on safety. The lessons of the gulf of Mexico in particular have shown the industry generally what catastrophic damage to its global reputation can happen in the event of safety not being given the seriousness required.
I am keen to develop an even closer relationship with the industry, in working to shared objectives. Our restructuring at PILOT, which has been the main body for discussion with the industry and which is clearly focused on issues affecting the industry, in particular how we optimise return from the North sea, shows our determination to work with the industry. At the end of the day, however, we set the legal requirements, so we must have a physical limit on how closely we can work together in order to respect such a relationship.
The hon. Member for Linlithgow and East Falkirk asked where we were on the more general approach to the European Union and its powers. I hope that I can reassure him. In article 194, the Lisbon treaty specifically upholds a member state’s right to determine the conditions for exploiting its energy resources. The United Kingdom welcomes the Commission’s confirmation that any suspension of activities would be at the discretion of member states, as is appropriate under subsidiarity. We have no intention of moving at all from that position.
We are completely clear about the importance of the issue, and about the United Kingdom being served well by tough domestic regulations rather than by international regulations. I am more than happy to work towards international regulations, if they are to approach the high standards that we already have, but I am not prepared to countenance international regulations that would diminish our standards. I hope I have provided the hon. Gentleman with the clear assurance for which he was asking.
The hon. Member for Linlithgow and East Falkirk asked about the meaning of self-regulation. It refers to the companies and not to the nation states involved in the area. There is some lack of clarity in the documentation as to the role of self-regulation or new regulation, but we are clear that the issue will not in any way hinder our ability to do what we believe to be right in that respect.
The hon. Member for Hayes and Harlington (John McDonnell), who I am glad has taken part in our discussion this afternoon, focused on the safety culture. I am more than happy to meet the trade unions about that—I have already met them, and have been in Aberdeen for meetings. If there are issues that he thinks it would be helpful to discuss, I will most certainly be keen to do so. He asked in particular about S.I. 971 and the workforce involvement group, which is part of the offshore advisory committee. We have just finished a review of S.I. 971 and expect a report in late spring, when we will see whether any changes are necessary. We will not hesitate to take further action, if needed.
The Select Committee, in its report, looked at the issue of whistleblowing, which we are keen for the Health and Safety Executive to take forward. If there are areas where people are nervous about raising the alarm, they should feel in no doubt about the need to do so.
I was very struck by one of the safety films by Apache which I saw before going offshore. In it, the chairman of Apache said, “You have an obligation. If you think that anything is not being done as safely as it should be, you must raise the alarm.” The message from the top of that company could not have been clearer—he expected everyone to be part of the process and that
I hope that has reassured those who have contributed to the debate. If anyone made a point that I have not picked up on, I hope that I may write in due course to provide any additional clarification. We have had a useful discussion about many of the issues, and once again I am grateful to the people who have served on the Committee for the expertise and understanding that they have brought to it. We can hold our heads up high in this area, saying that Britain under the previous Administration and through the work we are doing has set globally high standards. We will not compromise on them. We are always keen to learn how we can do things better, and in that respect we will co-operate actively with the Commission on ensuring that the world more generally can learn from our expertise in this country.
That the Committee takes note of European Union Document No. 14768/10, relating to a Commission Communication on Facing the challenge of the safety of offshore oil and gas activities and Addendum 1; agrees that the UK has a proven, robust offshore environmental and safety regime, and supports the Government's intention to work closely with the Commission and EU Member States to ensure that high standards of health and safety and high levels of protection for the environment are maintained across Europe in respect of oil and gas operations.
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