Information Exchange Mechanism for Intergovernmental Energy Agreements

The Committee consisted of the following Members:

Chair: Dr William McCrea 

Brown, Lyn (West Ham) (Lab) 

Clappison, Mr James (Hertsmere) (Con) 

Connarty, Michael (Linlithgow and East Falkirk) (Lab) 

Donaldson, Mr Jeffrey M. (Lagan Valley) (DUP) 

Greatrex, Tom (Rutherglen and Hamilton West) (Lab/Co-op) 

Harris, Rebecca (Castle Point) (Con) 

Hendry, Charles (Minister of State, Department of Energy and Climate Change)  

Menzies, Mark (Fylde) (Con) 

Munt, Tessa (Wells) (LD) 

Sheerman, Mr Barry (Huddersfield) (Lab/Co-op) 

Stewart, Bob (Beckenham) (Con) 

Whitehead, Dr Alan (Southampton, Test) (Lab) 

Wiggin, Bill (North Herefordshire) (Con) 

Eliot Barrass, Committee Clerk

† attended the Committee

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European Committee A 

Tuesday 3 July 2012  

[Dr William McCrea in the Chair] 

Information Exchange Mechanism for Intergovernmental Energy Agreements

4.30 pm 

The Chair:  Does a member of the European Scrutiny Committee wish to make a statement? 

Mr James Clappison (Hertsmere) (Con):  May I say what a great pleasure it is to serve under your chairmanship this afternoon, Dr McCrea? I will make a short opening statement on behalf of the European Scrutiny Committee setting out the background to this debate, and I will explain why the Committee recommended this document for debate. 

In an earlier communication on the external dimension of the EU’s energy policy, the Commission said that bilateral agreements between member states and third countries can have a significant impact. It therefore intended to propose a decision, which would set up an information exchange mechanism to ensure that the agreements comply with EU legislation. Last September, the Commission accordingly put forward this document, which would cover all existing, provisionally applied and new intergovernmental agreements likely to have an impact on the internal energy market or on the security of EU energy supply, as well as agreements having an impact on energy supply through fixed infrastructure. 

More specifically, the document would require member states to inform the Commission of their intention to open negotiations and to communicate the ratified version to it; give the Commission the right to participate as an observer in the negotiations; and enable it to review developments in relation to agreements in this area, and to identify common problems. The Commission would also be able to assess the compatibility of an agreement with EU law before it is signed, with the proviso that the agreement should not be concluded during the four-month period allowed for making such an assessment. 

The Government recognised the Commission’s role in ensuring compliance with the EU acquis, and saw advantages to greater transparency in bilateral agreements, and in member states providing details of agreements. However, the Government were concerned about the Commission’s right to participate as an observer, the practical implications of the four-month standstill period for assessing an agreement, and the need to ensure the protection of confidential information. 

In its report of 12 October last year, the European Scrutiny Committee noted that the UK was pursuing a number of detailed points, and decided to hold the document under scrutiny pending further information on these. However, despite further information from the Government indicating that they were now broadly content, the Committee decided at its meeting on 23 May that the document highlighted a more general concern

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about the extent to which the Commission was seeking to concern itself in energy matters more properly the preserve of member states. It therefore considered that it should be debated in European Committee A. 

4.33 pm 

The Minister of State, Department of Energy and Climate Change (Charles Hendry):  It is indeed a pleasure to serve under your chairmanship this afternoon, Dr McCrea. 

The draft decision on setting up an information exchange mechanism for intergovernmental agreements between member states and third countries in the field of energy is intended to increase the transparency of agreements between member states and third countries and to ensure that they conform to EU energy law. It creates an information exchange mechanism so that the Commission and member states have information on bilateral energy agreements between member states and third countries that are likely to have an impact on the operation or functioning of the internal market for energy or on the security of supply in the union. 

Such transparency will also benefit closer EU co-operation in external relations and the union’s long-term policy objectives relating to energy, climate change and security of energy supply. The EU’s external energy policy is vital for the security of EU energy supplies. It is particularly important for the EU to have a coherent approach to external relations at a time when it has an increasing need for access to diverse, reliable sources of supply while it makes the transition to a low carbon economy. 

Europe will remain dependent on fossil fuels—many imported—for many years to come, and some member states will be particularly vulnerable to supply disruptions and price volatility. In that context, the Commission’s proposal on intergovernmental energy agreements is intended to increase the transparency of agreements between member states and third countries, and ensure that they conform with EU energy law. Such transparency should help the operation of gas markets in particular. It is important, however, that member states retain the right to act on their own in a way consistent with EU law, and that the division of competence between member states and the EU is respected.

We had a number of concerns about the original proposal. First, member states would have been required to inform the Commission of their intention to open negotiations, and keep it informed of progress during those negotiations. Secondly, the Commission would have had the right to participate as an observer in the negotiations, and to assess the compatibility of the agreement with EU law before it was signed. Thirdly, the Commission would have had a period of four months to make that assessment. 

Negotiations on the draft decision began last September, and during the course of those negotiations the text has undergone substantial revision. All our concerns about the original proposal have been addressed, and the more prescriptive obligations, such as the right of the Commission to have observer status in negotiations and the requirement to keep it informed of progress during negotiations, have been dropped. 

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The Commission proposed mandatory ex-ante compatibility assessment for all bilateral agreements, and it has now been agreed that, if a member state has doubts about the compatibility of an agreement with EU law, it should inform the Commission, which will have four weeks to consider the matter. The European Parliament has supported the compromise negotiating text agreed by member states at official level. It will be voted on by the Parliament in plenary session, probably in September, before being adopted by the Council. 

I believe that the current text of the draft decision will help provide greater transparency in intergovernmental agreements. It will help the EU assess where there are weak spots in energy security, and ensure that all new agreements are consistent with European energy legislation. Member states can still request the assistance of the Commission if they experience difficulties during negotiations with third countries. 

The Commission has a clear role in defending the EU acquis. This decision should provide the Commission with the information that it needs to ensure that intergovernmental agreements comply with EU law, while still respecting the right of member states to conclude bilateral agreements in accordance with EU law. I therefore seek the Committee’s clearance for this decision. 

The Chair:  We now have until 5.30 pm for questions to the Minister and I remind Members that those should be brief. Subject to my discretion, Members may ask supplementary questions, and I am usually happy to oblige. 

Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op):  What assessment has the Minister made of the revised text and the requirements that will still be on the UK and other member states to provide information to the Commission? What assessment has he made of the time and cost that may be involved? 

Charles Hendry:  We have looked carefully at what is going to be required, and we believe that it now strikes the right balance between our ability and right to make decisions on energy policy, and the Commission’s natural interest in trying to ensure that security of supply is addressed across the EU. We think that the right balance has been struck and, if I may, I will return to the hon. Gentleman in due course with information about any costs associated with that. We think, however, that broadly the right balance has been struck between those two objectives. 

Tom Greatrex:  May I also ask the Minister how many intergovernmental agreements on energy there are between the UK and non-EU states, and whether in the course of discussions and negotiations on this matter, the European Commission has expressed any concern about those? 

Charles Hendry:  Our primary discussions are first with Norway, one of our most important trading partners, and with Iceland, where we are looking to develop an interconnector in due course to harness its geothermal electricity. We have a separate set of discussions with the Channel Islands, which are not formally members

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of the European Union, and in addition we have more general trading arrangements with energy partners around the world, most notably with Qatar on gas. We have not experienced any direct intervention from the Commission in those matters. The driving force behind interest in those areas is where something is seen as a major issue of energy security, for example, the negotiations it has with Russia over the security of supply to the Baltic states and their understandable desire to have a greater degree of security than in the past. It has tended to focus on those areas rather than the free-trade agreements that we have.

Tom Greatrex:  Finally, is the Minister content, with the revisions that he has talked about, that there will no longer be any prospect of the Commission’s inserting itself as a silent partner in bilateral negotiations between the UK, other member states or non-EU states? 

Charles Hendry:  I am very satisfied that we have reached a position whereby our ability to negotiate bilateral agreements will be protected and that the EU cannot insert itself inappropriately in those discussions. I think that strikes the right balance. As I said in my open comments, we had three primary concerns. All of those have been satisfied. They have been struck out completely, in the case of two of them. The third has been addressed separately. We have now got the right balance: we have the ability to set our own energy policy independently but, where there are issues of security of supply and the EU competence in relation to climate change, they can be accommodated in a way that does not conflict with our rights in those areas. 

Michael Connarty (Linlithgow and East Falkirk) (Lab):  I am very happy to serve under your chairmanship, Dr McCrea. I will ask the Minister one simple question first: would Norway come under the definition of a third country? 

Charles Hendry:  Norway would be a third country. We have already notified the Commission of all our intergovernmental arrangements. Wherever they take place, they have been notified to the Commission. That covers all our agreements, including with Norway. 

Michael Connarty:  That is now on the record. The Minister will recall the breakthrough by the previous Labour Government. The Energy Minister at the time, Brian Wilson, got an agreement with Norway that they would land their gas in Scotland. Previously, it had to be landed on Norwegian soil before it could be taken anywhere. Has the Minister looked at the model clauses that have been recommended and are now advisory, not compulsory, to see whether any of them are contained in our agreement with Norway? If they ever became mandatory, would they have to be inserted into such an agreement? 

Charles Hendry:  We have looked at our trading arrangements in terms of our intergovernmental arrangements. We are satisfied that none of the measures included in this matter would be conflicted by the proposals. Had it not been for the changes we required, we felt that there would have been a much greater

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degree of Commission intervention in those matters. That matter has been satisfied and we are, therefore, persuaded that it is appropriate to accept the decision as it now stands. We can move forward to the decision by the European Parliament in due course. 

Michael Connarty:  I have received a broad-brush reply to a precise question. I asked about the specific clauses, which had been put down as model clauses to be included in every agreement. Has the Minister or his team looked at those clauses to see whether they are contained in our agreement with Norway, or if we would have to insert clauses should they become compulsory? 

Charles Hendry:  I am advised that there are no model clauses and the new decision makes clear that they would be voluntary. 

Michael Connarty:  There are no model clauses, so was the reference to model clauses about any clauses that the Commission wished to come up with? They were not model clauses that it thought were necessary to every agreement. So we were basically being asked to sign up to model clauses that had not yet been written. Is that what the Minister is telling me? It did originally propose there should be model clauses. 

Charles Hendry:  But we have ended up with the situation whereby there are no model clauses and, therefore, the issue does not arise in the way that the hon. Gentleman has suggested. 

Michael Connarty:  I have to come back. The Minister’s letter of 16 May, which is included in the documents that we received, said that the agreed text “removes these rights” and that 

“the proposed model clauses… would be voluntary.” 

There either were proposed model clauses or there were no clauses, or the Minister’s team has not looked at the clauses. 

Charles Hendry:  The comment that I made in response to the hon. Gentleman just now was to say that there are no model clauses. I will read exactly what I said: “There are no model clauses and the new decision makes clear they will be voluntary.” So, if there is a desire to include model clauses, that will be a voluntary matter for the parties involved, but what had been proposed was an involuntary approach—a compulsory approach—and that no longer applies. The Commission has said that if, in due course, they develop model clauses, they would be voluntary in those circumstances.

Dr Alan Whitehead (Southampton, Test) (Lab):  Will the Minister tell me whether the proposed information flow will be two-way in future? That is to say, will the information that the UK is providing to the EU on third-party contracts be available to other EU states and will the information that other EU states have made available to the EU on their third-party contracts be equally available to the UK? 

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Charles Hendry:  With regard to that, let me come back to the hon. Gentleman if I may. I hope to get some specific inspiration on the precise nature of the information flow. 

In this process, we have certainly been keen to see much greater transparency; transparency is an important part of the process. We believe that the decision, as it is currently drafted, provides the requirement for transparency. In relation to the hon. Gentleman’s specific point, there will be a two-way flow of information, unless it is commercially confidential. 

Michael Connarty:  I wish to continue to pursue the Commission’s purpose in making this proposal and the consequence of where we now stand. In my reading of matters, even in my reading of the Minister’s letter of 16 May, this question of compatibility with EU law arises. The Minister seemed to infer in his opening remarks that this issue was also to do with either compatibility with EU regulations or agreements on its own energy policy. As far as I know, that is not EU law. If it is limited to law, we might have some comfort. However, the Minister is saying that any agreement would be compared with the EU’s purpose and aim in its pursuit of a low-carbon Europe; that is what the Minister seemed to say. That would not be the law; that would surely be an interference in the energy policy of any sovereign country. 

Charles Hendry:  The hon. Gentleman makes an important point. As he will know, the Lisbon treaty—I think in article 194—sets out the areas of competence with regard to energy policy. He will also be aware that energy is not an area of Commission competence, but there are clearly areas associated with energy in terms of the development of the single market. There are issues of security of supply where the Commission has a competence, and of environmental protection where it has a competence. We have been keen to ensure that we do not see a competence creep in this area, with a gradual transfer of powers from the UK Government to the Commission. We believe that this measure puts down a set of parameters that ensures that that will not happen. 

We welcome the Commission’s engagement in many of these areas. It has made a significant contribution towards security of supply across the EU, in trying to create a more integrated market and in trying to ensure that the development of interconnectors and gas pipelines has been looked at in a more holistic way. That is undoubtedly to the benefit of the member states overall. However, there is a very clear defining line between that activity and setting energy policy. Our view is that intergovernmental agreements were matters of agreement between member states and other governments, and that was not an appropriate area for more direct Commission involvement. As I say, the decision that has now been drafted reflects that appropriate breakdown. 

Mr Barry Sheerman (Huddersfield) (Lab/Co-op):  May I press the Minister on that particular point? I am rather an old-fashioned pro-European who believed that having a holistic European approach to many of these aspects of energy security was a rather good thing. Europe has a great deal in common, in terms of the worries and concerns about having a reliable supply of energy over a period of time. 

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I know that this coalition Government’s attitude to Europe is rather negative, but they also want to cut regulation. Where does this piece of legislation sit in terms of that? Is it a tick for Europe, a cross for Europe, or is it part of the deregulatory process? 

Charles Hendry:  It does not tie in to the regulatory or deregulatory agenda as such, but it recognises that the Commission can play a constructive role in the good functioning of the single market in energy—breaking down barriers is an important part of that—although there is a limit to its powers. The Committee has debated previously, when the hon. Gentleman was present, the Commission’s desire for a more active involvement in the control of safety regulations in relation to offshore oil and gas drilling. We are clear that that is not a European competence, but is best done at member state level. We recognise, however, that a significant number of issues, particularly the development of gas pipeline interconnectors, can be addressed only at a Europe-wide level. 

As a result of that process, the Commission has been a strong force for good in creating a stronger European Union. All member states are individually stronger because of the role that has been played there. There is a fine dividing line, however, between helping to secure such policies and interfering in an area that is clearly retained under the Lisbon treaty, which says that such measures 

“shall not affect a Member State’s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply”. 

That is an integral part of the powers that we still have as a member state. The decision in no way undermines such powers. 

Mr Sheerman:  I do not want to prolong the Committee, but I am an old-fashioned, pro-nuclear Member of Parliament, and I believe that nuclear energy will play a part in our energy supply—I think that the Minister agrees with me on that. In terms of overall European communication about nuclear power, the south of England is ringed by nuclear power stations in France, and if something horrific happened in any of those nuclear power installations, it would be of great import to this country. We will also be dependent on a great deal of French technology in developing our nuclear power capacity. Will the Minister confirm that nothing in the decision will stop such mutual trust and communication carrying on in future? 

Charles Hendry:  The hon. Gentleman raises an important point, and I am delighted to be an old-fashioned pro-nuclear Member of Parliament alongside him. Following the Fukushima accident, the Commission drove forward an important process of stress tests of nuclear plants across Europe, and that has rightly ensured that we have all examined in a robust way the safety of our nuclear installations. The decision whether to pursue nuclear power as an energy source, however, is one for individual member states. With France, Britain is taking a lead to try to bring together the countries that wish to have that approach, and to share knowledge, understanding and good practice. The Commission cannot interfere in that—it is an individual member state decision-making power, as enshrined in the Lisbon treaty. 

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The Chair:  There seem to be a lot of old-fashioned Members in the Committee today. 

Mr Clappison:  As an old-fashioned Member who asks critical questions of the Government on Europe, on this occasion may I offer congratulations to the Minister on having accomplished his negotiating objectives on the matter that originally gave cause for concern to the European Scrutiny Committee—not least keeping out the European Union, as an observer, from negotiations? Does the Minister agree that such a change in status for the EU would have been a step too far? 

Charles Hendry:  It is easy to agree with my hon. Friend and his kind congratulations. There were three very important issues without which we could not have accepted the proposed document. With other European partners, we have taken a strong position, saying, “That would be going too far. That was an intervention too far.” We have ended up with a document that allows a useful contribution to be played by the Commission in the further development of the single market. The United Kingdom has much to gain from the single market in energy that is being developed throughout the EU, but it stopped short of allowing the Commission to become involved inappropriately beyond its powers in matters that should be the preserve of member states. 

Dr Whitehead:  Pursuant to my question about a two-way process for information sharing, and bearing in mind that the Minister has ensured that the EU is not a party present at bilateral discussions, who in his view will determine what is a commercially confidential aspect of a particular bilateral discussion? How will that then affect the regularity of reporting between the UK and other European member states to the EU? Does he have any concern about bilateral discussions with, for example, Qatar about a liquefied natural gas supply if different criteria of commercial confidentiality were unilaterally applied to reporting to the EU? If that reporting comes back to other member states, and there is potential for negotiating strategies and discussion about LNG when a couple of bilateral arrangements are envisaged between different EU member states, there could be a difficulty with the integrity of those discussions. Does the Minister accept that that is a problem, or has he thought it out and sorted it out as he has with other aspects of the directive? 

Charles Hendry:  I hope that we have sorted that out. There is a difference between intergovernmental discussions and commercial relationships. The directive relates to intergovernmental agreements, so most of the LNG agreements with Qatar are straightforward commercial agreements. 

In terms of commercial confidentiality, we have a magnificent team of lawyers in the Department of Energy and Climate Change, as the Government have in all Departments, and their job is to identify whether information can be released, often under a freedom of information request, or whether it is commercially confidential. The procedure for deeming what issues are commercially confidential is well established. That may be subject to challenge, and in that event there is a period of a few weeks during which an assessment is made of whether it is appropriate or not. There is a

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clearly established path that we go down regularly, but it applies only to intergovernmental agreements, not to straightforward commercial transactions. 

Dr Whitehead:  Forgive me, but my original question still applies, even about intergovernmental transactions when different considerations of commercial confidentiality between different member states could apply in terms of reporting to the EU, hence the sharing of information by the EU with its member states. 

Charles Hendry:  The document relates to intergovernmental discussions. If the discussions cover matters that are appropriate for the Commission to be involved in, it sets out the parameters within which it can be involved. It also sets out the circumstances in which information must be published, and what information must be published. We are satisfied in terms of our own discussions with third countries, Norway being the most important, where we have intergovernmental discussions that the nature of this preserves the basis for that going forward. 

Given that we have a clear understanding of what constitutes commercial confidentiality, which is information that, if it were in the public domain, would undermine the commercial operation of an agreement, we have addressed that, unless the hon. Gentleman is seeking something more specific that I have not picked up in his question. 

Dr Whitehead:  I am just following the logic of the extent to which this is a two-way process whereby an intergovernmental discussion between a particular EU member state and Norway, for example, would be shared with other EU member states as a result of the arrangement. That particular member state would report on what its discussions consisted of. The EU would receive that, and would share that information with other member states, which might also be involved in discussions with that third country—in this case, Norway—and would presumably have a considerable interest in what that information consisted of. If there is not a constant view in two—or possibly more—bilateral discussions that are shared with everybody, different tests of commercial confidentiality might apply, for example, to one information package relating to a bilateral discussion in one member state and to another package relating to the bilateral discussion and another member state. How might that be resolved? 

Charles Hendry:  I am now entirely clear about what the hon. Gentleman is getting at; my apologies for not picking it up initially. The mechanism relates to intergovernmental agreements, not discussions that are taking place. It is not a constant commentary on intergovernmental discussions. Only once they reach the state of an agreement is there a requirement to provide the information, as I have described. 

Michael Connarty:  Hopefully, I have one last question. The ministerial letter of 16 May said that the negotiations with the European Parliament were continuing in trialogue sessions. I recall that we in the European Scrutiny

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Committee were critical of trialogue sessions—certainly, under my chairmanship—because things were agreed in trialogues that did not have to come back to the Council, and they became part of the agreement. Is the Minister clear that we are now discussing a finished product or are there outstanding issues in the trialogue process that we should know about? 

Charles Hendry:  Let me try to reassure the hon. Gentleman. The European Parliament has supported the compromise text and it is proposed that that text will be voted on in the plenary session in the autumn. It is an agreed text. 

The Chair:  If no more hon. Members wish to ask the Minister questions, we now proceed to the debate on the motion. 

Motion made, and Question proposed, 

That the Committee takes note of European Union Document No. 13943/11, a draft Decision of the European Parliament and of the Council setting up an information exchange mechanism with regard to intergovernmental agreements between Member States and third countries in the field of energy; and supports the Government's efforts to achieve greater transparency in intergovernmental energy agreements, whilst ensuring that the provisions of the draft Decision do not alter the balance of competence between the Commission and Member States. (Charles Hendry.)  

5.2 pm 

Tom Greatrex:  I will be relatively brief. I welcome the motion. I am pleased to hear the Minister mention the progress that has been made between the draft decision that we Committee members considered previously and where things stand at the moment, because I share a number of the concerns expressed by the Committee about the approach pursued by the Commission. As the Minister mentioned, many Committee members were here in February, talking about the potential regulation of offshore safety in the North sea, and there was concern then that although the aims may have been laudable, the approach could be interpreted by those of a sceptical mind—I use that term advisedly—as a way to gain greater responsibility and powers in an area. I share the Committee’s concern about some aspects of the draft decision, but I am pleased to hear the Minister say that there has been a degree of discussion and that we are now in a better place. Although it may not be usual to do so, I congratulate those involved on being able to get to a better position than we were originally in when the Committee considered the draft decision. 

There is concern about a number of issues. I ask the Minister to continue to be vigilant in ensuring that there is the opportunity to share information, which is a laudable aim as I said before, that people understand intergovernmental agreements within the EU and with third parties, and that the mechanism does not impinge on the ability of member states to set their own energy policy and their own agreements. Although interconnectors and a single energy market are important, energy policy decisions are, to a great degree, rightly made by member states. 

In his earlier questions, my hon. Friend the Member for Huddersfield picked one example in respect of which there are different approaches among member states. I hope that the UK’s approach continues on a consistent

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and sensible trajectory, rather than reacting in the knee-jerk way that we have seen in other member states, particularly in Germany in relation to nuclear power. That is one example of where we need to be protective of the ability of the UK as a member state to make our own energy decisions and our own decisions around investment and how we take that forward. 

The Minister has probably dealt with the main concerns around the ability for the Commission to insert itself in, if not discussions, almost overseeing agreements between member states. Will he respond to the issues that I raised around costs and potential costs to the UK? What assessment has been made of that, because that is something that we should always bear in mind in relation to European regulation? While there are, as I said before, laudable aims, we need to ensure that, as well as being transparent, those aims are also appropriate and do not end up being a burden on member states. I welcome the progress that has been made in getting us to this position, which is much more acceptable to Members. 

5.6 pm 

Michael Connarty:  I join the hon. Member for Hertsmere in complimenting the Minister on the position that we have reached. I can put my hand up and honestly say that I was the one who raised this issue in the Committee. I have raised a number of other issues in Committee about the Commission’s continuing attempt at competence creep in many areas. In this particular area, it is more than competence creep; it is actually an attempt to rewrite the agreement on the Lisbon treaty. There was an energy chapter and no constitution, so we argued with our colleagues in other countries to take it out. Of course, it affected us more than everyone else, because we had 91% of the offshore oil and gas industry. That is in UK waters, within the EU. Norway is not in the EU. The industry is growing in other countries and we applaud Cyprus, Ireland and others for developing offshore facilities, but we are the people who would be most affected should the energy chapter ever be written into the behaviour of the European Commission. It is certainly not in the Commission treaties. 

There were three issues that I wished to reiterate. One was about the Commission inserting itself into every negotiation as an observer. The second was that it would have draft clauses, and I will still pursue the question about the draft clauses. Are the clauses that it wishes to see in existence at the moment, which would not be found in the agreement that we have with Norway—our one major bilateral agreement with a third country? I will pursue that matter, because I wish to know that it is not the case, and whether we are dealing in the abstract or with concrete clauses that it wishes to see inserted. It is unlike the Commission not to have in draft, on the shelf, things that it wishes to insert into agreements to interfere and take over more power for itself. 

The third issue is having to refer any agreement for a compatibility test to the European Commission. It is an attempt, among many other attempts that we have found in our Committee in papers from the EU Commission, to write in an energy chapter. The Minister referred to the health and safety proposal, which has come from the energy directorate of the EU—not the

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environment directorate—following the problems in the gulf of Mexico. It is totally unnecessary, given our health and safety standards, as the Minister has said. 

There are other things coming down the pipeline, which will affect installations offshore. Another proposal coming forward is to have one maritime authority for the EU. When the proposals are bundled together, they can be seen as an attempt to cobble together an energy policy run by the Commission. I am glad that the Minister and his team repulsed the European Commission’s proposals in this area, because its determination to take over powers that it does not have or that are unnecessary is frightening. That is particularly the case in relation to the current difficult situation in the energy industry and the energy position in the UK. We do not need the European Commission to complicate matters for us, because we are facing serious problems. 

When I was first in Linlithgow and East Falkirk, which was then called Falkirk East, I remember the people at the BP refinery in Grangemouth—it is now called the INEOS refinery—talking about facing the $10 challenge. That was when a barrel of Brent crude was $11 and we were talking about the downstream having the problem. BP was then a combined upstream and downstream company that faced huge drops in its offshore income, because it had to supply feedstock to the downstream and across the world at such low prices. I believe that $111 is the latest price for a barrel of Brent crude, and the downstream is being destroyed. The refining industry is losing money hand over fist, people are paying huge sums of money at the pump and they resent the Government’s interference. All that is complicated enough without the Commission’s imposing controls and regulations that we do not think we need ourselves. 

I agree with the hon. Member for Hertsmere that we are in a good place compared with when we first saw the paper. I hope that this is a signal from the Government and the Minister that they will stand up and fight every proposal from the European Commission that would take power away from us and give it to itself with regard to our energy policy and energy agreements and, in particular, anything that affects our offshore and onshore energy resources. 

5.11 pm 

Charles Hendry:  We have had a useful debate about and exchange on the document and some of the broader issues. I well remember debating the Lisbon treaty at great length in the main Chamber. I stood at the Dispatch Box and argued that energy should not be included at all, because I was concerned that it would be a slippery slope. Although one could start off by saying that something is not an area of Commission competence, that position could gradually be eroded. We have started to see that happen as environmental measures are used to encroach on energy policy, and natural areas for member state Governments to make decisions about are gradually being eroded because the Commission says that they are not energy matters, but environmental matters, and that it therefore has competence for them. Unfortunately, my wise words were voted down by the then Government. I cannot remember which lobby the hon. Member for Linlithgow and East Falkirk was in, but my eloquent words failed to persuade his colleagues at the time, so that part of the treaty went through. 

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I hope that I can reassure the Opposition’s Front-Bench representative, the hon. Member for Rutherglen and Hamilton West, that we will be vigilant. We are absolutely clear that the areas under discussion are of fundamental, nation-state competence, and we do not wish to see that eroded further. Indeed, that is one of the reasons why we have put a lock in place, stating that further powers may not be transferred from this member state to the Commission without a referendum. That has now been locked into legislation. 

The hon. Member for Linlithgow and East Falkirk raised offshore oil and gas—he has been a doughty campaigner on those matters—and I absolutely agree with him. I think that he will be reassured to know that the Commission recently said publicly that it is willing to be more flexible about whether this should be a directive rather than a regulation, which is what we have been pushing for. That is an important step forward. We are not through the process yet, but it is certainly moving in the right direction. Moreover, this is not being portrayed as a desire to downgrade safety standards—we have no interest in that. We believe, as he does, that, together with Norway, we probably have the most robust regime anywhere in the world for safety standards for offshore oil and gas activities, and we are not prepared to see those downgraded by a move towards the lowest common denominator. Our concern is that, during a period of some years while we move towards a regulation, there will be a period of jeopardy when the security and safety of our oil and gas sector are at risk. I hope that the hon. Gentleman is continually reassured that we are moving in the right direction on those matters. 

The hon. Gentleman also raised the issue of observer status. I want to make it clear that observer status is not ruled out by the measure. There are circumstances in which a member state can request that the Commission should have observer status. Poland, for example, said that it wanted the Commission present at some of its negotiations with third Governments. That is an important step forward and it is beneficial, but the Commission cannot insist on being there and having observer status if that is not the wish of the member state. That is probably an important clarification.

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The hon. Member for Rutherglen and Hamilton West asked about costs. My understanding is that these would be minimal. That simply relates to the cost of informing the Commission of the text of an intergovernmental agreement. There are almost no costs on top of those involved in securing the intergovernmental agreement. I hope that reassures him. 

There were also questions about the draft clauses. We are assured that the Commission has not drafted any such clauses. However, in the event that it did, they would not be mandatory. They would be entirely voluntary and they could not be retrospective. I think, therefore, that we have a lock on that in the nature of the wording that we have achieved. 

I hope that we have ended up in a position which is very much in our national interest. It recognises that these issues will be long-term matters and that member states across the EU will be dependent on imported fossil fuels for many years. We will be very vigilant in ensuring that the right balance is struck between the legal rights of member states to determine their own energy policy and the desire for the Commission to ensure that the single market in energy matters is put in place and that we take that forward and also secure security of supply matters. The Lisbon treaty is quite clear in article 194 about the limits of that competence. This decision is absolutely in keeping with the agreement that we have. I can reassure you, Dr McCrea, and this Committee that we will be extremely vigilant and not allow that to be watered down. 

Question put and agreed to.  


That the Committee takes note of European Union Document No. 13943/11, a draft Decision of the European Parliament and of the Council setting up an information exchange mechanism with regard to intergovernmental agreements between Member States and third countries in the field of energy; and supports the Government's efforts to achieve greater transparency in intergovernmental energy agreements, whilst ensuring that the provisions of the draft Decision do not alter the balance of competence between the Commission and Member States. 

5.17 pm 

Committee rose.  

Prepared 4th July 2012