APPENDIX
4
S.I. 2012/2862: MEMORANDUM
FROM THE
DEPARTMENT OF
ENERGY AND
CLIMATE CHANGE
OIL
STOCKING ORDER
2012 (S.I. 2012/2862)
1. In its letter to the Department of Energy
and Climate Change of 5 December 2012, the Joint Committee requested
a memorandum on the following point:
Given that -
(a) P is defined in article 2 in effect as a
person who has been given a direction under section 6 of
the Energy Act 1976 to create or maintain a level of fuel stocks;
and
(b) it is apparent that more than one person
can be given such a direction,
explain how paragraphs (1)(e) and (2)(d) of article
3 are intended to operate, in relation to stock (or, as the case
may be, biofuel or additive) that could otherwise be the United
Kingdom stock of more than one person, to determine whose the
United Kingdom stock counts as and how effect is given to that
intention.
2. Part 2 of the Oil Stocking Order 2012 ("the
Order") prescribes the cases and circumstances in which stocks
(including biofuels and additives) are to be treated as the United
Kingdom stocks of a particular person for the purposes of complying
with a direction by the Secretary of State given under section
6 of the Energy Act 1976 (a "direction") . Included
in this list at paragraph (1)(e) (for stock) and paragraph (2)(e)
(for biofuels or additives) is the requirement that the stock
(or biofuel or additive) is not the United Kingdom stock of any
other person.
3. Due to the requirements of paragraphs (1)(d)
and (2)(c) of article 3, the Department thinks that it would not
be possible for United Kingdom stock to be the United Kingdom
stock of more than one person. This is because the Department
cannot currently envisage a situation in which the tests set out
in those paragraphs - that the stock, biofuel or additive is available
to, and physically accessible by, P at all times - could be satisfied
in respect of more than one person.
4. However, the companies to whom directions
are given under section 6 of the Energy Act 1976 have significant
financial incentives to structure their stockholding arrangements
in order to enable them to meet their obligations in the most
cost-effective way. The benefits of such innovation are recognised
in the Oil Stocking Directive ("the Directive"), which
makes specific provision about the circumstances in which stock
relied on by one member State to meets its stockholding obligation
under the Directive may be held outside its territory, and enabling
stock holding obligations to be "delegated" to persons
in other member States under certain conditions. Notwithstanding
this flexibility the Directive states explicitly in Annex III
that "no quantity may be counted as stock more than once".
5. The Department therefore considered it necessary
when drafting the Order to explicitly address the scenario whereby
the stock would meet the test of being P's United Kingdom stock
but for the fact that it was held by more than one person.
6. As it is not currently possible to predict
the circumstances in which this might arise, the Department does
not have a particular preference as to which person may treat
the stock, biofuel or additive as their United Kingdom stock provided
that the stock is never counted twice.
7. The provision referred to by the Committee
is therefore designed to ensure that the first time a stock, biofuel
or additive meets the requirements in article 3 in respect of
a person subject to a direction (P1) it will become the United
Kingdom stock of P1. If the requirements of article 3 are in
every other respect later satisfied in respect of another person
who is subject to a direction (P2), paragraphs (1)(e) and (2)(d)
of article 3 will operate to prevent P2 from relying on the stock,
biofuel or additive until it ceases to be the United Kingdom stock
of P1.
8. In addition to the provision in article 3,
any person who is subject to a direction will continue to be required
by the direction to provide detailed information to the Secretary
of State on a monthly basis about their United Kingdom stock and
the Secretary of State has substantial administration and enforcement
powers to verify these returns under Schedule 2 to the Energy
Act 1976.
DEPARTMENT OF
ENERGY AND
CLIMATE CHANGE
11 DECEMBER 2012
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