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Where the MFA or the replacement Marine Management Organisation or any other similar organisation has a clear interest, we will of course continue to consult. However, where a licence application clearly complies with any environmental or spatial planning concerns—for example because the strategic environmental assessment, or other environmental assessments, has already ensured that the necessary consultation has taken place—we would not wish to impose an additional statutory consultation process and further delay the licence process. We are serious about ensuring environmental protection, but we are also serious about removing any unnecessary barriers delaying these important investments in infrastructure. As so often in these matters, the objective is to get that balance correct.

The noble Lord posed two questions and I shall do my best to reply. The first is who will regulate the carbon storage regime. Decisions on the appropriate regulatory authority for the storage of carbon dioxide will be taken in due course once the arguments about which authority is best placed to exercise licensing and other functions are carefully assessed. This will be part and parcel of a consultation that the Government are launching shortly. Meanwhile, as I have just argued, regulatory agencies will continue to work together to develop the detailed regulatory regime.

The noble Lord also asked how we will ensure that CO2 storage does not conflict with the proposed protected areas under the Marine Bill. I have gone some way, I hope, to answering him on that. Let me go further by saying that activities that involve oil and gas will be subject to marine planning and conservation zones. Any application to undertake activities in these areas will be subject to appropriate scrutiny and controls. Regardless of whether that applies retrospectively, we do not expect the first licence for CO2 storage to be in place before the Marine Bill is enacted and comes into force.



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I hope that I have provided the noble Lord with some reassurance that the environment is being, and will continue to be, adequately protected, which is something that everyone concerned with the Bill is very keen to see. On that basis, I hope he will feel somewhat reassured.

Lord Redesdale: I thank the Minister for that reply. Our intention in these amendments was not to impose a rigid bureaucratic burden on the regulators. The Minister’s reply has gone much further than could any earlier reply in another place because the Draft Marine Bill had not yet been published. I take on board the point that the licence for carbon capture and storage may well take place after the Marine Bill. However, some of us have been waiting so long for that Bill that I would not take that as an absolute given. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clauses 5 to 7 agreed to.

Clause 8 [Offence to carry on unlicensed activities]:

Baroness Wilcox moved Amendment No. 3:

( ) has a decommissioning programme for the facility, which has been approved by the Secretary of State.”

The noble Baroness said: Perhaps I may digress a little before speaking to the amendment. We have had a change of Clerk and I think it would be a nice moment for us to applaud the way in which she trains for her work. On Tuesday she led the parliamentary women’s tug-of-war team to great triumph and I think that we should congratulate her.

Amendment No. 3 deals with the decommissioning programme. This clause relates to the licensing of gas importation and storage projects and, more aptly, it relates to the offences of carrying out unlicensed activities. Yet it is concerned only with the duration of the projects and makes no provision for decommissioning them. This may be a dangerous oversight. The intention behind this amendment is to level the playing field in the energy sector to ensure genuine competition wherever possible. Other parts of the energy sector, such as wind power, are required to have full decommissioning programmes established from the outset. We want to ensure that this is spread across the entire sector. Sometimes rigs are abandoned in very rough seas or stop being used for whatever reason. Before a facility could stop being used for the importation or storage of combustible gas, it would be required to have a detailed proposal in place for decommissioning the site, which would have to be signed off by the Secretary of State. This could specify things such as what is required to be removed from the site to prevent danger to shipping and the environment. It could also specify the establishment of a decommissioning fund similar to that proposed for the nuclear decommissioning programmes. That would make certain that decommissioning occurred regardless of the circumstances of the owners or users.

We understand that in Schedule 1 amendments are made to the Petroleum Act 1998 such that the decommissioning process will be extended to offshore

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oil and gas. I understand that we want to avoid conflicting penalty schemes and undue complication about what happens if the decommissioning programme is inadequate, but a few questions still need to be answered. Could the Minister explain the relationship between the extension of penalties and regulation under the Petroleum Act and the new licence arrangement that the Bill introduces? How will the licence programme in the Bill be integrated into the provisions in the Petroleum Act? The Petroleum Act allows the Secretary of State to require decommissioning security at any stage in the life of these facilities, but who decides this?

Is there a statutory obligation on offshore gas importation and storage facilities to have a comprehensive decommissioning programme from their inception? I beg to move.

Lord Teverson: I congratulate the noble Baroness, Lady Wilcox, on this amendment. You look at the Bill and see paragraphs (a), (b), (c), (d) or whatever and ask yourself: what can I think of that is not covered there and will show that I have paid attention in class? I am exceedingly impressed because clearly we need provision for decommissioning, which is an important part of almost any energy project, investment or installation in any sector. Therefore, I shall be interested to hear from the Minister whether the Government deem that this is already covered in other areas.

The noble Baroness asked a number of other questions. The matter in which I am particularly interested concerns paragraph (b), which refers to another person carrying on the activity on behalf of the person who has the licence. Having read the section on licensing, I should be interested to hear what approach the Government will take to granting licences to ensure that subcontractors—as I think of them from my industry days—have the right expertise and qualifications to undertake work for the person who holds the licence. Clearly, this is an area where the quality control or the original granting of a licence could fall down as regards large energy installations where quality and safety are particularly important.

Lord Davies of Oldham: I am grateful to both noble Lords who spoke on the amendment. I agree entirely with the noble Baroness, Lady Wilcox, that we need to ensure that the activities we are seeking to license in the gas unloading and storage regime are subject to a robust procedure for managing the final stage of the process, decommissioning. We shall hear a lot about decommissioning during the Bill’s passage, but this is the first amendment which specifically addresses the concept. I agree entirely with her sentiments that there needs to be an offence defined, if there is not a successful and proper carrying out of any decommissioning programme. What she wants is that the programme must be approved by the Secretary of State at the time when the offshore gas storage or unloading facility is operational and the offence potentially occurs.

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We are extending through Schedule 1 to this Bill the existing decommissioning provisions in Part 4 of the Petroleum Act 1998 to include offshore gas storage

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and unloading, and related activities. This means that operators will be required to draw up and carry out an approved programme for the decommissioning of their installations. Such obligations can also be placed on certain other interested persons, such as companies associated with the operator, as the noble Lord, Lord Teverson, said.

The problem with the amendment is that it would, in effect, create a different regime for gas unloading and storage from that which applies to oil and gas developments. We believe that there are virtues in consistency in the decommissioning regime across all types of offshore energy installations, which will help to ensure investors are clear about their obligations in respect of properly dismantling their structures. This has been a guiding principle and a strength of the proposals in the Bill, that we are continuing with existing tried and best practice on the issue of decommissioning.

Changing the requirements for decommissioning projects on a piecemeal basis, which would be one of the implications of this amendment, would lead to inconsistencies across the different applicable licensing regimes. For example, the decommissioning provisions in Part 4 of the Petroleum Act 1998, which will apply to offshore gas unloading and storage, provide a penalty, in the case of a conviction on indictment, of a term of two years’ imprisonment and/or an unlimited fine. However, the penalty for the part of the Bill where the amendment is suggested is, in the case of a conviction on indictment, an unlimited fine—that is, a lesser penalty regime than that of the relevant part of the Petroleum Act 1998. So we would be diluting what is already in place in relation to decommissioning regimes. By linking offshore gas with the existing regime, we provide an essential consistency, which is valuable to all those operating in the industry, and we make sure that changes made to the Petroleum Act regime, including the proposed changes in Part 3 of this Bill, flow through to the offshore gas licensing regime.

I assure the noble Baroness that we take the point about security of decommissioning very seriously, but we are providing consistency across regimes by continuing with the provisions on the Petroleum Act. We also have consistency in the operation of the regime. The changes that we are proposing to Part 4 of the Act under this Bill would apply equally to the offshore gas regime. Chapter 3 of Part 3 of the Bill amends the Petroleum Act, and noble Lords can identify exactly what it does. In several clear ways, it establishes clarity on the decommissioning regime for offshore gas holding.

I was asked what would happen if the contractor did not apply; that was the burden of the concern expressed by the noble Lord, Lord Teverson. We are channelling responsibility to the licence holder, which will in this case produce a more effective regulatory regime whereby the prosecuting regulator is not required to examine the relevant chains of command and allocations of responsibilities between the licence holder and the various contractors.

The regulator would be able to target the licence holder in all instances, which should surely guarantee compliance with the licence holder’s responsibilities. Due diligence will be found where the licence holder

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has done everything it can reasonably be expected to do to avoid a breach of the licence. Where a contractor is used to carrying out a particular operation, due diligence will be shown where proper steps have been taken to select a competent contractor and where there has been an appropriate level of supervision of the contractor’s operations. I hope that the noble Lord recognises that we have addressed ourselves to the question of when the contractor can be guilty potentially of producing as large a breach in the licence holder’s requirements as the licence holder itself. But we think that we have got the appropriate rigorous regulation in place.

The noble Baroness, Lady Wilcox, made a point on who decides when a decommissioning programme must be in place. The offshore environment and decommissioning unit of the department will serve a notice on the owner of an infrastructure as soon as it has been constructed, notifying them that the department will call for a decommissioning plan at a suitable time thereafter. This will be closer to the end-life of the facility when the best technology is known and available. If there were anxieties or concerns about the installation, the Secretary of State could insist on it being earlier. I think the noble Baroness will accept why we would want an element of delay before judgment of that. Clearly, decommissioning techniques evolve over time and the contractor would, we would hope, employ the best technology available when decommissioning is necessary.

Certainly, the department has the responsibility for serving the notice and the Secretary of State has the responsibility for ensuring that a decommissioning plan is operated. But the operation of that requirement would be as close to the point of decommissioning as possible to make best use of available technology. I hope the noble Baroness will feel that she can safely withdraw her amendment.

Baroness Wilcox: I thank the noble Lord, Lord Davies, very much for the time and trouble he has taken to allay not only my fears but the fears of the noble Lord, Lord Teverson, whom I thank, too, for his kind words. If these things had been clear, explicit and easy to understand, we would not have had to ask them. Naturally, at this stage, there is so little in the Bill and so much that will be in secondary legislation, which we cannot see right now. I have listened carefully to what has been said. It sounds good, although I should like to reflect on it. Perhaps some of our questions may also cause the civil servants behind the Minister to freshen up some of the things that he has said today. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Wilcox moved Amendment No. 4:

4: Clause 8, page 5, line 15, at end insert—

The noble Baroness said: Amendment No. 4, which is grouped with Amendments Nos. 5, 6 and 10, concerns barring future licence applications for offenders. These

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amendments would add an extra penalty for offences regarding licences, and specifically they would bar offenders under this section from future licence applications. We are not entirely convinced that the fines are an adequate deterrent to the offences under this section. The statutory maximum fine, as mentioned in the Explanatory Notes, is £5,000 for England and twice that for Scotland. The companies developing these facilities have very deep pockets and it might even be worth their while to take the hit and continue in breach of the law. We are very keen to see the chance of that happening taken out of the Bill.

I understand that there may be some provision in regulation to place such a bar on bodies seeking future licences if they are in breach of the law, but does the Minister think that that is sufficient? How is it triggered? Does it require the Secretary of State to judge the nature of the offence himself and then personally decide to bar future applications? It seems that the Government are not opposed to the idea of barring future applications for offenders; it is merely the mechanism that we are discussing. Surely having something in the Bill would be the most effective way in which to deter such offences. If there is a quasi-subjective power for the Secretary of State to bar someone after they have committed an offence, this seems like a much weaker deterrent. At best, under the mechanism in the Bill as it stands, we can hope to close the stable door after the horse has bolted. Does the Minister not agree that deterrence is the goal here? If so, is not having something in the Bill the most effective deterrent? I beg to move.

Lord Redesdale: I have a brief question on these amendments. As we are talking about very large contracts, is it a person or a company who is the licence holder? Can companies act as licence holders? I ask for personal information on that matter. If the company holds the licence, the provision and fine seem extremely small, since the companies could be very large.

Lord Davies of Oldham: I am grateful to the noble Baroness, Lady Wilcox, for raising these important issues and I hope that I can give her a satisfactory response so that she will feel confident in not pressing her amendments.

First, on Amendments Nos. 4 and 5, Clauses 8 and 9 relate to the enforcement provisions of the new offshore gas storage and unloading regime. In particular, Clause 8 stipulates that it is an offence to undertake any of the activities set out in Clause 2, such as the unloading of gas to an installation or pipeline, without a licence granted under Clause 4. Meanwhile, Clause 9 specifically covers offences once a licence has been granted—for example the breach of certain specified licence conditions.

The clauses form part of a suite of provisions designed to ensure that a licence is obtained for the activities listed in Clause 2 and that the terms and conditions governing the licence are adhered to. Adherence to the terms and conditions of licences will ensure that the necessary safety, environmental and other protections are in place for the offshore storage of gas and unloading of LNG. We believe that the proposed penalties for

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failing to obtain a licence, or for non-compliance with licence conditions, are proportionate and sufficiently strong to deter licence holders from committing the offence. The penalties for any person found guilty under either Clause 8 or 9 consist of a fine of up to the statutory maximum, which as the noble Baroness said is currently £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland.

The noble Baroness has suggested we add to the existing offences to provide a power for the Secretary of State to stipulate that a person guilty of an offence under the gas unloading and storage regime will be barred from applying for future licences for a period of time to be determined by him. We have given some thought to those issues, and I am grateful to the noble Baroness for her amendment, as it gives me the opportunity to give voice to these points.

I am confident that we have the right penalties for these offences without the need for this particular amendment. The penalty provisions contained in Clauses 8 and 9 are based on an existing enforcement regime which has worked successfully to date—the penalty provisions of the submarine pipelines regime in the Petroleum Act 1998. If the noble Baroness thinks that we are leaning too much on past experience, that is a tremendously important Act that has governed an important development in our energy supplies. We have that experience to draw upon. The risk of a potentially unlimited fine will act as an effective and proportionate deterrent to operators engaged in offshore gas storage.

3.30 pm

However, if in future it was felt that a broader range of penalties were necessary—as the noble Baroness suggests with her amendment—including a bar on persons found guilty of an offence, the Bill already provides for that possibility. The power afforded to the Secretary of State by Clause 5(a) allows for regulations to be made detailing who may apply for such licences. These regulations could therefore adequately provide for such a measure of restriction if we deemed it necessary. Our intention is to consult on the regulations and the requirements for applying for a licence prior to their being adopted. This would be the subject of secondary legislation and full consultation will take place before any of that is proposed.

I hope the noble Baroness will recognise that we have thought seriously about these issues and that we have already catered in the legislation for the specific points she picks up on in her amendment. She wondered whether a fine was sufficient to guarantee that companies did not break licence conditions. Companies will be subject—to answer the noble Lord, Lord Redesdale—to a maximum fine but may also be subject on conviction or indictment to an unlimited fine. You cannot have a greater financial deterrent.

There was a question about whether the entity committing an offence may be a company rather than an individual. If it is a company, that company will be liable for the penalty. In certain circumstances, officers of the company would also be liable. We accept the noble Lord’s point that an individual and the company may bear the responsibility. Certainly the penalties we envisage in these terms apply to both.



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I turn to the final set of amendments in this group, starting with an explanation of what Clauses 13 and 27 set out to do. I will then set out why we think the amendments to revoke a licence if an offence is committed against an inspector or other person acting on the directions of the Secretary of State, or Scottish Ministers in relation to carbon dioxide storage in Scottish territorial waters, are not necessary.

Provisions under Clauses 13 and 27 give the Secretary of State, or Scottish Ministers, the power to appoint inspectors to inspect facilities used for gas or carbon dioxide storage under the seabed, offshore unloading of LNG or related activities. They also provide a power to make regulations setting out the powers and duties of inspectors. Examples of powers that might be set out in regulations include the right of entry to premises and powers to carry out an investigation, to require information or to take samples. The regulations may also specify the assistance that must be offered to the inspectors.

To encourage compliance with these requirements, Clause 13(5) specifies that these regulations may also create offences relating to inspections. An example of an offence might be obstructing an inspector in exercise of his duties under the regulations. The clause lays down the penalties that may be imposed for such offences. Such offences would be punishable on summary conviction by a fine not exceeding the statutory maximum or a lesser amount specified in the regulations, and, on conviction on indictment, by an unlimited fine. As before, the maximum penalty provisions contained in Clauses 13 and 27 reflect the penalty provisions for offences against submarine pipeline inspectors in the Petroleum Act 1998. That enforcement regime has worked successfully to date. I believe that the threat of an unlimited fine will act as an effective and proportionate deterrent.


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