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The deterrent effect of Clause 54 of the Bill, however, is to ensure that the operator puts money aside to pay for the full costs of decommissioning and the full share of waste management costs. The Government believe that this framework creates the necessary powers to ensure that funds are accrued to meet those costs, and that any offence should be consistent with the overall purpose and aims of this legislation.

I shall explain how we see the sanctions process operating. Where there is a failure to comply, it is our intention that where time permits, or where the gravity of the breach is not too severe, the Secretary of State would seek to enter into discussions with the operator in order to understand why and how the breach occurred and see if informally it could be put right. In normal circumstances we would seek recourse through the provisions in the Bill to correct the breach only after we had failed to do so using these methods. I think the Committee would be broadly in favour of that approach.

Where the breach is more serious or significant, however, or where informal agreement cannot be reached, the Secretary of State may seek to impose a direction under Clause 55. In other words, a failure to comply with a programme would not necessarily result in the immediate initiation of criminal proceedings. It is also likely that in practice, before beginning criminal proceedings, the Secretary of State would, among other things, consider whether or not it was in the public interest to prosecute. However, that does not prevent the Secretary of State from commencing a prosecution without first imposing a direction to remedy

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the breach. The clauses as drafted provide the Secretary of State with the flexibility to respond to a variety of situations. We think that this flexibility is an important part of the procedure and of ensuring that programmes are adhered to.

Amendment No. 49 seeks to remove the term “misleading” from Clause 57. Again, we are unable to support the amendment; frankly, it would undermine the deterrent effect of the provisions as currently drafted. “Misleading information” can be taken to mean information that a person knowingly or recklessly includes in, or omits from, the material submitted to the Secretary of State. That would mean that the information or material misled, or did not provide an accurate or full picture to, the Secretary of State.

The Government believe that the proposed amendment is much too wide and would mean that it would be acceptable for an operator to submit information that was not necessarily false, but perhaps did not provide the full picture—and I suggest that it is that full picture that is important to the general public—about a particular issue. For example, that could result in the submission of information that deliberately provides an incomplete picture, such as including information about investments that are performing well but omits to mention other factors—changes in discount or interest rates—that may negate these gains.

In our mind, the act of “misleading” is a deliberate act and not the result of a clerical error. Of course there would be discretion, as there always is in these cases, for the prosecuting authorities. To put it in a nutshell, we are convinced that the public would not feel comfortable for a Minister to say that it was acceptable for a person knowingly or recklessly to submit misleading information without facing any sanction. Therefore, we think that the amendment would undermine one of the foundations of the regime, which is that the Secretary of State must be able to take decisions on the basis of full and accurate information. It is best that companies should know that from the start.

We hope that Clauses 54 and 57, to which the amendments apply, send a clear message to operators about what is and is not acceptable behaviour. On that basis, we cannot accept either amendment.

6.15 pm

Baroness Carnegy of Lour: In Clause 54, it is an offence,

Will a failure to comply involve a public health risk? Could it involve escaped radioactivity in an area? If so, what the Minister said does not really apply. I understand what he said about his other points.

Lord Bach: Those obligations are imposed in any case, but I venture to think that if the alleged offence were against the health and safety regulations or legislation, the relevant body would seek to bring enforcement proceedings against the failure. The noble Baroness has been sharp enough to notice what I said: there

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might be a higher maximum sentence than under these provisions. These provisions are not necessarily to deal with that type of obligation; we are talking about a different type of obligation. If it is a health and safety obligation, the Health and Safety Executive is the right body to consider prosecution.

Baroness Carnegy of Lour: Should the Bill not say that in Clause 54(1)? That is not clear from the wording of the Bill. I know that the Minister explained that earlier.

Lord Bach: I am grateful to the noble Baroness but the provision is,

Those are the crucial words. It is the obligations under the programme that are important. There are other obligations that we all have, including operators in nuclear science, to ensure that the health and safety rules and regulations are enforced, but they are unlikely in themselves to be part of funded decommissioning programmes.

Lord Teverson: I did not catch the Minister’s reply on the maximum fine under subsection (3).

Lord Bach: I am sorry; the noble Lord is too polite—he did not catch it because I did not say it. I am advised that for these offences the maximum under summary jurisdiction will be £5,000, but let us not forget that these matters are also indictable. On indictment—I venture to think that if there were a serious breach, a serious offence, it may well be indictable—the Crown Court has the power to impose an unlimited fine.

Lord De Mauley: I am most grateful to the noble Lord, Lord Teverson, and my noble friend Lady Carnegy for their interventions, which led to some rather interesting revelations. I am also grateful to the Minister for his response. I shall not detain the Committee further today but I propose to take away this matter and to consider the noble Lord’s response to both these points. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 agreed to.

Clauses 55 and 56 agreed to.

Clause 57 [Offence of supplying false information]:

[Amendment No. 49 not moved.]

Clause 57 agreed to.

Clause 58 to 66 agreed to.

Clause 67 [Security for decommissioning obligations]:

Lord Bach moved Amendment No. 50:

“(ca) an insurance policy;”.”

On Question, amendment agreed to.



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Clause 67, as amended, agreed to.

Clause 68 agreed to.

Clause 69 [Persons who may be required to submit abandonment programmes]:

Lord Rowlands moved Amendment No. 51:

The noble Lord said: Amendment No. 51 seeks to amend Clause 69(7) by leaving out the word “may” and inserting “shall”. First, perhaps I should declare an interest in that I am currently, through the auspices of the Industry and Parliament Trust, studying energy matters, and consequently I have had briefings of various kinds from the oil and gas industries.

It may help the Committee if I give a brief history of subsection (7). It was not in the original Bill but was inserted via an amendment moved by the Government on Report as a result of representations from the oil and gas industries and also as a result of the debate that took place in Committee in the other place. The problem that had been identified and which the Government sought to address in the amendment, which is currently subsection (7), was how one defined a “beneficial interest” in an installation that was being decommissioned. As noble Lords will know, many of the original licences go back to the very beginning of the exploration and exploitation of our North Sea oil and gas reserves. The interests of the companies and persons named on many of those original licences have now long gone. However, because no one has updated or amended the licences to exclude those who no longer have beneficial interests in them, the question arises of whether those companies or persons will be caught by the decommissioning processes.

As a result of representations made by the industry and the debate that took place in Committee in the other place, it was agreed to define “beneficial interest” and to exclude those companies that might have originally been named on a licence but which hold no interest of any kind and derive no benefit from it today. That was the origin of subsection (7) and the amendment produced by the Government. However, when the industry saw the proposed subsection, it felt that it did not fully meet its concerns in defining someone with a beneficial interest. For example, does the concept of “beneficial interest” catch companies that only transport production from another installation across or around the installation that is being decommissioned? Would it catch companies and persons whose only interest would be in the purchase of cargos of production from the decommissioning installations? It was appreciated that the Government had responded to the representations of the industry, but it was felt that the subsection did not fully cover all the concerns and issues. As a result, discussions took place between Ministers and Members of Parliament, including Mr John Robertson, who had spoken in Committee in the other place, and it was indicated that either an amendment or clarification of what was meant by “beneficial interest” would be brought forward to meet concerns expressed about the deficiency in subsection (7). I understand that there was a high degree of agreement and that it was hoped that the

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matter would be addressed properly on Report in the Commons in the form of a clarifying statement, an amendment or an assurance that the guidelines accompanying the Bill would make it absolutely clear that “beneficial interest” would not catch those persons or companies who use decommissioning installations to transport their oil.

Unfortunately, the truncated programming of Bills in the other place—it is a long time since my days there—meant that although the amendment was tabled it was never debated. Therefore, assurances of the kind that I think Ministers and officials had given the industry never materialised. I therefore take this opportunity to seek that assurance and clarification of what is meant and not meant in subsection (7) in the way that I have suggested.

Ministers have gone a considerable distance already to try to offer that assurance. I have a copy of the letter that Minister Malcolm Wicks sent to Mr John Robertson a little while ago, answering the concerns of the industry. I shall quote directly from it, because it makes it clear that there is no disagreement between government and the industry on this issue. He wrote:

that is, the installation that is to be decommissioned—

It was exactly that kind of clarification and assurance that the industry was seeking, and it was certainly given in the letter.

However, will the Minister go a little further and say that he will look at whether subsection (7) should not be amended further to put it beyond doubt that it will not catch people or persons who are using the installations for peripheral reasons? If he cannot, perhaps he can give the other assurance that has been sought: that the guidelines accompanying the Bill will make it absolutely clear that what was written in the letter from the Minister to Mr Robertson MP applies.

Perhaps I may speak briefly to the amendment that prompted this debate. I have been around long enough to know that substituting “shall” for “may” is the most common form of amendment. I have done it many times, as have many others whom I know. However, there is as good a case for doing so in this subsection as anywhere else, because the Government are saying loudly and clearly to the industry that they will not give notices in relation to the types of company or people in question and make them liable. That is what the subsection is for. Therefore, why not insert “shall” instead of “may”? I beg to move.

6.30 pm

Lord Teverson: I must admit that I did not understand this clause one little bit. When a parliamentary clause gets into algebra involving a person called “P”, frankly, in any other walk of life we would set up a PowerPoint presentation on it. I will be absolutely delighted to hear the Minister explain what it actually means and I congratulate the noble Lord, Lord Rowlands, on raising the matter.



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Lord Davies of Oldham: I do not have a PowerPoint presentation to give because they are not allowed in our Committee. I was hoping to address the concerns of my noble friend with some clear definitions, and I hope helpfully. The noble Lord, Lord Teverson, has broadened the debate by asking me to explain the clause, which is a rather more daunting prospect. I shall give some context to the issue because my noble friend has followed the argument in the other place with more diligence than perhaps other Members of the Committee have been able to. He has alighted on a specific point to which I want to respond constructively. As he indicated, the Government had every intention of responding constructively when the Bill was considered in another place. However, I am not as critical as he is about the processes that have developed since he and I were last there. Suffice it to say that on this occasion, it was not possible to make quite the full response he seeks, and I hope to do that for the benefit of the Committee today.

The obvious point is that the UK has benefited from our reserves of oil and gas from the North Sea for many decades, and it has been necessary to update the provisions that apply to the obligations of the contractors. Part IV of the Petroleum Act 1998 consolidated provisions in the 1987 Act, and in this Bill we seek to bring up to date Part IV of the 1998 Act in order to meet the existing abandonment regime which, as my noble friend said, has different structures from the companies. The original structures were clear. Large multinationals with huge resources at their disposal carried out the initial exploration and exploitation, but as the industry developed it has become more sophisticated and the companies now involved are much smaller. The question of who bears the burden, therefore, has to be defined and updated with greater accuracy.

First, the clause extends the list of persons who may be required to provide a decommissioning programme upon receipt of a Section 29 notice under the Petroleum Act 1998. This list will include licensees which have transferred their rights to another company without the consent of the Secretary of State. Companies should not be able to avoid their decommissioning liabilities by such unconsented action, so this is an attempt to ensure that, despite changes that may have taken place in recent years regarding where decommissioning liabilities should rest, they will continue to do so.

Secondly, the clause clarifies the Petroleum Act provisions so that it is clear that they apply to limited liability partnerships in the same way as they apply to limited companies. This includes the provisions for making associates such as parent companies responsible for decommissioning where there are concerns about the financial strength of a company. I am sure that noble Lords will recognise the importance and significance of ensuring that we are able to put responsibility where it lies; that is, with the organisation that is able to meet its obligations.

Thirdly, the clause will ensure that all those involved in a development share the decommissioning obligation from the same time. The wording of the current legislation means that the operator can be made responsible for

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decommissioning when construction of the platform starts, but his fellow licensees cannot be made responsible until one of the activities specified in the Act has commenced; for example, production. That may leave a significant period when the liability rests on a single company, which is not equitable.

Finally, the clause will prevent the Secretary of State from placing a decommissioning obligation on a licensee or a party to a joint operating agreement if that licensee or party is not entitled to derive, and never has been entitled to derive, any benefit from the installation. Consequential changes for associate companies of licensees are also included to reflect this change. The point is, as I indicated, that over the years, oil and gas companies have created a patchwork of commercial arrangements by splitting licensed areas into sub-areas. As a result, some companies which have received no benefit at all from a particular commercial sub-area are still a party to the licence that covers that sub-area. It is not right that they should bear that responsibility.

I now come to a point that I hope my noble friend will recognise is especially helpful. The wording of Section 30 of the Petroleum Act 1998 brings all the companies on the licence for a given area into the scope of the Secretary of State’s power to make them responsible for decommissioning an installation in any part of that licensed area. Naturally, companies which have never been entitled to derive any benefit from an installation are reluctant to carry a liability for its decommissioning. In our discussions on the clause with companies that might be affected, it was clear that there could sometimes be doubt about whether a company would be seen as being entitled to derive a benefit from an installation.

My noble friend is asking us to define who does not receive the benefit and therefore ought not to fall within the range of liability, so I want to make it clear that the entitlement to a benefit must arise from the exploitation or exploration of mineral resources or storage or recovery of gas from the installation in question. We do not regard that as including persons who are only transporting production from another installation via the installation in question, nor persons who only buy oil or gas produced from the installation. It would also not include persons whose only benefit is derived from trading the installation’s carbon dioxide allowances or from the supply of goods or services to the installation. We intend to consult the companies concerned further on this issue and will publish revised guidance notes on the department’s website, but I hope that my noble friend will recognise that he was seeking what the Government intend to happen. We will, of course, issue guidance after consultation.

I hope that the explanations that I have given assure the noble Lord, Lord Teverson, of the virtues of the clause in general and particularly on the position of companies which have never derived a benefit from an installation, which was the burden of my noble friend’s anxiety. Changing the wording from “may” to “shall” would not alter the way that the clause limits the Secretary of State's powers, so it is not necessary. I hope he will recognise that we intend to meet the anxieties that he expressed when moving the amendment.



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Lord Rowlands: I find that reply totally satisfactory. I would love, one of these days, to get “shall” instead of “may” into a Bill at some stage in my parliamentary lifetime, but in light of the very positive assurances given by my noble friend and the fact that they will be included in guidelines and have full force, as it were, in any form of interpretation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 69 agreed to.

Clause 70 agreed to.

Clause 71 [Protection of abandonment funds from creditors]:

Lord Davies of Oldham moved Amendment No. 52:

(a) a charge over a bank account or any other asset;(b) a deposit of money;(c) a performance bond or guarantee;(d) an insurance policy;(e) a letter of credit.”

On Question, amendment agreed to.

Clause 71, as amended, agreed to.


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