Energy Bill

Public Bill Committee, 21 February 2008.

John Bercow (Conservative, Buckingham)

Before we begin, I have a few preliminary announcements. Members may, if they wish, remove their jackets. Please would all Members who have mobile phones or pagers ensure they are switched off or turned to silent mode. There is both a money resolution and a Ways and Means resolution in connection with the Bill. Copies are available in the room.

We are now back to the more familiar territory of clause-by-clause scrutiny. There are no amendments to clause 1, so we go straight to stand part debate.

Clause 1

Malcolm Wicks (Labour, Croydon North)

Good morning. It is good to get into the Committee stage proper, although the evidence sessions are an interesting innovation. It is a great pleasure to serve under your Chairmanship, Mrs. Humble.

Let me introduce clause 1. Under part V of the United Nations convention on the law of the sea, coastal states can claim certain rights within an area known as the exclusive economic zone, which extends from the edge of the 12 nautical mile limit to the territorial sea for a further distance of 188 nautical miles. Article 56(1) of the UN convention provides that these rights include, among other things, the exploration and exploitation of the sea bed and its subsoil and the waters above it. It also provides jurisdiction for the establishment and use of installations and structures in the area. The UK has previously claimed a number of rights under article 56(1), such as rights to the offshore generation of electricity, under the Energy Act 2004, but has not yet claimed rights in relation to unloading and storing gas.

The clause makes provision to claim those rights by providing for the ownership to be vested in the Crown within areas designated as gas importation storage zones by means of an Order in Council. Subsection 2 sets out the activities to which those rights relate—namely, the unloading of gas to installations or pipelines, storing gas whether or not it will be recovered and exploring for suitable sites for unloading or storing gas.

I draw hon. Members’ attention to the fact that the clause covers both the storage of combustible gases, such as methane and butane, and the storage of non-combustible gases, such as carbon dioxide. Without this provision, it would not be possible to implement the licensing regimes set out in chapters 2 and 3 of this part of the Bill.

Hugo Swire (Conservative, East Devon)

Will the Minister confirm that nothing in the Bill will affect existing foreshore-right owners, where the foreshore is not vested in the Crown?

Malcolm Wicks (Labour, Croydon North)

If other hon. Members are going to speak to the clause, I may have the opportunity to give the hon. Gentleman a definitive answer to that question in due course. I hope that that is acceptable to him. My instinct is that the Bill will not do so; but if my instinct is wrong, perhaps I will return to the question.

Charles Hendry (Conservative, Wealden)

I join the Minister in welcoming you, Mrs. Humble, as our Chairman, and I thank the Minister for the way that we went through the evidence sessions. It is the first time I have gone through an evidence-taking session. They have been extremely useful; they have given industry and others a very good opportunity to tell us what they think, and that has helped us work more effectively together as a Committee.

My understanding of these Committees was that the Government would normally stuff them with placemen, who would simply vote with everything that the Government wanted, but what is very encouraging is that it is actually a Committee full of Members who understand energy, who care passionately about different aspects of it, and that is very good in terms of the issues that we need to debate.

Another thing that came out of those sessions was a sense that many of the things that we have concerns about are not included in the Bill, such as smart meters, feed-in tariffs and the role of Ofgem. I hope that the Minister will give us an opportunity—particularly in the light of today’s news on British Gas—to have wider debates about fuel poverty and social tariffs, because they are clearly matters of great concern to people.

As you said, Mrs. Humble, there are no amendments to these early clauses, but we wish to have some questions answered before we give the go-ahead to individual clauses. We certainly agree with the Minister that more needs to be done to make those areas outside territorial waters available for gas importation and storage.

Will the Minister tell us his assessment of the long-term role of the Rough gas field storage facility? Does he believe that it has a long life? Does he expect it to be there for many years into the future, or is part of his concern—and part of the reason for introducing these provisions—a feeling that the Rough gas field will have reached the end of its useful life before long? Will the Minister elaborate on how the process of identifying such zones will work? Who will be responsible for that and what process of consultation must be undertaken before approval as an appropriate zone for such work? Can he also provide some detail on the types of installation that such exercises will involve, especially the above-water structure?

There has been recent media coverage and some discussion during the evidence sessions about the Ministry of Defence’s objections to some of the offshore wind farms; not so much the actual objections—we all understand the need for radar and national security—but on the timing of some of those objections. Clearly, if significant parts of the new structures will be above sea level, the MOD might have concerns about them. Perhaps this would be an appropriate moment for the Minister to address those issues. These are simply a few points of clarification; but, in general, we have no objection to the clause.

Brian Iddon (Labour, Bolton South East)

Does the Minister feel that enough is known about the storage of carbon dioxide below the sea in the cavities from which oil has been excavated? Will he support future research by the organisations that are already involved, to ensure that such carbon dioxide storage will be safe indefinitely?

Steve Webb (Liberal Democrat, Northavon)

Good morning, Mrs. Humble. It is a pleasure to serve under your chairmanship.

What is very striking, having observed the procedures on the Bill so far, is that most of the attention has been focused on what is not in the Bill, rather than what is. Obviously, we will look at the detail. However, the balance of amendments tabled so far reflects the fact that we in the Committee are not particularly exercised with most of the Bill, but we do feel that it is a missed opportunity. I hope that there will be time during our proceedings to discuss those issues, some of which were raised by the hon. Member for Wealden.

Will the Minister give us slightly more context to the clause and this part of the Bill? I appreciate that clause 1 is very limited, but rather than repeat that on each clause in this part of the Bill, may I refer the Minister to the Department’s press notice that relates to those clauses? Is says that

“The current offshore regime for gas infrastructure projects is complex and a barrier to investment.”

Will the Minister expand on the measures in this part of the Bill, of which this is obviously the first clause? What exactly is deemed complex about the present regime by those who have to deal with it? How will the changes in these clauses address those complexities?

Often, we find that complexity is there for a reason. It may be possible to achieve the same objective more simply, but often something has been specified in detail to address a particular problem. How sure is the Minister that, by simplifying the regulation, we will not allow things to happen that were perhaps not meant to be allowed when the original regulations were framed?

If the Minister can give us more of an overview of this part of the Bill—this is probably the right time to do so—it may speed up our consideration of subsequent clauses. Certainly, on the substance of the clause, I do not think that we have any substantive objection.

Malcolm Wicks (Labour, Croydon North)

I understand the concern expressed by the hon. Member for Northavon about the need to set out the context. I hope that the Committee will be patient with me, as I was going to set that out when I introduced clause 2, which introduces a family of clauses that hang together.

May I just confirm to the hon. Member for East Devon that my instincts were right? The Bill will not affect the territory that he was discussing; indeed, the clause will only affect rights beyond the 12 miles of the territorial sea.

The Conservative spokesman asked me about Rough storage facility. I am advised that that is a commercial matter. However, to be helpful, our understanding is that Rough storage probably has quite a long life ahead of it. The more strategic point however is that there is sense in which the UK continental shelf, especially in the North sea, has been a natural store of gas and, indeed, oil for the UK.

Mr. Brian Binley (Northampton, South) (Con) rose—

Malcolm Wicks (Labour, Croydon North)

Let me just finish my paragraph—although it could be a long paragraph, I do not know, depending on what the hon. Gentleman is going to ask, and I cannot guess. As the UKCS starts to decline and given the fierce international competition for energy resources, many of us feel—I think that this will be shared in the Committee—that we need more gas storage facilities, and the market is indeed coming forward with proposals. I think I am at one with the Conservative spokesman on the importance of that—indeed, much of the Bill will enable it to be facilitated by an appropriate regulatory regime.

As for the types of installation, above water, they will be injection platforms and involve the recovery of stored gas—plus, of course, liquefied natural gas platforms. Indeed, LNG is becoming an increasingly important part of the global energy market. I think that I have dealt with the issue of Rough.

My hon. Friend the Member for Bolton, South-East talked about the behaviour of CO2. This is a critical question. So far, globally, we have relatively little experience of CO2 storage, although the sheet is not blank; there is some experience. The example that I draw comfort from—it is perhaps the one that has been best researched—is the Sleipner gas field in Norwegian waters, where CO2has been successfully injected for something like 10 years. It is carefully monitored, scientifically studied and the advice is that, geologically, the CO2 is behaving as one would expect, which in layman’s terms means that it is still down there in a very safe state.

I certainly agree with my hon. Friend that, as we enter a century in which we expect to see the development of the safe storage of CO2—frankly, we need to see it—the scientific issues are absolutely vital. That is one reason why we have established a joint working relationship with our Norwegian friends. I discussed this with the Norwegian Minister only a couple of weeks ago, and we have an expert working group looking at all aspects of CO2. My hon. Friend raises a very important point.

One or two of the other issues raised may be ones we can tackle in the course of the morning. As our debates proceed, there are a number of pegs on which we can have some informed discussion on some of these critical questions. That might include the Liberal spokesman’s question about why is the current regime so complex—we might be able to tease out answers to that this morning.

Brian Binley (Conservative, Northampton South)

Has the Minister finished his paragraph?

Malcolm Wicks (Labour, Croydon North)

I am sorry. I meant no discourtesy to the hon. Gentleman, but I got so excited by the geological storage of CO2 that I was guilty of a discourtesy. Let me give way.

Brian Binley (Conservative, Northampton South)

The Minister is very kind; I am most grateful. I recognise that the whole question of the regulator and the relationship with licensing will be dealt with later. However, I am concerned at this early stage about storage in the North sea and its relationship to the pre-combustion extraction of carbon and to the ability to obtain more from the North sea.

I recognise that I am slightly out of order, but one reason why I raise the issue now is that the Minister will know that tests have been set in respect of post-combustion. One proposal involved linking pre-combustion with the extraction of oil. Will he at least comment on that and give me some hope that other ways might be found to help people who want to exploit that facility?

Malcolm Wicks (Labour, Croydon North)

The hon. Gentleman said that I was very kind to give way. If I may say so, he was far too patient. He should have been waving his Order Paper to remind me that I had promised to give way.

The issue raised goes slightly outside the clause, but let me say that what we are doing this morning is, with the permission of the Committee, putting in place a fit-for-purpose regulatory framework. That brings us back to the Liberal Democrat question. The short answer is that we believe that, at the moment our legislative cover, is not fit for purpose. We are engaged in new territory relating to LNG and carbon capture and storage—later clauses deal with CCS—and we need a fit-for-purpose regulatory framework. That is the essence of the early part of the Bill.

I think that I can reassure the hon. Member for Northampton, South that although there is an interesting debate about whether we have chosen the right technology for our demonstration project of post-combustion—my story there is about its applicability to China, given the imperative of tackling global warming—this framework would be fit for purpose for whatever technologies arise in the future. These clauses are not part of the post-combustion scenario; they are about a wider scenario.

Clause 2

Malcolm Wicks (Labour, Croydon North)

I recognise that in the absence of many amendments this morning—it is a great tribute to the drafters of the Bill that it is near perfect, although we will see whether Committee members agree with that—I will detain the Committee with a number of relatively short speeches on clause stand part. However, it is important to get certain points on the record and, of course, to enable Committee members to participate in debates about particular clauses. This will be one of the slightly longer speeches, because I want to set out the context that the hon. Member for Northavon was anxious to hear.

I have touched on this point already. The context is that we in the UK have been fortunate for some time in being able to rely on natural resources for much of our energy consumption. As I have noted, however, gas production from the UK continental shelf—the UKCS—and particularly from the North sea is in decline. The story of the North sea is in two parts, both of which are important. One is that the UKCS remains a very important business in the United Kingdom. There is still a great deal of energy there. Indeed, I am reliably informed that two thirds of our energy need and demand in Britain is still met by the UKCS, so it is still very significant, but it is in decline at probably the rate of about 8 per cent. at the moment. The decline is therefore significant. Both things are true: it remains important, but it is in decline. That is part of the context for our discussion.

We started to import gas relatively recently because of the decline that I have mentioned. We are perhaps importing 20 per cent. or so of our gas requirement at the moment, but by 2020 that could be up to 80 per cent. A more cautious estimate would be between 50 and 80 per cent., but the Committee will see that the change is significant and relatively rapid. That greater reliance on imports poses some risk to the United Kingdom from overseas disruptions to energy supplies, as supply routes become longer and as they cross ever more countries to enter the UK’s energy system.

To minimise the risk of disruption or of soaring prices at times of high demand, we need to ensure that we have sufficient levels of gas importation and enough storage facilities. Some will remember that only two winters ago the spot price for gas rose on some days to a considerable height. We have less storage capacity than our continental neighbours, but as I said earlier that is because our store is the UKCS itself. However, it is worth noting that things are now changing.

The clauses in chapter 2 seek to address the problem by creating a regulatory framework to encourage investment in infrastructure that will allow the storage of gas offshore and enable liquefied natural gas imported into the UK to be unloaded to offshore installations or pipelines in order to be piped ashore. The Committee will know that LNG will become a significantly important part of global gas supplies. Almost certainly, it will become an increasingly important part of supply to the United Kingdom, not least with the Qatari LNG about to come on stream.

We know that there is potentially some £10 billion of private sector investment to be made in such projects, but investors have told us that they need a regulatory regime for such investment that will offer clarity and certainty. This part of the Bill will provide for such a regime through the establishment of gas unloading and storage licences. The Bill provides the powers to create a bespoke regulatory regime for the unloading of LNG and natural gas storage projects under the sea bed. Clauses 2 to 6 cover the licensing arrangements for such unloading and storage projects, and clauses 7 to 14 cover the enforcement of those licences.

Clause 2 underpins the new regime by prohibiting gas storage or unloading without a licence, gas being defined in terms of the combustible gases such as methane used for energy production. That prohibition also covers the recovery of the gas stored, the conversion of natural features such as salt domes for use as storage space and related exploration activities, as well as the establishment and maintenance of installations for those purposes. The prohibition applies in any place within the limits of the territorial sea adjacent to the UK or within a gas importation and storage zone designated under clause 1, which could extend up to 188 miles beyond the seaward boundaries of the territorial sea.

On a point of clarification, I should add that clause 2 applies to operators that carry on storage activities, but the provisions do not apply to the shipper or owner of the gas. Those persons that provide the gas to the operators of the storage facilities will therefore not require a gas unloading and storage licence. Anyone undertaking such activities without a licence will be subject to the criminal sanctions set out in clause 7.

Establishing an offence for non-compliance will help to ensure that developers seek the necessary licence before undertaking any such activity. That will enable us to keep track of all projects and to ensure that appropriate safeguards, such as environmental protections, are in place and adhered to.

Hugo Swire (Conservative, East Devon)

On that point about environmental protection, I want to tease out from the Minister what discussions he has had with the marine environmental lobby. For instance, my part of the world is an area of outstanding natural beauty and a world heritage site, where the marine environment is extremely sensitive. What consideration will be given to that?

Malcolm Wicks (Labour, Croydon North)

Again, I thank the hon. Gentleman for notice of that question. We are fully aware of the environmental considerations, and I may say a little more about the subject later. However, just as in existing regimes for the exploration of oil and gas, environmental considerations are paramount. We are confident that through these provisions we can satisfy the hon. Gentleman. I am bound to say that all our constituencies are areas of outstanding natural beauty, and that is certainly true of Croydon, North.

Albert Owen (Labour, Ynys Môn)

Will the Minister assure the Committee that these provisions will not impact on the role of the local planning committees with regard to their environmental impact studies?

Malcolm Wicks (Labour, Croydon North)

The short answer to that is no, but there will be an opportunity during the course of this debate to give a more specific answer to my hon. Friend .

Stephen Ladyman (Labour, South Thanet)

I give the Minister advance notice of my question now so that he can answer it later. How does this measure interact with the habitats directive? Will the licences be issued irrespective of one’s responsibilities to the habitats directive, with those responsibilities being met later? Or will the person applying for the licence have to fulfil the obligations of the habitats directive before applying for the licence? As I say, I am quite happy if the Minister answers that question later.

Malcolm Wicks (Labour, Croydon North)

If I may, I will answer that question in full later. The short answer is that we are fully joined up. Let us give an example of how we intend to tackle this. Concerns exist, for example, about the situation for whales and dolphins. Before awarding any licence or consent, the Department for Business, Enterprise and Regulatory Reform will conduct an appropriate assessment of the site, in line with the requirements of the habitats and wild birds directives. Should a licence or consent be deemed to have a negative impact on a protected habitat, such as the one for whales and dolphins, the licence or consent will not be awarded. For example, we have not issued licences for oil and gas exploration in Cardigan bay recently because we were concerned about the situation of the dolphins there. I hope that that reassures my hon. Friend about our good intentions and our commitment to ensure that we have the appropriate legislation and regulation.

Stephen Ladyman (Labour, South Thanet)

I am very grateful to the Minister for that reassuring answer. The one concern I have relates to his point of view and that of his Department. He seems to be describing a process in which officials in his Department have to be expert not just on energy matters but on environmental matters in order to judge whether to issue a licence. I wonder whether that is to expect too much of his Department.

Malcolm Wicks (Labour, Croydon North)

I do not want my hon. Friend to expect too much of my Department, but he can expect a great deal. Obviously, this is a situation in which we have to join up with relevant agencies, and with the Department for Environment, Food and Rural Affairs in particular. I note his concern, and I will say more about that in due course.

My instincts about local planning were correct. I am sure that during the course of Committee procedures in the past, my instincts have been incorrect, but I have always corrected myself later. I am being modest about this. In terms of local planning, the answer is that this regime purely applies offshore. I hope that that satisfies my hon. Friend.

We recognise that with the advent of the single electricity market across Ireland, there are increasingly different considerations to take into account in Northern Ireland to the proposals that might come forward in the rest of the United Kingdom. To reflect those differences, I believe that it will be prudent for my Department and the Department of Enterprise, Trade and Investment in Northern Ireland to pursue a formal memorandum of understanding, setting out how we would work with the relevant authorities in Northern Ireland before granting any consents for gas infrastructure projects in Northern Ireland territorial waters. With those words, I move that this clause stand part of the Bill.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for pointing out with such clarity the stark picture that is facing us on these issues. Some of us will have felt that his judgment was slightly impaired when he referred to Croydon as an area of outstanding natural beauty. I thought that most of us would assume that the nicest thing in Croydon is the A22, which leads to my constituency. However, this may have to be one of those areas of difference where we simply will not be able to find common ground and agree.

The Minister is also right to say that we could be dependent on imports for 80 per cent. of our gas by 2020. In the explanatory notes, it says that more than half of our demand for gas may be met by imports by 2020. However, the Minister is absolutely right to give a much starker assessment of the situation. Looking at his Department’s figures, our current consumption of gas is about 105 billion cu m a year. By 2010, that figure is expected to rise to 110 billion cu m a year and by 2020 it is expected to rise to 130 billion cu m a year. By 2010, half of our demand will be met by imports and by 2020, 80 per cent. of our demand will be met by imports.

So there is a very significant challenge facing us. It is not just us who face it; the issue of gas demand applies across the whole world. It is estimated that in 20 years’ time, there will be a 300 GW energy gap in the European Union alone. Just because people choose to build power stations that are powered by gas, that does not mean that there will be the gas available to power them.

The Government are rightly now addressing the issue of gas storage. In the past, I do not think that they have done enough in this regard. The Minister will remember his words when he said, just about two years ago, that we were “awash with gas”, which was about 24 hours before we nearly ran out of gas; I think that was the timing of his comment. Of Mary I, it was said that if they opened her up they would find “Calais” written on her heart; when the time comes for the Minister to be opened up, which we obviously hope is a long way off, we will find the words “awash with gas” written on his heart. It is better than having “full of wind” written there, but the phrase “awash with gas” did not quite capture the spirit of the problem at that time.

The fact is that, at the moment, we have about 12 days of average winter gas usage storage in this country. That compares with 80 days in France, Spain and Germany, where they are required by law to have far higher amounts of gas storage than we are required to have in this country.

Gas storage is an area in which we need to do much more. The Minister quite rightly points out the improvements that are happening in LNG and the pipeline connections that we have, which certainly add to our country’s energy security. However, he is absolutely right to say that more needs to be done to open up the potential for that £10 billion worth of investment in gas storage facilities. The industry has said to us that it wants a much clearer regulatory regime and, judging from its reactions to the Bill, it seems that the proposals that are being put forward are just about right.

We also need to be clear about the security of our gas imports. People can very readily get worked up about Russian gas imports, but I think that we must be sensible about that issue. There is wonderful imagery of the Russians being able to turn off a tap and just stop the gas flow coming through to countries such as Britain. We have a duty to explain to people that that is not the way that the system works. We must make it clear that, as a company, Gazprom has honoured every trading contract that it has had. Where the difficulties have arisen in Belarus and in Ukraine, those difficulties have been caused by very different issues, where gas sold cheaply for domestic consumption has been sold on at a much higher market price. I hope that we can try to reassure people that we do not face a threat from Russia on these issues. However, it is still right to take these steps of improving gas storage.

Jamie Reed (Labour, Copeland)

I recently attended a conference on energy and climate change in Ukraine, where representatives of the Belarusian and Ukrainian political parties were present, in addition to Gazprom. Among the Belarusians and the Ukrainians, the fear is a very real one that the Russians will arbitrarily turn off their gas at a whim.

Charles Hendry (Conservative, Wealden)

The hon. Gentleman is absolutely right that, in those countries, there is that fear. However, it is very interesting to see how the British press and the German press have interpreted this story. Here, we have tended to say, “Look what Russia has done. How scary! That could happen here.” The German press have focused on the comments of the President of Ukraine, who says that Ukraine must look at its contracts and see if it has paid its bills, because that was the reason why Ukraine was disconnected. I think that, in this country, there is a bit of hysteria about this issue.

Nevertheless, if we want to reassure people, it is absolutely right that more gas storage will be an integral part of any energy solution, because the more gas that is stored on land or at sea here, the more we can increase the number of days of provision that we have and that will make it easier for people to feel secure in the long term.

I agree with the Minister that the current system of consents is too complicated and that there is great sense in simplifying it. What would happen if there was more than one licence sort for the same patch of sea? It is possible that there would be two potential storage areas, one beneath the other. About a year ago, I went with a parliamentary group to Texas and we saw what BP is doing in the gulf of Mexico. It is looking for and is able to identify oil and gas reserves under 10,000 ft of water and 20,000 ft of rock, and it can pinpoint those reserves with incredible accuracy. If one is now looking for oil and gas at those depths, it is plausible that one will find two potential reserves: one above the other. How does the licence relate to depths as well as to geographic area? What will the proposals mean for combined gas and wind projects? The Minister may be aware of Eclipse Energy’s project off the north-west coast; the intention is that when the wind is blowing, power will be provided by wind turbines and when it is not, the project will draw the gas from a largely depleted gas field. That seems to be a good balance, because one uses the wind when one can but one ensures security of supply as there is a gas back-up. In those circumstances, is it conceivable that what was previously a gas field would be designated as gas storage because of the way that it was being used? What would be the implications for those sort of projects? In general, we support the clause and, with those clarifications, we are happy to take it forward.

Martin Horwood (Liberal Democrat, Cheltenham)

Mrs. Humble, it is a delight to be serving under your chairmanship again and I am looking forward to a co-operative approach from the Committee, with a lot of free exchange of ideas between both sides. However, to sound a slightly partisan note to start with, my constituency really does contain an area of outstanding natural beauty; the Cotswolds might beat Croydon on a good day. We have already had an insight into the psychology of Conservative Members on this subject; I had not realised that when they were talking about withdrawing from Europe, they were still talking about the loss of Calais. Perhaps that is an unfair point.

Returning to the subject of the clause, which is the licensing regime, clearly the purpose, as the Minister said, is to provide a suitable basis on which to have security of gas supply and to provide certainty and stability to energy retailers. One hopes that that stability will translate into stability of prices for consumers, which is a hot topic at the moment because of the sharp rises in energy prices that consumers have been suffering from. Instability and energy prices for the energy companies can sometimes translate into very large profits, as we have seen in the news today. Have the Government given any consideration to ways of recovering perhaps some of the cost of this licensing regime? The impact assessment puts the cost at a high level, but the licence price suggested in the impact assessment is only about £3,000. Will there be any scope for trying to recover, from the very high profits that energy companies make from time to time, any of the taxpayers’ costs? Recovered costs could then be directed at measures to tackle fuel poverty and might offset some of the impact of variable energy prices. Perhaps the Minister can address that.

The impact assessment also suggests two particular risks associated with a new licensing regime. Paragraph 66 on page 58 says:

“There is a risk that the time taken to bring the new licensing scheme into effect will act as a disincentive to developers in the short term.”

Are there any steps that the Government can take to minimise that disincentive and to make it clear to developers that they should not be discouraged at this vital time in the development of the technology? There is also concern in the impact assessment that:

“The licensing scheme will need to be sufficiently widely drafted so as to capture the range of innovative new technologies which are being developed in this sector.”

Having looked at the clauses, I cannot see anything that addresses the issue in the legislation. Will the Minister tell us that there will be a conscious effort to avoid closing off any particular technological avenues or innovation, and that the licensing regime will not be implemented too tightly?

Malcolm Wicks (Labour, Croydon North)

This has been a useful debate on a number of quite important issues. I suspect that from time to time, perhaps with your support, Mrs. Humble, I have been a rather tedious member of the Committee who sticks to the Bill. The contextual issues are very interesting and the hon. Member for Wealden, helped us with the context by emphasising the changing nature and growing importance of imports of gas into the United Kingdom. Certainly those will be considerable in the future.

My judgment is that, as the century unfolds, the geopolitical issues relating to energy insecurities globally will become almost as significant on immediate agendas as climate change. I do not feel entirely relaxed about some of the questions in that regard, but we must pursue those issues on another occasion. It is certainly important that, alongside the UK developing what I always refer to rather simply as “home-grown energy”—energy that we can produce ourselves, here and offshore—we are smart about pipelines and regions and the importance of LNG. In terms of our national security, that is very important.

I had better not say too much about the phrase “awash with gas”, but on the occasion referred to, a debate was going on about whether the lights were going to go out. I cannot remember who was the leading proponent of that idea at the time. Others of us said, “No, the lights are going to stay on,” and on the particular day when I said to the House of Commons that we were awash with gas, that was the advice that I had received from national grid. That turned out to be the case, but I hope that that rather inelegant phrase will not be written across any part of me on any occasion, either now or in the long-term future.

Several issues have been raised. In particular, it was asked whether more than one licence would be sought in relation to the same patch of sea. I am advised that the Crown Estate will consider the competition and overlapping issues for any lease. Both the licence and the Crown Estate lease will apply to a defined volume, so it can deal with the issue of depth. I think that we are all right there, but no doubt when we need to draft any regulations later, or when we are in discussion with the Crown Estate, we will bring that issue to the attention of the relevant authorities.

I was asked about potential conflicts and I agree that the project that has a wind turbine attached to it in the sea is quite intriguing. We may see more of that in the future. At present, all consents required will be given by the Secretary of State, taking into account other activities in the sea environment, including other petroleum activities and proposed wind farms. Likewise, the Bill includes an amendment to the Petroleum Act 1998 to allow gas storage developments as well as wind farms to be taken into account when consenting to petroleum activities. Such provision is already made in relation to wind farms by an amendment made by the Energy Act 2004. Those arrangements will allow the Secretary of State to ensure that the respective industries have liaised with each other with regard to a mutually agreed solution for developments, and ensure that those industries co-exist in the interests of all.

My hon. Friend the Member for South Thanet wondered whether BERR was sufficiently environmentally expert. I reiterate that our long experience as a Department in regulating offshore oil and gas means that we have become expert on environmental issues. Indeed, the Department already employs an offshore environment and decommissioning unit, which regulates the offshore oil and gas and renewables industry, in the context of sustainable development, with a raft of legislation for the protection of the environment. I reiterate that we liaise carefully with DEFRA and other appropriate agencies.

We heard from the hon. Member for Cheltenham—another very important and beautiful part of our country. I will not rise to the challenge about Croydon, North, except to say that Thornton Heath looks lovely at this time of year, if hon. Members know what I mean. I will not go on about Broadgreen, which is also particularly beautiful—I am in enough trouble making those remarks. I will not be tempted by the hon. Gentleman.

The usual answer applies, perfectly appropriately: the use of revenues must be a matter for the Chancellor of the Exchequer and not me, sadly. I think that I have more or less covered that question, but the hon. Gentleman asked another about new technologies. We are not in the business of trying to close those off. The Bill contains enabling powers to facilitate the new licensing regime to cover all types of innovative investment in gas offshore. Later on, we will come to clauses on carbon capture and storage. Part of the raison d’être of the Bill is the introduction of a new regulatory regime for the kinds of new challenges and technologies that we are now seeing.

Clause 3

Steve Webb (Liberal Democrat, Northavon)

I beg to move amendment No. 19, in clause 3, page 3, line 21, at end insert—

‘(4) (a) The Secretary of State shall consult with relevant environmental bodies, particularly in relation to marine plans, when granting licences.

(b) “environmental bodies” are defined as government departments and their agencies with particular responsibility for environmental issues.’.

John Bercow (Conservative, Buckingham)

With this it will be convenient to discuss amendment No. 20, in clause 17, page 9, line 20, at end insert—

‘(4) (a) The Secretary of State shall consult with relevant environment bodies, particularly in relation to marine plans, when granting licences.

(b) “environmental bodies” are defined as government departments and their agencies with particular responsibility for environmental issues.’.

Steve Webb (Liberal Democrat, Northavon)

We now move on to the part of the Bill that deals with the licensing process. Our amendment relates to the conditions that must be satisfied before a licence is issued. Amendment No. 19 relates to gas licences. Amendment No. 20 is identically worded and relates to carbon storage licences. It was very sensible and wise of you, Mrs. Humble, to group them together, so that we do not have the same conversation twice.

The amendments would ensure that, when the licensing arrangements for the offshore storage of natural gas and, subsequently, CO2 are made, they take full account of the environmental risks and, in particular, that they are integrated with future legislative arrangements for protecting the marine environment. What we are driving at is the fact that we have this Bill and then a marine Bill. Clause 3 talks about the regulation of the marine environment, on which will follow further legislation later this year. How will those interrelate? Should we be concerned that this Bill might not deal with things that are not then picked up in the marine Bill?

As I understand it, the marine Bill will not cover the sort of issues before us today, such as gas storage. Therefore, if we do not get that right in this Bill, it might not be done at all. That is why we tabled these two amendments, which would simply require that, before a licence is granted, the licence issuing authority should consult other Departments with an environmental interest, of which DEFRA is the most obvious. It would also be required to consult different environmental agencies, including those with responsibilities for the marine environment.

I hope that the Committee will forgive me for returning ad nauseam to my main theme, which is that energy and the environment are the responsibilities of different Departments. With the best will in the world, the incentives, interests and focus of those two Departments are not identical; they could not be. The danger is that the body that decides whether to grant a licence under the Bill will have a raft of considerations, such as safety—that consideration would be common to both Departments—and energy considerations might be given greater weight than environmental ones where there is a potential trade-off between the two. Obviously, if they go hand in hand, it is not an issue. However, if, for example, a big leap forward in energy security or supply could be achieved at some modest environmental cost, there would be a trade-off.

Without our amendment, the energy Department might be inclined to grant a licence where the environment Department might give greater weight to consideration of the environmental damage and say no. To give an imperfect analogy, we had a meeting with the Secretary of State for Business, Enterprise and Regulatory Reform about the Severn barrage—a clear case in which energy issues might point one way, but consideration of the environmental damage the other. A trade-off must be sought, and if the energy Department has the lead and has no environmental duty under the Bill, the worry is that environmental considerations might, at best, be secondary.

Stephen Ladyman (Labour, South Thanet)

I very much understand what the hon. Gentleman is saying, which is why I asked the Minister the same questions. However, my understanding is that the habitats directive already imposes on the Government the obligation to carry out consultations, so I do not understand why the hon. Gentleman wants to include such a provision in the Bill.

Steve Webb (Liberal Democrat, Northavon)

I am grateful for that and I noticed that the hon. Gentleman’s intervention was consistent with the points that I wanted to make. Many of the environmental organisations that have been in touch with us, such as the WWF and the Royal Society for the Protection of Birds, are keen to have some reassurance from the Minister on the point that the hon. Gentleman raises. They seek reassurance on not only present technologies, but novel technologies, which my hon. Friend the Member for Cheltenham mentioned. In other words, we want to be confident that there will be, for example, a full strategic environmental assessment where novel forms of extraction or storage are applied. I am not absolutely sure that such an assessment would follow from the habitats directive—I do not know enough about it to know whether that would be the case—but that is the sort of assurance that those groups seek from the Minister. Where novel extraction or storage activities are licensed under the Bill, will they be subject to a full strategic environmental assessment?

The question is whether such considerations should be dealt with as part of the licensing process at all, or whether the proposed marine management organisation, which is obviously germane to this issue, should have oversight. The worry is that the Government’s plan is that it should not. If so, we would have a Bill covering the licensing of offshore gas storage and supply, but the separate marine management organisation that is to be introduced in legislation later this year would have no duties at all. Most people would think it rather strange to create a body called the marine management organisation when that body has no remit over the extraction and storage of gas and energy in the marine environment. I hope that the Minister can clarify the relationship between that body and the licensing authority and why the marine environment organisation will not be given oversight over such issues.

Finally, I should like some clarification of spatial planning in the marine environment, to which these proposals relate. Currently, there is not a robust set of protected marine areas to guide the location of new activities at sea, but the licences that we are talking about should be granted in accordance with a strategic overview. We have heard mention of local planning authorities, and individual planning applications that were made on land would fall within a strategic plan. If the Government do not accept the amendment and if the marine management organisation does not have responsibility for such issues, we might end up with—I was about to say a gold rush, but that is not the right analogy—people making licence applications on an ad hoc basis that do not fit into an overall planning environment, as they would on land.

Our preference would be for the marine management organisation to have responsibility for environmental oversight over such issues. However, if the interest is in regulatory simplicity and in having only one body, not two, and if the marine management organisation is deemed not to be the right body, we would, at the very least, want there to be consultation of the sort envisaged in the amendments with the relevant environmental bodies before licences were granted.

Alan Whitehead (Labour, Southampton, Test)

I seek your guidance, Mrs. Humble, on whether the intention is to enter into a clause stand part debate after we have considered the amendments, or whether I should address all my remarks to the amendment. The best thing is probably to proceed and see whether you ask me to sit down.

Regardless of whether the amendments are accepted, the clause refers to not only the question of whether Departments should issue a licence for gas storage, but the fact that a licence is subject to the provisions of a Crown lease that may have been granted or may be granted subsequently. To take up the comments by the hon. Member for Northavon, there are not two partners in this enterprise but at least three. That is the extent to which the licence that is granted by the Secretary of State is subject to an entirely separate body, over and above any other considerations pertaining to DBERR, DEFRA and other Departments.

The Crown Estate is not a reactive organisation in the way that is sometimes implied by references to it; nor, in fact, is it particularly responsible to the Crown. It was split into two some while ago—I believe in the 1960s—whereby the personal possessions of the Queen went in one direction and the commercial activities that relate to those things that were relevant to the Crown went in another direction. The Crown Estate is now a separate organisation with a board of directors and managers. It is responsible, apparently—although not accountable to anybody, as far as I can see, least of all to Parliament—for the deposits of money that it makes to the Treasury, and it is subject, in theory, to an intervention notice by the Treasury if its activities go seriously off the rails.

It is interesting that no intervention notice has ever been issued by the Treasury to the Crown Estate since it was set up, and it is not clear whether the intervention notice would be compatible with, for example, policy on the charge that was decided for a licence. The possibility more than theoretically exists that, in pursuit of its wish to maximise the money that it deposits in the Treasury’s coffers, the Crown Estate could take a view on the issuing of a licence that would be completely incompatible with the aims of providing a licence, given the idea that, for national strategic purposes, a licence might be granted for gas storage. It is also more than theoretically possible that, under those circumstances, the Crown Estate could simply refuse a licence or put such conditions on it that totally negated the intent of the licence that was issued by the Department.

Those may be regarded as fairly arcane considerations. I accept that members of the Committee are looking at me as though they were rather arcane. [Hon. Members:“No, no.”] Nevertheless, they are important, because, as far as I can see, the clause contains no leverage whatsoever that the Department that issues the licence can use on the next procedure to make the licence real. I may not have understood the process properly, or it may be that the procedures that have been followed over so many years give reliability to a process that, theoretically, is not perfect. Nevertheless, that is how matters stand as far as the Crown Estate is concerned, and I would value the thoughts of my hon. Friend the Minister on whether the arrangements that I have described are sufficient and reliable enough to ensure that the clause has the effect that I am sure we all want it to have.

John Bercow (Conservative, Buckingham)

Before calling the next speaker, I advise Members that I would not anticipate a separate stand part debate, given that clause 3 is narrowly phrased and the discussion so far on the amendment has been wide-ranging. If Members wish to address the clause in addressing the amendment, this is their opportunity to do so.

Martin Horwood (Liberal Democrat, Cheltenham)

Thank you, Mrs. Humble. I think that I will be on that procedural territory.

It is always a pleasure to follow the hon. Member for Southampton, Test with whom I often find myself in agreement. He often points out problems in policy that the rest of us have not spotted. He has outdone himself on this one.

The issue that I want to raise is one that was mentioned in passing by my hon. Friend a minute ago. It is about the tension that is reflected in this clause as to whether this is a natural area of responsibility for DBERR or DEFRA. Do we see this as principally a business activity and, therefore, naturally in the domain of DBERR or is it about the disposal of a toxic substance? That question involves an important principle. Surely, one of the main purposes of energy policy should be to reduce the production of CO2 and not to accept it as a natural part of the energy process. We ought to be thinking of the disposal of CO2 as analogous to landfill.

The operation of a landfill site can be a profitable business activity, but it is not something that we would want to encourage, or see as a long-term growth activity. Such an operation is clearly the responsibility of DEFRA. If one was a conspiracy theorist, one might see something slightly suspicious in the relative timings of this Bill, the Planning Bill and the marine Bill. The latter Bill had widespread support when it was proposed some years ago, but it has not yet made it to the House. Now it is being pre-empted by this Bill in an important respect that is highlighted in my hon. Friend’s amendment. The marine management organisation may well have some of its anticipated responsibilities removed from it before it has even been set up, which must be some kind of a record.

Perhaps the Minister could reassure the Committee that such a conspiracy theory is not well founded and that there has been adequate consultation on the issue of the responsibilities of the marine management organisation and that he has had discussions with DEFRA on this. Perhaps, also, he could tell us what conversations his Bill team in DBERR have had with the Bill team working on the marine Bill in DEFRA.

Paddy Tipping (Labour, Sherwood)

This is an important discussion on a matter of principle. How can we have development while at the same time protecting the natural environment? How do we balance the two? These are important amendments, particularly, as the hon. Member for Northavon has said, with the introduction of long-anticipated legislation on the marine environment.

I say to the hon. Member for Cheltenham that I do not think that there is any conspiracy here at all. He is right to say that there has been a long gestation period for the marine Bill. It is a difficult issue. Let me remind him that the Bill appeared in Labour’s last manifesto; it has not been forgotten. A White Paper was published last March and I anticipate that the draft Bill will be published in April. We will have to wait and see what is in the draft Bill. Clearly, it will bring forward an enhanced series of marine protected areas and, for the first time, it will introduce the notion of marine spatial strategy. As has already been said, there is the notion of a marine management organisation. There needs to be considerable discussion about the powers of such an organisation and we shall have to wait to see what is in the draft Bill. Clearly, it is not possible now to table amendments on a Bill that is not yet in existence, but there is a point of discussion here.

Martin Horwood (Liberal Democrat, Cheltenham)

The hon. Gentleman raises an extremely important point with which I agree. I accept that we cannot know the content of the marine Bill until it is published, but does he expect the marine spatial strategies that are envisaged to encompass gas storage agreements of the sort that we are discussing today?

Paddy Tipping (Labour, Sherwood)

I am not in the position to answer that question, because I have not seen the draft Bill. However, having followed such matters closely for a long time, I know that there have been substantive discussions between DEFRA and DBERR. My hon. Friend the Member for South Thanet will remind us that the Department for Transport has been involved fundamentally in the preparation of this Bill. It is a difficult issue, but the essential point made in Committee today is that, whatever the powers under the Bill, they must link clearly to the future attraction—an attraction that we have had a trailer about, but we do not yet know what is in the film. I look forward to the Minister’s response to that point because I anticipate that the marine Bill may be highlighted in the next Queen’s Speech, and the Bill now under discussion must be in sync with larger legislation on the marine environment.

I wish to pursue briefly the arcane point made by my hon. Friend the Member for Southampton, Test. Those of us who have had dealings with the Crown Estate know that it is an arcane body; it is unique. My hon. Friend referred to having leverage on the Crown Estate, but I do not know how we can have any leverage on it at all. I look forward to hearing what the Minister says about the role of the Crown Estate. It chooses to maximise profit and income from the Treasury. It is in a powerful position. We need assurances that it is on board with the general policy set out in the Bill.

Brian Binley (Conservative, Northampton South)

I thank you for your guidance on clause 3, Mrs. Humble. I had my doubts about certain points, and you have clarified the position for me.

I wish to set my remarks about climate change against the issue of China and India because carbon storage impacts particularly on that debate. If we go ahead in Europe alone, the cost throughout the next 20 or 30 years will be enormous to European industry and the only way in which we can take a proper approach to climate change is to ensure that we have a global agreement with both China and India. The whole matter of gas storage impacts on that particular area.

The Bill provides a dual lease and permit system of licensing, which adds sizeably in the minds of the industry to the bureaucracy of licensing, regulation and inspection. It is concerned about adding to cost, for example, at a time when cost is in the early days and very much an investment that is reliant on income at a later date. A licensing exercise will be more expensive because of its dual purpose. The lease part of the process is related to the Crown Estate and, as the hon. Member for Sherwood said, there is much worry about control and the ability to understand the machination in that regard.

Later in the Bill, particularly under clause 12(3), reference is made to the regulatory and inspection powers. It suggests that they will be lodged with another body. That will make the matter of licensing and regulation particularly difficult for an industry that is in the relative early stages of development and needs all the help it can get.

My real plea is to ask the Minister whether we can reconsider the whole matter. I know we cannot do so in this Bill, but there will be later opportunities. Indeed, we could bring the whole of licensing, inspection and all the regulatory matters under the control of a central body rather than splitting it between the two bodies, as suggested by the Bill.

John Robertson (Labour, Glasgow North West)

I, too, welcome you to the Chair, Mrs Humble. Could I follow on from the hon. Member for Northampton, South on the question of licensing in general? Although, it will crop up in various places in the Bill, it is important to raise the issue now. At our third sitting I asked Mr. Paul Dymond, the director of operations of Oil and Gas, about licensing. He said:

“There are a number of parts in the Bill asking to tighten up certain pieces. Licensing has been going on since 1964, and there are hundreds of licences. Within each licence, there are tens of part-licences, so the licensing process today is exceedingly complex

When I asked him whether he thought it was more or less complicated, he replied:

“Because the process has been going on for so long, companies have commercial and legal mechanisms to cover this for themselves. What is really important is that some of the new powers that the Secretary of State will have as a result of the Energy Bill do not work against, but with those mechanisms that are there.”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 105, Q205-6.]

I am not concerned about costs, because I think that these companies can afford a few bob or two. I will not worry about how much it costs them to get the licences and how many people they employ. But if there is one thing that has been a feature of many Bills over the time of this Government, it is that we try to streamline bureaucracy. I ask the Minister to take a look at this and see whether we can do that here. Although we must ensure that security and safety are paramount in everything we do, if we introduce more hurdles for people to get over, sometimes the process just becomes too cumbersome. At the end of the day, the only people who make any money are the lawyers.

Charles Hendry (Conservative, Wealden)

This has been a useful and well informed debate and we are all indebted to the hon. Member for Southampton, Test for the knowledge that he has brought to some of these considerations. We all agree that this should not simply be a matter of transferring environmental damage from one aspect of the energy process to another in an attempt to reduce CO2 emissions. Doing massive damage to our marine environment in the process is not an appropriate response to the issue.

We have to go into the whole CCS debate with our eyes open and understand the consequences. It is easy at the moment for it to be seen as the panacea for all our ills that will enable us to go on burning fossil fuels for all time to come. People have not yet fully understood how it might work and what the consequences might be. But I should be interested if the Minister could take this debate a little further and look at the legal responsibilities of where liability lies in these matters, particularly in relation to things like statutory nuisance.

It is quite possible that if one of these installations was put in place, it would be deemed to be a statutory nuisance to fishermen or to shipping lanes. Who then has responsibility? Clearly there is the operator, who is in charge and who owns the installation, but he has a lease from the Crown Estate. So does the Crown Estate also have some of the legal duties for statutory nuisance? But it is operating under licences partly from DBERR and partly from DEFRA, so do they have any legal responsibility for statutory nuisance in these areas?

We need some clarity here and not just in relation to such activities, but in relation to a whole load of others too. Offshore turbines are in a different part of the Bill, but the same issue will apply if they have a licence from the Crown Estate and it is deemed that they are making a statutory nuisance by obstructing other people’s legitimate right to go about their business. Who will be responsible for that?

I have a couple more general questions, which I should be grateful if the Minister could answer. Who will be responsible for assessing the geological safety of the proposed storage area? Will it be officials from his own Department, the inspectors who are referred to in a subsequent clause and who will carry out subsequent assessments? We all know that the terrain of the Earth changes gradually over time in certain areas, so who will be responsible for making sure that, in decades to come, they are still satisfied about the geological safety of the areas that are being proposed for these activities?

Albert Owen (Labour, Ynys Môn)

I want to bring a Welsh dimension to this issue. We heard in the discussions on the amendments talk about environment groups and agencies but, in Wales, the statutory consultee is the Welsh Assembly Government. I know from my experience—and my constituency is surrounded by sea so the issue affects me considerably—that with some applications in the past, we had the old Department of Trade and Industry giving licences, using the Welsh Assembly Government as a consultee. However, they had certain responsibilities themselves and there was often duplication and delay because both bodies were involved.

Now we have the move to liquefied natural gas, and I prompt the Minister on this point because there is a proposal in my constituency, or off my constituency, for the unloading of LNG. I want to know whether the Welsh Assembly Government have responsibility for that because of the short distances involved. The planning authorities are responsible for what happens ashore, the Department for Business, Enterprise and Regulatory Reform is responsible for what happens off the territorial waters, but who is responsible for what takes place a short distance offshore and not on land, but not outside territorial waters? Do the Welsh Assembly Government have responsibility for this? Would he deal with that question in his winding up?

Malcolm Wicks (Labour, Croydon North)

This has been a useful discussion, including the question of who is responsible for longer-term geological monitoring, and I hope to have an answer to that before too long.

Let me just set the scene on this clause by saying that clause 3 empowers the Secretary of State to grant licences for the purposes of offshore gas storage or unloading and related activities. The licences will contain a number of terms and conditions, details of which will be decided following consultation. Perhaps we can leave the details of such terms and conditions until we move on to clause 5.

Because the exclusive rights to exploit the sea, the sea bed or spaces under the sea bed for these purposes will be vested in the Crown under clause 1, an operator will in addition have to obtain lease or authorisation from the Crown Estate. Subsection (2) therefore makes provision for the geographical co-ordinates covered by the gas storage licence to be linked to those covered by the lease or authorisation from the Crown Estate. This is a sensible arrangement as both are required before any activity can take place and it will reduce bureaucracy for both the licensing authority, in this case the Secretary of State, and the operator.

We hope to convince the mover of the amendment that it is unnecessary, but that is for him to judge. However, it is a useful and important amendment and has led to an important discussion. The hon. Member for Northavon has raised the important point of the interaction of environmental regulators when granting licences for offshore gas storage and carbon dioxide storage activities. There is also the important theme of the advent of marine spatial planning and the marine Bill, to which I will return, although hon. Members will understand that until we have a marine Act, some of the specifics cannot be decided.

Through this amendment, hon. Members are seeking to introduce a requirement that before issuing offshore gas unloading and storage or carbon dioxide storage licences, the Secretary of State shall consult with relevant environmental bodies, particularly in relation to marine plans, when granting the licences. One key aspect of the provisions in the Bill is the protection of the environment. We have therefore ensured the regulatory framework for offshore gas unloading and storage and carbon dioxide storage builds on existing environmental legislation. There already exists a tried-and-tested environmental regime for the oil and gas industries in the North sea and this is set out in a number of pieces of legislation. I assure hon. Members that it is because we take these issues so seriously that we will also provide for legislation to cover offshore gas unloading and storage and carbon dioxide storage activities. That will ensure that proposals for installations of that type are subject to appropriate controls to protect the environment. Where necessary, environmental approvals granted in respect of a project would also contain conditions to protect the environment. We will extend the requirements of EU environmental laws to the offshore gas unloading and storage, and carbon dioxide storage, regimes.

The relevant environmental protection laws provide for and, indeed, require consultation with the relevant environmental bodies, such as Departments and their agencies that have a particular responsibility for the environment. The hon. Member for Northavon may find it helpful if I explain some of the environmental protections that will be in place once the regime is implemented. Those obviously cannot be specified in the Bill.

First, under legislation implementing the environmental impact assessment directive, certain aspects of any offshore gas unloading and storage of CO2 will require an environmental impact statement. I hope that that reassures the hon. Gentleman in that respect. The environmental impact assessment will be undertaken by the potential developer and assessed by the Secretary of State or, in the case of CO2 storage, the relevant licensing authority. The assessment will determine the extent of any potential impact of the proposal on the environment, and, where necessary, will propose options for minimising such impacts. By virtue of the public participation directive, the public will be able to participate in and be consulted on any proposal.

Where necessary, an appropriate assessment will also be undertaken under the habitats directive. That will determine whether the proposals would have any adverse effect on the integrity of Natura 2000 sites. I do not think that there are any of those in my constituency, but I am sure that Opposition Members have them in their constituencies.

I shall speak briefly to the specific point about marine plans. As hon. Members will know, the concept of marine spatial planning is one that the Government are considering in the context of the draft marine Bill that we expect to publish later this year—as it says here, more cautiously than my hon. Friend the Member for South Thanet: I shall give him more lines to take in the future.

We expect that once the marine management organisation is established, the Secretary of State will work closely with the organisation in considering the potential for offshore gas unloading and storage and carbon dioxide storage projects in UK waters. That will replicate the existing relationship between the Secretary of State and the Marine Fisheries Agency in the context of existing oil and gas licensing rounds. There is already a good deal of experience of the need for such consultation and collaboration.

I appreciate the commendable intention of the amendment, but I consider that because of the existing environmental protections that I have just outlined, it is unnecessary. In my view, the relevant matters should be dealt with under existing environmental laws; they can and will be amended as appropriate.

Martin Horwood (Liberal Democrat, Cheltenham)

Perhaps I should just briefly share some of the thought processes behind the drafting of the amendment, which refers to environmental organisations in general. Of course, the reason it had to do so was that the maritime management organisation does not yet exist. It was the maritime spatial aspect of the matter that particularly concerned us.

The Minister has given a reassuring indication of the direction of policy, but surely the Government are the Government and they must know whether the maritime management organisation will be a statutory part of the process in due course. If the Bills had been presented to Parliament the other way round, that matter would have been sorted out. Surely the mere timing of the Bills does not mean that the Government do not know the answer to that question. Will the Minister give an absolute assurance that the organisation will be part of the statutory process?

Malcolm Wicks (Labour, Croydon North)

For reasons that my hon. Friend the Member for South Thanet outlined, one cannot be as specific as the hon. Gentleman wishes, because the question of what the marine Act will look like at the end of the day is subject to the will of Parliament. The hon. Gentleman surely understands that discussions are already going on, and will continue, about the precise and important arrangements that need to be made.

As I have said, in relation to offshore oil and gas, agreement has been reached with the Department for Environment, Food and Rural Affairs that that is a reserved matter, and that therefore the Department for Business, Enterprise and Regulatory Reform should be the licensing authority. Perhaps I did not say that earlier, but it shows that we are already discussing in my Department the interaction of oil and gas with marine spatial planning.

Sir David Amess (Conservative, Southend West)

I remind the Committee that with this we are taking amendment No. 20, in clause 17, page 9, line 20, at end insert—

‘(4) (a) The Secretary of State shall consult with relevant environment bodies, particularly in relation to marine plans, when granting licences.

(b) “environmental bodies” are defined as government departments and their agencies with particular responsibility for environmental issues.’.

I understand that Mrs. Humble said that in view of the wide range of the debate on these amendments, she was not inclined to permit a debate on clause stand part. I do not intend to depart from her guidance—coward’s way out.

Malcolm Wicks (Labour, Croydon North)

Thank you, Mr. Amess. I welcome you to the Chair for the business part of our Committee. Before the Committee adjourned, I was saying that I appreciate the commendable intention behind the amendments but, because of the existing environmental protections that I outlined, I consider them unnecessary. In my view, these matters should be dealt with under existing environmental laws. Those can and will be amended as necessary to ensure that we continue to have a robust regime that ensures that relevant controls are in place.

In summary, any approvals granted for an offshore gas or carbon dioxide storage project will contain conditions, where necessary, to protect the environment. In granting any approvals, the Secretary of State will have had to consult the relevant environmental bodies. I should make it clear that in our role as the licensing authority for petroleum extraction, we have been considering such environmental issues for many years and have built up considerable expertise, which will be applied to the new regimes under the Bill.

I hope that I have provided some reassurance to hon. Members that the environment is being, and will continue to be, adequately protected, which of course we are very keen to see. I therefore hope that the hon. Member for Northavon will withdraw the amendment.

A number of issues were raised about the marine environment, and understandably and usefully so, given policy developments in that area. The hon. Member for Northavon asked in particular about the interaction between this Bill and the proposed marine Bill. We have already had some dialogue on that matter involving my hon. Friend the Member for Sherwood as well. The marine Bill will not change the current licensing arrangements in respect of offshore methane gas storage, as those will remain with my Department.

As I mentioned, my Department has a large, dedicated offshore environment and decommissioning unit, which includes a specific inspectorate. The unit regulates the offshore oil and gas and renewables industries, in the context of sustainable development, with a raft of legislation for the protection of the environment. Specifically, that unit liaises closely, where necessary, with the Marine Fisheries Agency, although that body is not a statutory consultee. However, as my hon. Friend the Member for Sherwood outlined, the marine Bill has not yet been published and certain matters have still to be decided. He made sensible and practical points about time scales.

The hon. Member for Northavon asked whether offshore gas storage would be subject to the requirements of the strategic environmental assessment process. I can assure him that that has been scoped into the next strategic environmental assessment, which is due to commence this year.

Several hon. Members raised issues relating to the Crown Estate. The hon. Member for Wealden asked whether the Crown Estate had any role in statutory nuisance issues. To the extent that statutory and common nuisance apply to CO2 storage activities offshore, either the operator or the Crown Estate could be liable. That would depend on the specific circumstances in which the nuisance occurred. It would be up to the Crown Estate to indemnify itself against any potential liability in the lease or authorisation that it would grant to the operators.

The hon. Member for Northampton, South asked whether the need for a Crown Estate lease and a licence from the Department for Business, Enterprise and Regulatory Reform would place an undue burden on developers. We do not believe that to be the case: the creation of a new tailor-made licensing regime has been welcomed by the industry. The system that we are putting in place is analogous to the onshore area where a developer would need to seek agreement with the landowner for the site development, as well as consents under the Town and Country Planning Act 1990. That is the right approach.

My hon. Friend the Member for Southampton, Test expressed concerns about the Crown Estate’s position to insist on unreasonable lease terms. The Crown Estate is under a statutory obligation not to exploit its monopoly position under the Crown Estate Act 1961. The Crown Estate has extensive experience of administering offshore rights, and it is working effectively in relation to offshore renewable energy zones.

My hon. Friend the Member for Glasgow, North-West sought an assurance that the licensing process would not result in unnecessary delays. We will be consulting industry on the application process to ensure that it is as smooth as possible. However, we mentioned earlier in our debate that environmental considerations will need to be taken into account to ensure that we comply with environmental legislation before issuing licences.

I feel that, both this morning and this afternoon, we have had a reasonable dialogue on the subject. In view of my reassurances, I wonder whether the hon. Member for Northavon, who initiated an important and significant debate, would nevertheless—

Albert Owen (Labour, Ynys Môn)

I was a little late arriving and I wonder whether the Minister has had the opportunity to look into the question of whether the Welsh Assembly Government will be a statutory consultee or whether it will be able to make its own legislation.

Malcolm Wicks (Labour, Croydon North)

I apologise to my hon. Friend for not covering that point. Would he be happy for me to cover it later or, if necessary, in writing? I can see the importance of the matter.

Charles Hendry (Conservative, Wealden)

I asked the Minister who would be responsible for assessing the geological safety of the proposed storage areas and who would carry out subsequent assessments. I wonder whether he has had a chance to consider the matter and whether this would be an appropriate moment to respond to those questions.

Malcolm Wicks (Labour, Croydon North)

I remember the hon. Gentleman raising those matters, and I apologise for not covering the point. Again, I shall respond either later or in writing. Of course, it is vital territory. Our inspectorate will receive training to cope with the new technologies. Technical assistance will always be available to undertake monitoring, but I shall be able to say more about that in due course.

I was about to ask the hon. Member for Northavon whether, in the light of my assurances, he might consider withdrawing his useful amendment.

Steve Webb (Liberal Democrat, Northavon)

The Minister never fails to charm me. He gave a helpful and constructive response, but one or two issues remain outstanding, some of which were raised by other hon. Members. For instance, the hon. Member for Southampton, Test raised the issue of Crown Estate; the Minister’s reply seemed to be that they are basically good guys and it has not been a problem so far—I paraphrase only slightly. There is a lack of accountability under the clause, and I am not wholly reassured on the point.

The central point, about timing, was raised in exchanges between the hon. Member for Sherwood and the Minister. We do not have a marine Bill, and we do not know when we are likely to see a draft Bill. The critical point of the amendment is to deal with what in other circumstances might be called an interregnum. In other words, after the coming into force of this Bill, but before the coming into force of the marine Bill, who will do the work that the marine management organisation will be doing once it exists? It is that period about which we are particularly worried.

Once we have a marine management organisation, even though the marine Bill will probably not give it a remit over the matters that we are debating—the Minister assured us that the Department undertakes such consultation routinely—and although we might try to amend the marine Bill to that effect, can we assume that the marine management organisation will be consulted? If the organisation is adding something to the process and is not just another tier of bureaucracy—if there is some added value—where are the safeguards and reassurances to come from until it exists if we do not amend the Bill to require the granting of licences to be subject to the kind of consultation that we are talking about?

The Minister said that various EU directives already protect the marine habitat. Presumably, however, the Government think that superimposing a marine management organisation would add something. However, until it comes into being something is missing, otherwise it would not need to be invented; I mean the strategic dimension. Before we adjourned this morning, I spoke about the worry of a gold rush or a scattergun approach being taken to applications for licences. Prior to there being a marine management organisation, where will the strategic spatial planning in the marine environment come from? When thinking about granting licences, there should be consultation on those key environmental factors.

Malcolm Wicks (Labour, Croydon North)

Will the hon. Gentleman nevertheless recognise the points raised my hon. Friend the Member for Sherwood that we do not yet have a marine Act and Parliament has not yet judged it? When there is a marine Act, as I hope that there will be, my Department and the relevant agencies can begin to look at the practical specifics necessary. I have given a reassurance that we are going to work very closely with the new legislation, the Department for Environment, Food and Rural Affairs and the new marine management organisation. Meanwhile, I was trying to reassure the hon. Gentleman that we have environmental protections in place and that my Department is well versed in it, given the history since the 1960s of oil and gas exploration. I am reminded, and I may have mentioned earlier, that we are already covering these with the Marine and Fisheries Agency in advance of the creation of the MMO. We are, as ever, as joined up as we could possibly be.

Steve Webb (Liberal Democrat, Northavon)

I am grateful for that intervention. I will not labour the point, but the concern that the hon. Member for Sherwood raises about the fact that we have a gap between the passing into law of this Bill and of the marine Bill reinforces our concern; it does not undermine it. The Minister is saying that we do not have a draft Bill, we do not have a Bill and we do not know what it is going to look like, but this regime will be in force until we have a marine Bill. Our concern is about what will be the regulatory regime between now and then. The Minister seems to be saying, quite interestingly, “it’s alright, it’s all covered”. We are going to have the marine Bill anyway, which is going to either not add value, in which case it is pointless, or it is going to add some value, which will not be present in the period up to the coming supporting marine Bill.

Malcolm Wicks (Labour, Croydon North)

The hon. Gentleman will recognise that despite the wonderful Department behind me, I can only deal with what we have at present in terms of legislation. I have tried to reassure him that going forward we will make all the appropriate connections. I imagine that the hon. Gentleman might have been going on to ask me about the powers of the Welsh Assembly, following the question from the hon. Member for Ynys Môn. I would reassure the hon. Gentleman, if he asked me that question; although my Department’s licence will cover the 12 nautical miles of Welsh territorial waters, a licence will also be required from the Welsh Assembly under the Food and Environmental Protection Act 1985. That is the answer to an anticipated possible question, echoing the question from my hon. Friend.

Steve Webb (Liberal Democrat, Northavon)

I am grateful. It is great to have questions answered that I have not even asked. It could set a precedent for the rest of our deliberations. In fact, we could just wait for all our questions to be answered. I take the point from the hon. Member for Ynys Môn that the our amendment does not cover the Welsh Assembly and it probably should have done; I accept that comment.

We are worried about the period up to the coming into force of the Bill that we do not yet have. We will take on the Minister’s assurances, because we believe that the energy considerations should not be subsidiary to the environmental considerations, which is what we are pointing out through the amendment. Having received those assurances, I beg to ask leave to withdraw the amendment.

Clause 4

Malcolm Wicks (Labour, Croydon North)

On the Government side of the Committee there is probably a hackneyed new clause 4 quip, but I will not make it. The clause makes provision for the Secretary of State to make regulations under the negative procedure, which will set out who can apply for a licence, requirements that must be satisfied by or in relation to the licence applicant, how the application for a licence must be made and the information that an application must contain any accompanying documents. Additionally the regulations under the clause may require the payment of an application fee, which will be assessed in line with the Treasury’s fees and charges guidance. That is in line with our other licensing regimes such as for oil and gas licensing under the Petroleum Act 1998.

Charles Hendry (Conservative, Wealden)

It is a pleasure to serve under your chairmanship this afternoon, Mr. Amess. The Minister will be delighted to know that new clause 4 is in my name, but he will have to wait a little longer for the chance to discuss that. I imagine that it will cause the Labour party as much consternation and debate as the original clause 4.

The clause that we are discussing seems very straightforward. It sets out who may apply for a licence, what requirements must be met in relation to that, the manner in which the application should be made, the information that should accompany it, and the fee. I wonder, however, whether the Minister has also considered whether it should contain a reference to the appropriate time for which a licence should last. I imagine that there have been discussions about that in his Department. One would clearly expect licences to last for a period of years, but does he have it in mind that they should last for five, 10 or 20 years? Some guidance on that would be helpful.

Also, what about making stipulations with regard to who is responsible for the maintenance of the facility? This would seem to be a good point in the Bill at which to set those out. I should be grateful if the Minister would respond to those two points.

Martin Horwood (Liberal Democrat, Cheltenham)

It is very good to be serving under your chairmanship once again, Mr. Amess, at this clause 4 moment. Perhaps you will permit me to rephrase a question that I asked a little earlier, which is also directly relevant to the clause that we are now considering, about a risk identified in the impact assessment. That is the possibility that the time scale for introduction of the licensing regime might act, in the words of the risk assessment, as a disincentive to developers in the short term. The impact assessment also raises again the possibility that the narrowness of the licences will discourage innovation in storage technology.

Perhaps, bearing those two matters in mind, the Minister will suggest the time scale on which the licensing regime is expected to come into force, and reassure us that there will not be a slow grinding of the wheels of Government, to the point at which the industry becomes disenchanted and frustrated with the current, less adequate regime.

Malcolm Wicks (Labour, Croydon North)

The hon. Member for Wealden raised the question of an appropriate duration for the licence. I imagine that that could vary to an extent, but I am advised that we are talking about quite a long time scale. Licences might possibly typically last for 40 years, or something of that kind. There will be different issues perhaps for carbon capture and storage, which we shall come to. I am hoping to give the hon. Member for Cheltenham some advice on the question that he raised this morning.

I was asked who would monitor the regime, and the answer is that it would be one of our departmental inspectors.

Hugo Swire (Conservative, East Devon)

The Minister has just informed the Committee that licences may be granted for up to 40 years. Presumably the value of that licence will depend largely on what is being licensed. For that period it might vary enormously, in terms of supply, and so forth. What mechanism has been built into the licensing, or indeed the Bill, that would allow the value of the licence to be readdressed at any point while it was in force?

Malcolm Wicks (Labour, Croydon North)

I think that on that one I may need to come back to the hon. Gentleman. There may be an opportunity later to consider that matter.

Our general approach is that once a licence is granted, although certain things may change, we do not want to change existing licences retrospectively. I have heard the question about the possibility that values may change, and I will try to find an opportunity to return to the matter for the hon. Gentleman. I think that I had also better find another opportunity to return to the matter raised by my Liberal Democrat colleague.

Charles Hendry (Conservative, Wealden)

I wonder if the Minister will also provide greater clarity on another matter. Is it his expectation that the licences will be tradeable? If, for example, Exxon decides to apply for a licence to store gas in one of these facilities, and then wishes to sell it on to Conoco, could that happen in a straightforward way or would the licence have to be returned to the Government and a new licence issued?

Malcolm Wicks (Labour, Croydon North)

Yes, they will be tradeable in that sense. From my experience of this, through the pilot partnership with the industry, we can see that some of the bigger players are phasing down their operation in the North sea and some of the smaller more enterprising companies are taking over the licences. The hon. Gentleman raises an important point about the regulatory regime that we need to put in place in practice as well as in principle. There is the idea of “use it or lose it”. We need gas storage and it is important that these facilities stay in operation.

Hugo Swire (Conservative, East Devon)

The Minister has gone some way towards answering my original question. By definition, if these licences are tradeable, we will need to establish a value at the time of trade. Will that be up to the free market, or do the Government see themselves as having a role at that time?

Malcolm Wicks (Labour, Croydon North)

It has to be up to the market within the regulatory framework. If the hon. Gentleman is asking whether we would put forward certain ideas about costs and prices, I would say that those are not things for us to decide. Such things are always best left to the market.

The hon. Member for Cheltenham asked what the risks and disincentives were in delaying the legislation. We expect the first application for licences to take place in January. We understand that on the back of our proposals, potential developers are already preparing their applications. I hope that those words reassure the Liberal Democrats that we intend to move very quickly.

Clause 5

Malcolm Wicks (Labour, Croydon North)

It might be helpful if I briefly introduce the clause. It makes provision for the Secretary of State to grant a licence on such terms and conditions as he or she sees fit. For the most part, standard terms and conditions will be appropriate to all licences of a particular type. Others might be peculiar to the circumstances of a particular licence. The conditions will seek to ensure that appropriate environmental protections are in place, or they will provide for the licensee to submit information to the Department to enable it to perform its regulatory functions. For example, the conditions may place an obligation on the licensee to undertake the licence activities in a way that does not interfere with other uses of the sea or the sea bed. The licence may include a duty to consult and to maintain effective communication with fishing interests, or to refrain from activities that unjustifiably interfere with navigation or fishing interests. We will consult fully on the proposed standard terms and conditions and hope to start this consultation in the summer. When making regulations prescribing model clauses under clause 6, there will be an opportunity for interested parties to put forward their views before the regime comes into effect.

Brian Binley (Conservative, Northampton South)

May I say what a pleasure it is to serve under your direction, Mr. Amess?

Although I welcomed the support of the hon. Member for Glasgow, North-West on an earlier occasion, I took some exception to the fact that he was happy that companies could afford a bob or two with regard to the provisions on licensing. The truth of the matter is that the Committee would be doing a disservice if it did not take into account the need to preserve good cash flow in companies. That means that they do not want to tuck away resources when it is unnecessary to do so. Companies need to use all their resources to the best possible advantage. Those two considerations alone—and there are many others—overtake the comment about this being just a bob or two. I hope the hon. Gentleman will forgive me, but I felt that I needed to get that on record.

I understand the need for a financial security test with regard to the financial standing of certain licensees when that test suggests that their ability to meet their obligation may be at risk. However, we need to temper that with an understanding that this should not be an automatic presumption to ensure that companies do not make unnecessary financial provision over a sizeable period of time. That would tie up financial resources that I believe are necessary to develop what is a relatively new industry. I know the Minister would not want that to happen.

We know that industry is going to have to pay a sizeable investment price if we are to crack the question of global climate warming. We know that we have to make several changes with regard to infrastructure, how we run our businesses and transportation—the list is endless. I do not want to tie up money unnecessarily in a Government holding somewhere that detracts from the ability to move on to make the investment necessary to deal with climate warming. I hope that the Minister will agree that it should not be an automatic presumption that, during CO2 storage operations, there should be financial provision whereby money is lodged and held right across the piece as a matter of ongoing procedure.

I ask that there is not such an automatic presumption. It would place a massively onerous obligation on the balance sheets of companies and take up significant capital. More importantly, it would be immensely damaging to medium and smaller companies that might wish to be involved. We need to get all the resources we can involved in this procedure. The presumption would place a proportionally greater disadvantage on those people than on the very big operators. I am sure the Minister would want to be aware of that concern. I hope that he will give me the reassurances that I want.

There is considerable concern about the amounts that we might be talking about to allay the risk, from the Government’s perspective. I know from people to whom I have talked that if they do not know what that financial implication might be, it might stop plans proceeding. We need to know the amounts and the timings, so perhaps the Minister can give us some thoughts in that regard.

Finally, there is a question of when it might become necessary to make some financial stand-by to alleviate the risk from the Minister’s perspective, which I understand. I have spoken about the considerable financial cost involved and that will be particularly grave if it has to be made at the time of the permit application. There is some leeway to allow that provision to be made either before construction starts, or before the storage operation itself starts. I ask the Minister for guidance because this impacts on a number of organisations that might wish to be a part of the infrastructure that the Minister is trying to create, but could be put off by that lack of knowledge.

Martin Horwood (Liberal Democrat, Cheltenham)

Following on from what the hon. Gentleman has raised, particularly in terms of the impact on smaller companies that might wish to engage in this business, there is mention in the impact assessment of Petroleum Act 1998 costs. I am not familiar with the Petroleum Act, so perhaps the Minister could expand on what that is based on. There is talk of a price for the licence of £3,000, but a potential cost to the companies developing it of £31,000 a project. I think that that underlines some of the concerns that the hon. Gentleman might have had, although I remember raising earlier the possibility of perhaps extracting a little more money from those companies that are enjoying windfall profits.

The other points I was going to make were regarding some of the conditions that might be attached to licences.

Hugo Swire (Conservative, East Devon)

I think that it is the hon. Gentleman’s party’s policy to do something about what he sees as levying a windfall tax on the profits of the existing companies. He has just stated that perhaps some of that money could be used towards helping other companies to get into the business. Would not that be a strange precedent, and is that really what he is trying to say?

Martin Horwood (Liberal Democrat, Cheltenham)

I was asking questions, not setting out party policy—I should make that very clear. I was seeking a response from the Minister on the potential funds available in the energy companies for various purposes.

The issue that I wanted to address regarding this particular clause relates to the conditions that are attached to licences, particularly those relating to the environment. I was rather reassured by the Minister’s promise of full consultation on the conditions, which is a very positive commitment, and I hope that there will be engagement with many organisations that are concerned about the environment.

Earlier today, the Minister talked about the environmental impact being “paramount”—I think that that was the word that was used. Is he able to expand on that? Does that mean that environmental considerations will, in effect, supersede all commercial considerations? Will considerations be attached particularly to public health? The gases set out in the earlier part of this chapter of the Bill make a rather explosive list. Presumably public health considerations—in terms of leakage and so on—might be a major consideration. Will those be the kind of things that might attach to conditions?

What is the type of time scale over which these conditions might apply, and how flexible will they be if evidence of a public health risk or, indeed, environmental damage, emerges? As we have established, we are talking about time scales of possibly as long as 40 years for the operation of these licences. If such evidence emerges, will the conditions attached to the licences be flexible enough instruments to allow for action to be taken to mitigate or eliminate those risks?

Charles Hendry (Conservative, Wealden)

This clause seems very straightforward and sensible, but the Minister’s opening remarks raise a couple of questions in my mind, which I would be grateful if he could answer.

In setting out the sort of terms and conditions that might be relevant here, I think that the Minister said that the installation should not interfere with other users of the sea bed. I am not quite sure what he means by that, so could he expand on it further? How will that be achieved?

By definition, I would have thought that putting hundreds of millions of tonnes of concrete into the sea bed is going to interfere with what goes on there. Who does the Minister have in mind? Other users of the sea bed? Are these fishermen, trawlermen or other people who earn their living in that respect? Otherwise, the thought going through my mind that an assortment of crustaceans might be affected—crabs and lobsters and so on—as users of the seabed.

Malcolm Wicks (Labour, Croydon North)

We will consult them.

Charles Hendry (Conservative, Wealden)

If the Minister intends to consult them, which they will be incredibly relieved about, they will be able to go back and say, “Well, on 21 February 2008, the Minister gave us an assurance that we would not be interfered with.” Judicial review has happened too often with energy issues already.

Will the Minister expand a little more on what he has in mind? Is this something that he sees as being a permanent structure because there are risks of things going calamitously wrong with some of these installations? We are talking about combustible gases. Clearly, in the event of an emergency, the lobsters would come out ready to eat. The point here is that the Minister has flagged up an issue, but exactly what he has in mind is far from clear.

The Minister has spoken about “use it or lose it”. Is that one of the terms and conditions that he might have in mind? Is he saying that if someone applies for a licence but does not actually use it, it would be revoked? Perhaps the Minister will expand on his thinking.

Will the Minister talk a little more about the implications of clause 5 for decommissioning and, in particular, whether he would use this as an opportunity to set out how a facility should be left at the end of its operating life, and how it should be decommissioned? What will happen about ensuring that necessary funds are available to carry out that decommissioning work at particular installations?

Malcolm Wicks (Labour, Croydon North)

This has been a useful discussion. Let me try to cover some of the points that have been made. My response will probably not be as coherent as I would like, if I had more time.

The terms and conditions that are likely to be in the licences include placing an obligation to retain the gas within defined geological boundaries, placing the operator under a general obligation to protect the marine environment from pollution, requiring a licensee to obtain a lease from the Crown Estate, and placing an obligation on the licensee to undertake licensed activities in a way that does not interfere with other users of the sea or sea bed—the hon. Member for Wealden noted that remark in particular. What does that mean? There is a duty to consult and to maintain effective communication with fishing interests—not necessarily fishes themselves, I suppose, although I had better be careful—to refrain from activities that unjustifiably interfere with navigation or fishing interests, to deal promptly with compensation claims, to give the Ministry of Defence notice of installation movement and seismic surveys, and to maintain and install underwater beacons to MOD specifications. Those are some of the things that we have in mind.

Hugo Swire (Conservative, East Devon)

On the question of settling any insurance claim, and if one subscribes to the enduring principle of the polluter pays, will it be incumbent on companies applying for a licence—and indeed being awarded an operating licence—to prove that they have sufficient insurance to meet any claim for compensation that might be made against them?

Malcolm Wicks (Labour, Croydon North)

Subject to further consideration, that would seem eminently sensible. We will try to clarify that, and there is ongoing discussion about the nature of the licences. I have indicated some of the criteria and some of our objectives, but that was a useful point.

In terms of the point about use it or lose it, I made the comparison with the UK continental shelf—the North sea—where we have brought this in. I would guess that the matter is ultimately for the Crown Estate, but we will be consulting on this issue, among others, in due course. My judgment would be that on gas storage, for example, if a company decided after 10 years that it wanted to enter another market, it would seem sensible to ensure that where there was commercial interest, another company would take that over, not least because of national security considerations.

I was asked about the costs of licences and I think the hon. Member for Cheltenham recognises that the difference is that the figure of £3,000 or thereabouts could be for submitting the licence, which covers the administrative costs to our Department. The larger fee mentioned is just an estimate of the internal cost to the company of preparing their application, and that needs to be weighed against the potential benefits of up to £400 million to companies and the economy from such a proposal.

On environmental considerations, when I use the word “paramount”, I am simply saying we are not going to play fast and loose with the environment—that is crucial. We have to comply with EU legislation on environmental matters, but on other matters raised regarding terms and conditions, we intend to consult with industry before any of these regimes come into place. There will be plenty of time for discussion on these matters.

Martin Horwood (Liberal Democrat, Cheltenham)

I am beginning to sense that the Committee does not seem to have a great consensus on exactly what these terms and conditions might be and where they might be directed, although there is a broad sense that they might have a strong environmental focus. We do not really have a sense of the price levels, although the impact assessment had those numbers that the Minister quoted, which were based on the Petroleum Act 1998. It might be helpful if he could explain where those costs come from. Would it not have been better to have some sense of the conditions in the Bill rather than leaving all this to secondary legislation? For instance, should the primacy of environmental considerations be set out? Would he consider that suggestion as a possible amendment at a later stage?

Malcolm Wicks (Labour, Croydon North)

I always consider suggestions from Liberal Members most carefully before reaching a judgment, and that would apply in this case.

I have done my best to outline some of the key points that would be covered by a licence. To be fair—the hon. Gentleman is a fair man and I always like to be fair to myself on these occasions—we have not passed this Bill yet, although I hope that Parliament will enact it. We are working hard on some of these details. I do not think—this is a general issue around the law—that being ultimately specific in the Bill is sensible, if only because this is a fairly fast-moving technology and sometimes one can be over-specific.

The hon. Member for Northampton, South made some interesting remarks, much of which were about carbon capture and storage. He made some important points to which I will return when we consider the clauses concerning carbon capture and storage. I hope that that will be sensible.

As for terms and conditions, I am reminded that we will be consulting on this in due course and publishing a consultation document in June. One would probably get into trouble with parliamentary colleagues if one consulted before a Bill had received its Second Reading. One has to do these things in the appropriate order.

The hon. Member for Cheltenham talked about a worry that we could be too narrow in terms of licences, given the technological developments that will take place. For that reason, we are setting out enabling powers for the licensing regime. We want to encourage innovative new technologies in relation to offshore technology to come forward under this regime. We feel confident that in a fast-moving territory—in terms of liquefied natural gas, gas storage, and later CCS—it is important to put in place a regulatory framework that we think will be fit for purpose in the long term.

Martin Horwood (Liberal Democrat, Cheltenham)

I also raised the issue of whether public health considerations, such as evidence of public health risk, over time might be included in the conditions. Does he have that as a possible objective?

Malcolm Wicks (Labour, Croydon North)

Yes, I do. Again, drawing on the helpful though not exact comparison with the UK continental shelf—the development of North sea oil and gas into the mid-sixties—the Government and relevant agencies, such as the Health and Safety Executive, and the companies themselves have always put a huge premium on the safety and mainly the safety of the workers. We saw an incident the other day when people took no chances in evacuating an oil rig.

I understand the public concerns about gas storage and CCS. We need to ensure that we are protecting the public health through the appropriate agencies such as the HSE. That is a very significant point, not least when some of these technologies are fairly new to most of us, let alone our constituents. We need to reassure people and make sure that these issues are covered in the appropriate regulations.

Charles Hendry (Conservative, Wealden)

I am very grateful to the Minister. He has given us a much greater understanding of the way his mind is working on this. I understand why he cannot set out a prescriptive list of the conditions in the Bill.

One thought on competition rules occurs to me. Can the Minister clarify how competition rules will apply to the people who set up and operate such facilities? Would there be the normal ability to refer a matter to the Competition Commission if there were concerns about vertical integration in terms of who owns different aspects of the supply chain? If the starting point is to provide greater security of supply, there would be concerns if people could own a gas storage facility and chose not to use it so as to pump up prices of gas elsewhere in the supply chain. I do not expect that to happen, but I will be grateful for reassurance from the Minister that it will not be able to happen.

Malcolm Wicks (Labour, Croydon North)

That raises an important point. My off-the-cuff response would be that Ofgem, the regulator, would be able to look at those aspects. Ofgem is not the regulator for offshore installations and all that—not the ones that we are discussing here—but we have a regulator of the market and its effective operation is in place. The regulator will need to be mindful of the changing territory, both literally and metaphorically, in relation to this matter. I understand the hon. Gentleman’s example of gas storage. Effectively, although it is new territory, normal competition rules would apply, which is what I said in a less prÃ(c)cised way a few moments ago.

Clause 6

Malcolm Wicks (Labour, Croydon North)

I thought that at this stage the Committee might like me to make a short speech again. The clause makes provision for the Secretary of State to make regulations that will set out model clauses that could be applied to all licences—that is, standard terms and conditions. Some of our discussion already applies to this clause as well. However, to ensure that the terms and conditions relate to the activities being undertaken, it will be possible to set out different model clauses for different cases, which follow from the general provisions contained in clause 88(2). For instance, it may be appropriate to have a different set of model clauses for offshore gas storage than for the unloading of LNG.

The Secretary of State will also have the power to modify or exclude particular model clauses when granting a particular licence, should the need arise. Furthermore, amended sets of model clauses may be laid down by making further regulations under the clause. Those new model clauses would apply only to licences granted after the amending regulations came into force. Such amendments would, of course, be made only where it was necessary in the light of experience or changed circumstances. We will consult fully on the draft regulations to give interested parties an opportunity to comment on those standard terms and conditions before the regulations are made. Once made, the regulations will be laid before Parliament, and will be subject to annulment for a period of 40 days. To further improve transparency, the model clauses will also be published on the DBERR website.

Clause 7

Charles Hendry (Conservative, Wealden)

I beg to move amendment No. 7, in clause 7, page 4, line 29, at end insert—

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

Clause 7 relates to the offence of carrying on unlicensed activities. As it stands, it looks at the how a facility should be operated during its lifetime, but it does not look at how that facility should be decommissioned once it has stopped being used. My contention is that decommissioning needs to be included from the outset, so that we can put it on a level playing field with other activities in the energy sector—for example with wind farms, which have to have a decommissioning programme in place when they are established. Indeed, the hon. Member for Copeland has spoken about the need for a level playing field in relation to the requirements that the Government are proposing for nuclear facilities.

A failure to decommission a site effectively would lead to significant hazards, especially to shipping, if part of the rig or the injection system is left in position. Such facilities will inevitably decay over time if they are not being used or well maintained, especially in the rough seas that they are being proposed for. Amendment No. 7 would simply require that before a facility could start to be used for the importation or storage of combustible gas, there would need to be an approved decommissioning programme in place, which has been signed off by the Secretary of State. This could include, for example, a decommissioning programme to state what needs to be removed at the end of the period of use; the establishment of a decommissioning fund, and perhaps in that fund, a charge on the parent or associated company—as is being proposed with the nuclear decommissioning programmes.

It would seem that this is a modest change, but it would avoid the need to address this issue at a later stage when a facility has perhaps stopped being used, and the original users have ceased to exist in their current form.

Martin Horwood (Liberal Democrat, Cheltenham)

The intention behind this amendment seems, sensibly, to make decommissioning a de facto part of the licensing process. My only qualification would be that there might be neater ways to do it than are in the amendment—perhaps even slightly less aggressive ways. It could perhaps mirror what is present in other parts of the Bill where the decommissioning programme seems to be more closely tied in with the licence application process, rather than creating what seems to be a new offence in operating without a decommissioning programme. That seems to be a rather punitive approach from Conservative Members, but perhaps that simply represents a temperamental difference between Liberals and Conservatives.

There also does not seem to be much detail about what actually constitutes a decommissioning programme. In the nuclear part of the Bill, it is referred to as a “funded decommissioning programme”. Of course, this may reflect the general consensus that nuclear waste having to be disposed of is environmentally bad—and an environmental risk in a much more serious sense than the gas being stored on this occasion, which is at least economically, if not environmentally, good. Perhaps there is a rationale to having a different basis, but I wonder whether the hon. Members for Wealden and for Billericay, who are proposing the amendment, or the Minister have considered how a decommissioning programme for these installations would be funded, and how those funds might be protected.

In general, I am sympathetic to the intention of the amendment, which incorporates decommissioning into the licence regime. I would be interested to hear from the Minister why this part of the Bill differs in that respect from other parts of the Bill.

Hugo Swire (Conservative, East Devon)

I thought for one moment that the hon. Member for Cheltenham was going to suggest that the decommissioning programme or plan could be funded by a windfall tax on the existing companies, but that money has been pledged by the Liberal Democrats to so many different areas that probably the pot is, as we speak, empty.

This is a good proposal from my hon. Friends the Members for Wealden and for Billericay. I do not see how it is draconian. Decommissioning is just as interesting as the commissioning of these activities and licensing, and it is something that exercises hon. Members on both sides of the House in this day and age. Indeed, there are those of us—myself included—whose reservations, particularly about the nuclear programme, concern the aftermath and what happens to the material once it has been processed and so on. There are those of us who care passionately about the environment and want to see plans in place—before any commissioning is undertaken—that would show how a redundant plan could be implemented at the given time.

Stephen Ladyman (Labour, South Thanet)

I could understand us having this debate if it was on the next part of the Bill about carbon storage. But surely a decommissioning plan for a gas storage unit is to sell the gas and not put any more in.

Hugo Swire (Conservative, East Devon)

Indeed, that may well be the case, but we are not just talking about gas storage. We are saying that written into the Bill should be the principle that there is a plan or a fund set aside that could be used in decommissioning. I think it is a fairly uncontentious amendment and I hope the Minister will address it, given the fact that it has been supported by the Liberal Democrats as well

Malcolm Wicks (Labour, Croydon North)

This has been a useful discussion. I hope to persuade the hon. Member for Wealden that for the reasons I am about to outline the amendment is not required. I think that the problem can be tackled in another way.

The hon. Member for East Devon drew the comparison with nuclear decommissioning and I suspect that there may be an opportunity later to discuss that subject. I do not anticipate that the nuclear clauses will go through on the nod, so I hope that he will forgive me if I do not go down that path at the moment.

We need to ensure that the activities we are seeking to license through the gas unloading and storage regime are subject to a robust procedure for managing the final stage of the process, in other words decommissioning. Through this amendment the hon. Member for Wealden appears to be seeking a provision that would make it a criminal offence not to have a decommissioning programme approved by the Secretary of State at the time the offshore gas storage or unloading facility is operational. Although I agree with his sentiments, I cannot agree to this amendment for two reasons.

First, we are extending through schedule 1 of this Bill the existing decommissioning provisions in part 4 of the Petroleum Act 1998, to include offshore gas storage 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 parties such as companies associated with the operator. This amendment would in effect create a different regime for gas unloading and storage from that which will apply to oil and gas developments.

We are proposing a number of changes to the decommissioning regime in the Petroleum Act under chapter 3 of part 3 of this Bill. These changes will allow the Secretary of State to require decommissioning security at any time during the life of an oil and gas field if the risks to the taxpayer are assessed as unacceptable.

We are also looking to protect the funds put aside for decommissioning so, in the event of insolvency of the relevant party, the funds remain available to pay for decommissioning and the taxpayer’s exposure is minimised. Once the Bill is passed the Petroleum Act regime, including the changes I have mentioned, will also apply automatically to offshore gas unloading and storage facilities. Changing the requirement 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. By linking offshore gas with the existing regime we provide a single, consistent approach to decommissioning, with any changes made to the Petroleum Act regime flowing through to the offshore gas licensing regime. However, if the amendment were accepted a different requirement would be put in place for offshore gas unloading and storage, and regimes would start to diverge.

Secondly, this amendment could create confusion over which penalty regime would apply to decommissioning. For instance, part 4 of the Petroleum Act 1998, which will apply to offshore gas unloading and storage, provides 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 conviction on indictment an unlimited fine. That is a lesser penalty regime than that of the relevant part of the Petroleum Act 1998.

I hope I have provided some reassurance to the hon. Gentleman that the provisions around decommissioning facilities are appropriately covered under this regime and explained the drawbacks to having a piecemeal approach to decommissioning obligations. I thank him for introducing an important debate on the significant topic of decommissioning but wonder whether he might consider withdrawing his amendment.

Charles Hendry (Conservative, Wealden)

I thank the Minister for that extremely helpful response to the issues we have raised in this debate.

It is clear from the explanation that the Minister has given us that there are other elements of the Bill that address these issues in a consistent way and will provide the sort of coverage and protection that we were seeking to achieve through this amendment. It has essentially been a probing amendment to try to make sure the Committee had a full understanding of what is being proposed.

In the light of the assurances the Minister has given we do not wish to pursue this further. I beg to ask leave to withdraw the amendment.

Charles Hendry (Conservative, Wealden)

I beg to move amendment No. 8, in clause 7, page 4, line 35, at end insert—

‘(4) A person guilty of an offence under this section is liable to be subject to a bar on future licence applications, for a period of time to be determined by the Secretary of State.’.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment No. 9, in clause 8, page 5, line 24, at end insert—

‘(6) A person guilty of an offence under this section is liable to be subject to a bar on future licence applications, for a period of time to be determined by the Secretary of State.’.

Charles Hendry (Conservative, Wealden)

The two amendments relate to clauses 7 and 8. We are seeking to ensure that we have effective deterrents in place so that people do not breach this part of the Act.

The explanatory notes set out the penalties available, which are a fine of up to a statutory maximum of £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland on summary conviction or an unlimited fine for conviction on indictment. The high penalty is contained in the proposals, but I think it is worth including an extra penalty, which would be a bar on that organisation or person applying for a licence to import or store combustible gas for a time to be determined by the Secretary of State if they fall foul of this part of the Bill. The companies developing these facilities are very large with deep pockets for paying fines if they decide that they want to operate in breach of the law if it comes into force.

John Robertson (Labour, Glasgow North West)

They have a bob or two.

Charles Hendry (Conservative, Wealden)

They have a bob or two where necessary for dealing with these issues, although they will need a few more bob in Scotland because the fine is rather more expensive than it is in other parts of the Kingdom. The activities being carried out are potentially very dangerous and if anything goes wrong, there is a very serious risk to life, sea life and the environment. The Bill sorts out the activities that would not be permitted. These include, in clause 7, acting without a licence, or in clause 8, acting without prior consent where it is necessary to have such consent, or a failure to keep good records. Those penalties would rarely, if ever, be used, but would add an important further measure to discourage breaches and I hope that the Minister will consider them.

Martin Horwood (Liberal Democrat, Cheltenham)

I am all for effective deterrence, especially when people and the environment are at risk, but I do see a potential problem with the way the amendment is framed, which perhaps reflects a weakness in the way clause 7 is framed. By holding individuals responsible, these fines or punitive measures could easily be evaded if the individual cannot be identified. Since we have a clear trend towards corporate responsibility, it seems odd that in this obviously corporate area, we are holding only individuals responsible. It is difficult to imagine a private individual surreptitiously indulging in a bit of gas storage on the side. There are visions of “Trotter’s Combustible Gas Storage Limited”—I think that we can all imagine how that episode would end. If the argument is that the corporate fines would never be large enough to act as a deterrent to large companies, who have a bob or two, we simply have to make the fines sufficiently cripplingly to make sure that they are a deterrent.

Amendment No. 8 has an unsatisfactory delegation once again of complete discretion to the Secretary of State. No disrespect to Ministers, but this an unfortunate trend in the legislation—everything seems to be left to the Secretary of State or to Ministers to determine at some later stage, instead of being in the Bill. It is crucial, because if the period envisaged is six weeks, that amounts to a slap on the wrist; if it is a lifetime ban on applying for a licence, that would close down the business. Clearly that is a critical consideration and I would be interested to hear what the Conservative spokesman feels might be the relevant time scale.

Amendment No. 9 seems more useful and is a logical extension of amendment No. 8, but again, there is a problem with the way it is framed in that it could be avoided if an individual was not identified as culpable. I see shortcomings with these amendments, but I am interested to hear the response of both the hon. Member for Wealden and the Minister.

Malcolm Wicks (Labour, Croydon North)

In response to the hon. Member for Cheltenham, I should say that when we talk about “a person” in clause 7, that could include a company and any corporate body. I think that that does ground it in corporate responsibility.

I am grateful to the hon. Member for Wealden for raising such an interesting and pertinent point with his suggested amendment. As hon. Members may know, clauses 7 and 8 relate to the enforcement provisions of the new offshore gas storage and unloading regime. In particular, clause 7 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 3. Meanwhile, clause 8 specifically covers offences once a licence has been granted, such as 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, indeed, the unloading of liquefied natural gas.

The currently proposed penalties for failing to obtain a licence, or for non-compliance with licence conditions, are, we believe, proportionate and sufficiently strong to deter licence holders from committing the offence. The penalties for any person found guilty under either clause 7 or clause 8 consist of a fine of up to the statutory maximum, which is currently £5,000 in England, Wales and Northern Ireland, and £10,000 in Scotland, on summary conviction, or an unlimited fine for conviction on indictment.

The hon. Member for Wealden suggests that we should add to the existing offences and provide the Secretary of State with the power to stipulate that a person guilty of an offence under the gas unloading and storage regimes should be barred from applying for future licences for a period to be determined by him. Perhaps I can provide some reassurance that we have already given those issues a great deal of thought. I am confident that we have the right penalties for the offences, without the amendment.

The penalty provisions in clauses 7 and 8 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. I believe that the liability to a potentially unlimited fine will act as an effective and proportionate deterrent to operators engaged in offshore gas or carbon dioxide storage.

If in the future it should be felt that a broader range of penalties was necessary, including a bar on persons who had been found guilty of an offence from holding a gas storage and unloading licence, the Bill would already provide for such a scenario. The power afforded to the Secretary of State by clause 4(a) allows for regulations to be made detailing who may apply for such a licence. I hope that that goes some way to answering the point made by the hon. Member for Wealden about the responsibilities and duties of the corporation.

The regulations could therefore adequately provide for a measure of the kind in question, should we deem that necessary. Our intention is to consult on the regulations, and the requirements for applying, prior to the adoption of the regulations. In conclusion, therefore, I do not consider that the amendments are necessary, first because I am confident that we have adopted the right balance in our offence provisions, and secondly because the amendments would duplicate powers that we already propose to give to the Secretary of State under clause 4. I therefore ask the hon. Gentleman to consider withdrawing his amendment, which, again, has teased out a useful discussion.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister, as always, for the clarity with which he has responded to the debate. I understand exactly what the Government have been seeking to achieve in the other provisions of the Bill. I think that there would be interesting legal challenges if it should be decided at some future date that a particular person or organisation might not apply for a licence because the Government had been unhappy with their performance elsewhere. However, that would be a matter for debate and legal challenge at the time in question.

In the light of what the Minister says, there would appear, in current circumstances, to be enough protections and penalties in the Bill, should those be required. However, if it were to emerge over time that those were not satisfactory, Parliament would clearly have to return to that issue subsequently. In the light of the Minister’s assurances, I beg to ask leave to withdraw the amendment.

Clause 8

Malcolm Wicks (Labour, Croydon North)

To ensure that the Department, as the licensing authority, can keep tight control of activities undertaken by licence holders, the clause sets up penalties for breaching certain key licence conditions. There are also penalties for misrepresentation and non-disclosure in relation to licences. The offences attracting criminal penalties under this clause include carrying out an activity, such as a drilling operation, without first obtaining the prior consent specified by the licence; breaching any conditions attached to a consent; or failing to keep records, give notice, or make a return or report, as required by the licence. Anyone found guilty of such offences will be subject to a fine not exceeding the statutory maximum on summary conviction or an unlimited fine on conviction on indictment. The licensee, as the person responsible for the licence, will be liable for all offences under the licence even where they are not directly responsible, for example, where the unauthorised activity is carried out by a subcontractor.

However, it is recognised that licence holders may not always be at fault. Subsection (2) accordingly ensures that licence holders will have a valid defence, if they can show that they exercised due diligence in trying to comply with the licence conditions. In the case of a contractor, due diligence could include appropriate monitoring and supervision of a contractor who was acting on behalf of a licensee even if the contractor subsequently still failed to comply with conditions. Subsection (1) provides for the Secretary of State to specify, by order, further kinds of breaches that will amount to an offence. That will allow the Department to put in place new criminal sanctions for conditions that may be needed in the licence in the future in response to changes in the industry. The penalties for non-compliance with licence conditions are, we believe, proportionate and sufficiently strong to deter licence holders from committing the offence.

Charles Hendry (Conservative, Wealden)

In general we are happy with the clause but would like a little clarification from the Minister on the phrase “ought to know” in subsection (4), line 17 on page 5:

“It is an offence for a person to fail to disclose information which the person knows, or ought to know, to be relevant to an application”.

That sounds like the sort of language that I use towards my children, when I say “you ought to have known that if you didn’t eat your lunch, you wouldn’t be getting a chocolate bar in the afternoon” or “you shouldn’t have got up in the middle of the night and played on your PlayStation”. I do not know the legal groundings of it; it sounds vaguely Rumsfeldian—there are the things that we know that we know, the things that we know that we do not know and the things that we do not know that we know. When one introduces to that the things that we know that we ought to know that we do not know and the things that we do not know that we ought to know, it becomes a recipe for chaos. I will be grateful if the Minister can give us further guidance and clarification about the legal definition of those few words.

Malcolm Wicks (Labour, Croydon North)

I ought to know really, but I know someone who does know. Would the hon. Gentleman seriously mind if I wrote to him on the matter? That would be the best way of dealing with it.

Martin Horwood (Liberal Democrat, Cheltenham)

I am a little concerned about subsection (2). It may be following standard legal wording, for all I know, but I will be grateful for clarification on it. It says that

“it is a defence for the person”—

which I now understand can mean a body corporate—

to prove that due diligence was exercised to avoid committing the offence.

That becomes important because of the issue that I have raised before of the long timescales over which this is operating. If we are talking about decades, it is plausible that evidence of environmental damage or public health risk may only emerge over time. We are talking about serious issues: gasses that may prove very toxic to wildlife or potentially or mixtures of methane, butane and propane, I am not a chemist but if that was bubbling to the surface, I would not put a match near it. If we had a serious explosion or another environmental disaster resulting over long term from the operation of these facilities, and the body corporate was able to say that 15 years ago a completely different management operation had done due diligence at the time, what is the consequence of that? Who picks up the tab? Who picks up the liability for any damage done, for the clean up operation or for whatever would be necessary? Would it be the taxpayer? Would there be a giant loophole that allowed the company responsible to get away with the environmental disaster, if it were to happen?

Malcolm Wicks (Labour, Croydon North)

Of course, I agree with the hon. Gentleman that we are talking about very serious matters, both substantively and also because of the need to reassure the public, as he indicated earlier. I will reiterate what we mean by due diligence. Due diligence will be found where the licence holder has done everything it can reasonably be expected to do to avoid a breach of the licence. Where a contractor is used to carry out a particular operation, due diligence will be shown where proper steps have been taken to select a competent contractor and there has been an appropriate level of supervision of the contractor’s operation. I am not a lawyer but it is common on the one hand to specify penalties but to be sensible about what we mean about responsibility through due diligence procedures of different kinds.

I think the hon. Member for Cheltenham stepped into different but related territory which we touched on earlier today, namely how to monitor these facilities—geologically and so on—over a long time. The proper responsibility will be with the company but our Department, where necessary with technical experts, will also be in the business of inspection. That is the major way we tackle the concern raised by the hon. Gentleman.

Martin Horwood (Liberal Democrat, Cheltenham)

I do not think this quite tackles the issue. Over a long time, with the way that companies shift, change, merge and sell parts of themselves, it is almost inevitably going to be a different company. Could companies exploit this clause or regulations relating to it as a giant loophole to evade liability for some environmental consequences which might genuinely not have been foreseen but for which they should be responsible—or someone should? There is a big question mark over who is liable 20 years down the line.

Malcolm Wicks (Labour, Croydon North)

The best way I can deal with this is to say that when we are drawing up appropriate regulations and when we are consulting we should look at this issue. Obviously, in this territory we are talking about the long term. I mentioned the period of possibly 40 years to the hon. Member for Wealden when questioned about, say, gas storage. It could be longer. When it comes to carbon capture and storage, which we are coming to later, we are talking about millennia, which raises interesting issues of different kinds. On the other hand, the issue about what to do 30 years on when a company at fault has gone bust or been merged, is presumably familiar in law. I suspect it is not unique to this circumstance. It is an important point and we will consider it as we move forward in terms of regulation.

Clause 9

Malcolm Wicks (Labour, Croydon North)

The purpose of this clause is to provide the Secretary of State with a direction-making power.

I agree with the Liberal Democrat spokesman that the Secretary of State is a pretty busy character in this. Knowing Secretaries of State, they do occasionally delegate. You appreciate the formal use of this term.

It is to provide the Secretary of State with a direction-making power to direct a licence holder to take appropriate steps in the event of a breach of licence conditions. For example, if the licence requires equipment to be maintained to a good standard, a direction may require the equipment to be repaired or replaced. This provision is an important part of the suite of enforcement provisions and enables the Secretary of State to take a lighter-touch approach to remedy the breach before considering criminal proceedings, if he considers such an approach would be appropriate.

Moreover, it may not always be sufficient simply to punish the licence holder for breaching a licence provision. The Secretary of State may wish to direct the licence holder to comply in a way that minimises any damage already caused. Before issuing a direction, the Secretary of State must consult the licence holder. This will provide the licence holder with an opportunity to explain why the breach has occurred. If the licence holder fails to comply with the direction, the Secretary of State will have the power to ensure that the necessary action is taken and to recover the costs with financial interest from the licence holder.

The Secretary of State may also make arrangements for any person to comply with the direction on the licence holder’s behalf. Subsection (9) ensures that this clause does not affect any provision made by the licence itself. For instance, the licence may already include a power of direction in certain circumstances. Again, Mr. Amess, it touches on the importance of regular inspection to see whether things are going badly wrong in this respect, so that these directions can be made.

Brian Iddon (Labour, Bolton South East)

I am sorry I have not raised this matter with the Minister previously but it has only just occurred to me during this session. I do not know whether the drafting agents have considered this either, but I think it is worth raising.

In the 2002-2003 session of Parliament, I steered through a private Member’s Bill which became the Marine Safety Act 2003. I had the pleasure to work with the late Lord Donaldson and learned a lot about safety at sea. My point is that, undoubtedly, some of these transfers of gas will occur using shipping and could be transferred to an onshore facility—it could even conceivably be transferred to an offshore facility such as a spent oil rig or gas rig.

Lord Donaldson’s two major reports on safety at sea led to the setting-up of a person called SOSREP—the Secretary of State’s Representative, representing the Secretary of State for Transport. Together with my legislation and Lord Donaldson’s legislation, that has given SOSREP the powers to direct captains of ships to do whatever it is intended they should do to avoid a catastrophe at sea. These are enormous powers and we are further advanced in this country than any other in the world.

My point is that, if this Bill is giving this Secretary of State powers of direction, is there going to be any conflict with the powers of direction that SOSREP has—who is currently Robin Middleton, based in Southampton. I can conceive of situations where these powers of direction may, indeed, conflict with the powers of direction of SOSREP. I realise the Minister may have difficulty giving me an answer today, but I think this matter should be considered seriously before the Bill becomes an Act of Parliament.

Hugo Swire (Conservative, East Devon)

May I just second what the hon. Member for Bolton, South-East has just said? In my own constituency in East Devon, there has been tremendous concern about ship-to-ship transfers of heavy oil, particularly from Russian ships. More recently, we have had a marine tragedy which could have been a lot worse—that of the ship the MSC Napoli, which the Minister and other members of the Committee will be familiar with. That experience was very interesting, because I first encountered the SOSREP, Robin Middleton, in that capacity, and he did an extremely good job.

At the beginning of that situation, members of the Committee may remember the almost 19th or 18th century wrecking scenes on the beach. There was confusion at the time as to who the lead agency was. In the aftermath of the Napoli having been grounded, there was a misunderstanding or a lack of clarification as to which was the lead agency—whether it was the Devon and Cornwall Constabulary or whether it was SOSREP, in the form of Robin Middleton. On clarification, it was SOSREP who then really took the lead in all this.

I think it is important; I agree with the hon. Member for Bolton, South-East that it does need to be clarified as to the respective roles so that in the event of an emergency, such as the one I have just alluded to, the emergency services—and indeed, all those agencies involved—know who takes the lead position.

Malcolm Wicks (Labour, Croydon North)

I must confess that, until recently, although I knew about the Secretary of State regulations, in my ignorance I had never heard the term SOSREP before—although, come to think of it, I often feel that I am a SOSREP in various work that I have done in a number of different departments.

The short answer to the questions raised is one that I hope will content the hon. Members, as the SOSREP regulations will apply in the offshore gas regime.

Clause 10

Malcolm Wicks (Labour, Croydon North)

This clause will ensure directions issued by the Secretary of State will, if they are not complied with, attract the same maximum penalties as would an infringement of a licence, which leads to criminal sanctions under clause 8. It is therefore a central part of the regulatory enforcement arrangements proposed by this Bill. As with clause 8, it will be a valid defence if the licence holder proves that due diligence was exercised in trying to avoid committing the offence, and we have had a useful discussion about due diligence. In the case of a contractor, due diligence could include appropriate monitoring and supervision of a contractor acting on behalf of a licensee, even if the contractor subsequently still failed to comply with conditions. I move that this clause stand part of the Bill.

Malcolm Wicks (Labour, Croydon North)

I think I will take this one on. This clause gives the Secretary of State the power to apply to the court for an injunction to prevent, or require the cessation of, activities prohibited under clause 2. For example, if there is evidence that a gas-unloading activity is taking place, or is about to take place, without a licence, the Secretary of State may apply for an injunction requiring the operator to cease the activity immediately. This is a further safeguard to ensure the integrity of the licensing regime. Given that such unlicensed activity would be a criminal offence under clause 7, we expect this power to have to be used only rarely. However, it is a useful power to have in reserve. I therefore move that this clause stand part of the Bill.

None

Charles Hendry (Conservative, Wealden)

I beg to move amendment No. 10, in clause 12, page 6, line 41, at end insert—

‘(d) the appropriate length of appointment for an inspector.’.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment

No. 13, in clause 26, page 14, line 6, at end insert—

‘(d) the appropriate length of appointment for an inspector.’.

Charles Hendry (Conservative, Wealden)

This is our next attempt at a probing amendment, to which I am sure the Minister will have an incredibly effective answer already prepared. Clause 12 relates to the appointment of inspectors

“to assist in carrying out the functions of the Secretary of State under this Chapter.”

Clause 26, to which amendment No. 13 refers, relates to inspectors with regard to carbon capture and storage facilities. The clauses give the Secretary of State powers to make certain regulations with regard to the inspectors. Specifically, they say that they

“may make regulations about the powers and duties of inspectors, the powers and duties of any other person acting on the directions of the Secretary of State and the facilities and assistance to be accorded to persons mentioned”

in those paragraphs.

What we are suggesting is that as it stands, it does not include any guidance or rules about the appropriate length of service of an inspector. I am inherently uncomfortable about open-ended appointments where people are appointed for an unspecified number of years. With the best will in the world, whatever qualifications they have and whatever energy and drive they have when they take on an appointment, people will lose some of that over a period of time. These two amendments would give the Secretary of State the power to determine an appropriate length of appointment for an inspector—we leave it to his discretion, or indeed to that of a SOSREP, to decide what that time scale should be.

Martin Horwood (Liberal Democrat, Cheltenham)

Earlier I was questioning the wide latitude being given to the Secretary of State by some parts of this Bill, but in the case of this amendment, we seem to be lavishing very detailed powers on the Secretary of State which I am not sure really is appropriate. There seems to be too much detail and I thought the Conservative party was in favour of reducing red tape. The important point is that this is based, as I understand it, on the existing licensing regime for the petroleum industry and we should hesitate to muck about with it too much. I am all for giving more general, strategic powers and having those more closely defined—we referred earlier to the primacy of the environment in the issuing of licences and issues of that kind, but when it gets down to detailed human resource issues that should be naturally included in any appointment process, that seems ludicrously over-detailed. I seek clarification from the Conservative spokesman, but I cannot see the justification for these detailed prescriptions.

Malcolm Wicks (Labour, Croydon North)

Although I think that the Committee has stuck to its task very diligently this afternoon, as a sideshow, I am enjoying the traditional debate about the power of the state between the Tories and the Whigs, which has been going on for several centuries and which I follow with close attention. It is not for me to make a judgment. I understand the concern of the hon. Member for Wealden. Any politician facing regular general elections has to be jealous of open-ended appointments, so I understand the prejudice.

Before addressing the amendments, I would like to set out a little of what we are trying to achieve with clauses 12 and 26, because the proposals also relate to clause 26. Those clauses give the Secretary of State the power to appoint inspectors to inspect facilities used for offshore gas or carbon dioxide storage or related activities. They also give him the power to make regulations setting out the powers and duties of inspectors and other persons acting under his direction, for example, surveyors or other contractors. Examples of such powers and duties are the power to enter premises, to carry out an investigation, to require information or to take samples. The regulations can also set out the facilities and assistance that licensees must offer inspectors in carrying out their duties.

Inspectors play a crucial role in ensuring that the terms and conditions of the licence are adhered to. They are the eyes and ears of the regulating authority and provide a valuable resource to ensure that the oil and gas industries comply with a raft of legislation that is in place to protect the environment. I suspect that we are in agreement so far.

To get to the point, in almost all instances, inspectors are civil servants, recruited on civil servants’ terms and conditions of employment. The amendment tabled by the hon. Member for Wealden to set out in regulations the appropriate length of appointment for an inspector appears, therefore, to cut across contractual matters that are normally covered within a contract of employment. Equally, if a contractor is employed for the purpose of inspection, the duration of their employment will be stipulated in the contract of employment.

There are currently a number of inspectors who act on behalf of the Secretary of State in respect of oil and gas licensing. Our proposal is not to recruit more inspectors, but to extend the powers of the existing inspectors, bringing their knowledge and experience of oil and gas into the new regime. With thanks for probing the Government, I wonder whether the hon. Gentleman might consider withdrawing the amendment.

Charles Hendry (Conservative, Wealden)

The Minister began by talking about why politicians will be jealous of people having these sorts of contracts. I remember well on the final day of the 1997 election campaign, when I was the MP for High Peak, being told by somebody in a factory, “The problem with you Members of Parliament is that you do not understand what it is like to work on a short-term contract.” Within 24 hours, I did.

I am grateful to the Minister for clarifying the issues. I understand that two types of people may act as inspectors: those who are civil servants and it would therefore be inappropriate for them to have a particular period of appointment and people who are brought in from outside, in which case it would be standard working practice for the term of the appointment to be stated in their contract. That provides the assurance that we need and I beg to ask leave to withdraw the amendment.

Charles Hendry (Conservative, Wealden)

I beg to move amendment No. 11, in clause 12, page 7, line 8, at end add—

‘(c) by the revocation of the licence, at the discretion of the Secretary of State.’.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment No. 14, in clause 26, page 14, line 14, at end add—

‘(c) by the revocation of the licence, at the discretion of the Secretary of State.’.

Charles Hendry (Conservative, Wealden)

As you will have seen, Mr. Amess, these amendments also relate to the clauses on inspectors. They relate to the penalties that can be given out where people have deliberately obstructed inspectors in their work. As with earlier amendments, we want to send a clear signal that we recognise the potential dangers of the activities being carried out in relation to the importation and storage of combustible gas or CO2. That is especially the case with CO2 storage, given that it is a very new technology and science and it will be a long time before we understand all of the risks involved.

The inspectors are fundamental in ensuring safety. We should not contemplate anybody blocking their work. The inspectors should have access to inspect whatever they want, wherever they want and whenever they want. We need to understand the motivation behind somebody refusing access to an inspector. They could, for example, say that a dangerous manoeuvre was going on and the inspector would understand why they might suggest that he should come back at a different time, if the inspection did not relate specifically to that manoeuvre. It would also be understandable if the relevant person whom the inspector needed to see was unavailable.

In almost every other circumstance, we would have reason to be suspicious of why an inspector should be refused access or obstructed in his or her work. A fine provides punishment, but the threat of revoking a licence if the operator wilfully obstructs an inspector is far more powerful. I hope that the Minister will agree. He may say that that is covered in clause 30, on the termination of licence regulations, but we believe that more detail is needed on the circumstances in which licences could be terminated and it should not be left so vague as the clause currently provides it to be.

Operators need such a level of guidance, given the tens of millions they are being asked to invest in the projects. They need to know in what circumstances the licences could be removed. We do not seek an exhaustive list, but we need an indication of the level of offence that would result in such draconian steps. I would suggest that blocking the work of an inspector would be grounds for such revocation.

Martin Horwood (Liberal Democrat, Cheltenham)

Perhaps my phraseology in relation to the last amendments was a little harsh, but I am also puzzled by these amendments and whether they need to be included at all. I suspect that they do not.

On amendment No. 11, I find it difficult to believe that the Secretary of State does not have the power to revoke the licence of someone who acts to obstruct the work of inspectors, which appears to be the object of the clause, if the licence has been appointed by him. That is a natural part of any licensing regime that would come out of the regulations and the design of the licence, on which we have already been told there will be consultation, before we see the meat of the licensing regime. In a sense that is the meaning of the word “license”. There is only continued license to operate providing the terms of a licence are not broken, which obstructing the work of inspectors would clearly do.

Even if provision does need to be included more clearly in the Bill, as the hon. Member for Wealden suggests—I would love to take credit for this, but my talented researcher Anna Harvey suggested to me that there were more logical places in the Bill for similar amendments to be made, such as clauses 7 and 8, which we have already gone past. Perhaps it provides an opportunity to explore with the Minister exactly what the Secretary of State could have the power to do in sanctioning those who operate without a licence or break the terms of their licence.

Coming to amendment No. 14, I find myself once more puzzled that it needs to be included. As the hon. Gentleman stated, it could be said that clause 30 already covers the matter. That is exactly right. It sets out the regulations under which a licence may be terminated. Obviously, it is important to outline specific provisions to clarify what those circumstances would be, but that would also be a natural part of a licensing regime.

The explanatory notes to the Bill suggest that any provisions of a licence relating to its termination will be made under the regulations in clause 30. So, I cannot see the purpose of the amendment. Perhaps, on a probing basis they provide the Minister with a useful opportunity to explore the powers that might be exercised in those circumstances.

Malcolm Wicks (Labour, Croydon North)

That was another useful discussion and I congratulate the researcher of the hon. Member for Cheltenham. I know that it would not be accurate to say that that is what families are for.

Martin Horwood (Liberal Democrat, Cheltenham)

I am not so much of a Whig that I follow my august predecessor Craven Berkeley, the first MP for Cheltenham, who was elected in a family tradition. We have abandoned those practices now, I hasten to add.

Malcolm Wicks (Labour, Croydon North)

I know that Hansard will have followed my words carefully when I said that I knew it would not be accurate to say that in the hon. Gentleman’s case. That is important. However, just in case, parliamentary privilege is a wonderful thing, is it not?

To encourage compliance with these requirements, clause 12(5) specifies that the regulations may also create offences relating to inspections. For example, it would be an offence to obstruct an inspector when he is exercising his duties under the regulations. The clause lays down penalties that may be imposed for such offences. Those offences will be punishable

“(a) on summary conviction by a fine not exceeding the statutory maximum or such lesser amount as is specified in the regulations, and

(b) on conviction on indictment by a fine.”

The maximum penalty provisions contained in clauses 12 and 26 reflect those outlined in the Petroleum Act 1998 for offences against submarine pipeline inspectors. That enforcement regime has worked successfully to date. The liability to a potentially unlimited fine will act as an effective and proportionate deterrent to operators engaged in offshore gas or carbon dioxide storage. I remind the Committee of that because these words are now becoming familiar to me.

However, it is felt that financial penalties are insufficient in relation to offences committed against inspectors. A revocation of a licence may present an additional sanction. Under clauses 5 and 19, the licensing authority could include a provision in a licence that specifies that the licence could be revoked if the licensee committed any offence as set out in the relevant regulations. Moreover, in the case of carbon dioxide storage, the appropriate sanction might not be revocation of the whole licence, but withdrawal of the rights of the operator to continue storage activities. That is because we may wish the operator to continue to be bound by the monitoring and the remediation obligations under the licence, even if they no longer have the right to continue storage activities.

I hope that I have reassured the hon. Member for Wealden that the proposed penalties for offences relating to inspections are adequate. I hope that I have also explained that a revocation provision is not required in the Bill because it could be included in the terms and conditions of licences if the regulatory authority deemed it necessary. There are circumstances in which that might not be appropriate. I would like to reassure colleagues and the hon. Gentleman that refusing to allow an inspector entry to a site would be very serious indeed, but that is true across a range of areas from this to child protection. Such a refusal would be enough to attract a penalty or the loss of a licence. That will be in the terms and conditions of the licence.

The hon. Gentleman has been very kind this afternoon. I hope that in the light of those reassurances, he will consider withdrawing his amendment.

Charles Hendry (Conservative, Wealden)

I am very flattered by the attention that the Liberal Democrats have been paying to the various amendments that we have tabled. They seem to have given more thought to our amendments than to the Bill itself, which I think is very generous of them and we appreciate it greatly. It is an interesting approach to look at retrospective amendments once we have gone past the clause and say, “What a shame that we didn’t think about this a little bit earlier on.”

Martin Horwood (Liberal Democrat, Cheltenham)

Just to clarify, I was not actually suggesting that the amendments might have been more logically amended in those places. Since we were not in favour of making them anyway, we would have been the last people to suggest them at that point.

Charles Hendry (Conservative, Wealden)

That sounds a very Liberal Democrat position—we should have done something that we are not in favour of somewhere else in the Bill at an earlier stage. However, we will not get involved in this petty partisan politics, Mr. Amess, because I know that you would disapprove of that strongly.

To go back to our traditional love-in with Minister, he has been so helpful in reassuring us on all of our concerns. In particular, the final comments that he made about what would happen if someone sought to bar an inspector from a particular facility or from looking at records. The Minister made it very clear what is inherent in the Bill. With those particular assurances in mind, I am happy to seek leave to withdraw these amendments.

Clause 13

Malcolm Wicks (Labour, Croydon North)

This is very much a procedural clause that ensures that an offence under the chapter can be tried in any part of the United Kingdom, regardless of the location, which may be offshore, in which the offence may have been committed. It also sets out which authorities can institute, or give permission to institute, criminal proceedings in respect of the offshore area. The clause will provide a more streamlined procedure than exists under the current arrangements for prosecuting offences committed offshore. Those are contained in the Territorial Waters Jurisdiction Act, which, as you may recall, Mr. Amess, was in 1878 and would now be disapplied.

Clause 14

Malcolm Wicks (Labour, Croydon North)

Where a gas storage development intends to use a geological feature that contains hydrocarbons, in addition to a gas unloading and storage licence, a developer will also need to obtain rights under a petroleum production licence. That is due to the inevitable production of indigenous hydrocarbons, which will be mingled with the stored gas when it is recovered. Where the intention is not to use a geological feature containing hydrocarbons, such as a salt feature, no rights would need to be obtained under a petroleum production licence.

However, in some cases, a developer with a gas unloading and storage licence may discover trace amounts of hydrocarbons that could not in any way be considered as suitable concentration for their production. In such cases, the gas storage licence holder can seek a direction for the avoidance of legal doubt, stating that a petroleum production licence is not required. The clause empowers the Secretary of State to make such a direction where he is persuaded that the concentration of hydrocarbons is insignificant.

Brian Iddon (Labour, Bolton South East)

I am a little concerned about subsection (4):

“A direction may be given only if the Secretary of State is satisfied that the amount of petroleum which exists in its natural condition in the relevant stratum is so small that it ought to be disregarded for the purposes of that Part.”

My question is: how will the Secretary of State know? Will the evidence come from the company that has previously been extracting petroleum oil from the reservoir, or will independent soundings be taken—that will obviously be more difficult?

When the Science and Technology Committee carried out an investigation into carbon caption storage and published a report in February 2006, we discovered that enhanced oil recovery is the only way of clearing out considerable oil reserves that are in the interstitial cavities of the rocks. That is the only way to ensure that the oil is completely evaporated, or that it is as evacuated as possible of petroleum oil. If enhanced oil recovery has not been carried out, there will be substantial petroleum oil reservoirs down in those cavities.

During the evidence-taking session I had a conversation with Mike Tholen, the Director of Economics at Oil & Gas UK—that is at columns 105-6 of the transcripts for 19 February 2008. He gave the impression that enhanced oil recovery is very common these days, and that most of the reservoirs that would be used for the storage of gas, and later carbon dioxide, would be empty of petroleum oil. However, the evidence that we took in this report suggests otherwise. It is important that whoever polices subsection (4), is aware of those facts.

Martin Horwood (Liberal Democrat, Cheltenham)

I hesitate to follow the hon. Gentleman, who clearly speaks from a very expert and knowledgeable perspective. However, I too, was intrigued to know how on earth this could literally be done. We have talked about the powers of the Secretary of State being very wide, but the power to give a direction in respect of a “relevant stratum” of a geological storage area, seems an extraordinarily technical power to give to a Secretary of State. I would be interested to know in respect of subsection (3)—I am not sure that the Minister quite explained this and I am not familiar with the Petroleum Act—[Interruption.] perhaps my researcher is not familiar with it. What exactly is the significance of being regarded or not being regarded as

“ resulting in the boring for or getting of petroleum”

for these purposes? What is the practical relevance of that? If the extraction of oil from a geological area of this type constituted boring for petroleum, what would that mean in practical terms for the operation of this facility?

That reflects an underlying worry that this is an example of gold-plating—that there is a rather extreme level of detail in the provision that might be better dealt with in more flexible regulation. The worry is that we run the risk that if, for instance, enhanced oil recovery becomes viable unexpectedly in the course of the operation of one of these facilities, the Secretary of State will have almost boxed themselves into a situation in which a particular regime applies to that and there is not sufficient flexibility to allow it to take place on a viable or commercial basis. I would therefore welcome clarification if possible of exactly what the implications are of this near overlap with the petroleum licensing requirements.

Malcolm Wicks (Labour, Croydon North)

My hon. Friend the Member for Bolton, South-East has introduced an important discussion. However, as he knows, we have a great deal of expertise in this type of territory. I recognise that in relation to carbon capture and storage—we shall move on to that aspect of the Bill shortly—it is relatively new territory. However, I am advised that the companies themselves will be required, under the terms and conditions of their licence, to provide the information that he seeks. Tests and drilling information will provide the company with the relevant information.

Earlier, I said that certain powers would not come into effect where the Secretary of State was persuaded that the concentration of hydrocarbons was insignificant. It might be helpful if I say that if circumstances change and the amounts of hydrocarbons increase substantially, the Secretary of State must issue a notice to the licence holder revoking the direction. Again, this comes down to the proper and appropriate management and inspection of what is happening over what is often a very long period. The prime function is for the companies themselves, but I reiterate the importance of the inspectorate that we are putting in place.

Clause 16

Malcolm Wicks (Labour, Croydon North)

We now move on to carbon capture and storage. The debate has often been ahead of me on this one and, indeed, ahead of the Bill, although there have been one or two cases in which it has been appropriate to discuss CCS alongside other activities relating to gas. Therefore some background will perhaps be helpful.

CCS with power generation involves capturing carbon dioxide that would otherwise be released from fossil fuel power stations and storing it permanently in geological formations such as depleted oil and gas fields. Although CCS is considered a promising climate change mitigation measure, it has yet to be demonstrated in relation to a commercial-scale power station. CCS has the potential to reduce CO2 emissions from fossil fuel power stations by up to 90 per cent., which is a key reason why it has created such interest, not least in Parliament.

Steve Webb (Liberal Democrat, Northavon)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

I am willing to concede that it is 90.5 per cent.

Steve Webb (Liberal Democrat, Northavon)

I have not put my anorak on yet today. No, my question for the Minister is this. Does he know whether that 90 per cent. figure is broadly the same for pre-combustion and post-combustion technologies, or does one have greater potential than the other?

Malcolm Wicks (Labour, Croydon North)

Let me see whether I can return to him later with the answer, as I do not have it in my head.

The Government, as the Committee knows, have announced their commitment to the development of CCS by supporting one of the world’s first commercial scale demonstration projects. We had a useful evidence session on that very subject. This chapter of the Bill is intended to provide the regulatory framework for storing CO2 under the sea bed. The next 20 clauses that we shall be debating relate to this important part of the Bill, which will enable this important technology to go forward here in the UK.

The Committee will notice some similarities with the provisions of offshore storage of natural gas and the unloading of LNG. We have these provisions as a different part of the Bill because CO2 storage is a separate issue from offshore natural gas storage or the unloading of LNG. Moreover, there are some differences between the regimes and some additional clauses that reflect the specific issues relating to CO2 storage. These provisions are necessary because existing legislation is not suited to licensing an underground storage of CO2.

The provisions in this chapter are intended to address these shortcomings. They provide a comprehensive and adaptable legal basis for regulating the storage of CO2 in the offshore area. The offshore areas thought to have particularly promising geology for the storage of CO2 are the depleted oil and gas reservoirs of the North sea. This clause prohibits the storage of CO2 and related activities beneath the UK sea bed potentially out to 200 nautical miles, unless it is carried out under a licence and in accordance with the provisions of that licence. In addition to the storage of CO2, the prohibition also extends to the exploration of a site to assess its suitability for storage, the conversion of a site to make it suitable for such storage and the building of relevant installations.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister has raised the important point of the appropriateness of the geology. That is clearly an important potential advantage for Great Britain in pursuing carbon capture and storage technologies because we have a great deal of experience in exploiting these kinds of geological features. But he will recall that it was pointed out during the evidence session that some of these geological features, such as the Miller field, are exhausted. Unless they are exploited for carbon capture and storage on a relatively quick time scale, they will be capped and lost as a potential facility. The time scale of this is critically important. If we have a regime that extends the time scale too far, we will find that that advantage from geology starts to reduce quite sharply with geological features becoming less available as they are capped and effectively removed from the possibility of exploitation for these purposes.

Malcolm Wicks (Labour, Croydon North)

I do not understand why the hon. Gentleman feels that this regime—presumably the one we are discussing now and in the forthcoming clauses—will unnecessarily extend the time scale. We are all anxious to tackle global warming and reduce CO2 emissions here in the UK and worldwide just as quickly as possible. Time is not on our side. I certainly wish that CCS had a history of 20 years and we would be talking more about its universal deployment. But we are not there yet scientifically and technologically. The costs, as we noted the other day in Portcullis House, are obviously considerable. Perhaps the hon. Gentleman can return to this theme on another occasion. I do not want to stop him intervening again, but we have hours of delicious debate on this subject ahead of us.

Martin Horwood (Liberal Democrat, Cheltenham)

I am extremely grateful to the Minister and you will guide me, Mr. Amess, if we veer too far off the immediate clauses before us. The Minister talked about the necessity of getting CCS on stream as soon as possible. The competition regime that the Government are considering and which is relevant to the Bill will not bring it on stream as fast as possible. As fast as possible would be projects like the Peterhead project by BP, which would have been on stream by 2011, which is a good three or more years ahead of the competition outcome. In fact, the Carbon Capture and Storage Association told us in evidence that there were potentially four or so other projects, which I think the association will provide details of to the Minister, which could be on stream ahead of the competition regime. Surely, if the Minister means what he has just said—he pointed out that he wants carbon capture on stream as fast as possible—there is a major flaw in the Government’s thinking on carbon capture and storage, which is presumably reflected in the Bill’s approach.

Malcolm Wicks (Labour, Croydon North)

I will return to the clause in a moment, but with your permission, Mr. Amess, I feel that I should answer that point. The Liberal Democrats are asking for more and more and for more and more money to be spent because of urgency. I am genuinely proud that the United Kingdom, alongside only a few other countries— Norway and perhaps the United States—is ahead of the game. I think that I said in the evidence session that I wish that we were not ahead of the game and that there were 15 or 20 countries with us, given the urgency of climate change policy. No one has demonstrated the whole project—the whole chemistry set. We have useful evidence from around the world and examples of good practice, and we have mentioned Sleipner gas fields where CO2 has been stored successfully. As I understand it, and I think that I do understand this part, no one has built a power station with CCS technology and then demonstrated the stripping out of the CO2, the transportation and the successful storage.

Although, to some extent, I share the frustration of the hon. Member for Cheltenham about the time scales, it is important that we in the United Kingdom, on behalf of the taxpayer, have said that we will spend considerable amounts. His colleague, the hon. Member for Northavon, teased out of me that we are probably talking about a total of hundreds of millions of pounds—not a few shillings or a few bob—to demonstrate the technology. Even the Liberal Democrats have to have regard to costs from time to time.

Martin Horwood rose—

Malcolm Wicks (Labour, Croydon North)

I will give way to find out whether that is true.

Martin Horwood (Liberal Democrat, Cheltenham)

I completely accept that we need to have careful regard to costs when dealing with such projects. The Peterhead project alone could have requested a subsidy of hundreds of millions of pounds over a long time, so we have to be cautious about cost. We have heard the phrase “as soon as possible”. Does the Minister dispute that BP and others expected that the Peterhead project would have been online by 2011, which would have been at least three years ahead of the time scale envisaged under the competition now planned by the Government?

Malcolm Wicks (Labour, Croydon North)

I am not technically in a position to support or dispute what the hon. Gentleman says about BP’s time scale. We have a demonstration project that is using hundreds of millions of pounds of taxpayers’ money and I do not think that it would have been fair to have said to BP or anyone else ahead of a competition, “Okay, we’ll support you.” We want to demonstrate this with coal, and a coal-fired power station was not the Miller field, Peterhead, project. We want to demonstrate it with coal because of the worldwide significance of coal in contributing to the rising temperatures of our planet and climate change. I do not think that the hon. Member for Cheltenham has understood that.

We are not being insular in terms of post-combustion, which we have chosen, and coal. We are looking at global problems. Of course, if money were no object, it would be wonderful to have four or five projects, but given that we are among one or two in Europe that are ahead of the game, I do not think that we are doing too badly. I hope that in the hon. Gentleman’s fairer moments, which I know are many, and the fairer moments of his research assistant, that point will be recognised.

Jamie Reed (Labour, Copeland)

The Minister said in the evidence session the other day that we have no choice other than to go for CCS, irrespective of the state of the technology at the moment. Does he agree that this issue is about the status of the science and the ability of industry to achieve and effect those solutions? It is not about the regulation, as we were discussing under the previous clause.

Malcolm Wicks (Labour, Croydon North)

Yes, of course I agree with that, but we need to set up an appropriate regulatory position in anticipation. We are ahead of the game—perhaps alongside one or two other Governments and some Australian states, I believe. The useful collaboration with the Norwegians is important here because we are doing a lot of technical and important work with them. Anyway, we will not say how we look forward to the Liberal manifesto commitment on expenditure on the matter, although I think that Liberal Members now understand how expensive the technology is, given the current state of the science and technology.

I know that you would encourage me to move forward with discussing the clause, Mr. Amess. I am told that there will be a Division at some stage—not here, I hope, because this clause is so wonderful, but elsewhere in the building.

The clause applies to operators who carry on carbon dioxide storage activities. The provision does not apply to the suppliers of carbon dioxide. Those persons who provide CO2 to the operators of carbon dioxide storage facilities will not require a carbon dioxide storage licence. We recognise that with the advent of the single electricity market across Ireland, there are increasingly different considerations in respect of proposals in Northern Ireland from proposals that might come forward in the rest of the UK. To reflect the differences, therefore, I believe that it would be prudent for my Department and for the Department of Enterprise, Trade and Investment in Northern Ireland to pursue a formal memorandum of understanding setting out how we would work with the relevant authorities in Northern Ireland before granting any consents for carbon dioxide storage facilities in Northern Ireland territorial waters. That rather complements an earlier proposal that I made about a memorandum of understanding with our colleagues in Northern Ireland.

The provisions in the clause are similar to those covering combustible gases in clause 2, which concerns the licensing of offshore gas storage activities for the purposes of offshore gas storage and LNG unloading.

Charles Hendry (Conservative, Wealden)

We are moving on to one of those parts of the Bill on which there will be the greatest amount of discussion, not because of inherent flaws in the clauses, but because of the background of the debate that we need to have to understand their implications. While I have some particular concerns about this clause, it highlights what I would call the failings of the Government’s general approach towards carbon capture and storage.

None of us is in any doubt that carbon capture and storage could be the great hope for energy in the 21st century, or could be the great white elephant. It is quite possible that in 10 years we will have established that it is, as we all think, technically feasible to capture and store carbon, but we might have decided that it is not economically viable to make that happen without masses of taxpayers’ money or a very high price for carbon. Our primary concern is that the Government would be issuing licenses that focus on one type of CCS technology, rather than looking at the whole range of CCS technology that is out there.

In one evidence session, Tom Burke had a few words to say about carbon capture and storage—no doubt they greatly pleased the people who pay his salary—and its role in enabling us to get electricity and energy from fossil fuels without the damaging carbon emissions.

Steve Webb (Liberal Democrat, Northavon)

On a point of order, Mr. Amess, I wonder if you could advise me, but I think that the hon. Member for Wealden implied that one of the witnesses before our Committee was prejudiced in what he said to us and was favouring his paymasters. As we know, his interests were before the Committee, and I hope that the hon. Gentleman might be asked—or encouraged—to withdraw that allegation.

Sir David Amess (Conservative, Southend West)

I was listening carefully to what the hon. Member for Wealden said and I do not think that he impugned the honour of the gentleman mentioned. I think that he was in order.

Charles Hendry (Conservative, Wealden)

I am grateful for your guidance, Mr. Amess. I think that the spokesman for the Nuclear Industry Association did a fine job for the nuclear industry. The spokesman for the British Wind Energy Association did a fine job on its behalf, and the spokesman for Rio Tinto Zinc did a fine job on its behalf, too.

Martin Horwood (Liberal Democrat, Cheltenham)

Mr. Amess has made it clear that up until now the hon. Gentleman has not been out of order. It was quite explicit in briefings that we received, and from the remarks by Mr. Burke, that he was not acting as a spokesman for Rio Tinto, but in a personal capacity. I think that it would be gracious of the hon. Gentleman to withdraw that allegation.

Charles Hendry (Conservative, Wealden)

I am not going to prolong this discussion. I understand where the hon. Gentleman is coming from. I perceived Mr. Burke’s remarks in one way, but if he perceived them differently, we will have to disagree. This is a bit of distraction from clause 16, on which we should be focusing.

Most of the witnesses from whom we heard in the evidence sessions were quite clear about the way forward. It is worth reminding ourselves of what some of them said. The spokesperson from the Trades Union Congress, Mr. Philip Pearson, said:

“We believe that all options should be explored. There is a question about resourcing, and if there are limited Government resources then the Government have clearly made a particular kind of decision. If resources are that thin, you could argue for post-capture, pre-capture or a regional network, if only one of three major options is to be chosen. The trouble is that the CO2 challenge is too enormous to restrict to the development of one option only.”

Those views were echoed by Mr. Roger Salomone, of the Engineering Employers Federation, who said:

“For example, we do not know exactly what the competition criteria are right now, but we could have had criteria around retro-fitting and global applications and there could be other important ones such as cost-effectiveness. I do not see how narrowing that down now does the situation any favours.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 11, Q21-22.]

Malcolm Wicks (Labour, Croydon North)

I did not want to interrupt the hon. Gentleman so early on, but does he recognise that although a perfectly proper and reasonable debate is to be had about whether we were right to choose post-combustion technology for our demonstration project, this Bill is technologically neutral in that respect? It sets up a regulatory framework for the storage of CO2 that does not depend on whether it is pre or post-combustion.

Charles Hendry (Conservative, Wealden)

I agree with the Minister. However, that should be seen against the background of what the licensing regime will achieve. Owing to the way in which the Government are going about the programme, it will achieve less than if the pilot scheme had been done in a more all-embracing manner. I am not going to continue quoting from the evidence sessions because I think that you would rule me out of order, Mr. Amess, for straying away from the clause. However, similar representations were made by Centrica, Scottish and Southern and others. The only people who spoke in favour of the Government’s approach were from E.ON and Npower, which indicated that they wish to bid for contracts under the proposed pilot scheme.

I understand the Government’s argument, which the Minister has just made, about the importance of the export potential to China. However, we are doing that at the expense of our nation’s domestic interests. There would be massive potential for exporting pre-combustion technology. It is one of the most exciting energy technologies around. To some extent, we are closing the door on that opportunity because of the Government’s approach. Their message seems to be, “You might be developing one of the most exciting energy technologies on the planet, but do not expect any help from us in doing so”. Through pre-combustion, CO2can be captured in its totality at much less expense than can be the case for post-combustion. However, as we have heard in interventions, the pilot scheme in Peterhead closed down through lack of support.

The point that I am making was made clear recently by the chief executive of Shell, Jeroen van der Veer. He has argued that there are two approaches to the current energy challenges: what he called “scramble”, where we all do what comes into our heads first and think about what is right for our narrow domestic interest; and what he called “blueprint”, where we co-operate to maximum effect. That absolutely should be the way forward for carbon capture and storage. As the Minister said, other countries are getting involved in that process as well. Very few are as far ahead as we are. However, we should be working together and learning from each other’s work, rather than ploughing our own furrows. We should be trying to achieve the most in the shortest possible time.

Time is not on our side—literally, I see, looking at the clock. The pilot scheme is unlikely to be up and running before 2014. It will then take us some years to evaluate and learn the lessons, so commercial exploitation of the technology is unlikely before 2020—five years after we will get hit by the energy gap. What that means in the short term is that we will be seeing applications for new dirty coal-powered plants being brought forward—they will be significantly cleaner than their predecessors, but still very dirty.

In many cases, those plants will be replacing the 10 GW of coal that will be going out of commission by 2020, but we should be trying to move away from burning coal where we can. We are understandably concerned that that is the way in which we are going to go.

The truth is that we will be in a mess if we cannot get carbon capture and storage to work. We should be looking at how we can work with others to make that happen, and that is the background against which these clauses need to be considered. There are many hon. Members who, on Second Reading and during our discussions in the evidence sessions, have made it clear that they want a broader approach to be taken on this.

I also have concerns about the general licensing approach. The witnesses from the Carbon Capture and Storage Association said that they need a single licensing agreement. How will the Government help them to achieve that? In their written submission they said:

“Recognising that offshore CO2 storage will have many technical and operational parallels with current hydrocarbon exploration and production activities, for which substantial regulatory expertise already exists within the Department for Business, Enterprise & Regulatory Reform (BERR), the Association would strongly favour a comparable ‘one stop shop’ licensing arrangement for CCS projects over which BERR has singular responsibility.”

Will the Minister give us assurances that the approach that he is putting forward in this Bill will help to achieve that? Oil and Gas UK made the same sort of representations:

“On the issue of carbon capture and storage (CCS) and natural gas storage, Oil & Gas UK is concerned that the new licensing scheme does not properly take into account the interaction with the existing petroleum licensing regime or respect the legal rights already conferred, especially on any transfer of a petroleum licence. We believe there needs to be a clear and unambiguous statement within the Bill on the primacy of vested rights under existing Petroleum Production Licences in the event of any conflict between these and the terms of new CCS or gas storage licences.”

I hope the Minister can give some clarification on that.

In clause 16(3), there is a reference to waters in gas importation and storage zones. Does that potentially include anywhere in the wider 200 mile limit around our shores and outside the 12 mile limit? What is the process of identifying and establishing those zones?

Will the Minister say something about the use of saline aquifers on land? Subsection (3) defines a controlled place as being at sea, but some of the witnesses indicated that the best use of saline aquifers would be where most of the potential storage would take place. I think they said that 14 billion gigatonnes of CO2 could be held there out of a 24 billion gigatonnes storage requirement. Some of that would be on land. How do the Bill and the licensing arrangements relate to land-based saline aquifers?

Finally, will the Minister say something about enhanced oil recovery? At the moment, carbon capture and storage applies where there is an enhanced oil recovery capability. There are international treaty obligations that tie us into that and stop us from simply using the sea bed as a dumping ground for carbon dioxide. What are the Government proposing to relax those treaty obligations so that this technology can genuinely move forward and we can achieve the most from it?

The Minister will be aware that we are supportive of the general principle, but we are disappointed by the narrowness of the Government’s approach. There is more that we could achieve in a shorter time scale than will happen as a result of the Government’s approach. I hope that it is not too late to make some corrections to these failings.

Steve Webb (Liberal Democrat, Northavon)

I feel that my pearls of wisdom may be interrupted, but I will give it a go.

I start by asking a general question about this chapter of the Bill on the storage of carbon dioxide. I would like to ask the Minister what I call my idiot’s question. Carbon dioxide is one greenhouse gas. Presumably there are other greenhouse gases that could possibly be captured and stored. I appreciate that this is the biggest one and the one we are talking about now, but would it not be better to legislate generally rather than to legislate for this gas and then find ourselves coming back when we have some technology for liquefying or storing methane, or whatever else it happens to be? Why did the Minister not—and why does the Bill not—legislate in general terms because presumably the structural issues of licenses and so on would apply to any other greenhouse gas?

If I may digress a second, I think that I should put on record my concern about the remarks that were made about one of the witnesses. I have a lot of time for the hon. Member for Wealden. I do not know him very well, but when I have come across him, I have found him to be very fair minded and constructive. I hope that when he leaves today he will reflect on maligning a witness. I think that suggesting that he was special pleading is really not appropriate and I hope that the hon. Gentleman will reflect on that.

Sir David Amess (Conservative, Southend West)

Order. I understand the point that the hon. Gentleman is making, but I should have been much firmer earlier. I will not allow us, when we are debating clause 16, to revisit arguments that were dealt with in private. There was eventually full disclosure of the interests of the gentleman concerned. I know that the hon. Gentleman was making his remarks in a placatory fashion, but I would now ask him to leave the matter there.

Steve Webb (Liberal Democrat, Northavon)

Thank you, Mr. Amess. I am very happy to do that. The interest was in fact declared up front, as you rightly say, before the evidence was given.

3.21 pm

Steve Webb (Liberal Democrat, Northavon)

In the debate so far, Mr. Amess, you have allowed us to start off a whole section on carbon capture and storage and to range somewhat more freely than I am sure we will do on subsequent clauses. In that spirit, I have a couple of observations triggered by the Minister’s comments and by the thoughts of the hon. Member for Wealden on carbon capture and storage.

The important context for the Liberal Democrat position is, and I hesitate to say this, from a European Union briefing that makes the following interesting assertion:

“While energy efficiency and renewables are in the long term the most sustainable solutions both for security of supply and climate, EU and world C02 emissions cannot be reduced by 50 per cent. by 2050 if we do not also use other options such as carbon capture and storage.”

That is a clear statement from an organisation that presumably has no commercial axe to grind that carbon capture and storage is absolutely essential to meeting these targets. I was genuinely interested in the comment made by the Member for Wealden that in a few years time, we might decide that carbon capture and storage is uneconomic. I suppose that it depends on what is meant by “uneconomic”. The Stern report said that unless we tackle the problem now, it will be far more expensive to tackle it in the future. I am not aware of a plan B on this and although the costs that we are talking about may be frightening, the costs of not acting may be more frightening still. That is why we need to get the licensing regime right.

I take the Minister’s point that the licensing regime in the Bill is technology-neutral. The Bill itself does not favour one technology or another, but clearly Government policy has done so, and he referred to the competition that the Government have initiated. He said that we need to get on with CCS as quickly as possible. What my hon. Friend the Member for Cheltenham was saying—and I do not really think that the Minister has addressed this point—is that Government policy has actually obstructed getting CCS up and running sooner. That is demonstrably true. The Minister shakes his head, but the Carbon Capture and Storage Association said in evidence to the Committee that not only the Peterhead project, but four others—all of them pre-combustion technologies—are now on “go slow” because they are not eligible for the competition. Had the Government included those projects within the competition, there would have been a strong incentive to get going, get moving, get them in competition and then we could have been applying the licensing regime to post- and pre-combustion technologies.

Charles Hendry (Conservative, Wealden)

Does the hon. Gentleman agree that it is not right for there to be a race between individual countries in this area, with each trying to win some sort of championship at the end? The scale of these projects is so huge that countries ought to be working together internationally to decide which is going to work on pre-combustion and post-combustion and how we ensure that a range of technologies is tried so that we can work out which has the most promise.

Steve Webb (Liberal Democrat, Northavon)

I absolutely agree with the hon. Gentleman: I know that the Conservatives are great on European co-operation, internationalism and on Governments co-ordinating things rather than just leaving them to the markets. I agree that what he has just described is necessary in this case. It is another example of why constructive co-operation across Europe is such a good thing. That is the approach that we need.

The Minister will probably tell us repeatedly during the course of the Committee’s proceedings—he already has twice—how good Britain is, but does he not realise that the consequence of the policy that he has just described has been to drive CCS projects out of Britain to other countries? For example, I asked BP what it will do now that the Government have scuppered the Peterhead project, and it said it would move them to Abu Dhabi. In other words, the projects will go elsewhere, as will the technology, potentially, and Britain will lose out.

The problem with carbon capture in that regard is that the licences that we are talking about will effectively only be implemented in the first instance on the Government’s demonstration post-combustion project—if the Government think that that is the first thing that will happen, I presume that it is the first application we will have. Our worry relates to the time scale.

Malcolm Wicks (Labour, Croydon North)

I want fully to understand the argument. I am not sure whether the hon. Gentleman is saying that we should have abolished the idea of a fair competition between companies and given it to one company—and I think that he has BP in mind. Is he arguing that we should have done that, or that we were wrong to make that judgment between pre and post? Given that considerable amounts of money from companies go into those exercises, we felt that it was only fair to make our judgment about the technology, and we choose post. Does he think that we should have kept all of them going, given that we could only fund one project? Maybe the Liberal Democrats could fund five, but because we can only fund one, at some stage a judgment has to be made.—[ Interruption. ] And he will start receiving notes from the researchers.

We received advice that the rate at which coal power stations are being built in China means that they will hopefully one day require post-combustion, so does the hon. Gentleman think that that advice was wrong and that the Government were wrong to follow it and to reflect on the global issues, not least of which is China? Does he think that we should have reflected only on the UK? Those were difficult judgments, and I think that we made the rights ones. I will be interested to hear, in the real world, what judgments he would make.

Steve Webb (Liberal Democrat, Northavon)

I am grateful that the Minister anticipated a day when I shall have ministerial responsibility, so I shall practise now. In answer to his question on whether it should have just been given to one company, it clearly should not. However, my critical point is that I do not think that the Government’s approach is up to the scale of the problem. The Minister’s argument is, “We are a bit strapped for cash. We will fund one, but we could not possible fund two, so we had to choose one technology.” His argument is that there is not enough money to have a look at two major technologies.

Although the Carbon Capture and Storage Association told us in evidence quite how exciting the potential for pre-combustion technology is, I do not dispute the potential benefit of the other technology and the international dimension, which is clearly also important. However, I shall give an example of where money might come from to enable both technologies to be pursued. There might be two competitions or two approaches. In our evidence sessions, we talked about the £9 billion that the energy companies are getting from the European decision to hand them a free emissions trading permit, which the Government had a part in. A person as sober and grounded in the real world as the director general of Ofgem has said that that was a £9 billion windfall. That is not the hundreds of million that the Minister talked about for the Government’s competition on post-combustion, but a £9 billion windfall.

Given that the Minister thinks that the companies should—I almost quote—get off their backsides and do some of this stuff themselves, why do not the Government not ensure that, having given them that windfall, some of the money is used precisely for that purpose? That way, we would not have to make this false choice between two technologies, both of which could be critical, dare I say it, to the future of the planet. My point is that if, as their planet slowly fries, our grandchildren say, “If you had gone for two technologies that were actually up to the scale of the problem, we might not be in this mess. But you couldn’t find the money so you only chose one and, as a result, we haven’t achieved the critical improvements we need”, I think that they would hold us responsible.

Brian Binley (Conservative, Northampton South)

In the light of what seems to me to be a sizeable declaration in favour of a windfall tax on energy companies, would the spokesperson for the Liberal party consider saying that it would forgo that, provided that the companies spent the money on working out a project—

Sir David Amess (Conservative, Southend West)

Order. The hon. Gentleman is making an interesting point, but I am afraid that it has absolutely no relevance to the clause that we are debating.

Brian Binley (Conservative, Northampton South)

Point of order, Mr. Amess. It is relevant to the greater world outside, and I wonder whether you might reconsider so that I might finish.

Sir David Amess (Conservative, Southend West)

I have heard what the hon. Gentleman has said, but my ruling is final.

Steve Webb (Liberal Democrat, Northavon)

I am more than happy to be bound by your strictures on that point, Mr. Amess.

Without referring to the intervention, the general, important point remains. That point is that the difference between our approach and the Minister’s is that the Government say that they will put public money into one technology but not another; they hope that the private sector will fund the other. That is essentially the Government position, rather like how they hope that the private sector will do something about fuel poverty instead of the Government making it do something. The same issue applies to carbon capture and storage. The Government could—via a mechanism that we might consider—make the private sector do those things or threaten it with some penalty if it did not, but they have not chosen that route. This section of the Bill and this set of technologies are so vital and Mr. Burke, the expert witness, said powerfully that if we did not get it right, we would be in real trouble. My worry is, therefore, about the Government picking one technology over another.

I want to ask the Minister about another closely related aspect and that is the work—which the Minister mentioned—that the Government are doing in co-operation with China. That work is the UK-China near-zero emissions coal project with which I am sure he is very familiar. I do not know whether he was on the plane with the Prime Minister when he went to China; I do not know whether he gets to go on those jaunts.

My understanding is that the EU and China are working together on a near-zero emissions coal agreement, which incorporates demonstrating and building carbon capture and storage technology in China. I wonder how that squares with what the Minister says. I am not suggesting it is inconsistent—I think it is great. The Minister seems to be saying that we need that approach in the UK because we can sell it to the Chinese, but are we not already working jointly with the Chinese, separately on the demonstration projects that he talked about? How do those two things fit together? Does he know—I do not—which CCS technologies are being considered for the UK-China near-zero emissions coal project? I think that somebody in the room probably does, which is a help. Can he clarify how all of those things fit together?

My specific question on the clause is: we are doing a whole section just on CO2; are there other gases that we would want to bring in at some point, and could we be doing that now rather than having to legislate again? My general contextual question is to try to stress that our view is that although competition and public money are welcome, the scale of the problem means that picking one technology and putting all the public’s eggs in that basket with no public money in the other basket is profoundly mistaken.

Brian Iddon (Labour, Bolton South East)

I will try to be as brief as possible. I am a chemist and so I start from the premise that I would not be burning fossil fuels in the first place, because particularly coal, but also oil, are sources of chemicals for generations well into the future. Petroleum oil will run out far earlier than coal. I accept that we have enormous coal resources throughout the world, particularly in places such Australia but also of course in this country.

On the question of pre-capture or post-capture, I am also slightly worried about what the Government are doing. I will read out the conclusion that the Science and Technology Committee came to in its February 2006 publication, HC 578 volume 1:

“Although it is clearly important that pre-combustion, post-combustion and oxyfuel capture technologies be developed, we believe that for new plant pre-combustion capture offers a significant advantage, in a carbon constrained world, as a potential source of hydrogen. As the technology develops, the Government should take into account the potential strategic importance of polygeneration systems based on pre-combustion capture technology and consider the case for putting in place incentives to promote the use of this technology in new build plant.”

I emphasise that that is “in new build plant”. Obviously it will not be cost-effective to retrofit post-carbon capture technology. That would be too expensive in a plant that has only a few years to live. We therefore dismiss those because Britain will be closing its older plants shortly. I do not know about China or the rest of the world; I suspect that in the rest of the world, particularly in developing countries, those plants will be made to last as long as possible. Perhaps post-carbon capture on older plants in other countries is a possibility.

We are by no means sure about the relative costs of post-carbon and pre-carbon technologies. Post-carbon technology relies on the fact that the carbon dioxide coming out of the plant is separated from all other gases, such as oxygen and nitrogen, by forming a complex diamine carbonate, and then heating the solvent, as it is often called, which boils off the carbon dioxide so that it can be transferred to storage. Diamines are not cheap chemicals and large amounts will be necessary to capture the huge volumes of carbon dioxide coming out of a coal-fired generating plant. Those are getting bigger and are not the small plants that we had post-1940. They are huge and one can see them when driving around the countryside. The cost of that will not be insignificant in my view.

The Select Committee was also quite clear about pre-carbon capture technology. If we are building new plants anywhere in the world, especially in this country, they should be carbon capture-ready. The Science and Technology Committee, after taking a lot of evidence, recommended that pre-carbon capture technology is the only answer because it generates hydrogen. Anyone who went to the Hitachi “Inspire Life” exhibition either yesterday or today will have seen how the Japanese, who are leaders in all technologies, regard the hydrogen technology for driving cars in particular.

I think that hydrogen will be one of the transport fuels of the future because it does not produce carbon dioxide. The Japanese have realised that and are developing the hydrogen economy quite significantly. If we do not jump on this opportunity and encourage pre-carbon capture technology now, I do not think that the hydrogen economy in this country will be kick-started. Therefore, our transport economy will still rely on hydrocarbon fuels to generate the electricity that drives the cars. We will miss a trick and will lose out in competition to the Japanese if we do not kick-start the hydrogen economy. The only way to do that is to have pre-carbon capture technology on all new fossil fuel burning plants.

Martin Horwood (Liberal Democrat, Cheltenham)

I am very grateful to the hon. Gentleman for the very expert argument that he is making. From his point of view or from the Select Committee’s report, is there any comparable project on post-combustion carbon capture and storage that is as advanced as Peterhead, Immingham, Hatfield or any of the pre-combustion projects in terms of planning or implementation?

Brian Iddon (Labour, Bolton South East)

I can tell the hon. Gentleman that pre-and post-carbon capture technologies are not new. In the Algerian desert, oil is being extracted with huge quantities of carbon dioxide in it. It is called the In Salah field and that carbon is now being captured and stored in the desert in the way that I have described. Pre- carbon capture technology is also well known in the chemical industry. The technologies are not new, but using them in the electricity generating industry with coal burning plants is. I do not know—I suspect that nobody knows—whether post or pre-carbon capture technology will win out, but the difficulty with the Government’s decision is that we are not going to be able to test that, as the hon. Member for Northavon said. I would have preferred, as I said in the evidence-taking sessions, at least parallel competitions, if not one competition involving pre and post-carbon technology.

As a scientist, my difficulty is that, if we take the line that the Government are obviously taking—I agree that retrofitting of existing plants is extremely important and I do not disagree with what the Government say about it—it will send the wrong signals on the other technology. As has been said, the danger is that the technology will go elsewhere, but we cannot afford to lose it, because it produces hydrogen.

Malcolm Wicks (Labour, Croydon North)

I was listening with such care to my hon. Friend—he is clearly a great expert on science. I am merely a relatively ignorant former science Minister, so I learned a great deal from him.

I shall not trespass too much at the moment into the pre and post-combustion discussion again—I have made my comments on that. If it is appropriate, I might say more next week. I shall respond to a number of the remarks in the limited time available in no particular order. I suspect that I shall continue with my dissertation in response next week.

The hon. Member for Wealden asked about international collaboration. The UK plays a significant role in a number of international initiatives with the aim of accelerating the deployment of CCS technology. For example, we have a memorandum of understanding with the United States that provides for working together on joint R and D projects, and we expect that the relationship will lead into CCS demonstration, co-operation and sharing. We are also actively participating in the carbon sequestration leadership forum, which is led by the USA.

Co-operation within the EU is wide-ranging and includes work on the zero-emissions fossil fuel power plant technology platform. As has been mentioned, the UK has an energy memorandum of understanding with China, under which we are jointly developing R and D projects. The near-zero emissions coal initiative was announced as part of the EU-China partnership on climate change at the EU-China summit in September 2005. Also, co-operation with the North sea states, particularly Norway, focuses on the work of the North sea basin task force. There is quite a strong international dimension to what we are doing.

The hon. Gentleman asked about the European Union. We hope that other member states step into the arena, as it were, on carbon capture and storage. The EU has spoken of the need for perhaps 10 to 12 demonstration projects, which it aims to deliver by around 2015; as we know, we have promised to deliver one of the projects. I repeat that we, alongside Norway, are very much leading on such matters in the continent of Europe.

I obviously welcome the fact that a number of companies have a strong interest in the different technologies. The point I made in the evidence session the other day was that it does not need to be Government alone who demonstrate the project. It would be good for corporate social and environmental responsibility if one or two of the world’s big energy companies could demonstrate projects.

Martin Horwood (Liberal Democrat, Cheltenham)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

Perhaps the hon. Gentleman has details of the projects.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister made the point that the energy companies should be prepared to put their own money in, but BP put tens of millions of pounds into the Peterhead project. The truth is that none of the projects will be viable without some measure of public support. They will clearly ask for the largest possible amount of public support and we might want to minimise it, but it is important to recognise what they put in.

Malcolm Wicks (Labour, Croydon North)

I suspect that in certain parts of the world companies will do that without Government support in future, and we will be able to test that hypothesis. In clause 1(5), there is a power to designate one or more areas as gas importation and storage zones. In exercising that power, it will have to be considered whether to designate a single zone covering the whole of the relevant offshore area or adopt a step-by-step approach.

I was asked about other greenhouse gases, which was a perfectly reasonable point. CO2 is the most applicable greenhouse gas in the context of fossil fuel burning, including in power generation, but we do not rule out the need to consider measures for emissions of other greenhouse gases. Given the challenge of climate change, CO2 is public enemy No. 1, if I can put it like that.

I was asked about the overall regulation of carbon dioxide storage. The Bill intends regulation through the Secretary of State but allows his powers to be transferred to an appropriate agency. We have not yet decided which will be the appropriate authority. We have some time to think about that, but whichever is chosen, it will have the appropriate expertise to regulate carbon dioxide storage effectively.

We have talked about offshore storage, but the hon. Gentleman asked me about onshore storage. I am advised that it is currently prohibited by theEuropean Union. [Interruption.] Was it the hon. Member for Wealden? There are so many Euro-enthusiasts on the Opposition Benches that I could not quite recall. We hope that a forthcoming EU directive will remove that prohibition; the use of a saline aquifer on land will be assessed when the directive comes forward.

I was asked about enhanced oil recovery, which is important and helps to make CCS more cost-effective. The development of the emissions trading scheme and a higher price for carbon is another important development, but enhanced oil recovery is critical. Through clause 32, we will have the power to define the circumstances under which it will require a CO2 storage licence, and we expect to use it.

I was asked about the need for a clear statement in the Bill about the primacy of vested rights under existing petroleum production licences. The Bill is an enabling framework, and it would therefore not be appropriate for it to contain the detail of our proposed regulatory arrangements, on which, as hon. Members know, we shall shortly consult. We expect the consultation to cover, among other things, the proposed interaction between petroleum rights and CO2 storage licences, but in any event, there is no possibility of taking away vested rights. For instance, if a petroleum licence holder already has consent to drill in a particular area, we could not take it away by granting a gas storage licence over the same area. We are, however, amending section 47A of the Petroleum Act 1998 to ensure that, in deciding to give such a consent, we can take into account gas storage and CCS activities. That is already the case for wind farm activities, and we shall consult on guidance that we will issue in relation to the new activities.

I apologise if there were other questions that I have not dealt with, and I hope that I have persuaded the Committee to support the clause.