Energy Bill

Public Bill Committee, 6 March 2008.

Clause 64

Malcolm Wicks (Labour, Croydon North)

Good morning to you, Mrs. Humble, and to the Committee.

Let me make a very brief introduction to the clause. As hon. Members know, one of the themes in the Bill is the decommissioning of various infrastructure involving oil and gas drilling and exploitation, as well as gas storage in the future. The Bill also focuses on the decommissioning around carbon capture and storage in the future, decommissioning relating to nuclear, which we discussed at useful length recently, and the decommissioning of renewables.

The clause concerns renewables and their eventual decommissioning. The Government are committed to ensuring that renewables play an increasingly important role in the UK’s energy mix. It is anticipated that a large proportion of the renewable electricity in the future will be generated offshore. The reforms of the renewables obligation, as we discussed in part 2, are intended to support that growth by providing increased levels of support to the offshore wind industry.

As a signatory to the United Nations convention on the law of the sea, the Government have international obligations to ensure that redundant offshore installations are removed from the sea bed to ensure safety of navigation and to ensure the protection of fisheries and the rest of the marine environment.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for giving way quite so early. Can he tell us how many turbines he is considering in relation to this? In particular, the Government have talked about 33 GW of offshore wind, so that is the 8 GW plus 25 GW. Does he expect that to be the installed capacity or the available power? In other words, if there was a 40 per cent. load factor, one would need more than that to get 33 GW. Therefore, is that the total capacity or the actual output?

Malcolm Wicks (Labour, Croydon North)

Perhaps I can come back with the details later. The Secretary of State has indicated that, in a future licensing round, that kind of capacity will be available. It will be subject to environmental assessment and so on, so it is difficult at this stage to predict precisely the number of offshore wind turbines. As I understand the developments—and this is a matter for the commercial sector—we may well see much larger wind turbines in the future. There is a lot of work going on offshore and I know that our new Energy Technologies Institute is interested in the implications of offshore wind and whether future technology might be different from the onshore wind turbines that we have had. If I can return to the hon. Gentleman’s specific question at some stage, I will.

In line with the “polluter pays” principle, sections 105 to 114 of the Energy Act 2004 introduced a statutory decommissioning scheme for offshore wind and marine energy installations. The provisions in chapter 2 of the Bill are intended to strengthen the decommissioning scheme in the 2004 Act. The clause will add associates of the developer into the list of persons from whom the Secretary of State may require a decommissioning programme.

Clause 65 ensures that funds set aside for decommissioning cannot be accessed by creditors in the event of a company becoming insolvent and will be available only for the purpose that they were originally set aside for. Clause 66 ensures that the Secretary of State has access to the necessary information when making a judgment on the suitability and financial viability of a decommissioned programme put forward by an operator.

As I mentioned, clause 64 amends the Energy Act 2004 by adding associates of the developer, such as a parent company, to the list of persons from whom the Secretary of State may require a decommissioned programme. The ability to require a decommissioned programme from an associate follows practice in the offshore oil and gas sector, which is set out in section 30 of the Petroleum Act 1998. It seeks to ensure that the costs of decommissioning can be met without recourse to the taxpayer in cases where the developer does not have the financial resources to meet those costs, but the associate does. The issue of not having recourse to the taxpayer is central to our decommissioning programme.

Steve Webb (Liberal Democrat, Northavon)

As the Minister says, the clause defines an associate, and again we have the issue of definition. When we queried the threshold last time, the Minister said that we would come to it—I think with reference to oil and gas but it applies here as well. Under the clause, an associated company would own more than half of the share capacity, but under the nuclear provision, it would be 20 per cent. of capacity. Does the Minister not think that there is a risk of companies organising their business to get under the 50 per cent. threshold here? If it was necessary to add a 20 per cent. threshold for nuclear, why does the same consideration not apply to this clause as well?

Malcolm Wicks (Labour, Croydon North)

I think, as we discussed when we considered the nuclear issue, that the issues at stake when it comes to nuclear are mighty big ones in terms of the decommissioning costs. As we noted, hundreds of millions of pounds are involved, and then there is the sheer importance of an effective decommissioning of a nuclear plant and of disposing of the waste in the ways that we have discussed. That might be why we were advised to be more rigorous when it comes to nuclear, but the provisions here, by looking at associated companies, are prudent in terms of safeguarding the taxpayer.

Provided the associate has adequate financial resources, the new power will enable the Secretary of State to approve a decommissioning plan that would otherwise have had to be rejected if it had come from a developer with inadequate financial resources of its own. The clause will provide greater clarity and certainty for developers and investors by giving the Secretary of State more options to approve decommissioning programmes in a wider range of circumstances, with a wider range of developers. As a result, we will have firmer foundations for growing the robust and internationally competitive offshore renewables sector that we all wish to see.

For the purposes of the provisions in this chapter of the Bill, the clause includes a test used to define associates. A company—let us say company A—is an associate of another company, B, if A controls B or if a third company controls both A and B.

In summary, these provisions will further improve the business environment for offshore renewables by providing the Secretary of State with greater flexibility in approving decommissioning programmes. They will now allow the Secretary of State to look to a controlling associate for a decommissioning programme where the developer does not have sufficient assets of its own. That is already the case for oil and gas. These new provisions should allow more programmes to be approved, which in turn will assist more offshore renewables projects to proceed.

On associate definitions, definitions are consistent with the oil and gas regime. The difference from the nuclear regime reflects, as I was saying, the greater liabilities and we mentioned as an example somewhere between £600 million and £900 million. The hon. Member for Northavon is interested in the noughts and there are quite a few noughts there.

I think that that is the answer—we just need greater rigour and greater safeguards when it comes to nuclear energy, so we have £600 million or more compared with, say, £10 million for offshore wind energy. I do not think it is a full answer to the hon. Member for Wealden’s question but it might help if I say that at the moment there are currently some 394 MW of installed offshore renewable energy generating capacity in the UK, with a further 3.1 GW of capacity consented. There is a further 2.1 GW of generating capacity under consideration, with another 3 GW expected from developers that have been issued with round 1 or round 2 licences from the Crown Estate.

On the hon. Gentleman’s question about 33 GW in the future, we are not in a centrally planned state, so one cannot predict that that will be the amount. We have tried to facilitate those kinds of developments, but I am advised that it is roughly 2 MW per turbine at the present time. However, as I indicated, the feeling I get from industry is that in future, some of these offshore capacities could be much larger, so the number of turbines would therefore be smaller than the current arithmetic might dictate.

Charles Hendry (Conservative, Wealden)

It is a pleasure to serve under your chairmanship, Mrs. Humble. It is also a great pleasure to find that our friends from the Liberal Democrats are here with us today, still in their posts.

Steve Webb (Liberal Democrat, Northavon)

It took the hon. Gentleman 10 minutes to get to that.

Charles Hendry (Conservative, Wealden)

Exactly. Had I had a chance to get to it earlier, I would have done so. However, whether the Liberal Democrats are here to abstain in person or whether they will be voting against one another remains to be seen.

We have touched on some important issues during the Minister’s speech. We have to get a greater understanding of the order of magnitude that we are looking at. He says that we do not live in a centrally planned economy—sometimes it feels a bit like that, but I realise that we cannot determine exactly how many turbines there should be. However, there is a fundamental issue as to whether the Government’s idea for 33 GW is for installed capacity or total output. If it is total output, one needs many more turbines to deliver that, because the load factor offshore is typically about 40 per cent. If one wants to get 33 GW of output, 80 GW of installed capacity is needed. So, we are looking at a massively different order of magnitude. To understand the decommissioning process, we need greater clarity on this issue.

Hugo Swire (Conservative, East Devon)

Does my hon. Friend share my concern about the lack of attention that has been given to the possible effect on our very busy shipping lanes—particularly between Britain and France—if there is to be an explosion in the number of offshore wind farms?

Charles Hendry (Conservative, Wealden)

In some cases, I am relatively relaxed about it. Many of the offshore turbines will be built on sandbanks, which is the logical place to put them—shipping should not be going where there are sandbanks. In most cases that would be all right. However, if one looks at the potential numbers, an enormous amount of the turbines would have to be put into deep waters. To take that a stage further, 33 GW of output, if it was 2 MW per turbine, is 16,000 turbines. If one needed the 80-plus GW to deliver that amount of output—

Malcolm Wicks (Labour, Croydon North)

To help the hon. Gentleman, the 33 GW is for installed capacity.

Charles Hendry (Conservative, Wealden)

Right. Now that raises an entirely different challenge for the Minister, which is that if one has only 33 GW of installed capacity, the total output from that will be about 8 GW. The Government cannot meet their European commitments with 8 GW of wind power. If we are getting only 8 GW of power from them—[ Interruption. ] Sorry, I mean 12 GW; I bow to the economics graduate maths of my colleagues. We will be unable to get close to the European commitment of 15 per cent. of our energy to come from renewable sources by 2020. The Government cannot have it both ways—we need greater clarity from them on this.

We are, however, still looking at a huge number of turbines. If one wants 33 GW of installed capacity, at 2 MW per turbine that will come out at 16,000 turbines. Even if one goes to the highest expectation for how powerful those turbines could be, which is potentially 5 MW, one is still looking at an enormous number of turbines—7,000. The physical construction programme implications of that—how many can be built each day—present a major challenge.

The Government now have a gaping hole between the renewables that they think they can achieve and what will be their commitment to the European Union to meet their 2020 target. I hope that the Minister can give us some assurances on how we can deliver this, because the Government are trying to have it both ways.

Some other issues need clarifying. Who will be responsible for inspecting offshore renewable installations to ensure that they are still safe? We are looking, potentially, at thousands of offshore turbines. They will have sophisticated remote monitoring systems to show how they are working and how much electricity they are generating. However, that is not the same as having up-to-the-minute information on the safety of an installation. Just this week, we saw pictures in the papers of a wind turbine disintegrating in the force of the wind. What will happen if they start to break up? How will the process work for requiring the immediate dismantling of the residual elements of a turbine? A fractured turbine is a much greater danger in relation to shipping and others issues than a turbine with all its blades in place.

Presumably, this also relates to underwater installations. How will they be monitored and by whom? Who will determine that such installations have stopped working permanently and are genuinely at the end of their lives? Will there be a certification of worthiness, so that an inspector can say that an installation’s useful life is over, even if the operator does not agree?

Hugo Swire (Conservative, East Devon)

There is also the question of installations being liable to possible terrorist attack.

Charles Hendry (Conservative, Wealden)

That is always going to be a risk in our current environment. One needs to be able to react quickly when there is a terrorist atrocity and to ensure that the installations affected have been made safe and decommissioned effectively.

Will the Minister also tell us more about how the decommissioning fund will work? Over what period will the operator contribute to the fund? Will there be a standard formula or different options? How much will need to be put into the fund before a wind farm starts operating? Who will manage the fund, and who will establish how much needs to be put in and whether it needs to be topped up from time to time?

The final point relates to the Severn barrage or potential Severn lagoons. I am not certain whether that counts as an offshore or between-shore installation, but it would be useful to know from the Minister whether it is covered. I assume that a Severn barrage would be designed and constructed to be permanent, and not to be decommissioned at all. The hope is that it would be generating power over many decades, with parts replaced as necessary. Therefore, does there need to be a decommissioning fund for a project such as the Severn barrage or would it be exempt from the rules that the Minister is suggesting?

Steve Webb (Liberal Democrat, Northavon)

Good morning, Mrs. Humble. In this section on offshore renewables, it seems appropriate to ask a couple of questions about the connection between offshore renewables and the grid.

The Government’s model, as I understand it, is that if I want to set up an offshore wind turbine, I might be responsible for the connection to the mainland. I am not sure about that. Presumably, in the context of the clause, I would be responsible for decommissioning the connection when I am done—not just the turbine, but the infrastructure. As it is critical for the roll-out of wind turbine networks, how is that interconnection process going to work?

If an operator not only has to get a turbine out there and running, but is also responsible for the connection to the mainland and from there to the grid, and if that is a purely private obligation, that could be a serious disincentive to the roll-out of offshore wind power. If there were some concept of a grid—a trunk network akin to the motorways—perhaps with the state paying, or at least ensuring that it was non-competitive, there would be more of a boost to the offshore renewables we are talking about.

The Minister has not yet been clear about where that infrastructure will come from. Decommissioning arises only if the private sector provider has put in the infrastructure. I may be hazy about that as I am new to the issue, but I get the sense from the industry that there is considerable concern that the roll-out of offshore renewables will be hindered if the Government require the offshore renewable developers also to put in place the infrastructure to bring the power onshore. If there is an area offshore where several providers—several energy companies—are in place, is it rational to expect them to have their own separate infrastructure to bring the power onshore and, indeed, from the point where it touches land to the point where it accesses the grid, or is there any scope for sharing? If everybody has to do everything for themselves, there is great multiplication and additional decommissioning costs at the end of the process.

Earlier in the Bill, we looked at renewables obligation certificates and giving extra incentives to different sorts of technology. Presumably, that is a key part of the Government’s renewable energy strategy, so they will want to remove barriers. How does the Minister see the infrastructure working and being operated between these offshore renewable installations and the mainland and then the grid? Who would own it, who would provide it and who would decommission it in the context of the clause?

Malcolm Wicks (Labour, Croydon North)

Again, this has been a useful debate and happily, small sections of it were relevant to the clause. I say that because there could be a debate about offshore wind, but this is not that debate; this is something rather narrower about decommissioning.

Let me try to be helpful, because the hon. Member for Wealden was interested in capacity and how it relates to generation. I am advised that 33 GW of capacity equals about 8 GW of generation, so I hope that that is helpful. I am trying to work out the arithmetic and I think that is where we are, for the obvious reason that the wind does not blow all the time. Let us just make the obvious point, because I get a lot of correspondence from constituents of MPs saying, “What happens when the wind stops?” Basically, because of the national grid, there is a mix of energy sources and we need the base load and so on.

Let me say at the outset that we have never said that where we are now with our planning will necessarily get us to the European target, although of course if we move towards real capacity offshore, as we hope to, that will help. As I said in earlier sittings, in the light of the European target, which is likely to be 15 per cent. or thereabouts—we are still discussing that—we are now developing a new renewable energy strategy. We hope to be able to consult on that and to issue a paper sometime during the summer. I see it in two phases. What we have done in the past, and what we were planning prior to the Euro target of 2020 gets us quite a long way, but it does not get us to the 15 per cent., or whatever it will be. That will require something of a revolution, which is good because we need a wider revolution in terms of decarbonising our economy, so we are working hard on what steps we now need to take. I certainly recognise that the gigawatts and how that translates into generation will not, by itself, enable us to hit our target.

Charles Hendry (Conservative, Wealden)

I will not go into further extended discussion about gigawatts as I realise that the Committee’s eyes are glazing over, but does the Minister agree that to get 15 per cent. of our energy from renewable sources translates into about 35 to 40 per cent. of our electricity having to come from renewable sources? That is what independent people are generally saying: in order to reach the European target of 15 per cent., a much higher proportion—35 to 40 per cent. of our electricity—will have to come from renewables.

Malcolm Wicks (Labour, Croydon North)

I would not want to be tied to a certain percentage, but I think the hon. Gentleman has the right order of magnitude. In terms of hitting our European target, whatever it turns out to be—let us say, for the sake of argument, 15 per cent.—clearly the easiest way of doing that is in terms of electricity. Obviously we want to make progress in other ways, on motor transport for example, but the easiest way is in terms of electricity, so the implication for the future proportion of our electricity generated from renewables is significant. Therefore, I agree with the hon. Gentleman on that.

Let me deal with some other issues. The hon. Member for East Devon asked about shipping. Principal shipping lanes will be avoided. We are not going to plant wind farms in the middle of a big, obvious shipping lane. For non-principal lanes, developers would need to reach a commercial agreement with those who use them. I hope that the hon. Gentleman is reassured that we have that issue in mind. In terms of the safety inspection of offshore installations, I think—although sometimes I am wrong, so I will check—that it is the responsibility of the Health and Safety Executive. If I am wrong about that, I will correct myself in due course.

The hon. Member for Northavon asked about a fund with regard to offshore decommissioning. Our judgment is that unlike with nuclear power, that is not necessary because of the orders of magnitude. Earlier I contrasted what may be a £10 million figure with the much larger number of noughts needed for nuclear, and we do not think that that is necessary. It is important for the Secretary of State to be sure that there is financial security at the start of the life. That is where we need the reassurances.

I am not sure whether the hon. Member for East Devon is a supporter of offshore wind or not—

Mr. Swire indicated assent.

Malcolm Wicks (Labour, Croydon North)

Good. The hon. Gentleman is understandably worried about terrorist attack. We are all worried about that, and a number of measures are in place—it is not just an issue for offshore wind. However, because of the wide range of areas covered, a terrorist attack on a single or multiple wind farm, or other renewable station, would not have a significant impact on generating capacity. That is not to say that we are relaxed about it—of course we are not—but given the scale involved, I do not think that it is a big issue.

The hon. Member for Northavon asked about grid transmission. We had an earlier discussion about the new regime on transmission under clause 40. On my understanding, the regime that we are putting in place does not require or even allow the installer to run the grid to shore. That will be subject to competition; it is a new regime and other companies will be players in installing those grids.

Hugo Swire (Conservative, East Devon)

With regard to offshore connectivity to the main grid, is it envisioned that that will be by underground power lines or by overhead power lines? If they will be overhead power lines, what effect will that have in areas of outstanding natural beauty, which are often around the coast where the power will be coming onshore?

Malcolm Wicks (Labour, Croydon North)

They would be underline—under the sea

Hugo Swire (Conservative, East Devon)

And when they come onshore?

Malcolm Wicks (Labour, Croydon North)

I may need to come back to the hon. Gentleman on the exact arrangement there. Certainly, the power lines will run under the sea, but I will come back to him about what I suspect may be slightly different arrangements for when they come onshore. In terms of areas of outstanding natural beauty, the lines will only affect that of fishes and other sea creatures, as they will run under the sea. I am advised that such power lines tend to be underground, but it would depend on particular licensing and consents.

Hugo Swire (Conservative, East Devon)

The Minister will be aware that there is a real issue here. Of course I appreciate that the power lines will be under the sea when they are offshore, but they have to come onshore at some point in order to connect to the grid. My question is simple. When the power comes onshore on our coastline, will it still be underground? If it is overground, there will be huge cables and pylons and so on, and they are unsightly and would disfigure our coastal landscape. This warrants more than a slightly flippant remark about it endangering fish and other such life.

Malcolm Wicks (Labour, Croydon North)

I recommend a sense of humour to the hon. Gentleman on occasion.

Hugo Swire (Conservative, East Devon)

I am well known for my sense of humour, but I like the coastline.

Stephen Ladyman (Labour, South Thanet)

Will my hon. Friend give way?

Malcolm Wicks (Labour, Croydon North)

I want to try to deal with the point, but I think that I can best deal with it later, if there is an opportunity to do so, or in correspondence. I can well imagine that the arrangement might be rather different, depending on matters such as terrain and proximity to the grid and so on. I shall have to come back to the hon. Member for East Devon on this issue; I do not think that there is one particular answer. I have visited a number of such sites and I am trying to remember the arrangement, but I suspect that it will vary. I appreciate that the hon. Gentleman wants to protect natural beauty. I do not know whether that is a cue for my hon. Friend the Member for South Thanet.

Stephen Ladyman (Labour, South Thanet)

I will try to be helpful to my hon. Friend. One of these lines has been planned to come ashore in my constituency, on a site of special scientific interest. I can assure him that it will be under the ground, hidden from view, and that it will not emerge until it gets to the substation. I warn him, however, that my local fishermen are worried about the effect of magnetic fields on the sex life of skates, so he might have to deal with that at some point.

Hugo Swire (Conservative, East Devon)

The Minister must get his skates on.

Malcolm Wicks (Labour, Croydon North)

Some humour! I thought that it was quite good. I thank my hon. Friend the Member for South Thanet for his intervention, but it is far too early in the morning to pursue that particular issue. To help the hon. Member for Northavon, we discussed the matter of transmission earlier. We are pursuing an approach based on competitive tendering for offshore transmission, so the person who builds the installation will not have the responsibility for wiring it up to the shore and protecting natural beauty. We expect that all round 2 projects will want to connect directly to the shore—round 2 is where we are at the moment.

On the hon. Gentleman’s point about the grid, in future, given the issues surrounding the gigawatts and the number of wind turbines, ideas about some kind of grid become quite interesting. We discussed the idea of a European grid—not across the whole of Europe, but where appropriate. Some kind of hub and spoke offshore transmission system, with multiple developers using a single line to shore, is likely to be what we will want in certain areas. That line would be owned by the people involved in the process, and they would have the decommissioning responsibilities for that as well.

I am now advised that I can be more precise on health and safety. The Health and Safety Executive took over administrative responsibility for the health and safety of, among other things, offshore electricity installations in 2006. It is worth noting that the formal statutory transfer of those types of electricity-related safety functions forms part of the Bill. We will probably come on to issues affecting electricity safety this afternoon. I think that I have dealt with that point, which is again about offshore lines connecting to shore.

Subject to the normal consent process, the developer will make a proposal that we will consider. In doing so, we will consider issues such as visual impact and impact on environment when deciding whether to grant consent under the Electricity Act 2004. I shall try to come back to the hon. Member for East Devon on the practicalities of what happens currently, but I may not be able to do so immediately.

Charles Hendry (Conservative, Wealden)

I raised the issue of the Severn barrage. The Minister has not yet come back on that point and I would be grateful if he did so. Will he also tell us how this aspect of the Bill relates to hybrid facilities? We had a discussion in an earlier sitting about the Eclipse Energy project, which you may be familiar with, Mrs. Humble, as it is just off the coast of your constituency. It will be a combined renewable wind and gas facility. When the wind is blowing, the facility will be used to create electricity; when it is not, the gas from a significantly depleted gas field will be used to honour the project’s electricity commitments. Will that fall under two separate decommissioning funds or is there some element in these measures to take account of such hybrid facilities?

Malcolm Wicks (Labour, Croydon North)

I do not think that there will be one specific regulatory regime for hybrids. There are already regimes in place; the Bill will reform and improve those regimes, but again I am sorry that I will have to come back to the hon. Gentleman on how the two regimes will work together. That is a detailed and important question, and I am glad he asked me about that.

The Severn barrage is—like the hon. Gentleman, I hesitate to say “offshore”—a rather especial project. The Government have indicated their interest in it in principle, as he knows. Following the work of the Sustainable Development Commission, we are proceeding to investigate that, but it is going to take quite a lot of study, not least in terms of the ecology and environmental impact. We are looking at the kind of studies that we will require; it is not going to be built tomorrow.

I am not a lawyer, but my guess would be that, were the project to proceed, it might require new legislation. No doubt, as part of that, we would look at some issues concerning eventual decommissioning. In my mind’s eye, I can see a movement in 150 years’ time to save the Severn barrage. The successor to the hon. Member for East Devon might say that it is an area of such natural beauty—so loved and featuring on postcards and photographs—that it must be saved, even though, after so many years, it may not be fit for its original purpose, but I jest, at the risk of annoying him.

Clause 65

Malcolm Wicks (Labour, Croydon North)

Thank you, Mrs. Humble, for reminding us about that important amendment, which I did not immediately call to mind.

Hon. Members will remember that we discussed protection from insolvency for decommissioning funds in the context of nuclear waste. The clause will ensure that moneys set aside for decommissioning of offshore renewables installations cannot be accessed by creditors in the event of a company becoming insolvent. It will do that by disapplying the relevant insolvency legislation. It will ensure that any such moneys will not be restricted or prevented from being used for decommissioning if the company with the decommissioning obligations becomes insolvent. Similar arrangements to safeguard funds already exist in section 29 of the Coal Industry Act 1994.

Without such provision, if a company with decommissioning obligations were to become insolvent, creditors could access moneys set aside for decommissioning. In other words, payments could be returned to creditors for purposes other than decommissioning. That could mean that there would not be sufficient moneys remaining to pay for decommissioning after those payments to creditors.

The clause will also allow the Secretary of State to direct that the information regarding relevant financial security arrangements be published by the person responsible for the decommissioning programme—for example, in the financial pages of that person’s website. That will ensure that informed decisions can be made by creditors: they will know that there are certain earmarked funds that they cannot access.

To ensure compliance with the direction to publish information about relevant financial security arrangements, the clause also enables the Secretary of State or a creditor of the person responsible for a decommissioning programme to apply for a court order if the direction is not followed. It is Government policy to ensure that developers make adequate provision for the cost of decommissioning their installations—to protect the environment, but also to protect the taxpayer and to meet our international obligations. By protecting any funds set aside for decommissioning from insolvency, we are minimising the risk to the taxpayer.

Charles Hendry (Conservative, Wealden)

I have a couple of quick questions. Will the trust fund have to be set up within the United Kingdom, or might it be set up offshore—at the risk of a pun, an offshore offshore fund? That is a serious issue. If the fund is set up offshore—for example, in Liechtenstein—it may not be subject to UK laws. How would it be covered by the legislation?

The Minister talked about the super-grid, which also raises an interesting issue. The super-grid would have a range of offshore installations in a range of different territorial waters. How is that covered? Will there be a fund specifically for decommissioning the turbines in UK territorial waters? What will be in place to stop that fund being used to decommission the turbines that happened to be in German or Dutch territorial waters? Will the use of such funds to decommission facilities that have been set up in someone else’s territorial waters be explicitly prevented?

Malcolm Wicks (Labour, Croydon North)

The second question is for the future, because we are not there yet. The European Union has asked the former German Energy Minister, Mr. Adamowitsch, to look at the issue as related to offshore wind—we noted his role in earlier conversations. I have had discussions with him, but he has not yet reported. That is an important point for the future. No doubt those issues will be looked at then, in an appropriate way. The hon. Gentleman has raised an interesting question but, with due respect, it does not require an urgent answer, because we are not there yet.

In terms of offshore offshore, I might need to take advice. [Interruption.] I thought it was a sound line, but it fell to the ground immediately. The Secretary of State will clearly have to be certain that there are appropriate arrangements for the funds. I anticipate that funds proposed by a developer will be approved case by case by the Secretary of State, so he or she—who knows, in the future?—will make a judgment on the suitability of the funding proposal. It is unlikely that we will approve a programme if the fund is outside the UK. It comes down to the Secretary of State’s sound judgment on such matters.

Clause 66

Malcolm Wicks (Labour, Croydon North)

The clause, which concerns provision of information to the Secretary of State, will ensure that the Secretary of State has access to the necessary information to carry out his functions as they relate to the decommissioning of offshore renewables. Those functions include making a judgment on the suitability and financial viability of the proposal contained in a decommissioning programme—the offshore issue relates to that.

The provisions will therefore enable the Secretary of State to require information about the place where the offshore renewable energy installation is or will be situated; the offshore renewable energy installation and an associated electric line; in certain circumstances, details of an associate as defined by the Bill; the financial affairs of the person receiving the notice for information and, in certain circumstances, the financial affairs of an associate as defined by the Bill; the proposed security in relation to carrying out the decommissioning programme; and, in certain circumstances, the name and address of any person whom the recipient of the notice believes to be an associate.

The clause will make it an offence to fail to comply with a notice requesting information without a reasonable excuse. The penalties are set out in section 113 of the Energy Act 2004. One of those is becoming rather familiar to us, and I have had the honour of reading them out on a number of occasions. However, I know that the hon. Member for Wealden likes the full works, as it were, so an offender is liable

“on summary conviction, to a fine not exceeding the statutory maximum”.

That is £5,000 in England, Wales and Northern Ireland, and £10,000 in Scotland. I will not comment on why it is £10,000 in Scotland because that matter is devolved. On conviction, they are liable

“to imprisonment for a term not exceeding two years or to a fine, or to both.”

The hon. Gentleman may want that to be 10 years, with all those prison places to fill up—in the very distant future, may I say? I do not know, but I do not want to anticipate his question.

Anne Main (Conservative, St Albans)

I do not wish to tempt the Minister down the route of talking too much about Scotland. However, will he reassure the Committee that the £10,000 fine has nothing to do with Scotland being more worried about the severity of the crimes, but applies because it is a harsher regime?

Malcolm Wicks (Labour, Croydon North)

I am sure that my hon. Friend the Member for Glasgow, North-West has no direct experience of that. I think that the penalty is different because Scottish law has different origins and differs from English law in many respects. Such things are lost in the mists of time, so I will not go down that route.

The clause also provides that it is an offence for a person to disclose information obtained by virtue of a notice under the clause unless it is disclosed with the consent of the person providing the information—that it

“is for the purpose of the exercise of the Secretary of State’s functions under this Chapter, the Electricity Act 1989 or Part 4 of the Petroleum Act 1998”,

or because it is otherwise required by law. Under the Bill, the offences in relation to the disclosure of information are also included in the decommissioning provisions for nuclear waste and for oil and gas installations. The penalty provisions for such offences mirror those in section 41 of the Petroleum Act 1998 and section 113 of the Energy Act 2004. It is important that information can be obtained for the Secretary of State to fulfil his functions under the chapter. The clause clearly states for what allowable purposes such information may be further disclosed. Clarity on information use and disbursement is essential to enable the decommissioning regime to operate as intended and to ensure that all operators meet their responsibilities in regard to decommissioning.

Clause 67

Joan Humble (Labour, Blackpool North and Fleetwood)

With this it will be convenient to discuss new clause 19—Notices—

‘(1) Section 31 of the Petroleum Act 1998 (c. 17) (section 29 notices: supplementary provisions) is amended as follows.

(2) After subsection (2) insert—

“(2A) Subject to subsection (3), the Secretary of State shall not give a notice under section 29(1) in relation to an offshore installation to a person within paragraph (b) or (c) of section 30(1) unless the person owns or has owned any interest in the offshore installation.”’.

Malcolm Wicks (Labour, Croydon North)

Part IV of the Petroleum Act 1998, which consolidates provisions from the Petroleum Act 1987, sets up the statutory scheme for the abandonment of oil and gas facilities. We are now moving on from renewables. Since the regime was established in 1987, there have been changes in business practices in the oil and gas industry. For example, there has been increasing participation by smaller players with fewer assets, who, as such, bring increased risks that they might not be able to meet their decommissioning liabilities. This issue is to do with the maturity of the fields on the UK continental shelf in the North sea. Experience has shown that it has not always been possible to share liabilities equitably between the parties responsible for installations or pipelines. This provision will strengthen the existing abandonment regime by amending part IV of the 1998 Act.

The clause will strengthen the provisions in three ways in response to the above challenges. First, it will extend the list of persons who may be required to provide a decommissioning programme upon receipt of a section 29 notice under the 1998 Act. That will include licensees who have transferred their rights to another company without the consent of the Secretary of State. Companies should not be able to avoid their decommissioning liabilities by such unconsented action.

Secondly, it clarifies the existing Petroleum Act provisions so that it is clear that they apply to limited liability partnerships in the same way as they apply to limited companies. That includes the existing provisions for making associates, such as parent companies, responsible for decommissioning when there are, for example, concerns about the financial strength of their subsidiary.

Finally, it will ensure that all those involved in a development share the decommissioning obligation from the same point in time. The wording of the current legislation means that the operator can be made responsible for decommissioning when construction of the platform starts, but his fellow licensees cannot be made responsible until one of the specified activities, such as production, has commenced. That may leave a significant period when the liability rests on a single company, which I do not believe is equitable.

By amending the 1998 Act, the clause will help to ensure a clearer legal framework of rights and duties for all concerned, which will provide greater clarity and certainty for developers and investors.

John Robertson (Labour, Glasgow North West)

To help the hon. Member for St. Albans, the Scottish Presbyterian upbringing makes us a lot harder and much more unforgiving than most people. That is linked to why I rise to speak to new clause 19, which is tabled in my name, and is a technical proposal designed to probe the Minister for information. I hope that colleagues will not find it too boring, as I am afraid that that is the end of the light-hearted bit.

The Minister will be aware that now that oil and gas exploration and production on the UK continental shelf is at a more mature phase of development, it is often the case that a single licence governs the development activities of various groups of licensees, all with interests in separate blocks and unrelated infrastructure. Industry representatives have told me that the subdivision of licence interests has increased in recent years, particularly with the introduction of the fallow block initiative. It has been further complicated in instances where blocks have been re-licensed following decommissioning or partial decommissioning of existing infrastructure.

In discussions with the industry, officials from the Department for Business, Enterprise and Regulatory Reform have stated that their policy is to ensure that a party to a licence will incur a liability with regard to the decommissioning of an offshore installation only where such a party owns, or has previously owned, a beneficial interest in a specific offshore installation that requires decommissioning, or is a related person in accordance with section 30(1)(d) and (e) of the 1998 Act. That liability is not intended to extend either to parties who are licensees but have no ownership interests in the particular infrastructure, or to parties who have re-licensed in a particular block where an offshore installation has been constructed subsequent to the transfer. I hope that everyone is following this. The existing legislation is drafted so as to impose an obligation on the licensee or a previous licensee and does not expressly refer to the ownership interest in the offshore installation. Oil & Gas UK and some of its members are concerned that such liabilities might be attributed to parties who have never been involved with the ownership of such an installation. New clause 19 would clarify the current situation.

Charles Hendry (Conservative, Wealden)

I am very interested in the hon. Gentleman’s new clause, but I would be grateful if he would clarify what the problem is. Are people who do not own offshore facilities going round applying for permission to decommission someone else’s facility? I am not sure why they would do that, although perhaps Shell would find it helpful to decommission all BP’s facilities.

John Robertson (Labour, Glasgow North West)

The hon. Gentleman asks a very good question, but unfortunately I do not have a very good answer; I only have what I have been told. I will direct his question through to the Minister, who may find a way of giving a nice answer that he will be happy with.

As I said, the new clause seeks to clarify the situation, and perhaps some my remarks will help in that respect. Since the Secretary of State is using the opportunity represented by the Bill to further define, as part of the process that notifies companies that they have become a decommissioning liability, which persons may be served with a section 29 notice, this seems to be an ideal moment to gain clarification on that point. I suggest to the Minister that without the new clause it is likely that companies engaged in the transfer of existing licence interests to companies seeking innovative ways to extend the production life of fields where existing infrastructure has been decommissioned or partially decommissioned will request additional security to ensure that no liability for decommissioning new infrastructure can be attributed to them. Equally, co-licensees with an interest in separate licence areas may seek security to back the indemnities provided under the trust deed to ensure that they face no further unintended liabilities.

This clarification should assist with active training in the asset market and encourage new investors by removing the potential for increased licence entry costs. I look forward to the Minister’s response.

Malcolm Wicks (Labour, Croydon North)

With your permission, Mrs. Humble, I will clarify an earlier point which is, in a way, related. The hon. Member for Wealden asked whether a combined hybrid project—for example, an offshore wind turbine on an oil and gas platform, a development that is beginning to happen—will be covered by two decommissioning regimes. The answer is yes. I can envisage someone making the debating point that that seems onerous, but it is unreasonable to propose a new clause to deal with a variety of hybrid types that might occur in future. The hon. Gentleman also asked whether there are parties looking to decommission oil and gas installations for which they have no interest. The answer is no.

The new clause is interesting. It relates to the maturity of the UKCS, where a number of players are now involved, including some relatively new and small enterprising companies. Our initial assessment is that the new clause could apply to well over 100 licences. We are aware of the issue, have considered it carefully, and will continue to do so. The new clause is a significant proposal, but we feel that there are complexities that need to be fully identified and discussed with the industry before deciding on the right way to treat the different parties that might be covered by it. One issue is that over the years companies have created a patchwork of commercial arrangements within many of the licences by splitting them into sub-areas. Some licensees have no interest in a particular commercial sub-area but are still a party to the licence that covers it. The wording of section 30 of the 1998 Act brings all licensees within the scope of the Secretary of State’s power to make them responsible for decommissioning an installation in any part of the licence area. Naturally, companies that have not had an interest in the installation are reluctant to carry a liability for its decommissioning.

I understand that view, and would like to explain how our policy tries to reflect the different standing of licensees. It might be helpful to see the policy as being based on three tiers of liability. The first tier comprises those who have been served with a section 29 notice to establish their statutory obligation to decommission an installation. That will include the current field players and any previous partners who have sold their interest but have not had their notices withdrawn by the Secretary of State because of concerns about the financial strength of the remaining partners.

The second tier includes previous partners who have sold their interests and have had their section 29 notices withdrawn by the Secretary of State at an earlier stage, and are therefore not obliged to submit a decommissioning programme. The third tier comprises licensees who have never had an interest in the installation or been served a section 29 notice.

Our policy is that decommissioning should be carried out by the companies that are currently responsible for the installation: the current field partners in what I call the first tier. Our proposals in the Bill include measures to strengthen the arrangements for ensuring that those companies are able to carry out the decommissioning. If a financial assessment of the first-tier section 29 notice holders indicates that they might have difficulty funding the decommissioning, provisions in the Bill will enable the Secretary of State to ask for security, such as a bank’s letter of credit, at any time during the project from any of the first-tier notice holders.

Charles Hendry (Conservative, Wealden)

Will the hon. Gentleman give way?

Malcolm Wicks (Labour, Croydon North)

I wonder whether it would be helpful for me to make a little more progress.

Charles Hendry (Conservative, Wealden)

My point relates specifically to the issue to which the Minister has just referred.

It is common practice now within the North sea for different people to own and use the rigs, so there are people who develop businesses by constructing the rigs and hiring them out to others. In those circumstances, who would be responsible for the decommissioning, the contractors or the owners?

Malcolm Wicks (Labour, Croydon North)

I hope to come back to that point in due course, as I certainly understand the hon. Gentleman’s description of where the industry is.

As I was saying, with the provision to cover the higher-risk cases, there should be little chance that the current field partners will fail to decommission the installation. However, in the unlikely event that those companies do default, the Secretary of State would have to call on other notice holders in the first tier, and if those fail, on those in the second tier. That would cover the companies that were responsible for the installation until they sold their interest and would, we believe, provide a kind of belt-and-braces approach that should cover all but the most exceptional circumstances.

We have had only two instances in the past 20 years when first-tier companies have been unable to meet their decommissioning responsibilities, but I cannot assure Parliament that our policy will cover 100 per cent. of cases. There is the very remote scenario in which the second-tier companies might also fail. On a multi-block licence, the question would then be whether the taxpayer must step in or whether the Secretary of State should call on the third-tier companies to do the decommissioning work. The new clause would remove that choice of accessing the third tier and mean that—I emphasise this point—the taxpayer would have to fund the decommissioning in that remote scenario.

It is clear from the breadth of existing powers in the Petroleum Act 1998 that Parliament intended that every effort should be made to ensure that the taxpayer does not have to pay for decommissioning due to the default of companies involved in a field. Our policy is therefore not to rule out the extremely remote possibility that it might be necessary in an exceptional case to use the full powers of the 1998 Act to protect the taxpayer.

It has been pointed out to my Department that the potential liability for third-tier companies on multi-block licences could discourage sales of field interests, but there is an answer to that situation. The industry and my Department have put considerable effort over the past two or three years into developing a new model security deed to deal with decommissioning liabilities. That deed could be used to indemnify third-tier companies in multi-block cases. As the deed has just been launched, ideally I would like some time to see how it beds in.

However, given the interest shown in the proposed new clause, I am prepared to consider that further within the context of the Bill. That will require the examination of hundreds of existing licences to consider the impact of such a change, so it is a considerable undertaking that we need to work on. There are complex commercial arrangements on some of those licences, which make the process more complicated. It is not straightforward, but I am committed to investigating it further, although I emphasise that it will take some time. I cannot give a commitment that that will lead to an acceptance of the proposal, but I hope that, in view of this undertaking, my hon. Friend the Member for Glasgow, North-West will not press his new clause.

I was asked whether the liabilities will be on the owners or the contractors. I am advised that both the owners and licensees will be liable for the decommissioning; they will both be tier 1 bodies.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for that helpful response, and I am sure that the hon. Member for Glasgow, North-West will be grateful for the Minister’s offer.

Can the Minister tell us a little more about the decommissioning involved? Is it the entire structure, meaning the rig, the pipe work that goes with it and the areas below the sea bed as well? I was part of the British-American parliamentary group trip to Texas last year where BP showed us how it is identifying new reserves under 10,000 ft of water and 20,000 ft of rock.

In circumstances where it is possible to identify and to reach oil and gas reserves that were simply unachievable a few years ago, an enormous amount of pipe work is going to be in the sea bed and the rock beneath it. I do not know whether it is already standard practice for that to be removed at the end of the process or whether it is simply left there. Will the Minister’s decommissioning proposals require the removal of all that infrastructure or simply that above the sea bed?

Malcolm Wicks (Labour, Croydon North)

My understanding is that it is certainly not just that above the sea bed. I want to get this right, and we might have to return to it or I will write to the hon. Gentleman. I think that, to put it simply, the principle is to do as much as possible. In reality, however, it might not always be possible to remove some very deep infrastructure on the sea bed. I will not pretend that I have been out to a number of oil rigs or that I am an expert.

An important question is what the obligation represents. The ideal principle is that we remove as much as possible, but I do not think that it is always possible to do that 100 per cent.

Brian Iddon (Labour, Bolton South East)

Has my hon. Friend had any discussions with Ministers representing the fishing industry? More and more trawlers that trawl the bottom of the sea are snagging installations. For that reason alone it is important that as much of the debris as possible is removed after the use of these wells.

Malcolm Wicks (Labour, Croydon North)

Yes, that seems to be the basic principle—the ideal scenario. I have said that I will write to the hon. Member for Wealden, and I will obviously copy that to Committee members. We need to establish what the regulatory framework desires and also what the practice has been in the recent past. I understand the concern. I can assure my hon. Friend that although I have not raised that issue with my colleague in the Department for Environment, Food and Rural Affairs, only yesterday I was talking about matters of mutual interest on the marine environment and my concerns as Minister for Energy. I will certainly raise that issue with him.

We are into an era where there is much competition for sea and marine resources. The hon. Member for Wealden asked about shipping; this is a fisheries aspect of shipping. There are now aspects of marine life that touch on different areas of Government and we need to co-ordinate wherever possible. I am advised that wells are sealed and made safe, and that wellheads are fully removed, which seems a fairly definitive answer. If I need to add to that, I will pursue my ambition to write to the hon. Gentleman.

John Robertson (Labour, Glasgow North West)

I thank the Minister for his extensive answer and I look forward to hearing his deliberations on Report to see how we go. I reserve the right to bring back my new clause, but I will not press it.

Clause 68

Malcolm Wicks (Labour, Croydon North)

I am sure that my civil servants, who are looking at hundreds of licences now, are grateful that we have had that useful discussion.

I shall move on to clause 68, which concerns financial resources. It clarifies the information that may be required to satisfy the Secretary of State of a person’s ability to fund their decommissioning obligations. It also brings forward the time when the Secretary of State can require a person to take relevant action, such as providing the security of a bank’s letter of credit when the risk of default is deemed by the Secretary of State to be unacceptable on the basis of a published assessment process. The provisions in this clause therefore help to ensure that the taxpayer is protected from the risk of a person being unable to meet their decommissioning obligations.

To assess a person’s ability to carry out decommissioning obligations, the Secretary of State may require information such as financial accounts to compare with the potential costs of the work. This is achieved by amending section 38 of the Petroleum Act 1998, which sets out the existing information requirements. Under this provision, the Secretary of State can require information such as a detailed estimate of the costs of the abandonment, predictions of future revenue, the costs and benefits of any plans for further development, and up-to-date management accounts.

Clause 68 enables the Secretary of State to obtain some of this information prior to serving a notice requiring a decommissioning programme. This will enable the Secretary of State to assess the potential impact of the decommissioning liability on what may be a small company. Later, more detailed information may also be required before the approval of an abandonment programme, in order to assess whether financial security is required. This information allows the Secretary of State to assess the financial resources of a person earlier than under the existing regime to further ensure that the risk of default on a future decommissioning obligation is minimised.

After considering the information obtained and consulting the Treasury, this clause allows the Secretary of State to require a person to take action, such as providing financial security, to satisfy the Secretary of State that the decommissioning duty can be discharged. By enabling the Secretary of State to require action before an abandonment programme is approved, he will be able to ensure that proper taxpayer protections are in place at whichever point in time the assessment process indicates a higher risk.

It is standard practice to draw up programmes at the end of the life of a field when there is greater certainty of available technologies. Given the nature of oil and gas reservoirs, the levels of risk can vary across the life of a field, and therefore we need to be able to adjust the security requirement to match the risk. The flexibility in this clause will reduce the costs of security to the companies, compared to a catch-all approach to financial security.

Officials will not be able to disclose the information unless required by law or with the consent of the person who provided it. It will be an offence to disclose information if it does not fall within the exemptions set out in this clause. The penalty for such an offence will be a criminal sanction. The same offence for disclosure of information is being proposed in the Bill in the decommissioning provisions for nuclear and offshore renewable installations. It is also important that the Secretary of State has the power to obtain information so that he can fulfil his functions under this chapter of the Bill. The industry will benefit if the Secretary of State’s actions to protect the taxpayer and the environment are based on up-to-date and accurate information.

Clause 69

Clause 70

Malcolm Wicks (Labour, Croydon North)

The Government are committed to maximising the production of oil and gas from the UK continental shelf, often know as the UKCS. That is worth emphasising. At a time of some interest and excitement around renewables and nuclear, people can forget our still heavy reliance on oil and gas from the North sea and the wider UKCS. I think that, at present, some two-thirds of our energy comes from the UKCS. That is a considerable resource and, as such, it is important that the regulatory framework remains appropriate against a rapidly changing commercial environment.

One of the most noticeable changes in operations on the UKCS over the past five years has been the increasing number of smaller players, as noted earlier. Typically, such smaller firms are more focused on exploiting smaller fields, where their less complex and more flexible financial and operational processes can be an asset in helping to exploit new opportunities on short time frames. However, some smaller players may be less resilient and more exposed to financial risk, compared to their bigger brothers.

The Government must therefore look at what measures may be used to mitigate the additional risks to the taxpayer of having smaller firms on licences, while not discouraging viable new players from entering the market. The clauses on oil and gas licensing update the regulatory regime to do just that. It is important, for the protection of the environment, that all wells are properly plugged and abandoned. It is a term of a petroleum licence that licensees must plug and abandon their wells at least a month before the end of their licences.

There are also provisions, later in the Bill, to allow the Secretary of State to order that a suspended well be plugged and abandoned at any time. If parties to a licence cannot afford to do that when the time comes, by which we mean when their licence requires them to do so, the cost of doing so could fall to the taxpayer.

The clause allows the Secretary of State to require financial information at any point and in any circumstance during the course of the licence. Being able to gather such information will enable the Secretary of State to monitor whether the licensee has sufficient resources to plug and abandon the well when required to do so under the licence.

The obligation to plug and abandon a well arises either automatically, at the end of the licence, or when directed to do so by the Secretary of State. If the information is not provided or if, having looked at the information, the Secretary of State is not satisfied that the licensee will be capable of plugging its well in the future, then, after consulting the Treasury, the Secretary of State can require it to take certain action—including providing financial security. That will reduce the risk of licensees not being able to plug and abandon the well at the end of their licences, thereby reducing the risk that the taxpayer would have to foot the bill.

To ensure that this is an effective tool and that licensees take heed of notices given by the Secretary of State, the clause also makes it an offence for a person to fail to comply with a notice from the Secretary of State requiring either information or action. If found guilty, they would be liable, on summary conviction, to a fine not exceeding the statutory maximum or, on conviction on indictment, to a fine, imprisonment up to two years, or both. The clause will apply equally to licensees under the Petroleum Act and to licensees holding gas storage and unloading licences.

Charles Hendry (Conservative, Wealden)

I have a couple of small points for clarification. The Bill says:

“This section applies in relation to a person who has drilled, or commenced drilling”.

What does “commenced drilling” mean? Does it cover exploratory work, so that if someone is drilling with the hope of finding gas it counts as “commenced drilling”, or does it refer to an exercise once gas has been found and extraction is involved? What, therefore, are the implications for someone doing exploratory work, and do the same rules apply to people who find nothing?

Also, the definitions towards the end of the clause say that “‘well’ includes a borehole”. What is the difference between a well and a borehole? The Minister may wish to write to me about that, as it is a point not of fundamental objection to the clause, but for my own education.

Malcolm Wicks (Labour, Croydon North)

rose—

Stephen Ladyman (Labour, South Thanet)

I have taken my hon. Friend by surprise. I have just a few questions for him, and I am trying to be helpful. I wonder whether the clause is phrased as well as it might be, because it seems to be embedding a logical inconsistency. If he finds that somebody is incapable of plugging the well, he can consult the Treasury about requiring them to plug it. If they are incapable of that, how can they be required to do so?

What my hon. Friend means by this is that the Government wish to identify somebody who is about to enter a process that might render them incapable of plugging the well because they do not have the money to do it and wish to intervene early to require them to do it before they enter that process. The way that the provision is phrased, however, will not allow my hon. Friend to take action until that person is not capable of it, by which time it will be too late to intervene. Would he like, therefore, to have a chat with the lawyers in his Department about whether the provision is phrased in a way that will be useful to him in the future?

Alan Whitehead (Labour, Southampton, Test)

Further to that, I wonder whether the Minister can clarify whether, under circumstances that we have already discussed, a licence will be granted for carbon capture and storage, but be granted before the ending of a licence of someone who has previously drilled a well or a borehole. Will that licence therefore have to be terminated according to the conditions of the clause, or will the person who wishes to undertake carbon capture and storage by placing carbon through the well or borehole that is about to be abandoned take over the process without the well having to be capped or otherwise disposed of?

Alternatively, does my hon. Friend intend the processes to be entirely separate—that the well be capped and that all business cease? If so, presumably the person engaging in carbon capture and storage would have to undrill the well and start again.

Malcolm Wicks (Labour, Croydon North)

On that last point, I will take refuge in the fact that CCS is still an infant technology. We are working hard on these issues, not least in our working group with the Norwegians, which our Dutch colleagues have now joined. We have taken regulatory powers in the Bill and there is also the demonstration project. I cannot therefore be precise about the answer to that question. Given that the great hope is that vacated oil and gas works would be the repository for CO2, as a non-engineer I do not envisage that they would be closed and then reopened.

There is also the issue of enhanced oil recovery. One of the commercial advantages is achieved through access to more oil and gas. That is one of the factors that helps to make CCS—I will not say financially viable, because there is a gap—part of a commercial set up. Although, as a lay person, I do not see the thing being closed and sealed and then reopened, I can see that there are interesting issues about where the two regulatory regimes come together, which we will need to explore in the future.

It was not by any means a boring question, but I cannot at the moment describe the difference between a borehole and a well. I will write to the hon. Member for Wealden, given his great interest in the subject. On exploratory drilling, we do include exploration because there is something to be decommissioned. It is one of the risks of the business that not every investigation, exploration or drilling leads to a find. There is, however, something there to be remedied.

My hon. Friend the Member for South Thanet asked about how we can require someone to plug a well if they are unable to do so and whether we can take action before they become incapable? The answer is that we can ask for information as soon as they have started to drill a well. If we are not happy with what we find, we can ask them to take action—for example, give financial security of some kind. We have therefore to be vigilant and we can act early in the process. I have talked about the different tiers that come into our regime.

Stephen Ladyman (Labour, South Thanet)

I fully accept that it is my hon. Friend’s intention to take early information and act before the situation arises. I am not a lawyer but my understanding of the clause is that it might be interpreted to say that he cannot act until the situation has arisen, even though he may see it coming up.

Malcolm Wicks (Labour, Croydon North)

I am not a lawyer—

Sir David Amess (Conservative, Southend West)

When the Committee adjourned this morning, the Question was that clause 70 stand part of the Bill, and the Minister was reaching his peroration.

Malcolm Wicks (Labour, Croydon North)

Good afternoon, Mr. Amess. I was certainly in full flow, and about to respond to my hon. Friend the Member for South Thanet on whether the power in clause 70 to require information on action from a licensee arises too late in the process. I do not believe that that is the case, and I am reassured by my Department’s lawyers, who agree with me. I believe that it happens in a timely way, and I hope to explain why in reasonably plain English.

If the Secretary of State was uncertain about a licensee’s ability to plug an abandoned well at the time that the licensee requested consent to drill, he would not grant consent. In other words, financial scrutiny at the beginning is crucial. However, the power to require information to be provided and action to be taken can be exercised at any time after drilling has been started. The provision is designed to cover situations where we believe that the licensee, having started to drill a well, will start to or has started to run into financial difficulties; or, further down the line, where we believe that the licensee, after suspending a well, will start to or has started to run into financial difficulties. We would then require the licensee to take specific action, including providing financial security, which could involve the licensee giving a letter of credit. However, if a licensee’s financial capacity comes increasingly into doubt, the aim is to take the necessary action before he loses the necessary capacity. Besides protecting the taxpayer and giving the Secretary of State greater assurance that wells will be plugged and abandoned, it is worth noting that the power will give him greater flexibility in accepting small companies’ business plans. He will be able to consider allowing wells to be suspended in cases where he might otherwise have no choice but to require immediate abandonment. I hope that that deals with the point raised by my hon. Friend the Member for South Thanet.

I want to clarify a couple of other points raised this morning. I thank the hon. Member for Wealden for asking about the difference between a well and a borehole. We think that a well and a borehole are broadly the same. The definition in the clause follows that used in model clauses for licences granted since at least 1934, perhaps internationally. However, usage over time may vary. I may be wrong, but I think that the reason behind that question was the hon. Gentleman’s memory that in 1923—[Laughter.] I do not mean his personal memory but his sense of history. As most members of the Committee will know, in 1923 the oldest extant licence was granted to the Duke of Devonshire for what was then described as a borehole. I wonder whether the hon. Gentleman’s historical literacy was behind the question; I am sure that he was not trying to catch me out.

I wish to provide clarity on what I said in response to my hon. Friend the Member for Southampton, Test about what would happen if existing oil and gas wells were to be used for the purpose of CO2 storage. There is flexibility on whether such wells would need to be capped and redrilled—it would depend on the needs of carbon storage.

The hon. Member for Wealden asked whether entire structures should be decommissioned, including everything below the seabed and the associated pipelines. An international convention—the OSPAR convention, to which the United Kingdom is a signatory—requires that redundant installations are removed to shore for re-use, recycling or disposal. To be more specific, the structures will be cut off below the seabed, the wells will be sealed at the reservoir, and the pipe work will be removed to a depth usually of 2 m or 3 m below the seabed. A small number of installations may be given exemptions allowing them to be left in place, because that is the most practicable option. However, cutting them off at that distance below the seabed should help in relation to the issue that was raised about fishermen’s—or fisherperson’s—nets, dragging and so on. I hope that that is a useful response.

Pipelines may be decommissioned by removing them to shore for recycling of the steel or, if they are already buried and therefore not a hazard, they may be left in place. The Secretary of State’s powers under the 1998 Act enable him to control the choice of decommissioning options, having regard to the international convention and the impacts on safety, environment and other users of the sea—and, of course, the taxpayer.

Charles Hendry (Conservative, Wealden)

I thank the Minister for that very helpful response and for the additional detail that he has been able to give us. I would certainly never seek to catch him out—he is far too nimble-footed for that. My interest was much more parochial than he suggests. My constituency is adjacent to Royal Tunbridge Wells, and I have always wondered why it is not called Royal Tunbridge Borehole. I am grateful to him for making the distinction so clear.

Clause 71

Malcolm Wicks (Labour, Croydon North)

“Disgruntled of Tunbridge Borehole” has a certain ring to it, but we had better not go there.

It is a term of existing petroleum licences that a licence cannot be transferred without the Secretary of State’s prior consent. That is to ensure that interests in a licence are not transferred to a party or parties who would not have gained the Secretary of State’s consent for such a transfer had he been asked. The Secretary of State needs such powers for situations where, for example, the licences transferred to parties who will not or cannot put enough time and resource into recovering oil and gas from the area. It is important that licensees’ objectives are aligned with the Government’s aim of maximising production from the UK continental shelf. However, despite the requiring of the Secretary of State’s consent to transfer a licence, experience has shown that there can be circumstances where a licence interest has been transferred without it. In such situations, under current provisions, the Secretary of State could accept the transfer—although if it has already been decided that the new licensee is unsuitable, that would not rectify the problem—or revoke the whole licence, although that would mean that any new licensee would need to wait until the next licensing round to get the licence, which could significantly delay production. However, the Secretary of State could not force the parties to transfer the licence back.

We believe that the Secretary of State’s having the power to direct that a transfer revert back to the transferor is a better solution because the transferor would then have the option of transferring the rights under the licence to a more suitable person. In turn, that would mean that production on the field could continue. The clause allows the Secretary of State to direct that the licence interest revert back to the transferor, should he think fit. I believe that that creates an important safeguard and an effective incentive for licensees to comply with the existing requirements of a licence and to seek the Secretary of State’s consent before going ahead with any potential licence transfers. I reiterate that this does not change any of the existing obligations about seeking prior consent for transfers from the Secretary of State; rather, it creates an effective system for addressing any such transfers if the Secretary of State believes it appropriate to do so.

In order to ensure that the Secretary of State has the information necessary to identify whether an unconsented licence transfer has taken place, the clause also allows the commissioners for Her Majesty’s Revenue and Customs to give specific information to the Secretary of State for the purposes of determining whether that has taken place. That ensures that any actions that the Secretary of State may wish to take are fully informed.

Hugo Swire (Conservative, East Devon)

Given that the clause gives the Secretary of State new powers relating to the uncontested transfer of rights or benefits under petroleum licences, why is the Secretary of State being granted these new powers at this point? What has gone wrong in the past which has led to this need for additional legislation?

Malcolm Wicks (Labour, Croydon North)

I hoped that I had touched on that in my opening remarks, but I will try to give greater clarity in a few moments.

It is important to protect the information and the people to whom it refers. That is why the clause sets out that the information supplied by the commissioners at HM Revenue and Customs must be limited to that necessary for the Secretary of State’s decision. There are also restrictions on the purposes for which the information can be used. The clause also, in line with the rules on sharing information between Government Departments, makes it an offence for information to be further disclosed without the permission of the commissioners of Her Majesty’s Revenue and Customs, the people identified in the information, or in pursuance of a court order. If found guilty of that offence, a person will be liable, on summary conviction, to a fine up to the statutory maximum and, on indictment, to a fine, imprisonment of up to two years, or both.

Charles Hendry (Conservative, Wealden)

May we have clarification on a couple of issues? In what circumstances is the Secretary of State’s consent required? Is it always required if a licence is being transferred? Will the Minister clarify the rules regarding the trading of licences? Are people allowed to trade licences, subject to the consent of the Secretary of State, and in what circumstances might he use his powers to revert the licence to the transferor? Would it happen automatically if it were an unconsented transfer, or only if the Secretary of State had additional concerns about the consequences of that transfer?

Malcolm Wicks (Labour, Croydon North)

Let me deal first with the question from the hon. Member for East Devon. As I have explained in the context of one or two other clauses, the circumstances in the North sea UK CS are changing. Whereas in the past it was dominated by relatively few big players—the well-known names—the field is maturing as some of the big players give priority to fields elsewhere in the world and there are opportunities for new enterprise companies to come forward, and issues of security have arisen. A number of smaller players are active on the continental shelf. That is welcome, but the other side of that coin is that they are potentially less financially viable. We therefore thought it important to use the Bill as an opportunity to introduce new safeguards.

The hon. Member for Wealden asked several questions, and I may not be able to answer them all at this precise moment. He asked in what circumstances consent is required and whether it is always required. The answer is that it is always required. Moving on—seamlessly, I hope—he also asked whether licences can be traded if the Secretary of State agrees. Yes, they can. Indeed, that is now an important part of the market. However, licensees can also transfer the benefits without his consent, and that causes a disparity between the benefits and the obligations of a licence. Perhaps that was not so seamless. I need to clarify that point, as I muddled myself.

On the question of whether the Secretary of State will always revoke the licence of unconsented transfers or do so only if there are other concerns, some unconsented transfers are acceptable, but we would use the powers only if there were concerns about one of the parties involved in the transfer—for example, about their financial health. If I can clarify other matters later, I will do so.

Anne Main (Conservative, St Albans)

Perhaps I was not listening as closely as I should have been and what the Minister said was brilliant, but I thought that he said that the parties could transfer the benefits but not the obligations. Is that something on which he is seeking clarification?

Malcolm Wicks (Labour, Croydon North)

It is.

Clause 72

Malcolm Wicks (Labour, Croydon North)

This clause will give effect to the amendment of the terms of existing petroleum licences, as set out in schedule 3. Section 4 of the Petroleum Act 1998 allows the Secretary of State to set out in regulations model clauses, which are incorporated into petroleum licences. Section 4 requires that any regulations prescribing model clauses for such licences are made through secondary legislation. However, new regulations will affect only licences granted after the regulations come into force.

As section 4 powers do not allow the Secretary of State to make regulations amending the terms of existing licences, we are making changes to existing licences by way of clause 72 and schedule 3. The Government have used primary legislation to amend the terms of existing licences in that way in the past. For example, amendments were made to existing petroleum licences under the Petroleum and Submarine Pipe-lines Act 1975, the Petroleum Act 1987, the Offshore Safety Act 1992 and section 5(5) of the Petroleum Act 1998.

Schedule 3 will amend the model clauses in four ways: first, by requiring licensees to provide up-to-date contact details to Ministers to ensure that the Minister can send notices and directions to the licensees; and secondly, by allowing the Minister to issue a notice requiring licensees to plug and abandon wells to reduce the risk of a licensee leaving a well suspended, but not properly plugged and abandoned, for a number of years and then not having the funds to plug and abandon it properly at the end of their licence. Without that power, there would be an increased risk of the liability falling to the taxpayer.

Thirdly, such amendments can be made by extending the circumstances in which the Secretary of State can revoke a licence in the event of a change of control. The Secretary of State can currently revoke a licence if there is a change of control or of the person to whom it was originally granted, the Minister objects to the change of control, and the licensee does not take the requisite steps to address the Minister’s objections.

The new model clauses will extend the power, so that it can apply to anyone the licence is assigned to, not just to the person to whom it was originally granted. That is important because it is always necessary, at any stage of a licence, to ensure that licensees are suitable—for example, that they are interested in and capable of maximising production on the UK CS. Without that power, if a licence is transferred to a party that experiences a change of control, the Minister could not revoke the licence.

Fourthly, the Minister will be given a power partly to revoke a licence, so that if one person in a consortium that holds a licence breaches certain terms—for example, becomes insolvent—the Minister can, rather than revoking the whole licence, partly revoke the licence interest of the defaulting person. That is important because, in some circumstances, it will allow a consortium to continue production, rather than revoking the licence and forcing the remaining members of the consortium to wait for the next licensing round to reapply for one if they want to continue production.

The clause will also set some conditions on the operation of those amendments to the model clauses to ensure that all relevant licences already in existence before commencement are amended with the new model clauses. That is important to ensure consistency across the petroleum licensing regime as far as possible.

Although all licences should contain these new model clauses, in certain circumstances, where things happened before commencement of the Act, it would be unfair to apply the rules retrospectively. So, for example, the clause sets it out that, if the drilling of the well started before commencement, the power to require a licensee to plug and abandon it will not apply. It also sets it out that, if the event that leads to the need for partial revocation happens before commencement, the power will not apply.

Martin Horwood (Liberal Democrat, Cheltenham)

On a point of order, Mr. Amess. I wish to address some of the issues raised by the Minister, but I had expected to do so under schedule 3, which is listed as the next item for consideration. I seek your advice on the appropriate point at which to refer to the detail of schedule 3, which addresses the same points.

Sir David Amess (Conservative, Southend West)

I confirm to the hon. Gentleman that there will be a stand part debate on schedule 3, and that it will be perfectly in order for him to make his points then.

Brian Binley (Conservative, Northampton South)

The Minister has confused me a little, although that is not unusual. I am concerned about capping and abandoning a well in a given set of circumstances. I assume that that will take place when an unconsented transfer has happened—that is, one without the Minister’s consent. I assume that, if the Minister thinks that the person to whom the transfer is made is unsuitable to carry out the responsibilities, he will also assume that the transfer has not taken place and the original licensee will be told that he has to close and cap the well if the Minister thinks that that is necessary.

Legal matters are likely to arise in such complicated situations, and I do not understand what will happen. Will the Minister tell me in what circumstances he might tell the original licensee to cap and abandon the well, what cost there would be and whether it would be easy to open the well again without too much cost? These are valuable resources to the nation, and capping a well seems a pretty drastic step.

Malcolm Wicks (Labour, Croydon North)

Yes, I agree; we are trying to establish a regime that will lead to that happening only in extremis. We need a regime whereby licences can be transferred only in bona fide circumstances. Much of this part of the Bill will put in place that regulatory system, so that we can ensure that decommissioning is done effectively, at the right time and in a way that does not jeopardise the taxpayer’s interest. That is the burden of this part of the Bill.

Brian Binley (Conservative, Northampton South)

Can the Minister give me an idea of the cost of capping and abandoning and then later reopening a well? I want to be clear in my mind what the cost of the exercise will be for the people granted the licence in the first instance, because that is where it will revert, will it not?

Malcolm Wicks (Labour, Croydon North)

The endeavour will be to ensure that a well is not capped while it still has economic life. Given the market situation, there is every chance that another commercial player could be brought in. However, I am advised that a well cannot be reopened once it has been plugged and abandoned. We abandon only those wells that have no economic life remaining. After all, they are valuable assets. I am also advised that the cost of capping could be £1 million to £10 million. There is a double jeopardy in the economics, which is why we try to keep wells open.

Charles Hendry (Conservative, Wealden)

Those comments raise another issue: who decides that the well is empty? We know from how drilling and extraction are done that often substantial reserves—20 per cent. perhaps—are left underground. Will a well be considered empty because a large concern decides not to go on extracting oil or will it have to be genuinely depleted before these actions come into play?

Malcolm Wicks (Labour, Croydon North)

I think that I used the phrase “no economic life remaining”. That is not the same as saying that there is not another barrel or so of oil down there.

We talked earlier about the importance of enhanced oil recovery and the potential to associate that with carbon capture and storage, for example. These are largely commercial decisions, of course. It will be mainly up to oil companies to make that judgment, albeit within the regulatory framework. We are talking about a very good industry, whose professionalism I have seen at first hand. No company is going to abandon a well if it has commercial life left in it. It will be for the licensee—the company—to judge, but as a safeguard, Government will have to agree.

Charles Hendry (Conservative, Wealden)

Some of the larger oil companies leave when a significant amount of oil is left in the well. Indeed, other companies have specialised in going into partly depleted oilfields and extracting what remains. Although the major international companies might say that it is not economical for them to do that, there is an economic benefit to be pursued by a smaller company that has developed a niche market in those areas. I hope that the Minister will not be guided only by what the larger international companies say, if some smaller companies feel that they can still go into those fields to extract more than is currently being taken out.

Malcolm Wicks (Labour, Croydon North)

I understand the point that a time comes when a large company wants to move on—its geographical priorities may lie elsewhere—and that provides an opportunity for a smaller company. However, one would imagine that the larger company would see some commercial advantage in arranging a transfer to the new player, because I assume that financing would be involved. I do not think that it is in anyone’s interest simply to abandon such a resource.

I think that I was asked how we obtain the information that a company is no longer using its well. We know that by a variety of means; largely through the normal dialogue that takes place between the regulator and the licensee, and not least because the regular well production reports would start to fall to zero.

Hugo Swire (Conservative, East Devon)

Is there anything in the legislation, or anything further envisaged, that would stop companies creating a bank of drillable wells that still have resources within them, to maximise what is coming out of the North sea? Is there anything in legislation that prevents companies from stockpiling assets without exploiting them?

Malcolm Wicks (Labour, Croydon North)

We have an effective partnership with the industry, known as the PILOT partnership, which the Secretary of State now chairs. There are regular meetings, which I normally attend, in which a range of matters are discussed. I am therefore confident that we have arrived at an acceptance of a “use it or lose it” principle. The industry itself has signed up to that. If a large company—it might not always be a large company—decides that its priorities lie elsewhere, there is a recognition that the licensed work should transfer to another company, given the importance of the UK CS to the British economy. I am satisfied that the regime in place is truly the envy of the world. Many oil company executives tell me that they wish other zones had that kind of partnership, so I think that we have got it right.

Martin Horwood (Liberal Democrat, Cheltenham)

It is good to serve under your chairmanship again, Mr. Amess. The Minister said that such decisions would be essentially commercial, yet the powers in the clause are given to him and not to the commercial operators. Therefore, the Department for Business, Enterprise and Regulatory Reform will be evaluating the commercial considerations. A rather crucial consideration that comes into play is the future cost of climate change, especially if, as the Minister says, the wells covered by the clause could be used for carbon capture and storage.

The Stern report recommended that we take the future cost of climate change into account in making commercial decisions now. That was a key recommendation, and it suggested a methodology based on a rather optimistic outlook that may or may not be right. Not all the measures that the world was trying to put into place to reduce carbon emissions will succeed. That seems to be a realistic assumption.

Stern recommended that methodology as the commercial basis for calculating the future cost of climate change. That would be important if wells had a value related to carbon capture and storage. If the future price of carbon was expected to be high, carbon capture and storage would probably be more viable in that respect. If the price was artificially low, it would be less viable. Will the Minister confirm that, in any commercial calculations that DBERR might make under the clause, it would follow the methodology advocated by the Stern report in calculating the future cost of climate change?

Malcolm Wicks (Labour, Croydon North)

On the hon. Gentleman’s first point, most of this is about commercial judgment, commercial decisions, and deals and partnerships between different commercial entities. However, the state does not hold its hand. The state intervenes through a regulatory process. The state intervenes through the PILOT partnership that I have just described—the use it or lose it, or fallow approach. The state is actively involved. In these clauses we are trying to do our utmost to ensure that there is final and effective decommissioning of this infrastructure in our seas. We want to ensure that if one company runs into financial difficulties and an associated company is involved, decommissioning still happens, but not at the expense of the taxpayer. That is what this is all about.

The hon. Gentleman introduces a far wider subject, which is featured in various parts of the Bill. We have already discussed carbon capture and storage and I feel confident that we will be able to demonstrate its value and practicality. Given that the most obvious place in the UK to store CO2 is under the sea in depleted oil and gas reservoirs, we need to think this through. We are doing that, but we have some time to consider the interface between the oil and gas industry and the reservoirs and pipelines and the kind of infrastructure and regulatory framework that we might one day need for CCS.

I think that the historian will look back on this Bill—I hope this will encourage Members during the more tedious moments of dry explanation—as the first time that this Parliament looked ahead and sought to begin to put in place a regulatory framework. Despite the Bill’s excellence it will not be the end of the story. We will need to make progress to ensure that the issues raised by the hon. Gentleman are properly considered.

Martin Horwood (Liberal Democrat, Cheltenham)

Perhaps I can buy the Minister a few more minutes to glance at the advice that he might have been given. I hope that he will respond to my substantial point about the future cost of climate change and the carbon price that it would dictate in any cost benefit analysis and commercial evaluation when deciding whether to maintain access to a well or to plug and abandon it. The cost of carbon dictated by the methodology on calculating the future costs of climate change is crucial to that. Stern made clear recommendations on what that methodology should be. I hope that the Minister can respond positively now and say that DBERR, in making calculations like this, will use the methodology on the future cost of carbon set out in the Stern report.

Malcolm Wicks (Labour, Croydon North)

The Stern report is a keynote document for the century. I am not in a position yet to say the precise methodologies that we will explore, but we are certainly seized of the need to relate our thinking and planning on CCS to that on the UK CS. Where there is a potential for CO2 to enhance economic production, for example, we would want to insist that it happened. I may not entirely understand where the hon. Gentleman is coming from and perhaps there will be another arena in which we can discuss this. It is not as if we are being slow on CCS—we are an active lead nation.

Martin Horwood (Liberal Democrat, Cheltenham)

I am not suggesting that we are going slow on CCS, although I might have done so on other occasions. I am trying to tease out the methodology that DBERR will use in calculating the cost of carbon and whether it will be based on the methodology for the future cost of climate change used in the Stern report. It is a fairly straightforward question, although it may have a slightly complicated answer, and it is critical to considerations such as this. If DBERR is going to make essentially commercial evaluations of such projects, it has to use a cost of carbon in its calculations. I am trying to work out how it will calculate that cost and whether it will use the methodology recommended in the Stern report.

Malcolm Wicks (Labour, Croydon North)

I might need to come back to the hon. Gentleman on those methodological issues once I have looked at the record and fully understood his questions. It is not as if we are being relaxed about CO2 emissions. If companies in any arena emit large amounts of CO2, their activities will be captured by the European Union’s emissions trading scheme. They will therefore have either to reduce their emissions—that is what I would hope—or pay for any additional CO2 ETS allowances that they would need to buy. I think that his point is more specific, although I am not saying it is not important. With his approval, and possibly without it, I will write to him.

Brian Binley (Conservative, Northampton South)

I am still concerned about the question of capping and abandoning wells in the North Sea in relation to carbon capture and storage and their potential use some considerable period hence after a well has been abandoned. I think I understood the Minister correctly. I think he said that, once a well had been capped and abandoned, it could not be reopened. He also said that wells would only be capped and abandoned in extremis. I am told by the industry that we could get up to another 15 per cent. of additional oil using carbon capture and storage from the North sea wells. The process and the technology for doing that, however, are some way off. I wonder, therefore, what “in extremis” means. I would hate the thought of capping and abandoning a well which in 15, 20 or 25 years’ time could be used not only for carbon capture and storage but to enhance our oil energy needs at that time. Therefore, I want to understand what “in extremis” means in that respect.

The Minister is right to be proud of the Bill. We are creating an important platform for the future. Therefore, this is not a knocking process, but we need to understand the possibilities inherent in additional North Sea oil.

Malcolm Wicks (Labour, Croydon North)

I have touched on the issue of enhanced oil recovery and I have said that, in future, where there is potential for CO2 to enhance economic production, we would want that to happen. I am thinking through the implications of the hon. Gentleman’s remarks. I agree with his train of thought and, although he was not suggesting this scenario, it would be ridiculous if we abandoned all the oil and gas wells, capped them and made it very difficult to reopen them and then a few years later discovered that we wanted to use them for CCS. Therefore, I can see where he is coming from.

My understanding is that, once a well has been capped, it cannot be reopened. I will check again with some experts to ascertain whether that is really the case or whether we are talking about reopening at enormous expense. I will make sure that the record is accurate. We could be talking about a real difficulty if a well is capped.

There are two stories about the UK CS. Both are true, but we need to say both of them virtually in the same breath. We have been very fortunate with the oil and gas in the UK CS since the mid-1960s. The first truth is that the resource is now in decline. The last estimate I saw showed that the decline was something of the order of 8 per cent. per year—it is quite marked.

The other story is that that oil and gas are still very important to us, and probably will be for about half a century or more—who knows? No doubt, people will then re-evaluate. For example, there is the potentially exciting development of feasibility studies looking at west of Shetland, which was previously unexplored. Four major companies are working together to determine the potential in that very difficult terrain, where connections could be very expensive. The story of the North sea continues, despite the decline. Why do I say that? Because there will still be plenty of oil and gas wells as we develop CCS potential.

As a lay person, it does not seem to me that there is a problem of the two time scales being totally out of sync, if hon. Members follow me. We will have our demonstration project, and I suppose that in six or seven years we will be in a better position to see the potential of CCS. I hope—we all hope—that there is real potential. If so, we will start to see new industries being born around carbon capture, the transportation of CO2 and its storage.

One can see the economic opportunity and the importance of Britain becoming one of the world leaders on the issue. One can imagine that there is a new book to be written about the UK CS and the North sea in terms of the storage, the monitoring and so on of CO2. We are not in a difficult position time-wise, as far as I can judge.

Charles Hendry (Conservative, Wealden)

Will the Minister clarify the retrospective nature of the clause? Subsection (4) states:

“Where an amendment made by a paragraph of Schedule 3 confers a power to give a notice requiring the plugging and abandonment of a well, the power may not be exercised in relation to a well the drilling of which began before commencement.”

Subsection (8) defines commencement as

“the time when that paragraph comes into force.”

Does that mean that that cannot be done retrospectively to wells that have already been sunk and that the measure applies to future wells rather than ones that have already been constructed?

Malcolm Wicks (Labour, Croydon North)

I think that the answer is yes. I will say one or two other things on the matter. I did not anticipate such an interesting debate on what I assumed was a humble clause, but I am encouraged.

With the hon. Member for Wealden, I was trying to think about how this area might develop over the next few decades. In the future, when we think that a well might be ideal for CO2 storage, it is possible that we could suspend it rather than abandon it totally. I am advised that we need to be careful about that option because, apparently, wells cannot be used after 10 to 20 years as they become unsafe in a number of ways. Nevertheless, that new information helps us with the scenario that we are building up. Although I was hedging a bit on the issue of abandonment, I am now clearly advised that it is permanent. Even if it was felt that there was potential, it would apparently be cheaper and safer to drill a new well rather than to open one up.

On retrospection, the power cannot be used for wells that have already been drilled or where drilling has commenced. I think that I said that in my speech, but I would like to emphasise it to the Committee.

Schedule 3

Malcolm Wicks (Labour, Croydon North)

I shall introduce the schedule very briefly. It simply implements the changes to the model clauses that we discussed when I introduced clause 72. I do not intend to speak further, other than to say that the schedule should be read together with clause 72.

Martin Horwood (Liberal Democrat, Cheltenham)

It is tempting at this stage to whiz through what appear to be humble clauses, or humble schedules in this case, but it is still sometimes important to pay attention to the detail and look for important and perhaps worrying precedents that might be set. Perhaps the Minster can give reassurances on those.

As the Minister said on clause 72, there are essentially four areas relating to the various amendments to regulations that the schedule provides for. The first area relates to the provision of contact details to the Minister, and I have to point out that there is a logical flaw in that provision. A provision in paragraph 14(2) of the schedule states:

“The Licensee must supply the Minister with the name and address of a person to whom notices...are to be given.”

What happens if the licensee fails to comply with that? Well, the Minister will have to serve them a notice, but one wonders to what address he will send it if the contact details have not been supplied. While that is a genuine logical flaw, I suspect that it is not absolutely critical, although it draws attention to another aspect. The explanatory notes state:

“It is the licensee’s responsibility to ensure that the contact details held by the Minister are up to date.”

Rather subtly, that provision in the schedule will transfer to the licensee DBERR’s responsibility for keeping its records up to date and having accurate data. I would have thought that that might be a slightly risky responsibility for a commercial operator.

Anne Main (Conservative, St Albans)

I am following the hon. Gentleman’s argument with interest, but I would have thought that it was obvious that the address will be supplied by the company that applies for the licence, and I am sure that he would not expect the Department to contact everyone every so often to ask, “Have you moved?” I would have thought that it was quite obvious that they would notify the Department of any major change of address for their business.

Martin Horwood (Liberal Democrat, Cheltenham)

I am grateful for the hon. Lady’s intervention, and I think that she has touching faith in the efficiency of Departments. As constituency MPs, many of us occasionally come across instances where what she describes is not the case.

Hugo Swire (Conservative, East Devon)

The hon. Gentleman is perusing an interesting line, because the alternative to the licensee keeping the Department informed of changes is the Department contacting the licensee, perhaps on an hourly or daily basis, on the off-chance that the address might have changed. If he moves house—after what he did last night, he may be tempted to change party—is it incumbent on him to notify the supplier of his telephone, for instance, or is it incumbent on the supplier to check with him regularly in case he has moved?

Martin Horwood (Liberal Democrat, Cheltenham)

I am grateful to the hon. Gentleman for his entertaining intervention, but I have no intention of moving house, especially now that I have been placed on the Daily Mail roll of honour, which I must admit was not an honour that I had even been seeking and which I hope is never repeated.

The explanatory notes state not only that updates should be sent to the Department, but that it is the licensee’s responsibility to ensure that the contact details that are held are up to date. Will licensees be able to check, for instance, that DBERR’s processing and data protection arrangements are adequate? Does that set any precedent with regard to placing the risk of error and of mistakes being made—they might be crucial if no legal notices are served—entirely on the licensee so that the Department will not accept any responsibility for keeping its own records up to date?

The schedule also deals with the power to issue a notice to plug and abandon a well, about which the hon. Member for Northampton, South has already raised important questions. Such a decision could have major commercial implications for an operator, so that is quite a major power to pass to the Secretary of State. Perhaps it is an important environmental initiative, but it is also a technical and operational matter, which, one imagines, would normally be dealt with by an operator, not a Minister.

My questions on carbon pricing and the future cost of climate change—one of the technical considerations that would have to be factored into any cost-benefit analysis of whether to plug a well or whether to continue making it accessible—give an example of how technical this could get. It is perhaps unfair to suggest that the Minister should have that information at his fingertips, but it underlines how important it is to get such things right.

The future cost of carbon methodology can change the outcome of a decision such as this. Therefore, if the methodology being used is wrong, or if it does not follow the Stern report and sets the price of carbon too low, that could change the outcome. As we have already discussed, it could mean a well with the potential for future use in carbon capture and storage being plugged and lost for that purpose. That is an important consideration.

The explanatory notes and the Minister himself have discussed the clauses that deal with revocation on change of control. I struggled to find an example of such a paragraph in the schedule. I found the other three things that the Minister referred to, but perhaps it would be useful if he drew our attention to exactly where an example of that is in the schedule.

Again, we have the prospect of the Minister stepping into what is a commercial transaction, so this matter should therefore be dealt with using particular care. As I say, I could find no example in the schedule, but the explanatory notes give an example of something that might rival the example of gobbledegook given by the hon. Member for Wealden. I found it rather difficult to follow.

When talking about trying to include in the responsibilities not just the person to whom the licence is issued, as the Minister said, but people to whom it has been assigned, the notes say:

“The Schedule extends this by providing that where rights have been assigned, there will also now be said to be a change of control whenever a person takes control over an assignee who did not control that assignee when the rights were assigned.”

I read that several times and I need a little more explanation of what it means, so perhaps the Minister can clarify it. We have the power of partial revocation, which he referred to and in respect of which there are a lot of examples in the Bill—schedule 3, proposed new section 38A, for instance.

The explanatory notes contain an interesting statement:

“Obligations and liabilities arising before the partial revocation of an interest in a licence are not affected by the partial revocation.”

That is an optimistic statement but surely, if the licence is shared, the liabilities will be shared in some way. Looking at the text, it seems that any of the persons who together constitute the licensee share in the liability. If the licence is partially revoked for one of two people, that will surely affect the liabilities of the other, and it is difficult to reconcile the statement in the explanatory notes with that.

My worry is not that there is a huge technical problem in the Bill, but that we might inadvertently be introducing loopholes into which lawyers may one day crawl. That could land us with an unexpected public liability that we would have to cope with. I seek the Minister’s reassurance that such loopholes are not being created.

Malcolm Wicks (Labour, Croydon North)

I will do my best to cope with those points. I had hoped that my opening speech on the clause covered much of that territory, but we will see. If I may say so, the first question was not the hon. Gentleman’s strongest card. It was about how we will know where people live. In this era of concern about civil liberties, I am not going to say that we know where they live and that we have their number—that would not be appropriate.

A licence can involve more than one party, so a number of parties might have to be contacted. There is no issue here. Let us get the record straight: most companies do not abstain from giving us information about their addresses, even if most of the hon. Gentleman’s intimate colleagues abstain in some other respect.

Martin Horwood (Liberal Democrat, Cheltenham)

This could go on all day.

John Robertson (Labour, Glasgow North West)

Longer than that.

Malcolm Wicks (Labour, Croydon North)

Indeed. The issue, which I thought I had covered well, although perhaps at tedious length, is why the Secretary of State is in a better position than the companies to decide which wells should be plugged and abandoned. It is not quite like that, but let me repeat some of the issues. Plugging and abandoning wells is not optional; licensees are already required to plug and abandon wells at least one month before the end of their licence. The issue is ensuring that licensees can plug and abandon a well when it needs to be done.

As the regulator, the Secretary of State is the person charged with ensuring that the risks to the taxpayer arising from licensees who default on future financial commitments are minimised. Clearly, the regulator can have a different perspective from the commercial players in a particular market. In deciding whether a well needs to be plugged and abandoned, the Secretary of State must weigh up whether the risk to the taxpayer of a licensee being unable to meet the cost of plugging a well is sufficiently great to warrant the plugging of that well immediately, rather than waiting until the last month of the licence, as is currently required by the model clauses.

I will not go on in more detail, because I think that when the hon. Member for Cheltenham reads the record he will see that I had a great deal to say about that matter. We are in the business not of making commercial decisions, but of producing a fit-for-purpose regulatory framework, given how the industry in the North sea has developed in a maturing field, so that we can ensure that companies have the money finally to decommission wells and that the taxpayer can be safeguarded.

I was asked about the partial revocation provisions. I understand that they are in paragraph 1(4) of the schedule, on page 104 of the Bill. I hope that is right, and I hope that it helps the Committee.

Martin Horwood (Liberal Democrat, Cheltenham)

I beg the Minister’s pardon, but I did not ask about the partial revocation. That is quite clear; there are numerous examples of partial revocation throughout the schedule. I asked about revocation on change of control, of which I did not find a single example in the schedule, although I may be in error about that.

Malcolm Wicks (Labour, Croydon North)

I am advised that this is about change of control, so we are getting into textual analysis here. The relevant provision reads:

“In clause 38(4) (power of revocation: change of control).

Does the hon. Gentleman have that passage? I want to be singing from the same hymn sheet.

Martin Horwood (Liberal Democrat, Cheltenham)

I think that I have found the provision, if it is the one numbered (4), but it appears to be in a broader section concerning provision of contact details to the Minister. I am not sure whether that is a drafting issue.

Malcolm Wicks (Labour, Croydon North)

I know that the purpose of a Committee is line-by-line scrutiny, but there might be another way of resolving this issue. The paragraph that I have mentioned is where the hon. Gentleman will find the relevant power. He asked about extending the power of revocation from the person to whom the licence was originally granted to a person to whom the licence was assigned. Currently, the Minister can revoke a licence where there is a change of control in the licensee who was originally granted the licence. In future, that will also apply for the licensee who had the licence assigned to them. I have a feeling that some of these matters would be better dealt with in writing, but I hope that all that is clearer than it sounded.

What happens to the rights and liabilities of the parties? Where a licence interest is revoked in relation to one person on the licence, the person whose interest has been revoked remains jointly and severally liable for any obligations arising before the partial revocation takes place. After partial revocation, the rights, obligations and liabilities associated with the licence continue to have effect in respect of all the remaining persons.

Anne Main (Conservative, St Albans)

Can the Minister tease that out a little bit more for me? After the revocation of one of the people on the licence, there would still be a liability to pay. What assessment would be done and who would do it, so that the liabilities would be understood at the particular point when the person on the licence was revoked?

Malcolm Wicks (Labour, Croydon North)

Who?

Anne Main (Conservative, St Albans)

Yes.

Malcolm Wicks (Labour, Croydon North)

My Department would obviously play a leading role; we could not simply leave it to the companies involved. If I can clarify that in writing, I will, in case there is more detail that the hon. Lady would like.

Anne Main (Conservative, St Albans)

I thank the Minister for that offer. I can imagine that it would be something of a legal minefield, with arguments over who is responsible, and for what, at some point in the future. I am concerned that we ensure a degree of clarity about how the liabilities are assessed should someone no longer be part of the operation but still have the financial liability for a future that they do not know about.

Malcolm Wicks (Labour, Croydon North)

I had rather hoped that when I explained the guts of the regime and the three tiers this morning, I was providing some clarity about where the obligations would fall. They would fall on the first tier—the people currently in the field who have been drilling for and extracting oil or gas—and would move on to the second tier only if insufficient moneys were available. We teased out some of those issues a little further during the debate on the amendment tabled by my hon. Friend the Member for Glasgow, North-West. If I find when I look at the record that I need to bring greater clarity to the hon. Lady, I will do so.

Clause 73

John Robertson (Labour, Glasgow North West)

I beg to move amendment No. 28, in clause 73, page 62, line 26, leave out from ‘all’ to end of line 27 and insert

‘existing apparatus, works and associated services necessary for the existing and future operation of such pipe-line or network of a similar nature with a third party.”’.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments: No. 30, in clause 73, page 62, leave out lines 31 and 32 and insert—

‘(d) separating, purifying, blending, odorising or compressing upstream gas for the purpose of—’.

No. 29, in clause 73, page 63, line 6, leave out from ‘all’ to ‘and’ in line 7 and insert

‘existing apparatus, works and associated services necessary for the existing and future operation of such pipe-line or network of a similar nature with a third party”,’.

John Robertson (Labour, Glasgow North West)

Amendments Nos. 28 and 29 are probing and intended to gain clarification. They are, like my new clause 19, technical amendments. You were fortunate to miss my previous contribution, Mr. Amess; let me assure you and other Members that this one will be a lot shorter.

The amendments relate to third-party access to infrastructure and concerns raised by the industry about how the new wording will broaden the scope in which the legislation can be applied. The industry agrees with the intention to remove so-called ransom strips so that the Secretary of State can meaningfully determine third-party access, but in order to achieve that the new wording unduly broadens the scope with which he can apply the legislation. In particular, the meaning of “pipeline” has been extended from “any apparatus and works” to a wider definition. There is no test of reasonableness, which would require the Secretary of State to act appropriately and proportionately and to ensure that infrastructure owners were not commercially burdened. The definition now includes

“all apparatus, works and services associated with the operation”

of the system. It would be preferable if that were limited to “services necessary” for such an operation and to third-party services comparable to the existing business or services.

I am informed that there is further concern about upstream gas and oil-processing facilities now being included in subsections (2) and (4). That could extend the Secretary of State’s powers beyond normal upstream activities into downstream activities, given the inadequately defined distinction between upstream and downstream, and would exclude refineries, gas conversion plants and the like. I hope that the Minister will support the amendments, which would bring clarity to the Bill in terms of the scope within which it can be applied and the distinction between upstream and downstream.

Martin Horwood (Liberal Democrat, Cheltenham)

The hon. Gentleman’s amendments are technical, and I may be out of my depth. He said that they would bring clarity to the provisions. Amendments Nos. 28 and 29 would do that, but amendment No. 30 would limit them in that it takes a definition of a gas-processing operation and applies it only to upstream activities. Surely that would be a substantive change, or do I misunderstand him?

John Robertson (Labour, Glasgow North West)

Probably. I am pointing out what needs further clarification from the Minister. In all honesty, amendment No. 30 is sufficiently clear. If definitions are too broad, they are all-encompassing, whereas the amendment would help to define exactly what is required. When I receive the Minister’s answer about upstream and downstream activities, I hope that matters will be even clearer.

Brian Iddon (Labour, Bolton South East)

I seek clarification, Mr. Amess. I am not speaking for or against the amendments, but I have a different point to make. Should I do so now or when we discuss clause stand part?

Sir David Amess (Conservative, Southend West)

It would be appropriate if the hon. Member made his point when we debate clause stand part.

Malcolm Wicks (Labour, Croydon North)

Before I cover the specific issues raised by the amendments, it might be helpful if I remind members of the Committee of the rationale behind the clause that my hon. Friend the Member for Glasgow, North-West wants to amend. We already have a legislative regime that allows the Secretary of State to intervene, if requested, in disputes over third-party access to most upstream petroleum infrastructure. If he were asked to intervene, the outcome of a disputes resolution might be that he sets the terms for access, such as the tariffs to be paid for transportation and processing. In practice, he has not been called to use such powers to date. We believe that that is because the potential deterrent effects of their use have done well in encouraging successful negotiation. They certainly add an additional incentive towards effective and timely commercial negotiations. However, some gaps in the scope of the current regime mean that, while he can require and determine the terms for access to some infrastructure, owners could lawfully charge exorbitant amounts for the use of, or refuse access to, other facilities or services. The existence of such ransom strips, as they are known in the industry, effectively undermines the Secretary of State’s powers to deliver reasonable access to the third party. We believe that a more comprehensive and consistent coverage of upstream petroleum infrastructure will make the threat of the use of the Secretary of State’s powers more effective. The third-party access clause therefore closes the gaps that we have identified in the existing legislative regime. I wish to state for the record that we intend the clause to capture only the upstream petroleum infrastructure, not downstream facilities. I hope that I have put to rest the concerns of my hon. Friend that resulted in his tabling the amendment.

Clause 73 modifies the Pipe-lines Act 1962, the Gas Act 1995 and the Petroleum Act 1998 by expanding the relevant definitions of “gas processing operation” and “pipeline”. The expanded definition of “gas processing operation” covers converting gas into a form that is acceptable to sellers or loading it into a pipeline or tanker to be transported elsewhere. That means that upstream gas processing facilities such as Mossmorran and Braefoot Bay will now be covered by the third-party access legislation. The expanded definition of “pipeline” covers

“all apparatus, works and services associated with the operation of”

a pipeline. Without that expansion, an infrastructure owner could lawfully comply with the Secretary of State’s directions over access to the pipeline in question but refuse access to related services.

Amendments Nos. 28 and 29 would restrict the proposed extension of the scope of the Bill to cover only the existing services necessary for the operation of such pipelines. However, that would run contrary to the intended effect of extending its scope through clause 73 to cover the whole upstream petroleum infrastructure chain. For example, if a particular dispute related to the first time that a third party had requested access to a pipeline, then the infrastructure owners would be unlikely to have in place metering or allocation services, because those services would not be necessary for the operation of the pipeline. The owners’ petroleum would flow through the pipeline very well without them, and the amount of flow would be measured when it entered a terminal or joined another hydrocarbon stream. However, if a third party is to be able to use the pipeline in addition to the owner, then metering or allocation services will be needed.

Such services are not necessary for the operation of the pipeline but are necessary to enable third-party access. Thus they would not be caught by the “necessary for” test proposed in the amendment but would be caught by the “associated with” test. Furthermore, such metering and allocation services would count as new services not offered by the owner before, so they would also fail the “existing” test. The amendments would prevent the Secretary of State from including in a notice a requirement for an owner to provide allocation or metering services, if those did not already exist. The infrastructure owner could comply with the notice for third-party access issued by the Secretary of State, but charge any price for, or even refuse to offer, the associated services of allocation or metering, thereby undermining the Secretary of State’s intervention. That is just one example of the possible unintended consequences of the amendments.

My hon. Friend the Member for Glasgow, North-West asked me about a test of reasonableness. As with any decision taken by the Secretary of State, there will be the usual public law duty on him to act reasonably. Although the scope of his powers to determine third-party access disputes is extended by the Bill, the exercise of those powers will remain subject to that duty. Furthermore, the existing legislation already requires him to take certain factors into account in so far as they are relevant in considering an application for third-party access. Some of those already refer to the concept of reasonableness. For example, he must consider the owner’s reasonable needs for the transport and processing of petroleum. In relation to upstream petroleum pipelines, sections 17F(8) of the Petroleum Act 1998 and 10E(8) of the Pipelines Act 1962 provide those checks and balances. Moreover, the Bill provides that the Secretary of State may serve a notice for third-party access only if he is satisfied that the pipeline could be operated in accordance with that notice and without prejudicing the efficient use of that pipeline by the owner.

I thank my hon. Friend for allowing me to clarify these issues, but I hope that my response to his amendment and the explanation of how we would aim to use the powers in clause 73 give him some confidence that we are taking an appropriate approach. I therefore ask him to consider withdrawing the amendment.

John Robertson (Labour, Glasgow North West)

I thank the Minister for his excellent answer. He excelled himself in his clarification, and the people who have advised me will obviously take note of everything he has said. I beg to ask leave to withdraw the amendment.

Brian Iddon (Labour, Bolton South East)

This clause is about third-party access to infrastructure. I want to raise the issue of access to gas infrastructure by biogas producers. All over Germany, they collect biodegradable waste from farms, from the food industry and from civic collections. That biodegradable waste is transferred to large digesters, which are across the country, not site-specific. They produce biogas—largely methane—along with a solid fuel that can be burned and a liquid fertiliser that can go back to the farms. That process is extremely efficient. We do it on a limited scale in the United Kingdom, but I want to point out to the Minister the difference between the German and British systems of biogas production. The difference is simple. In Britain, biogas production is site-specific, in that the biogas is used largely for heat production, or sometimes goes into a combined heat and power generation process. That is normally incentivised by an industry that requires that heat, or heat and power. In Germany, biogas producers are incentivised by the fact that they have a feed-in tariff to the gas main infrastructure, which lies across Germany. That means that in Germany the digesters can be anywhere, provided that they have immediate access to the gas pipeline.

Charles Hendry (Conservative, Wealden)

In addition to a feed-in tariff, does the hon. Gentleman also see the benefit of a renewable heat obligation? That sort of thing could encourage the development and use of biogas.

Brian Iddon (Labour, Bolton South East)

I omitted to say that, and I am grateful to the hon. Gentleman for pointing that out. That is an important factor in the debate. Has the Minister considered introducing the German feed-in tariff to incentivise biogas generators in this country? At the very least, would he agree to meet a delegation led by people who have studied the German process? That would probably be led by the chairman of the all-party warm homes group, the hon. Member for Nottingham, South (Alan Simpson).

Malcolm Wicks (Labour, Croydon North)

My colleague, the hon. Member for Cheltenham, is the master of the specific words in the Bill and the schedule, but I do not think that everything that my hon. Friend the Member for Bolton, South-East raised would be found there. Nevertheless, he used that as a peg to raise an interesting issue. The clauses that I have been discussing are about the UK CS, oil and gas, and access.

However, it might help my hon. Friend if I say that we will have a debate later—hopefully much later, next week—on the renewable heat obligation, under new clause 10. On access to the grid by biogas producers, I am advised that it is not currently possible to inject biomethane into the gas network, due to practical constraints such as nitrogen content and pressure issues. There are some practical difficulties, but nevertheless it is a potentially important resource. I will, of course, be happy—once the Bill has passed through the Committee—to meet a delegation, if he will lead it.

Clause 74

Malcolm Wicks (Labour, Croydon North)

The clause focuses on pipeline modifications. Without the ability to require modifications of upstream petroleum pipelines at the third party user’s expense, the owner of the existing structure might legitimately follow the Secretary of State’s decision to grant access to his pipeline but refuse to modify it, or charge an excessive amount to modify it. The clause therefore allows the Secretary of State to intervene, if requested to do so, in such disputes over modifications to onshore upstream petroleum pipelines.

That intervention would be a pipeline modification notice—an exciting document, I am sure—which must set out, among other things, the modifications that the Secretary of State thinks should be made and the amount to be paid, or how that amount may be determined, by the applicant to the owner for the purpose of carrying out such modifications. There is a requirement on the applicant to make appropriate arrangements, in a specified time, for the sums to be transferred to the owner if the modifications are carried out, or if the Secretary of State is satisfied that they will be carried out. There is also a requirement on the owner to carry out modifications if the applicant makes appropriate arrangements for payment within the specified period.

I should add that similar powers and sanctions are already available to the Secretary of State, under the Petroleum Act 1998, over controlled petroleum pipelines offshore. The clause applies an equivalent regime, in effect, for modifications to upstream petroleum pipelines onshore under the Pipe-lines Act 1962.

Brian Binley (Conservative, Northampton South)

I seek clarification. If I am out of order, I am sure that you will quickly tell me, Mr. Amess. The Minister has already said that the infrastructure in the North sea is valuable, particularly the pipeline infrastructure. That value seems even greater with the prospect of carbon capture and storage, and the ability to extract more oil from existing oilfields by using carbon capture and storage, as I explained before. However, that process is very long term, so how much do these powers relate to that long-term scenario?

I assume that pipelines will go out of use for periods of time over the next 20, 30 or 40 years because wells that they serve will have closed down. The pipelines might be capable of being opened up, hence the value of the infrastructure. I want to know how long we expect a pipeline’s operator to maintain and to modify it, while recognising its potential value in the future. Also, to what extent is it right and proper that the maintenance would be carried out at the operator’s cost when a pipeline is not in use? When its value is, we hope, general to the nation over a long period, what part of that cost should the nation pay, while recognising its value as infrastructure? Perhaps that does not come under the clause; there may be other clauses where I have not noticed maintenance coming in specifically, as well as modification. I am sure that the Minister will point that out.

Malcolm Wicks (Labour, Croydon North)

I should tell the hon. Gentleman, tedious though it may be, that carbon dioxide is not covered by these provisions on third-party access. They deal only with upstream petroleum infrastructure, and not, therefore, with carbon dioxide. I am struck and, indeed, pleased by his interest shown in carbon capture and storage and its future implications. However, he is a little ahead of the rest of us in raising rather serious issues that we cannot reasonably answer now.

For example, it would not be reasonable to say that every pipeline has to be maintained in the hopeful expectation that there might be a lot of CO2 flowing through it in 20 years’ time. I am not a scientist, an engineer or a technologist, but merely the Energy Minister, so I do not even know whether the existing pipeline would be fit for purpose for CO2. Others will have an idea about that. I hope, however, that I have reassured the hon. Gentleman, given a scenario where the UK CS would be alive and well, as it were, for four or five decades to come—it might be more—that the time scale for developing CCS and the time scale of the UK CS are not totally out of synch with one another.

Brian Binley (Conservative, Northampton South)

I understand the point about gas going through pipelines and that those pipelines might not be able to be used for that, although modifications could be made, but my question is partly about the extra petroleum or oil that we hope to get out through those pipelines. That might mean a long delay between the last time that the pipeline is used and its reuse in 20 or 25 years’ time. I assume that a pipeline will last that long and I assume that the facility will be good enough to carry the extra oil that we are going to shove out if properly maintained, if carbon capture and storage works in this respect. Who is going to maintain it and where will the costs fall in the longer term?

I understand what the Minister tells me about the time scale and that no one knows these answers. I want to tag it, as it were, so that thought is given to it. It is an important area. To have the infrastructure now and not to look after it to the point at which it would be useful would be rather sad, and it would be an expensive exercise to do it over again. That is my thought.

Malcolm Wicks (Labour, Croydon North)

They are all good thoughts. I shall give some added reassurance. Although, rather humbly, I am suggesting that many of these issues need to be sorted out at a technical level in the years to come, depending, of course, on how successful CCS turns out to be. We all wish it great success because it is the only show in town for tackling CO2 emissions from fossil fuels. It is not just another technology; it is absolutely critical, hence the demonstration project.

I can reassure the hon. Gentleman by saying that the possible future use of pipelines is considered before they are decommissioned and also that we will bear carbon storage in mind when considering any decommissioning notices. It is already part of the Department’s mindset to ask those questions and to start to tease out the answers.

Clause 75

Malcolm Wicks (Labour, Croydon North)

I thought that it was time that I ended my silence and made a short speech to the Committee. I sensed that Members demanded it.

The clause extends the dispute resolution process so that the Secretary of State can intervene in disputes over third-party access to oil processing facilities, if requested by a prospective third-party user of upstream petroleum infrastructure. Legislation in that area does not currently cover such upstream oil facilities. However, by contrast, the existing regime covers most upstream gas processing facilities under the Gas Act 1995. As I mentioned earlier, these powers are meant as a deterrent against the use of infrastructure owners’ monopoly powers. A more comprehensive and consistent coverage of upstream petroleum infrastructure by the third-party access regime will make the threat of the use of the Secretary of State’s powers more effective.

The clause specifies the steps that the prospective third-party user needs to take before they can apply to the Secretary of State for directions. For example, the clause sets out the process that a third party will need to have followed to agree access with the existing owner of the oil processing facility, before they can ask the Secretary of State to intervene on their behalf.

The clause also sets out the issues that the Secretary of State must consider when deciding whether to intervene. For example, he must decide whether the application needs to be adjourned in order to give the parties more time to negotiate. The Secretary of State may give directions, if he is satisfied that they will not prejudice the efficient operation of the oil processing facility or its use by the owner, his associates, or anyone else with a right to use it. The content of these directions is set out in clause 76, and that clause should, therefore, be read with this one. I move that this clause stand part of the Bill.

Clause 76

Malcolm Wicks (Labour, Croydon North)

As I said, clause 76 should be read in conjunction with, and is supplemental to, clause 75.

The clause describes the detail of the directions that the Secretary of State may issue in disputes over third-party access to oil processing facilities, including directions for the terms of access, the amount of oil to be processed and the amount to be paid for it. I move that the clause stand part of the Bill.

Clause 78

Sir David Amess (Conservative, Southend West)

With this it will be convenient to take new clause 5—Annual report on gas storage —

‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—

(a) his assessment of the appropriate volume of onshore gas storage to ensure long-term energy security, and

(b) the progress that has been made towards reaching that target.’.

New clause 25—Energy usage in homes and businesses—

‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—

(a) total energy consumption in domestic housing,

(b) total energy consumption by businesses, and

(c) the impact of government measures to assist energy efficiency.’.

Martin Horwood (Liberal Democrat, Cheltenham)

It is good to give the Minister a little rest, even though we are enjoying his numerous speeches on the subject. In the explanatory notes, we are told that the clause removes prescriptive and outdated reporting requirements. That is strange. Since those requirements were introduced only in the Sustainable Energy Act 2003 and barely seem to have had time to settle in, how can they be outdated? Further, if they prescribe the provision of accurate information, I do not see how that is such a bad thing.

The first part of clause 78 seems to relieve the Government of some of their reporting duties under the Sustainable Energy Act, including what they have done to develop renewable and micro-generation energy sources and to ensure the necessary expertise to develop potential energy sources. That may not just apply to the energy sources that I am quite fond of, such as tidal power, biomass, or even biogas; the hon. Member for Copeland might be interested to know that it could include ways in which we are developing expertise in nuclear energy, which is quite an issue. The clause also appears to relieve the Government of reporting duties on what they have done to achieve the energy efficiency aims set out in the Sustainable Energy Act.

The clause goes on to remove the requirement for the Government to report on activities undertaken during the previous year, although not the requirement to publish a report each year. However, that means that they could report on any period that they decided. In other words, the time scales could be adjusted so that, for example, good things could be re-reported, or they could miss out particular months so that some things went under-reported.

Again, we hit the succession problem for the Minister. We all know that he is an honourable man and I know that he would never, under any circumstances, re-present, or re-package good news year after year. Nor would he—perish the thought—adjust time scales to produce the best possible spin on statistics. However, I know that he will be shocked to discover that that sort of thing sometimes goes on in government. The CO2 and greenhouse gas emissions targets under the Kyoto protocol spring to mind. We are constantly told that we are on course to meet those targets, despite the fact that the basket of greenhouse gases has gone up under this Government and that since 2002 they seem to have been on an upward trend. Yet we are still apparently on course to meet the greenhouse gas targets. The fact that we are missing the domestic CO2 targets is rather glossed over. That offers an example of the kind of trap that Ministers might inadvertently fall into when they present these numbers.

Charles Hendry (Conservative, Wealden)

I am interested in the way in which the hon. Gentleman is introducing the clause. Does he agree that another example is fuel poverty targets? When the numbers of people suffering fuel poverty were going down, the Government managed to produce the figures every year, but now that they are going up, we have not seen the figures since 2005.

Sir David Amess (Conservative, Southend West)

Order. I hope that the hon. Gentleman will not be tempted to respond to that particular point.

Martin Horwood (Liberal Democrat, Cheltenham)

I think that we may come back to the subject of reporting on that front later in the Bill, Mr. Amess. We will obey your instructions.

The risk is that some statistics will inadvertently be presented in an overly generous way. It is important that, having set up these specific requirements for reporting on particular issues and on particular time scales, we do not change that regime unless there are very good reasons to do so. It would surely be wise to remove the temptation from the Minister’s successors—whoever they might be—to organise the statistics to their own advantage. I question the necessity for the clause to remove those reporting requirements and allow the temptation for future Ministers to massage statistics.

Charles Hendry (Conservative, Wealden)

Clause 78 is one of the most important in the Bill, about which I very much share some of the concerns set out by the hon. Member for Cheltenham. I am particularly indebted to Andrew Warren, from the Association for the Conservation of Energy, for pointing out the possible consequences of the clause, about which we should be profoundly concerned.

The hon. Gentleman implied that we should strike out the clause, under which, as he pointed out, the Government would not have to report on, for example, specified energy sources, the expertise to develop potential energy sources and energy efficiency. As he also pointed out, the clause will change the time at which the Government will produce their reports. Currently, they have to produce them for the year in question, but, as I understand it, that requirement would be removed by the proposed changes. It would not remove the requirement to produce a report every year, but it does remove the requirement for that report to cover the whole year or, as is currently the case, the year ending on 23 February, which ensures consistency in what is covered.

Under the clause, the Government could in theory choose to report on any period that takes their fancy, including a period of less than a year—it could be six months or less. It is extremely unlikely that they would choose to do that, but they could produce pre-dated reports. We have serious grounds for concern about the implications of the clause. Indeed, some months could be missed out of a report all together, if appropriate, or the Government could cover a period longer than a year. We are very concerned that, under the clause, some of the requirements on the Government will be removed.

New clauses 5 and 25 would provide for additional requirements for the Government to report to Parliament every year. New clause 5 relates to energy security and gas storage and new clause 25 relates to energy use and, in particular, energy efficiency. We all accept that good gas reserves give us energy security. We could have a long debate about whether there is a risk of our gas supplies being cut off. In a very good article in the Financial Times this week, Gideon Rachman explained why he did not think that that was a likely scenario. However, it is in all of our interests that we take steps to ensure against that scenario anyway.

There is general agreement that this country’s gas reserves are too low. Typically, we have 12 days of winter gas storage, which compares to 70 or 80 days in France, Germany, Italy and other European countries. The situation will, of course, improve as a result of liquefied natural gas facilities being built and the pipelines that are now operating, particularly the Langeled pipeline, which has made a significant difference. However, I still believe that more should be done to improve gas storage facilities, which new clause 5 would do. Under it, the Secretary of State would have to make an annual report to Parliament on his assessment of the appropriate gas storage levels, which would be taken in days rather than an absolute amount. It might say that there should be 20 days of average winter use, for example. That assessment would provide us with details of the energy security that he believes that we need. He would also have to set out our progress towards achieving that level, which would give us an opportunity to have a debate in Parliament every year about the level of gas storage that we believe is necessary, in the light of changing circumstances at home and abroad, and about what more needs to be done to improve the situation if necessary.

I find it difficult to see a reason why the Government would say no to that proposal, although I am sure that the Minister will come up with one any moment now—he normally does. The only one that I can think of is that he might want to be secretive about how much gas storage he believes we need to maintain our energy security. In France, and elsewhere, there is a legal obligation to keep a certain number of days of gas storage. We are not suggesting that we do that. One of the reasons for the problems two years ago was that the French could not legally send us gas through the interconnector, because they would have fallen short of their legal requirements for gas storage in their own country.

We are not going that far. We are trying to get a more informed debate, and to ensure that we make sensible progress each year and never put ourselves into a situation in which we do not have the storage necessary to protect our energy security.

New clause 25 would ensure that we do rather more about energy efficiency than we have done to date. The UK is lagging behind seriously, and this would be one of the most important contributions to our energy security. It is a great shame that the Bill has missed out altogether the issues of energy security. In a note to me, Andrew Warren said:

“It is rather difficult to provide you with a brief upon it, other than as that it is like that proverbial dog that doesn’t bark in the night. No part of it is designed to do anything to forward energy efficiency in any shape or form.”

Sadly, the Bill focuses rather more on electricity generation, but fails to look at energy use and wastage in our homes. We are at a stage when people want to do more to conserve energy. There is a great thirst for knowledge, and a thirst to do things, but people are unclear about exactly what they should be doing. It is worth the Committee spending a moment looking at some of the facts.

In 2005, total UK CO2 emissions were 554 million tonnes. The energy that we use to heat, light and power our homes accounted for 153 million tonnes, or 27 per cent. of those emissions. The shameful fact is that at the moment only 10 million, or 40 per cent., of our homes are sufficiently and properly insulated. Around 33 per cent. of the heat lost from an uninsulated house is lost through the walls, and the people who live in those homes could typically save £90 a year on energy bills by insulating their wall cavities. There is not just a cost to them: this would save £720 million worth of energy overall, and 9 million tons of carbon. That is enough to power 1.8 million homes for a year. There is very significant wastage here, and no reason for people not taking this basic step to insulate their homes. Insulating lofts is another way in which people would save significant sums of money—typically about £110 a year.

We in this country are not good at switching things off. We are three times as likely as the Germans to leave our mobile phone chargers on and our appliances on standby. Sky is being very innovative in this area, and will be able by the end of the year to turn off remotely the standby buttons on every single digibox. Business is doing very significant work in this area, but in too many other walks of life we rely on the individual to take action. All too often, they simply do not. According to the Energy Saving Trust, leaving mobile phone chargers and lights on results in an extra 43 million tonnes of carbon dioxide being pumped into the atmosphere every year—that is the estimate for the period 2006-2010—and a waste of £11 billion worth of energy.

The UK could reduce electricity requirements by as much as 3 per cent. if all non-essential household appliances were turned off when not in use. That equates to the entire output of one medium-sized coal-fired power station producing 500 MWe, or 3 million tonnes of carbon a year. Switching to energy-saving light bulbs could save up to £60 of electricity over the bulb’s lifetime. Now, multiply that by the number of bulbs in the typical home. If, as a nation, we switched to energy-saving light bulbs, the carbon emissions saved would fill the Albert hall 3,000 times over.

Malcolm Wicks (Labour, Croydon North)

What would they be singing?

Charles Hendry (Conservative, Wealden)

If one of his colleagues had her way, they would not be singing anything at all. The Minister of State, Department for Culture, Media and Sport suggested that the last night of the Proms should be stopped, because it does not appeal to all parts of the nation. I am talking about energy efficiency—an issue that does appeal to all parts of the nation and is relevant in every home.

The best high-efficiency condensing boilers convert more than 90 per cent. of their fuel to heat, compared to 78 per cent. for conventional types. If every household had one of these, the energy saved would power the west midlands for a year. Double glazing cuts heat loss through windows by 50 per cent., and could cut the average heating bill by 90 per cent.

Sir David Amess (Conservative, Southend West)

Order. I am reluctant to interrupt the hon. Gentleman, but I have been listening very carefully and he is increasingly talking about things which are not in the Bill. Can I kindly ask him to draw his remarks a little closer to the new clauses that he is asking the Committee to consider?

Charles Hendry (Conservative, Wealden)

You have been very generous, Mr. Amess. I hope that we have explained some of the things that we could be doing and what the new clause could help to address. We are not very good at energy efficiency in this country, and we have the bizarre situation that VAT is charged on energy efficiency measures at the full rate, whereas wasted energy is charged at only 5 per cent. We have a perverse way of dealing with this issue.

Clause 78 will reduce the reporting requirement, whereas we think that the Minister should be required to report more clearly on some of those issues. New clause 25 would drive forward energy efficiency. Other measures would help more, but, as has been pointed out, they could not be included within the scope of the Bill. There should at least be more information about what we are achieving. The new clause would require that an annual report be made to Parliament on the total energy consumption in domestic housing, the total energy consumption by business and, most importantly, the impact of Government measures to assess energy efficiency. That means that every year, we could see what effect those energy efficiency measures are having and whether we are managing to reduce demand for energy or simply to stabilise it or reduce its growth.

The lack of energy efficiency measures is a major hole in the Bill, and it is unfortunate that, because of the way in which the Government have phrased the Bill, it is out of order to talk about energy efficiency. The new clause would at least help us to address some of those failings.

Hugo Swire (Conservative, East Devon)

The proposed new clauses are important, and I support them. I give the Minister the benefit of the doubt, as I think that there has been a sin of omission rather than of commission. However, anyone who reads the reports of our deliberations—I am sure that there will be thousands of people up and down the country hanging on every word that we utter—will expect information. As my hon. Friend the Member for Wealden has said, we need some kind of guideline and incentive to meet the energy reduction targets that we have been discussing. For whatever reason—no doubt the Minister will articulate his reasoning—the whole thrust of clause 78 is an attempt to reduce the amount of information available, and to make it less incumbent on Government to meet certain targets and to be held to account for those targets.

New clause 25 is indicative of my party’s thinking. We have a desire to be open and to have targets in the public domain to which we will eventually, when we are in government, be held to account. I should have thought that the Minister would want to meet that aspiration. Those of us who have children are very aware of the deliberations that they have at school on energy conservation, climate change and so on. You are looking at me in a forbidding way, Mr. Amess, so I shall not stray too far on this. They will find it very strange that we are introducing an Energy Bill that covers so many aspects of energy, but does not address how we use that energy and how we can establish where we are expending our limited resources. The new clause is uncontentious and positive, and I very much hope that the Minister will find some way of including it in the Bill.

New clause 5 is different. I am not an authority on these matters, and I was interested by my hon. Friend’s comments about the amount of onshore gas storage on the continent. I think he said that the law in France obliges it to keep a certain amount of gas at any time, which is why the French were unable to help us out when we ran low. I think that my hon. Friend has been unambitious with his new clause. Paragraph (a) talks about his assessment of the appropriate volume of onshore gas storage to ensure long-term energy supply. I would be intrigued to know about mid-term energy supply. We were down to about 12 days of gas at one point quite recently. Given the geopolitical situation with some of our suppliers and the choppy waters of our current relationship with the former Soviet Union—and we have seen how Russia has behaved in the past to some of the former Soviet republics in turning off supplies, as a political tool—I think that there is a real desire in this country to know what supplies we have. The Minister will remember how forward-thinking it was of a Conservative Government to stock up on coal supplies so that they could head off any future disruption in the coal industry back in the 1980s—

Malcolm Wicks (Labour, Croydon North)

Is the hon. Gentleman going to say more about the Conservative record on the coal industry?

Sir David Amess (Conservative, Southend West)

Order. I hope that the hon. Gentleman will not be tempted.

Hugo Swire (Conservative, East Devon)

I certainly will not be tempted by someone who clearly knows more about nationalisation than denationalisation, as we have seen with Northern Rock.

To go back to what is an important point. People are interested in the security of our supplies. I take on board the fact that things are going to improve and that we are increasing our capacity for storage but I think that most people were very concerned when we were down to 12 days—

Charles Hendry (Conservative, Wealden)

Twelve is our normal amount. That is as much as we would usually have in gas storage, compared to 70 or 80 days in France. At the time of the particular gas shortage we were down to much less than that—just a couple of days.

Hugo Swire (Conservative, East Devon)

That is even more worrying and I would like the Minister, if he is allowed, to say what his aspiration is for storage. We have heard that storage capacity is going to increase. Why is it that by law the French are obliged to have 70 or 80 days and that the average in this country is apparently 12 days? I was wrong: I said that it had come down to 12 days and then that it had come down to two or three days. In fact, that is not a supply at all: it is an emergency if your supplies are down to 48 or 56 hours. It is completely unacceptable.

The Minister does therefore need to include this in the Bill. I do not think that national security concerns should mean that people do not know what energy supplies this country, perfidious Albion, has for survival. I think that it should probably be in the public domain. The public have a right to know. They have that expectation. I cannot see why the Minister is shy of putting it in the Bill. The entire thrust of this clause is to reduce the information that the Government are obliged to supply to the public whereas the new clauses submitted by my party would achieve the reverse. In this spirit of openness, the Minister should rise to the challenge and accept the new clauses.

Malcolm Wicks (Labour, Croydon North)

I will certainly rise from my seat. I am still reflecting on the hon. Member for Wealden’s request about his amendment. Is it not wonderful that this report is going to be such an important document because—[Interruption.] I would not say your ruling was wrong, Mr. Amess though possibly a little late in the day [Laughter.]. No, it was timely. It was such a fantastic speech that it made one think that, if only we could get this report right, we would be well on the way to tackling climate change and global warming. I am therefore greatly encouraged. The authors of the report will be greatly encouraged about its importance because I suppose that the cynic might think that the major contribution of reports like this would be to lag the odd loft or two. I thought that it was very interesting and I was waiting for the end of the lecture because I found it fascinating. I thought that the punchline might be, “Would the last person to leave the Albert hall turn off the lights”, but we never quite got there. I am encouraged by the interest in the report.

Martin Horwood (Liberal Democrat, Cheltenham)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

No, I do not think so.

The purpose of the clause is twofold. First it introduces flexibility around the timing of our annual report on the Government’s four energy goals, and secondly it removes unnecessary or overly prescriptive reporting requirements.

Martin Horwood (Liberal Democrat, Cheltenham)

I am sure that, like me, the Minister is nostalgic for the days when Tories were Tories and they thought carbon reduction was about closing coal mines. I find myself yet again in the uncomfortable position of supporting Conservative new clauses. I would not want the Daily Mail to think that it will become habit forming, but these new clauses are well intentioned and seem to be very important. They are the result of the rather frustrating situation that all members of the Committee have found ourselves in: we have been unable to table more substantial amendments on energy efficiency because it is outside the scope of the Bill. It is wrong for the Minister to make light of the fact that we have had to bring the subject of energy efficiency kicking and screaming into this Bill through means of reporting. It is an important provision, which I hope that he will address properly in his remarks.

Malcolm Wicks (Labour, Croydon North)

I did not follow events in the detail that I should have done, but as I understand it, the hon. Gentleman did not vote with his party last night. Now, in an overture to the Conservative party he is supporting the Conservative new clauses. We will see how the rest of the narrative develops.

As we said at the outset of our deliberations, the Bill is very important. It does things that need to be done, but it is not a kind of Christmas tree on which we can hang every aspect of our energy or climate change strategies. We have a good policy on aspects of energy efficiency. A number of things are being developed that do not require legislative cover. The purpose of a Bill is to reform the law and introduce new laws where that is required. It is not an election manifesto. I will not have anyone say—well I will, of course, but I will not agree with them—that we are not fully committed to energy efficiency measures. Outside the Committee I am happy to debate that at any time, within reason, and in any place.

Anne Main (Conservative, St Albans)

I hope that the Minister will reconsider his position. During his speech on Second Reading he said that the whole point of the Bill was to implement the major aspects of the White Paper. That is why we feel we have to press the bits that are missing from the White Paper in some way now. Could he reconsider that?

Malcolm Wicks (Labour, Croydon North)

I have reconsidered and the answer is no. The purpose of the Bill is to do what we need to do in amending the law and providing new regulatory frameworks and all those things that we have been discussing. For example, we do not need legislative cover to pursue our energy efficiency commitment into a new phase or to do many other things that we are doing. It would be absurd if I introduced proposals for zero-carbon housing by 2016. That is one of our policies and we will do that, but nothing needs to be said about it in the Bill.

In respect of timing—[Interruption]—I am worried about my timing, because I have manfully struggled through just four lines of my speech, but of course I will give way.

Charles Hendry (Conservative, Wealden)

That is because the Minister keeps interrupting his own speech. I have now completely forgotten what my intervention was going to be.

Malcolm Wicks (Labour, Croydon North)

Well, the answer is no.

Charles Hendry (Conservative, Wealden)

I am most grateful to the Minister for giving way again so rapidly. Does he not feel that the refusal to address these issues in the Bill will lead people to feel that the Government are complacent about these subjects? We have an appalling lack of energy efficiency in this country. Our homes are massively under-insulated. There is a real crisis, and overcoming it would make a significant difference to our ability to meet our carbon challenges, but the Minister does not want to discuss the issues.

Sir David Amess (Conservative, Southend West)

Order. I hope that the Minister will not be tempted to respond to that; we should discuss things which are specifically in the Bill.

Malcolm Wicks (Labour, Croydon North)

Thank you, Mr. Amess, for that ruling—I was trying to resist that temptation. Certainly, we do not believe currently that we need any additional primary legislation beyond that set out in the Climate Change Bill, which is the powerful sister Bill to the Energy Bill. The Climate Change Bill covers many elements relating to energy efficiency, as I am sure that the hon. Member for Wealden would recognise.

Let us remember that we are talking about a report—a humble and important report—and I think that the Chairman is encouraging us to discuss it. There may be more interesting things to talk about—Arsenal’s victory over Milan, for example—but we are debating the clause. I have to be the borehole and talk about it.

In respect of timing, we are seeking to remove the requirement in section 1 of the Sustainable Energy Act 2003 to report by a certain period in a given year. Our objective in doing that is to ensure that the information that we produce is current and complements, where possible, other key reporting requirements. At present, we publish various reports at different times in the year, driven by timings currently set out in statute, and sometimes when the most up-to-date data are not always available. The proposals in the clause will allow us greater flexibility in choosing the timing of our publication and adapting its contents to reflect priorities.

With the introduction of the Climate Change Bill, it is even more important that we align the publication of the sustainable energy report with the carbon budget reporting cycle proposed in that Bill. The idea that we will choose the month to suit us—one year, it might be February, and another year, it might be November—is incorrect. We will still publish the reports annually, and we expect to do so around the month of May. The reports will specify the period to which they relate.

The clause will also enable the Government to include the most up-to-date data on fuel poverty. When we have up-to-date data on fuel poverty, we publish them. The data are available generally in about spring, after the reporting period set out in the legislation has ended.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister’s intentions sound good, so will he confirm that he will maintain, for the sake of consistency and ease of comparison, the reporting year that is set down by statute in the Sustainable Energy Act 2003, when these reports are published, whenever that is? Will he maintain that specific 12-month period in future reports?

Malcolm Wicks (Labour, Croydon North)

I may need to take advice on that, because I am not absolutely clear of the precise reporting year, but I will come back to the hon. Gentleman.

Martin Horwood (Liberal Democrat, Cheltenham)

Will the Minister give way, because I can tell him?

Malcolm Wicks (Labour, Croydon North)

No, because I will come back to that, and if I need the hon. Gentleman to provide clarity later, I will avail myself of it; but if this helps, our intention is always to ensure that the report covers progress made in the year since the last report, as well as looking forward. I do not know whether that is the point that he is making.

Martin Horwood (Liberal Democrat, Cheltenham)

As I understand it, the current requirement is to publish a report specifically on a whole year, with the year ending on 23 February. In the interest of all of us being able to compare like with like and having a consistent pattern of reporting, will the Minister confirm that, whatever clauses we pass, he will stick to that specific reporting year?

Malcolm Wicks (Labour, Croydon North)

Let me make some progress and I will return to that. I certainly see the need, as someone interested in these things, for long-term data sets, but I will get some specific advice on that.

The second reason for introducing the clause is to remove outdated or unnecessary statutory reporting requirements. Since 2003, a number of reporting requirements have been created on a variety of energy-related issues.

Subsection (1) will repeal section 81 of the Energy Act 2004, which requires the Secretary of State to report on specific energy sources and technologies. Section 81 also includes a requirement to report on scientific and engineering expertise in the UK, as well as energy efficiency aims designated under the Sustainable Energy Act 2003. If hon. Members will bear with me, I will explain why we believe that those requirements are no longer needed.

First, the list of energy sources or technologies provided in section 81 is over-prescriptive. In the Government’s view, the annual energy report should focus on the most important issues that affect the energy sector. Those issues are likely to change as markets develop and as technologies become more effective and new ones emerge. It would not be right, therefore, to have a statutory requirement to report on a specific list of technologies, irrespective of whether their state of development continued to be a relevant consideration. We need reporting to be sufficiently flexible to allow us to exclude less relevant technologies and include more relevant ones, as developments dictate. Our change will facilitate that.

Secondly, on energy sector skills, we are already working with the sector skills network to deliver a report on skills commissioned under the 2007 energy White Paper. It is not right prescriptively to require the Government to report annually on energy skills. The development of skills is a medium to long-term issue, and the picture will not necessarily change dramatically from year to year. My Department has managed relationships with key sector skills councils—Cogent and the National Skills Academy for Nuclear—and has close links with the oil, gas and power industries. Those relationships will enable the Government to gather intelligence and work with industry to guide policy action on energy sector skills.

On energy efficiency, which has understandably led to a great deal of interest, we aim to remove duplication and overlap.

Charles Hendry (Conservative, Wealden)

On the point about the skills base, surely, the concern is that the Government will liaise with academic establishments and industry but that information will be private? If we want to ensure that we have the necessary skills base for a new fleet of nuclear power stations or for developing renewables or carbon capture and storage, Members of Parliament should have access to the Government’s assessment of the skills base and how any shortage is being met? We will be denied that information, as a result of the changes that the Government are making under the clause. Although the Government may have that information and they will have those conversations, Members of Parliament will be denied the opportunity to discuss that.

Malcolm Wicks (Labour, Croydon North)

There is clearly great suspicion and cynicism about our attempt to rationalise the reporting procedure to bring greater clarity to Parliament and the public. Those suspicions are not reasonable.

The hon. Gentleman has not taken account of what I said: we are proposing to deliver a report on skills that we commissioned under the energy White Paper. Surely, that shows our keen interest. The launch of the National Skills Academy for Nuclear also shows our keen interest. The fact that the sector skills councils also report publicly shows that we have nothing to hide. We should not be over-prescriptive about the report that would be most useful to present to the public and Parliament.

With the clause, we will remove the requirement imposed by the Sustainable Energy Act 2003 to report on progress towards energy efficiency aims, as there is overlap with that report and the requirement on energy efficiency targets in residential accommodation under the Housing Act 2004. In addition, we produce the UK energy efficiency action plan, which we will regularly update as required under the energy services directorate. Therefore, there will be a regular report on energy efficiency. We would also expect to capture energy efficiency issues as part of our reporting on carbon emissions in the annual sustainable energy report.

Subsection (1) will also remove the requirement under section 172 of the Energy Act 2004 to report on the short and medium outlook for security of supply. As for energy efficiency, we are already obliged under Community legislation to report on issues that relate to the security of supply of gas and electricity. Those obligations are fulfilled by our new energy market outlook, which provides an update on the key drivers of the security of energy supply and provides scenario-based analysis of the future supply-demand balance. The energy market outlook will be published annually. We therefore believe that section 172 is unnecessary.

Before I discuss the new clauses, I should like to make it clear to hon. Members that the clause will not remove our duty to report on the four key energy goals. As part of the annual report, we will include progress on key targets, such as the energy efficiency of residential accommodation, the implementation of the microgeneration strategy and promoting community energy projects. In addition, the annual publication of the fuel poverty strategy will continue.

With new clause 5, the hon. Member for Wealden raises an interesting issue about the need for increased gas storage capacity by 2020. By that time, it is estimated that we will be importing between 50 and 80 per cent. of our annual gas demand, because of declining production from the UK CS in the North sea. He appears to be seeking to establish the volume of gas storage that will be needed to secure our long-term energy security and to ensure that the Government report annually on progress towards achieving it. In effect, the new clause states that they should propose a target.

We believe that new clause 5 would interfere with the developing gas market by specifying the appropriate volume of gas to be stored onshore within the UK energy market. It is not for the Government to specify to what extent one form of gas market flexibility is appropriate to help secure energy supplies. Given the complexities of the energy system, companies are far better placed to manage risks and to identify and deliver the types of investment that are needed. In considering which investments to make, companies must take account of a range of uncertainties, including current and future fossil fuel prices, carbon prices and energy demand. I believe that new clause 5 would send the wrong signal to industry—that there is an ideal amount of gas to be stored and that it should be stored onshore.

Hugo Swire (Conservative, East Devon)

So is the Minister sanguine about the fact that this country was down to two or three days’ gas supply or does he feel that there is an amount that we should have stored?

Malcolm Wicks (Labour, Croydon North)

I am not at all sanguine. Historically, since the mid-1960s, there has been a natural store in the UK CS in the North sea. Given the decline in that and the need to import more gas, we need more gas storage. We have made that clear. We believe, and I would have thought that the hon. Gentleman believes, that it is best left to the market to store the gas and to determine these matters. We are not passive bystanders because, for example, we are taking action by introducing a regulatory framework for gas storage under the Bill. Our planning reforms will also facilitate the timely arrival of gas storage facilities. I am not sure if the hon. Gentleman is saying that the state should set a target or that the state should build such stores. What is he saying?

Hugo Swire (Conservative, East Devon)

I am very clear in what I am saying. Of course it is up to the market to supply the gas. However, I find it extraordinary that effectively the Minister is saying that the Government of the day should have no view on how many days’ gas storage should be available to the country at any one time. Is that what the Minister is saying? Even in a private capacity as an individual, does he not have a view whether two days or 20 days is acceptable, or 70 days, as in France? I am not saying that that should be enshrined in law as it is on the continent, but it is very worrying that the Minister and the Government seem to be complacent about having an idea of what is acceptable.

Malcolm Wicks (Labour, Croydon North)

I do not think that we wish to be prescriptive about how much gas storage is required. We will clearly need more in the future. Our regulatory framework will enable that to come on stream, as will our planning framework. I think that the hon. Gentleman needs to look at this issue in wider terms. We are all concerned about energy security and it is an aspect of a nation’s security, but we can achieve it in different ways. One is by having an appropriate mix in terms of energy—not all of our eggs in the gas basket, or any other basket. Much of the Bill is enabling that to happen, with more renewables and a future generation of nuclear power.

Of course in terms of the gas that we need to import, the Government have been active on many fronts with the commercial sector to help to bring on the Langeled pipeline from Norway, for example, and to help to facilitate liquefied natural gas capacity at this end; I am referring to Milford Haven. The hon. Member for East Devon needs to see all of that in the round. I am confident that the market will provide far greater amounts of gas storage in future.

Mr. Swire rose—

Malcolm Wicks (Labour, Croydon North)

I think that the hon. Gentleman wants to ask me the question again.

Hugo Swire (Conservative, East Devon)

I just want to say that of course I understand that we are moving towards an energy mix—we all know that—but increased nuclear capacity is, as I think the Minister would concede, some way off. Clearly, he is talking about the regulatory and planning frameworks that the Government are looking at, and of increasing onshore gas storage—

Sir David Amess (Conservative, Southend West)

Order. The debate is going extremely wide now. We are specifically talking about energy reports, so will the Minister please direct his response to those matters?

Malcolm Wicks (Labour, Croydon North)

Yes, tempting though it is. This may help the hon. Member for East Devon. Companies may decide in some instances that it is more cost- effective to store gas offshore than onshore. Equally, they may prefer instead to enter into long-term contracts, as I was implying, for liquefied natural gas, or to take steps to provide non-gas back-up fuel, such as distillate, for gas-fired power stations as a coal substitute. It is also interesting to note that, during that difficult winter two years ago when gas prices were very high, there was quite a move to coal by power stations. Whereas on an annual average coal was accounting for perhaps a third of electricity, in those few months of that winter, that rose to 50 per cent. I hope that that makes my point about the need for a range of energy sources.

Let me assure the hon. Gentleman that I very much want to ensure our long-term energy supply, including sufficient supplies of natural gas. However, I believe that the way to do that is to ensure that we maximise the options available to companies to import and to store gas for the British market. We have already discussed the proposals contained in the Bill for a new licensing regime, which will enable offshore gas storage and import projects to be built in future. The Energy Bill does not itself deal with onshore gas storage, which is the subject of the new clause. However, provisions to modernise and reform the planning consents required for onshore gas storage are going forward in the Planning Bill, and will similarly enable the market to respond to the need for increased gas storage and import facilities.

Martin Horwood (Liberal Democrat, Cheltenham)

I do not think that any of us are questioning the direction of travel of Government policy on energy security—indeed, we welcome it—but how is he to judge the success of the policy if there is no sense of what the benchmark is? At least the new clause deals with the appropriate volume of onshore gas storage. The new clause is actually fairly modest. It does not even suggest that an exact number of days of supply should be specified. It simply asks about the volume of storage capacity. The Minister cannot seriously be suggesting that that is something that should be left up to the market. What if the world market—as does not seem entirely unlikely—ends up being dominated overwhelmingly by one company, such as Gazprom, that might not be entirely friendly to our national interest? To leave that entirely to the market is an extraordinary proposition.

Malcolm Wicks (Labour, Croydon North)

With respect, it is an exaggeration to say that one company dominating the world gas market is a likely scenario. That is extremely unlikely in my judgment. I have been trying to make the point that the new clause relates only to onshore gas storage, and I have said that companies may well decide that offshore gas storage, partly because of the provisions of the Bill, might be a more commercially sensible decision. It seems slightly foolish to be prescriptive about one approach to energy security, and say that it has to be onshore, not offshore.

Charles Hendry (Conservative, Wealden)

The Minister misunderstands the issue here. The clause has been phrased to be as flexible as possible, so that every year the Minster can say, “Actually, we think that we need a bit more” or, “Now we need less, because we have more offshore storage and pipelines and LNG terminals.” It is not prescriptive at all and simply means that he will have to come to Parliament every year and say, “Look, taking into account the offshore storage, the LNG terminals and the pipelines, this is how much we should be having for onshore storage.” That is not prescriptive and offers tremendous flexibility, and I think that it is an incredible abdication of responsibility by the Government to leave that to the market. The crisis occurred partly two years ago when the Rough gas storage facility was damaged by fire, because overnight we lost a huge proportion of our gas storage facility. The market could not react to that and could not put it right, but this is one way of trying to ensure that our energy security is guaranteed.

Malcolm Wicks (Labour, Croydon North)

I am enough of an amateur political scientist to note with interest the call for greater statism from the Opposition Benches and my advocacy of a market approach on these Benches, and I understand the irony there. I do not want to repeat myself too much, because we are talking about a report, but I think that the issues about energy security, which I take extremely seriously, are much wider than simply those relating to onshore gas storage. I repeat that we want to see more gas storage in the future, as we have made clear. We think that the market will bring that about, and we are facilitating that through changes in this Bill and in planning.

Data are important, and in the Government’s digest of UK energy statistics, which is of course published annually, we cover a wide range of important energy statistics, including energy consumption and oil and gas production. That report also includes details of the projections and capacity of existing and planned gas storage facilities, so I hope that the hon. Gentleman is reassured that the data are available. It would be pedantic to say that the data should be somewhere else, rather than there. It is out there and available for public and parliamentary debate.

In addition, we are providing clear and transparent information on energy supply and demand generally, and that type of information is published in the energy market outlook, which I mentioned earlier—it seems a long time ago because of the number of interventions. That is intended to provide information and analysis to help potential investors and those with an interest in the UK energy market to form a comprehensive overview of the likely supply and demand balance in energy over the next decade or so. I hope that I have explained why I do not think that the new clause would be helpful. I might not have convinced everyone entirely and still detect certain suspicions, but I have also explained the steps that we are taking to encourage a solution. I hope that the hon. Gentleman will not seek to press his new clause to a vote.

I will now turn to new clause 25, which I will also ask the Committee to resist. The new clause, which was proposed by the hon. Member for Wealden, relates to the important issue of energy efficiency. Saving energy is a key part of the Government’s strategy to tackle climate change and help ensure secure supplies of energy. For example, energy efficiency can often be a cost-effective way of reducing carbon emissions. Equally, saving energy can reduce the need for energy imports and the level of overall new investment needed in large-scale electricity generation, thereby reducing security of supply risks.

Once fully implemented, the measures set out in the 2007 energy White Paper are projected to deliver an additional 7 million to 12 million tonnes of carbon savings, so no one can reasonably say that we do not take energy efficiency seriously. Our policies include helping consumers make more informed decisions about the energy that they use through improved awareness, information and services, such as better billing, the raising of standards for the products that we buy, and increasing the energy performance of new homes and buildings. We have also increased the obligation on energy suppliers to deliver carbon savings and energy efficiency measures in domestic homes, including loft and cavity wall insulation. For the largest industrial users of energy, the European Union emissions trading scheme, together with the climate change levy and climate change agreements, incentivises companies to improve their energy efficiency and save energy. We will also announce a new mechanism to drive energy and carbon savings in the large non-energy intensive sectors such as banks and supermarkets. Although the hon. Member for Wealden and I agree on the importance of energy efficiency, I must sadly confirm that I cannot accept the new clause.

We already compile the information that he suggests under the guise of other reports. Information on energy consumption in the UK is contained in my Department’s digest of UK energy statistics which, as I said earlier, is updated regularly and published annually. Under provisions in the Climate Change Bill, the Secretary of State will also have a duty to prepare and lay before Parliament an annual statement on emissions. Similarly, the Climate Change Bill will mandate the committee on climate change to assess and report on progress and delivery of climate change policies annually, including on energy efficiency measures. The Government will be required to provide a response to the report that it will lay before Parliament.

I noted that the hon. Gentleman opposite said that it was a great disappointment that there was nothing about energy efficiency in the Bill. I have outlined a whole raft of measures that we are taking on energy efficiency, and the million tonnes of carbon that will be saved. However, I do not think that I have yet heard from him any specific proposals or amendments to bring forward energy efficiency measures in the Bill. He dealt with it in a more general way, and I am sure that he will be satisfied that, through the raft of other measures, we have a more than satisfactory strategy. Perhaps on another occasion he could table a specific amendment.

Charles Hendry (Conservative, Wealden)

I am astonished by the Minister. He will have read the opening sentence of the Bill where it says “A Bill to”. Amendments can be tabled and are in order only if they relate to the issues in the Bill. I would have thought that the Minister was aware of that. If he wanted to have a discussion and give us the opportunity to debate energy efficiency, he should have included a reference to energy efficiency in the legislation. That is why we have not been able to table the amendments, and why the Committee has been denied the opportunity to speak about it—it is due to the way in which he has phrased the Bill.

Malcolm Wicks (Labour, Croydon North)

If the hon. Gentleman makes a technical point, I accept that. However, he has been speaking about energy efficiency at some length on a number of occasions—I may have forgotten the technical point, but I am not clear why he is not satisfied with the ambitious energy efficiency strategy that we have in place.

Much as it pains me to bring the debate and my speech to a conclusion, I hope that the hon. Gentleman will feel reassured that the Government take these issues and their duty to report to Parliament seriously, and that he will not press the new clause to a vote.

Charles Hendry (Conservative, Wealden)

I am sorry. The Minister has managed to reassure me on many occasions during the debates that we have had so far—it has been fairly good natured and worked well. On this occasion, however, he has not reassured me at all. My concern about the clause is fundamental. The Government are removing the requirement for them to report to Parliament on certain factors, and the Minister asks us to take that on trust. Everything that we see about this Government shows that when the news is good, they like to announce it, and reannounce it again and again, and hope that nobody notices that it is just the same bit of good news. When the news is bad, they like to tuck it away—“A good day for announcing bad news”, as one of the ministerial spin doctors told us in the past.

We believe that the Government are moving away from reasonable reporting requirements without a good reason for wanting to do so. I am suspicious about their motives because it will be used in years to come—not by the Minister who I know is a decent, honourable man—but by someone who could say, “There’s a general election coming up. I’m not sure that it will be useful to put those figures into the public domain at this stage. Let us hold back the report for a little longer.” There will be a row about why the report is being held back—lots of technical reasons, lots of reasons for why it should not be put forward at that time, but it means that the Government will be let off the hook of being held accountable for the decisions that they make.

With regard to the two new clauses, I am astonished that the Minister does not believe that the Government have a responsibility to have a view on energy security and on how many days of gas storage we should have. Yes, he tells us that the data are available and published in other ways, but the data do not include an assessment of need and that is what the new clauses require. They would also enable us to monitor the progress towards that goal, which the Minister would have set up. I find that very disappointing, and it is an issue to which we will most certainly return.

On energy efficiency, the Minister enjoyed a bit of knockabout. We would have truly loved to use the Bill to discuss energy efficiency, and members of his own party would have been keen to do so, too, as was evident on Second Reading. However, we have been denied the opportunity because of the narrow way in which the Bill is phrased. Similarly, we have been denied the opportunity to discuss fuel poverty, which is another matter of fundamental concern to people. Through the new clauses, we are asking not that we try to change the world regarding energy efficiency, but that we start to monitor our progress. The fact that 40 per cent. of our homes are effectively insulated is not good enough. We do not know the Minister’s target by 2010 or 2015; it is not available to us. However, every year, a report should be made about energy consumption by business and in domestic homes, and about the progress that is being made to improve energy efficiency. People watching this debate would then feel that the Government were taking the issue seriously.

Malcolm Wicks (Labour, Croydon North)

But the hon. Gentleman would concede that we have done something far more important, would he not? Namely, we have set a long-term target that by 2050 we want at least a 60 per cent. reduction in CO2 levels when compared with those in 1990. The Prime Minister said that if we get representations from the new committee that we are establishing under the chairmanship of Adair Turner, we may consider a higher target—an 80 per cent. target. That really is the point—

Sir David Amess (Conservative, Southend West)

Order. I hate to interrupt the Minister, but we are being taken far wider and referring to matters that would be more appropriately discussed under the Climate Change Bill.

Charles Hendry (Conservative, Wealden)

I am obviously not grateful to the Minister for that intervention, because it was out of order. However, the principal objective of the two new clauses is that we want the Minister to have to come to Parliament to tell us what is happening each year on gas storage, what his assessment of need is, and the progress that is being made on energy efficiency. His refusal to do so just means that we must go away with the impression that he does not want to be scrutinised properly on those matters. That is very unfortunate, and I remain profoundly concerned about the inclusion of clause 78 in the Bill. I hope that the Liberal Democrats will support us in trying to remove it.

Malcolm Wicks (Labour, Croydon North)

The Liberal Democrat.

Charles Hendry (Conservative, Wealden)

The Liberal Democrat. The hon. Member for Cheltenham will not be able to vote against himself on this occasion. We hope that he will give us support, because this is a bad clause. The clause represents the Government rowing away from their reporting commitments; it is political rather than managerial, and it was very misguided to include it.

Martin Horwood (Liberal Democrat, Cheltenham)

Perhaps the hon. Member for Wealden should not push his luck in assuming my support, or even that of the whole Liberal Democrat party. My hon. Friend the Member for Northavon and I will both be present when the new clauses come to a vote, probably next week, but I might change my mind and choose to abstain, which I gather has been the increasingly fashionable thing to do this week.

I shall restrict my remarks to the hon. Gentleman’s new clauses. I am still perfectly supportive, and the Government have not produced adequate replies to the question why the new clauses should not be included. In the case of new clause 5 on energy security, the Government’s replies were quite alarming. I am more inclined to support the new clause now than I was when we started.

I, like the hon. Gentleman, was not reassured by the Minister’s remarks on the clause stand part debate. The Minister has gone to enormous lengths to assure us that the Government have a great record on energy efficiency and are absolutely committed to developing it. However, if that is true, and it is equally true on renewable energy and microgeneration, I cannot see what possible justification there is for removing the reporting requirements from legislation. Surely the Government should leap at the opportunity to report in a standardised format that none of us can criticise either for inconsistency or for being presented in an obscure or difficult way.

The Minister suggested that we were being suspicious, but his replies rather fuelled that suspicion. He did not answer my question about how the reporting requirements can possibly be outdated. What has changed since 2003 to make them outdated? How could they have been appropriate then and overly prescriptive only a few years later? If the list of technologies specified in Sustainable Energy Act might become out of date in due course—I allow for that possibility—why did the Government not draft a proposal to allow for amendment of the list, perhaps by secondary legislation? That would have been a perfectly acceptable route. However, by not doing that and given his reluctance to commit to the specific time scales by which he will be reporting in a substitute format, the Minister has increased the fears of perhaps more suspicious people than us that the Government might be tempted to take the opportunity to obscure bad news and possibly repackage and represent good news to their own advantage. That would be a shame. For all Governments, it should be right that we can compare and contrast statistics on a reliable basis. That has been the direction of much of the presentation of Government statistics during recent years, and the clause seems a completely retrograde step.

Charles Hendry (Conservative, Wealden)

Does the hon. Gentleman agree that it is a matter of frustration that sometimes when we ask a parliamentary question, we receive the response that the data are not collected centrally? By removing a requirement to report, there will be more areas about which the Government say that they have not collected the data. At the moment, they are required to do so and we know that the data are there. It actually makes the job of parliamentary scrutiny more effective and accountable.

Martin Horwood (Liberal Democrat, Cheltenham)

The hon. Gentleman has made an extremely valuable point. The net effect of the clause will make the whole issue of reporting on such vital issues as energy efficiency, microgeneration and the development of necessary expertise in new energy sources from nuclear to tidal power more contentious and less of a discussion of objectively presented statistics. I wish to press the clause to a Division.

Clause 79

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following: New clause 1—Smart meters —

‘(1) The Secretary of State shall make regulations which require smart meters to be installed for gas and electricity in all homes by the end of a specified period of ten years from the date on which the regulations are made.

(2) In this section a “smart meter” means a gas or electricity meter with two-way communication capabilities including communication capability to a display which illustrates household usage and cost per unit consumed.

(3) Regulations made under this section must be made within a period of 12 months beginning on the date on which this Act is passed.’.

New clause 2—Information on ETS allocations—

‘(1) Companies involved in the generation of electricity must publish information in their Annual Reports on the amount and value of any allocation they have received from the EU ETS and the amount that has been paid for such an allocation.

(2) Companies failing to publish the information required under subsection (1) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding level 5 on the standard scale.’.

New clause 4—Information on contributions towards environmental taxes—

‘(1) The Secretary of State shall make regulations requiring energy utilities companies to specify the proportion of those consumers’ energy bills that contribute towards environmental taxes.

(2) In this section “environmental taxes” means—

(a) the Renewables Obligation Certificates,

(b) charges resulting from the EU Emissions Trading Scheme, and

(c) charges resulting from the Carbon Emissions Reduction Targets and future additional environmental charges.’.

New clause 20—Implementation of new metering arrangements—

‘(1) The relevant licensees for the purposes of this Part are—

(a) gas suppliers and gas transporters within the meaning of Part 1 of the Gas Act 1986 (c. 44); and

(b) electricity suppliers and electricity distributors within the meaning of Part 1 of the Electricity Act 1989 (c. 29).

(2) The effective date for the purposes of this Part is the date which is 10 years after the date on which section 79 comes into force.

(3) Expressions used in this Part have the same meaning as in Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(4) As from the effective date, a relevant licensee must not supply gas or electricity to any premises that is not subject to the provisions of this section.

(5) The Secretary of State may exempt any relevant licensee from the prohibition imposed by subsection (4) in relation to such premises, for such period of time, and subject to such conditions as he considers appropriate in all the circumstances of the case.

(6) References in this Part to new metering arrangements are to arrangements (including the provision and operation of any necessary communications and data-handling infrastructure) designed to ensure that, by the effective date, all premises supplied with gas or electricity in Great Britain will continue to be so supplied through a meter that conforms to the following three requirements—

(a) that the meter must record and be able to store measured consumption data for multiple time periods;

(b) that the meter, either on its own or with an ancillary device, must facilitate remote access to such data; and

(c) that the meter must meet any specifications that may be set out in any regulations made by the Secretary of State under this Part, pursuant to his duties under Part 1 of the Gas Act 1986 and Part 1 of the Electricity Act 1989, for the purposes of facilitating the introduction of new metering arrangements.

(7) This section may not be brought into force before 1st January 2010.

(8) The Secretary of State may, in accordance with this section, modify—

(a) the conditions of a particular licence held under section 7(1) or 7A(1) or (2) of the Gas Act 1986 or under section 6(1) of the Electricity Act 1989;

(b) the standard conditions of licences of any type mentioned in those subsections

if he considers it necessary or expedient to do so for the purpose of securing the implementation of the provisions of this section.

(9) The power to make modifications under paragraph (a) or (b) of subsection (8) includes powers—

(a) to make modifications requiring licence holders, or classes of licence holder, to cooperate together, under arrangements approved by the Authority;

(b) to make modifications requiring any relevant licensee to take or refrain from taking any specified action, whether in relation to premises supplied with gas or electricity or otherwise;

(c) to make modifications relating to the operation of, access to, or use of pipe-line systems and distribution systems; and

(d) to make incidental, consequential, or transitional modifications.

(10) Before making modifications under this section, the Secretary of State must consult the Authority, the holder of any licence being modified, and such other persons as he considers appropriate.

(11) Subsection (10) may be satisfied by consultation undertaken before, as well as by consultation undertaken after, the commencement of this section.

(12) Any modification under subsection (8)(b) of part of a standard condition of a licence shall not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(13) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (8)(b), the Authority must make the same modifications of those standard conditions for the purposes of their incorporation into licences of that type granted after that time.

(14) The Secretary of State must publish any modifications under this section in such manner as he considers appropriate.

(15) The power of the Secretary of State under this section may not be exercised after the end of the period of five years beginning with the passing of this Act.’.

New clause 21—Reports on meters—

‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—

(a) the number of smart meters that have been installed in that period, including their effect on reducing carbon emissions and fuel bills;

(b) the discussions he has held with energy supply companies about—

(i) pre-payment meters,

(ii) the number of such meters in use, and

(iii) their tariffs;

(c) the progress that has been made in reducing carbon emissions through—

(i) increased use of renewable generation, and

(ii) energy conservation measures in households;

(d) the discussions he has held with energy supply companies about the impact of pre-payment meters and their tariffs.’.

Charles Hendry (Conservative, Wealden)

We are moving into an area where there will continue to be issues of difference with the Government and we have now reached the particular issue of smart meters. During our debates on Second Reading, the evidence sessions and in Committee, there has been huge support for smart metering. We are certainly in favour of its introduction. The technology for smart metering is feasible. Industry is ready to begin its installation throughout the country, but it believes that we must have legislation to back it up.

Smart meters are in operation in Sweden, Italy, Australia, the United States and Canada. Italy has almost completed its programme to convert 30 million homes to two-way smart meters. Sweden has plans to introduce 5.2 million meters by 2009 and 5 million homes in Ontario, Canada will have smart meters by 2010. It is widely accepted that it will take about 10 years to roll out smart meters to all 45 million gas and electricity meters in the United Kingdom with two to three years of planning and five to seven years of replacement.

Smart meters will achieve a number of things. They will cover both gas and electricity and help to tackle fuel poverty directly, enabling real-time information to be provided on the amount of gas and electricity being used by any given household. That will bring an end to the estimated bill, which will be widely welcomed by groups campaigning on issues such as fuel poverty. Secondly, smart metering will help to improve energy efficiency, because consumers will have a technology enabling them to reproduce their consumption figures readily—they could see when they were going to be charged most. There will be a whole range of tariffs available, at different times of the day. If people notice that it will be cheaper to put their washing machine on in the middle of the night, rather than at 6 o’clock in the evening, they will be encouraged to do so. They can choose which sort of tariff suits them. That is good for consumption and for helping tackle fuel poverty. Smart metering will also encourage new technologies. Smart meters will support microgeneration technologies, as they will allow individual homes to sell back to the grid when they are in surplus.

There is a significant amount of evidence in favour of smart meters. In briefings to the Committee, there was a lot of backing from industry. Scottish and Southern said:

“We should therefore decide now that smart meters should be rolled out and include broad enabling powers in this Bill to facilitate a mandated roll-out.”

Centrica said that it was disappointed that the Bill contained

“no provisions to mandate the roll-out of smart meters...Without a mandate from Government it is highly unlikely that energy suppliers would be able to facilitate a roll out to 45 million UK households in the timescale envisaged. A mandate would give the industry the ‘green light’ it needs to initiate a coordinated and managed roll out programme.”

The Energy Retail Association called on the Government

“to provide a mandate to the energy retail industry to roll out smart meters to all 45 million British households. A change that would end estimated billing and put consumers in full control of their domestic energy use.”

The Energy Networks Association said:

“We believe that a mandate for smart metering rollout is necessary. Any national rollout of gas and electricity smart metering will need to be taken forward on the basis of a clear statutory mandate.”

Malcolm Wicks (Labour, Croydon North)

I am impressed by the number of organisations on whose advice the hon. Gentleman can draw. There are undoubtedly many benefits associated with smart meters, but has he been able to gather any estimates of the other side of the balance sheet—what the costs might be? That would include costs, ultimately, to the consumer.

Charles Hendry (Conservative, Wealden)

That is work being done by Ofgem, which is actively supporting the roll-out of the programme. Some of the costs would be absorbed by industry, some by the consumer. One cannot know how that will work until a decision is taken about what the roll-out programme would involve. Depending on who was going to be doing that, it would result either in a direct cost to the consumer at that point or, otherwise, in the cost being spread over the 10 years, through a small incremental cost to the individual’s energy bill. One cannot answer that question without knowing the preferred method of going forward.

Martin Horwood (Liberal Democrat, Cheltenham)

I am following the hon. Gentleman’s argument with great interest. I support much of what he says. Does he agree that any incremental cost to the consumer from the introduction of smart meters might well be largely or even entirely offset by the reduction in energy use, which often seems to result from the introduction of such meters?

The rest of the debate is in Hansard.