My Lords, I thank noble Lords who have spoken on this group of amendments, which seek to amend Clause 4, in Part 1, and Clause 9, in Part 2, of this Bill. Those amendments are Amendments 3A to 11—excluding Amendments 7 and 9 which are grouped separately—and Amendments 20 and 21.
Amendment 3A, moved by my noble friend Lady Byford, seeks to insert provision into Clause 4 of the Bill which would require the Oil and Gas Authority to have regard to the need to minimise public expenditure relating to, or arising from, its existence. Clause 4 already places an obligation on the Oil and Gas Authority to have regard to,
“The need to minimise public expenditure relating to, or arising from, relevant activities”.
The concept of “relevant activity” is intended to capture activities such as petroleum extraction or gas or carbon dioxide storage in relation to which the Oil and Gas Authority has statutory functions and functions under licences. For example, when taking decisions under licences, it is intended that the Oil and Gas Authority should have to consider whether a licence holder will be able to meet liabilities under a licence if these are liabilities that might otherwise have to be met by the taxpayer.
The question of how the Oil and Gas Authority should spend its own resources is dealt with by other means. However, there are arrangements in place to ensure that the OGA’s spending is controlled. As accounting officer, the OGA’s chief executive is responsible and accountable to Parliament for the organisation of, and quality of management in, the authority, including its use of public money. The chief executive has responsibility for ensuring that the OGA operates in accordance with the guidance set out in the Cabinet Office’s Managing Public Money.
Furthermore, the Department of Energy and Climate Change is establishing a robust governance framework to oversee its relationship with the OGA. This will ensure that any issues which may have a financial impact on government are reported to the Secretary of State at the earliest opportunity. The framework requires the OGA to have the prior written consent of the Secretary of State before it takes any action which will, or is likely to, give rise to an additional funding requirement from the department or gives rise to obligations or liabilities which are not expected to be affordable in terms of expected levy income. The Secretary of State will be the sole shareholder of the OGA and her role in this regard includes assessing
and approving the business plan developed by the authority, among other things, to ensure its long-term viability and sustainability and its ability to deliver value for money in light of the strategies of the department and wider government. I hope that this explanation is reassuring.
I turn now to Amendments 4 and 6, which each make reference to responsibilities under the Climate Change Act 2008. While the OGA will be bound by any environmental legislation that relates to the exercise of its functions, it is purposely not an environmental regulator. Perhaps I may refer noble Lords to Clause 4, which refers to those matters to which the OGA must have regard—
“include the following, so far as relevant”—
so, obviously, any pre-existing legislation would be binding in relation to the OGA, and that would include the Climate Change Act.
Environmental regulation responsibilities under the Climate Change Act 2008 will continue to sit within the Department of Energy and Climate Change, which has expertise and experience in this field. There are synergies between the two forms of regulation, and the existing strong relationships between the OGA and DECC will continue. However, it is important that these regulatory functions remain separate, ensuring that the correct focus is placed on each by the different regulators. Noble Lords will also be aware that the amendments raise issues of compliance with the offshore safety directive, which requires a separation of oil and gas licensing and environmental functions, so I am not sure that it is legally possible either. I cannot agree that it would be appropriate to provide the OGA with additional environmental functions, and I hope that noble Lords will not press the amendments.
Amendment 5 includes reference to the development of carbon storage. I thank noble Lords for proposing these amendments because, as I have indicated, between now and Report I should like to look at the whole issue of carbon capture and storage to ensure that there is dovetailing between the existing regime for control of carbon capture and storage and the way that the Oil and Gas Authority will move forward on the matters in the Bill. Clause 4, as I have said, sets out a non-exhaustive list of matters to which the OGA must have regard when exercising its functions. The functions of the OGA include functions relating to carbon capture and storage. A number of the matters refer to “relevant activities”, which is defined as activities in relation to which the OGA has functions. As things stand, the relevant activities therefore include CCS. These matters include the need to collaborate with industry and foster innovation, which should help the CCS sector to achieve its aims. In addition, reference is made under the heading “System of regulation” to encourage “investment in relevant activities”, which once again should include CCS. No other sectors in relation to which the OGA has functions are explicitly referenced by this clause. Making the OGA’s mandate and associated powers on CCS explicit when other sectors are not mentioned could have the effect of prioritising CCS over other areas, which the Government would be against. An example would be maximising
the delivery of economic recovery. I hope that on that basis, and with the assurance that we will look at the whole issue of CCS between now and Report, the noble Baroness will be content not to press the amendment.
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I thank the noble Baroness for proposing Amendment 8 on behalf of the noble Lord. This amendment makes similar provision to Amendment 5 and would require that the OGA has regard, when exercising its functions, to the need to encourage innovation and working practices,
“with particular emphasis on the development and promotion of carbon transport and storage”.
As I have said, the OGA has functions that relate to the CCS sector and is already required to have regard to the matters referred to in Clause 4 when exercising functions that relate to that sector, so far as relevant. This amendment, like Amendment 5, places too great an emphasis on carbon capture and storage and would have the effect of prioritising it over other areas. The Wood review specifically highlighted the potential of enhanced oil recovery—EOR—as something the Oil and Gas Authority would need to promote, as part of its remit to maximise the economic recovery of oil and gas from the continental shelf. As carbon dioxide can be used for enhanced oil recovery, this would potentially make a substantial contribution to lowering the cost of CCS projects, as well as benefiting North Sea revenues and jobs.
Clause 4 sets out that the OGA must have regard to the need to “work collaboratively” with industry and government in carrying out all activities in relation to which it has functions and to encourage innovation in technology and working practices. These legal requirements underpin the way we expect the authority to work with the department and the carbon capture and storage industry. If needed, there are other powers that DECC may use to force the OGA to do this, for example through the Secretary of State’s power of direction. I hope that noble Lords have found these comments reassuring and will not press their amendment.
I thank noble Lords for proposing Amendments 10 and 11. The Oil and Gas Authority has been established to deal with the real and severe challenges facing the United Kingdom continental shelf and the United Kingdom’s important oil and gas industry. Its primary role relates to oil and gas. The Oil and Gas Authority will have some functions in relation to carbon dioxide storage sites and permits, and will therefore be required to take account of the needs of CCS as it carries out its role. We acknowledge the benefits that carbon capture and storage can offer the continental shelf. No barriers which might inhibit active consideration of CCS are being put in place in the Energy Bill, and making the OGA’s mandate and associated powers on CCS more explicit might compromise delivery of the goal of maximising economic recovery, if additional duties were overly onerous or distracting.
Further to what I have said, we do not propose to give the OGA a new objective relating to CCS through the Energy Bill. This is because there is uncertainty at the moment over the desired role on carbon capture and storage, which is also acknowledged by the Carbon Capture & Storage Association, which wants regulation
to be proportionate to the emerging nascent state of the CCS industry. There is also a strong likelihood that further legislative opportunities could be forthcoming. I hope that noble Lords have found these explanations reassuring.
Turning to Amendments 20 and 21, I once again thank noble Lords for proposing the amendments. As has been the case elsewhere, these amendments seek to broaden the definition of “licensee” throughout Part 2 of the Bill to include carbon capture and storage licensees. Part 2 creates a raft of further regulatory functions for the Oil and Gas Authority relating to offshore petroleum. As I have said previously, the Wood review carried out a thorough assessment of the oil and gas industry in the North Sea and of what was needed to support this mature and well-established industry. The result was the recommendation for a raft of new and significant regulatory powers, part of which is seen in Part 2 of the Bill.
These amendments would considerably widen the scope of these new regulatory powers beyond the realms envisaged by the Wood review and would extend the powers of the Oil and Gas Authority significantly, without consultation or full consideration of the impacts. These amendments subject carbon capture and storage licensees to the whole raft of new obligations and requirements imposed by Part 2 of the Bill. This includes the obligations in relation to information and samples, and the requirements imposed by the access to meetings provisions. It would also bring carbon capture and storage licensees within the scope of the Oil and Gas Authority’s sanctions regime.
The Government recognise the role of the United Kingdom’s carbon capture and storage industry. However, I suggest that the full impact of the widening of the regulatory scope that these amendments would create has not been thoroughly considered. This is particularly in the context of whether the regulatory burdens that would be imposed on the nascent CCS industry are necessary or justifiable. We do not want to impose these new obligations.
That said, as I have indicated previously in relation to other amendments, we are happy to sit down and look at how the whole CCS issue dovetails with the Oil and Gas Authority, because we have a shared interest across the House in ensuring that we maximise the important role of the CCS industry in helping us to decarbonise and reach the targets that we need to reach. I respectfully ask my noble friend to withdraw her amendment.