Energy Bill [HL]

My Lords, I put this forward as a probing amendment to clarify the issue of liability in the event of an oil spill. There are two triggers for the amendment. The first is the group of clauses that we are coming on to discuss and the second is the debate that we had thanks to the noble Lord, Lord Moynihan, towards the end of last year on the Deepwater Horizon oil spill. It was while researching for that debate that I thought more about the issues of liability if we had a spill in this country. I understand that with the Deepwater Horizon spill the costs are huge—around $20 billion and still counting. I am not clear on the issues of liability in this country, which is an area of concern. This seems an opportune moment to raise it during our proceedings on the Bill. There is a two-pronged approach to this. First, there are technical ways in which to do everything that we can to avoid such a spill. Secondly, we could have an insurance policy in case a spill was to occur. That is the reason for proposing this amendment. At the moment, should there be a significant oil spill, the costs would fall on the taxpayer. Would that be at a national or a local authority level? This amendment seeks increased liability cover to be required before drilling in the UK. The recent report from the Energy and Climate Change Committee in the other place dealt with this issue and highlighted liability as an area that needed significant improvement to protect the taxpayer. The financial requirements currently placed on the industry are under the offshore pollution liability agreement, but my understanding is that they are quite weak. A significant oil spill would leave taxpayers disadvantaged, because they would face potentially huge costs in order to clear a major spill from the ocean off our shores. In proposing this amendment, we want the Government to ensure that any new offshore drilling licence is granted only when the licensee has proved its ability to meet the full costs to address the direct and indirect consequences of an accidental release of oil that occurred as a result of any operations on the UK continental shelf. The Government should also ensure that compulsory third-party insurance cover is obtained for all small exploration and production involved in drilling operations in the UKCS. When we discussed this issue before, the Minister was content that the current arrangements for monitoring in the UK were perfectly adequate. Indeed, we have some of the toughest regulations and inspections in the world, but the HSE has warned about the increase in the number of serious accidents and spills. It has said that the industry’s performance is not good enough and has urged it to up its game. The monitoring and regulations that we have in place are significantly better than those that existed in the US at the time of Deepwater Horizon. However, I was concerned that the department’s evidence to the committee confirmed that just one inspection of a deepwater rig will take place in 2010-11. I appreciate that the Government will be vigilant, but we need some clarification on the costs and who would be responsible. There are technical improvements that the Government could undertake. I am sure that the Minister is aware of the issues surrounding blow-out preventers and how they could be improved. Obligations might be placed on companies installing such rigs to have significantly improved blow-out preventers, doing everything that they could to prevent a blow-out and an oil spill. However, in case there was an oil spill, it would be helpful for some clarification as to where responsibility lies and whether measures could be taken via insurance on the licensees, as indicated in my amendment. Could the Minister consider that?