My Lords, first, I thank the noble Baroness for setting out the non-government amendments relating to this part of the Bill. Amendment 11 would replace the principal objective in Part 1A of the Petroleum Act 1998 of,
“maximising the economic recovery of UK petroleum”,
with an objective to maximise the economic return on UK petroleum while, first, retaining oversight of the decommissioning of oil and gas infrastructure and, secondly, securing its reuse for the transportation and storage of greenhouse gases.
I understand the purpose of this amendment. Indeed, I have detailed significant positive amendments from the Government—which we will discuss more fully elsewhere—to ensure that both CCS and decommissioning are given a prominent focus in the Bill. Indeed, the amendments that I have tabled ensure that the OGA will have a strong role on decommissioning, to ensure both that costs are controlled and that reuse of assets, including for CCS development, is given full consideration before decommissioning begins. The Infrastructure Act 2015 refers to abandonment, which of course is the technical term used in the Act for decommissioning.
I hope that noble Lords will agree that the Government’s decommissioning amendments achieve the same effect as the reference to decommissioning in this amendment, rendering it unnecessary. I have tabled a large number of amendments to ensure that CCS developments will be a firm and important consideration for the Oil and Gas Authority. My noble friends Lord Howell and Lord Spicer, and others, referred to the fragile nature of the industry, and we do not want to add more costs to it. This will be particularly relevant in looking at some later amendments, but it is relevant here, too.
Bringing CCS into Clause 4 and maximising the potential synergies, as we have done with the amendments we have tabled, will be much more effective than trying to give the Oil and Gas Authority a new and separate objective on CCS. The amendments that I have tabled are meaningful, and I hope that they will be sufficient to satisfy noble Lords that Amendment 11 is not necessary. The noble Baroness suggested that the review was limited to the Oil and Gas Authority’s performance for each review period. That is not strictly true. Subsection (4) of the new clause in Amendment 26 says:
“A review must, in particular … assess how effective the OGA has been in exercising its functions, and … consider the OGA’s functions under … Part 2, and … Chapter 3 of Part 1 of the Energy Act 2008 (storage of carbon dioxide), with regard to their fitness for purpose and scope”.
Amendment 11 is therefore broader than the noble Baroness was suggesting. It would create a significant expansion of the OGA’s responsibilities, which would have consequences for the OGA and industry.
Notwithstanding the difficult challenges that the industry is facing, the recommendations of the Wood review remain as important as ever. They continue to attract strong industry support, and I have been pleased to note the continued cross-party support for them throughout the passage of the Bill. The Wood review envisaged an Oil and Gas Authority focused on maximising economic recovery, and the recommendations made by Sir Ian Wood hold that principle front and centre.
I have not spoken to Sir Ian Wood—it might be unhelpful to ask him to revisit the review and interpret it back to the House—but it is worth noting that he has chaired the interim advisory panel of the Oil and
Gas Authority, which is looking into the functions and preparation of the authority before it achieves its enhanced status, so he is very much involved in the process.
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I fear that expanding that principle to cover decommissioning and carbon capture and storage specifically would create significant knock-on effects for other aspects of this Bill and the Infrastructure Act 2015, particularly the strategy to maximise economic recovery of United Kingdom petroleum. It would also have repercussions on at least the meetings-access powers and the dispute-resolution powers in the Bill by opening them up to a raft of additional industry activity. It would also cut across many of the amendments that we have tabled in relation to the information and samples powers, which I will discuss later, which clearly and specifically address CCS, rendering them of uncertain effect. I fear that by expanding the OGA’s remit to those new and significant areas of regulatory activity, we risk weakening the overall approach that the organisation can take towards supporting the industry for the short, medium and long term.
Clearly, the oil and gas industry is facing major challenges, but it is an industry which remains critical to the United Kingdom economy by satisfying just over half of the United Kingdom’s oil and gas demand and supporting approximately 350,000 jobs. We will still need significant oil and gas supplies over the next decades while we decarbonise and transition to a low-carbon economy.
The OGA’s key actions are providing urgent support to industry through developing exploration, promoting new ways of working and protecting key infrastructure in the North Sea. The reality is that, without the OGA’s focus on maximising economic recovery in the United Kingdom, we risk premature decommissioning of the United Kingdom continental shelf and loss of assets, infrastructure and skills, including those which could in time help to promote the longevity of the industry through carbon storage projects.
I believe that carbon storage is vital. I note the points made by the noble Lord, Lord O’Neill. Clearly, it is not the whole of the answer, but carbon capture and storage has been regarded across the House as of key significance. That is why I have taken away and responded to what was said at earlier stages and come up with the amendments.
Premature decommissioning creates the very real prospect that infrastructure and skills disappear from the UK continental shelf before the CCS industry is ready to take advantage of them. Maintaining the OGA’s focus on maximising economic recovery of United Kingdom petroleum and extending the lifetime of key pieces of infrastructure will therefore benefit the CCS industry.
I reiterate that I have made extensive and meaningful amendments to the Bill to incorporate a significant role for the OGA on both CCS and decommissioning. Furthermore, as has been noted, I have tabled amendments which demonstrate a firm commitment that the OGA’s powers, including those on carbon dioxide storage, will be regularly reviewed by the Secretary of State.
Ultimately, this process of review will provide an opportunity to review the OGA’s principal objective if in future this was considered necessary.
I hope that the approach that I have set out avoids the need for this amendment, which would create a significant extension of the Oil and Gas Authority’s functions and also directly impose new and unquantified obligations on petroleum licence holders, operators and owners of upstream petroleum infrastructure. I therefore hope that the noble Baroness will be content to withdraw the amendment.
I turn to government Amendment 26, which inserts a new clause after Clause 11, requiring the Secretary of State to carry out a review of the Oil and Gas Authority’s performance and functions on an ongoing basis. As I said in Committee, it is important to put in place measures to ensure that the OGA remains well equipped to address the diverse challenges which are faced by the oil and gas industry. The amendment requires an initial review to take place no later than three years after Clause 1 comes into force and subsequent reviews every three years thereafter, although the Secretary of State will have discretion to conduct more frequent reviews if necessary and an earlier review if that is felt appropriate. A review, of course, will consider both the OGA’s effectiveness in exercising its functions and the fitness for purpose and scope of its functions under Part 2 of the Bill. Importantly, a review will also give consideration to the fitness for purpose and scope of the OGA’s powers under Chapter 3 of Part 1 of the Energy Act 2008, which sets out the OGA’s functions in respect of the storage of carbon dioxide.
Read in conjunction with the amendments to Clause 4 of the Bill, this will ensure that the OGA’s role in relation to carbon storage is given due prominence and regularly evaluated. It will also ensure that Parliament can effectively scrutinise the outcomes of any review—and, in particular, those functions relating to carbon storage. This is achieved through the requirement in subsection (5) of the clause for the Secretary of State to lay a report of the findings of the review before Parliament as soon as possible.
In tandem with the extensive amendments which I have tabled relating to the OGA’s role on CCS, I hope that noble Lords will agree that this represents a considerable step towards ensuring that an appropriate focus upon carbon storage is incorporated throughout the Oil and Gas Authority’s functions. I have tried to strike a balance in relation to the debate and the consideration that we have had here between excessive review, in terms of disrupting the activity of the Oil and Gas Authority, and, clearly, a need to review the functions, which will include CCS and decommissioning.
I now turn to non-government Amendments 27 and 28. I thank the noble Baroness for proposing them. These amendments relate to my own Amendment 26, which I have just described, and which inserts a new clause after Clause 11 of the Bill requiring the Secretary of State to carry out a review of the OGA’s performance and functions on a more frequent basis. These amendments seek to reduce the time period for carrying out a review given in subsections (2)(b) and (3)(b) respectively of government Amendment 26. The effect of Amendment 27 would be to reduce the time period
within which the Secretary of State must carry out an initial review from a maximum of three years after Clause 1 of the Bill comes into force to a maximum of one year after such time. Similarly, Amendment 28 would reduce the maximum time period within which the Secretary of State must carry out subsequent reviews from three years to one year.
Although I have reiterated that the OGA’s functions should be kept under review, I believe that a mandatory requirement for a review to be repeated on a frequency of yearly—rather than the three-year period proposed in my own amendment—would be too onerous for government, the OGA and industry, and would have unintended consequences. It is a more frequent review than is generally the case; it is almost universally the case that it is not held on that frequency. The amendments as proposed would also be out of step with other regulators and risk conflicting with the OGA’s status as an independent regulator.
Let us consider the practicalities of these amendments. Each review would need to evaluate the effectiveness of the OGA’s functions, which include statutory functions within multiple pieces of legislation and non-statutory functions. It would also need to specifically consider the fitness for purpose and scope of the OGA’s functions under Part 2 of this Bill and Chapter 3 of Part 1 of the Energy Act, which relates to the OGA’s functions in respect of the storage of carbon dioxide. This evaluation would need to be assessed against external factors, such as changes in the regulatory landscape, changes in operational practices across the UK continental shelf, and environmental and economic factors.
After a review period, the Secretary of State would need to consider the findings and prepare a copy of a report of the review to be laid before Parliament. This would be a significant piece of work, and I am concerned that for a review to be repeated every year would subject the OGA to an almost continuous process of evaluation by government. This would create significant resource burdens both for the OGA and for government and risk obstructing the work of the OGA. It would also weaken the ability of the OGA to act as an independent regulator which is free from government intervention.
Noble Lords may consider that a three-year period is too long, but in the amendment that I have tabled it is explicit that three years is the maximum period within which a review must be carried out. If the Secretary of State deemed it necessary to carry out a review within a shorter period, then this is possible through the amendment that I have tabled. It is worth also noting that there will be other mechanisms in place to ensure that the OGA is held to account over its performance and functions. It will publish, on an annual basis, a refreshed five-year business plan and an annual report of accounts. This latter report will also be laid before Parliament.
An arm’s-length body charged with the effective stewardship and regulation of the United Kingdom continental shelf was a central recommendation of the review. I believe that these amendments would conflict with that recommendation by subjecting the
OGA to an onerous and almost continuous process. I hope that this explanation will satisfy the noble Baroness and that she is content to withdraw the amendment.