§ 7.45 p.m.
§ Mr. Erroll
I beg to move, in page 4, line 41, after "gas", to insert "in Great Britain".
886 The Clause as drafted requires a licensee to seek the Minister's consent before using any natural gas for whatever purpose it is required. However, such purpose might include use on the licensee's own installation, such as for lighting drilling platforms or running generators in connection with the power supply of the installation itself. This is an unnecessary restriction in such a case and the Amendment is designed to permit the marginal use of natural gas by the licensee without his first seeking the Minister's consent.
§ Mr. T. H. H. Skeet (Willesden, East)
I thought that the Parliamentary draftsmen had surpassed themselves with their ingenuity, because I thought that the Amendment was to allow the licensee to export, but all that is to be available, apparently, is the use of natural gas on the installations themselves. From Clause 9 alone it would appear that the licensee would have the right to export gas, but I observe in Committee that the Parliamentary Secretary said:I can give him this short answer, that our present intention is that a licensee shall be required to import into this country either by ship or pipeline whatever products may be found."—[OFFICIAL REPORT, Standing Committee A, 12th February, 1964; c. 50.]I give the Clause a rather wider interpretation than that given to it by my hon. Friend. As I understand it, there would be nothing to deter the licensee from exporting the natural gas, which would be his product, except that he would be in breach of contract, because he would have signed the terms of the licence and thus agreed to observe the provisions of Sections 2 and 6 of the Petroleum Production Act, 1934. The stipulations would make it necessary for him to comply with rather stringent terms, these being that he must bring in the natural gas within the jurisdiction and so forth.
This is putting an enormous amount of power in the hands of the Executive which is not apparent from the first reading of Clause 9. However, the Clause will say:The holder of the licence shall not without the consent of the Minister of Power use the gas in Great Britain and no person shall without that consent supply the gas to any other person at premises in Great Britain.The implication is that he might be entitled to utilise it elsewhere. I would 887 have thought that limited interpretation was a little against the interests of the licensees who own the oil and the natural gas which is captive and which does not and cannot vest in the Crown as it is beyond the jurisdiction. This is correctly termed by the Convention.
It also disregards the position of the miners in this country, because if my right hon. Friend lays down certain conditions and it is later discovered that there is an ample supply of natural gas, my right hon. Friend would be obliged to provide for it to be bought internally and he would also have to arrange for a complete displacement of the other high-cost fuels available on the market. However, it would be invidious for the industry if licensees were not in a position to export the natural gas and there would have to be a protection for the coal industry by raising substantially the price of gas per therm to domestic and commercial users.
The whole purpose of Clause 9, which is a redraft of Section 52 of the Gas Act, 1948, is to preserve the monopoly of the gas industry. In this case it is taken a little far. In Committee, I made a recommendation to my right hon. Friend that while I was prepared to see a working monopoly in the terms of domestic gas, when it came to considering this in a broader context of being able to use the resources of the Shelf to the advantage of all concerned, then the licensee should be in a position to export what surplus he has in mind and, prima facie, from a reading of the words which have been put in, it would appear that that is so.
I do not know what teeth are being gnashed in the committee which is drafting the regulations on this matter, but I imagine that a few shots are being fired from either side as to what the actual terms are to be. I wonder whether we could have further clarification from the Minister about what will be the export position, otherwise it can lead the coal industry, general industry, and the rest of the economy into a difficult state.
§ Sir F. Soskice
I feel in some doubt about the position under Clause 9 with regard to exports. We have listened carefully to the hon. Member for Willesden, East (Mr. Skeet), who has given close study to this Bill and obviously 888 has great knowledge of it. Having heard his views on the Minister's Amendment, and having as best I can restudied that Clause, it seems that the Amendment leaves the position in a somewhat unsatisfactory state.
I begin from the point of view that natural gas which is extracted from a concession under the seas in pursuance of a licence should be gas which, in a general sense, inures to this country. Surplus requirements no doubt should be utilisable for the purposes of export, but, in the view that I would put forward from this side of the House that should be done with the consent of, and subject to supervision by, the Minister, and it seems that the proposed Amendment is putting an end to any control which the Minister can have over the export of natural gas obtained from the seabed. I would, therefore, be grateful if the Minister would tell me whether my reading of the Amendment, and the Clause as it would read when amended, is correct or not.
Under subsection (3) the Minister of Power has the right to give or withhold his consent. The broad concept of subsection (3) is that he will withhold his consent unless the area boards—or the area board in whose area any particular premises are situated—have been given what in the Committee stage we loosely described as a pre-emption right. That is what subsection (3) seems to enact at the moment. If the words which the Minister proposes to insert are not included, it would seem that the Clause would require that the Minister's consent should be given before any natural gas is used—whatever "used" may mean—whether in Great Britain or outside.
The question was raised in Committee whether gas is used when it is exported. I would have thought—though I stand to be corrected—that the expression "used" was sufficiently wide in its import to cover the process of exporting gas. Therefore, with the Clause as it is at present worded, I would have thought that the holder of a licence under the 1934 Act, when he has supplied home requirements and is considering whether there is a surplus which could be exported—and it would naturally be sensible to export if there was a surplus—should be under some measure of supervision by the Minister. He should have 889 to get the Minister's consent, and no doubt the Minister would exercise a wise jurisdiction in withholding his consent or not. That is what the Clause in its unamended form would provide if the word "use" is wide enough to cover the exporting of gas.
If, after the word "gas", the Minister inserts "in Britain", then surely he is limiting in a drastic sense the scope of the Clause. All that he can then do is to give or withhold his consent if the question arises of the use of the natural gas in Great Britain. If the question arises of the use of the natural gas by exporting it from the seabed to a foreign country, then, as I read the amended Clause, the Minister would no longer have any power to withhold or to give his consent. I would be grateful if the Minister would give me his views as to whether the interpretation that I have put on the Clause is the right one or not, and, if it is the right one, will he say what, in his view, is the proper approach with regard to exports?
If the Minister agrees that he should retain a measure of control over exports, then, certainly, the Amendment that he wishes to introduce endangers the position that he wishes to achieve, and my reaction to the Amendment would be to hope that the House would reject it, unless, of course, I have misconstrued and misunderstood the effect of the Clause as it would read if amended as the Minister wants it to be amended.
§ Mr. Erroll
The Clause as it stands deals with matters within Great Britain. It is common form that Statutes shall be construed as operating only in this country unless the contrary is clearly stated or clearly implied.
All that I am proposing in the Amendment is to exclude from the necessity to seek my consent those uses of natural gas which might take place at the installations themselves. This subsection does not attempt to deal with the question of exporting direct from the installations to other countries. As my hon. Friend the Parliamentary Secretary explained in Committee upstairs, that is taken care of by the provisions of the licences themselves. They will require that normally the products, whether gas or oil, will be brought to this country, 890 but the Minister will be able to give his consent if the conditions seem appropriate for direct export to take place. The question of direct exports will be fully supervised and covered, but it is not done under this subsection. It is taken care of in the licences themselves.
§ Mr. Erroll
I should like to make certain that the situation is as my hon. Friend has said, but I think that that is the case, and it will be a matter of reviewing the licensing arrangements in the event of such a breach. I hope, therefore, that with that explanation the House will accept the Amendment.
§ Amendment agreed to.
§ 8.0 p.m.
§ Mr. T. Fraser
I beg to move, in page 4, line 42, to leave out from "person" to the end of line 43.
When the Minister put down the previous Amendment I thought that he would want to delete the words at the end of subsection (2), which seemed to be unnecessarily repetitive. Taking into account the Amendment which we have just accepted, the subsection will read:The holder of the licence shall not without the consent of the Minister of Power use the gas in Great Britain and no person shall without that consent supply the gas to any other person at promises in Great Britain.I would have thought that the last five words were unnecessary. I do not think that the meaning of the provision would be altered if they were deleted.
But there is another purpose behind the Amendment. I had in mind the fact that the Minister's consent would have to be obtained before the person concerned could supply the gas to a customer outside Great Britain. The Minister has made it clear that the licence holder would require the Minister's consent before doing that, so that that argument does not seem to apply any longer.
Nevertheless, I ask the right hon. Gentleman whether the drafting would not be a little tidier if the Amendment were accepted.
§ Mr. Erroll
At this late stage in our proceedings I would, naturally, like to be able to accept an Opposition Amendment, but I am assured that it is advisable to retain the wordsat premises in Great Brtainfor the avoidance of doubt and to make matters absolutely clear. If the hon. Gentleman will accept my assurance, I hope that he will be prepared to withdraw the Amendment.
§ Mr. T. Fraser
I do not see what difference could conceivably be made by taking out these words, but I do not wish to take up the time of the House at the moment, and I therefore beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. Erroll
I beg to move, in page 5, line 19, at the end to insert:and in determining whether any industrial purposes are as mentioned in this subsection the use of any gas derived, otherwise than as a by-product, from any natural gas shall be treated as the use of that natural gas".In Committee, the right hon. and learned Member for Newport (Sir F. Soskice) and others referred to the complicated question of the uses of natural gas. The right hon. and learned Gentleman, in particular, referred to the reforming process and asked whether it was an industrial process whereby the processor could acquire a supply of natural gas as fuel and thus escape the monopoly of the local gas board. Clearly, it would not be appropriate for him to be able to behave in this way, and the Amendment—which has been a difficult one to draft—gives effect to what the right hon. and learned Member proposed.
It means that a reforming process would not so alter the nature of the gas statutorily as to make it possible for a person so engaged to escape taking supplies from the gas board. I hope that the House will accept the Amendment.
§ Sir F. Soskice
I am grateful to the Minister for his assurance, but I hope that the Amendment really goes far enough. In Committee, many hon. Members felt that subsection (3) placed an obligation upon the Minister to give his consent to the supply or use of gas in certain circumstances. If we look to see what those circumstances are, we find 892 them included in subsection (4). This is a substantial and highly complicated provision.
The Minister now proposes to add certain words to that subsection and I should be grateful for some further enlightenment from him as to the mechanism of the Clause. I have not quite succeeded in unravelling precisely what is the effect of treating the use of gas derived from natural gas as being the equivalent of the use of that natural gas. What is the effect of that? What we had in mind when we discussed this matter in Committee was rather more than the Minister has just indicated: we were anxious lest the Minister should find himself statutorily obliged to give his consent in cases where natural gas of 100 calories value had been reformed into town gas of an approximate 50 calories value. We thought that under the wording of the Clause the Minister might be obliged to give his consent to the use of that town gas.
We were also concerned about the use of tail gas—the 90 per cent. of the natural gas which remains after it has been subjected to a chemical process and 10 per cent. has been extracted. We were concerned lest, under the Clause as it then read, the Minister might have to give his consent to the free use of the whole of that 90 per cent. content of the natural gas which had been won.
The Minister has given me an assurance about reformed or town gas, but he has not mentioned tail gas. I do not know whether he intended his assurance to go as far as that. If he is in a position to give me that assurance as well, I shall be grateful if he can indicate how the words which he seeks to insert provide that result. How do they produce the consequence which the Minister has indicated?
Have the Minister and his Department been in touch with the Gas Council to see whether it is content with the Amendment? Does it think that by this wording the Minister has succeeded in preserving the position which the Council—quite rightly, in the opinion of my hon. Friends and myself—enjoys as a gas producer and distributor, or does the change in some way impinge upon its existing position?
§ Mr. Skeet
Would not the tail gas be caught by Section 52 of the Gas Act, 893 1948? I should like to ask my right hon. Friend a question relating to the construction of this most complicated provision. It contains a number of negatives, and it is difficult to elicit the meaning. I understand that a licensee using gas for industrial purposes as a fuel proceeding under subsection (3,a) would probably receive consent, provided certain conditions are fulfilled, one of which is that the area board has had the opportunity to buy the gas in the first instance. Would not this provision apply also to a subsidiary company?
Subsection (3,b) and subsection (4) provide that a licensee or a subsidiary company can utilise the methane that comes from the Continental Shelf partly as a fuel and partly for processing. If this be the case, I think that we have got ourselves into a rather complicated position. As I understand it, the whole point is to preserve to the gas industry its monopoly. But if we consider the circumstances of I.C.I. for example, which may have as many as 400 subsidiaries, what will be the result? Do they have to sell their gas to one of the area boards? Do they have to buy it back later at what may possibly be a disadvantageous price, the area boards in the circumstances being intermediaries? I do not think that would be satisfactory as a way to run a company. Ft would be simply inserting another step and that would be unsuitable.
What does this consent mean? The consent of the Minister would be given. But it is obligatory if the use is for chemical synthesis. The Amendment says that where it is a by-product it is excepted. Could not reformed gas be excepted, for the reformed gas could be considered as a by-product? If that is so, would not it be exempted? Is this Clause sufficiently watertight to include what the Minister has in mind as essential to safeguard the interests of the gas industry?
It seems that here we have a Clause in which we are attempting to tie up certain matters of planning a part of which I agree. But it is for the right hon. Gentleman to construct the Clause in a way he wishes. On what basis will he give his consent under subsection (3,a)? If a licensee says that he wants 894 the gas as fuel, is the Minister prepared to exercise his discretion reasonably and allow the licensee to use the gas for his own purposes in his own plant? It is obvious to me that there are ways round this provision. Bottled propane and butane could be extracted from natural gas and supplied in large quantities, or supplied by a parent licensee to subsidiaries, and that would be exempted by the woks in subsection (6). It would be possible to bring liquefied methane from Africa, and possibly later from Europe, and this could be passed out—at great expense—to subsidiaries in the United Kingdom. That has not been shut out by any of the undertakings which, I take it, have been given by the oil companies in respect of a project which comes into operation this year.
If the law in this connection is to be unreasonable—and I pray in aid the rather complicated Clause 9—might not it be possible for a consortium to do its drilling in a neighbouring State's territory rather than in our own territory; particularly if the favourable sedimentary formation lies beneath the Median Line, in which case the gas would be drawn off in a territory under the jurisdiction of a neighbouring State although it would be underlying our own territory? Those are some of the difficulties which might arise unless this Clause is worded properly.
As I see it, the purpose is to provide protection for the gas industry. I maintain that this should be reasonable. It applies to domestic consumers, but to a limited extent it should apply to industrial consumers. If necessary, consent should be freely given to protect their enterprises. Is the Minister closing the door too firmly by this Amendment or is he not doing it properly?
§ 8.15 p.m.
§ Mr. Erroll
By leave of the House, I will speak again to try to explain the Amendment in a little more detail and, I hope, to the satisfaction of hon. Members. Here, we are dealing with something of a compromise between two important principles, the right of the owner of the gas to do what he likes with it and the monopoly position of the Gas Council. Both these rights have to be taken into account.
895 I wish to reassure the right hon. and learned Member for Newport (Sir F. Soskice) that I have been in close and continuous touch with the Gas Council on this and other aspects of the Bill which affect the statutory interests of the Council. The point is that in considering whether gas is used for an industrial non-fuel purpose the reforming process is not to be regarded as the actual use of the natural gas. It is the use of the product of the process which will be the governing factor. That deals with the reforming process.
The right hon. and learned Gentleman referred to the residual or tail gases, as did my hon. Friend the Member for Willesden, East (Mr. Skeet). One could have a fairly substantial quantity of tail gases resulting from a genuine non-fuel use. I admit that this could form a substantial proportion in thermal value of the original gas. But after going through what I should have previously regarded as a genuine non-fuel process as determined in the light of subsection (1) of the Clause this gas will no longer be natural gas obtained under licence. It will be different stuff altogether, and as my hon. Friend pointed out, it will become manufactured gas, to which Section 52 of the Gas Act, 1948, will apply.
For this reason I do not think that it is a matter which may properly be dealt with in this Bill. It is taken care of by the 1948 Act, and the reforming process is taken care of in the Amendment which I hope hon. Members will accept.
§ Amendment agreed to.