HC Deb 28 July 1975 vol 896 cc1301-46

'(1) There shall be a body corporate to be called the United Kingdom Oil Conservation Authority (and hereafter in this Act referred to as "the Authority") which shall be constituted in accordance with the following provisions of this section.

(2) The Authority shall consist of not more than five persons appointed by the Secretary of State, one of whom shall be appointed chairman and two of whom shall be appointed deputy chairmen.

(3) No member of the Authority shall have any pecuniary interest in any business engaged in any phase of the oil or gas industries.

(4) The Authority may from time to time appoint one or more persons having special technical or other knowledge—

  1. (a) to sit with the Authority to hear and consider any matter before it, or
  2. (b) to inquire into and report to the Authority in respect of any matter before it.

(5) The Authority shall have power to do anything which is necessary for or incidental to the achievement of the purposes of this part of this Act, that is to say—

  1. (a) to provide for the appraisal of the reserves and productive capacity of oil and gas resources in the United Kingdom and controlled waters;
  2. (b) to provide for the appraisal of the existing or future requirements to be met from United Kingdom oil and gas resources—
    1. (i) in the United Kingdom and
    2. (ii) in markets outside the United Kingdom;
  3. (c) to effect the conservation of, and to prevent the waste of, the oil and gas resources of the United Kingdom;
  4. (d) to control pollution and ensure conservation of the environment in the exploration for, processing, development and transport of oil and gas resources;
  5. (e) to secure the observance of safe and efficient practices in the exploration for, processing, development and transport of the oil and gas resources of the United Kingdom; and
  6. (f) to provide for the recording and timely and useful dissemination of information 1302 regarding the oil and gas resources of the United Kingdom.

(6) The Authority shall, in the exercise of its powers for the purposes of this part of this Act,—

  1. (a) be guided by directives given to the Authority from time to time by the Secretary of State;
  2. (b) hold such inquiries, make such orders, give such directions and take such action as the Authority reasonably considers to be necessary to give effect to the purposes of this Part of this Act and to any directives given to it under paragraph (a) above;
  3. (c) make investigations, undertake studies, and prepare reports on any matter within the purview of this Act or of the Petroleum (Production) Act 1934, the Pipelines Act 1962, the Continental Shelf Act 1964, the Prevention of Oil Pollution Act 1971 and the Mineral Workings (Offshore Installations) Act 1971 or any statutory modification or re-enactment of any of them; and
  4. (d) provide advice to the Secretary of State with regard to such measures as the Authority considers necessary or advisable in the public interest related to the exploration for, production, development, conservation, control, transport, use and marketing oil and gas resources and for the safety of those engaged or employed in connection with such activities.

(7) Where under this Act, or under any licence or authorisation issued pursuant to this Act or to the Petroleum (Production) Act 1934, or to any statutory modification or re-enactment of either, any matter falls to be referred to arbitration (howsoever such reference may be described), such matter shall be referred to the Authority for determination and not to any other tribunal.

(8) Where under this Act or under any licence or authorisation issued pursuant to this Act or to the Petroleum (Production) Act 1934 or to any statutory modification or re-enactment of either any matter or thing falls to be determined decided, directed, approved, specified or consented to by the Secretary of State, then at the instance of any person affected or likely to be affected by such action by the Secretary of State the matter or thing as aforesaid shall be referred to the Authority for inquiry or investigation and recommendation and the Secretary of State shall not act as aforesaid in respect of such matter or thing until the Authority has issued a recommendation thereon and the Secretary of State has considered such recommendation; and where the Secretary of State acts otherwise than in accordance with such recommendation he shall state his reasons for so doing.

(9) The Secretary of State may after consultation with the Authority and with the consent of the Lord Chancellor make Regulations governing the proceedings of the Authority under subsections (7) and (8) of this section and without prejudice to the generality of the foregoing such Regulations may provide for—

  1. (i) the service of notices upon any person affected or likely to be affected by any such proceeding;
  2. 1303
  3. (ii) allowing any such person as aforesaid to submit written or oral evidence or to make representations in any such proceeding;
  4. (iii) requiring all such persons as aforesaid to have access to all evidence given or representation made as aforesaid;
  5. (iv) the examination, cross-examination and re-examination of witnesses in any such proceeding;
  6. (v) representation of any such person as aforesaid by Counsel or a Solicitor;
  7. (vi) the protection of privilege for any words spoken or written and for any acts done, whether by the Authority or by any person concerned, in any such proceeding;
  8. (vii) such other matters as the Secretary of State (after such consultation and with such consent) may consider necessary or desirable for the proper performance by the Authority of its functions and duties under subsection (7) and (8) of this section.'—[Mr. Patrick Jenkin.]

Brought up, and read the First time.

3.54 p.m.

Mr. Patrick Jenkin (Wanstead and Woodford)

I beg to move, That the clause be read a Second time.

We have a very heavy agenda before us and as you have reminded the House, Mr. Speaker, we are operating under the guillotine—a guillotine which, it is agreed on all sides, owes nothing to any intransigence on the part of the Opposition.

The clause proposes the establishment of a new regulatory body which we have christened the United Kingdom Oil Conservation Authority. It embodies a proposal put forward last year by the Conservative Party in a statement which I made on 11th September. That proposal duly found its way into the Conservative election manifesto.

It is a happy coincidence that this Report stage of the Bill follows only a few days after the proposal for a regulatory body received powerful endorsement from the Select Committee on National Industries, in a report from Sub-Committee A, under the chairmanship of the hon. Member for Feltham and Heston (Mr. Kerr). I regard that as a valuable report, and it is a pity that it was not available before the conclusion of the Bill's Committee stage. The Select Committee agreed its report on 23rd April, a week before the Second Reading of the Bill, but it was only last week that it was published. It seems to me that if these reports are to be of value to the House, they need to be issued, published and made available to hon. Members as swiftly as possible.

In Standing Committee we concentrated on three main points: first, the powers, rôle and purposes of the British National Oil Corporation; secondly, the finances of the BNOC and the participation in North Sea oil licences; and, thirdly, the strengthening of the regulatory functions of the Government in relation to licences, pipelines and refineries.

In our debates we established a number of valuable propositions, as I am sure the Minister will agree. The first proposition was that the central purpose of the existence of the BNOC and the participation in licences was to gain information and expertise. This point was put clearly by the Secretary of State on 17th June, as follows: In addition, participation has a special value, because it gives the nation itself a direct knowledge of and expertise in the production of oil."—[Official Report, Standing Committee D, 17th June 1975; c. 4191 One might add that the nation needs it.

I, for one, was not much reassured by the answer given by Lord Balogh on 23rd July in another place, when asked by Lord Orr-Ewing As the noble Lord referred to all previous advisers as amateurs, perhaps he could give the names of the professionals who are advising the present Government? Lord Balogh replied: My Lords, I am."—[Official Report, House of Lords, 23rd July 1975; Vol. 363, c. 332.] I find that a very disturbing answer indeed.

Much had been made in our debates of the need to secure revenue and to exercise control, but in debate it became clear that participation in existing licences will bring no extra revenue because the Government are pledged to negotiate on a "no gain, no loss" basis. Furthermore, it became clear that revenue from new licences must be regarded as a somewhat speculative venture. It was also established that the pattern of control had nothing to do with BNOC. It is interesting to note that when the Department gave evidence to the Select Committee earlier in the year that was not clear. It has now become clear and we welcome it.

The second point we established was that this by any standards, will be a very costly exercise for the taxpayer. The figure put forward from the Opposition estimated the exercise as costing over £2,000 million of taxpayers' money—sums which will have to be invested up to 1980. The Government were not quite so forthcoming. They admitted to a figure of £500 million in 1976 and a further sum of the same order in 1977, and they went further and said that, in addition, there would need to be added the compensation payable to the companies under Clause 41. Up to the end of 1977, at any rate, we are talking of a sum well in excess of £1,000 million and it could be half as much again.

The third proposition we established was that to finance this venture we shall need the £900 million which the Corporation will have to borrow under Clause 6 and also the flow of royalties diverted from the Exchequer to the national oil account. Furthermore, there is the question of BNOC's exemption from petroleum revenue tax. The Government did not deny that by 1980 these sources could provide the BNOC with funds of up to £2,000 million at least.

Fourthly, we established—and, if we did not do so, the Select Committee endorsed the point—that the capacity of the BNOC to operate as an exploration or production company in the early years wil; be virtually nil. Indeed, The Guardian reported last week: The Government is expected to announce shortly that the proposed state oil company will take no technical part in North Sea oil search for the first few years of existence. As appears from the Select Committee report, it will take many years before the BNOC can build up the teams of experts necessary to make a success of the operation. For many years it is bound to be no more than a sleeping partner, although an exceedingly expensive one.

Yet, despite all these considerations, we were able to agree in Committee that there needs to be pretty close supervision of offshore exploration and development. We agree that the Government need high technical competence at their disposal to undertake this task. They need information and expertise, and they also need fully to understand the problems facing the industry which is responsible for carrying out the operations on the continental shelf.

But nothing said in the course of a long Committee stage, either by the Secretary of State for Energy or by his indefatigable Under-Secretary of State, began to convince me that it makes any sense to invest up to £2,000 million of public money to achieve those purposes by direct participation. At £2,000 million, information and expertise is very dearly bought. On the contrary, the more we discussed the proposal, the more unnecessary and irrelevant it seemed. In our view, the Government's legitimate objectives would be far better achieved, not by investing thousands of millions of pounds in an unnecessary State oil company, but by setting up a proper, well-staffed, regulatory agency of the kind to which we direct new Clause 1 in this Bill.

4.0 p.m.

The central idea behind the proposal for an independent regulatory agency is the need to combine three features—competence, impartiality and trust.

The body needs to be highly expert and to have a high level of technical competence if it is to handle effectively the regulatory functions at present vested in the Secretary of State. The Select Committee cast some doubt on whether the Department of Energy was sufficiently equipped by itself to carry out that task.

Secondly, the functions need to be exercised with a strict—almost a judicial—impartiality, not only when considering issues that arise between one licensee and another, but perhaps still more when they arise between the licensee and the Government themselves.

Thirdly, if these functions are to be operated properly, there needs to be built up the trust and confidence of the industry, whose operations and investment decisions can be quite dramatically affected by the exercise of the regulatory power.

It was these ideas which commended themselves to my party last year and led to its including the proposal for a United Kingdom Oil Conservation Authority in its General Election manifesto. We now know that shortly afterwards the same ideas were put to the Select Committee on Nationalised Industries by several witnesses and were endorsed by the Committee earlier this year. Perhaps I may direct the attention of the House to paragraphs 165 and 166 of the Select Committee's Report. Paragraph 165 reads: On its visit to Norway the Sub-Committee was impressed by the work of the Petroleum Directorate, to which we referred in Chapter 5. This external Government agency's tasks include the monitoring of Shelf activity, the collection and processing of technological material, the preparation of appraisals for Government, the publication of technical data, and the function of ensuring that production takes place in accordance with guidelines laid down. BP in their evidence recommended that a regulatory commission should be set up here, comparable to the Norwegian body. It would be ultimately responsible to DEn (which would fulfil the central policy-making role for oil and gas), but would be semi-autonomous and at arm's length from both the Department and the oil industry. Its functions would include the custody and release of licensees' technical information, conservation policies, unitisation, the assessment of reserves and the regulation and inspection of pro-rationing programmes. The Committee then went on to refer to other similar bodies, such as the Energy Resources Conservation Board of Alberta and the Texas Railroad Commission. The House knows that I, together with a number of my hon. Friends, had the opportunity in January of studying these bodies when we visited the United States and Canada. We became convinced that something of the sort is needed in this country. It is through such a body that the Government would best acquire the competence, the information and the expertise which we are all agreed they need to have. It is, therefore, very reassuring to find that the Select Committee has reached the same conclusion. I should like to quote very briefly from paragraph 166: We assume that the Government recognises the need for these tasks to be performed by a competent body, but it was not clear to us how they proposed to handle it ֵ There is also advantage in separating the regulatory body from the Department itself, which would of course retain the ultimate responsibility for its work. That is exactly the pattern for which we have provided in new Clause 1, which sets out the framework. I drafted new Clause 1 and put it on the Notice Paper before I had read the report of the Select Committee, so it is all my own work.

We envisage a small body, of no more than five members, though with power to take on technical assessors for particular studies. We believe that the members should have no financial interests of any sort in oil and gas activities, so that they may be strictly impartial. We believe that this should be the body to monitor and, so far as it can, establish the reserves of oil and gas available to the nation, to prepare reports and studies on the markets, and to be responsible for the conservation rôle and the prevention of waste—waste having in this context a very wide and rather specialised meaning. It would be the body to monitor and control pollution, and deal with safety and other similar matters. It would build up and establish a library of information which would be available to the Government and, as appropriate, to the industry.

It is worth noting that the Alberta board reckons to have the finest collection of core samples of any such body in the world, because it is entitled to collect, store and monitor them under the Alberta legislation. It is perfectly true that the Institute of Geological Sciences, under the NIRC in this country, performs something of the same function, but in a less satisfactory and rather less coherent way. But, of course, policy must remain with the Government, with the Secretary of State, and we recognise that. New Clause 1, therefore, provides that the Secretary of State may give directives to the conservation authority, and the authority is then bound to carry out its function in the light of those directives. The detailed implementation is for the authority. It would be empowered to hold hearings and inquiries, to undertake studies, to prepare reports and to tender advice to the Secretary of State. It would be the expert arbitration tribunal to hear and decide on disputes that might arise. It would be able to make recommendations to the Secretary of State in cases where he is vested with powers under the licences or under the Bill.

I am not wedded to the exact wording or even to every detail in the clause. The main purpose is to paint a broad general picture of how such a body could be set up and operated.

The Secretary of State will no doubt recognise—or his officials will be able to recognise—that I have drawn heavily on the Alberta legislation, and certainly the Alberta board has become the model not only for other provinces in Canada and for the National Energy Board in Ottawa, but for similar bodies in other parts of the world.

When my hon. Friends and I visited Alberta we were much impressed by the trust and confidence in which the Alberta board was held by industry, and also—just as important—by the confidence of the board that it in turn was not being bamboozled or misled by industry. As the Deputy Chairman, Mr. Doug Craig, said with a smile, "We reckon we know enough to know when the industry is not telling us the whole truth."

It seemed to us then, as it seems to us today, that the United Kingdom could do much worse than to learn from this experience and base its institutions on the Alberta model.

The Select Committee's report brings out one other valuable point. In Chapter 5 it goes to some length into the shortage of skilled staff. Indeed, this is perhaps the central message of the report. Paragraph 103 says: A constantly recurring theme in our evidence was the difficulty of finding sufficient technological expertise to direct, operate and support this huge programme of exploration and development. This is a major limiting factor in the aspirations of any nationalised industry, state corporation, private sector company or Government department or agency in playing a useful role in the exploitation of UKCS oil and gas. Yet, when the Committee dealt with the question of regulatory aspects, it indicated that staffing might not be quite the difficulty for a conservation authority that it would be, for instance, for the BNOC. In paragraph 112 of the report, Professor Whiteman thought … that if the Department were to carry out the function of a proper regulatory commission a staff much greater than those at present in the department of IGS would be needed to handle all the seismic data, logs, geophysics, etc., and to make assessments, look after conservation and legal problems and so on. British Petroleum also said that the Department was not at present properly equipped to handle such matters, and suggested that staff might be recruited from specialists who had just retired and might be willing to serve the Government for a few years. But Sir Eric Drake makes the considerable point that the kind of people nearing the end of their careers who could perform a useful task in a regulatory commission are not the kind of people one should be looking for to start such a body as the BNOC.

I believe that the establishment of a United Kingdom oil conservation authority is not only necessary but perfectly feasible. It would have one overwhelming advantage compared with the British National Oil Corporation proposed by the Government. Its budget up to 1980, instead of being £2,000 million or more, might require no more than £10 million or £20 million. Instead of saddling the industry with the BNOC, a huge, unwieldy inexpert operating partner—a real cuckoo in the nest if ever there was one—the Government would have their own watchdog, expert, competent and impartial, to safeguard the national interest.

Mr. Dennis Canavan (West Stirlingshire)

But with no teeth.

Mr. Jenkin

The hon. Gentleman would do well to study some of the orders made by the Alberta board, the Texas Railroad Board, and the Oklahoma Gas and Oil Commission. It is nonsense to say that they have no teeth.

It is desperately important that the Government should make this change of direction. It is freely admitted that the momentum of exploration is slowing down. Rigs are leaving our waters at the rate of about one a week. The current issue of Offshore Services says: … it now seems that exploration activities are beginning to run down. The contracts of some of the big semi-submersibles expire this year and in the absence of renewal contracts with North Sea operators some of them are now certain to take up overseas contracts and leave the North Sea at the end of Summer. We know, too, that there is grave shortage of orders for production platforms. The Under-Secretary of State made a statement last week trying to deal with the danger.

On 18th July, moreover, The Guardian reported: A serious crisis in the North Sea Oil construction programme is casting doubt on whether Britain will get the oil ashore as speedily as the Government has planned. What are the real reasons for the rundown of capacity in the yards, in the manufacture of modules and all the other equipment needed? The Government do not have to look far for them. They were spelt out by Sir Eric Drake in his evidence to the Select Committee earlier this year. He said, in answer to Question No. 603: … I must tell you that the proposed establishment of the B.N.O.C., and the unknown rate of taxation through the petroleum tax, are beginning to slow down the exploration and productive scene of the North Sea. In answer to Question No. 605, Sir Eric said: … in common sense these must have an inhibiting effect on the development of the North Sea, for two reasons, one because of a reduction of an unknown rate, so far not known, and secondly, to the extent that the establishment of B.N.O.C. may represent an interference perhaps by less skilled people in the decisions of those whose profession it is. The Government have, of course, since then announced the detail of the PRT but the British National Oil Corporation still hangs over the industry as a threat which is inhibiting activities.

4.15 p.m.

Mr. Gordon Wilson (Dundee, East)

Even if new Clause 1 were accepted, surely the BNOC would still remain in existence. Surely the clause is more to do with the powers of the Department of Energy than with the BNOC.

Secondly, if, following aspects of Government policy, there is or will be a diminution of activity in the North Sea, would not the proposals in the clause for bringing in a conservation authority and giving it teeth lead to a further diminution of that activity?

Mr. Jenkin

The hon. Gentleman has been in the House long enough to know that once a decision has been reached in Committee it is unlikely to be permitted to be reopened on Report. We were bitterly opposed to the setting up of the BNOC, and we see the oil conservation authority as a very much better alternative. But, of course, within the constraints of debate on Report, the hon. Gentleman is right. Second, he must distinguish between the machinery for giving effect to proper conservation policies and what those policies might be. The latter would be for the Government to decide. I am content for the purpose here to assume that the powers would be those set out in Part 2 of the model clauses of the licences. If one were looking at this matter de novo that view might also De rather different. But a regulatory body of the sort I have described would be an infinitely better way to look after the public interest than anything proposed in the Bill.

The Government should abandon their doctrinaire proposals for the BNOC and embrace the concept of a regulatory agency which would secure all its legiti- mate objectives more efficiently, more surely, and much more cheaply.

Mr. J. Grimond (Orkney and Shetland)

I hope not to repeat in detail all the arguments I advanced on Second Reading and in Committee. But the fact that I do not repeat them does not mean that I am convinced by the Government's replies.

I suggested to the Conservative Government that they should set up a committee to monitor developments taking place in connection with oil. I suggested that it should be purely advisory and that its advice should be available not only to the Government but to local authorities. I suggested that it should also try to cover the effects on the environment and on local economies of oil-related work. That was not done. Later, a committee was set up and it is still operational, but it is difficult to find out what it is doing. I think it reports to the Secretary of State for Scotland. Could we be told a little more about its activities?

I wholly sympathise with the new clause as an alternative to the BNOC. But what alarms me is that if the Government were to accept it we would have the new conservation authority in addition to the BNOC. There must be an end to the setting up of commissions, corporations, Ministries and so forth. We have not the people of sufficiently high calibre at hand unless they are taken out of other important jobs. Secondly, we are always getting top hampers of unproductive officials while the country desperately needs to increase production.

The right hon. Members for Wanstead and Woodford (Mr. Jenkin) put the conservation authority idea forward as an alternative to the BNOC. He must face the danger that it might be in addition to the BNOC. He may well argue that it would be a small body. No one would want to tie him down to the exact wording, but, against the background of his description of the Alberta authority, it is clear that he would regard the conservation authority as having pretty wide powers, and executive powers into the bargain. For any such body to remain small would be wholly against the whole ethos of its history. The original Cabinet Secretariat contained four people but it now contains 500. It has been steadily accumulating functions, and in my view this body would do the same. The House would be showing total disregard for history and undue optimism if it thought that any such body would remain compact with five or six people. Alas, those happy days of the Indian Civil Service and our Civil Service at its best have disappeared.

I do not see why most of this function should not be discharged by the existing Department of Energy. It is primarily the business of Government Departments to undertake this sort of general assessment of developments. One reason why I regret appointing civil servants to the BNOC is that it would confuse the position. The Department should be the guardian of the public, looking at developments, advising about them, taking expert advice from universities and other places from which it can be obtained, and ultimately making up its mind on questions of conservation, how fast we should develop our resources and what the effect will be.

Therefore, my first reaction is that this would be a valuable alternative to the BNOC and one which I should prefer. However, before the debate ends I hope that we shall be more enlightened about whether the Conservative Party will be happy if this new body is set up in addition to the BNOC and the Ministry and the existing committees, of which there are several.

There are two small points to which I should like to draw attention. It is suggested that this new body will be responsible for the control of pollution. Who is the ultimate authority? Who is in final charge of anti-pollution measures? As I understand it, there are, in effect, various Ministries, such as the Ministry of Defence, the Department of Trade and the Department of the Environment, all of which may have some part to play in anti-pollution measures. If there are oil slicks and so forth, many people will be in control of different means of dealing with them. I make no complaint about that, but there should be some definite chain of command because action may have to be taken quickly. I hope that in that respect we shall know a litle more about the present control of pollution.

Moreover, I do not think that I shall he in favour of giving this new body, if set up, the ultimate authority to deal with pollution. I do not think that would be a very suitable function for it, if it means deploying the various means which are available to deal with oil slicks and so forth. However, if it means dealing with wider questions such as pollution of the atmosphere, that may be a different matter. I am not certain what is meant.

The second matter concerns the environment. We are just reaching the stage where oil-related developments may soon have some considerable effect on the environment. Many people will have been alarmed by the events in the Gulf, where apparently large quantities of highly poisonous petroleum are pouring out and cannot be stopped. I doubt whether this body would be the right one to deal with such environmental problems.

I am a little concerned about who has the ultimate responsibility, especially in Scotland, where the Scottish Office, the Department of the Environment and the local authorities all seem to come into the matter. I do not know whether this matter can be dealt with in an amendment to the Bill on Report, but the fact that this is mentioned in the suggested duties of the new body entitles me to ask the Government to look at the matter and to see whether the present position is satisfactory.

Dr. Colin Phipps (Dudley, West)

I declare an interest, as I have done on many previous occasions, and I refer the House to previous energy debates. Very few hon. Members would take exception to the objectives of new Clause 1. Those objectives are fairly well understood within the international oil industry and, as has been pointed out by the right hon. Member for Wanstead and Woodford (Mr. Jenkin), they are similar to objectives that are already carried out by various regulatory bodies in various countries.

However, it is necessary to state that the proposed regulatory body is hardly an alternative to the BNOC. In my view, it is totally unrelated to the BNOC, and I bear in mind the remarks of the hon. Member for Dundee, East (Mr. Wilson). The BNOC is not designed to be a regulatory body. The proposed regulatory powers, excellent as they are—I have read them carefully but I am subject to correction—are powers already possessed by the Department of Energy. There may be one or two powers which, as suggested by the right hon. Member for Orkney and Shetland (Mr. Grimond), are possessed by other Ministries, but, as far as I know, the powers are not powers which the Ministry cannot already exercise should it so wish.

I doubt whether the Ministry needs to produce a new body of this complex kind. I should like to see the Ministry grow in expertise. Many of us have felt sad that the Ministry has not developed and built its staff at a more accelerated rate. We have had, since the first gas discovery, some 12 years in which to build a bigger and more competent technical staff in the Ministry. I am in no way suggesting that the current staff are not competent. Indeed, I think that they do their job quite remarkably given the size of the tasks which confront them and the small number of people concerned.

Since 1965–66 I and many others have pressed what was then the old Ministry of Power—it has had a number of metamorphoses since then—to employ more and more technical people. During the past 12 years the rate of progress in that direction has been most unsatisfactory.

There is the further question of the BNOC staff. Once more we are told that we cannot have a BNOC because it cannot get sufficient staff, it will take too long to recruit staff and for them to become expert, and, therefore, it will be too long before the BNOC can do anything.

Precisely the same arguments were put to me in 1966–67 when I proposed the formation of the National Hydro-Carbons Corporation to the then Labour Government. That proposal was put to three successive Labour Ministers of Power and it was rejected by all three. One of the principal grounds of rejection was that it would take too long to develop the staff and the expertise, and too long before we had a body that would genuinely be able to do something positive.

We are now faced with precisely the same arguments. We all appreciate that it will take time to gather the proper staff and to train them. However, we shall be getting oil and gas out of the North Sea well into the next century. We have to start sometime, and the time has come now. I have heard the same arguments for eight or nine years. The House should not be prepared to accept them again. We need a BNOC not for regulatory purposes—that can be fully carried out by the Ministry—but in order to have proper participation by this country in its own resources.

I emphasise that the regulatory bodies and the staff of the Ministry, no matter how competent or how dedicated they are, are not concerned with the day-to-day technical difficulties of looking for, winning and producing oil and gas in the North Sea. It is important to have at the Government's disposal a body of people who do have that day-to-day experience. This is not just for the advantage of this country, but for the advantage of all the oil companies.

I have worked in many countries and dealt with fine technicians who work for the Government and who have made what appear to them to be fine decisions on a political and technical basis, but which frankly, on a practical basis, really were not on. Those countries which have a properly developed national oil company participating with a working interest within the industry are the ones whose Governments are able to get the best possible advice. The industry benefits from this as well as the Government.

I believe that the objectives of the new clause are excellent but that they are already within the powers of the Ministry. I do not believe that a new regulatory body makes a lot of sense. The BNOC is an essential part of our overall strategy.

4.30 p.m.

Mr. T. H. H. Skeet (Bedford)

Plainly, the hon. Member for Dudley, West (Dr. Phipps) accepts the view that the BNOC is essential in its own right, not as a regulatory body but as an oil company. In my view, it is totally irrelevant.

We already have two major internationals, BP and Royal Dutch Shell, as well as many other smaller companies. Why, therefore, do we need the British National Oil Corporation, which has to start from the ground to build itself up? It has no chairman and no staff. The right hon. Member for Orkney and Shetland (Mr. Grimond) said that he would like to see the Department running the whole show. We cannot have anything like that. The hon. Member for Dudley, West has already vividly reminded us that the gentlemen in Whitehall do not know best, just as they did not know best years ago.

My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) has already referred to the argument set out in the First Report of the Select Committee on Nationalised Industries. In paragraph 166 the Committee said: Some of the evidence suggested that the Government might be looking to BNOC for at least a part of the regulatory role. We think this would he undesirable. A regulatory commission, as BP suggested, should be independent of the oil industry, of which BNOC, if it is to act as an effective commercial participant in exploration and development, would obviously be a part. To that extent, therefore, the Select Committee accepts the view that the BNOC should be completely independent, that it should, as the hon. Member for Dudley, West said, be an oil company.

On previous occasions, I have given the reasons why we should not have the BNOC as an oil company, and I am certain that that case can be fully sustained. It would be invidious to put the corporation also into a position where it had some regulatory powers.

The Secretary of State is on an easy wicket here. He need do no thinking at all. He could look at what is done by the Texas Railroad Commission and study its performance. Equally, he could go to Alberta and study what has been happening there during the past decade or so. Equally, he could follow the advice set out in Appendix 30 to the Report of the Select Committee, in the memorandum by Mr. Kenneth Smith, of the University of Glasgow, who talks about the Norwegian petroleum directorate. Mr. Smith deals with what has been done by that independent body set up by the Norwegians to look after all these matters in considerable detail. It is an advisory body only, giving advice as an expert body to the Government, on the basis of which the Government are able to order what should be done.

I think it desirable to sketch out in a little more detail the responsibilities of the Energy Resources Conservation Board of Alberta. I turn here to the board's report for 1973. There are 12 departments. In present circumstances, one need not go into coal, electricity and like matters, but I shall mention the relevant departments—those concerning themselves with development, with gas, with economics, with geology, with oil and with pipelines.

The development department will concern itself with the drilling and production section, enforcing regulations relating to drilling, completion, production and abandonment of wells and pollution abatement in field operations. The field operations section is responsible for implementing the Oil and Gas Conservation Act and the Pipeline Act. There is also an environment protection section. The gas department concerns itself with such matters as determining reserves, establishing permissible rates of production, gas conservation schemes, gas cycling schemes, and gas processing facilities, having an eye to the effect on the environment, and it concerns itself also with the production performance of gas pools.

The economics department looks at forecasts of supply and demand, preparing monthly oil pro-rationing computations, preparing monthly pro-ration orders, and generally assessing the competitive position of Alberta oil.

One need not spend time on the geology department. The oil department has as its separate interest to deal with reserves, reviewing the performance of primary depletion oil pools and promoting the application of enhanced recovery methods. Also, it ensures sound operational methods, advising the economics department in the preparation of monthly oil production allowable orders.

It is apparent from all this that what is going into what are known as the model clauses, relegating to the Secretary of State all manner of powers, could well be done for oil outside Whitehall by an independent body—which, incidentally, could be located in Scotland, not in Whitehall. Such an independent body could be located in Scotland to fulfil all these functions.

The pipeline department in Alberta would incorporate what we find in Clause 21 of the Bill; namely, authorisations, as well as what we find in Clauses 24 to 26.

That is just a rough sketch. On Report one ought not to go into the technicalities of what each division of this important body—a body of some size, I should add —in Alberta does, but it illustrates a vital consideration in this context. It takes responsibility away from the Minister and puts it into independent hands. This independent body cannot legislate, but it can advise. In the same way, our Minister could take such advice and dispassionately review it, making a fair judgment on what is reported to him. It should be emphasised that if BP is prepared to recommend a body such as the Norwegian petroleum directorate or something along these lines, there is at least one oil company supporting such proposals.

I turn now to the Railroad Commission of Texas, another of these organisations. In Article 6008 of its general provisions, it is provided in section 12: If and when the Commission finds that waste exists or is imminent in the production of gas from any reservoir, or that the capacity of the wells to produce gas from any reservoir exceeds the market demand for gas from such reservoir, the Commission shall then proceed by proper order to prorate and regulate the gas production from such reservoir on a reasonable basis. This shows that the regulatory bodies in the industry in the United States, in Canada and in Norway are independent bodies separate from the main legislative stream. The idea is that experts talk with the oil industry and, because they are removed from and independent of the industry, they are able to make impartial assessments on the maintenance of performance throughout.

The Secretary of State's difficulty in the set-up which he has provided is that he is himself embroiled in so many matters that he will have applications put to him on which he will have to decide this, that and the other. No doubt he can delegate minor matters to his Under-Secretary of State, but his Department will be so concerned with many matters that the oil industry will not be able to get on with the job of extracting oil from the North Sea as quickly as is desirable—desirable partly because our own United Kingdom market wants it, and partly because we need it for balance of payments reasons.

The Under-Secretary of State did not say so, but we know that the only reason why he has been seeking substantial modification of the model clauses has been to allow for depletion control to be introduced. In both the Canadian scheme and the Norwegian scheme—I can give chapter and verse if necessary—and in the Texas scheme depletion is allowed in all cases. As for the United Kingdom, it is not likely that in the next five or 10 years depletion control will be required in relation to North Sea oil because all the oil which can be brought to the surface and marketed either here or in Europe will be required.

I fully endorse the new clause introduced by my right hon. Friend the Member for Wanstead and Woodford. The Government would be extremely wise to accept it. It would mean that the whole pattern of this legislation would be turned upside down, but something of this kind will have to be introduced at a later stage, so why not do it now? If it cannot be done here on Report, at least let it be done in the other place, or perhaps it could be done by another statute next year. But, however it be done, I am certain that, as sure as I am standing in this Chamber today advocating what my right hon. Friend has proposed and what we have all seen elsewhere in the world, this will be the line which Britain will have to follow in future years.

If we start off on the wrong foot, notwithstanding the administrative difficulties, the United Kingdom may well find delays developing and increasing, and we shall not have the oil extracted from the Continental Shelf at the rate we want. It will be our fault. There may be an administrative problem, but I strongly urge the Government to take this whole matter very seriously and at least to adopt the principle of the recommendations in the new clause. If they cannot be accepted in the form set out, the skill of our parliamentary draftsmen should be applied to them so that we finally adopt something in the right shape.

Mr. Robert Hughes (Aberdeen, North)

I have the distinct impression that the First Report of the Select Committee on Nationalised Industries gives considerable comfort to those right hon. and hon. Members of the Conservative Opposition who are advocating the new clause, since they have quoted so readily from it. I suppose that that is only reasonable. The right hon. Member for Wanstead and Woodford (Mr. Jenkin) has made clear that, while he sees the rôle of his proposed conservation authority as of importance in itself, he recognises that the rules governing the Report stage do not allow him to argue his main case; namely, that the conservation authority should be a substitute for the British National Oil Corporation rather than an additional body.

It is fair to point out that the First Report of the Select Committee saw desirable objectives in having some kind of regulatory authority, but, as I read its report, the Committee saw it not as a substitute but as an addition. At no point did the Select Committee argue against the setting up of the BNOC. One of the difficulties of the Select Committee's report is that people draw from it what they want to draw and quote particular paragraphs which suit their own arguments. The report does not come down in such a hard and fast way as one would think from listening to the Opposition.

For instance, the Committee says it was impressed with the workings of the petroleum directorate in Norway, but goes on to say that the new body, if it was set up, would be ultimately responsible to the Department of Energy, which would fulfil its policy functions and the body would be in some senses semiautonomous and at arm's length from both the Department and the oil industry. I am not quite sure how a body which is ultimately responsible can be semiautonomous and at arm's length at the same time. It is clear that there will be a direct relationship with the Secretary of State for Energy, who will appoint the five or six members and will oversee their functions. There may be a need for a body of this kind, but in the initial stages our main job will not be to set up a regulatory authority. It will be to get the BNOC under way and doing its job.

Mr. Skeet

I am very much obliged to the hon. Member. Does he not agree that it would make a little more sense if there were no BNOC and the functions of the British Gas Corporation were extended? The report deals with this in paragraph 169, when it says: It is possible that operating companies will see the British Gas Corporation as a more attractive partner than BNOC. We have the Gas Corporation, which is a going concern, and we could probably add to it. This would make it unneces- sary to have the organisation the hon. Gentleman is suggesting.

Mr. Hughes

An argument is developed in the report suggesting that the British Gas Corporation and some of its subsidiaries or the National Coal Board and some subsidiaries might be amalgamated with BP to take on the rôle of the BNOC. If one sees the rôle of the BNOC as research and extraction of oil, there might be something in that argument. But I would like to see BNOC taking part and overseeing a whole range of work connected with the North Sea and eventually involved in the whole rôle of energy production and how energy should be used. The Bill gives the BNOC the power to sell oil, petrol and petro-chemicals. It is given a whole new range of functions and is not limited to one narrow sphere.

The Select Committee's report points out the difficulty of finding staff, and some hon. Members have put forward suggestions for solving this difficult. The right hon. Member for Wanstead and Woodford suggested that we should rely on retired employees of oil companies who have expertise and could do a useful job with the new authority and others. I do not know how my colleagues on the Front Bench feel about this, but I would think very carefully before accepting as gospel the word of people who have been concerned solely with the oil industry all their lives if we had to rely on them to advise us on how to go about our business. I would like to see instead people brought in new to the industry. They might perhaps have had some experience but their whole lives should not have been steeped in the arguments about how oil companies should operate. That is not to say that retired people or those in semi-retirement do not have a useful rôle to play in relation to the BNOC. Of course they will be needed, and they could be employed in giving expert guidance. They would be selling their wares in exactly the same way as everybody else.

4.45 p.m.

I detect a worry about staffing running through this report. It points out the difference in experience between that of BP and Shell and the experience in Norway. Paragraph 117 says: It is worth comparing the Norwegian staffing experience. The generally pessimistic opinions expressed by our witnesses (including the nationalised industries) contrast with the relatively optimistic view taken by its Norwegian partial counterpart, Statoil. Statoil felt that we would not have the kind of difficulties being suggested.

It goes on to mention Professor Whiteman. No doubt he will be mentioned many times in the debate. He said that members of the petroleum directorate were beginners and that some of them had been his pupils. I am not quite sure whether that is a recommendation or not. It is capable of different interpretations. We need the staff, and I believe we shall get them. I do not share the criticisms of the Select Committee's report relating to staff. I am a little concerned that the Department of Energy has come under some criticism for failing to get as much information as it might have done from the British Gas Corporation, the National Coal Board and their subsidiaries during its period of participation. It is unfortunate that the Department has not had the opportunity to study all, and not just some, of the important points in the report.

The purpose of the BNOC is not to act simply as a pollution expert. It will be the first nationalised industry starting up as a new industry, expanding its field of work. It will be a growth industry where the permutations of operations are almost endless. It gives very wide scope to add to it from time to time. The economics of the North Sea can be argued, but there is no doubt that unless we get firm control through the BNOC we shall lose the benefit to our economy that we might otherwise receive and the opportunity to work in the most profitable fields. They will go to other oil companies.

Mr. Patrick Jenkin

The hon. Gentleman talks about firm control through the BNOC, but throughout the Committee stage we never got an answer from the Government about how the BNOC would add to their powers of control. It came down in the end to information and expertise.

Mr. Hughes

Presumably the right hon. Gentleman is saying, and he may be right, that a board of directors in no way controls a company in the interests of shareholders on any occasion. The same case can be made for the BNOC. It can control and operate in the oil industry for the benefit of the shareholders, who in this case are the ordinary people of this country and not those who manage to buy into private companies. That is why I think the Government are right to go ahead with this Bill as it stands and to reject the new clause.

Mr. Alexander Fletcher (Edinburgh, North)

The Government's attitude to this clause will determine in the closing stages of the long debate about this whole concept whether Ministers are motivated by the national interest and a desire to do the job of Government or whether they cannot resist the temptation to play the part of oil barons and to set themselves up in the North Sea as oil operators at the risk and expense of the taxpayer.

There is clearly a need for a conservation authority. I do not think that anyone is making any bones about that. It should have teeth, be backed by Parliament and act in the national interest, not as a participator but as a referee charged with the responsibility to oversee those matters which are described in subsection (5) of the clause.

There is no need for the BNOC. We have excellent British oil companies operating today and making a success of their operations very much in the national interest. At no stage of the Bill have Ministers suggested how long it will take for the corporation to become anything like viable, how long it will take for it to become in any way a substantial operator in the North Sea. I doubt whether the Secretary of State would deny that it is more likely to take a generation than a decade for the corporation to produce anything like worthwhile results.

The justification given in Committee for the BNOC has been the need for the Government and the nation to get hold of the know-how and to understand what is going on in the North Sea with this great British asset. That is what the conservation authority is all about. That agency could provide the Government and the people of this country with the know-how necessary to understand what is happening in the North Sea and could act as a referee in the operations of the oil companies.

The job of setting up a conservation authority would tax the ability of the Department and the Ministers to the utmost. It would be a tremendously important job which would keep the Secretary of State and his colleagues extremely busy for some time without them being able to take time off to play the oil business game in the North Sea. Ministers therefore should take a lead from my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and study how in Canada and the United States Government agencies have acquired know-how without duplicating the operations of the oil companies.

The right hon. Member for Orkney and Shetland (Mr. Grimond), and the hon. Members for Aberdeen, North (Mr. Hughes) and Dudley, West (Dr. Phipps) asked why the authority was necessary, why the controlling agency could not be the Department itself. I understand the principle of that argument, but as Whitehall has grown to such an enormous size people want to be able to identify more easily particular operations and agencies of Government, and the Department of Energy is now just a part of the huge Government machine. Its decision making process would be very much slower than that of a small well-staffed and well-equipped agency of the kind we propose in the clause.

We could use and follow the example of the Civil Aviation Authority, which was set up independently and separately to do a particular job and to make decisions as rapidly as possible affecting a very important aspect of our affairs. That is how the conservation authority would operate.

On the question of staff, naturally we should expect to attract good calibre people to this authority from the oil companies. We have no prejudice against oil company executives, civil servants or trade unionists. The only qualification would be that they would know something about the business and were able to administer the affairs of the agency efficiently and effectively. The opposite applies to attracting staff to the BNOC. Here, yet again, we are debating the Bill and still asking the Secretary of State if there is any hope of hearing before rising for the Summer Recess who the chairman of the corporation is likely to be. May we know, or are the Government still plodding through application after application without finding a suit- able applicant? That is how it appears to us.

We believe that what we propose in the new clause would lead to the setting up of a worthwhile and streamlined authority which would serve the national interest in the North Sea.

Mr. Gordon Wilson

The proposal in the new Clause is attractive at first sight because it seeks to lay out certain powers which would be usefully exercised on behalf of any Government. It also analyses the various sources from which to derive information which any Government would wish to build up. The question is whether this could be done effectively or should be done under the proposals of the clause through an oil conservation authority or whether it should be done through the Department of Energy.

Very few people would quibble about the need to build up these reservoirs of experience and skill which will be necessary to deal with the very many important questions which will arise from the development of our oil resources. This is so in relation to a depletion policy. The Department of Energy will need to get much more information from the oil companies than it already does about their reservoirs, their structures and their reserves which are likely to be capable of development before it can decide upon a depletion policy.

The report of the Select Committee on Nationalised Industries produces interesting information about the situation in Norway. The Norwegians have gone some substantial distance in building up an oil directorate which is seeking to obtain the information that is required.

The clause gives rise to certain problems. I appreciate from the outset the difficulty which faces the right hon. Member for Wanstead and Woodford (Mr. Jenkin) when he admits that the clause would still leave the BNOC in existence. There is always the difficulty at Report Stages of ensuring that basic amendments are admitted for discussion even though they were discussed in Committee. However, I do not think that in considering the Opposition proposal we can accept the argument that the operations of the BNOC should be excluded. Most of the powers which the clause seeks are those which would have been enjoyed by the Department of Energy, and very few of them would be exercisable by the corporation except under the agency provisions, when the BNOC would be instructed to do certain things on behalf of certain Government Departments.

Some of the points which cause me concern are as follows. Will the proposal lead to a splitting in control? It appears certain that the proposed oil conservation authority would not be an independent referee but would come under the direct control of the Department of Energy although the Department of Energy would be required to hold back on decisions until the authority had supplied it with the advice and guidance upon which the Department could then act. If that were so there might be no real difficulty, because then it would be subject to an ultimate source of ministerial control which would oversee oil policy generally and take the authority's guidance.

5.0 p.m.

But there is a problem. Two things can flow from setting up a body called the "conservation authority". By its very name, it seems to be much more interested in conservation than in other aspects. From the outset it can set about determining a conservation policy. No one would quibble about the need for that. But it is possible that if it happened the Department of Energy would not take so much interest in conservation. If the United Kingdom Oil Conservation Authority were taken away, we should be left with the Department of Energy and, we hope, its recognition of the need for depletion control and conservation.

Therefore, there would be possible confusion, which could lead to conservation being put on a rather more minor road than many of us would wish. That is a matter of opinion, and I do not necessarily accept that it would happen. but it causes me to have second thoughts.

The other problem is that if the Department needs to take speedy action, under what time scale would the authority have the power to make up its mind about the advice and guidance that it would give the Secretary of State? There is nothing here to cause it to take one week, a month, three months, a year or 10 years. It being the creature of the Secretary of State, no doubt there would be certain compulsions, but the fact that the Minister could not take decisions until the authority had given him advice could in certain emergencies place the Department and, therefore, the national interest in difficulty.

I come thirdly to a point where I probably differ considerably with other hon. Members. Subsection (5)(b) says: to provide for the appraisal of the existing or future requirements to be met from United Kingdom oil and gas resources—

  1. (i) in the United Kingdom and
  2. (ii) in markets outside the United Kingdom."
That begs the question of where we are to set the limits on conservation. One would presumably have to work out what markets were involved. But in subsection (5)(b)(ii) we face the problem of what the EEC's policy will be. Is the subsection intended to apply not just the United Kingdom standards of depletion control applicable to the United Kingdom's needs or to make the new body take into consideration what the new European requirements will be? If so, what will be the emphasis on that?

This is where I differ from many hon. Members, because I believe that in a sense the difference between the British attitude towards depletion control and the European attitude can be mirrored by the difference between Scottish and British attitudes. Scotland is a small country with a consumption of 10 million tons of oil a year. It is likely to hit oil independence day within a year, and will be much keener on conservation than the United Kingdom as a whole, which will hit oil independence day, at 110 million tons, in the early 1980s. When shall we reach oil independence day for Europe? We do not know. I should not like to see the authority given such latitude that it could stretch the definition of its conservation policy. We must lay down standards by which conservation will be judged—not just the reservoirs, the amount of oil available for development, but the time scale within which we wish it to be used, and the consumption.

I should like to take the opportunity to protest yet again at the Conservative Opposition's failure to recognise that we who are lawyers in Scotland object to English legal imperialism. I am very sorry that, notwithstanding the criticism made of the hon. Member for Ross and Cromarty (Mr. Gray), he and the hon. Member for Edinburgh, North (Mr. Fletcher) have fallen yet again into the trap of signing amendments which seek to strip away from the Scots law the right to determine what sort of regulations will be made. I would have hoped that the hon. Gentlemen would read the clause before signing it. Perhaps they signed it in blank. Subsection (9) says: The Secretary of State may after consultation with the Authority and with the consent of the Lord Chancellor make Regulations. That is an impertinence, when most of the oil is lying in the Scottish jurisdiction, even without my going any further into exactly what that means in terms of ownership. If the hon. Members want my support, they should consider these matters carefully. All Scots lawyers, regardless of their political views, will take umbrage when the rights of Scots law are once again overridden. I hope that the junior Minister, the hon. Member for Lanarkshire, North (Mr. Smith), will agree. It is a small point, perhaps, but it is the sort of matter to which many of us in Scotland take serious exception.

One of the persuasive arguments in favour of the proposal before us is that it would create a new source of employment. In these desperate days of unemployment, any small crumb of comfort would be of use. If the proposed agency were to be situated in Scotland I could offer my constituency as a location, and I am sure that there would be a rush of offers from other constituencies. But we should not be bound by that argument. If we are to build up the expertise, skill and knowledge required, and if it is more logically to be under the petroleum division of the Department of Energy, it is simple to transfer that division to a Scottish location. The Conservative Opposition have made a manifesto commitment to doing that. They have appreciated that it would be a simple and reasonable thing to do.

I am not convinced that the clause has been argued through in terms that enable me to support it, but I shall, as always, listen to the closing speeches with some interest.

Mr. William Small (Glasgow, Garscadden)

I intervene briefly to speak about the weaknesses of the clause, which suggests no intellectual embezzlement from the oil industry for its knowledge and wisdom. Subsection (2) speaks of not more than five persons appointed … one of whom shall be appointed chairman and two of whom shall be appointed deputy chairmen. The clause then says that members of the authority shall have no pecuniary interest in any"— I emphasise "any"— business engaged in any phase of the oil or gas industries. Is this not like the Tsarina in St. Petersburg who would not invite a sexless Rasputin into her boudoir.

What commercial and other knowledge of the oil industry does the authority want? Presumably, the kind of people who would be appointed under the clause are those standing in the wings, with no knowledge and no contribution to make to the national interest.

Mr. Peter Emery (Honiton)

I am certain that it is not the intention of my hon. Friends, in appointing the conservation authority, to follow the line of reasoning that the hon. Member for Glasgow, Garscadden (Mr. Small) has just suggested. I am convinced that if such an authority existed it should consist of people, appointed by the Minister, with the necessary expertise and ability to carry out the tasks outlined by the clause.

My hon. Friend the Member for Edinburgh, North (Mr. Fletcher) argued that there was a need for a conservation authority. He appeared to suggest that the need was self-evident, and that no one disputed it. I do not regard it as self evident, and I strongly dispute that it is.

We do not need the BNOC. It is ponderous, wasteful, unnecessary and costly Socialist dogma. It will do nothing for the oil industry. It will not get more oil out of the ground, or help solve the problems of exploitation and marketing.

Although I missed the first three minutes of his speech, I listened to my right hon. Friend the Member for Wan-stead and Woodford (Mr. Jenkin) with great interest. I am not completely convinced that we need a conservation authority such as he suggests. Surely we have enough nationalised authorities, public sector advisory bodies and nationalised industry committees advising Ministers. There is no sense in creating a new public body for its own sake.

Both my right hon. Friend and my hon. Friend the Member for Edinburgh, North cited the example of the Canadian authority, the Alberta Energy Resources Conservation Board, and some of the regulatory bodies in the United States. However, the federal authorities in those countries do not have the powers that exist in this country.

The new authority is to provide for the appraisal of the reserves and productive capacity of oil and gas resources in the United Kingdom and controlled waters". That duty is now undertaken by the Department.

The authority is to provide for the appraisal of the existing or future requirements to be met from United Kingdom oil and gas resources". That duty is now undertaken by the nationalised industry policy division of the Department.

The authority is to effect the conservation of, and to prevent the waste of, the oil and gas resources of the United Kingdom". Although the Government refuse to accept my argument in this respect, in fact they have power to get the industry to agree to a sensible conservation policy without regulations.

The authority is to control pollution and ensure conservation of the environment in the exploration for, processing, development and transport of oil and gas resources". That duty is undertaken by a number of Ministries and local authorities, although perhaps that duty should be centralised under one authority, as was suggested by the right hon. Member for Orkney and Shetland (Mr. Grimond). However, I wonder whether those most concerned about the environment or about the preservation of rural England and Scotland would take the view that the authority should be judge and jury in its own cause.

The authority is to secure the observance of safe and efficient practices". That duty is undertaken by the two inspectorates under Government control. Although regulations in this connection are still in their infancy, I have no doubt that they will be fully implemented.

Finally, the authority is to provide for the recording and timely and useful dissemination of information". That is certainly a function within the Department's aegis. My former hon. Friend Tom Boardman, who was a Minister with me, ensured that we should have an annual report giving any necessary information.

If these functions are already discharged, what is the need for a new authority? Would the work that is now done by the Department be transferred to the new authority and not also done by the Department?

Mr. Patrick Jenkin

Of course.

5.15 p.m.

Mr. Emery

I am delighted to hear it. Does my right hon. Friend believe that possible? That is the real question. Are Ministers with such authority likely to divest themselves of the ability to undertake some of the responsibilities that existing law puts on their shoulders? Can my right hon. Friend convince me that the Minister will rely entirely on the authority and follow through its recommendations without duplicating its work in the Department?

Mr. Skeet

The Alberta Energy Resources Conservation Board is charged with the administration of the Canadian Oil and Gas Conservation Act and with all these other duties. That is exactly what my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) has in mind. Part of the responsibility now delegated to the Department would go to the independent authority, which would be thoroughly independent.

Mr. Emery

I am delighted to hear that, but it is not clear from the new clause, because the authority's recommendations would go to the Minister, who would have to make the necessary regulations.

Mr. Patrick Jenkin


Mr. Emery

That is how I read subsection (9). I am helped considerably if my right hon. Friend assures me that that is not so.

In that case the Minister would not be able to overrule the authority's recommendations. I am not certain that this would appeal to the present Secretary of State, although it might appeal to me. Nevertheless, I need a firm assurance, and I am sure that the industry does, that there will not be a duplicate organisation, which will still have to be supervised by the Department, which until now has done a remarkable job, although normally massively understaffed.

Does the oil industry want such a conservation authority? I am not certain that it does in normal times. However, perhaps with the right hon. Member for Bristol, South-East (Mr. Benn) as Secretary of State this is not normal times for the industry. The industry believes that the best regulator for conservation is the market itself. What concerns me is that the new regulatory body may set long-term policy on the conservation of existing discoveries which will go a long way to discourage either wild-catting or other exploitation, because the oil companies and their investors will feel that it will not be easy to alter established conservation policy.

Therefore, my right hon. Friend has to make it clear that the conservation authority would not be so hidebound as to stop the type of investment necessary for an increasing exploitation by private enterprise in the North Sea. That exploitation will become more costly, and, the nearer we come to levels of production which meet the targets set for conservation, the incentive for wild-catting bodies to go into the North Sea will be very much less. If the clause were to be carried, it would be imperative for my right hon. Friend to explain to the industry how he would deal with that specific matter.

As I said at the beginning of my speech, I believe that the best method of dealing with conservation is the ordinary market place. If the market place goes wrong, it may be necessary for the Government to take certain steps. At this stage, no one has the right to say that the market place will go wrong. It has not gone wrong up to now, and there is no proof that it is likely to. What worries me about the Socialists' intentions is that it is suggested that the market place must automatically prove to be a failure.

Therefore, before I can give my full support to my right hon. Friend's clause, he must make it clear first that there will not be a duplication of staff or responsi- bility, secondly that he will ensure that it is the authority which has the powers, without further control by the Ministry, and thirdly that any conservation policy will take into account the need to encourage further exploitation. If my right hon. Friend can give the oil industry assurances on those points, I can support his clause.

Mr. Peter Rost (Derbyshire, South-East) rose

The Secretary of State for Energy (Mr Anthony Wedgwood Benn) rose

Mr. Speaker

Mr. Benn.

Mr. Rost rose

Mr. Speaker

Mr. Rost, if he must. [HON. MEMBERS: "Oh."] This is a guillotine day. I hope that the House wishes to make progress.

Mr. Rost

My name appears on the Notice Paper as one of the sponsors of the clause, and I have been waiting to be called. I am sorry if that is thought to be unconstructive. I do not wish to delay the House. I am sure that none of my colleagues will regard my contribution as an unnecessary filibuster.

I was very much impressed by the constructive and thoughtful contribution made by my hon. Friend the Member for Honiton (Mr. Emery). However, I hope that he will accept that those matters about which he seeks assurances from my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) are covered adequately in the original construction of the clause. Indeed, I should not be supporting it unless I had similar assurances, and I accept what my right hon. Friend said.

It may be that my hon. Friend the Member for Honiton does not appreciate the spirit in which the clause is phrased. In my view, it is an attempt to give the Government a last death-bed opportunity to get themselves off their own Left-wing hook. It is an attempt to replace the rather unconstructive and damaging BNOC proposal with something that is constructive and will be in the national interest. In other words, it is an attempt to restore some semblance of responsibility and sanity to the affairs of this House and especially to this legislation.

As my right hon. Friend the Member for Wanstead and Woodford said, the BNOC is not only irrelevant. It is damaging and costly. It is irrelevant because we have a British oil industry already, contrary to other less-developed countries, including Norway, where there is no highly developed oil and petro-chemical industry. We have one already. Therefore, the BNOC is irrelevant. It is damaging because it will create further nationalisation on a vast scale and inevitably will produce inefficiency. It is costly because it will divert vast sums of revenue which should be going to the Treasury into the coffers of the National Oil Account which will be spent on profligate nationalisation schemes and, by doing so, will help to create further inflation and accelerate the unemployment problems which will face the country over the next two or three years.

The real reason why I suggest that the clause should be supported is that no case has been made for the BNOC by the Government, either on Second Reading or in Committee, which is in any way convincing. We have been told that participation will be on a "no loss, no gain" basis. Why, then, go ahead with it when adequate taxation at almost a crippling rate already exists and when adequate Government controls are already in operation?

Not only have the Government failed to make a case for the BNOC, but they have already by their proposals put the oil industry into retreat so that the main objectives of energy strategy which we should be striving for in order to make ourselves self-sufficient as soon as possible are being delayed.

We really are giving the Government a last opportunity to get their priorities right and to adopt a policy which will be less doctrinaire and perhaps more pragmatic. As we have said on numerous occasions, the BNOC will not produce any more oil and will not produce it more quickly or more cheaply. On the contrary, the BNOC as proposed by the Government will do precisely the opposite.

It is really time that this House woke up to the realities of our economic situation and that we gave the Government a last opportunity to abandon their outdated Socialist proposals. The country has already paid too high a price for this extravagance. It cannot afford any more. It is time for more realism and common sense. It is time that the Secretary of State put the national interest above Socialist Party dogma. That is why I beg him to regard this clause as a constructive contribution from the Opposition and as an alternative to the destructive proposal contained in the Bill.

Mr. Bean

I recognise that, in moving the Second Reading of the clause, the right hon. Member for Wanstead and Woodford (Mr. Jenkin) was putting forward a major statement of Opposiiton policy. The House regards it in that light. It appeared in the Conservative Party's manifesto, and later a number of Opposition Members went to Alberta, where they found that it worked. They were attracted by it, and now we are invited to look again at the North Sea in the light of the Alberta experience. What is more, the Select Committee said one or two things pointing in this direction, and this has been recommended to the House on that basis.

Governments do not normally refer to Select Committee findings until they have given an official response. But I can say this about the Select Committee. It suffered from the disadvantage, which no doubt it would recognise, of not having had the Government's proposals before it in full prior to completing its report. Therefore, it was a Committee which did valuable work but in ignorance of the development of Government policy.

Mr. Alexander Fletcher

And vice versa.

5.30 p.m.

Mr. Benn

And vice versa. That is manifestly correct. That is what I would call a "no gain, no loss" situation.

Three main provisions would relate to the United Kingdom Oil Conservation Authority. First, the Secretary of State would have to refer to it before reaching a decision. That would be a built-in delaying feature. Secondly, the authority would have to act under the Minister's orders. That would, to some extent, erode its own authority. Thirdly—and this is the most astonishing thing of all —having advised the Minister on licensing matters, it would have to perform an advisory function and an arbitration function. Theerfore, it would advise the Minister what to do and then arbitrate in any dispute between the Minister and the oil companies. I may have done the new clause an injustice, but it has that slight deficiency.

The argument for the UKOCA, put forward with great charm, as always, by the right hon. Member for Wanstead and Woodford, is that it would provide knowledge without expenditure. The right hon. Gentleman gave a very cheap figure for it. There would be licensing controls, but one would win back the confidence of the industry despite the fact that UKOCA would have teeth, although they would be cheaper teeth. [Interruption.] It would have teeth of a regulatory character. The right hon. Gentleman therefore asserts that the oil rigs would come cruising back again and our problems would be resolved.

I have not intentionally minimised the importance of the proposal, because the Alberta scheme and, no doubt, the Texas Railroad Commission are different ways of dealing with the matter, but if the Opposition's proposal is to be fully understood it must be seen as a regulatory proposal compared with our proposal, which was put in our manifesto—and I am in favour of people sticking to their manifestos. Our proposal was for deliberate participation. I invite the House to compare the two propositions.

My argument is that there is no substitute for participation in regulation. The Opposition, in putting forward their proposal, recognised that the UKOCA would be a spectator, though a critical spectator, of the oil business with certain regulatory powers. I shall return to the question whether one needs the UKOC'A to deal with the matter because the new clause was to some extent torpedoed by a former Parliamentary Secretary at the Department of Energy, the hon. Member for Honiton (Mr. Emery), who made some points which I shall embrace and adopt.

UKOCA would have no right to explore for oil. Therefore, it would have no expertise in exploration. It would have no control over oil or gas and it would not have the capacity to develop downstream or in other ways which the BNOC would have. Therefore, the House should appreciate, when voting, if it is to vote, on the new clause, that UKOCA would not be an alternative to BNOC. The Opposition's request to us, which they are entitled to make, is to drop the BNOC and hive off the Department of Energy and make that an agency—[HON. MEMBERS: "No."] Many of the functions of the Department of Energy would be hived off.

Let us consider the regulatory role. To what extent can the Government exempt themselves from matters as important as the regulation of the resources off our shores? The argument sounds attractive, and the hon. Member for Honiton was right in saying that the Opposition felt that they should have an agency, too; it must be cheaper and non-interventionist, but it must be an agency to compete with the Government's proposal. But the balance of payments implications, the question of revenue, international policies and the interests of the supplying industries are such that the Government must take a major part in those aspects of policy which it is suggested should be hived off.

Even with regard to what are called the small cases, I am advised—and I believe that the figures are right—that the Brent field alone has a potential of about £1 billion in balance of payments terms and £l½ million in supplying industry value terms. One cannot hive off decisions of that magnitude and be dependent on the advice of others, because the House of Commons will expect the Secretary of State of the time to defend his policy. I know that UKOCA would have to do what the Department of Energy said, but since it would have the right to have matters referred to it the House of Commons would find that its rôle had been eroded by UKOCA whereas in matters of concern to the nation we want the Minister to be accountable to Parliament for what has happened.

I therefore believe that UKOCA is a badly conceived proposal which is no substitute for the BNOC and would weaken parliamentary control, about which hon. Members opposite were concerned in Committee.

Mr. Skeet

The right hon. Gentleman, in developing his argument, has not dealt with the question of the independent Norwegian board. In Canada all the important matters, such as exploration and exploitation of oil, are dealt with at the centre by the National Eneregy Board. We are not suggesting that such matters should not be considered, but it is better to have an independent body rather than a Government Department to deal with them.

Mr. Benn

The argument about an independent body rather than the Government is confusing unless it is understood that the independent body must remain answerable to Parliament. The question of execution can be hived off in certain circumstances, but the House of Commons would expect the major decisions to be taken by Ministers who could be cross-examined in the House.

I did not hear the name of the Committee to which the right hon. Member for Wanstead and Woodford referred and about which he sought information. When I have read the Official Report, I shall reply to him.

The right hon. Gentleman asked about the question of pollution and the chain of command. Hon. Members who have dealt with this issue and similar issues over the years know that we cannot have a single chain of command for a major subject which impinges on every Department. It is not practicable. It is like asking who is in charge of science, because everybody has a scientific research interest, or who is in charge of space, because many departments use space— the military authorities for their purposes, and the Post Office for its purposes, for example. The Scottish Office, the Department of the Environment, the Department of Trade, with its marine responsibilities which cannot be removed from it on the basis that pollution must take precedence over its other responsibilities, and the Department of Energy have pollution responsibilities and responsibilities for enforcing environmental safety levels.

It is not therefore possible to put one aspect of a matter in a single Department without creating appalling dereliction of duty by other Departments.

Mr. Grimond

I apologise to the right hon. Gentleman if I did not make myself clear. I agree that there are two aspects of pollution. There is the general aspect, which I agree affects many departments, but there is the narrower aspect to which I referred. Let us suppose that there is a major accident in, say, Scapa Flow in my constituency. Who will be immediately responsible for mobilising all the Departments which no doubt will be con- cerned? If it is a fire, one does not telephone all the Ministries; the fire brigade deals with it. It is important that we should be clear about this matter. Who will be responsible within minutes for dealing with a situation of that sort?

Mr. Benn

The right hon. Gentleman has made a different but very important point; namely, when a incident occurs, to whom does one go to discover who should take charge of the matter? If there is any dubiety about it, I undertake to write to the right hon. Gentleman and put the letter in the Library so that there is no doubt about it. It depends whether there was a major leak in a tanker in the Thames or off our coast. Different authorities would be brought into play. The right hon. Gentleman is entitled to a clear answer to that question and I shall seek to give it to him.

Mr. Tam Dalyell (West Lothian)

Is the answer that the man who is still responsible for vast areas of the North Sea is that admirable fellow the Chief Constable of Aberdeen? This matter needs all my right hon. Friend's energy to sort out. Will he reflect that the whole of the anti-pollution strategy has been made to look silly in recent weeks by the proposed experiment with an oil slick in an area where a great number of birds take their young? Although this may not be the most momentous issue with which my right hon. Friend has to deal, the fact remains that the general arrangements for anti-pollution have been open to some ridicule. Ought he not to direct his energy to that subject?

Mr. Benn

I do not want to treat any intervention without due gravity in responding to it. My hon. Friend referred to the duties of the Chief Constable of Aberdeen. I think that it is the Grampian Region now which has these responsibilities. The Chief Constable deals not with pollution as such, but with enforcement of law and order on the oil rigs. I have had the opportunity of discussing this matter with the authorities up there. This is not primarily a pollution question.

Concerning the extent to which tests may affect bird life or other interests, this must be looked at seriously. However, it is not always possible to conduct tests without having some effect on the environment. The fact that oil is released into the sea to test means of clearing it up necessarily creates some pollution. It is like the vaccination principle. However, I take seriously what my hon. Friend said and will make inquiries.

One question asked by my hon. Friends the Members for Dudley, West (Dr. Phipps) and Aberdeen, North (Mr. Hughes) was whether it was true that we could not find staff for the BNOC. Everybody recognises that this is a big operation. The BNOC will have to develop over a period. However, I cannot accept that it will not be possible to recruit, train and develop people for the British National Oil Corporation. I have some sympathy with the point made by my hon. Friend the Member for Dudley. West, who referred to the National Hydrocarbons Corporation of 1968, I think, and listed the number of Ministers whom he was unable to persuade about the matter. Had we started at that time, I believe that we would have been much further advanced than we are now. I cannot accept the argument that suitable people cannot be found for this purpose.

Mr. Peter Viggers (Gosport)

Does the right hon. Gentleman accept, agree or confirm that several senior oil executives have refused the position of chairman of the BNOC because they do not believe that it is a proper, sensible and commercial operation?

Mr. Benn

The hon. Gentleman is now inviting a Minister to comment upon matters which are the subject of speculation in an attempt to draw out of him comments on approaches which may or may not have been made. In dealing with this matter we are defending a basic national interest.

I will give a single example which I quote from a newspaper. I do not know whether the account that I read is correct. Last week it was reported that a single oil company, which I will not name, had paid £20 million in a nine-year period in a country, which I will not name, in contributions to political parties. If anybody seriously believes that what the hon. Member for Honiton called the market place is the only factor which bears on oil politics, he is being naïve to an exceptional degree. The truth is that we must defend the national interest. That statement, which was widely reported, was an official statement.

I am pointing out to the Opposition that systematically throughout its deliberations the Select Committee in most cases espoused the interests of the industry and implied that the interests of the Government were not served by the establishment of a national oil capability. I am anxious—indeed, I believe that it will be possible—to develop the strong overlap of interest which exists between this country and the oil companies exploring in the North Sea. They have an interest in forwarding their investment. We have an interest in getting the oil. To say that there is a strong common interest on which we should build is not the same as saying that there is an automaticity of common interest between the oil companies and the United Kingdom.

Mr. Skeet rose

5.45 p.m.

Mr. Benn

The hon. Gentleman must allow me to finish. This argument ought to brought into the open. When the Conservative Government left office, they left this country without a petroleum revenue tax, with having granted 46-year licences with a requirement to drill for only six years, with no participation, with no provision for information, with no depletion control, with no control over flaring and with no control over the transfer of the ownership of licences which had been given. The previous Government, in their handling of operations in the North Sea, failed the nation. That is my argument. To come up now with a conservation agency—a new term for the functions of the Department of Energy—is no substitute for the development of a national capability. That is what is embodied in the Bill. The new clause—

Mr. Skeet rose

Mr. Benn

The hon. Gentleman must allow me to finish my sentence. The new clause is, therefore, not an alternative policy, but a cover for a lack of policy. I hope that the House will not give it a Second Reading.

Mr. Patrick Jenkin

This has been a valuable debate. I am grateful that the Secretary of State recognised the nature of the new clause. There are two kinds of new clause. There is the new clause which is put forward with the avowed intention of attempting to improve the Bill and the new clause which is put forward to air alternative policies to the proposals in the Bill. The right hon. Gentleman fairly recognised that this new clause fell squarely into the latter category.

To the right hon. Member for Orkney and Shetland (Mr. Grimond) and the hon. Member for Dundee, East (Mr. Wilson) I can categorically say that we envisage a properly constituted conservation authority—a regulatory body—as an alternative to the BNOC. We believe that it would be a much better and far cheaper way of attaining the legitimate objectives of the Government.

I should like to rebut utterly and completely the outrageous remarks made by the Secretary of State on that subject. In Committee, where he did not have the ear of the Press, he was more reasonable. When talking about depletion, he said that nobody knew—he did not know, we did not know, the Department did not know, and so on. I could quote the passage from the Committee if he wished me to do so. However, on the Floor of the House the right hon. Gentleman makes wild, extravagant claims with no substance at all.

I think that the House is anxious to reach a decision, so I will be brief. I suggest to the hon. Member for Dudley, West (Dr. Phipps) that we cannot build up the kind of staff which the BNOC needs within a year or two. I commend to him the words of Sir Eric Drake answering Question No. 531 before the Select Committee: You cannot just go out and recruit a man and other men and put them together and say, 'Now we have got a team.' It does not work. That is what we fear about the BNOC—it will not work.

My hon. Friend the Member for Honiton (Mr. Emery) was under a number of misunderstandings about the intention of the clause. Here perhaps I can take up a point made by the Secretary of State. It always seems to me that there is, particularly in this area involving inevitably fairly direct Government intervention, a clear distinction to be drawn between the formulation of policy, which is a matter for Ministers and on which they are answerable to the House, and the detailed implementation of that policy, particularly where that implementation can affect to a dramatic extent the rights and advantages enjoyed by private corporations in the market place.

Rather than continuing to describe, it is better to illustrate. Let me illustrate how I envisage our proposed conservation authority working in the realm of depletion control. I know that my hon. Friend has studied the new powers which the Government are taking in the model clauses set out in Schedules 2 and 3—powers over exploration, powers over development, and the ultimate depletion power—the power to pro-rate in model clause 16. It is for the Government to determine what the overall rate of production from the United Kingdom oil province should be—one would imagine on a five-year rolling programme; some indication to meet the balance of payments objectives and other objectives that the right hon. Gentleman set out. That is for Ministers and must remain with them.

When it comes to determining how, within this overall global production, production is to be authorised to this licensee or to that licensee, which fields are to be pro-rated—this field or that one —when one is dealing with an infinite variety of economic and geological circumstances, that is a matter for detailed and impartial administration by a highly expert body of administrators.

It may well be that my hon. Friend would be content, as he said in an earlier debate, to leave it to the Murrays and the Mongers of this world, but that is not what is wanted by the industry, not that the Ministry has anything but praise for the two individuals concerned. However, it is not, and cannot be, their job.

I have discussed this proposal with a great many companies in the industry —British, Canadian, American and others. They raised some of the doubts that my hon. Friend expressed, and some went even as far as to say that it should be left to the market. However, I made it clear that no British Government could accept this with an essential national resource of this sort and that administrative powers had to be taken to monitor and control the operations of the United Kingdom's oil province.

Given that, virtually without exception all the firms that I have consulted would far rather see the detailed implementation of these powers carried out by an impartial regulatory body of the sort described in the clause than they would see it left to the Department, which must inevitably be under the day-to-day political control of the Ministers who run it.

So I believe that on this point we have the support of the industry, given that any Government must exercise powers of some sort, particularly powers over depletion.

I come on now to answer my hon. Friend's other questions. First, the Minister would not have to make the detailed orders. We would envisage the regulatory body having an order-making power operating under the firm statutory control and under the broad directives of the Secretary of State. Secondly, certainly these functions would be transferred with the individuals concerned from the Department of Energy to the new authority. I hope that, with those assurances, my hon. Friend will feel able to support the proposal in the clause.

Finally, the right hon. Gentleman still persists in the delusion that the only way for a Government to exercise effective control over an industry such as the oil industry is that they should get their hands dirty in doing it themselves. That is simply not true. There are examples, mainly in the Western hemisphere, where Governments have exercised perfectly effective control through the kind of regulatory control we are proposing, and they have done it—this is the key point—without the investment of the thousands of millions of pounds of taxpayers' money which the Government are currently proposing to invest in the BNOC.

I believe that this proposal has a very great deal to commend it. I reject utterly the right hon. Gentleman's argument about the political contributions. Does he think that that kind of undesirable activity on the scale which he indicated is more likely to happen in a case where the decisions are taken by the political bosses than in a case where the decisions are to be taken by an impartial regulatory quasi-judicial authority? Does he not think that, in fact, contributions to a political party are more likely to happen—I do not say in this country, but in countries where decisions by Ministers on the detailed implementation of powers—

Mr. Skeet


Mr. Jenkin

My hon. Friend is right —in countries where there is an exceedingly powerful ENI-type organisation, than where these powers are exercised openly and impartially by a quasi-judicial regulatory authority?

Mr. Benn

The right hon. Gentleman has made a very significant statement in which he has recommended the House to consider that ministerial control is more subject to corruption in this country than would be an independent agency. Therefore, he is in a sense inviting the House to adopt his proposal, which is that we go for a conservation agency, on the ground that if the Government proposition for a British National Oil Corporation were to proceed it would be more likely to tempt to corrupt intervention by oil companies in the conduct of our affairs. On reflection, does the right hon. Gentleman wish to pursue that line of argument?

Mr. Jenkin

The right hon. Gentleman has made abundantly clear the unwisdom of his ever introducing that argument into this debate. It is, of course, totally irrelevant. It is a piece of damaging prejudice against the oil industry, and was intended to be so. I ask my hon. Friends to join me in voting for the clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 230, Noes 296.

[For Division List 305 see col. 1465.]

Question accordingly negatived.

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