HC Deb 24 May 1984 vol 60 cc1351-60

Motion made, and Question proposed, That this House do now adjourn—[Mr. Lang.]

10.29 pm
Mr. John Browne (Winchester)

I thank you, Mr. Speaker, for selecting my subject for debate this evening. I thank, too, my hon. Friend the Parliamentary Under-Secretary for attending the debate. I shall complete my speech as quickly as possible, to enable him to reply fully.

Despite the early wells that were drilled in Hampshire in the early 1930s, large-scale onshore, as opposed to offshore, exploitation of oil and gas reserves is a new phenomenon in Great Britain, with major implications.

I shall start by stating my position, because this is a complex argument. I am not against any of the oil companies. In fact, I have oil companies as clients of my own company. I am not intending to criticise in any way local government planners or local councillors in actions that have been taken or are taking today. Planning of offshore oil and gas exploitation is a complex business. It is a difficult challenge that they face.

I am entirely pro, not only exploration, but exploitation, but I want wells that end well. By that I mean exploitation that results in the maximum profit both to the company and to the Inland Revenue, with the minimum of environmental and psychological damage.

As I said, onshore oil and gas exploitation is a new phenomenon, but increasingly profitable. Let me point to just some examples of the profits and potential of this onshore exploitation.

The area known as the "Golden Belt", which is a Jurassic limestone rock line stretching from the English Channel through Dorset, Hampshire, Surrey, Sussex, into the Weald of Kent and up through Norfolk to the Wash, is probably one of the largest potential upstream developments in the world since the North sea. Like that of the North sea, the oil is of a high quality, but unlike North sea oil it is much cheaper to locate and easier to exploit.

Onshore exploration drills in the south east of England have had a striking rate of eight out of 10, whereas in the United States the average is a mere two out of 10. So it is a very attractive area. To drill one hole of about 5,000 ft costs approximately £500,000. In the North sea it would cost tens of millions of pounds to drill a similar hole.

To date, onshore oil flows do not suffer petroleum revenue tax. That is correct. The Government must encourage exploration, but it means that good profits can be made. Take, for example, Humbly Grove, which has an estimated full production of some 4,000 barrels a day at $20 a barrel at today's prices. Over 25 years the gross revenue for that well would be about $730 million—or about three quarters of a billion dollars—against costs of approximately $25 million spread over 25 years. Therefore, a share of the profits which rightly accrue to the companies which explore and exploit can and should be spent on enhanced environmental protection.

Onshore oil and gas is a great asset. It is more profitable than the North sea and it is much more secure, both against weather and potential aggressors, so we must exploit it. That implies planning permission and threats to our environment. Furthermore, exploitation and environmental protection imply a conflict between the Department of the Environment and the. Department of Energy. To date, the Government's view has been to leave planning to local decisions makers. That has some merit, but it also has important risks.

First, most oil companies are bigger and possess more land, through their leases, than most county councils. Is there not a need for a regional planning process rather than a county planning process? Secondly, the oil business is extremely complex and my experience as a banker, both in New York and in London, has taught me how easy it is for an oil company to massage figures and, if it wished, to pull the wool over the eyes of people without expertise in the business. They are faced with a mass of detail and no ability or training to verify the oil companies' figures. Such training and expertise are not in the normal line of training and expertise of even the best of county planners such as we have in Hampshire. So there is an inherent need for county planners to buy in outside expert advice, and in that the Government have a duty not to desipate but to help and advise in suggesting suitable consultants. As local authority planners work on the oil applications they will gain valuable experience.

In Hampshire, as I said, the first well was drilled in 1930. Again, the Government have an obligation to start to encourage local planners to pool the experience as it is gained. What happened in Hampshire yesterday is happening in Surrey today and may happen in Norfolk tomorrow. To date, I know of no effective mechanism for pooling this experience on a regional basis.

In the United Kingdom, the basic planning process is by nature gradualist. I believe that this is correct when related to our inner cities and other conventional planning matters. However, in the oil business, development is vast and largely unseen. The wells are often one mile underground. Unlike a gravel pit, a well is not easily seen, and not easily quantifiable.

Once oil is struck, exploitation is rapid. It is very difficult for a local authority to stand in the way of exploitation once it is faced with a successful well. I know of no example of a county council refusing an application to exploit proven reserves of oil and gas.

It is interesting to note that in Kingston on 16 May this year the elected county councillors of Surrey county council turned down, by a majority of 20 to two, an application by Conoco for an exploratory well—not an exploitation well, an exploratory well—and this despite the recommendation of its own planning officers, who recommended that the council approve it. These elected councillors genuinely felt unable to judge the importance of the well within national terms, or the long-term implications, for Surrey, of any exploitation that would follow a successful test drill. They lacked confidence in the information before them and the informed knowledge to make that judgment. There are similar problems in Benenden in Kent. There is a great need for a Government initiative to pool knowledge that has been accrued by county councils, especially those which have benefited from expert advice.

Not only is oil exploitation largely unseen, by its very nature, but the most important planning procedures and activities of our planners—the negotiations before the proposals are put to the open forum of elected councillors—are usually carried on behind closed doors. This often creates great suspicions and fear. I do not believe that the oil companies like it. Inevitably, they become the public whipping boys for the Government. These fears and suspicions are increased by private negotiations.

I therefore believe that it is vital that the Government think carefully about how they can increase public access to and consultation on the planning process. So far I see virtually none, despite the clear statement in the Stevens report of 1974. In chapter 19, "Summary of Recommendations", it said: Applications for planning permissions for mineral working by county planning authorities should be notified to the Secretary of State; any such application relating to a working of significant size, or situated in an environmentally sensitive area, or liable to affect ancient monuments etc. should automatically be called in for determination by the Secretary of State. Furthermore, in chapter II 4.6, the report said: One of the things we found most striking during the course of our inquiry was the extent to which the necessary skills at present are completely lacking. These feelings of fear and suspicion are fanned into frustration by a lack, sometimes apparently high-handed, of consultation in the planning process. It is a frustration at grassroots level, which is spreading across large sections of the south-east of England. I come from Winchester, and I do not have to remind you, Mr. Speaker, or my hon. Friend, of the name of Mr. John Tyme, who, out of a genuine conviction, got in the way and turned the planning process of the M3 into a farce. Today the hole in the M3 is exactly the width of my constituency.

I think that my hon. Friend would be well advised to take note of this intense feeling, which is growing among people who would otherwise be his strongest supporters. At present it is quiet, but it is simmering.

May I now humbly suggest some brief points for my hon. Friend's consideration. First, the Government must iron out publicly their own apparent conflict involving the Departments of the Environment and of Energy and make one Department responsible.

Secondly, the Government should issue a clear statement on national onshore oil policy to include guidelines on regional pooling of planning knowledge and of oil finds, so that all the information is available regionally.

Thirdly, there should be guidelines on genuine public access and consultation in the planning process, balancing needless delays against allaying fears.

Fourthly, there should be ideas set out for schemes such as performance bonds—they could be called nuisance bonds — which are entered into in the construction business.

Fifthly, there should be guidelines for contra-deals, which set out how local authorities can give some of the "action" to the local community from the large profits that can be available from onshore exploitation, in return for any damage that is done to the environment; in short, of amenities for the general good.

Finally, there should be guidelines on environmental protection itself. For example, an application was submitted recently by an American oil company to drill an oil well in the middle of Las Vegas. It was granted because the company agreed to build a house around the drill and to have it fully noise insulated.

Time is short, so, in summary, may I say that we need a clear Government statement on national policy to ensure that the public feel that they are genuinely consulted and have access to the figures and the planning decisions that are made.

As I have said, we want oil wells that end well.

10.41 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Neil Macfarlane)

There will be many who will be grateful to my hon. Friend the Member for Winchester (Mr. Browne) for raising this most important and topical subject. It has aroused the concern of a number of other hon. Members in recent months, as I am only too well aware from the volume of correspondence that I now receive on onshore oil and gas development.

This concern has coincided with a renewed interest on the part of the industry in the prospects for oil development in some of the most attractive areas of countryside south of the Thames. I shall not take up my hon. Friend's description of how he sees the possible effect of this development throughout the rest of the United Kingdom. The concentration of this activity is presently very much based on the southern shores of England, but it is only right that it should be considered carefully, and I welcome the vigilance with which my hon. Friends are studying development proposals.

Much of the concern arises from uncertainty about what is involved in oil and gas development onshore. My hon. Friend has touched upon that and has echoed some of the concerns of his constituents. There is also concern among the constituents of my hon. Friend the Member for Woking (Mr. Onslow), who is in his place and who has approached me on this issue previously. There is uncertainty about what is involved in oil and gas development onshore and about the safeguards that are available to ensure that any such development is compatible with the protection of the environment. I understand that, and I sympathise with it. I recognise that my Department has an important role in helping to dispel such uncertainty and in assisting local planning authorities to strike the right balance between satisfying the country's energy needs and safeguarding the environment.

Although my hon. Friend the Member for Winchester suggests that there is a conflict between the Departments of Energy and the Environment, I can assure him that there is not. Both Departments have major roles to play. That is why I have announced that guidance will be issued to local authorities by the end of the year. It will seek to explain the sort of activities involved in the exploration and the development of oil and gas resources, the factors that should be considered at each stage, and where to turn for specialist advice if this is needed. That is something to which my hon. Friend attaches great importance. We shall be consulting local authorities and the industry shortly on the framing of these guidelines and I expect this to provide an opportunity for all sides to air their views.

My Department's guidance will be preceded by important changes to the licensing system for onshore oil and gas development, changes which I believe will help to clarify the respective roles of licensing and planning control. Under the existing procedures, applicants may apply at any time for an unlicensed area, subject to a maximum size of 500 sq km for an exploration licence and 250 sq km for a production licence.

My right hon. Friend the Secretary of State for Energy publishes the criteria against which he assesses applications. He considers the applicant's technical and financial capability and previous licence performance, with particular reference to the applicant's approach to environmental and amenity issues. Licences now cover extensive areas of the north-west, east midlands and Yorkshire, as well as southern England. I recognise, however, the particular concerns raised by the upsurge of interest in this latter area, particularly given the positive nature of some of the early finds. I hope to say something about these proposals in a moment.

However, I cannot emphasise too strongly that the grant of a licence by my right hon. Friend does not confer any planning or access rights. That must be made perfectly clear to my hon. Friend the Member for Winchester, and to my other hon. Friends and their constituents. A licensee, like any other potential developer, needs to obtain all permissions — planning or otherwise — to conduct his operations. The Government believe that the planning control procedures are the right way to handle evironmental and amenity issues.

These issues are best considered at first hand by mineral planning authorities rather than by central Government, except in the most exceptional of cases. Planning permission for drilling in a particular area in which hydrocarbons might be present could be refused for environmental or other reasons. It might, nevertheless, be possible, say by deviated drilling, to extract the hydrocarbons from a site acceptable to the planning authorities.

For this reason, there is a general presumption in favour of awarding exploration licences for all those areas in which oil or gas companies are interested, and similarly, where the companies find the results of seismic exploration sufficiently encouraging, in favour of awarding production licences for those areas.

A review of on-shore licensing terms and conditions has recently been completed. My right hon. Friend the Minister of State for Energy announced on 4 April the outcome of this review—and I commend that reading to my hon. Friend — and the introduction of a new licensing regime for on-shore oil and gas. It was a most important announcement.

The essence of the new system is that the present exploration and production licences should be replaced by three new licences, for exploration, appraisal and development. A development licence will not be awarded until planning permission has been obtained—this is not the case with the current production licence. New regulations are expected to be placed before the House in early July, and to come into effect in the autumn.

My right hon. Friend emphasised that planning safeguards will be maintained under the new regime. In addition to the major change to which I have just referred, he will continue to require evidence that the planning authority has been consulted about any proposed seismic survey and that planning approval has been given before he gives his consent to any appraisal well being drilled.

Our new circular will explain these changes to the licensing system more fully, and indicate how the safeguards built into both systems are designed to ensure that the right balance is struck between short-term economic gains and the longer term implications for the countryside and for nature conservation.

Mr. John Browne

Will those proposals drive towards allowing public access and consultation in that planning process?

Mr. Macfarlane

That is inherent in the entire planning system in this country.

I turn to the proposed development at Humbly Grove in Hampshire, as my hon. Friend touched on that briefly. He will understand that I am unable to comment on the merits of the policies and particular planning applications at Humbly Grove so long as there is a possibility that the case will come before my right hon. Friend for decision at some stage.

But my officials and I are familiar with the proposed development, and I can assure him that I am monitoring what is happening there very closely indeed. It may be helpful if I describe briefly what is proposed and the latest position as I understand it.

As a result of seismic surveys in this area of Hampshire, south east of Basingstoke, promising geological structures at Humbly Grove were drilled in 1980 and hydrocarbons were found in middle Jurassic limestones. A production test gave a stabilised production of about 100 barrels a day. The commercial viability of the structures was confirmed in 1983.

Carless's proposals are for facilities which could handle up to 4,000 barrels a day. Planning applications were submitted to Hart, Basingstoke and Deane, and east Hampshire district councils, and then forwarded to Hampshire county council for decision as the minerals planning authority. These proposals are important and include eight well sites, five of which already exist; a gathering and production station at Weston Common; an export terminal at Holybourne, which I understand is in my hon. Friend's constituency; and pipelines from the wells to the gathering and production station and to the export terminal. The number of wellheads has been kept down by using deviation drilling. Up to 12 boreholes would be at each well site—with a maximum of 65 for the entire development—with equipment small enough to give a low visual impact.

The station at Weston Common would be on a site of approximately 1.7 hectares surrounded by coniferous woodland and requiring a firebreak. The terminal at Holybourne would be situated between the railway line to Alton and the A31.

Hampshire county council has publicised Carless's application widely and allowed two months for representations instead of the usual 21 days. Carless has held a number of public meetings. Although not in an area of outstanding natural beauty or an area with any other kind of designated sensitivity, the local inhabitants regard it very highly and there is considerable opposition to the proposals. A number of representations have already been received by the Department.

I understand that the application is regarded by county council officers as being in accordance with Hampshire's structure plan and its oil and gas policies. In order to make sure that the council understood the technical aspects properly, it engaged independent consultants to assess the proposals.

My hon. Friend touched upon that in his speech. He talked about the deployment of these experts and the way in which they are appointed by the authority. I think that it is important for the local authority, which is the planning authority, to do the appointing rather than central Government. The authorities must have that impartiality and appoint their own consultants.

The consultant's report had no adverse comments from the point of view of oilfield engineering. The noise aspects were subcontracted to the Wolfson unit of the Institute for Noise and Vibration, at Southampton university, which has made certain recommendations about the noise standards to be adopted if planning permission is given. I emphasise the phrase "if planning permission is given."

The county council is still conducting extensive inquiries with Carless Exploration on the details of the application. A major package of revisions was delivered by Carless to be read in conjunction with the original application.

I understand that the council's planning and transportation committee is soon to spend two days studying the sites in question. A decision is not expected before July. I hope that my hon. Friend will agree that the way in which the county council has considered this application is a model of care and sensitivity.

My hon. Friend requested that the planning application be called in for determination by my right hon. Friend the Secretary of State after a public inquiry. I have to say that on the evidence so far before me I do not think this is necessary, but I will of course continue to monitor the situation and consider all the representations made.

I now go wider. It may be helpful if I were to explain more fully the basic premises on which Government policy in respect of on-shore oil and gas currently rests—which I would expect to be expanded in my Department's advice later this year. It is an important aspect. It is clear that the Government have a prime responsibility to encourage the exploration and proving of the nation's indigenous energy resources. I was grateful for my hon. Friend's comments on that.

As the exploitation of our off-shore reserves increases, attention naturally turns to what is available on-shore. I recognise that, in common with other mineral resources, oil and gas are frequently likely to be found in areas of attractive countryside, and that a conflict of interests can often arise.

But we should not assume too readily that the terms of this conflict are self-evident. I am most anxious that we should establish for example the extent and precise location of our on-shore oil reserves so that the best environmental option might be considered at the outset should those reserves prove commercially viable.

Secondly, it must be right that decisions on whether particular proposals are environmentally acceptable should be taken wherever possible by those elected to represent the people who stand to be most affected by them. This is fundamental to our planning system, and I have no reason to believe that it will be unequal to the task presented by on-shore oil and gas developments.

I am greatly encouraged by the efforts of many local planning authorities — following much debate and discussion — to draw up sensible and constructive policies which clearly carry a wide measure of public support. There are at present 10 on-shore oilfields producing around 0.3 million tonnes of oil a year which are as a result operating perfectly satisfactorily and, in some cases — as at Wytch Farm in Dorset — also collecting well-deserved design awards in the process. Any advice that my Department gives later this year must therefore complement and support such efforts rather than encourage blind adherence to a single "national" approach.

My hon. Friend mentioned that there is some concern about the lack of expertise available in local authorities when faced with oil and gas proposals. I understand that this can be a problem at the beginning, but it is open to an authority to employ consultants to assist in their analysis of the information provided on certain aspects of the proposed development. As I have already described, Hampshire county council has done just this in appointing consultants at Humbly Grove to advise on the proposed distribution of wellhead sites, and on acceptable noise levels. It must be done at local level and not by my Department.

I understand that in Dorset the county council likewise retains a consultant on the pollution aspects. Planning authorities can also of course require additional information from applicants to help them reach an informed decision, and I know that most oil companies are only too ready to do so. This is a practical and flexible way forward when faced with new developments of this sort.

Finally, I should like to refer briefly to some other oil and gas developments in southern England. With a Hampshire constituency, my hon. Friend is probably aware of the proposal that was made by Shell UK to drill an oil exploration well in the very sensitive area of the New Forest, and the public inquiry that was held into the submitted planning application.

In the event, it transpired that, because the affected site was Crown land, in which there was no other interest, my right hon. Friend had no jurisdiction to decide that application, but the inspector's report was published and is a useful exposition of some of the environmental problems associated with on-shore oil development.

Another recent controversial proposal has been the application by Carless Exploration to drill a well on the South Downs between Ditchling Beacon and Brighton. Indeed, it was that proposal that prompted a debate in the other place on the issue of oil exploration in areas of outstanding natural beauty some six months ago, and was referred to again in another more recent debate there on development generally in such areas. The proposal attracted considerable local opposition, but in the event East Sussex granted planning permission given the careful choice of site to minimise visual intrusion.

I am aware, too, not least because of the representations made by my hon. Friends the Members for Woking and for Wealden (Sir G. Johnson Smith), of the great interest in certain applications for oil and gas developments in parts of Surrey and Sussex. But it is still possible that those may come before my right hon. Friend for decision at some stage, and therefore I fear that I must resist the temptation to say anything further on those applications tonight.

In conclusion, I recognise that oil and gas development is a relatively new activity in southern England. I have indicated clearly that we are keeping a very close watch on what is happening, and have further measures in hand to ensure that we achieve the right balance between development necessary for our economic well-being and the protection of our environment. I shall consider most carefully the points made by my hon. Friend tonight, and I am most grateful to him for the way in which he has introduced this debate.

Question put and agreed to.

Adjourned accordingly at three minutes to Eleven o' clock.