§ Order for Second Reading read.3.43 pm
§ The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith)
I beg to move, That the Bill be now read a Second Time.
We debate this Bill against a background of low oil prices and at a time when the industry is going through one of its most difficult periods since we were first fortunate enough to discover oil and gas off our coast. To that extent, many of us in the House—particularly those who, like myself, represent constitituencies in the areas where the activities are based—are very sensitive about the particular problems that the industry faces.
We have particular sympathy and understanding for those individuals who face difficulties, many of whom, because of the downturn in the price of oil, have lost their jobs. Nevertheless, despite these difficulties, it is important that we should not become too obsessed with the immediate problems, important though they are, but that we should look ahead to the future of this industry and to the other challenges and problems that it will have to face in the years ahead.
Despite the immediate difficulties that are faced by the industry, it is still very much in business. Production continues and there have been new developments, especially those relating to gas. I have considerable confidence in the continuing activity of this industry for many years to come.
Against that background, it is important to plan at this stage not only for the continuing development activities of the industry but also for the other challenges that the industry will have to face. When no more oil or gas is economically recoverable from a field and the life of that field comes to an end, one of the challenges will be that the structure and other installations that have been used to recover the oil and gas will still be in situ. Therefore, we have to provide for what happens to those structures and installations when the life of a field comes to an end. That is the main matter that the Bill tackles. As I said earlier, it is a challenge for the future; it is not of immediate importance to the industry. None the less, I am glad that the Bill is being introduced at this stage, because it will provide us with a better opportunity to plan and to prepare for this challenge.
The Government have taken the opportunity to deal with a number of other important issues in the Bill. They are less striking than the abandonment of installations and structures, but they will also have to be dealt with.
The abandonment of structures and installations is not, as I have already emphasised, an immediate problem for the industry. The first fields are not expected to come to the end of their lives before the early 1990s, when steps will have to be taken to remove the installations and structures associated with them. There are now 150 oil and gas installations on the United Kingdom continental shelf. As the industry will continue to develop for many decades to come, the number of installations is expected to increase in the coming years, which will pose a substantial challenge.
28 Furthermore, the wide variety of gas and oil fields and the different types of structures and methods used to extract the oil and gas means that their abandonment will pose a variety of problems. There are a number of fairly small, lighweight installations in a number of fields. There are also a number of giant installations. I am thinking in particular of the huge concrete and steel jackets that are placed in water depths of up to 185 m. These very heavy structures are found mainly in the northern part of the North sea. By contrast, in the southern basin there are smaller structures that weigh as little as 300 tonnes. In the deeper waters the steel structures can weigh up to 58,000 tonnes each, creating a considerable physical problem, and concrete structures, of which we have about ten in the North sea, can weigh up to 650,000 tonnes. This illustrates the scale of the problem and the challenge which the industry and the Government have to face, and which the Bill seeks to address.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
Has any research been conducted into the possible utilisation of the lighter structures, based as some of them are in shallow water, for artificial reefs?
§ Mr. Buchanan-Smith
Yes, some research is under way on such structures and attention has been given to artificial reefs in the press and on radio and television. I believe that some oil companies may be inviting the fishing industry to consider the matter, but perhaps we may deal with that point later.
To remove structures of the size and scale that I have described would involve huge sums of money. With the co-operation of the oil industry in 1984, it was estimated that, at 1984 prices, to require the complete removal of the structures in place at the moment—not future developments—could cost about £6 billion. That is a very large sum of money indeed.
I emphasise that that figure is surrounded by considerable uncertainties. For example, as the hon. Gentleman has just said, there are many different structures in different areas—small structures in the southern basin and larger structures elsewhere. However, the real challenge lies in the deep waters which, although they contain only about one third of the total number of structures, might, it is estimated, involve more than three quarters of the total cost. It is that kind of uncertainty, given the scale of the problem, that makes it difficult to be specific about costs.
Existing legislation requires the removal of such structures, but in general terms to the satisfaction of the Secretary of State. Under present legislation, we lack any detailed framework to deal with the abandonment of platforms and other installations. We do not have the provisions to set the kind of standards that might be required to do that or deal with the submission and approval of removal plans and with important matters such as preventing default from any removal obligations. The Bill seeks to enable action in all those general areas.
A large number of interests are involved. On the one hand, there are the interests of the oil companies which installed the structures and platforms and other installations and which are now operating them and will be doing so for the rest of their productive life. On the other hand, in contrast, there are the interests of the taxpayer. At the end of the day, in the same way as development costs were allowable against tax, it has 29 always been understood that abandonment costs would equally he allowable against tax. Therefore, another major interest in any legislation must be that of the taxpayer and the country generally.
There are other interests which use the sea—for example, the shipping industry, navigators and, most important, fishermen who have traditionally used the sea and the waters around our coasts for longer than the oil industry. Because of that, for longer than a year, consultations have been undertaken, some of which I have conducted. We have consulted the National Federation of Fishermen's Organisations from south of the border, a number of organisations representing the Scottish fishing industry, and the Sea Fish Industry Authority. On the industry side, we have consulted the Oil Industry International Exploration and Production Forum, the United Kingdom Offshore Operators Association and Brindex, the organisation that represents the small British independent exploration companies.
§ Mr. Albert McQuarrie (Banff and Buchan)
I do not wish to delay my right hon. Friend and I am aware of the consultations that he is having with the various fishing organisations, but can he assure me that, before or during Committee stage, he will have further negotiations with the fishing industry, especially the Scottish Fishermen's Federation, which has expressed serious reservations about clause 2(11)?
§ Mr. Peter Hardy (Wentworth)
May I follow the intervention of the hon. Member for Banff and Buchan (Mr. McQuarrie) and ask, while I have no objection to consultations with fishermen—they seem to be a good idea—whether the Minister recognises that, in a letter from the United Kingdom Offshore Operators' Association, we are told that it is disturbed by some proposals in the Bill and is at present discussing those concerns with the Department of Energy in the hope that they can be resolved by appropriate amendments to the Bill? Would it not have been better to have delayed the Bill a little longer so that consultations could have been carried out? Can we take it that the Minister will have consultations, even at the cost of delaying the Committee stage by a day or two?
§ Mr. Buchanan-Smith
I had hoped to get on with some of the detailed provisions, but I am happy to deal with these points, as they are about consultations. Consultations have been taking place now for nearly a year and in some cases for more than a year. All parties to the consultations have been aware of the problems under discussion. We have made clear what we believe needs to be done and the issues that need to be covered. If some matters are not dealt with to the satisfaction of those concerned, we shall consider them during the later stages of the Bill. Some consultations will certainly continue.
I do not agree with the hon. Member for Wentworth (Mr. Hardy) about delaying the Bill. What he says would be a great reason for delaying all legislation. We have laid down provisions for some important issues. There may be better ways, but I shall approach the Committee stage in my usual constructive manner; I am sure that the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), with whom I have worked in Committee, will do the same. If there are further representations and 30 suggestions, I shall be happy to consider them during the later stages of the Bill. I am sure that we shall have a great deal of opportunity for debate during those stages.
Following those consultations, we have sought in the Bill properly to strike a balance between the different interests. There is a conflict of interest, as there is in any legislation. That is why the Government must reach a decision and make their proposals. We have sought, for example, both to ensure that we minimise the costs of abandonment which ultimately fall on taxpayers, thereby ensuring their interests, and at the same time to balance the interests of those who use and who will be using the sea in different ways for many generations to come. There is another important balance to strike, for we must ensure that the provisions that we introduce are consistent with our obligations under international law. That must have a bearing on what is ultimately decided.
That is the background to what we are seeking to do by means of the Bill.
§ Mr. Edward Rowlands (Merthyr Tydfil and Rhymney)
Am I to understand that that is all that the Minister intends to say about international obligations?
§ Mr. Buchanan-Smith
I should be happy to say a great deal more on that score, but, if I do so, I shall not be able to make progress with my speech, in what is a relatively short debate. I have been interrupted constantly so far.
I have mentioned in passing our international obligations; as the hon. Gentleman is aware, there are certain obligations under the Geneva convention of 1958, which were laid down at a time when the North sea had not been developed in the way that it is now and when international law was directed to smaller and lighter structures. The very large structures which now exist were not anticipated then.
As the hon. Member for Merthyr Tydfil and Rhymney knows, with his experience of dealing with international matters, international law evolves constantly, and the Geneva convention has been very much overtaken by the law of the sea conference of 1982. The hon. Gentleman may know that, following that conference, the International Maritime Organisation, which is one of the arms of the international organisation that deals with this matter, will be convening meetings that will start early next year to deal with these precise issues. International law will evolve as the Bill is considered, and will evolve even further after it is enacted. We have chosen a relatively flexible framework for the Bill, as that will enable us to respond to whatever may be decided internationally. In introducing the Bill and in planning for the 1990s, we are way ahead of any other country that faces these challenges. In introducing the Bill now, I hope that we are focussing the debate on the United Kingdom and more widely.
§ Mr. Rowlands
I am grateful for that elaboration. These are important matters and they will be of importance in the Committee. May I take it that the Government intend to submit proposals to the IMO at its meeting in January in giving a lead of the sort that the Minister has suggested?
§ Mr. Buchanan-Smith
Discussions are taking place on the precise form of the IMO meetings and they are still at an early stage. No decision has been taken on the exact case that we shall present. We want to know slightly more about the agenda that is to be discussed. The international debate through the international organisations will be a 31 reflection of what we are discussing domestically. I wish to emphasise that domestically we are ahead of what is taking place internationally.
The provisions of the Bill are addressed to providing a framework that will control the safe and orderly abandonment of installations. The Bill will not set standards in the abandonment provisions. It will enable the Secretary of State to set standards covering such important matters as safety of operation and the other important matters to which my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie) referred, such as the extent of removal. My hon. Friend is probably aware that fishermen believe that international law requires complete removal, but that is not the Government's view. We believe that partial removal is possible under international law. We understand, however, the fisherman's reservations. I had discussions with fishermen's organisations as recently as the middle of last week, and we shall continue to discuss with them what we are doing.
§ Mr. Buchanan-Smith
I think that I have given way enough already. I shall be replying on behalf of the Government and I shall answer all detailed questions at that stage. I am aware that many other right hon. and hon. Members want to contribute to the debate.
I was saying that the Bill does not set standards or norms for abandonment. These will follow in the regulations that the Bill, when enacted, will enable the Government to put before the House. The die is not being cast irrevocably or rigidly. We do not believe that that would be sensible. By asking the House to allow this proposed legislation to take its place on the statute book, we are enabling the oil companies especially to make sensible financial provision and clarifying what is likely to be expected of them.
By introducing regulations at a later stage rather than setting them out in primary legislation, we are making it much easier to vary what may be required in the light of experience and in response to changes in international law. That is the reason for our approach. The Bill makes it clear that ultimately responsibility will rest with the owners of installations for their final removal. Responsibility will rest with them whether removal is partial or complete.
The early clauses deal wholly with abandonment. Under clause 1, the Secretary of State will be able to require those responsible to draw up programmes for the removal of installations and to set out details of their programme. The Secretary of State is given power to draw up his own programme where the owner is unable or unwilling to frame his own, and will be able to recover the costs that he may incur in so doing. I hope that we shall not be required to use that power, but it is important that we have it in the event of default. The power is set out in clause 5.
Under clause 8, strict responsibilities and duties are laid on those responsible for submitting a programme. They will have a duty to ensure that the programme is carried out properly. In the last resort, the Secretary of State will be able to arrange for the abandonment and to recover the cost of so doing. Again, that is something that I hope will not arise in practice. Clause 12 makes it a criminal offence to fail to comply with any of the requirements set out in this part of the Bill.
§ Mr. Andrew Rowe (Mid-Kent)
Am I right in my understanding that the Bill widens considerably the numbers and types of people who can be served with a notice by the Secretary of State, taking them well beyond those that come within the normal limited liability regulations? Is there anything in the record of the companies which have operating in the North sea which would justify such a widening?
§ Mr. Buchanan-Smith
My hon. Friend anticipates precisely that to which I was about to turn. The House will realise from what I have said already that the financial costs of abandonment are extremely high. The commitments of the oil companies will vary greatly given the partnership arrangements, for example. Under clause 2—this is probably causing my hon. Friend concern—the Secretary of State may require companies to satisfy him that they can fulfil their obligations. That is why the liability under the clause has been spread widely. If a company failed to fulfil its obligations, the cost of so doing, which could be very large, would fall on the taxpayer. Therefore, the Secretary of State and the Government have an important responsibility to ensure that the interests of the taxpayer and the country are protected.
Under legislation in other areas, provisions have been made for spreading the liability widely. I would be happy to return to those provisions later and I am sure that they will be returned to later during discussion on the Bill. I am aware, as interventions from other hon. Members have shown, that some oil companies consider that their liabilities under the clause are too severe. Given the risks that exist—I mentioned that the Secretary of State may be required to carry out certain things in the event of a company not fulfilling its obligations—there is a responsibility to ensure that companies live up to their obligations and can fulfil them. We are not asking for anything unreasonable and we would be failing in our duties if we did not make that provision. Equally, if the oil companies believe that there are better ways of achieving the same objective of protecting the taxpayer and the public interest, we would consider them.
During consultations over the past year, several suggestions have been made to the oil companies which they have not taken up or proceeded with. In the absence of any other counter-proposal from the oil companies and their organisations that can meet practically and sensibly the fair obligation which the Government believe should be imposed upon them, we have drafted the Bill as it stands. I assure the House that we shall closely consider fishing interests when deciding on the degree to which abandonment shall take place. We shall also consult the oil companies on whether there is a better way to achieve that objective. I emphasise to the House that the objective is fair. The Government are committed to it and, in principle, I do not believe that the oil companies regard it as unreasonable. However, if there is a better way to achieve the objective, I would be happy to consider it.
§ Sir Trevor Skeet (Bedfordshire, North)
Is not the Minister faced with the problem that the initial stage, when the revenue is tumbling in, is not the time for decommissioning? At the end of the fields' useful lives, when the revenue is falling off, companies may not be in a state to give an assurance that they will make provision 33 for their liabilities out of future earnings which do not yet exist? Should not the Minister require the establishment of a fund?
§ Mr. Buchanan-Smith
That idea has been put around and discussed from time to time. There may be a solution down that road, but it is one to which the oil companies would have to make a major contribution and in which they would have to play a major part. We have been discussing this matter for a year and no specific proposals have been made. Therefore, the Government have rightly made their proposals. If suggestions are made for another route, I would consider them.
As the House will realise from my remarks, we have endeavoured in the Bill to adopt a flexible approach which seeks to balance different interests, including costs, and which uses regulations, to establish standards of what may be expected in the case of abandonment. An advantage of that approach is that the huge variety of different structures and installations can be approached case by case. That is the only sensible way to achieve some of the objectives.
I hope that the Bill makes clear the Government's determination to ensure that the industry discharges its obligations. It also meets the point raised by my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), that now is the time to plan, rather than leaving it until the last minute when companies may not be clear about their obligations and may therefore be less able to provide for them. The fact that the Bill is being introduced now rather than leaving it too late in the day will ensure that proper provision is made to cover extreme eventualities.
The abandonment provisions of the Bill have another advantage. By endeavouring to widen the debate and set out the framework under which abandonment will be approached, an opportunity will also be provided for what I would loosely and inaccurately describe as the supply industry offshore. The term "supply industry" is used for those industries that work in support of the oil industry in supplying all the goods and services. Abandonment will also require a supply industry and the development of new technology. Research is already taking place.
This weekend an article in a Sunday paper mentioned a company in Aberdeen which was already actively pursuing and trying to evaluate the opportunities for getting involved in that area. At present, the industry is rightly concerned with development rather than abandonment. None the less, given that the United Kingdom is in the lead in terms of legislation on this matter, British industry has the scope in terms of technology and of capacity to move ahead of industries in other parts of the world by getting involved in activity, first, on our continental shelf and, I hope, on the continental shelves of other countries as opportunities occur.
Finally, I shall mention briefly the later parts of the Bill. Part II, which deals with royalties, updates the royalty regime by rationalising procedures for royalty accounting and for arbitration. It also provides the enabling power, related to part I of the Bill, to allow the repayment of royalty to make allowance for abandonment costs. I apologise to the House unreservedly for the complicated nature of the schedules which refer to the clauses relating to royalties. I tried to do that more simply, but we are dealing with amendments to seven different sets of model 34 clauses. The approach that we adopted in the drafting of the Bill was the same as in previous Bills where amendments had to be made.
I promise the House that, in Committee, I will provide full explanatory notes on that part of the Bill. Hon. Members may be even more confused when they see the length and complication of the notes, but I shall endeavour to provide them. I shall also endeavour in Committee to rewrite the schedules, although not in the sense of rewriting them as part of the Bill. I shall try to submit to the Committee draft model clauses which incorporate the amendments in the schedules. Precisely how those schedules are applied will perhaps be made clearer. I hope that that will be helpful to the Committee, as the procedure appears to be enormously complicated for what, in other respects, are not enormously dramatic changes and tidying-up measures.
On part III, I wish to pick out two important items. Around rigs, platforms and other installations there will be automatic rig safety zones of 500 m. At present, each safety zone must be submitted in an order to the House by statutory instrument. Where a safety zone is revoked, an order must again be submitted to the House. The provisions on safety zones represent a direct response to representations from the Joint Committee on Statutory Instruments, which asked that the Government should consider this approach. I am happy that we have been able to respond. It will certainly save me placing a lot of orders before the House.
It is worth reflecting that only about 30 orders in 1981 involved establishing or revoking safety zones, whereas up until the end of October this year about 159 orders have had to be submitted to the Joint Committee on Statutory Instruments. The provisions represent a sensible tidying up. The Committee has been very patient, as it has been pressing us for some time. This is our first legislative opportunity to oblige, and I am happy to do so.
In recent years, those involved in the industry have expressed worries about pipelines. This Bill represents our first legislative opportunity for action. It enables the Secretary of State to prohibit the use or testing of any pipelines until specified steps have been taken by their owners to ensure that funds are available to discharge any liability for loss or damage, and so on. One or two recent public inquiries on pipelines have raised this question. It has been examined carefully and fully, and I am happy that we can now respond to those who have raised the issue. They had a legitimate point, and subject to the agreement of the House, it will be incorporated in the Bill.
The Bill is important. I make no apology for having dwelt at length on abandonment. I hope that I have anticipated some detailed questions and answered some of the interventions made. The issue is complicated, and is surrounded by many doubts and uncertainties as to the best way to proceed. As yet, for example, we do not have the technical knowledge as to how best to deal with some of the structures. I ask the House to put this legislation on the statute book, because I believe that it will give us the necessary legislative framework, and will help to concentrate the minds of those in charge of oil companies and supply industries, as well at the minds of those in other international forums on the problems. A flexible approach means that we should be able to react to changes in policies and decisions, particularly at an international level, as the moment of first abandonment comes closer.
I commend the Bill to the House.
§ Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)
I shall follow the Minister in one respect, in that I shall devote my remarks almost entirely to part I of the Bill. The Bill primarily creates the legislative framework with which to deal with the abandonment issues and the decommissioning of oil platforms in our waters. The Bill's other clauses involve miscellaneous questions that still, however, deserve scrutiny. I think, particularly, of those provisions relating to the royalty repayments that are involved in the whole question of covering the costs of abandonment.
Like the Minister, I shall concentrate on the major issues contained in part I of the Bill, which deals with the abandonment of oil and gas platforms on our continental shelf. We also realise the enormous, awesome implications of abandonment. It presents us with great technical challenges. I think, too, of the fiscal implications of abandonment and of the profound concern felt by many of those involved in fishing and marine affairs, who make their livings from the North sea.
Those issues, and the awesome challenges presented by the prospect of having to abandon such huge structures, raise major concerns. They, in turn, must be seen against the background of major international obligations and of the search for international standards. That was the reason for my intervention. I am still rather surprised that the Minister did not elaborate as much as I want to do on the international context in which the legislation is being debated. The problems involved in abandoning oil and gas platforms are to the oil and gas industries what decommissioning is to the nuclear power industry, although without such emotive connotations.
Abandonment presents those industries with an awesome technical and financial challenge, and with major concerns with respect to fishing and the marine environment. Those issues and concerns must be set against the search for a new set of internationally agreed standards and criteria. I think not only of how those standards will affect the North sea but of the major decisions made at the law of the sea conferences in 1982. We must judge the timing and character of the legislative proposals against such major domestic and international issues.
In some respects, I find the legislation odd, to say the least. I shall go on to explain why but first, I should underline what the Minister said about the consequences of those challenges. As he said, we are talking about nearly 150 installations. Although they are an intrinsic part of the Bill, he did not mention that for every installation there are about 2,800 miles of pipeline. It is not only the last part of the Bill that deals with pipelines, but the whole of part I. That part of the Bill deals not only with abandoning the installations but with abandoning large tracts of pipeline on the sea bed. In a way, they present just as difficult a problem.
As the Minister said, many of the installations are very large, and form part of the approximately 6,000 installations that are scattered all over the world. But the major difference between our installations and the others is that almost 90 per cent. of the other installations stand in relatively shallow waters that are no more than 40 m deep. Only 360 of the 6,000 installations stand in waters that are deeper than 75 m. As the Minister said, we have a share of them, so it is only right and responsible of us to address ourselves to the argument as early as possible. 36 I hope that the House will agree that we should not try to diminish the size of the problem. For example, I have heard it said that, compared with the sums earned from the North sea by the oil industry, Scottish trawler and fishing interests involve only small incomes. But the House should not consider the matter in those terms. I have also read articles saying that there are 20,000 shipwrecks recorded in United Kingdom waters, thus trying to minimise the potential problem of abandoning our oil installations.
§ Dr. Godman
May I point out to my hon. Friend that a modern stern trawler can fish in depths of up to 500 fathoms? Even a smaller, side trawler can fish in depths of 300 fathoms if it has the right equipment.
§ Mr. Rowlands
I hope that my hon. Friend will join us on the Committee, as his knowledge and expertise will be required in the sort of Committee that we hope to have.
We should not minimise abandonment, despite what is said in some contexts about the amount of debris that already exists on the sea bed. As the Minister said, 18 of the installations stand in the central North sea. Fourteen are major installations, of which eight, nine or even 10 are major concrete structures. Those present technical and financial challenges, and that is what has prompted the Government to introduce the Bill.
As the Minister admits, abandonment is an intrinsic part of the Bill. The question is whether we allow partial removal, toppling or alternative uses for the platforms. Under the 1958 convention, complete removal has been the historical position. The Bill would allow the oil industry to bring forward proposals for a combination of possible solutions to the problems involving partial removal, toppling, the possible towing to and sinking in other parts of the North sea or other uses for the platforms.
We recognise that there are enormous technical problems in trying to remove a concrete platform. The literature contains a romantic description of the champagne cork effect—if we try to pull out or remove the enormous concrete structures that are deeply embedded in the sea bed, there will be a terrible and awesome effect on the whole structure. The rapid lifting and rising will present an enormous danger to life.
We in no way underestimate the nature and character of the problems associated with abandonment. Hon. Members will have researched the issue and will know that some fascinating work has been done by the Heriot-Watt university into possible alternative uses. One suggestion is that one or two of these installations could be turned into casinos. It might be a bit of a gamble to have a night out on the Thistle, and I would not fancy it.
However, there are some interesting suggestions for alternative uses for the platforms. For example, one or two might be used for marine search or for communications and navigation assistance. However, in the majority of cases, the issue is one of either partial clearance, toppling or complete removal.
§ Dr. Michael Clark (Rochford)
The hon. Gentleman said that many hon. Members have researched the problems of abandonment. During his research, did he find any evidence of research at the time when the rigs were originally designed that would assist the abandonment programme? I have found no such evidence and it would be interesting to know whether he has found any.
§ Mr. Rowlands
The hon. Gentleman has made a most interesting point. A major retrospective criticism of the development of these rigs is that some aspects of design could have been done in such a way as to facilitate the handling of the problems that we are now facing. However, in view of the enormous technological breakthroughs that have enabled us to achieve so much during the past 20 years or so, we should not be too censorious.
The hon. Member for Rochford (Dr. Clark) is on to a good point. We are now beginning to realise fully the character and nature of the problem. Some interesting studies show how designs might evolve to tackle the problems, and there might be some interesting design techniques for demolition. Although that appears to be a contradiction in terms, designing for demolition will create many challenges in engineering and physical terms. I have read only a little about that aspect of the problem, but no doubt we shall have time to discuss it in Committee.
When considering partial abandonment, toppling and case-by-case programming, we must ensure that those who are listening understand what we are saying. There is a suggestion for international criteria for the standard that should be established for partial removal in the deepest waters. It requires that no more than 40 m of clearance from the sea should be the base for partial clearance. In other words, some of the platforms will have to be reduced to 40 in below sea level. We might be asked to approve enormous standing structures on the sea bed. Put in terms that we can understand and appreciate, that is what partial toppling involves. We are discussing structures in 500 or 600 ft of water. By seeking partial toppling of a mere 40 in we are talking about an underwater level for pylons of 300 or 400 ft.
We shall have to devise a set of arrangements to justify that proposal. However, at least we would know what we mean by such terms as partial abandonment and partial toppling. The lack of clarity is the reason for the real concern of the fishing industry about these arguments—especially in the trawling industry and those who might ship in the area.
We must recognise the shared concern of the United States and others about the defence aspects of leaving considerable structures or debris on the seabed after abandonment. With a Bill that contains such sweeping powers and the need for case by case solutions, we desperately need sensible and clear guidelines from the Government. Although the codes and criteria are very important to abandonment programmes, we must question whether powers in the form described in the Bill should be granted to the Government. That is one of our criticisms of the Government's approach. It is not emotive to draw clear and specific attention to the consequences of leaving such huge structures in the North sea as anticipated in the Bill.
I will not deal now with the specific worries of the fishing industry, as they will be dealt with later by my hon. Friend the Member for East Lothian (Mr. Home Robertson). The Opposition recognise the Minister's interest and concern for the profound anxieties of the fishing and trawling interests about the consequences of policies that might be adopted under the Bill. It is important that we establish that those interests have rights.
One of our major criticisms of the Bill is that third parties are given no right to a hearing or consultation 38 during programme making. The Minister might verbally promise the Scottish Fishermen's Federation that there will be consultation on the regulations, and so on. I should like him to tell me under which clause a third party's statutory rights and interests are fully to be taken into account.
§ Mr. Buchanan-Smith
Before the hon. Gentleman goes too far, he should read the clauses in relation to the drawing-up of the regulations. They make it clear that there has to be consultation. There is a legal obligation of consultation when those regulations are drawn up.
§ Mr. Rowlands
After the years we have sparred in Committee and across the Dispatch Box, the Minister should realise that I do read Bills. The point I made was not the one he rose to speak about. I said that, in this Bill, there are no third party rights—I was going to complete my remarks but he did not give me a chance—regarding the approval of programmes and input into their preparation. It will be of considerable concern to trawlermen and other interests that the Minister should proceed on a case-by-case basis. The cases, as well as any general criteria or general regulations, will matter. There will be general consultation on the regulations. Decisions will be made when the Minister gives approval to amend or reject individual programmes.
If one examines the clauses dealing with those provisions, one will notice that a third party has no right to be heard or to be consulted. That is one proposal that we might consider—I hope in no partisan spirit—in Committee. I hope the Minister will have an open mind about the way in which we can build upon this procedure. If he is to approach the issue on a case-by-case basis, he must allow those who could be most affected by it to have genuine statutory rights to be consulted and involved in the process.
Because of the way in which the Minister and the Government have brought forward these matters, we have minimum information about the Government's thinking on the criteria and guidelines that will constitute the regulations. The Minister did not give us much of an insight into the nature of his consultations. They are funny consultations in at least one basic sense. Front my experience and observation of Government consultation, there is usually a document available, especially if the matter has been going on for 12 months and many bodies are effectively involved. The Minister made the big claim at the Dispatch Box that he had conducted these consultations, but there is not one single document on which this process has been based. I asked his Department the form in which these consultations had taken place. The Minister quite properly referred to the speech of an official, Mr. Butler. It was a useful, helpful speech that some of us were directed to read. Apart from that speech and another piece of paper—there is nothing in the Library and nothing in writing—no other document has been properly used in consultation.
If consultation of the kind that the Minister described has occurred, it has obviously been oral consultation. I understand from my inquiries and my informal contacts that the Minister has put forward some ideas. I challenge him to tell us where the ideas are presented. Are they available to hon. Members as we embark upon this major debate? I thought that he would elaborate on them this afternoon, but he has not done so.
§ Dr. Michael Clark
My right hon. Friend the Minister can speak for himself. He made it clear that he had various consultations with oil companies, asking whether they could suggest ways in which this could be done. Does the hon. Gentleman agree that this is a consultation Bill? There is much scope in the Bill for consultation in Committee, when we shall thrash out so many of the matters about which he wishes to talk.
§ Mr. Rowlands
I am delighted to accept the hon. Gentleman's invitation. I rather like his description. My quarrel is that, if we bring forward a Bill with such sweeping powers—if nothing else, we all agree that clause 2 and others, upon which I shall touch, are wide, enabling provisions—it should be accompanied by a much clearer idea of how the Government will implement and exercise it. A Bill of this kind giving Ministers such awesome, huge powers to do all sorts of things to all sorts of people should be accompanied at this stage by much clearer thinking and a statement of the character and nature of the Government's policies.
I understand that the Minister has been discussing—I do not know whether orally or not; I cannot find any document—zoning the North sea. There are three zones. There is the southern basin, the central North sea and the deep North sea. Different criteria and standards relating to partial toppling, partial clearing and so on will be laid down. It is an interesting and reasonable proposition. We are debating the Second Reading of a Bill to include all those powers without having any real insight into the Government's thinking. That insight should have come as a consultative process alongside this Bill. We should not, as we shall have to, in a sense, winkle it out in Committee. The hon. Member for Rochford rightly said that the Committee stage of a Bill such as this can be a consultative process. We shall have to utilise it.
We have been discussing how we can improve the legislative process. This would have been a good opportunity—the parties are not necessarily divided—to use the pre-legislative process. A Select Committee or a genuine pre-legislative Committee could have taken evidence on the issues and the legislative structure in a genuine, non-partisan spirit. That would have been a most useful way in which to proceed. This procedure will cause many problems and make it harder for us to grapple with the issues. I assure the hon. Gentleman that we shall make every effort to do so.
I do not support the manner in which these issues have been brought to the House. It has led to the nature of this legislation. This point is given greater force in view of the financial and fiscal consequences of the various policies and programmes. I am grateful to the Minister for bringing to our attention the fact that core estimates of abandonment vary from £6 billion for total clearance to £2.7 billion, in 1984 terms, for partial removal. The lower figure—he did not mention this—was based on a policy of a 40 m clearance depth.
If the Minister is considering a variable system of clearance depths of the kind that we understood he has orally been discussing with the industry, there will be different clearance levels of 55 m or 75 m, depending on the depth of the North sea and the installation itself. We will need to know the cost implications of those arguments. We could take them on a core basis.
Every taxpayer and hon. Member should be concerned about who will pay and how. In July 1985, in the lecture 40 which we were advised to read, Mr. Butler, the Department of Energy official, estimated that 60 to 70 per cent. of abandonment costs would fall on the Exchequer in royalties or tax relief. He added:The way in which the rules would operate in individual cases will require a good deal more study.That was July 1985; it is now November 1986. We shall be interested to learn in Committee how much more study of the costs to fall on the Exchequer has been done since July 1985.
On 9 September 1986, Max Wilkinson in a perceptive article in the Financial Times drew specific attention to the capricious nature of taxation in relation to abandonment and certain companies and a certain size of field. These important matters will require much greater scrutiny in Committee.
Confronted with a large series of major problems, unresolved policy decisions and an uncertain financial and fiscal structure, what have the Government done? They have brought forward the Petroleum Bill and provisions such as clauses 2, 4, 5 and 10. They are catch-all clauses. Because the Government are not certain what to do, they will sweep up everyone, serving notices on everyone in sight who has the slightest possible interest in an abandonment programme. Clause 2 is a catch-all provision of enormous potential.
I understand the Minister's concern. We do not want the taxpayers to be rooked in any shape or form. He will have much support in ensuring that that does not happen. But is it the answer to bring in a provision such as clause 2? It smacks less of the Department of Energy than of the Inland Revenue. When in doubt, the Inland Revenue decides to serve notices in respect of taxation or costs on anyone who has anything to do with the issue. The House will have considerable qualms about clause 2. I shall be interested in Committee to hear the Minister reveal the precedents that it raises in respect of corporate liability, and so on.
I was glad to note the Minister's willingness to take part in consultation in Committee to thrash out variations on the way to handle the provisions of clause 2. Clause 2(5) seems to redefine the nature of control of a company. In my ignorance, I assumed that one controlled a company with 51 per cent., not 50 per cent., of the share capital. Under clause 2(5) "one half or more" is defined as giving control of a company. Major issues arise, and we have a right to register our objection to the nature of the legislation when we do not have a clear idea of the policy.
The international dimension—that we should relate our standards and policies to those being thrashed out in the key international forums, especially the law of the sea conferences and the International Maritime Organisation—is another important consideration. Although the Minister contested this, we are in an uncomfortable position. The only convention to which we are a party, to which we are a signatory and which is in force is the 1958 Geneva convention, but it contains the rather uncomfortable statement that there must be complete removal of installations. Rightly, we have moved on since then. In 1985, the Government sought to move away from the 1958 convention by introducing a revised article, article 60, and I compliment them on that. The agreement of 60 states was needed to make the measure enforceable. We were just over halfway there, with the support of 31 states, when the conference concluded. I suspect that we shall achieve the 41 agreement of 60 states only if we thrash out the definition of the article and devise genuine international guidelines which we, as much as any other country, will accept.
On 12 January there will be the first of a series of significant meetings of the IMO to start the work of turning article 60 into a meaningful set of practical criteria and guidelines. The last time I checked, as of last weekend only two papers had been submitted for discussion at the 12 January meeting. I understand that, according to the rules, submissions must be made by 15 September. The Minister complimented himself and the Government on coming forward with this legislation to give the lead and to shape up the debate nationally and internationally, but I am surprised that we are not taking the lead in shaping the arguments which will be made at the IMO meeting in January. I understand that, unless the Minister has submitted proposals in the last few days, the Government have not submitted any ideas to the IMO. The submissions made so far show the type of problems we could come up against. One major proposal could cause considerable difficulties in implementing the Bill in this form. We are justified in bringing these important international dimensions and issues to the attention of the House.
We understand the challenges that face everyone dealing with the issue of abandonment. We understand also the opportunities, on which the Minister touched, to develop new engineering techniques, in designing demolition techniques and in the physical opportunities of removal. We must ensure that British companies meet that challenge, take up the opportunities as outlined in the National Economic Development Council report, "Growing Markets for Demolition and Dismantling", which brought forward an interesting, important and almost contradictory concept which was nevertheless fascinating.
I cannot conceal our view that the Government have not approached the issues in the way we should have liked. It would have been useful to have a pre-legislative process of the kind I have suggested. I hope that there will be consultation in Committee. We shall not oppose the Bill tonight. We believe that there is constructive work to be done, not on a partisan or party basis but by searching for answers to meet this severe challenge. I think that it is no exaggeration to say that the problems of abandonment present, in their way, just as much of a technological and fiscal challenge as development in the North sea has done so far.
§ Sir Trevor Skeet (Bedfordshire, North)
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) dealt with a number of interesting international points, but my right hon. Friend the Minister is well protected. We passed legislation on deep sea mining well before the international agreement was negotiated, although we have not ratified it. That was done in enabling legislation which anticipated events, exactly as the Petroleum Bill does.
This is a necessary Bill. It is purely an enabling measure. There are difficulties in clause 11 which prescribes standards and safety requirements, although at this stage we do not know precisely what they are. I hope that the Minister will give the Committee a draft of some of the regulations in order to establish one or two of the criteria which could he rather useful. That would not negate the value of the legislation.
42 The hon. Member for Merthyr Tydfil and Rhymney spoke about the vast expenditure involved. That troubled me. We must keep it in proportion. He mentioned a figure of £6 billion. That would be equivalent to £2 billion above what we are spending on research and development in the United Kingdom. That is enormous expenditure. It could be expressed in terms of the number of hospitals which could be built in the United Kingdom. Do we have to spend that vast sum on getting rid of some of the structures in the North sea? Perhaps we can say that it could be done a little less expensively by considering other matters.
§ Dr. Michael Clark
I recognise that if we do have to get rid of the structures in the North sea it will involve great expenditure. I wonder whether my hon. Friend could say how the taxpayer, the nation and the state could extract that money from the oil companies in order to build hospitals and do the technical research that is required in this country?
§ Sir Trevor Skeet
I am not in the oil industry but the oil companies have been paying petroleum revenue tax and taxation for many years. About 85 per cent. to 90 per cent. of the take from the receipts of the North sea is held by the Government. Therefore, when one considers the liability for decommissioning the structures, one has to take into account who has the profits. It has been the state. [HON. MEMBERS: "Where are they?"] They have been carefully invested overseas to the benefit of the United Kingdom. The hon. Member for East Lothian (Mr. Home Robertson) may laugh, but the invisible account is of no mean significance to the United Kingdom. It buys a vast quantity of manufactures and food essential to this country.
There is one point which I consider to be of great significance. There is ample precedent. Legislation has been passed for the extraction industries. There is the Town and Country Planning (Minerals) Act 1981 in which aftercare provision was made; that is, that land had to be restored to the condition which was laid down by the Act.
We then moved into the nuclear area. The hon. Member for Merthyr Tydfil and Rhymney mentioned the companies trying to get togeher with British Nuclear Fuels Ltd. and the Atomic Energy Authority, working with the international agencies to try to devise ways to decommission nuclear power stations. Therefore, it is not surprising that in the North sea, even though it is no man's territory and free territory in which things can be left—although it is preferred that they are not—some sort of arrangement should be made now. It is important that we should consider that point. Navigation has to be considered, as does deep trawling and the movement of craft on the surface of the sea and submarines.
The hon. Member for Merthyr Tydfil and Rhymney mentioned that the number of platforms—144 of them—in shallow water is about 70 per cent. of the total. Those in deep water form about 30 per cent. I agree, as would many other hon. Members, that those in shallow water will have to be removed entirely. Those in deep water can be truncated or cut off. When I was at the University of Manchester Institute of Science and Technology recently I saw some novel methods of cutting the steel under water. When that has been perfected, it may reduce the costs substantially. We may look to the future when we avoid the use of those very expensive platforms and use floating production systems which are now coming into vogue.
43 When the Minister considers the liability of oil companies, will he be concerned with unlimited liability for those corporations—that is, after receiving certain grants or tax advantages from the state? After all, there is a principle in law that, when one brings something on to one's land and it escapes and damages a third party, one is liable for the damages, provided they are not too remote.
I understand the point referred to, which came under clause 2, that if a company becomes defunct at the end of its life and ceases to be a paying proposition because the revenues have disappeared and it is coming to the time when liabilities are beginning to mount, what does one do? Do the Government have to take in all the bills? The little device that the Minister has resorted to has been clear. One looks to the parent company for the default of the subsidiaries. One can travel right up the tree and fault anybody in the line. I mentioned in an intervention that the right course would probably be to establish a fund in the early stages, such as the ironstone fund which was utilised in Northampton, to which all companies had to subscribe in order to deal with the final reinstatement of the land at a later date. It was discussed at one of the inquiries prior to the Town and Country Planning (Minerals) Act 1981, when it was thought that it might be a useful idea to have a fund established for that purpose. I wonder whether companies would consider that.
Another important point is that obviously the Government want the maximum extraction from the North sea and the price of oil is one of the determining factors. That could lead to pemature closures which could lead to the loss of a lot of potential and available oil. I wonder how far the Government have got with their negotiations for a tax regime. According to the Bill, there is the possibility of the repayment of royalties, which will be appreciated. They may well be offset against corporation tax and PRT. It might be a sensible idea to do what somebody else has recommended, which is that one takes the last seven years of PRT which have been paid by the companies and offsets that in its entirety. There has been talk that we should adopt a grant system, which the Norwegians have resorted to, based on the average of tax to revenue over the complete life of the field.
Perhaps I can make one suggestion to the Government. The idea is to maximise extraction, and a formula for diminishing tax with the age of the field could be resorted to. That would encourage the use of enhanced recovery methods. It would counter the low price of oil and take into account the fact that liabilities are likely to rise at the time of the declining revenues.
Enhanced recovery is important. The public will recognise that about 42 per cent. of the oil is extracted and the rest is left in place. It may be extracted at some future date but, if the platforms are removed, some other method will have to be found for bringing it up. Of course, technology has not advanced to the point where it can be extracted. Therefore, it will remain in situ for the time being.
I want to ask the Minister about licensing. Under clause 19, in part II of the Bill, licensing can be extended to the territorial waters of Northern Ireland. I wonder whether the Minister will give me some indication as to the position of the Isle of Man, which is off the west coast of the United Kingdom. Does it have its own territorial waters? Does it 44 have the right to raise royalties and grant licences? Does it have the right to negotiate directly with the oil companies or does it fall under his own Ministry?
I want to be brief in order to enable my colleagues to contribute. My approach is that this is a useful Bill and must go on to the statute book. The approach must be constructive. We have to measure the opportunities which are likely to arise. The oilfields have a long time to run. The first to close will probably be the Auk field operated by Shell. That may be closed in the 1990s. Many of the other fields will be running for 20 or 30 years. Over the course of time, the regulations can be carefully devised and the Government can decide what should be done in the public interest.
Consultations with the United Kingdom Offshore Operators Association should continue and negotiations and discussions with international bodies, especially the International Maritime Organisation, should be extended. I believe that that will be of great value in achieving our aims—to maximise the advantage of North sea oil extraction and to safeguard the public purse without being unduly punitive to the companies involved.
§ Mr. Malcolm Bruce (Gordon)
The Minister and others have acknowledged that there is much still to be done in this area, but I welcome the Minister's opening statement because in the current downturn in North sea activities it is important to state clearly that North sea extraction is still in its adolescence rather than fully mature and that the development of new fields and platforms will continue for a long time to come. It is important that people outside the House do not get the impression that the Bill has been introduced because the North sea industry is somehow past its peak, when in fact it still has a long way to go.
In the context of the Bill, there are a number of creative tensions between the various parties directly affected. Those who have to meet the cost of removal of offshore installations—the oil companies and the taxpayers—are naturally concerned about how the costs can be contained and how they will affect the investment already made. Those who use the sea for other purposes, however, are anxious to ensure that removal is not carried out in such a way as to prejudice their free movement. As the Minister knows, the fishing industry is especially concerned, because this enabling measure does not clearly and specifically defend the interests of that industry.
At the outset of North sea oil development, it was acknowledged that the platforms would ultimately have to be removed and I understood at that time that complete removal was envisaged. Concern has naturally arisen because measures short of complete removal are now being discussed. I appreciate the reasons for that, but we must acknowledge the definite anxieties that arise as a result.
If partial toppling of a major platform in middle or deep water were allowed, there would have to be a full inspection immediately after the completion of the work to ensure that it met the requirements of the various Departments involved. A more difficult question is how the condition of the installation will be monitored in succeeding years. Storms and corrosion may lead to pieces breaking off and migrating, possibly creating problems in areas in which there were previously no recorded installations.
45 The need to monitor installations will continue for decades after they are abandoned. Even if they are taken down to a level which would not interfere with surface navigation, there might still be problems for submarines, despite advances in modern technology, particularly if pieces break off and migrate so that some areas of the North sea become more littered than they were previously. A Russian submarine sank in very deep water this summer. Although this is an outside possibility it must be taken into account, because we would not wish to risk accidents of that kind.
§ Sir Trevor Skeet
Maps of all the installations will be published. They will be pinpointed on the charts, so submarine commanders will be able to avoid them.
§ Mr. Bruce
I appreciate the availability of charts and the ability of modern technology to identify obstacles, but unless there is consistent monitoring, pieces could break off and migrate to areas in which no hazard was previously recorded. We are entitled to seek an assurance that that possibility will be taken into account.
The anxieties of the fishing industry are more immediate. I understand that the Minister met representatives of the industry last week. In informal conversation with a senior representative of the industry yesterday it was made clear to me that the industry wants total removal of offshore installations because it does not believe that partial removal can be carried out without causing potential problems for trawlers and the risk of damage and loss of equipment. We appreciate why the original plans for total removal are being reconsidered. It is a matter of cost, both for the taxpayer and for the oil industry, and no one wishes to demand expenditure if it is not necessary. But if there were any suggestion that the taxpayer and the oil companies were being protected at the expense of the fishing industry, a real conflict would arise. At present, the fishing industry is extremely unhappy about the proposals and already fears that its interests are being sacrificed.
For those reasons, I believe that fishing and certain other interests should be specifically mentioned in the Bill and specific rights set out in the legislation. No doubt we shall return to this in Committee, but at present the Bill provides no specific protection. Clause 11(5) merely states:Before making regulations under this section the Secretary of State shall consult organisations in the United Kingdom appearing to him to be representative of those persons who will be affected by the regulations.The fishing industry does not regard that as satisfactory and wishes to have more specific protection of its interests written into the Bill. At present, the industry is not even convinced that the Government are operating within the terms of international law. That difference of opinion can be resolved, but we shall need to consult our immediate neighbours in the North sea and many of the points that I have made will doubtless be raised by the Norwegians, the Dutch, the Danes and others using the North sea, who will want satisfactory assurances that their interests are taken into account.
The removal of offshore installations has been compared with the decommissioning of nuclear power stations. I do not wish to trespass beyond the confines of the debate, but I believe that that comparison has some validity in that it would be wrong to establish legislation setting out different obligations from those that would apply, say, in the decommissioning of a nuclear power station. At this stage, however, I merely put down a 46 marker to the effect that we should not create circumstances which might be cited as a precedent in the future either by overloading the cost or by underloading the obligations in decommissioning such an installation.
The hon. Member for Bedfordshire, North (Sir T. Skeet) mentioned the concerns of the oil industry and generously suggested on behalf of the taxpayer that petroleum revenue tax might be repaid to cover the cost of removing installations. I am not sure that that would be acceptable, because when the companies took out licences to explore and develop the fields, they knew that those obligations existed. Indeed, I understand that Shell has made substantial provision for the ultimate removal of offshore installations. If other companies have not done so, they should have done so.
Two points arise, one of which bears further consideration. That is the suggestion made by the hon. Member for Bedfordshire, North that a fund should be established. Some of the large companies are concerned that the Bill implies that they would be liable for defaulting partners.
I should be grateful if the Minister would clarify the last paragraph of clause 2(5), which refers to a company thathas the power, directly or indirectly, to secure that the affairs of the company are conducted in accordance with its wishes.If I am wrong, I shall be happy to be put right. Does that imply that the operating partner is a consortium could be made liable for all the members of the consortium if any of them were, for financial or other reasons, unwilling or unable to contribute to the cost of decommissioning? If that is so, the suggestion of a fund is to be commended, as it would ensure some fairness to all the operating companies.
On the positive side, as several hon. Members have commented, the removal of offshore installations will be an industry in itself. It is a classic proof of the proverb, "It's an ill wind that blows no one any good". Whatever the figures—£4 billion to £6 billion have been quoted—somebody will be able to pick up the benefit of that.
It is important that we have the best technology and the best means at our disposal. I ask the Minister to consider some sort of contribution, over and above what is already going on, to step up the research, perhaps through universities or other academic institutions, if suitable groups are available to be funded. Given the amount of taxpayers' money involved, and given the potential to encourage forward decision making in companies that are taking risks for further development, it would be to our domestic advantage to stimulate ways of developing new technologies that are cheap and effective, for the removal of offshore installations. That might provide the technology to meet the fishermen's concerns and would give us export opportunities.
In that context I welcome the Bill, although it has been rather broadly drawn and leaves many questions that will need answering in Committee. I hope that the Minister will approach the Committee constructively and that he will not regard the Bill as any sign—
§ Mr. John Hannam (Exeter)
There has been a consensus of approval, in principle, of the Bill in the speeches made so far. However, they have suggested the need for more detailed examination in Committee. I concur with that view. The Bill is not contentious legislation but is important not only for the oil industry, but for the Government and the taxpayer, as well as for the fishing industry.
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) underlined the size of the problem. My hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) asked whether the problem of abandonment had been taken into account in the design of the rigs when they were built, at the beginning of the development of the North sea. Presumably it was, but at the time it was a new industry and many innovations have been introduced since then. I remember visiting the Conoco tension leg rig on the Hutton field. If the technology there had been adopted throughout the North sea, the problem we now face of removing some of those structures would have been made much easier. Of course, that technology was only being developed then.
The Bill could, of course, have been subjected to the special procedure in Standing Committee. I served on the Committee that considered what is now the Education Act 1981 and we adopted the procedure of taking evidence in several sittings before going into full Committee. It was a useful procedure, which might have worked on this occasion. This is the sort of Bill where we could have gained by having representations from those affected by the legislation.
That is not being done. The Bill has been introduced fairly quickly and therefore there has not been a great deal of time to study all the implications. However, my right hon. Friend the Minister is right to tackle the immense problem of dismantling our North sea oil platforms now. Given the usual good co-operation between his Department and the oil industry, I am sure that the technical problems that arise, and those that are certain to arise as we go along, can be sorted out in Committee.
Everybody has known for a long time that decisions would have to be made and that financial provision for removing offshore installations would have to be allowed for. We are committed by the 1958 Geneva convention on the law of the sea to remove every trace of our offshore oil operations and every oil company has been making provision for that in its accounts over some years. The trouble is that nobody has known what the costs would be, and how much dismantling would be required, and so nobody has known the extent to which the oil platforms would have to be removed and provision made for that.
Originally, the oil rigs were much smaller than the present-day deep water platforms, some of which are larger than the Empire state building in New York. The complete removal of one of those larger platforms is estimated to cost about £150 million.
As part of their licence agreements, oil companies have agreed to carry out that work at the appropriate time and, as I have said, they have made provision in their accounts. However, they have not created specific funds of cash in their reserves, so any future dismantling costs will have to be met from future cash surpluses. The total cost of dismantling all the 140 to 150 platforms is estimated to be about £6 billion over a period of years. Therefore, the 48 Government are right to agree that the abandonment costs can be set against corporation tax, royalties and petroleum revenue tax on a retrospective basis.
The problem that seems to have arisen is the risk that an owner of a platform, say an overseas company, could pull out of the North sea subsidiary, declare it bankrupt and leave the Government or the taxpayer to clear the oil platform. The Government would not be left holding the baby because none of the oil rigs can be termed a baby—they are much more like grown adults in their size. In other words, the taxpayer would have lost the tax revenue that was given in relief to the company, but would still have to pay for the eventual dismantling.
The Bill proposes—I do not agree that it is right—that the normal corporate limited liability responsibilities should be put aside and a direct charge laid on all, some, or even one of the participants in the field. No provision is made for the company or companies made responsible for the abandonment to have recourse against the other partners to ensure an even and equitable distribution of the heavy costs involved. That could discourage the major oil companies from entering into partnership with small companies in future exploration rounds. As we are still not half way in the development of the North sea, that is an important factor. Although I understand the need to prevent a parent company from offloading its financial responsibilities—that would happen once or twice, if at all—I wonder whether there is a better solution.
In other commercial activities—my hon. Friend the Member for Bedfordshire, North mentioned motor insurance—special funds have been set up to deal with such emergencies. That would be a better approach to the problem. I hope that my right hon. Friend the Minister will confirm that, if the oil industry comes up with a special sinking fund solution, he will be prepared to consider it, rather than pursuing the present sledgehammer approach inherent in clause 2.
The Government are quite entitled to take steps to remove the possibility of being landed with the costs of dismantling through the default of the licenses. However, I hope that by the time we get through Committee, a better solution might have been agreed with the industry. I accept that my right hon. Friend has in effect thrown the ball at the industry and said, "Come up with a possible solution and we shall consider it favourably."
It is important that we do all we can to encourage the extension of the economic lives of our producing oilfields. The longer they run, the greater the chances of the oil companies making proper provision for the enormous abandonment costs, and of course, the greater the income to the country.
With the new powers given to the Secretary of State in the Bill, allowing him to approve, reject, amend or even impose a different programme for abandonment, it is important that proper criteria are laid down and that a system of appeal or arbitration is established. I hope that due consideration will be given to the latter point in Committee, possibly on the lines of the appeal and arbitration system established in the Petroleum and Submarine Pipe-lines Act 1975.
I refer finally to the methods to be used in the removal of installations. All sorts of weird and wonderful ideas are floating around, including offshore casinos, duty-free shopping centres, fishing centres and so on. I have no idea what the final solution will be for some of the platforms. The Government are right to deal with each installation 49 on a case-by-case basis. What cannot be denied is our responsibility to ensure safety for our sea traffic and protection for our fishing industry.
One idea that I saw in The Scotsman, which was referred to earlier, is for research into the use of rigs for offshore reefs around which huge new fishing grounds can be developed. Apparently countries such as Japan and the United States have been building artificial reefs for many years, and in Japan some $326 million has been spent on the construction of 2,500 artificial reefs. From them the Japanese are taking annual catches of nearly 5 million tonnes of fish and shellfish, compared with Britain's total annual catch of approximately 750,000 tonnes.
The suggestion is that some of our rigs be towed to within three miles of the shore, adapted for reef construction and sunk there. That could create jobs and help the fishing industry, as well as save costs. I have no idea whether that suggestion is workable, but as the European Community has allocated some £18 million for research into reef development, it might be worth while using some of that money to investigate the possibility of using some of our oil rigs for that purpose. That is the only suggestion that I should like to make.
I congratulate my right hon. Friend the Secretary of State on the steps that he is taking to prepare us, with the framework in the Bill, for the time when the massive steel and concrete North sea oil structures have to be dismantled. I am sure that we can achieve a good workable piece of legislation in Committee, and I support the Second Reading of the Bill.
§ Mr. Peter Hardy (Wentworth)
I support the suggestion of the hon. Member for Exeter (Mr. Hannam) that we emulate the Japanese in the use of the offshore structures for fish production. The idea is attractive. Perhaps it is already being pursued on a small scale. The only difference is that I trust that when we catch the fish, we shall cook it, as I do not believe that we should follow the Japanese that far.
The hon. Gentleman referred to the Conoco tension leg platform in the Hutton field, which he visited some time ago. I am not sure of his assessment that it would be easier to deal with a tension leg platform. The technicians can pursue that matter. The fact remains that that fascinating development is illustrative of the technological capacity of the industry, which may not be properly recognised by the Minister in the Bill. It might be easier to deal with such a rig; it certainly would be queasier. I visited that rig while it was more prone to movement than I think is normal. It was only a fortnight ago, and on the following morning I was relieved that the sea was calm. It was like glass, and there was not a cloud in the sky. One then began to perceive the scale of the problem. I could see 30 structures from the top of the Hutton platform, some a long way away. Many were of enormous size.
Even that size should not daunt the Minister. He should not underestimate the capacity of the industry to make the technological advances that it has made while facing the challenges that have been presented since offshore development began. For that reason, I was delighted that the hon. Member for Exeter referred to the complexities that will face us in Committee. I hope that the Minister will recognise that, although it is right that the Bill should get its Second Reading without dissent, the fact remains that there are many weaknesses in it. I should have thought 50 that he would seize the opportunity to recognise that such a Bill should be bipartisan. It should be accepted by the House as a whole. The conditions that the Bill presents should be the unanimous view of the House of Commons. However, unfortunately, there are grounds for serious concern and deep anxiety about the approach that the Government have adopted. I shall say just a word about that because I do not want to make a long speech; I may make longer speeches in Committee.
Our criticism must be that the Government have acted with enormous speed. It is outrageous that the Minister has produced the Bill today when proper consultations with the industry have not been carried out. As my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said, I hope that evidence of adequate consultations on the proposals will be forthcoming in Committee.
I also hope that the Minister will take note of the fact that some misgivings have been voiced on the Conservative Back Benches about the speed of the Bill. I know that Ministers in the present Administration are not accustomed to hearing dissenting or anxious voices on the Benches behind them. It is significant that such feelings have been expressed today. I suggest that the Minister delays the Committee stage a little so that he can show the Committee that consultations have been adequate, so that the anxieties of his hon. Friends can be justly and honourably relieved and so that we have a reasonable amount of time to read the complex notes on clauses that the right hon. Gentleman promised us. That suggestion is not unreasonable, given the complexity of the Bill.
The Minister is capable of dealing with complexities. He has been dealing with complex oil legislation quite effectively from his party's point of view, and he must recognise that other Members of his own Benches, as well as those on Opposition Benches, have other things to do, and perhaps not quite the same familiarity with complex legislation as he has. Therefore, a slight breathing space for preparation would not be an unreasonable thing to ask.
We could have seen a less draconian approach. One would not think that we had seen the technological achievements offshore that we have seen in the past decade. One imagines that the Government are running scared of the substantial task that faces the industry. They seem to be casting doubt on the industry's business and industrial capacity to meet that challenge. Perhaps the Minister perceived the low price of oil continuing and therefore earlier abandonment of the offshore structures than is now likely.
A question to which I received an answer today might give cause for anxiety. It states:In the week ending 27 October 1986, 27 mobile drilling rigs were active within the United Kingdom continental shelf. In the last week of October 1984, 49 rigs were active."—[Official Report, 24 November 1986.]That reduction in activity is relevant to the debate because it means that unless there is further investment, the abandonment of structures and the sterilisation of resources could accelerate. Because of that acceleration, the lower price, lack of investment, loss of confidence and developing anxieties, we are entitled to suggest to the Minister that it would be foolish for him now to appear to be seeking to rush in emergency arrangements, because it suggests to the industry that the Government take a particularly pessimistic view.
51 There is another anxiety, about schedule 1. I must confess that I am not a lawyer, and I have not had a great deal of time to examine schedule 1. It seems that it presents a particular risk. I hope that the Minister will examine it straight away because it is a serious matter. The Secretary of State was forced by the Treasury to refuse to proceed along the Sleipner gas route and he assured the House that there was an enormous additional amount of gas available. We have debated that on many occasions. That is probably the case and further gas discoveries have been made since the Sleipner decision. The Secretary of State and, I think, the Minister of State will certainly recognise that much of the additional gas which will make up for the loss of Sleipner supplies will have to be obtained from satellite platforms. Much of the gas is in small reserves and satellite platforms will have to be used.
As I see it, schedule 1 provides a requirement for additional metering and therefore additional separation even on the unmanned satellite platforms which are developing and which will have to be used much more extensively. If the Minister insists upon separation and additional metering of satellite platforms, the prospect of achieving those platforms and of landing the gas upon which the Government's decisions rely are dramatically reduced. This is a serious point.
We already see satellite platforms in the Viking field in the southern basin of our continental shelf operation. The Government appear to be saying in schedule 1 that there will have to be additional separation of oil, water and gas on the additional platforms which must be developed. If that is what schedule 1 means, it will inhibit development and I imagine that the Government do not want to do that, because even this Government wish to land gas so that the privatised British Gas will not find itself in difficulty within a fairly short time. In order to make their privatisation scheme work, the Government will have to ensure supplies of gas for Britain.
The Government must ensure that the people responsible for offshore operations can operate in a sane and proper manner, but the Government's attitude gives cause for enormous anxiety. The Minister recognises the financial position, and next week we shall see the repayment of the advance petroleum revenue tax. That is not what the industry needs, and if it had more faith in the economic common sense of the Government it would not have reduced so dramatically its drilling activity. The anxieties in the industry are now considerable and they are not relieved by this sort of draconian Bill nor by a failure to introduce the concessions that were half promised in the last Budget and upon which further development of the North sea can be encouraged and the premature abandonment of our offshore structures delayed.
The Minister should understand that there is an obligation to consult the industry, which has served Britain well. It has produced not merely £113 billion in total economic yield but £56 billion for the Government to use, and they have not always used the money as wisely as they might. It has produced at least 100,000 jobs and I know that the Minister has played some part in trying to ensure that we get jobs in the British Isles from offshore development. The industry has made a substantial contribution to our economy and it is regrettable that that contribution has been abused by the Government.
52 The Minister could at least offer some understanding that the industry has served Britain quite well and that the people in it have made a tremendous technological contribution which, sadly, has been ignored by large sections of the British media. He should demonstrate that the Government do not wish to act in a draconian manner, and he could show some appreciation of the service the industry has given and perhaps be a little more helpful by engaging in meaningful co-operation before the Bill proceeds further.
§ Dr. Michael Clark (Rochford)
I welcome the opportunity to speak on the Bill. The problem of abandonment of oil platforms or of any other piece of equipment with which we have finished is important in this mechanical and technological age, which is also a throw-away age. If motor cars or plant and equipment are abandoned on land we can afford to dispose of them properly because of their scrap value. The scrap value of the platforms in the North sea, even if the platforms were recovered, would be far less than the cost of recovering it. For that reason, there is a temptation to leave the scrap where it is and to abandon it in the sea, but certainly not to recover it and bring it back to dry land.
The hon. Members for Merthyr Tydfil and Rhymney (Mr. Rowlands) and for Gordon (Mr. Bruce) drew analogies with nuclear power stations. Those were valid analogies, but perhaps the most important and valid comparison between the abandonment of oil rigs and the decommissioning of nuclear power stations is that in both cases such things have not been done before. We are looking at new technology, which will be very expensive, and we need to make sure that power stations are decommissioned and oil rigs are abandoned in the interests of safety and for the sake of our environment. That environment is becoming smaller as our population increases and as people are able to travel and build much more than they did in previous centuries.
I am in favour of a proper policy for abandoning the rigs and should like to look into the possibilities in the Bill. There is no doubt that the oil industry recognises its obligations in a proper abandonment programme. It has no reason not to do that, because the oil industry is one of the main users of the oceans as a means of transportation. It is as interested in making sure that the seas are free for the movement of ships as anyone else.
It is possible that in the not-too-distant future oil companies will have large submarine tankers delivering oil all over the world. Such tankers will probably be more efficient because they will use less fuel and be more cost-effective. For those reasons, we do not want too many platforms or too many platform legs sticking out of the ocean in an indiscriminate manner, even if they are marked on the charts. I agree with the hon. Member for Gordon that, even though they are marked on the charts, to have them there at all is a hazard because mistakes happen and however careful people are, tragedies occur from time to time.
The oil companies have a good record on the environment. They are conscious of the need to ensure that as far as possible the environment is returned to the way it was when they started work, whether on land or at sea. Above all, the oil companies are conscious of and obey national and international law and the 1958 Geneva 53 convention on the law of the sea and the requirement of article 5.5 to remove all traces of installations that have been placed in the sea.
Who is liable for these platforms? When installations and pipelines are first put into the North sea they are owned by the companies that put them in and perhaps such companies have two or three partners in a consortium. When the licence expires, those installations and pipelines revert to the Government. But the Bill says that the oil companies will remain liable in perpetuity for the cost of maintaining these installations and pipelines. Clearly, the oil companies will not like that requirement, because having an indeterminate amount of money on a company's books for an indefinite time creates difficulties.
Will my right hon. Friend consider whether oil companies might be permitted in some way to buy out their obligations, so that by paying an amount to the Government to cover the cost of looking after the installations in future years they could get the amount off their books and would know where they stand in a proper trading way?
As many hon. Members have said, it is well known that the oil companies are not happy with the provision that allows the Secretary of State to name one person or one company as the party responsible for the costs and organisation of abandonment. They think that there should be another clause which enables the nominated person to ensure that his partners are legally responsible, and that responsibility is divided according to the equity, interest or perhaps profit that each partner has had from the enterprise. We must consider that in Committee.
We must consider alternatives to legislation such as this. An oil company could be required to purchase a bond, which is held by the Government, as a builder of a housing estate buys a bond held by the local authority to ensure that the roads are finished. Alternatively there could be an industry liability fund, similar to the funds of building societies, banks and insurance companies to ensure that, if one member defaults, the whole industry does not get a bad name and that the taxpayer does not have to pick up the tab.
On the other hand, we could require oil companies to pay a substantial deposit when taking up licences to ensure that abandonment costs are covered. That might be closing the stable door when the horse is truly down the track and all three suggestions are probably more expensive than what is proposed in the Bill. Oil companies might like to consider the options, compare them with what the Bill proposes, and see what they prefer.
Some oil companies might say that we should trust them and that they will ensure that the abandonment procedure is followed. We could say that, rather than trust the oil companies, they should trust the Secretary of State not to abuse this enabling legislation. It is easier to trust people when an industry is booming and profits are high than when profits decline and business is running low, as is happening now in the North sea. I believe that there must be legislation.
It might have been better if we had had the Bill earlier. We have had 18 years of gas production and 10 years of oil production from the North sea, and nearly 40 per cent. of its reserves have been extracted. We have about 140 installations. There will be more, but not many. We must get legislation such as this into place soon or it will be retrospective, and retrospective legislation is unpopular and, some say, unfair. We have no time to waste.
54 Although many platforms might have another 30 years' life, some will reach the end of their lives in the early 1990s and, with present low prices, some will be vulnerable earlier than we had anticipated. It is important to make the right provision bearing that in mind.
In view of the Bill, some companies may decide to extinguish impending liability by abandoning platforms early, rather than postpone abandonment indefinitely, not knowing what the future costs of abandonment will be. Would my right hon. Friend like to consider what will happen if a platform is abandoned before the Bill is in place? Would oil companies be under the proposed obligation? Would there have to be retrospective legislation or would they get away with it and be able to leave installations in the North sea at no cost?
The Bill could result in some oil companies continuing to pump oil until production costs equal or exceed revenue from sales. Platforms would therefore be in position longer than anticipated and remain a blot on the environment and a hazard. The Bill might arrest progressive abandonment.
The size of the problem has already been described. I have written in my notes that we have 139 platforms, but others have said that we have 144. It seems that five have toppled since the debate started. The abandonment programme will create about 100.000 jobs. They will be useful and welcome, especially in the north and Scotland. An analogy has been drawn with the nuclear power industry. Those jobs should be compared with the 140,000 jobs which are already to be found in the nuclear industry.
Opposition Members who want to abandon our nuclear industry should consider the fact that, welcome and important as they are, the 100,000 jobs in the abandonment programme are essentially negative jobs in that they are destroying something whereas the 140,000 jobs in the nuclear industry are positive and creating something.
§ Dr. Godman
Does the hon. Gentleman agree that many of the demolition jobs will require highly developed skills and, in some cases, training so that the task is performed competently and safely?
§ Dr. Clark
The job will indeed require a good, deal of skill. We do not yet know how much because the project has not been properly researched. I am sure that the hon. Gentleman agrees that many people with minimal skills have been trained to work in the North sea and that they have enjoyed substantial career development. I hope that, with the demolition programme, people in less skilled work will be trained so that they attain high levels of skill and earnings. They will deserve every penny that they earn as the job will be risky and highly skilled.
As the hon. Member for Wentworth (Mr. Hardy) said, the major concrete platforms will probably stay in place. We might find alternative uses for them. It would be nice to think that they could be the bases for wave power machines feeding in current for transmission back to the mainland, or as bases for wind power generators. They might be used as defence installations or even have a compassionate use as rescue stations for lifeboats or helicopters. It would be sad if we brought down some of these concrete installations only to erect something similar a few years later to help sailors at sea.
I do not like the idea of toppling rigs and leaving them on the seabed. That would be environmental vandalism. 55 The idea of leaving only 40 m of clear water, as the hon. Member for Merthyr Tydfil and Rhymney suggested, does not appeal to me. I prefer either to leave the platforms where they are or to remove them completely. I know that the latter is an expensive operation, except in the southern and shallower area of the North sea, where the figures supplied to us by UKOOA show that the cost of complete removal is no more than partial removal or toppling over. One should be able to clear the shallow waters of the southern basin.
The cost of the project will be about £5,000 million, which is a large sum of money, although not a lot compared with the revenue coming out of the North sea to the Government, the nation and the oil companies. The extractive industries have a tradition of returning sites to the condition that they were in before they were first worked. That tradition should be continued, although the site is maritime and we are talking about platforms in the North sea. Under the laws of the land, the Government allow the restoration costs to be offset against tax and thus it is in the interest of both the Government and oil industry to keep the costs of abandonment low.
I understand the reasons for the Bill. I support the need for it. I recognise the concern of the oil industry, and there will be an interesting Committee stage, during which all parties will be lobbying, presenting and debating the issues that the Bill brings forth. The Bill should be given a Second Reading so that the Committee can fill the many gaps in the detail of the Bill. However, I do not wish to see the oil industry and the Government fighting each other over the legislation on abandonment. Instead, I should like co-operation, so that together we can complete the task of providing legislation for a sensible policy for the abandonment that all of us consider necessary.
§ 6.2 pm
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
In principle, I welcome the Bill. I would give it more enthusiastic support if I thought that Ministers would be willing to listen with care to fair-minded and constructive criticisms and suggestions from Labour Members.
I declare a personal interest, of which I think the Minister is aware. At the moment, under the Industry and Parliamentary Trust, I am seconded to BP. However, what I have to say is not influenced by the management of the company and in no way do I receive financial inducement by way of that secondment.
People living and employed in maritime communities will take a close interest in the Bill. I argued in a debate this summer, in a meeting of the Scottish Grand Committee, that all these installations should be removed once their working lives had come to an end. I remember arguing that, if it is in the national interest to exclude fishermen from some areas to allow for exploration, development and production of offshore oil and gas fields, it is also in the national interest, when production comes to an end, to have some structures removed. I readily recognise that there are formidable problems, but nevertheless the fishing grounds of the North sea should be swept clean of such hardware.
I should like the Minister to comment on the American experience, if he has time. Historically, the mineral management service of the United States Department of the Interior has stipulated that disused platforms and wells 56 will be cut off about 5 m below the mud line or sea floor. It also requires that the sea bed shall be restored to its original condition, and that has been my argument for a long time. This American requirement replaced the former regulations, that simply called for the marking and abandonment of derelict structures. I appreciate that there are as many differences between the American offshore experience and that of our country as there are similarities and parallels, but we should follow the American lead.
A great deal of research is being conducted into the feasibility of turning defunct structures into artificial reefs; a journal said about this research:Extensive environmental analysis has demonstrated the value of converting offshore oil and gas structures and other appropriate materials into artificial reefs for everyone's benefit. Current removal and destruction requirements are wasting a national resource of tremendous public and private value.That should not be the main objective of abandonment, but it could be worthy of analysis in shallow water areas.
In two or three years, the first of the North sea platforms will have come to the end of their operational lives. They should be removed. The National Economic Development Council has stated that demolition will become a multi-million pound industry, as the hon. Member for Rochford (Dr. Clark) said. He talked about the 100,000 new jobs. The NEDC urges companies to plan ahead so that they can compete with this work. Again, this is likely to be dangerous work and will require careful management and a highly skilled work force, especially in the use of explosives, because not all the rigs can be burned. Controlled explosions will have to be used.
Despite what the hon. Member for Rochford (Dr. Clark) said, we have experience of the dismantling of rigs to draw on. The work will require careful regulation, especially when safety matters are involved. Safety matters should be the kernel of these regulations. I support the need for safety zones, which feature in part III. Is the Minister of the opinion that a safety zone of 500 m is extensive enough?
The Minister spoke of the partial abandonment of installations, and that causes me a great deal of concern. As I said earlier, the modern stern trawler can fish in depths of up to 500 fathoms. Even the smaller, side trawler, if it has enough warps on board, can fish in up to 300 fathoms. These are important considerations. We have heard that there are 139 rigs, or 144. They are scattered across the continental shelf, sometimes in shallow water and in other cases in deep water. The Leman bank gas rigs east of Lowestoft are in shallow water, but it should be possible if, I regret to say, costly, to take such rigs down below the sea bed, following the American example. We should follow that experience and ensure that these rigs are cut off below the sea floor. In America they refer to 5 m. I am not sure that this would be adequate in some parts of the North sea, where there is sea bed erosion. That is of considerable significance in the North sea close to the Dutch coast but it is also of some significance close to the English coast.
Mr. Peter Gilson, a diver of many years' experience at the bottom of the North sea, has brought my attention to the following:Underwater structures resting on or tied into the seabed and under 'current' influence can be subject to stress, which may lead to serious damage as a consequence of seabed 'Scour' or 'Erosion'. For example, in the case of a pipeline not resting on the seabed and fully exposed with a gap or daylight beneath it, the 'bridging and/or spanning' can put an 57 unacceptable stress load on the pipe and lead to serious damage. Further mechanical damage may occur to exposed pipes underwater as a result of contact with anchors and fishing equipment.If that is true of exposed pipelines, it also emphasises the dangers to fishing gear from the remnants of oil and gas rigs.
The Minister referred to pipelines in his speech. Is he satisfied with the present protection arrangements for pipelines which are marked on navigational charts? Trawlers must not tow across or along pipelines. Most trawler skippers obey the rules, but I know one skipper who by means of his echo-sounding equipment locates pipelines so that he can tow his gear up or down them. That is a very dangerous practice—indeed, extremely dangerous when, because of sea bed erosion, the pipe becomes exposed.
Sea bed scour or erosion emphasises the damage that can occur when trawl doors or steel bobbins come into contact with exposed pipelines and structure foundations. A beam trawler, of which we have many in the United Kingdom, could suffer severe damage if its gear were to snap on an exposed pipeline or on the remnants of a structure.
I have several questions to put to the Minister. First, by "sea level" does he mean low water springs? In the North sea that is very important to fishermen. It is also very important to the so-called partial abandonment policy. Secondly, when a licence application is made, is the applicant required to submit an environmental statement concerning the likely environmental impact of the new development? That should be a statutory requirement. Thirdly, what protection is to be given to pipelines vis-a-vis the problems of sea bed erosion? Fourthly, is the Minister satisfied with a safety zone of 500 m?
I hope that Ministers will pay close regard to fair-minded and constructive criticisms and suggestions concerning the Bill. To the many people who are employed in our maritime communities this is an important Bill. Many of the problems that it exposes will need to be analysed in a fair-minded and constructive way in Committee. I hope that those hon. Members who serve on the Committee will engage in a democratic analysis of the Bill and its implications. However, given this Government's record, democratic analysis is somewhat unlikely.
§ Mr. K. Harvey Proctor (Billericay)
My right hon. Friend the Minister of State is fair-minded and constructive, so I am sure that in Committee he will respond in the way that the hon. Member for Greenock and Port Glasgow (Dr. Godman) suggested.
I have a constituency interest in the oil industry, albeit that it is a downstream oil industry. I have not one but two oil refineries in my constituency. I share with my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) the Mobil oil refinery and terminal at Coryton, which employs about 900 people. There is a throughput of about 180,000 barrels a day, or about 25,000 tonnes of oil a day, or about 9 million tonnes a year. The Shell oil refinery at Shellhaven employs about 625 people and 200 contract staff. Current production is about 4.2 million tonnes of oil a year. That is not an insubstantial tonnage in terms of the United Kingdom's oil refinery capacity.
I congratulate my right hon. Friend upon the Government's foresight in introducing the Bill, in 58 particular the powers relating to the decommissioning or abandonment of offshore installations. This is the time to plan for the future. As we have heard from a number of hon. Members, the issues are complex and have very important technical, legal and financial implications. My right hon. Friend estimates that the cost of clearing the platforms—either 139 or 144—will be about £6 billion.
My right hon. Friend admitted that there is a conflict of interest between the oil companies and taxpayers and the shipping and fishing interests and he said that the Government have attempted to establish a balance. He also said that if there are better ways of tackling these issues he will be very happy to consider them. I hope that the Government will approach the Committee in that spirit.
I hope my right hon. Friend will consider whether this would be a suitable Bill for the special Committee procedure. My hon. Friend the Member for Exeter (Mr. Hannam) referred to the fact that he had served on such a Standing Committee. I served on a Special Standing Committee that led to very important changes to the mental health legislation. It would be appropriate for this Bill to be subject to that special kind of treatment. The first three sessions could be devoted to taking evidence from witnesses before commencement of the full Committee stage. I hope that that procedure is still available. I think that it is.
As for the abandonment of offshore installations, I wish to refer briefly to my concern regarding the powers and liabilities that are provided for in the Bill.
I recognise that the Bill, by the nature of the subject with which it deals, can provide little more than a framework within which the Secretary of State can regulate the requirements for abandoning fields, but in three important respects the Bill goes much further than it needs to or should do in terms of providing the Secretary of State with regulatory powers.
First, there are no restrictions on the way in which the Secretary of State can exercise the powers given to him in the Bill—in particular, the power of the Secretary of State under clause 4 to approve, modify or reject abandonment programmes submitted under clause 1. Secondly, the Secretary of State is under no obligation to give reasons why he has exercised the powers that he has under the Bill. Thirdly, clause 14 expressly limits the rights of those affected by decisions made by the Secretary of State under the Bill to appeal against them, and, in so doing, it can be argued that it restricts the usually accepted obligation of the Secretary of State to act reasonably.
The Bill could be construed as setting a bad precedent in giving a Minister powers which he may exercise as he chooses and without supervision. I hope that in Committee the Government will amend the Bill to provide some criteria which the Secretary of State must apply in exercising his powers under the Bill; to require the Secretary of State to give reasons why he has exercised his powers; and, at least, to provide the usual rights of appeal in relation to the exercise by a Minister of a regulatory power.
I understand and approve the desire of my right hon. Friend the Minister of State to ensure, through the Bill, that there is no chance of the Government or the taxpayer being required to meet that part of the cost of abandoning installations which should be paid by the oil companies. However, allowing the Government to pick on any 59 member of a consortium or its bankers and make it liable for all the obligations of the consortium, as clause 2 would do, could have a number of unsatisfactory side effects.
The larger oil companies, faced with the risk of having to bail out the smaller oil companies, will be reluctant to invite them to join consortia and thus stunt the development of the smaller British oil companies which the Government have so carefully nurtured over the past seven years. In addition, I fear that the banks will be reluctant to finance development if they face the possibility of being liable for abandonment.
The Government may want to keep the powers in clause 2 as a fallback position, but what is primarily needed is for the Government to take steps to ensure that the oil industry disciplines itself by establishing guarantees so that, come the day, everyone, including the Government, can be sure that each member of a consortium will be able to contribute its proper share of the cost of abandoning fields. That could be done without undue difficulty by the Government.
The House should give the Bill a Second Reading and then critically examine its contents in Committee.
§ Mr. Andrew Hunter (Basingstoke)
I am grateful to have an opportunity to speak on the Bill, even in what are, for Back-Bench contributions, the dying seconds. I do not regret that enforced brevity because most of the salient features of a Second Reading debate have been well rehearsed and there is little need for further repetition.
My overwhelming sentiment was expressed by the hon. Member for Merthyr Tydifil and Rhymney (Mr. Rowlands) when he said that he could detect no significant or fundamental matter of principle or dogma in the Bill and so we can approach the debate and subsequent deliberations on the Bill with an open mind and in a constructive way.
For my part, I am aware not so much of the immediate positive suggestions that I have to make, but of anxiety about two broad general areas. One, which has been mentioned a number of times, concerns the practice and principle of liability as expounded in the Bill. The second is my concern about the extent and arbitrary nature of some of the considerable powers bestowed on the Secretary of State.
With regard to the Bill's handling of the principle and practice of liability, I welcome my right hon. Friend the Minister's opening comments and the tone and terms that he used. He acknowledges that this must be the subject of further debate, and that is indeed the case. I support the comments made by my hon. Friend the Member for Rochford (Dr. Clark) when he turned his attention to that.
Some of the reasons for my concern about liability are to be found in clause 1. We there learn that even if a company were to abide by all the recommendations in an abandonment programme laid down by the Secretary of State—this is the great point—the company could, in perpetuity in some circumstances, be held liable. We have given some thought to the principle at stake and we have acknowledged that that could be of severe potential damage to companies. However, I am struck by the inconsistency between the principle expounded here and that which the House accepted only last June when we turned our attention to the Latent Damage Act and 60 discussed unlimited liability and propounded and accepted the principle of limited liability. Greater cause for concern about liability is to be found in clause 2. I need convincing that it is necessary to abandon corporate limited liability. I certainly need to be convinced of the need to extend liability in the way that the Bill proposes, especially as that applies to banks and finance houses. We are in danger of deterring investment and of moving into uncharted waters because, as I understand it, that is without parallel in other areas of corporate liability.
The second area for concern is the extensive powers given to the Secretary of State. I am surprised that Opposition Members did not give more attention to that theme. My hon. Friend the Member for Exeter (Mr. Hannam) referred to clauses 4, 5 and 6 and how the Secretary of State does not need to publish the criteria for his decision on whether to approve, reject, amend or even impose an abandonment programme. That is in contrast with existing law. Nor do we find in the Bill, as I understand it, provision for an arbitration procedure of the kind in existing licences.
Clause 14 compounds the matter further. The explanatory and financial memorandum says that clause 14enables any person aggrieved by certain specified acts of the Secretary of State to make application to the courts"—and so on. My understanding of that clause is that it limits the opportunities for remedy through public law rather than creates further opportunities. The arbitary powers proposed in the Bill perhaps reach something of a climax in clause 14, as they do also in clause 10 with the extensive reserve powers given to the Secretary of State. Hon. Members know how the offshore oil industry is expressing increasing concern about clause 10 and, indeed, about such powers altogether.
I welcome the Bill. There is no doubt about that. Some further work needs to be done on it and we must look to the Government for appreciably more explanation in Committee.
§ Mr. John Home Robertson (East Lothian)
The last occasion I remember the House debating the scrap metal trade was in relation to a whaling station in south Georgia. The transaction was not altogether happy for those concerned. Indeed, as far as I know, the scrap is still there and the unfortunate Mr. Davidoff has not even got his money back. Perhaps that is a cautionary tale about the importance of not neglecting the residue of industries which have died or are dying.
I rise to conclude the debate on behalf of the Opposition in my capacity as spokesman for rural affairs in Scotland. I do so because of the serious implications of the Bill for the fishing industry in Scotland. I intend to be brief because many important points have been raised and I want the Minister to have ample opportunity to respond to them in detail.
For all those concerned with the sea this is a disturbing measure. It could enable the Government to sanction irresponsible conduct by oil companies which may want to abandon unwanted equipment on the seabed. The Minister has a good reputation as a basically decent man. I hope that he does not mind me saying that. Indeed, he earned genuine credit in Scotland when in the 1970s he defied the present Prime Minister to support legislation to establish a Scottish Assembly and achieve better 61 accountability for Government in that part of the country. To many of us it seems that the Minister is selling himself short on this measure.
The measure is the legislative equivalent to a blank cheque—something like a blank Bill—and many gaps must be filled in Committee. It was interesting that so many hon. Members on both sides of the House emphasised the need for more information about the way in which the enabling powers would be operated and that my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) found an unlikely ally in the hon. Member for Billericay (Mr. Proctor) in suggesting a special Standing Committee to obtain more information about the way in which the Bill would operate when enacted.
The Minister referred to his consultations with the Scottish Fishermen's Federation last week. He knows that it is far from satisfied with those consultations. Indeed, it is genuinely worried about many possibilities raised by the Bill. The Bill foreshadows the beginning of the end of Scotland's oil era. Despite all the hopes raised by the discovery of North sea oil, so far the Government have managed to spend all the oil revenues on the additional cost of unemployment.
In Scottish terms, we now have a premature slump in the oil economy because of the Government's failure to run a sensible depletion policy. To add insult to injury, the Scottish fishing industry, which has been severely disrupted by the oil industry in the North sea, will be left with a vast obstacle course of sawn-off oil rigs and disintegrating pipelines strewn over the fishing grounds. All that is despite the assurances given by the Government and the oil industry at the beginning of oil developments in the North sea.
Fishermen have co-operated to the full with the Government and the industry throughout and now it appears that the Government and the industry may leave them with less than they were entitled to expect at the outset. It has been acknowledged by hon. Members on both sides of the House that fairly substantial profits have been made in the North sea by the industry and the Government. I acknowledge that the cost of clearing up the mess will be substantial. The Minister suggested that it could be as high as £6 billion. However, it should not be too much to ask the oil industry to take account of its responsibility to clear up the mess that it made after it has finished the operation. Indeed, that was acknowledged by the hon. Members for Exeter (Mr. Hannam) and for Bedfordshire, North (Sir T. Skeet).
We understand that the Government intend to cut the cost of that operation, perhaps by £2 billion, by allowing the oil companies to leave much of their scrap where it is, some with only 40 m of clear water above it. The hon. Member for Rochford (Dr. Clark) described that as environmental vandalism and he is right. We have severe doubts about those proposals and should like to consider them in proper detail in Committee.
Certainly, to saw off oil rigs in that way would present serious hazards for any semi-submerged cargoes that ply those seas in future. It will certainly create a fine old obstacle course for submarines, as the hon. Member for Gordon (Mr. Bruce) suggested. Above all, it will leave a dangerous and costly minefield for fishermen in valuable fishing grounds. I should not need to tell the Minister about that, or about the importance of the fishing industry to the economy of many communities on the east coast of 62 Scotland—indeed around the coasts of Scotland and England—because he represents the constituency of Kincardine and Deeside where there are many fishermen.
Our fishermen have been able to work their way around the oil and gas installations. We do not know whether there are 139 or 144. That is one of the important questions raised by the debate. When they are above the water they may be seen, and while the pipes are still in good order, the fishing industry has been able to live with the obstructions. But if the rigs are sawn off or toppled over, they will become invisible and as the years go by the rigs and pipelines will disintegrate and sections will shift around the sea bed because of the currents in the North sea, so the fishing industry, in particular, is entitled to ask for certain assurances and information from the Government.
The first question is whether those sub-sea obstructions will be marked and propertly charted, and, if so, who will be responsible for doing that and ensuring that fishermen and mariners are aware of their presence underwater. The second question is what compensation fishermen will have for the loss of their fishing grounds, if significant areas must be put out of bounds because of the risks to fishermen and their gear. More important, what provision will be made for compensation for the loss of gear when it is fouled in those obstructions? Most important, what about the risk to human life and limb?
I am not being alarmist. There was an incident two years ago when the fishing vessel, Mhari L, from Kirkcudbright, fishing in the Irish sea, went down and lost all its crew because the gear was caught on an undersea telephone cable. If that can happen as a result of gear being caught in an undersea telephone cable, imagine how much more danger there must be from massive unmarked structures, such as oil rigs and pipelines on the sea bed. We must accept that that could happen as a result of abandoning oil and gas equipment.
The Minister knows and we know that the SFF wants all the scrap to be moved from the sea bed. I do not necessarily suggest that that is reasonable or practical, but I share the federation's serious misgivings about the lack of genuine consultation. That is one job that the Committee can do, particularly if it constitutes itself as a Special Standing Committee. It can undertake proper consultations with all the interests concerned.
I tend to take the view, which has been expressed by many hon. Members, that the decommissioning of plant should be covered by the conditions of the licences to develop the oil reserves and should be included in the budgets of the oil companies involved in those operations.
I am deliberately being brief because it is important that the Minister has a proper opportunity to reply. The Bill seems to be a shameless enabling Bill. It provides far too much leeway for Ministers, the Government and, possibly, the oil industry. It undermines some useful principles which are at present enshrined in the 1958 Geneva convention. It appears to us that the Government are selling short important Scottish interests.
That reinforces our determination that the Labour party will establish a Scottish Assembly to protect Scottish interests better in future. It is a pity that the Minister no longer supports that principle. However, I hope that he will take this opportunity now, and future opportunities in Committee, to provide much more information about the Government's intentions in respect of the fishing industry and other maritime interests in the North sea. I 63 hope that he can allay some fears which have been expressed by his hon. Friends and Labour Members when he replies to the debate.
§ Mr. Buchanan-Smith
With the exception of the speech of the hon. Member for East Lothian (Mr. Home Robertson), there has been a constructive approach to the Bill. When the hon. Gentleman has to resort to saying that the Bill is selling Scotland short and other such phrases, he does not reflect the earlier part of the debate to which hon. Members on both sides of the House contributed. If the hon. Gentleman had carried out a proper study of what the Bill involves and had consulted the various interests, he would recognise that his speech did not reflect fairly the issues with which we are concerned.
I accept what the hon. Member for East Lothian has said about the importance of fishing interests. I hope that the hon. Gentleman will listen to me instead of talking to the hon. Member for Bradford, South (Mr. Torney), bearing in mind that he asked me to reply fully to the debate. There is probably no Member of this place who has been more involved in fishing issues over a longer period than I have. I do not think that I require any lessons from anyone on the importance of the fishing industry to Scotland and the whole of the United Kingdom. I am concerned that in a Bill such as the one before us we ensure that fishermen's interests are taken into account. That is why on two occasions I have met representatives of the fishing organisations to discuss our policy towards abandonment and work preparatory to the Bill.
I recognise entirely the interests of fishermen and shipping generally as well as the navigational interests that have been expressed. I hope that the hon. Member for East Lothian will acknowledge the interests that Scotland has in the oil industry. It is clearly a major Scottish interest. We must bear in mind those who operate in Scottish waters, those who are employed on platform rigs and other installations and those who are employed on shore. The hon. Gentleman has acknowledged that there is a balance of interests, although at one stage it seemed that he was speaking at one level of interest and one only. We are seeking to balance the different interests which he and others have described.
It has been acknowledged throughout the House that where we are dealing with an operation that will be so expensive it is important that we do not interfere with other legitimate interests in the sea. Against that background, however, it is only sensible to explore ways in which the cost of the operation can be diminished without putting at risk other serious long-term interests. I would have been a little happier with the hon. Gentleman's remarks if he had acknowledged that.
A large range of issues has been covered in the debate and I shall endeavour in the time that is left to me to deal with some that come within it. The issues are varied and numerous and some of them will be more appropriately taken up in Committee, and I hope that we shall have the opportunity to do so. I assure the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) that I approach our consideration of the Bill in Committee, as I have for other measures, in a constructive way. I hope only that the hon. Gentleman is more successful, when we 64 deal with this Bill, than on previous occasions in tabling amendments that are constructive, and persuading me of the way in which improvements could be made.
I endorse what was said by a number of hon. Members, including my hon. Friends the Members for Bedfordshire, North (Sir T. Skeet) and for Exeter (Mr. Hannam) and the hon. Member for Gordon (Mr. Bruce), in underlining what I said initially about abandonment and our approach to it. I reject what the hon. Member for East Lothian said about the industry's future. I do not regard abandonment as the beginning of the end in any sense. The industry has a long future in the exploitation of our own resources. It has an even longer future if we are successful in continuing the investment that we are now making in building up a supply industry that can aspire to be competitive worldwide, especially as a leader of new technology. Far from being the beginning of the end, we are preparing for a new phase. That is all that we are doing.
As I said at the beginning of the debate, and as others on both sides have reiterated, we have the opportunity to build up new technology and a new industrial capability that will provide jobs and business for Britain for many years to come and in many different parts of the world, and not merely in our own territorial waters.
I shall address myself to some of the central issues of the debate, some of which were referred to by the hon. Member for Merthyr Tydfil and Rhymney, but before doing so I shall take up a number of the detailed issues. My hon. Friend the Member for Bedfordshire, North spoke of the clause relating to Northern Ireland and asked whether the Isle of Man would fall into that category. Licensing the Isle of Man's territorial waters falls to the Government of the Isle of Man and not to my Department. As far as I am aware, no licences have yet been issued in that area of sea.
My hon. Friend made some extremely interesting and constructive comments about tax revenues and tax treatment on abandonment. I think that he was rather ambitious in what he said about the Government's tax take overall. It is much lower than 85 to 90 per cent. The most profitable fields pay a marginal rate of about 86 per cent. and some of the new and smaller oilfields will be paying as low a rate as that of corporation tax, which is 35 per cent. I hope that the discussions that the oil industry will be having with the Treasury and the Inland Revenue on possible tax treatment will prove useful. The principle is accepted that the costs of abandonment are properly to be set against tax in the same way as the costs of development.
My hon. Friend the Member for Bedfordshire, North explained that there are other approaches, and one has been mentioned by the oil companies as an alternative. The companies have drawn attention to the grant system, a system that has been considered in Norway. I accept that that approach can be considered here. I feel, however, that allowance against tax is probably the more appropriate approach given our background, but there will be discussions on tax matters. I hope that my hon. Friend will forgive me if I do not deal in detail with the comments that he has made on taxation, which involve matters more appropriate for consideration by my right hon. Friend the Chancellor of the Exchequer. I shall ensure, however, that the Treasury is aware of the point that he has raised.
The hon. Member for Wentworth (Mr. Hardy) spoke of the practical consideration of metering and asked for clarification. The Bill's provisions apply to existing fields 65 and existing licences as well as new ones. These provisions will apply to the new fields within the licences and there is no intention of requiring a licensee to alter the method of measurement that is agreed for an existing field, except where he proposes to make use of the measurement facilities for existing fields in measuring petroleum that is won and saved from another field. I do not think that our proposals will give rise to a large amount of unnecessary expense.
§ Mr. Hardy
The Minister will accept that, as schedule 1 stands, implications exist for the development of satellite platforms, which he knows will play an important part in the recovery of small reserves of gas. I hope that he will consider the matter to ensure that that development is not inhibited by this structure.
§ Mr. Buchanan-Smith
Of course I will consider that point. I was trying to say that schedule 1 will not inhibit that. If it did, I would be worried, as we are not seeking to inhibit any activity but rather to encourage it.
My hon. Friend the Member for Rochford (Dr. Clark) asked me a specific question regarding what would happen if, between today and the passage of the Bill, a company abandoned a platform. That is an important point. As I mentioned earlier, powers are available to prevent that. All platforms have required consent for their emplacement under the Coast Protection Act 1949. A condition of that consent is that a platform must be removed to the satisfaction of the Secretary of State when it is disused. Powers also exist under model licence clauses which provide that the licensee shall not abandon any well without the consent of the Secretary of State. Back-up powers exist. It was because of questions about the adequacy of those powers and their unspecific nature that we introduced the Bill.
I hope that as we proceed with the Bill no abandonments will occur and that it will not be too long before the Bill reaches the statute book.
The hon. Member for Greenock and Port Glasgow (Dr. Godman asked some detailed questions about the adequacy of safety zones. The 500 m zone is that which is allowed under the convention on the continental shelf. There is no evidence, so far as I am aware, that it does not provide, in normal circumstances, adequate protection. The hon. Gentleman asked from what level of tide one would measure clearance. I am told that it is the lowest astronomical tide. I hope that that answers his question.
The hon. Member for Greenock and Port Glasgow asked me an important question about environmental impact. Until now, that has been covered by conditions in the licensing rounds. For example, in the 10th licensing round we proposed to license some blocks close to the shore of the Moray firth. That is an example of an environmentally important area. We are imposing specific environmental conditions regarding blocks in such areas. We are rightly sensitive to the issue of environmental impact.
On the standards that we might require for the total removal of a platform as against its partial abandonment, the hon. Member for Greenock and Port Glasgow asked a specific question regarding the American experience. He is correct on that point. The Americans require total removal, but one should be careful when making a comparison between different countries because the Americans require removal in relatively shallow waters 66 where platforms can be fairly easily removed—conditions akin to our southern basin. In our discussions with the oil industry and fishing interests in areas where the water is shallow and the structures are smaller we, too, would envisage total abandonment of the platforms—
§ Mr. Buchanan-Smith
I stand corrected. In those circumstances, one would envisage the total removal of the platforms.
§ Mr. Buchanan-Smith
There is not much time left. I shall be happy to return later to any specific query the hon. Gentleman may have.
I shall now mention what I regard as the more fundamental areas of the Bill on which anxiety has been expressed. The hon. Member for Merthyr Tydfil and Rhymney and others fairly made the point about consultation. They asked what consultation had taken place up to now, how detailed it was and what consultation would take place in the future under the provisions of the Bill.
One must make a distinction here between two different elements in the Bill. One element is the general procedures and framework which we are setting up to clarify precisely the Government's powers, and the other is the general liabilities of the oil companies so that we may proceed to more careful planning regarding abandonment. Until now, the consultations have taken place in the latter direction.
The hon. Member for Merthyr Tydfil and Rhymney was especially critical of the fact that, during the more detailed consultations, we had not spelt out more specifically the extent to which removal would be considered necessary, and whether it should be total or partial. We have not yet reached that stage. That stage will be reached when regulations are introduced under the powers of the Bill and discussions on them take place. That distinction must be made because of the approach that we have chosen. It is the right approach. I defend it again, as I did at the outset. We are dealing with what will occur some years in the future. The legislation enables people to focus on the problems and tackle and discuss them in a much more detailed way within their proper framework. But no matter how much general consultation there may be, the position will still develop and evolve in the light of experience, not least in the light of what happens in relation to international agreements, as the hon. Member for Merthyr Tydfil and Rhymney correctly drew to the attention of the House.
The approach that we have adopted on some major issues, making it clear where we stand but leaving open the matter of further consultation as to how the precise provisions will apply in the case of abandonment, is much more appropriate to the problem that we must tackle.
Clause 11 deals with the regulations on the consultations with the interests involved. I envisage that fishing interests will be covered by those regulations. I will check the position, but the words used in that clause are precisely those used under present legislation when fishing interests are consulted. The legal obligation for proper consultation when the regulations are introduced is written into the clause. However, I am sensitive to the point that, if we are to approach the matter within the 67 framework of the regulations which will be introduced later, and if we shall require companies to produce plans and programmes for the abandonment of structures case by case—I would expect that this could be laid down by the Secretary of State in the requirement that he makes for the programme—consultation should take place. How that is done formally is a subject which I would be happy to return to and discuss. I intend that those consultations should take place at that stage case by case. Precisely how we shall give effect to them may be more appropriate for discussion in Committee. I will be happy to return to it later.
§ Mr. Bruce
Will the Minister acknowledge that the fishing industry believes that the abandonment of platforms is not the same as their installation? It seeks a right of consultation and wants its views to be taken into account. That is a stronger right than its rights in the discussions relating to the installation of fields.
§ Mr. Buchanan-Smith
I am in no doubt about the strong feelings of the fishing industry. I am under no illusions about it. At present, all the fishing organisations support total removal and nothing less. That is the official and public view of the fishing organisations. I do not wish to mislead the House in relation to that.
I hope that in the further consultations that take place the industry might be prepared, without prejudice to its stated position, to consider what other alternatives might exist in relation to partial abandonment, in which its interests might not be grossly interfered with or affected in any major way and where cost savings might be achieved. In that sense, I have invited leaders of organisations to enter into further consultations on what we should do.
Much of the debate has centred on the liability of the oil companies to discharge their obligations. I am grateful to hon. Members on both sides of the House for supporting the principle that it is correct for the Government to ensure that a company does not walk away from its responsibilities.
I hope that all companies, particularly the larger international companies, will live up to their responsibilities. But there is always a risk that a company could, for example, bankrupt its United Kingdom subsidiary at the time of abandonment, thus causing the cost of abandonment to fall on the British taxpayer. Hon. Members have all said that that would be wrong, so the Government are right to legislate for that. Indeed, my hon. Friends the Members for Bedfordshire, North, for Exeter, for Rochford, for Billericay (Mr. Proctor) and for Basingstoke (Mr. Hunter) all made that point. Thus, if there are alternatives, I am prepared to consider them with those interests representing the oil companies.
68 This measure is not without precedent, and I should not like any hon. Member to think that it was. If, for example, banks lend to a company, they may require a parent company guarantee or other security. Equally, in the case of a small company, the bank may require a guarantee or other security to be provided by the directors. Therefore, there is a precedent in normal commercial affairs. Furthermore, in the case of large construction or supply contracts, the customer may require performance bonds or guarantees fom the supplier's parent company. Thus, there is a precedent in the commercial world for wider responsibility being required.
Under the Insolvency Act 1985, wider responsibility is also required in the case of a company's wrongful trading. But notwithstanding that, I assure the House that as long as the objective is achieved, I am prepared to consider any practical approach.
We have had a good debate on the Bill. I apologise to those hon. Members who raised detailed points that I have been unable to respond to in the detail that is my custom because of the shortage of time. But I am grateful to hon. Members for the general welcome that they have given the Bill, and I look forward to a very constructive and improving Committee stage. In that spirit, I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).