ENERGY BILL [H.L.]

HL Deb 12 April 1976 vol 369 cc1884-965

2.46 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of ENERGY (Lord Lovell-Davis)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, that the House do now again resolve itself into Committee.—(Lord Lovell-Davis.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 3 [Implementation of reserve powers]:

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 7:

Page 3, line 20, at end insert— ( ) (a) If an Order is made by virtue of subsection (1)(a) of this section, then without prejudice to the remaining provisions of this section the Order shall be subject to annulment in pursuance of a resolution of both Houses of Parliament; and (b) any such Order shall expire at the end of the 12 months beginning with the date on which it was made but may be replaced by a further Order to the same effect and such further Order shall be subject to annulment in pursuance of a resolution of both Houses of Parliament.

The noble Lord said: The main part of our deliberations today will again be devoted to the so-called "gas clauses" from Clause 8 onwards, and I shall try to be brief in dealing with the Amendments prior to that. The first Amendment again addresses itself to the problem of Parliamentary control over the exercise in an international emergency of the Secretary of State's discretionary powers set out in Sections 1 and 2. As things stand at present, once an Order in Council is in force under Clause 3(1)(a), only orders made by the Secretary of State under Section 1 are controlled in this way. The Order in Council itself and the directions given by the Secretary of State under Section 2 are not reviewable by Parliament at any time. When one considers the effect which the exercise of the powers in Clause 2 could have on the whole of industry in this country, we feel that some review procedure is necessary and, since these directions are not technically amenable to Parliamentary review, the Order in Council itself should be scrutinised. This is what the Amendment purports to do.

A Parliamentary review is needed far two principal reasons. The first is to ensure that the way in which the Secretary of State's powers are being exercised is wholly and solely consistent with the United Kingdom's international obligations. This is a point which we have already raised, and which arises again several times in this Bill. The second reason is that we want to ensure that the Secretary of State ceases to exercise these very wide ranging powers when the emergency is at an end, and when the need for the powers under international law has terminated. The way in which this whole Bill has been arranged and drafted is, in itself, an example of the danger of an abuse of power by a Government.

As the Bill is drafted, an Order in Council made under Clause 3(1)(b) has to be reviewed by Parliament when it is made and then again 12 months later. We would argue that unless, by the passing of this Amendment Parliament is given the opportunity to debate, to question and, if necessary, to overrule the Secretary of State, there will be no control available over these Orders in Council and, in consequence, no questioning of the positively alarming powers under Clause 2. On the whole, we believe—I am sure that all noble Lords will go along with us—that Parliament is a better custodian of this country's international obligations than a Minister acting on his own, however well advised he may be. Therefore, I beg to move.

2.53 p.m.

The MINISTER of STATE, SCOTTISH OFFICE (Lord Kirkhill)

Like the noble Lord, Lord Strathcona and Mount Royal, I shall attempt to be as brief as possible, because today will be a heavy one and considerable debate must follow as we move nearer to Clause 8, and perhaps beyond. It would not be proper for Her Majesty's Government to undertake international obligations, unless assured powers were available for their implementation. It is therefore right for all the necessary powers to be obtained from Parliament before any occasion arises for the obligations to be fulfilled. In the present case, the circumstances requiring the full range of powers granted by Clauses 1, 2 and 4 will be the declaration of an oil supply emergency by the IEA or the EEC, giving rise to an obligation on all Member States to put into effect joint emergency measures to meet the crisis. In these circumstances, the necessary Order in Council will, of course, be laid before Parliament but the Government could not guarantee that an opportunity would be available for further Parliamentary debate.

Moreover, the Government see it as important to be able to act independently of a time-frame such as an Order in Council expiring 12 months later. Such a provision would take us back more or less to the position under the Fuel and Electricity (Control) Act 1973 with its renewal of powers every 12 months, which, it is considered, was an unsatisfactory basis for any Government to act upon in fulfillment of international obligations. For that reason, I would ask your Lordships to resist this Amendment.

The Earl of LAUDERDALE

Does the noble Lord agree that it comes strangely from a former Provost of the great democratic city of Aberdeen to defend anything which is not 100 per cent. democratic? Here is a situation where the Government have said that they must be independent of the time-frame of 12 months, and where they could not guarantee the opportunity to debate an Order in Council. This is a most extraordinary suggestion and, with respect, not altogether worthy and not what one would expect of the noble Lord, Lord Kirkhill, with his unimpeachable democratic background. We need to be absolutely certain that the Secretary of State is wholly and solely within the ambit of the emergency as laid down by the international agreements concerned, and does not stray from it one little bit in terms of time or scope. Of course, it will be argued that this is necessary; that the wider powers and the greater flexibility are needed by the Government in the name of conservation. As a Conservative, I have sometimes been surprised at the breadth of meaning given to "conservation" or for that matter to "conservatism".

When the noble Lord says that it would be quite wrong to enter upon international obligations without first being sure that the Parliamentary powers were there to enable those obligations to be undertaken, he is surely putting the cart before the horse. In a number of cases, this country has undertaken international obligations—the Japanese Treaty of Peace Act 1951 is one case, and the Austrian State Treaty Act 1955 is another—and only afterwards were the Parliamentary powers sought and required. In any case, the courts in this country are not interested in a treaty. They are interested in the rights of the citizen which are enshrined in Parliament, and any infringement or limitation of those rights has to be laid down by Parliament.

If I understood him aright—and I do not want to prolong the debate at this early stage, in view of more controversial matters that are to follow—the noble Lord said that a situation might arise when it would be inconvenient to the Government to be restricted by the Parliamentary time-scale, or that the Government might not be able to find time in Parliament. But when, in an emergency, cannot the Government of the day find time to debate a matter of importance? If they cannot, then they should go to the country, and perhaps that is what will happen in any event. But they have no right to say to Parliament, "We are not quite certain of being able to find Parliamentary time for debating an Order in Council, and certainly we cannot be restricted in the way that the Amendment suggests." I can only say that I find that extraordinary language coming from one whose democratic background we respect. He and his noble friend will know that I am most pacific in my intentions, and I am not trying to stir up trouble prematurely.

Lord KIRKHILL

If I may respond very briefly to the noble Earl, Lord Lauderdale—and of course, as a former Lord Provost of Aberdeen, I hope that my democratic concept is at a high level—I would emphasise that I am conscious of the fact that the democratic process must always be paramount. But we are talking of a crisis emergency, and I am advised that legally the procedure proposed in the Amendment would not enable us satisfactorily to meet our IEA and EEC obligations. The Government need power to act immediately upon the declaration of an emergency by the IEA or the EEC—for example, to implement an oil emergency scheme and a demand restraint programme—in the certain knowledge that the Order in Council would remain valid. I think that is the reasoning behind the Government's position.

The Earl of LAUDERDALE

We accept the reasoning, but if an order is subject to annulment in pursuit of a Resolution of both Houses and if it expires at the end of 12 months, surely it does not infringe the Government's proper executive freedom of action. It is subject to Parliamentary approval. Could the noble Lord undertake to look again at this point? I do not wish to prolong unduly the argument, but the position is not very satisfactory. The Amendment states that the order, shall be subject to annulment in pursuance of a Resolution of both Houses of Parliament. It is not asking for a resolution of both Houses to make the order; the order is subject to annulment afterwards. Therefore, the incidence of the emergency does not affect the argument. On the limitation of 12 months, is it so difficult for the Government to control their timetable that they cannot find time later on to allow debate on these subjects? Would not the Minister concede that at least it is worth looking again at this matter, without necessarily undertaking to come back with a different wording?

Lord KIRKHILL

I am a Scottish Minister paying, as it were, an itinerant visit to the Department of Energy. However, so far as the orders under Clauses 1 to 4 are concerned, may I assure the noble Lord that they are subject to the Negative Resolution procedure. Once an Order in Council had been made, the detail of these orders could certainly be a matter for proper Parliamentary debate.

Lord HAWKE

Would the noble Lord say exactly what obligations the other EEC countries are assuming in pursuance of this aim?

Lord KIRKHILL

I cannot be specific, but I can confirm that in the meantime discussions are taking place.

Lord STRATHCONA and MOUNT ROYAL

Even making allowance for the itinerant nature of the Minister's presence here today, we are bound to find his reply rather disappointing. My noble friend made the point that we are looking only for a Negative Resolution. This kind of point will come up time and again this afternoon during the course of the passage of the Bill, and I am bound to say that I take it as a rather unpromising start to our deliberations that the Government are digging in so firmly behind the ramparts. However, we do not want to prolong unduly this debate. While reserving the right to come back again to this point on Report, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.4 p.m.

Viscount LONG moved Amendment No. 8: Page 3, line 36, leave out ("12") and insert ("3").

The noble Viscount said: With the leave of the Committee may I take together Amendments Nos. 8, 9, 10 and 11. Returning again to the emergency powers, these Amendments deal with subsections (5) and (6) of Clause 3. As my noble friend has already mentioned. Section 3(1)(b) relates to an order made in an emergency in the United Kingdom. Unless the order is revoked under subsection (4), it may be continued by Parliament the year after it is made and at annual intervals thereafter. In these orders we are seeking to shorten the time from 12 to 3 months.

It is important to recall that in 1973 the United Kingdom was facing a somewhat vicious crisis and that powers had to be introduced under the Fuel and Electricity Control Act. At that time the United Kingdom, with the rest of the world, was being held to ransom by the oil barons. We were slowly being starved of urgently needed fuel, and industry was becoming very worried. In 1973, therefore, the then Conservative Government introduced temporary powers to deal with the situation. I hope that it will never again be necessary to use those powers. I hope that by the time this Bill is passed my noble friends and other Members of your Lordships' House will have produced a Bill that looks something like a Bill and that we shall not have to face again such troubles as starvation of fuel. However, we might have to deal with another problem. We must always look to the future and be prepared for what may come. The United Kingdom has become a party to the International Energy Agreement and also a member of the EEC, and we are seeking to amend subsections (5) and (6) to read "three months" instead of "12 months". When the Minister answers, I wonder whether he could assist us by saying what other emergencies he envisages within the next 12 months. Does the Minister visualise further violent strikes as a result of industrial problems? If so, certainly we need to correct this Bill and not to have it so upside down as it is. I beg to move.

Lord KIRKHILL

The Government consider that to deal effectively with a severe domestic energy emergency—and such an emergency need not involve, as has just been suggested, the question of strikes; it might lead, for example, to the introduction of motor fuel rationing— the introduction and successful operation of such measures is possible only if the requisite powers are available for some length of time. To the Government this seems to be an eminently sensible provision. The Amendment proposes that the emergency powers should endure for a period of only three months. I suggest that such a period fails to take account of the special requirements of an energy crisis. As has been mentioned, the last Conservative Administration provided in the Fuel and Electricity Control Act 1973 for emergency powers to be exercisable for a period of 12 months without further Parliamentary review. The Bill as drafted does no more than continue that policy in relation to domestic energy emergencies. It should be borne in mind that the effects of a disruption of energy supplies could persist for some time after the cause of the disruption had ceased to operate. The Government consider that a 12-month period strikes a reasonable balance between the need to provide powers sufficient to manage a domestic energy emergency and the need to ensure that emergency powers are not exercisable for undue periods without Parliamentary control. This is the Government's position, and therefore they wish to resist the Amendment.

Lord DAVIES of LEEK

I agree with the Government that there should be a 12-month period, particularly when one thinks of the physical problem that used to face the Ministry of Social Security in producing quickly an increase in pensions, and also the physical problem of producing ration tickets. I know that the period of time needed is much more than three months. I am not so concerned about the limitation of democracy by taking a 12-month period; I am much more concerned that the Government may not be their own masters when one considers their position in the IEA and the EEC. No longer is it a question of the old adage civis Romanus sum We may have to face the problem of doing what Brussels tells us to do because we have accepted the Treaty of Rome. However, my noble friend the Minister is right in asking for a period of 12 months, because that is a common sense period in which to produce the artefacts needed to introduce rationing or other measures.

Lord HAWKE

I do not believe that argument is valid because I think the Government would have to have the documents ready before they imposed the period. I would perhaps agree that three months is a little on the tight side but I should have thought that six months was ample.

Lord SOMERS

Would the noble Lord not agree that a condition of emergency very seldom lasts for longer than three months? Would he also not agree that a period of three months can be prolonged to 12 months quite easily whereas one cannot shorten 12 months to three months?

Lord KIRKHILL

Initially at least let me assure my noble friend Lord Davies of Leek that the Government view proposals from the IEA or the EEC with a robust sense of judgment and will of course represent very clearly this country's interests in these protracted and continuing negotiations. As to the point raised by the noble Lords, Lord Hawke and Lord Somers, I can only say that this is essentially a question of judgment. Certainly on the example I gave earlier, that of motor fuel rationing, considerable administrative difficulty occurs in the initial stages. I concede that one could argue that a period of six months seems to be reasonable. Against that the advice I have—and the Government have consulted widely on this matter—suggests that 12 months would be the appropriate period and, given all the administrative difficulties, the Governmenst must stand on that period.

Lord WYNNE-JONES

Is it not clear that the sort of emergency that can arise within the country—which is what we are discussing now, and not an emergency imposed from outside—is one which is likely to involve such matters as the stocks of coal? When one is dealing with stocks of coal I should have thought it was difficult within a period of three months to be certain that one has got the stocks back to the point required. As the noble Lord, Lord Hawke, has said, it may well be that six months is possible; but if this Committee is going to spend its time arguing whether we should have three, four, five, six, seven, eight or any other number of months we shall be here a very long time. I should have thought the Government proposal for 12 months was not an unreasonable one. In fact, if a period of 12 months was considered necessary by the noble Lord, Lord Strathcona and Mount Royal, in connection with the previous Amendment, I do not see why we should suddenly move to three months now. I think it would be better to leave it at 12.

Lord HAWKE

Why are we suddenly shifting to coal? I did not know this Bill was about coal.

Viscount LONG

We have had a lengthy discussion on these Amendments, and replying to my noble friend Lord Hawke, I am afraid that this Bill involves coal as well as electricity, oil and all the rest. If the noble Lord will look further into the Bill he will probably find that coal is mentioned. I am disappointed that the Government do not want to go along with this idea because I should have thought that since 1973 the Government would be ready to move into action when an emergency takes place. I should have thought three months was ample for the Government in this case. However, having heard from different sides of the Committee that it might be well to have six months or a year, although my own opinion is that three months is sufficient, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.15 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 12:

Page 3, line 45, at end insert— ("(7) Where an Order in Council has been made pursuant to subsection (1)(b) of this section the powers of the Secretary of State to make orders under section 1 and give directions under section 2 shall not include power to regulate the price at which crude liquid petroleum or natural gas may he supplied.")

The noble Lord said: This Amendment covers a slightly different point from the last one. The Bill as it stands permits the price control of petroleum products, crude oil and natural gas whenever an emergency obtains, whether it he domestic or international, and what we are seeking to do here once again is to try to separate these two different situations. The Amendment seeks to remove the powers of price control over crude oil and natural gas in a purely domestic emergency. Under the International Energy Agency—the IEA—Article 10 clearly talks about supplies of oil being switched between the participating countries which have centrally determined prices and it is accepted that price control may be needed to honour our obligations under this provision. But at the moment we fail to see why similar powers are needed for a domestic crisis of the kind envisaged by Clause 3(1)(b) which seems to us to cover a totally different state of affairs.

First, there is no international obligation to use powers which are of relevance to this particular clause. Secondly, there is a perfectly straightforward practical difficulty in that the Government would appear to be trying to control the price of imported crude oil when they have not got control over what the seller is doing. In other words, any control over a United Kingdom company in these circumstances would logically involve the Secretary of State in directing a company to break its international contractual obligations, and this hardly seems justified in the circumstances. Thirdly, if the Government were to use the powers under this clause to force the price of domestic crude sold on the United Kingdom market below the level which they would obtain if they were exporting to the EEC, then this would distort the EEC market and surely then we should be open to incur the displeasure of our partners in the EEC.

Fourthly, the price of natural gas is at present determined by negotiation between the producers and the monopoly purchasers—the British Gas Corporation—and arising out of these negotiations binding contracts exist which contain escalation clauses. If the Government take control over the pricing of natural gas, which is what they appear to be doing, would this not be tearing up binding contracts concluded by a statutory body in a position to exercise monopolistic power? One can only say that to insist upon these apparently unnecessary provisions to deal with a domestic crisis the Government are once again seriously undermining the already rather wobbly confidence which the industry feels in the good faith of the Government. Therefore I beg to move Amendment No. 12, which incidentally was alluded to when we first mentioned Amendment No. 4 last Thursday. I beg to move.

3.20 p.m.

Lord KIRKHILL

The Amendment, if approved, would deprive the Secretary of State of the power in a domestic energy emergency, that is to say, when an Order in Council has been made under Clause 3(1)(b), to regulate the price at which crude liquid petroleum and natural gas may be supplied. As your Lordships will know, this power is contained in Clause 1(2) of the Bill. The Government cannot accept such a limitation on its powers in these circumstances. My noble friend Lord Lovell-Davis explained on Second Reading that these powers are very similar to those in the Fuel and Electricity (Control) Act 1973—an Act passed by the previous Administration—and the closely circumscribed situation in which the Government see them as being necessary.

It should be emphasised that the Government cannot foresee exactly what might need to be done in a future domestic energy crisis, but on the occasion of such a crisis I cannot believe that taking powers such as are envisaged here would, as has just been suggested, in any way affect the Government's relationships and the mutual confidence evident between Government and the oil companies concerned. In fact, the price control powers might not be needed at all. But in the most severe emergency it is very likely that prices would need to be regulated as, for example, part of a stringent demand restraint programme, and these powers must, in the view of the Government, extend to all petrolem-derived substances, so that control of price may, if necessary, be extended both to the retailing of products and to crude oil. It is for that very concise and cogent reason that the Government would resist this Amendment.

The Earl of LAUDERDALE

Perhaps the noble Lord opposite would help us a little. I was following him until he said these powers might not be needed; but if they were, it would be in the event of a stringent demand control programme. Is the noble Lord saying that the powers to control price are to be used to keep down the price, or to send it up? Surely not to send it up? If, then, the power is to keep the price down, will that not exaggerate this stringent emergency that the noble Lord is foreseeing?

Lord KIRKHILL

It might be to keep the price constant. Certainly under the Fuel and Electricity (Control) Act the price of paraffin has been kept down. and so I think that leaves the options open to the Government of the day.

The Earl of LAUDERDALE

Just for clarity let me at once say that because an Act was passed by the Government I have generally supported, it does not follow that I supported it. I resisted adhesion to the European Community, so we will leave that argument aside as to who did what, and when. If the purpose of the powers is to keep down prices in an emergency, then surely the likely effect of the powers is only to bring about a black market situation on the one hand, or the need for rationing on the other. If the purpose is to put up the price, and therefore discourage over-exaggerated use, surely the emergency would do that anyway; so either way the power is not needed.

Lord KIRKHILL

I think it is impossible to be specific in replying to the noble Earl, Lord Lauderdale, because Government at this time, or indeed at any time prior to the onset of the emergency, do not quite know the full extent or ramification of such an emergency, and therefore Government do not know what sort of overall policy at the point of emergency they should apply. So Government need these rather wide-ranging powers, as I have been trying to emphasise. In passing, I should also make the point that this type of power has been taken by quite a number of oil-producing countries.

The Earl of LAUDERDALE

Why do not Government therefore take powers for rationing as well?

Lord KIRKHILL

Because at this time Government do not see that such a need would be relevant. They cannot bind their future position, and must have a wide-ranging power.

The Earl of KINTORE

I am worried about the side effects on feed stocks. In the plastics industry, the fertiliser industry, the making of pipes and so on, very often those concerned have gone into long-term contracts, and if you "monkey about" with the price of the feed stocks, they do not know where they stand. From that point of view it is entirely unreasonable to keep jumping about with prices. We have seen the situation in the nationalised industries. Consider the price rises in the Post Office, on the railways, and so on—nobody knows where they are. To do the same thing in regard to the major supply of feed stocks to 14 or 15 different industries in the country is very bad policy.

Lord KIRKHILL

Government are talking about a crisis situation at this stage, a hypothetical position. I do not think it has been asserted, from this side at least, that there is any suggestion that we should jump about in an improvident manner regarding prices.

Lord WYNNE-JONES

Does not the argument that feed stocks ought to have their price kept steady completely justify the powers proposed by the Government? An emergency situation in which, through one accident or another, the price of feed stocks on the market might vary considerably, could be quite harmful for the petrochemical industry, whereas if the Government have the power to control the price, they could prevent such erratic behaviour. For this reason alone, I think it would be desirable for the Government to have this power.

Lord HAWKE

Would the noble Lord the Minister tell us what powers the EEC countries have in this respect? One can well see a case arising where the United Kingdom might claim that there is an emergency and would try to control the price of oil here. But if it was not controlled in the EEC, the oil would flow over to them. If the EEC and Britain were all subject to price control, they are such an important bloc of world markets that oil would probably have to come to Europe. But if Britain alone has these powers and Europe has not, Britain would be starved of oil, except for the Government's share of North Sea oil, and I do not know how much that amounts to.

Lord KIRKHILL

As I understand the position, nine EEC countries have adopted similar powers to those proposed this afternoon.

3.27 p.m.

Lord STRATHCONA and MOUNT ROYAL

Once again we get back to the curious situation where it becomes evident eventually that the Government are trying to take powers to deal with what the noble Lord himself called a hypothetical crisis. This, to my mind, gives rise to two questions. The first is a general one: Why rush into print if you have not even thought out what kind of a crisis it is you are trying to deal with? Here we come back to the arguments advanced by the noble Lord, Lord Robbins, when we were dealing with this sort of issue on Thursday, and the black market question raised by my noble friend just now. Secondly, and following the same line of argument, we find ourselves asking: Why is it we have to select petroleum and petroleum products for this very special treatment? If we are dealing with a diabolical crisis which we cannot envisage, surely it will not be enough only to control fuel in the most general sense of the word. We shall possibly need to control all sorts of other things as well. Therefore, why do we have to waste our time trying to take powers which are frightening, certainly to this side of the Committee, and to large parts of the industry? Why do we have to waste our time taking powers apparently especially to clobber one particular industry for a hypothetical situation which we cannot envisage? I find that most extraordinary.

This same kind of thinking goes right through so many issues in this Bill. I am not going to labour the point in this connection; but I must once again say that I totally fail to see why we have to select, and to treat, the petroleum industry in this way. It may well be, when we look carefully at what the Minister has said, that it is something to which we shall again have to address ourselves at some time. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

3.30 p.m.

On Question, Whether Clause 3, as amended, shall stand part of the Bill?

Lord LOVELL-DAVIS

There are two points I should like to raise before we close the door on Clause 3. On Thursday, I asked the noble Earl, Lord Kintore, whether it would be appropriate to answer a question he raised when we reached Clause 8, in which we shall be dealing with provisions concerning gas supplies. However, I think it would be simpler were I to deal with it now. The noble Earl described the difficulties which could arise over serious plant deficiencies, For instance, Boddam power station was the instance he quoted, where the plant could not take fuel and it had to be piped back to the St. Fergus separation plant. I am sorry that I did not quite understand at the time. The kind of emergency he was referring to would not in the Government's view be sufficient to trigger the Clause 3(1)(b) powers for dealing with domestic emergencies. What we have in mind is that those powers would be used only in circumstances where there is an emergency on a national scale. I can therefore reassure the noble Earl that the Bill does not cover the kind of emergency at an individual plant to which he referred.

At the same time, may I attempt to clarify the matter that the noble Earl, Lord Lauderdale, raised today, and he and others raised on 8th April, about the breadth of power we propose taking in the Bill, and particularly in reference to the comparable powers in the Fuel and Electricity (Control) Act and in Section 2(2) of the European Communities Act. Emphasis was nut on the fact that the Orders in Council under Clause 3(1)(a) of the Energy Bill would not be subject to any Parliamentary scrutiny. By contrast, it was said, similar powers in the Fuel and Electricity (Control) Act 1973 and under Section 2(2) of the European Communities Act 1972 were subject to the Affirmative or Negative Resolution procedure. This is all perfectly true, but the comparisons are not valid, simply because we are dealing with different sets of circumstances. First, the Fuel and Electricity (Control) Act powers are intentionally very wide and could be used to deal with either an international or a domestic energy crisis. The key Parliamentary sanction lies in the annual need to renew the Act. But since the object was to meet both types of crisis by an instrument of admitted bluntness, it was not possible to distinguish, as we are now doing more precisely in this Bill, between the two sets of circumstances. So the Fuel and Electricity (Control) Act Orders in Council require Affirmative Resolution.

With regard to the noble Earl's reference to Section 2(2) of the European Communities Act 1972, this refers to a decision taken by the Government to join the Community by acceding to the Community Treaties. The action to be taken under the European Communities Act 1972 is in pursuance of that overriding decision and reflects the need to implement and/or enforce in the United Kingdom various detailed provisions of subordinate Community law. It is quite right, therefore, that the use of such powers should be subject to the Negative Resolution procedure. In the Energy Bill, under Clause 3(1)(a), we are concerned with a situation in which the Government, by virtue of their obligations to IEA and the EEC, must have available power for immediate use in relation to an externally triggered emergency, which could be implemented without Parliamentary sanction. Beyond that, as shown in Clause 15 of the Bill, all orders, with very few exceptions, would remain subject to the Negative Resolution procedure. I do not wish to extend the debate; we have a long way to go. I simply hope that what I have said has been helpful.

Lord KIRKHILL

Before we depart this particular clause of the Bill, my attention has been drawn to the fact that by a slip of the tongue, in response to the second last question put to me, I replied "nine EEC countries". I should have said nine European countries.

The Earl of LAUDERDALE

Should not the noble Lord have said that eight countries have taken powers and one is trying to take them? I do not want to detain the Committee unduly on that. Since the noble Lord, Lord Lovell-Davis, has intervened at last, I want to repair an omission and this is the opportunity to do it. It is some time since he was raised to his present office, and I want in the nicest possible way to congratulate him on it. The Minister of State reminds me of days gone by, when I was a little younger than he is—he is still very young. I went as staff correspondent of The Times to a foreign country, and a local paper said: "Ce journaliste, eminent quoique jeune." I say to the noble Lord: "Cet homme de politique, eminent quoique jeune", and I congratulate him on his eminence. Having said that, I should like to go further. He was good enough to say that the Fuel and Electricity Act and the present Energy Bill are not strictly comparable. This is our complaint. It goes back to the answer which was given by the noble Lord, Lord Kirkhill, just now. When asked why the Government will not take powers for rationing, he said, "Well, we do not know what the situation will be". But when asked: why do we need price control?—he said, "Because we do not know what the situation will be". Which is it? He cannot have it both ways. There is a fallacy of logic there, which strikes me once again as an Aberdonian.

Lord KIRKHILL

May I ask the noble Earl why I cannot have it both ways in those circumstances?

The Earl of LAUDERDALE

Because if you do not know what the situation is, and from that you deduce a negative conclusion in one case and a positive conclusion in the other, you are contradicting yourself.

Lord KIRKHILL

But my negative and positive conclusions leave room for an ambience of Government thinking.

The Earl of LAUDERDALE

Yes, and the Government thinking is mixed up between positive and negative and we do not know where we are. But I will not pursue it any further.

Lord KIRKHILL

I should have thought that the Government thinking was totally balanced in that case.

The Earl of KINTORE

I should like to thank the noble Lord for replying to my question so courteously. I must apologise for pressing it on him, but as a regional councillor in that part of the world local things are important to us.

Clause 3, as amended, agreed to.

Clause 4 [Other powers]:

Lord STRATHCONA and MOUNT ROYAL had given Notice of his intention to move Amendment No. 13: Page 4, line 16, leave out subsections (3) and (4).

The noble Lord said: I do not think it is necessary for us to move this Amendment, which really is associated with Amendment No. 6 which was carried on Thursday.

Clause 4 agreed to.

Clause 5 agreed to.

Clause 6 [Bulk stocks of petroleum, etc.]:

3.38 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 14:

Page 6, line 4, at beginning insert: For the purposes of complying with the obligations of the United Kingdom as a member of the International Energy Agency or a party to the International Energy Agreement or as a member of the European Communities, the Secretary of State may give".

The noble Lord said: With the leave of the House, I think I can speak to Amendments Nos. 14 and 15 together. We are now on the clause dealing with stocks, and it is quite understandable that the Secretary of State should require powers to ensure that strategic stocks are built up, as required by international agreements, under the EEC Treaty and the Directives, and under the International Energy Agreement. This Amendment seeks to ensure that the Secretary of State will exercise his powers of direction only for the United Kingdom's international obligations.

Certainly it is clearly undesirable that the Secretary of State should have any additional powers, totally unfettered by Parliament, to control the level of stocks held by industry. This is bound to cost somebody money, and if such powers are to be imposed then Parliament should seek powers to know why it is necessary to impose obligations on companies. In moving this Amendment, may I ask the Government why they think it is necessary in a purely domestic context to have these additional powers, and why they think that no Parliamentary control whatever is required? I beg to move.

Lord KIRKHILL

The effect of these Amendments is to limit the issue of oil stocking directions solely for the purpose of complying with our international obligations, and I would hope to explain to the noble Lord, Lord Strathcona and Mount Royal, the Government thinking behind their proposition. While the oil stock levels presently dictated by these obligations are somewhat above normal commercial levels and provide an acceptable period of security it is nevertheless likely that for strategic reasons the United Kingdom may wish to set stocking obligations at levels different from those agreed internationally. In the Government's view problems could certainly arise if the EEC came into line with the International Energy Program by raising the 15 per cent. constraint on the offset allowed for indigenous oil. Under the IEP Agreement the stocking obligation is calculated by reference to the level of net oil imports in the previous year. In the early 'eighties when the United Kingdom is self-sufficient in oil, net oil imports (and the resultant stocking obligation) will be nil and in the next four or five years the level will be progressively reduced. In these circumstances the Government consider that they would need powers to ensure that stocks did not fall below levels which they considered adequate for strategic and other reasons. It is against that background of explanation that I would ask your Lordships' Committee to resist the Amendment.

Lord STRATHCONA and MOUNT ROYAL

This is a complicated matter, as the Committee will have appreciated from the noble Lord's answer. I am bound to say that I thought his case got better as it went on. He started off by saying that it was solely for the purpose of honouring their obligations, and then went on to say, however, that the purpose of this section is different from the international agreements.

Lord KIRKHILL

If the noble Lord will allow me to intervene, may I say that I was attempting initially to explain the purpose of the noble Lord's Amendment, as I saw it, and then on the second phase I was attempting to explain the Government's position. Perhaps I was not as clear as I might have been.

Lord STRATHCONA and MOUNT ROYAL

I am grateful to the noble Lord. Maybe I was getting into the inconsistent situation and not the noble Lord. The best thing I can do in the circumstances is to read his answer carefully, because I must confess that I had not thought about the situation we shall be in as we reach energy independence. However, I was also slightly surprised that my noble friend Lord Wynne-Jones (if I may call him that) was not on his feet because we are back on this problem about where the various international obligations are not wholly directed to the same purpose. The best thing we can do is to read what the noble Lord, Lord Kirkhill, has said, and, if necessary, return to this matter later. I beg leave to withdraw the Amendment.

Lord WYNNE-JONES

May I make a comment before this matter is finished. The noble Lord, Lord Strathcona and Mount Royal, in this Amendment has referred particularly to the IEA and the EEC. If one is discussing the overall position with regard to oil there is another body that comes in, and that is NATO, but I think I am right in saying that this is covered by an entirely different agreement which is not the subject of this Bill at all.

Amendment, by leave, withdrawn.

3.44 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 16: Page 6, line 18, leave out ("substantial") and insert ("wholesale").

The noble Lord said: In moving Amendment No. 16 I am glad to say that I think we can get rid of a number of others, Amendments Nos. 19, 19K, and 18. I am sorry about the order in which I have put them, but this particular problem arises fairly frequently because of the way the numbering on this Bill has finally turned out. The underlying purpose of this Amendment is quite a simple one. We are seeking to ensure equity when these stocking obligations are imposed. The United Kingdom market is supplied by companies which have established refining facilities and distribution networks over a number of years. Then there are other companies operating in much smaller volumes who operate as importers of finished products which are then frequently sold quite near the point of unloading.

The purpose of the Amendment is to ensure that in financial terms an obligation to hold a higher proportion of working capital tied up in stocks is equally divided among the companies to whom it applies. This is an expensive performance. Oil has become an expensive commodity, and holding it in large quantities ties up a great deal of capital. The servicing of such capital imposes an extra operating cost on a company. The purpose of this Amendment is simply to ensure that in exercising their powers the Government will do their level best to be totally fair in the equity of the distribution of the obligation among the companies. I beg to move.

Lord LOVELL-DAVIS

Since the noble Lord has gathered together Amendments Nos. 16, 19K, 18 and 19, perhaps I may reply to all four. To take Amendments Nos. 16 and 19K first, which are substantially the same, the point of this part of the clause is quite simple. It allows the Secretary of State to prescribe by order the cases and circumstances in which a person subject to a direction under the clause is to be treated as a "substantial supplier".

The Secretary of State intends to define in an order the level of supply at which it is considered appropriate for a person to be subject to a stocking obligation. Our present view is that any undertaking marketing oil or oil products at the rate of about 100,000 tons or more per annum in the United Kingdom should be subject to a stocking obligation and to the receipt of a direction under this clause. Such an arrangement has the advantage that it would cover about 99 per cent. of the oil supplied to the United Kingdom market without including many of the small wholesalers. We do not need or wish to cover these, and I therefore ask your Lordships to reject these two Amendments.

On the subject of Amendments Nos. 18 and 19, on which the noble Lord also spoke, the Government do not believe that these Amendments are necessary. I think that the noble Lord is really simply asking for a governmental response to ensure that the Government will do what they most certainly will, for the Amendments merely seek to include an obligation on the Secretary of State to act equitably in applying oil stocks directions. Of course, this would be done whether or not it is spelled out in the Bill. Indeed, many oil companies agree that our present arrangements under the Fuel and Electricity (Control) Act 1973 are equitable, and we wish them by and large to continue under these new provisions. Having said that, I would therefore ask your Lordships to reject these Amendments.

Lord HAWKE

Is the Minister in a position to give any idea of the quantity of oil stored in terms of months supply, or is this one of the figures that are never disclosed?

Lord LOVELL-DAVIS

I would rather not give any figures at this time. Representations have been made in this matter and at this time I would rather leave it at that.

Lord STRATHCONA and MOUNT ROYAL

I do not want to be churlish in accepting the noble Lord's assurances. I would have been happier, however, had he taken out the words "of course". The trouble is that he is hearing a different feedback than I am and I do not think we can accept that it goes without saying that the Government are doing all the consultation; at any rate, that is not the way the industry sees it. Once again, however, the Government have asserted noble aspirations and the least we can do is take them at their face value and, accordingly, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 17:

Page 6, line 21, at end insert— ("( ) The Secretary of State shall give any person referred to in subsection (1) above particulars of the proposed direction and an opportunity of making representations before such direction is given.")

The noble Lord said: This Amendment in a sense represents the soft option to the last group of Amendments and, in view of what the noble Lord said, I cannot believe that he would have the face to refuse it because we are really saying that we want him to commit himself to doing something which he said he intends to do, anyway. It should not be necessary for us to be moving this sort of Amendment at all. We have earlier been saying that the Government do not feel it necessary to accept Parliamentary control over all the exercise of their powers, so what we are simply saying here is that they should be obliged to consult with the industry.

There is widespread feeling that the Bill was rushed through with indecent haste, and some of us do not feel that all the consultation took place that might have taken place and that we might have had a rather less unsatisfactory Bill if it had taken place. My hope that the Amendment may prove acceptable to the Government is somewhat reinforced by the fact that it has been more or less borrowed from an Act which I hardly dare to mention because it is such a horrible thing, the Petroleum and Submarine Pipe-line Act 1975. One of the better features of it, however, was that the Government accepted an Amendment on these lines, and I therefore confidently move this one.

Lord LOVELL-DAVIS

The Government consider that the Department of Energy has always given oil companies full opportunity to discuss their stocking obligations, and certainly would continue to do so. In our view, therefore, this position is already covered by Clause 6(2)(a), which allows the Secretary of State to set a specific time by which stocks must be brought to the required level. The companies will be free to make any representations during this period and therefore consultation in advance of the giving of the direction is, in the Government's view, unnecessary. But so that the noble Lord may not remain perhaps unconfident about other matters as we proceed this afternoon, let me say that the Government are prepared, if he will withdraw the Amendment, to have another look at the matter.

Lord STRATHCONA and MOUNT ROYAL

This is progress indeed and we are all as one. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 7 [Fuel stocks at power stations]:

3.55 p.m.

Visoount LONG moved Amendment No. 19A: Page 7, line 6, at beginning insert ("For the purposes of complying with the obligations of the United Kingdom as a member of the European Communities,").

The noble Viscount said: This is a probing Amendment. We feel that at this point die Bill needs tidying up and I hope that the Government will agree to this, if only as a result of the obligations of the United Kingdom as a member of the EEC. We would be interested to learn the Government's reaction to this Amendment.

Lord KIRKHILL

The main purpose of this clause is certainly to implement our EEC obligations, and my noble friend Lord Lovell-Davis made clear on Second Reading that this is the case. There is, however, no reason to restrict the clause to implementation of EEC obligations. Circumstances, which are not at present foreseen, may arise where the Government might wish, for reasons of United Kingdom energy policy, to require the holding of stocks in excess of EEC obligations. This appears unlikely at the moment, but it seems desirable in our view to retain the flexibility at present conferred by this clause.

Viscount LONG

I am grateful to the noble Lord for that answer. We felt that the Bill needed tidying up at this point.

Lord HAWKE

Is the Minister able to let us know whether the 100 megawatt station covers those subsidiary stations which at a moment's notice produce electricity by means of aero-engines? I cannot remember their exact rating, but I believe that they are between 25 and 30 megawatts each and that sometimes they go in batteries of four and sometimes of two. If they are only in twos they would not be covered by this, but it is important that they should have fuel.

Lord KIRKHILL

During the course of the afternoon I shall be professionally advised on that complex and technical point, and I assure the noble Lord that I shall seek an appropriate moment to give him a reply.

Lord STRATHCONA and MOUNT ROYAL

There is a point I had intended to raise on the Question, Whether the clause shall stand part? But as it has been raised in part by my noble friend Lord Hawke, it might be convenient if I dealt with it now. As I understand it, the EEC Directive specifically says that the matter of stocks is to be determined in the light of the system as a whole and will ensure that continuity of supply will continue to be made available. This provision in the EEC regulations was, I understand, specifically put in after representations from our Electricity Generating Board pointing out that it is anomalous to insist that the stocks are available at each individual station. Yet we find this 100 megawatt limitation in the Bill when, as I understand it, thanks to the representation by our Electricity Generating Board in collaboration with other European Generating Boards, they removed this detailed restriction which did not take cognisance of the fact that one has the system as a whole and one can frequently make good the supply of one generating station by increasing the supply from another; this is the right way of setting about control, rather than getting down to too much detail, something which worries us about the Bill.

Viscount LONG

When moving the Amendment, I omitted to mention that it might be convenient to the Committee if, at the same time, we discussed Amendments No. 19B, 19C, 19D and 19E, which all have the same wording, although I did not give the noble Lord, Lord Kirkhill, advance notice of this. These, too, are probing Amendments. The Bill confers powers on the Secretary of State in more than 15 important places, but only twice does it say that the Secretary of State "shall" do something, and each time it is only about consultation. Perhaps the Minister could be generous and allow us these Amendments, which would retain the word "shall" throughout the Bill.

Lord KIRKHILL

The Government see a distinction between the position under Amendment No. 19A and that under these further Amendments which we are now discussing. The clause as drafted gives the Secretary of State power to give directions to the operators of certain generating stations requiring them to maintain fuel stocks at a level specified in the direction. The Government's view is that these Amendments would convert that power into an obligation. The Government are already under an obligation, by virtue of our membership of the European Communities, to give effect to Directives such as Council Directive 75/339, which this clause is designed to implement. However, the obligation which Article 1 of this Directive imposes on Member States is to …take all appropriate measures by way of law, regulation or administrative action to oblige electricity producers to maintain the specified level of stocks. The Amendments would seek to cut down on the discretion which the Government have been given by the Directive, and to compel them to proceed by way of a direction under this clause. That is the distinction which the Government would make between the Amendments.

Lord WYNNE-JONES

Does not the word, "may" do exactly the same as the noble Lord, Lord Strathcona and Mount Royal, earlier suggested?—that is, it makes this optional for the Government, whereas an EEC Directive would indeed use the word "shall" and would say that this had to be done. Surely, when one is considering a number of things which may perhaps be necessary, the word, "may" is very much more appropriate all the way through because it allows an option for the Government to impose such a requirement or not as is considered desirable. "Shall" would seem unduly restrictive.

Lord KIRKHILL

My noble friend has expressed exactly the views of the Government.

Viscount LONG

I thank the noble Lord for his reply. I was only probing with this Amendment to see whether the Government had failed to use "shall" by mistake. Now I know that they have used "may" on purpose, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.5 p.m.

Viscount LONG moved Amendment No. 19F: Page 7, line 29, at end insert ("but the specified level shall at all times be sufficient to allow such a generating station to maintain its normal supply of electricity for a period exceeding 30 days.").

The noble Viscount said: With the permission of the Committee, I should like to speak to Amendments Nos. 19F and 19G together. These Amendments deal with the minimum level of stocks required by the EEC and are designed to discover why that level should not be written into the Bill rather than left to the Secretary of State to prescribe by order. They are entirely consequential, but, while we are dealing with this important Bill, would it not be best for the level of stocks to be written into the Bill? Why are the Government not able to do this? Surely, we should all know where we stood then. I beg to move.

Lord KIRKHILL

As regards Amendment No. 19F, Council Directive 75/339 at present seeks to impose an obligation on electricity producers to maintain at least 30 days' stocks. This Amendment would ensure that any direction given under Clause 7 requiring the operator of a generating station to maintain fuel stocks at a specified level would always impose a requirement that that level should be set at 30 days, or more, even if, for example, the Directive were to be amended to permit a lower level of stocks to be maintained.

The Government consider that Amendment No. 19F appears on the face of it inconsistent with the first Amendment on this clause, No. 19A, which sought to limit the power to give directions under it to cases when this was necessary to implement Community obligations. It would also preclude any relaxation of the requirement imposed by the direction such as is provided for in Clause 7(2)(a)(ii). In a supply shortage, the Secretary of State may well need to authorise a reduction in stock levels in order to permit continued operation of the generating station.

So far as Amendment No. 19G is concerned, the Government consider that the precise amount of stocks required to meet the requirement which will emerge will depend, for example, on the number of generating sets in the power station which are in use throughout the period. The Government consider that the Amendment would deprive the Secretary of State of his powers under subsection (4)(c); that is, the 30 days' requirement. These powers would be denied him were the Amendment to be carried. For those reasons, the Government would resist Amendments Nos. 19F and 19G.

Lord WYNNE-JONES

I wonder whether the noble Viscount, Lord Long, can explain why the period of 30 days is specifically introduced in this Amendment? It seems that, once more, the Amendments are attempting to make the Bill more restrictive than it originally was. My recollection is that the Electricity Board always preferred not less than six weeks as their period for stocking and that the 30 days was a compromise. I cannot help feeling that, if we are to have any control of this type at all in case of emergency, the nature of the control should be left to the Government, in discussion with the Electricity Board and any other body concerned, rather than that we should lay down a specific figure here.

Viscount LONG

In reply to the noble Lord, Lord Wynne-Jones, what we are constantly trying to do is to tidy up the Bill, to explore it or to make it safe. We are always coming up against different powers, and every now and again we have to find out which is the easiest way to deal with particular matters. We felt that 30 days—one month—would be ample. However, as the noble Lord said, the Electricity Generating Council prefers six weeks. This is really an exploratory Amendment to try to find out whether the Government or the Electricity Generating Council is right. This is something we see all through the Bill. Also, if the Government insist on leaving this out, we feel that it will be a great pity because we believe that, when it comes to an emergency, we might have to ask for a longer stay again. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.9 p.m.

Viscount LONG moved Amendment No. 19H:

Page 7, line 39, at end insert— ("(5) Notwithstanding subsections (1) to (4) of this section, the Secretary of State shall at all times ensure that, in cases where fuel stocks are held neither on the premises of any generating station for the purposes of its operation nor at a place directly linked thereto, but at a place further removed, such stocks can at all times be conveyed to that generating station for the purposes of its operation.")

The noble Viscount said: I move this Amendment because during the Second Reading debate my noble friend Lord Strathcona and Mount Royal asked the noble Lord, Lord Lovell-Davis, about access points, and we afterwards found that the noble Lord had not replied. Perhaps, therefore, we may have a very good answer this time.

The fact remains that in 1973 we went through problems in order to get the supplies out of the depots and to keep the generating stations going. At that time we came across problems of picketing and similar problems with the unions. We hope that through this Amendment we might get the reaction of the Government on whether the Secretary of State will be in a strong enough position in an emergency to deal with the pickets and to ensure that access to generating stations and depots is available to those who try to deliver the supplies. Article 2 of Section 4 of the Directive 75/339 specially states: Stocks shall be held on the premises of the power station or at a place directly linked thereto. Stocks may be held at a place further removed provided that they can be conveyed to the power station at all times. We hope that in moving this Amendment we might get an answer from the Government on how they will be strong enough to tackle the problems which lie behind an emergency in which there is not access to supplies. I beg to move.

Lord KIRKHILL

It should be stressed that the Generating Boards already hold more than sufficient stocks at their power stations to meet the requirements of the EEC Directive. In other Amendments to this clause noble Lords opposite have suggested that the clause should be restricted to implementation of the EEC obligations which are placed on Government. In the Government's view, what is now suggested in this Amendment goes far beyond that. In an emergency situation, when the normal lines of supply had, for whatever reason, been disrupted, the Government would have to consider what action they needed to take, and they would make appropriate use of the powers available to them, including those under this Bill and the Emergency Powers Acts. In the Government's view, it would not be appropriate in a Bill of this kind to impose a binding statutory duty on the Secretary of State in respect of one aspect of a possible emergency situation. The Government must be free to take whatever action is appropriate at the time, having regard to all the circumstances. Naturally, it follows from that that the Government would seek to resist this Amendment.

The Earl of LAUDERDALE

The noble Lord says that the Government would have the power to take whatever action is appropriate at the time, but I should like to ask him this question: How long is a piece of string? What the noble Lord said means nothing whatever, although he said it in the nicest, most plausible, and most charming way. On the one hand, the Government are taking wide powers, and they have assured us not once, but a dozen times, that these powers will not be abused. We are not asking them to abuse the powers, we want to make sure that they do not abuse them. We have been told they are taking these powers for situations which cannot be foreseen. They use that argument to produce a negative or a positive result, according to taste. But here is an issue which is very serious.

We know perfectly well that situations have arisen in the past where the movement of fuel to power stations has been prevented by picketing; that is a matter of history. We have all shared in the sweat of Parliament, in working over the series of legislative Acts, and charades, relating to the trade union movement. We have all been in it, and we are in it up to our necks. We are not, I hope, trying to make petty Party political points. The noble Lord and his Government say that they are taking wide powers for emergencies of all kinds, and that they cannot predict the circumstances; but when we instance a particular historical circumstance is the noble Lord so blind? Are the Government saying that they will do nothing whatever about the picketing in an emergency of this kind?

The noble Lord is brilliant at having it both ways; I should not like to go gambling with him at any time. But this is a serious matter. Are the Government, or are they not, prepared to take powers, if what they have are not sufficient, and to use powers which they have, to deal with picketing, if that interferes with the supply of fuel in an emergency situation?

Lord DAVIES of LEEK

I am looking at the logic of what is stated in the Amendment. It says simply that the stocks should be "at a place further removed" in order that they "can at all times be conveyed…" Noble Lords lived through that terrible winter in which there was a coal crisis, when an act of God meant that nobody could move the coal. The railways and roads were frozen. Let us use a little common sense. Are noble Lords opposite talking about picketing? If they are talking about picketing, that should be stated in the Amendment, rather than have loose phraseology like this. When there are winters such as I have mentioned, or acts of God, flood and fire, we cannot put in words like these. Every noble Lord knows that in a real emergency the Government have powers, and they can get the powers at any moment they wish. Therefore this Amendment is doing no more than delaying the Committee with a piece of verbiage.

The Earl of LAUDERDALE

What the noble Lord says is not without point. The wording in this Amendment is not very satisfactory; I should be the first to say so. But can we not plead with the Government to look at this Amendment? If it is withdrawn now, will they look at the point to see whether there can be introduced something satisfactory which would meet us all? The wording is not satisfactory as it stands. I, for one, would not go to the gallows for these words at all; in fact, I would not go to the gallows at any time, if I could avoid it! Will the Government consider that there is a serious and genuine point involved, not a Party political point; and will they undertake to look at this matter, perhaps in the spirit of the speech of the noble Lord opposite?

Lord KIRKHILL

I do not seek to reply in any partisan or Party spirit. I wish to reply briefly, to say that the Government do not see any need, under the Bill under discussion this afternoon, to effect statutory powers which would have a bearing on any possible industrial dispute.

Viscount LONG

We have had a very useful airing of this Amendment, but I am disappointed by the Government's reply. I am most grateful for the suggestion by my noble friend Lord Lauderdale that the Government should take this matter back and look at it again. I quite agree with the noble Lord opposite that in addition to pickets I should have mentioned the question of "weather permitting", but I omitted this from my notes. I agree that the winter of 1962–63 was very severe, but I hope that we have come a long way since then, and that there is now more modern machinery to ensure that the supplies get through. I am still very disappointed that every time we come to an important item, one which is touchy, we find the Minister sitting tight on the garden fence, not daring to come down off it to give any word of encouragement. We see that what is proposed is not to be accepted in the Bill under any circumstances. I am naturally disappointed. We shall merely have to sit and wait and hope that there will not be an emergency, either a national one arising from industrial strife, or one caused by the weather. I should think that if there is to be an emergency it will arise, first, from the weather. I beg leave to withdraw the Amendment.

Lord KIRKHILL

I promised to respond to the question posed earlier by the noble Lord, Lord Hawke. He asked me about the Government view of the feeding-in complex regarding the 100 megawatt station. The EEC Directive states that the stocking obligation shall not apply to private industrial generating stations with a total capacity of less than 100 megawatts. We regard the 100-megawatt limit as applying to individual stations, not to private generators, which may have a number of stations each of less than 100 megawatts but on different sites and, of course, not connected. I am further advised that only 6 or 7 private stations would be involved in the United Kingdom.

Amendment, by leave, withdrawn.

On Question, Whether Clause 7 shall stand part of the Bill?

Lord STRATHCONA and MOUNT ROYAL

Can I flush anything out of the noble Lord on the other part of the EEC Directive, regarding the grid as a whole, and not going down to holding stocks at specific stations—or did he deal with that just now? I do not think he did.

Lord KIRKHILL

I mentioned that we regarded the 100-megawatt limit as applying to individual stations. However, because I consider this matter to be technical and complex, I will undertake to write in detail to the noble Lord.

Clause 7 agreed to.

Clause 8 [Supply and use of of-shore natural gas]:

4.21 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 19J: Page 7, line 44, at end insert ("and for the purposes of this Act supply of gas through pipes shall mean and shall be restricted to the case where the gas is in the gaseous state.")

The noble Lord said: We now move into what is perhaps the most difficult, complicated and, indeed, in many ways, contentious part of the Bill—that containing what we have been prone to call the gas clauses, which are Clauses 8 to 12 inclusive. I hope the Committee will forgive me if, in moving Amendment No. 19J, I say a few words which apply to all the Amendments, or most of them, that we shall be moving to these clauses, which I suspect are going to keep us busy, I hope to not too late an hour, this evening. First of all, one sees that the heading is: Other measures for controlling energy sources and promoting economy". I have already suggested that the noble Lord, Lord Lovell-Davis, is very good at suggesting that he needs all kinds of powers for conservation measures, and I am frequently totally unconvinced that the reason he is giving is the genuine reason. I think that to some extent the same thinking permeates many of the Amendments that we shall be moving to these clauses of the Bill.

Another reason that is sometimes put forward for some of these powers being taken is the need for power to control the export of the fuels which we shall be bringing ashore from the finds in the Continental Shelf around this country. Yet one does not detect that the Government are really addressing themselves—if indeed this is their objective—to that end. So I do not doubt that they will justify some of the powers that they are taking on the grounds that they are needed to stop undue exports of our energy resources, but many of them go very much wider than we contend they need to go for the purpose for which they aver they require them. This, I think brings us back—and it is no use burking the issue—to a fundamental political disagreement between this side of your Lordships' Committee and the Government on these issues. Are we so sure that the Ministers and their staff in the Department of Energy, or indeed in any other Department, are that much better at determining the national interest (even in the short-term, let alone in the kind of time-scale which applies to these extremely difficult, complicated, technical issues of energy policy) than are members of the industry in competition?

It is easy to say that one specific company's interests are different from the national interest, but I suggest that the kind of problems that have to be resolved for energy policy are very much greater than those which have to be determined within the ambit of one single company's interests. You have to look at the industry in competition. Therefore, our case will be—and we shall be making it time and again—that in order to take the powers for which he is asking under the Bill, with all the dangers that go with the infringement of the accepted and traditional freedom of action which the companies have enjoyed in the past, and indeed which industry at large has enjoyed, the Minister has to make a case of a very compelling kind to justify the disadvantages which will follow from these widespread powers of control.

It is all very well to say, as I am sure we shall be saying, "Under this Bill, in some cases the Minister has to give consent, and in that case the licensee, the applicant, has to show that he fulfills certain conditions". Every time you do something like this, what do you do? First, you impose an extra delay while some executive in a company goes through a long fandangle. It has almost become a joke, if it was not so serious, as to what happens under the planning laws in this country if you want to do anything in the building line. So, first, it imposes delay. Then, it imposes another constraint, another consideration, on a difficult problem when an industrial enterprise is deciding how best to deploy its resources. Furthermore, it imposes extra expense by way of staff to deal with these problems, both within the companies and within the Government. I would suggest that, given all these difficulties, a very good case has to be made before we rush into granting these powers to the Government. That is the general issue.

So far as the gas clauses in this Bill are concerned, all these clauses are governed at the present time by Section 9 of the Continental Shelf Act. The principal purpose of that Act, as I understand it, is to protect the British Gas Corporation's monopoly under the Gas Act, so that the supply of gas through pipes for domestic purposes is a monopoly activity of the Gas Corporation. It also gives the Corporation the right of first refusal of any piped supply for industrial fuel use. That is the present situation. The obligation now to offer the gas—except, perhaps, that for feed-stock use—to the British Gas Corporation is retained, but the major change is that the Government now propose to withdraw the right of licensees to use their own gas for non-fuel purposes and to leave the discretion of the granting of consent for such use in the hands of the Secretary of State, with no appeal and with no compensation to licensees who have invested under the present regulations. These are the general purposes.

To come to the specific Amendment to which I am supposed to be speaking—and I am grateful to the Committee for their indulgence in allowing me to digress on a generalisation for a moment or two—we are now coming to what to me is a very difficult issue. It is a highly technical issue and my noble friend Lord Campbell of Croy and I will be doing our best to try to explain what we understand to be some of the technical issues and the reasons why we are moving these Amendments which we have discussed at great length with the industry.

The particular Amendment to which we are now addressing ourselves creates a problem right away. I am sorry that the noble Lord, Lord Wynne-Jones, has left for I was hoping for some expert advice from him. We have the product called liquid petroleum gas. I just managed to scrape graduation as a physicist and one of the things that I remember correctly was that there were three states of matter: solids, liquids and gases. We therefore seem to start off by having "clobbered" ourselves with a substance called liquid petroleum gas, which seems to be a physical impossibility. That is the first confusion. I cannot blame the Government for that. At least, I do not think I can; but I should be prepared to try hard to do so. But I believe, in all seriousness, that it leads us into an area of considerable difficulty because through a number of these clauses we find provisions in the Bill trying to define gas by its physical properties—which is to say that it is a gas and not a liquid although, in fact, a large number of these gases become liquids if you apply a little pressure to them. One of the things that we are dealing with here is that it would then be possible to say—unless we do something about it—that it is not a gas we are dealing with for it has become a liquid, and, obviously, it is not subject to controls as a gas.

Now comes the added confusion—and if you think it is complicated already, I may say that I have not even begun. I have pages of names of the chemical products which arise from this crude which comes ashore; even if I could pronounce them, I should bore the Committee to extinction if I tried to run through this long list I have been given. What I suspect has happened—and I am glad that the noble Lord, Lord Wynne-Jones, is back for we may be able to get assistance from an expert of his kind—is that the Bill has been framed in the light of the physical properties of the substance that we are discussing and has then been applied to its chemical uses.

I believe that this is one of the problems which run right through all the gas clauses; and I suppose I could say that it is not the job of the Opposition to straighten it out. It is tempting to make a joke out of it but, unfortunately, it is not a joking matter. This is a very big business indeed, of very great importance to the country and of international importance as well. Once again I have strayed from my Amendment but I will try to drag myself back.

What we are referring to in Amendment No. 19J is the right to supply liquefied petroleum gases—and I apologise then for that contradiction in physical terms. That, as I understand it, includes propane and butane in the liquid form without the need for British Gas Council or ministerial consent regardless of the end use of the product. This also applies to gases covered by Clause 8 and by Clause 10. I have already said that certain gases become liquids simply by compression. I understand that methane is invariably supplied as a gas through a pipe and that also applies to piped ethane unless the pressures of transmission are very high when the ethane is liable to become liquid. But propane and butane become liquid very easily with the slightest pressure and these liquids have in practice always been distributed and supplied by the industry in the form of a liquid. These clauses do not include the supply of these materials as a liquid which is sometimes supplied in containers on lorries or by train or by ship. It seems illogical, therefore, to include these products under the restriction which is intended to apply to maintain the British Gas Council's monopoly of the supply of gas far fuel purposes, for that is what their monopoly is intended to be about.

The dangers that follow are several. One of them is that you are inevitably putting the British Gas Corporation in a position where they could distort, and, if they wished, attempt to control, the competitive ability of their competitors in what has been a traditional and significant section of the market which has been controlled by these independent companies. It is not a necessary temptation to put before the British Gas Corporation.

I should like to ask the Government two questions on this particular Amendment. First, does the Minister agree that, as the Bill stands, it would appear also to cover the piped supply of natural gas in solution with other materials? For example, if offshore natural gas is piped ashore as a component of crude, would it not put the British Gas Corporation into the position where they could block the movement of the crude if they exercised their rights, as the Bill stands, to purchase the gas and to demand that the company separate out the gas before they distribute the oil. I apologise for the complications again but it is necessary to do this.

Secondly, does the noble Lord agree that as they stand the provisions in the Bill would apply also to butane where it is used as a blending component in petroleum? In that case, we could find ourselves in a situation where the supply of blending materials for petroleum was coming under the control of the British Gas Corporation. I have tried to give examples and to generalise as to why we believe that an Amendment such as we are proposing is essential to protect the position of the companies in this enormous market in this country. I beg to move.

Lord LOVELL-DAVIS

I must say that the noble Lord, Lord Strathcona and Mount Royal, has cast his net very wide in covering this first Amendment. I am sorry that he doubts the Government need for these powers in terms of energy conservation. I tried to make clear on 8th April how important I consider this and I understood him to agree that he, too, is fully seized of the importance of energy conservation. I do not know how he would propose to advance the cause of energy conservation without the powers to do so. We are simply trying to secure those powers. The noble Lord referred initially to the matter of our powers to control exports. Generally we are not proposing controls on exports in gaseous or liquid form. Any Secretary of State who deliberately used his powers under this clause to thwart exports to the European Economic Community, for instance, might find that he was acting in breach of our EEC obligations. In questioning the ability of the Department of Energy—that is, the arm of Government—to exercise these powers, I am not clear who he is suggesting should have the powers; or whether he is saying that these tremendously important natural resources belonging to this country should be handed over to individuals who are outside any Government control.

The noble Lord raised a number of questions and the answers to them will emerge as we continue through the Committee stage. I do not think that I should be led at this stage into great detail. I should like to answer the questions that he raised as to the powers that will be given to the British Gas Corporation. I ought to point out right away that the Energy Bill proposes no change in the coverage of the term "natural gas". Clause 19 defines natural gas as any gas derived from natural strata. Section 9 of the Continental Shelf Act 1964—through Section 1(2) of the Petroleum (Production) Act 1934—refers to natural gas in similar terms. This includes, as well as methane, such gases as ethane, propane and butane, which are gaseous at normal temperatures and pressures. It is true, as he says, that there has been some lack of definition of the chemical components of gas. None of the legislation dating back over the past century covering the disposal and utilisation of gas, including natural gas, has specified the chemical substances covered by the term. However, it has always been regarded as covering all substances which are gaseous at normal temperatures and pressure, even if the substances are not combustible and even if they are piped as liquid.

The heavier gases, ethane, propane and butane, are often liquid under the pressures experienced in reservoirs and during transmission in pipelines, and they are often sold in liquid form. Therefore, they are usually known as natural gas liquids. While the Energy Bill proposes no change in the coverage of the term "natural gas", it may be that some companies did not appreciate that these heavier gases were liable to control under Section 9 of the Continental Shelf Act, as they are, if they are manufactured, liable to control under Section 29 of the Gas Act 1972.

We are talking specifically on Amendment No. 19J, the first of the Amendments put down in Clause 8. I should like to take into consideration Amendment No. 20C, since it aims to have the same effect. Amendment No. 19J would exclude from control of supply and use the heavier natural gases such as propane and butane—which are gaseous at normal temperature and pressure, as I have said—where piped in liquid form, whether they were for fuel or non-fuel uses.

A similar Amendment was proposed by the Opposition during the proceedings on the 1965 Gas Act. It was pointed out that acceptance of the amendment would have meant that the extent of the gas industry's monopoly could be eroded by technical developments which enabled an increasing range of gases to be piped in liquid form. This would have had serious effects on the position of the gas industry. The Amendment was defeated, and it was established therefore that the gas industry's control extends to gas in both gaseous and liquid form.

These provisions were retained unchanged in the Opposition's 1972 Gas Act, and have therefore received the blessing of both of the major Parties. The circumstances have in no way changed since 1972, and I can see no reason why we should now limit the powers of the gas industry in the way suggested. Neither can I recommend that noble Lords should accept the second Amendment which by proposing that the liquefaction of the heavy natural gases should be removed from control, where a substantial quantity of liquid methane is produced, seeks to achieve the same object. I can only recommend that the Committee rejects this Amendment.

4.47 p.m.

Lord WYNNE-JONES

This Amendment raises the interesting point about the definition of natural gas. As the noble Lord, Lord Strathcona and Mount Royal, pointed out, natural gas could have a number of constituents. But the hydrocarbon constituents cannot go above butane; even butane is not a very important one because butane is a gas which can be liquid at normal temperatures and the next hydrocarbon above it, pentane, is a liquid at ordinary temperatures. It is only methane and ethane which are what one may call the permanent gases, which would not be liquified simply by pressure alone. One would have to reduce the temperature. Consequently when one is talking about natural gas, from the hydrocarbon point of view one is talking about methane and, to a certain extent, about ethane. These are the important constituents of natural gas.

But it is impossible to give an exact definition of natural gas, except that it is the gas which occurs and is brought up in a gaseous form. That is about the only way in which one can define it. One cannot define it by composition. If one is to discuss what can be done with this material, one has to bear in mind that the gas occurs together with petroleum in certain parts of the North Sea. For instance, at the Norwegian Ekofisk boring they have so much natural gas with the petroleum that when the petroleum is brought to the surface the gas bubbles up and has to be separated from the petroleum. They have a complete chemical engineering factory in the middle of the North Sea dealing with this separation. The natural gas is piped to Germany and the petroleum to Middlesbrough. One has a complete separation occurring because their physical properties are so different.

If one is to pump these gases in a liquefied form, without refrigeration it would be impossible to pump methane and ethane; one would have to have a refrigerated pipeline. One could pump the other gases simply by having pressure on the pipeline. I take it this is the point to which reference is being made by the noble Lord, Lord Strathcona and Mount Royal, that these higher hydrocarbons, as they are called, the ones which are liquid at ordinary temperatures, are likely to be used for various industrial purposes and not as a gas for ordinary burning purposes. Consequently any industry which wants these gases would naturally want to transfer them by pipeline; but I should have thought that Clause 8(1) made it clear—I raised this matter on Second Reading and should be glad if my noble friend Lord Lovell-Davis could give a definite answer—that this sentence means that it is offshore natural gas, and only offshore natural gas, which the British Gas Corporation can control. I should have thought that meant the gaseous material—the gaseous stuff which is called natural gas—and not a solution of natural gas in petroleum. That would be classified under petroleum and not under natural gas.

Furthermore, when it comes to the liquid gases, there is nothing inconsistent in using that term because all gases can be liquefied and liquid gases can surely be pumped round in pipes, because it is said: "Unless the supply is for industrial purposes". I may be wrong, but I read that to mean that if the material is to be supplied purely for industrial purposes and not as a gas for heating, lighting and so on, it could be pumped round by anybody other than the Gas Corporation. I should like to know whether this is the correct interpretation because, if it is, it seems to me there is no need for any Amendment. In fact, in my opinion, any Amendment would make the matter less clear than it is, because "natural gas" defines this material as well as it can be defined since it is not a material of constant composition. It is not even a material of known composition when you first get it out; it has to be analysed. All one knows about it is that it is gaseous at ordinary temperatures and pressures and not liquid, solid or anything else. So I should have thought that the wording of the Bill was adequate, but I should like to be satisfied that my interpretation of that sentence is correct and that the words "unless the supply is for industrial purposes" mean that if the gas is sent for an industrial purpose then it does not have to come under the control of the British Gas Corporation.

4.53 p.m.

Lord AVEBURY

I thought this subsection was necessary merely to clarify the provisions of the Continental Shelf Act and of the Gas Act 1972. I think the noble Lord, Lord Lovell-Davis, said that in his reply. If I am correct in that assumption, we are wasting time arguing over this Amendment at any great length. However, the point was raised by the noble Lord, Lord Lovell-Davis, and followed up in the speech made just now, that when we come to the definition clause it would add to the clarity of the Bill if the phrase "at normal temperature and pressure" were inserted into the definition of "natural gas". That would remove the confusion that has arisen in the mind of the noble Lord, Lord Strathcona and Mount Royal, who says that to him it is a contradiction to talk about "liquefied petroleum gases" when we are talking in particular of propane and butane, which are gases at normal temperature but which, as the noble Lord has just pointed out, can be liquefied by the application of pressure and without refrigeration equipment.

It is also worth bearing in mind that, even if it were not for the provisions of this subsection, the Government would still have power to control the distribution of natural gases by pipeline under the 1952 Pipelines Act, which provides that authorisation is required wherever a pipeline is constructed for the transport of any material, whether it be natural gas, crude oil or coal in a slurry. Therefore, for the mainland of Great Britain, the Government would have the power, even in the absence of this subsection, to prevent anyone from distributing natural gas for other than industrial purposes.

The Earl of LAUDERDALE

Unlike my noble friends on the Front Bench, I have not had the opportunity of discussing this matter with the industry. The first bit of paper of any importance that I saw about this Bill reached me just before lunch today. Of course, I am not a chemist or a physicist, but surely it is obvious we must be very careful about our definitions and intentions in an area of high technology. As the noble Lord, Lord Wynne-Jones, said so prudently—and in my observation the noble Lord is always prudent in his contributions to our debates—one cannot really define "natural gas" except by calling it "natural gas". One thing is quite clear: we must be very careful. The noble Lord, Lord Lovell-Davis, said that no change in the meaning of natural gas is implied here, but the fact is that we surely need to protect the present right to move liquids by pipe. In many cases it is more economic to move propane and butane as liquids. If they can go as liquids by ship or by road or rail, as apparently they can under Clauses 8 and 10 of this Bill, why can they not go by pipe?

Then there is the important complication, to which the noble Lord, Lord Wynne-Jones, alluded inferentially when he mentioned the Ekofisk field. There is the case where natural gas occurs in and with and as part of crude oil. There are cases where crude oil is brought to the surface and the machinery for handling it is in fact fuelled by the gas which is drawn off. There are cases where natural gas is drawn off at some point on shore, as in the case of the BP pipeline system. In other words, one gets natural gas conveyed in and with and, if I may use a simple layman's journalistic phrase, inside crude oil. Is that forbidden, or is it not? Here is an area of great confusion and difficulty, which may be one that does not lend itself to legislation in any event, but certainly there is a great difficulty here.

Perhaps I might add one other example which was brought to my attention. There are not only gases that are, as it were, inside crude petroleum there is the case of butane, which may be used as a blend in petrol. These are all cases which hitherto have been free of the control that the noble Lord is seeking to persuade Parliament to give in this Bill. This is the point that I want to make quite simply. I have one or two wisecracks up my sleeve, but I will save them for later.

Lord HAWKE

May I ask the Minister precisely what he means by "offshore natural gas through pipes "?because this seems to have rather a wide definition.

The Earl of KINTORE

I am in some difficulty here because, again, under normal temperature and pressure, one of the natural gas liquids is natural gasolene, which is a liquid at normal temperature and pressure once it has been separated. I am no chemist or physicist, but these points have been brought to my notice. The noble Lord the Minister referred to the Continental Shelf Act, as I think it was. The great point now is that for the first time, instead of having to import our feedstocks, we are going to be naturally self-supporting and in fact we shall probably have a surplus of feedstocks for export purposes. To me this makes a very great difference. I have one other difficulty in regard to the Bill. Clause 8(1) on page 7, which we seek to amend, refers to, "premises in Great Britain". I should like to ask whether our production platforms are in Great Britain and, if they are, whether they can take off gas to work their own machinery and booster stations. If they are in Great Britain then, clearly, they will be rateable hereditaments.

Lord LOVELL-DAVIS

First, I should like to say that I am grateful to my noble friend Lord Wynne-Jones, who explained some highly complex points regarding gas and the value of this Amendment much more capably than I could ever have done. I should like to assure him that his interpretation is correct. This subsection provides that: No person other than the British Gas Corporation shall supply off-shore natural gas through pipes to premises in Great Britain, unless the supply is for industrial purposes. "Off-shore natural gas" is defined in subsection (7) as: …natural gas won under the authority of licences under the Petroleum (Production) Act 1934, as applied by section 1(3) of the Continental Shelf Act 1964". This provision spells out clearly that the British Gas Corporation have a monopoly in supplying off-shore gas through pipes for domestic and other non-industrial uses. It complements a comparable provision in Section 29(1) of the Gas Act 1972, which applies to other types of gas.

Lord HAWKE

The noble Lord has just answered me, but may I ask him a further question arising out of what he said? He has told us that the meaning of "off-shore" is as defined in the Bill. Natural gas is found off-shore all over the world. If it is shipped to this country in liquefied form in a container, is it caught by this subsection?

Lord LOVELL-DAVIS

No, I do not think it is. One of the problems is that we are dealing with specific Amendments and, with the greatest respect, noble Lords are tending to anticipate later Amendments and are running forward into the Bill, which is liable to confuse us all and to make the proceedings on this clause extremely repetitive. Therefore, I should be very grateful—I ask this not defensively, but because it would be for the general benefit of the Committee—if we could confine ourselves to the Amendment under consideration, because this is a complex clause. To continue with what I was saying in reply to my noble friend Lord Wynne-Jones, Clause 8(1) prohibits anyone other than the British Gas Corporation from supplying gas for purposes which are not industrial. The remaining subsections impose controls on supply for industrial purposes.

The noble Lord, Lord Strathcona and Mount Royal, referred to the supply of crude oil with gas. I should point out that this is not caught by the provisions. The supply of gas extracted from crude oil can be subject to first offer, if it is to be supplied for industrial fuel purposes. The noble Earl, Lord Kintore, raised the matter of premises in Great Britain and asked whether it would be possible to use gas without consent to work machinery on a platform. The answer is Yes; of course they would be able to do so. They are outside the Realm and are able to use the natural gas to operate their own machinery.

The noble Lord, Lord Avebury, asked me to consider the matter of definition and, if I may, I shall do so as we proceed with our examination of this clause. The noble Lord, Lord Hawke, acknowledged that I had answered his question about off-shore natural gas in pipes. I hope that I have covered all the points raised. I can only ask noble Lords once again to reject—

The Earl of LAUDERDALE

Will the noble Lord explain how it is that when gas can go as a liquid by ship, rail or road, it cannot go by pipe? What about the situation where natural gas is included in crude oil and is piped, and what about the transmission of butane as a blend in petrol?

Lord LOVELL-DAVIS

I am not sure that I follow the noble Earl. Is he asking whether we have any intention of controlling bottled gas or gas supplied by tanker, or anything of that kind?

The Earl of LAUDERDALE

As I understand the Amendment—and I saw it this morning for the first time—its object is to make sure that, …supply of gas through pipes shall mean and shall be restricted to…gas…in the gaseous state". But what about gas which is not in a gaseous state? It is not in a gaseous state when butane is transmitted by pipe as a blend in petrol; it is not in a gaseous state when it is included in crude oil. These are simple points which I should have thought the noble Lord could answer.

Lord LOVELL-DAVIS

We are opposing the Amendment, because we wish it to include not simply methane but the heavier gases, and therefore to include the liquids. The liquids themselves should be in the pipe.

The Earl of LAUDERDALE

Would it not be more effective if the noble Lord were to invite us to withdraw the Amendment and say that he will look at the points raised and at the wording and come back next time, because this is not satisfactory as it stands. I am sure he will admit that.

Lord LOVELL-DAVIS

I can certainly do nothing of the kind. I cannot possibly recommend that noble Lords should accept this Amendment.

The Earl of LAUDERDALE

What I am suggesting is that the noble Lord invites us to withdraw the Amendment and undertakes to look at it. That is all we are asking.

Lord WYNNE-JONES

I hope that my noble friend will agree, and that the noble Earl will also accept, that butane dissolved in anything else is not natural gas. Natural gas is the gas which comes off on site. If it is dissolved in something else, then it is part of petroleum and is not natural gas. The term "natural gas" does not describe a substance; it describes a material which occurs.

Lord STRATHCONA and MOUNT ROYAL

I started by apologising for ranging wide. I was aware of the trouble it might create, but I did not see any other way of proceeding and I still do not. I must take up one or two general points which the noble Lord made at the beginning. He talked about not being able to advance conservation without powers. Our main objection to that statement is that he has masses of powers which he does not use at the present time, and we should look askance at giving him more. I thought he rather gave the game away when he talked about powers. He seems to be unaware of something called the market place, which has given people greater power throughout this country for a long time, with a certain degree of success; and, indeed, we reached a good deal of international pre-eminence in the days when we used to operate the market place. Therefore, for the noble Lord to talk about handing over power to individuals outside Government control is a fair definition of the main political difference which lies between us. And thank God for it!, and I make no apology for reiterating it.

However, I shall try to behave myself as much as possible, because I have the same interest as the noble Lord in getting to bed at some time in the next two days, and I can sec a danger of our not achieving it. I regret to say that we shall be coming back later, either tonight or tomorrow, to many other Amendments in an attempt to define various terms in this Bill. Therefore I will leave those issues for the moment. About the question of definitions, I say merely that the definitions did not matter so much when not so many powers were associated with them.

The big problem which now arises is that the Government are taking all kinds of new powers and that we are coming back to the old retrospective argument to which again we shall address ourselves later. The plain fact is that the Government now propose a major change whereby licensees will have withdrawn from them the right which they had in the past to use various materials for various purposes. Surely the principal reason for the protective monopoly of the British Gas Corporation was that they were operating a distribution grid, that it would not be sensible if they were not to operate that grid and that in older to operate it a monopoly was required. We do not question that reason, but we question whether it is right to try to remove the competitive element that can be introduced through the supply of some of these other gases by licensees who have built up a very considerable and complex industry. And if this industry threatens, in a competitive way, the British Gas Corporation, I see nothing unhealthy about that; it does not affect their grid.

The noble Lord then spoke about going back to the 1965 position and the fear that there would be technical advances which would seriously affect the competitive position of the British Gas Corporation. But we are in 1976 and the noble Lord is surely answering that point by saying, "We do not feel that there is any need to change the definitions." Various contracts are associated with the chemical industry which has grown tip alongside the offshore oil industry, and big industries have been established to use some of the parts which are extracted from natural gas. The issue to which we are addressing ourselves in this Amendment seems to us to be absolutely fundamental not only in political terms in resisting the Government in their belief that they can run operations which we do not think they are very good at but also as regards the straight practical issue of trying to extend control to something which is not needed to protect the British Gas Corporation.

Lord LOVELL-DAVIS

The noble Lord referred to the market price as the source of power. This is probably the reason why more and more countries have taken control over their natural resources, and the fact is that the market place has not been adequate to control this situation. I want to make it clear, however, that we have no intention of attacking or discouraging in any way whatsoever the petrochemical industry. The very words of the noble Lord, Lord Strathcona and Mount Royal, show our preoccupation. Several times he said, "This is big business". It is very big business; it is huge business; huge amounts of our natural resources are now being used by the petrochemical industry and it would be folly on our part not to require control. Under no circumstances, however, do we want to discourage, attack or run down the petrochemical industry—far from it.

Lord STRATHCONA and MOUNT ROYAL

I cannot agree with the noble Lord. I do not see the need for this mysterious word "control". The word "control" is becoming our watchword in the debate on this Bill, in the same way as "flexibility" was our watchword when we were dealing with the Petroleum and Submarines Pipeline Act. At least I can congratulate the Government upon having found a new word for us to argue about, and I suppose we should be thankful for that. However, I do not agree with the need for the word and that is the truth of the matter. I should very much like the Government to understand that whether or not it is their intention to interfere with this great industry which has grown up and although I quite accept that it may not be their intention to damage it, damage is

Resolved in the affirmative, and Amendment agreed to accordingly

what they are liable to inflict unless Amendments like this are agreed to. I sincerely hope that those who agree with me will support us in carrying this Amendment to a Division.

5.15 p.m.

On Question, Whether the said Amendment (No. 19J) shall be agreed to?

Their Lordships divided: Contents, 78; Not-Contents, 59.

CONTENTS
Aberdare, L.	Fraser of Kilmorack, L.	Penrhyn, L.
Alport, L.	Gainford, L.	Porritt, L.
Amory, V.	Greenway, L.	Rankeillour, L.
Auckland, L.	Gridley, L.	Redesdale, L.
Balerno, L.	Hailsham of Saint Marylebone, L.	Ruthven of Freeland, Ly.
Balfour of Inchrye, L.		St. Aldwyn, E.
Belstead, L.	Hatherton, L.	St. Just, L.
Berkeley, B.	Hawke, L.	Sandford, L.
Birdwood, L.	Hereford, V.	Sandys, L.
Bridgeman, V.	Hylton-Foster, B.	Sempill, Ly.
Campbell of Croy, L.	Killearn, L.	Somers, L.
Carr of Hadley, L.	Kinnoull, E.	Strang, L.
Carrington, L.	Kintore, E.	Strathclyde, L.
Coleraine, L.	Lauderdale, E.	Stralhcona and Mount Royal, L.
Cottesloe, L.	Long, V.
Daventry, V.	Loudoun, C.	Strathspey, L.
de Clifford, L.	Lucas of Chilworth, L.	Sudeley, L.
Denham, L.[Teller.]	Luke, L.	Swansea, L.
Digby, L.	Lyell, L.	Tenby, V.
Drumalbyn, L.	Macleod of Borve, B.	Terrington, L.
Dundee, E.	Merrivale, L.	Thorneycroft, L.
Eccles, V.	Meston, L.	Tranmire, L.
Elliot of Harwood, B.	Mottistone, L.	Trevelyan, L.
Elton, L.	Mowbray and Stourton, L.[Teller.]	Vickers, B.
Emmet of Amberley, B.		Vivian, L.
Exeter, M.	Northchurch, B.	Ward of North Tyneside, B.
Faithfull, B.	O'Hagan, L.	Young, B.

NOT-CONTENTS
Amherst, E.	Elwyn-Jones, L.(L. Chancellor.)	Northfield, L.
Amulree, L.		Norwich, V.
Avebury, L.	Gaitskell, B.	Ogmore, L.
Aylestone, L.	Goronwy-Roberts, L.	Oram, L.
Beaumont of Whitley, L.	Greenwood of Rossendale, L.	Paget of Northampton, L.
Birk, B.	Hale, L.	Popplewell, L.
Blyton, L.	Harris of Greenwich, L.	Sainsbury, L.
Briginshaw, L.	Henley, L.	St. Davids, V.
Brimelow, L.	Jacques, L.	Shepherd, L.(L.Privy Seal)
Brockway, L.	Janner, L.	Stedman, B.[Teller.]
Buckinghamshire, E.	Kirkhill, L.	Stow Hill, L.
Champion, L.	Leatherland, L.	Strabolgi, L.[Teller.]
Collison, L.	Lee of Newton, L.	Summerskill, B.
Cooper of Stockton Heath, L.	Llewelyn-Davies of Hastoe, B.	Taylor of Mansfield, L.
Darling of Hillsborough, L.	Lloyd of Kilgerran, L.	Wallace of Coslany, L.
Davies of Leek, L.	Lovell-Davis, L.	Walston, L.
Davies of Penrhys, L.	Lyons of Brighton, L.	Wells-Pestell, L.
Donaldson of Kingsbridge, L.	Maelor, L.	Winterbottom, L.
Douglas of Barloch, L.	Mais, L.	Wootton of Abinger, B,
Douglass of Cleveland, L.	Maybray-King, L.	Wynne-Jones, L.

5.23 p.m.

Lord CAMPBELL of CROY moved Amendment No. 20DD:

Page 7, line 44, at end insert:— ( ) The Secretary of State shall give his consent to the supply of offshore methane under subsection (2) of this section and to the use of offshore methane under subsection (3) of this section when he is satisfied that such supply or use is for industrial purposes which do not consist of or include the use of offshore methane as a fuel. The said purposes are industrial purposes which do not consist of or include the liquefaction of the offshore methane or the use of the offshore methane as a fuel except insofar as the offshore methane is used to provide heat or other energy required:—

1. (a) for a process in which the offshore methane is used otherwise as a fuel; or
2. (b) where such a process is one of a series, for any further process in the same series, not being a process in which a bulk product is converted into manufactured articles;

and in determining whether any industrial purposes are as mentioned in this subsection the use of any gas derived, otherwise than as a by-product, from any offshore methane shall be treated as the use of that offshore methane.

The noble Lord said: This Amendment was formerly numbered 21, and I suggest it would be for the convenience of the Committee if we were to discuss with it Amendment No. 20U, which is consequential; No. 20V which contains an accompanying definition and also No. 34 which is consequential. I must declare an interest, because since the last occasion on which we discussed energy in your Lordships' House, in a debate in which I took part very recently, I have become a part-time consultant to an oil company.

With these Amendments we are raising a substantial point and giving the Government the opportunity to consider it and to explain the background to their clause. I do not propose to press Amendment No. 20DD, which would add a new subsection to the clause, but I would point out that it indicates a way in which the Bill could be changed if the principle were agreed. The present position, as my noble friend Lord Strathcona and Mount Royal indicated just now, is that Section 9 of the Continental Shelf Act 1964 governs the position where offshore methane is to be used for feed stock for chemical industries. The Government are then obliged to give consent: that is the present position.

Where natural gas and offshore methane in particular is to be used as a fuel, then the British Gas Corporation are given a special position. They have a monopoly for the domestic supply of natural gas and for non-industrial purposes. The Bill seeks to change that situation and it would give the Government the right to approve if natural gas was to be used for feed stock for industrial purposes. So as well as being used as a fuel, where approval is necessary, the Government are proposing that the present situation could be changed and that this sanction should be imposed. This Amendment would restore the obligation to give consent for industrial purposes. It would also leave liquefaction of offshore methane to a decision of a Minister. It would make that change and I should like to point that out to the noble Lord, the Minister. The reason for that is that there is uncertainty about the interpretation of whether liquefaction constitutes a use for the purposes of this legislation. Given a certain interpretation, the Government might be in a position where they would have no control over the export of liquid methane, and we recognise that it is desirable that the Government should be able to control bulk exports of liquid methane. So the Amendment covers that point.

Natural gas, besides being a fuel, can also provide feed stocks for the chemical industry. This second role as a feed stock will probably become more important for Britain since we know that there are considerable quantities of natural gas in the North Sea. I would remind your Lordships that the products of the chemical industry include fertilisers, plastics and synthetic fibres. There are a whole host of materials which are needed for daily life and which are produced, and can in future be produced, in greater bulk from offshore gas. The supplies would no longer be assured to the chemical industry if the Bill as it is now drafted were to go through and that is why we are suggesting that the subsection in the form of this Amendment would allow the Government to enable natural gas, and methane in particular, to continue to be used for industrial purposes without interference by the Government.

So far, the offshore gas which has been obtained from the British Continental Shelf has been mostly methane, but it can also contain ethane, propane and butane, and as my noble friend pointed out just now, propane and butane as liquids form liquid petroleum gas, which is a specialised and highly competitive business. Noble Lords will recognise that calor gas and other ways in which these gases are conveyed in bottles have made them useful in various ways in our daily life. It is not of particular interest to the British Gas Corporation that this business carries on. So far as I know, they have never objected to it; it is not part of their scheme for distribution. If the Government were to try and interfere in this business they would not have the expertise that is needed, and it seems most unlikely they will be able to acquire it.

I would ask the noble Lord a definite question. I would ask him whether it is the intention of the Government that butane and propane should be controlled under Clause 8? The Minister himself has demonstrated the fallibility of the Government—if I may have his attention for a moment. He has illustrated the fallibility of the Government because in the Second Reading debate the noble Lord, Lord Lovell-Davis, seems to have made a serious mistake in his own exposition of Clause 8. The noble Lord stated: The provision will also enable us to control the conversion of natural gas to methanol liquefaction. These are processes which waste gas and can be justified only in special circumstances."—[Official Report, 22 /3 /76; c. 468.] The expression "methanol liquefaction" is a very odd one.

Lord LOVELL-DAVIS

If the noble Lord, Lord Campbell of Croy, will give way, it is unfortunately true—I have found cases myself when reading through the Committee stage—that it puts a great strain on the Hansard writers when we are dealing with technical subjects like this. In point of fact, I can clear that one up. I certainly did not say that, but was talking about methanol conversion which is wasteful of gas. I am sorry, but I have come across occasions on the debate last Thursday where the absolute opposite sense to what I said has unfortunately been given. I have taken steps to have this changed in the bound volume of Hansard. I am sorry, there has been a mistake which I did not detect. I will have a look at it.

Lord CAMPBELL of CROY

I seem to have touched on a delicate spot, and I am glad I was able to give way straight away to the noble Lord the Minister for him to agree that what appeared in Hansard, anyway, is nonsense. I am sorry however, that although this is a technical subject, the noble Lord was not able to get the necessary correction made before Hansard went to print, because leaving it to the bound volume, of course, means that it will be a long time before any correction can be made. But the noble Lord has agreed that what he said there was nonsense, and it certainly shows how a mistake like that can be made from the Government Front Bench, and apparently not noticed even for a day or so.

One of the derivatives of methane and natural gas from offshore is ammonia. I must remind your Lordships of the very wide range of substances which are products of ammonia from offshore gas. Ammonia can be produced in this country from offshore gas in much greater quantities in future, and, in turn, this will help the production of dyestuffs, pharmaceutical preparations, the preservation of rubber latex and the prevention of corrosion in boiler plants and power stations. It is also used in refrigeration. I have mentioned also printing processes, and the flameproofing of textiles which are other examples of the uses to which ammonia can be put. As I said at the beginning, this is an extremely important matter on which we should like to have the reaction of the Government now. Therefore, I beg to move Amendment No. 20DD.

5.35 p.m.

Lord LOVELL-DAVIS

This Amendment to which the noble Lord, Lord Campbell of Croy, is speaking, would restore methane to the régime of Section 9 of the Continental Shelf Act 1964, which means that consent would be mandatory if the gas was to be used or supplied for non-fuel purposes. Since the 1973 oil crisis, natural gas has made a growing contribution to the United Kingdom energy economy, and now represents 17 per cent. of our total energy demand. But since supplies of natural gas are finite, it is essential that we use it where it will bring the maximum benefit to the nation. It is impossible to organise pipelines and plan supplies if large quantities of gas are outside the control of British Gas or the Government.

The change from mandatory to discretionary consent which we are proposing in Clause 8 of the Energy Bill is in no way directed against the petrochemical industry. It will merely mean that the Secretary of State will be able to decide on the optimum use of the gas which may well turn out to be petrochemical use. It is accepted that the value of the gas is enhanced by using it as a feedstock for some petrochemical purposes. But there are other cases such as the conversion of gas to methanol—if I can have the attention of the noble Lord, Lord Campbell of Croy; that is what I said, and I can now make it clear—where its use is wasteful. In the interests of conservation of gas, the Secretary of State must be able to differentiate between valuable and wasteful uses of gas.

If methane were to be excluded from the discretionary control of the Secretary of State when used for non-fuel purposes, this could affect the British Gas monopoly of supply since methane is the main component of the natural gas supplied through the national network. Also, the control of the Secretary of State could be considerably eroded. There is also the physical problem of separating methane from the rest of the natural gas for the purpose of control, and difficulties would be caused by having different regimes for different components. In spite of the representations my Department has had from industry, I should like to mention that in the past 12 years there has been only one case where a licensee has sought consent under Section 9 of the Continental Shelf Act 1964, to use a very small quantity of natural gas himself for petrochemical purposes. I understand that there have been no cases in which consent has been sought for supply.

There need be no uncertainty in planning investment. I am sure that if an application for consent for the use or supply of natural gas for non-fuel purposes is made in good time, a decision will be quickly given. I should remind your Lordships that when the special provisions for non-fuel use were introduced, petrochemical use of gas was negligible, but now supplies to the petrochemical industry account for nearly 10 per cent. of the total market in this country. The Government are not claiming that this is a bad thing, nor do they want to deter future petrochemical use of natural gas. But the more closely one looks at the problems involved in meeting the seasonal changes in demand, of designing onshore pipeline systems to meet the national demand at minimum price, the more one sees the need for the nation's gas supplies to be looked at as a whole. A situation in which an unknown but very substantial supply of gas is totally outside the scope of co-ordination is bound to lead to an increase in the costs of meeting the overall national demand. It is for these reasons that I ask your Lordships to reject this Amendment.

I might add that the noble Lord, Lord Campbell of Croy, asked whether propane and butane would be controlled. The powers will apply to propane and butane, but I cannot anticipate the decision of the Secretary of State. We have no intention at all of interfering with the natural operations of the LPG industry.

The Earl of LAUDERDALE

As always, I find the noble Lord's speeches of great interest. He has now assured us that the Government have no intention of interfering with the proper operation of the natural gas industry. A little earlier, he said that it will be for the Secretary of State to determine the optimum use of the gas, and he said that, of course, no uncertainty with regard to investment policy need result from this. Sometimes one feels that the noble Lord and his colleagues are a little pained when we raise queries. Will you press a little slower, said a Front Bench Labour Peer, There's a purpose in our drafting but it must not be too clear. How unjustly some Conservatives see dangers in advance, They suspect it's all a swindle; won't you give our Bill a chance. The Government have said over and over again that they want investment, they have said over and over again that they want investment in the North Sea. They have said that their proposals do not in any way inhibit or discourage, or need not inhibit or discourage, investment. But surely, since the noble Lord has assumed an appropriate mantle of humility for the liturgical season we are in, and has admitted that he was not quite right the other day, would he not now admit that investment in fact has been hideously discouraged by recent legislation? When the Government say, "We have no intention to discourage", when the Government say, "We do not discourage", when the Government say, "Our legislation has the purest intentions", we are entitled to look back at the events of the past 18 months and see some of the things that have happened. Surely the noble Lord cannot deny any longer that there has been a great slowdown both in exploration and development in the North Sea.

He and his noble friends told us only a matter of months ago that it was all nonsense to say there was a slowdown, that it was all nonsense that the diminishing demand for gravity platforms reflected any slowdown in development purposes. Now, of course, one reads the headlines in the Press, "Ardyne base could close next year", this when the Government propose another base not very far away. We read, "Urgent bid to save oil rig builders". I have just taken two newspaper clippings of recent dates. Surely the Government cannot now deny that there has in fact been a slowdown and a discouragement of investment resulting from their policies. Therefore, when they say the Secretary of State can and must determine the optimum rate of this or that, surely in ordinary common prudence they would have to admit from recent experience that the Secretary of State's judgments are not always as satisfactory as one could wish. The Secretary of State is not the Lord Almighty.

Lord AVEBURY

If I may interrupt the noble Earl, could he tell the Committee how much additional investment, if any, he thinks is required for us to be able to use all the supplies of methane, which is what this Amendment is about, which will be available from our own sector of the North Sea and the Frigg field between now and, say, 1985?

The Earl of LAUDERDALE

I am much obliged to the noble Lord for his question. I cannot answer it without notice, and I do not think anyone else could. What is damaging is that unless the Government's obligation to allow offshore methane as a feedstock continues as before, there could, and very likely would, be a danger, as my noble friend Lord Campbell of Croy pointed out, to ammonia production. Surely, this is something which must be close to the heart of the noble Lord's own Secretary of State. He has proclaimed the desirability of a siege economy and import controls. Ammonia production is very relevant to home food production because of its relevance to fertilisers. It is relevant in other ways, too. Ammonia is relevant, apart from the examples given by my noble friend, to anti-corrosion methods in refineries; it is relevant to effluent control; it is relevant to the printing industry; it is relevant to industrial, and, for that matter, also military explosives; it is relevant to animal feeding stocks; it is relevant to plastic moulds and fibres. All these are industrial uses that are important.

We are saying that it is not good enough for the Government to say that the Secretary of State can and will and is able to determine the optimum use. No Secretary of State has ever yet in history succeeded in determining the optimum use. If the Secretary of State's wisdom is so self-evident, then look at the history of the past 18 months with regard to the Government's Oil and Submarine Pipelines Bill and its effects, the taxation and participation arrangements in the oilfields, and so on. The fact is that the thing has slumped. They know it has slumped. They are now getting frightened. That may explain the slight note of penitence and humility we heard from the noble Lord. I know, of course, that he does not mean to be arrogant at any time. When he confesses that he had been wrong the other day, perhaps he would also take note that this is not an area where a Secretary of State, where any Government, can literally determine from their own resources what is the optimum use. That, surely, is the heart of the answer in his reply to this very sensible and valuable Amendment.

Lord AVEBURY

Listening to the noble Earl, Lord Lauderdale, one would think that the essential supplies of ammonia and other petrochemical products derived from methane would dry up in consequence of the provisions of this Bill, that investment would be insufficient over the next few years.

The Earl of LAUDERDALE

I am not saying that it would all dry up. What I am saying is that Government control is liable to make free enterprise dry up; indeed it is one of its purposes. In this particular case there is a threat to the existing right to use offshore methane.

Lord AVEBURY

The noble Lord dwelt on the subject of ammonia and its importance to the national economy, which nobody is disputing. He mentioned some of the products derived from ammonia which are of tremendous importance, and that nobody is arguing about. What we are arguing about is whether the powers taken by the Government in this Bill would in any way interfere with the production of ammonia to meet national requiremets, or perhaps production of any other petrochemical which is derived from methane.

The Earl of LAUDERDALE

If the noble Lord would allow me to interrupt him once again, surely he is here striking, as we are, at the political heart of the matter. We are saying that the Secretary of State, whoever he may be, whatever Government he may be in, even if it were a Liberal Secretary of State, could not conceivably determine the optimum use. It amazes me to hear a noble Lord from those Benches pleading for this kind of control. But I will not interrupt the noble Lord again; he has been very patient.

Lord AVEBURY

We are not in the 19th century any longer and the Liberal Party no longer believes (if the noble Earl would like to catch up with events) in the unrestricted play of free market forces. We do not believe, any more than the noble Earl does, that the valuable methane, which, as Lord Lovell-Davis said, would probably be used as petrochemical feedstock in any case, should be burned under the boilers of power stations. I daresay I take the noble Earl that far with me in my argument. If he is saying that it is legitimate for the Government to give directions to the Central Electricity Generating Board—and for that matter the Scottish Boards if they felt inclined to use methane as a fuel—not to do so, because it is too valuable a substance to use in this way and must be conserved, probably as a chemical feedstock but certainly for what are called premium uses such as domestic heating—if the noble Earl goes that far and says that it is perfectly legitimate for the Government to have this power of interference with the free decision of the CEGB to burn the valuable substance of methane under the boilers of power stations, why does he think it is impossible, or not sensible, to go further and say in the future we must contemplate being able to use similar powers to control the use of methane for other purposes, which might equally not be right for the national economy though they may well be right for the CEGB or whatever user one is considering?

I intervened also to ask the noble Earl the question how much additional investment does he think is required in order to exploit the supplies of natural gas being produced in the North Sea and additional supplies we have contracted to buy from the Frigg field, and any associated supplies of gas which may arise from the fields now being developed. He said he was not prepared to give an estimate without looking into the matter more thoroughly. But at the same time he was prepared to say that investment was drying up and in the absence of the passage of this Amendment there would be a serious threat to the uses we are going to make of methane. How can the noble Earl maintain these two propositions at the same time?

The Earl of LAUDERDALE

The Government maintain contradictory propositions.

Lord AVEBURY

It is the noble Earl who advanced the proposition that investment is going to be seriously jeopardised if we do not accept this Amendment, but he has not taken the trouble to find out what volume of investment is required in order to sustain the usage of methane from the North Sea, and from the Norwegian sector of it as well, which is desirable in the national economy. Plans have been made for the use of existing natural gas from our own sector of the North Sea, from Frigg natural gas when it becomes available in 1976, and there is no problem with investment in the natural gas sector of exploiting the North Sea. The noble Earl is perhaps getting a little confused with the situation regarding oil, as one might gather from the discussion which he embarked on of the platforms, the orders for which have certainly dried up. The noble Earl must realise, if he gives the matter further consideration, that the ordering of platforms is connected with the development of oil, and although there is some natural gas associated with it we have already incurred the vast bulk of the investment necessary to exploit natural gas supplies from the North Sea when we developed the trunk grid.

The noble Earl finally said that it is not for any Government to determine the optimum use of natural gas, and I suppose he would also extend this argument to oil. I take a very different view because I think that in years to come we will find that the supply of hydrocarbons In general from the North Sea is an increasingly valuable asset in relation to shortages of supply in the world, and that in the later 1980s, when these supplies may begin to decline, we shall be entering again into the world market in a situation very much less favourable than that which we encountered in 1973 when, as the noble Lords will recall, oil prices were pushed up sharply by the OPEC countries.

Therefore, it is our duty, and our national duty, to accept any measures which can be advanced by the Government to conserve supplies and to make sure that they are only used for the most absolutely essential national purpose. If we do not do this, by the end of the 1980s, certainly before the end of this century, our descendants, and those who succeed us in Parliament, will say, "What profligacy! How could they have used up all these valuable resources of hydrocarbons from the North Sea, leaving nothing for future generations?" I think in principle, contrary to the noble Earl, Lord Lauderdale, that powers have to be taken by any Government, and I believe that the same powers would have been taken for the same kind of reason if we had had a Tory Government in power now. I think, if anything—and I am tempted to embark on the kind of Second Reading speech we heard from the noble Earl on the last Amendment, but I will resist it—the powers of control which we find in this Bill will prove to be inadequate in the light of experience in the later 1980s.

Lord MOTTISTONE

May I just say a few words? Surely what the noble Lord, Lord Avebury, has been saying presumes that the better people to conserve are the Government, rather than anybody else? That is a presumption which I suggest needs seriously looking at before we commit ourselves to that as being the basis for every argument. The other point that is of interest is that the noble Lord, Lord Lovell-Davis, I think said that since the 1964 Act, to which reference has been made, there has been only one very small application for the use of this gas, which might indicate that perhaps it would be as well not to give Draconian powers to the Government to control everything just for the sake of it but to wait and see what happens. There is a lot of time to pass legislation, if there are people rushing forward to take advantage of a situation which might come about if this Amendment is passed, a lot of time to stop the situation when it is necessary. It seems to me that the attitude of mind of the Government, which wishes to have control virtually for its own sake when they have no evidence that this has been necessary in the past, is surely one which should be questioned very severely, and I should have thought therefore that the Amendment we have before us is a reasonable one.

5.55 p.m.

Lord LOVELL-DAVIS

May I first of all say how grateful I am to the noble Lord, Lord Avebury. I entirely endorse what he said. I thought it was an extremely sensible view on the overall situation. What he says is exactly right about control. I do not understand why we should be looking to exclude a particular section of industry in this way. I utterly reject what the noble Earl, Lord Lauderdale, said, about this "very discouraging picture". The basic fact is that production is forging ahead. Huge investment is involved here. It is not perhaps surprising that there is some pause; the fact is that production is moving ahead, and in utterly rejecting the noble Earl's case I only say that I wish I had the time in this Committee stage to compose and declaim our case in verse.

The noble Lord, Lord Mottistone, mentioned energy conservation. I do not know who, if not the Government, is actually going to control this. Who is going to implement any programme of energy conservation if not Governments? Governments, surely, have to do it, and they are doing it all over the world. The noble Lord spoke of Draconian powers. This is the most abused word in politics. One can in no circumstances call any of the powers we are trying to take in this Bill, Draconian. If you look at the background of this word it does not mean the sort of powers that we are taking in this Bill. They are far from Draconian.

The other point he made about waiting, as I understood it, until the chaos is upon you before you actually get your powers right, I utterly reject, especially when one has, as we have, an opportunity to take the powers now which will prevent a chaotic situation from developing.

Lord MOT FISTONE

Would the noble Lord confirm that in his first speech on this Amendment he in fact said, "Really, I do not see what you are fussing about because there have been hardly any applications"? I think there was one small one which he quoted. He said, "Therefore, why not have the regulations that we are asking for?" Is that not the case?

Lord LOVELL-DAVIS

I said that there had over the past 12 years been only one case where a licensee had sought consent under Section 9 of the Continental Shelf Act. This was a very small quantity. I did indeed say that. I do not think that in any way invalidates the case for seeking the powers that we are seeking under this Bill. Finally, I should like to get this matter straight—I know I have mentioned it two or three times; but I take it rather seriously and I should like to satisfy the noble Lord, Lord Campbell of Croy, on the matter. I did in fact say: The provision will also enable us to control the conversion of natural gas to methanol and liquefaction". I am afraid what happened was that the "and" was omitted in Hansard. Having said that, may I once again hope that the noble Lord will withdraw his Amendment.

The Earl of LAUDERDALE

When the noble Lord says that production is forging ahead, we all know that. This is production made possible by investment decisions taken nearly 10 years ago. He knows that. It is an old debating trick to say, "Look how it is going ahead now". It all arose out of investment taken a long time before this Government laid their fell hand on the matter. With regard to the observations of the Liberal dirigiste sitting on the other Benches, I was not talking of burning gas as a premium fuel in power stations; I was talking about gas as a petrochemical feedstock, which is quite different. I must say that I think that the noble Lord could not have understood what I was saying when he misquoted me in that way. When we are talking about determining the optimum use, I was not saying that we can determine it, or the Government determine it internationally; what I was saying was that the Government were trying to determine it domestically. This is not something the Government can do; it is something only the market and the industry can do.

When the noble Lord talks about investment, the short point is that investment has been made extensively. Investments have been made in the gas fields of the North Sea on prevailing conditions and on the assumption of free access for natural gas for use as petrochemical feedstocks. Now that that free access is no longer assured, the confidence of investors must be called into question, and that is the only point I am making.

Lord AVEBURY

The noble Earl, Lord Lauderdale, has provoked me into intervening once again. The investment which took place leading up to the exploitation of natural gas was under the gas borrowing powers provisions of 1966, and that was also under a Labour Government, so he is quite wrong in thinking that legislation passed under Labour has in any way inhibited investments in the North Sea. I took part in those debates and, speaking from memory, the Gas Council, as it was then, was asking for a further £1,200 million, which was thought to be far too much by the Tory Opposition at the time. Incidentally, Mrs. Thatcher, the present Leader of the Conservative Party, was the Tory energy spokesman at that time and she was vigorously opposing the borrowing powers of the legislation. She was also saying at the time—I reminded the noble Lord, Lord Lovell-Davis, of this some weeks ago—that as a result of the policies of the Government, oil rigs and gas rigs were being driven away from the North Sea, that they were going across to Holland and that we would not succeed in attaining the targets that were set out in the 1965 White Paper showing that natural gas would account for 15 per cent. of our energy requirements by 1975. The right honourable lady was absolutely wrong and the noble Lord, Lord Lovell-Davis, has reminded us this afternoon that we are now up to 17 per cent. of our energy use provided by natural gas, and this under legislation criticised by the Tories 10 years ago.

The noble Earl also reiterated that the investment was made under free access provisions; the legislation that operated at that time. But he could not have been listening because the noble Lord, Lord Lovell-Davis, told us that only one application was made under the 1965 Act, and the way in which people have been able to acquire supplies of methane is by negotiation with the Gas Council, as it was then, and as they can do still by negotiation with the Gas Corporation. There is nothing in this Bill at all which prevents the would-be user of methane as a feedstock from going to the Gas Corporation and contracting to buy any quantities he may require, and one of the largest users who negotiated a particularly favourable contract in the early days was ICI. There was some argument not long ago about the Gas Council in the initial days of exploration in the North Sea granting them extremely favourable terms over a long time-scale. It was said that the contract should not have been entered into because they were now buying the gas from the Corporation at prices very much lower than other industrial users which had not had the foresight to enter into such long-term contracts.

The fact is that industrial users have never had any difficulty at all in obtaining whatever supplies of methane they require for use as a chemical feedstock, and they will have no greater difficulty because of the provisions of this Bill in purchasing whatever quantities they require from the Gas Corporation. But at some time in the future—and this is what we are talking about—a user will have access to supplies of his own and will require to use it in a manner which may be absolutely right and commercially sensible from the point of view of his own company but which will be contrary to the national interest. The noble Earl and his colleagues are saying that they do not want the Government—not this Government but a future Government—to have powers to control that situation. I hope that they will think again and will not press the Amendment because, if they do so, in a few years' time they will look as foolish as Mrs. Thatcher looks now when one looks back on her remarks on the 1965 borrowing powers.

Lord CAMPBELL of CROY

I do not think the noble Lord, Lord Avebury, could have been listening at the outset of the discussion. I said at the beginning that I had no intention of pressing the Amendment, for reasons which I will not repeat now. The noble Lord, Lord Lovell-Davis, replied to one of my questions and that was whether offshore propane and butane was to be controlled under this clause, and his answer was in the affirmative. I regret that the noble Lord, Lord Wynne-Jones, is not in his place and did not hear that remark because I am sure that he would have had something to say about it and, like me, might not have agreed with it. The noble Lord, Lord Lovell-Davis, gave an assurance that it was not the intention of the Government to intervene in what he described as the LPG industry—the liquid petroleum gas specialised business—and I think he accepted that it was a separate specialised business. In that case, we can see no point in including butane and propane in Clause 8, and that was the reason for our definition of offshore methane and for drafting the subsection we proposed with that accompanying definition.

As to the real reason for the Government proposing these new controls, I do not think that we have had a satisfactory explanation. The noble Lord, Lord Lovell-Davis, spoke of the need for coordination, but I detected little else in what he said. What the Government are proposing is that there should be controls over offshore natural gas for use as feedstock for industry. There are already controls where it is to be used as fuel, for reasons which we have discussed and to which we are not objecting; but do the Government think that Government officials will be better situated, in providing an extra layer in these procedures, to improve the coordination or the efficiency of the chemical and other industries using natural gas as feedstock? In my opening statement I said that I thought there would be difficulty in acquiring the necessary expertise to make these decisions. These are decisions which have to be taken by experts in the industry; the whole question of what is to be the optimum use of some offshore methane at a particular time is one on which it would be exceedingly difficult for Government officials to advise Ministers. They would certainly have to lean very heavily on advice from the industry and one therefore asks why it is necessary to try to insert these controls in the procedure which is now operating.

I think that it was Lord Avebury who spoke of plans that are made for years ahead for the industrial use of offshore natural gas and he mentioned that they had been drawn up for some years ahead. I am certain that more plans are being drawn up or are being considered now for natural gas which is in fields still to be developed in the North Sea, fields that have been discovered and thought to be commercial and which are to come into production in the future. However, it is difficult for the industry to make such plans if it cannot be sure that the Government will not step in to veto or reduce the amount of the gas which they propose as part of those plans which should go to feed-stock. These plans need to be made, including the building of ammonia and other plant, for 10 or more years ahead. Now the industries concerned will have at the back of their minds the thought, "We can make these plans, but the Government may step in at a certain moment and simply veto the quantities which we are proposing."

The noble Lord, Lord Avebury, raised the general question of the rate of extraction and we know, from having heard him speak in previous similar debates, that he is in favour of conserving natural gas in our continental shelf for a long period. So far as Lord Lovell-Davis is concerned—I noticed him thanking Lord Avebury—I think that there is no difference between both Front Benches, in that our object is to get as much crude petroleum and develop our offshore oil fields as much as possible in the next five years. We are trying to get ahead without delay during that period. We know that the Government have, in the Petroleum and Submarine Pipe-lines Act, taken powers for depletion control. Those powers are limited, but they are there to control the rate of depletion later if that should be necessary. I am asking the Government a further question, because the noble Lord did not give an adequate answer to the question as to what was the real reason for seeking these controls. Is there another purpose in proposing the new controls over offshore natural gas for use for industrial purposes? Is there a particular reason for controlling natural gas to be used for manufacturing and not for fuel?

The only addition which appears to be necessary is to avoid sizeable exports of liquid methane. That might not be desirable but it is covered by the Amendment. Do the Government visualise the British Gas Corporation entering the chemical industry? The noble Lord said that he could give us an assurance that the Government had no intention of interfering with the LPG business, but one wonders whether this control is being sought in order to extend the operations. Hitherto, the role of the Gas Corporation has been perfectly clear and has been understood and accepted by the country. The Corporation has priority in the supply of gas for fuel for domestic and nonindustrial purposes. One naturally wonders whether the Government are thinking in terms of the Gas Corporation extending into this completely new field of activity.

Lord LOVELL-DAVIS

I want first to clarify that last point. I do not think that there is any question of the British Gas Corporation entering the petrochemical business but, frankly, I do not know whether they are in a position, in any event, to do so. So far as I am aware that is not the Corporation's intention and no such thought is in our minds at all in this legislation. So far as the normal LPG fuel industry is concerned, this is far smaller than the volumes of propane and butane which will be produced from the North Sea. It is clearly important for energy policy that the use of these new large supplies should be correct. One possibility is increased petrochemical use. I do not know whether the noble Lord asked another question which requires a reply. I hope not, for we have spent a great deal of time on this clause and we have a very long way to go to get through the Bill. I hope that we shall be able to move faster from now on.

Lord CAMPBELL of CROY

I have occupied a great deal of your Lordships' time. I shall say straight away that I do not intend to spend much time speaking on later Amendments. However, the present Amendment was an important one on which, as I said, we hoped to get statements from the Government. I am grateful to the noble Lord for what he has said, though, as I indicated, we do not regard it as very satisfactory. However, in the light of the debate which has taken place, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 20C: Page 8, line 21, leave out ("except for the purpose") and insert ("which results in the production of liquid methane except such small quantities of liquid methane as may be produced in the course").

The noble Lord said: This is another Amendment on the question of rights for suppliers. I fear that we are back in the liquefaction and methane area again. However, this is an Amendment of considerable consequence, the lack of which would. I understand, cause a good deal of concern to the industry. Here, we are seeking to maintain the freedom for the suppliers to extract and process the ethane, propane and butane from the natural gas mixtures and to handle such products as liquids, while at the same time retaining protection for the British Gas Corporation to prevent its being denied supplies of methane as a result or the liquefaction processes involved in such activities. We have already had considerable discussion about that. We have also said before that liquefaction is an essential process in the industry's treatment and handling of natural gas.

The Amendment purports to recognise that the production of liquid methane could deny the British Gas Corporation access to its prime source of specification gas to meet its statutory supply obligations. I hope that that is adequately covered in the Amendment. However, in our contention, there is no justification for the application of controls on the use of liquefaction processes for reasons other than producing liquid methane. The only purpose one can divine here is the desire to withhold consent for such processes in order to deny the supplier the outlet of his choice. That, we believe, would run the risk, once again, of distorting a very sensitive market.

The industry sees many dangers if this is done. I shall pick out three: first, the industry could be denied the ability to supply an export market for ethane or liquefied petroleum gas. Surely that would be contrary to the spirit, if not the letter, of the Treaty of Rome and our obligations under that Treaty. Secondly, a highly technical point which has been represented to me and which I pass on to the noble Lord, Lord Lovell-Davis, and ask him whether it is something which he has considered, is whether this would not deny to the industry the freedom to use the supply flexibility which it has built up over the years—I recommend that word "flexibility" to the noble Lord as being something which he normally accedes to—to balance from offshore sources the United Kingdom liquid petroleum gas supply and demand? Incidentally, this is permitted under subsection (5). The refinery production of LPG varies considerably throughout the year and, at times, has to be supple-mented by imported material to match the equally seasonal demand for these products. There is a danger that any control would cut across that flexibility.

Thirdly, might it not deny the industry the use of its supply flexibility to serve the LPG markets from their nearest and most convenient potential source of United Kingdom supply, rather than having to concentrate on imports or products from refineries? Clause 8(3)(b) allows liquefaction, …for the purpose of providing a supply to the British Gas Corporation… or to supply another person where the consent of the Secretary of State has been given. But we believe that these exceptions would not in any way mitigate the unwarranted restraint imposed by the other subsection. We have spoken about this in another context. The liquefaction processes are used to extract the other gases from the methanes and to separate the other gases into their marketable components. Sometimes they have to be stored separately, and, furthermore, there are occasions when it is more economical to supply LPG in a particular form.

I appreciate that these are highly technical arguments, but we have said many times this afternoon that against our best wishes we have been dragged into technical areas into which we do not believe it is wise that we should stray. It seems to us that under this clause, as it stands, there would also be a situation where consent would be required for the rather common sense notion of possible liquefaction at remote locations where there might not be a market for piped natural gas; but the separation of the LPGs was essential if they were to be recovered, extracted and used. Perhaps I should leave it at that until I hear what the Minister has to say in reply to our suggestion that for the reasons I have given he would be wise to allow the Amendment. I beg to move.

Lord LOVELL-DAVIS

The situation is precisely opposite to that which has been set out by the noble Lord, Lord Strathcona and Mount Royal. Far from those of us on this side trying to confuse the Committee by technicalities, I get the distinct impression that noble Lords opposite create an enormous smoke screen of technicality. I notice that every Amendment we come to seems to spread out into all kinds of minor technical points. It is particularly noticeable that this is happening at this time, and I wonder what kind of technical advice lies behind this. I have already referred to the purpose of controlling liquefaction. I thought that the noble Lord was to deal with this Amendment when he raised Amendment No. 19J. The purpose of controlling liquefaction is to avoid unnecessary wastage of gas. There is no inherent reason why that should be applied only to methane and not to the other gases. It will make sense to liquefy propane and butanes in many circumstances, and the Secretary of State will recognise the validity of such cases.

These powers are not required as export controls. I have already made that point. We are not proposing controls on exports made in gases of liquid form. I have also shown that we fully recognise the EEC consideration that any Secretary of State who deliberately used his powers under this clause to thwart exports of the Community might find that he was acting in breach of our EEC obligations. Paragraph (b) has brought the liquefaction of gas within the context of use and thus subject to the Secretary of State's consent.

I do not think I can add more other than say that this is wasteful. It is necessary that it should be under his control, unless the process is for the purpose of any supply to British Gas or any supply already covered by consent. The use of supply from an oil refinery is covered by Clause 10. As I have already said, the use of a supply provided otherwise than through pipes is specifically excluded. We have, I repeat, no intention of controlling the use of bottled gas or gas supplied by road tanker. The noble Lord raised a number of points on this but, frankly, I thought that they were technical I might be wrong, or I might be making a misjudgment, but I felt that to some extent they were a smoke screen. I cannot go into great detail in answering the noble Lord at the moment, and I hope that he will feel able to withdraw the Amendment.

Lord STRATHCONA and MOUNT ROYAL

We have arrived at a rather unsatisfactory situation because it seems that the noble Lord is saying, in effect: "Don't worry, everything is all right. We have the best intentions". I would not question the noble Lord's intentions, although I might question the intentions of some other people. The difficulty in which we find ourselves is that we have taken the trouble to discuss these matters at some length to try to understand what they are about. I am perfectly prepared to concede that our degree of success in understanding what this is all about may appear somewhat limited. I should not regard that as a terrible disaster because this is a very complicated matter. I cannot escape the feeling—and this bears out what we have been saying throughout—that the Government are close to blundering into an area where they are out of their depth. I have produced three specific cases which the noble Lord has suggested amount to putting up a smoke screen. I find that, to a certain extent, we tend to operate in a fog or in a gas, or-whatever one cares to call it. It is sometimes a little easier for me to understand the siutation if I can get specific examples of the kind of reservations and worry felt by those who work in the area we are considering. Those of us who do not work in that area cannot be expected to have the comprehension of those who do. I freely confess my humility in this connection, and I hope that the noble Lord might include himself in that category, and I should not be surprised if that went for some of the people in his Department too.

We are saying to him that we have identified a number of possible problems which might arise. We are assured by the people who work in this industry that to them these are not small technical problems, but very major issues, which would both seriously disrupt their operations and work contrary to the best interests of everybody in this country. I do not think it is fair for the noble Lord to say that he will not answer my questions because he thinks that they are a smoke screen. These points have been put forward seriously. What the noble Lord has said merely makes me more worried than ever, because it appears that the Government are unwilling, or unable, to understand—

Lord LOVELL-DAVIS

Will the noble Lord please give way for a moment? Frankly, the noble Lord lost me on a number of the points he raised. I shall certainly write to him and answer these when I have had an opportunity to look at Hansard to see precisely what it was that the noble Lord required answering. One of the points I think he raised was to do with unavoidable liquefaction. The fact of the matter, as I understand it, is that the Secretary of State could always cover unavoidable liquefaction cases by a general order, and would consider doing so. But in respect of the other matters which the noble Lord raised, if he would like me to write to him and would agree to withdraw the Amendment, then it would certainly be up to him if he wished to return to them during Report stage.

Lord STRATHCONA and MOUNT ROYAL

The noble Lord is now talking in an altogether different fashion from that which I understood him to be adopting when we started. I must meet an offer of that kind. I was not aware that I had talked about unavoidable liquefaction, but it is quite possible that I did. At any rate, I was going to suggest that it was essential for us to force the Government to pay attention to these points by inviting your Lordships' Committee to divide on this Amendment. However, if the noble Lord is saying that he will seriously consider the representations we have made and will discuss them with us, perhaps by letter, when we can see whether they meet the points, then I would suggest that we defer this until Report stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.32 p.m.

Lord CAMPBELL of CROY moved Amendment No. 20D: Page 8, line 25, at beginning insert ("Subject to subsection (6A) of this section").

The noble Lord said: This is a paving Amendment for Amendment 20R, and I would therefore suggest that Amendment No. 20R should be discussed with this Amendment No. 20D, which leads the way for it. I can deal with this quite briefly. In Amendment 20R we propose a new subsection, subsection (6A), under which the Secretary of State would give specific consents in each particular case falling within an order of general application; and then, under our Amendment, such specific consents would not be withdrawn even though the general application was cancelled or annulled.

The reason for this will I think be clear to noble Lords who realise how much industry are assisted if they can plan ahead and, if they have been given a specific consent, they know that they can count on it and that it will not suddenly be withdrawn or altered thereby affecting their plans for perhaps some years ahead. This Amendment is therefore designed and is necessary to obtain the security of supply of natural gas which is needed when an investment has been entered into and when industry are committed. British industry will not be able to plan ahead with confidence unless they can be sure that a specific consent will not be subject to withdrawal at short notice. I beg to move.

Lord LOVELL-DAVIS

As the noble Lord, Lord Campbell of Croy, has said, we are considering this Amendment in conjunction with Amendment No. 20R. I have already I think spent quite a part of this afternoon and evening assuring the noble Lords that this Government do not wish to put companies' investments at risk, and I can assure them that, in exercising his powers under this clause, the Secretary of State would certainly not behave unreasonably. However, I accept that companies may be looking for more assurance, and I am prepared to examine the position further to see in what way we may be able to help. I hope that will satisfy the noble Lord.

Lord CAMPBELL of CROY

I am naturally glad to hear the noble Lord say that he is prepared to look at this to see what can be done in this direction. I think he will know from what I have said what is required here, and I hope he will go the whole way; but, of course, in the light of what he has said, at this stage I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 20E: Page 88, line 29, leave out ("original").

The noble Lord said: This is a probing Amendment. We should have moved another Amendment to go with it, which would be, in line 11 on page 9, to leave out the word "original". This is genuinely a probing Amendment. We are not really very sure why the word was included. The question is: what specific meaning is attached to this word "original" in the phrase "original licensee", and what is the position of a licensee who, with the Government's consent, has "farmed in" to a licence? Because he is clearly not an original licensee. I hardly dare to say it, but would it not have the happy effect of excluding the BNOC from existing licences into which they appear to be, as we see it, trying to shoulder their way? I hate to help the Government in this way, but perhaps in hearing the answer to the question we may get some guidance as to what it was that they had in mind when these words were included in the Bill. I beg to move.

Lord LOVELL-DAVIS

I wonder whether the noble Lord, Lord Strathcona and Mount Royal, would allow me to speak to Amendments Nos. 20E, F and H under the one heading, as they are, I think, all very closely bound together. If he prefers that I do not do that, I will speak to Amendment 20E, but I think it would help if I can take them together.

Lord STRATHCONA and MOUNT ROYAL

We are in a slight difficulty, I think, because my noble friend Lord Campbell was going to move Amendment No. 20H, which also takes with it Amendment No. 20VA, I think. However, may I suggest that perhaps the noble Lord should feel free to cover the whole area, and we will do our best not to ask him to repeat himself.

Lord LOVELL-DAVIS

I am most grateful to the noble Lord. In talking to Amendment No. 20E, therefore, I will bring in at the same time Nos. 20F and 20H, in the hope that I can satisfy noble Lords opposite. Under the provisions of Clause 8 as drafted, the use of gas by the original licensees or their associated companies, while requiring the Secretary of State's consent, is not subject to the first offer of British Gas. This is broadly the position under Section 9 of the Continental Shelf Act 1964; but I suspect that the introduction of the word "original" has led to some confusion. The expression "the original licensees" is defined in subsection (7) as those who won it under such authority "; that is to say, those who won the United Kingdom licence. However, it does include any other licensee to whom the licence has been subsequently assigned, so it will not affect BNOC. It was perhaps because this earlier point was not fully appreciated that I think this first Amendment was proposed, and because there appears to have been some misunderstanding I will undertake to consider whether further clarification is needed. I hope that will satisfy the noble Lord.

The second Amendment, Amendment 20F, seeks to ensure that the use of natural gas for terminal operations, which is essential to the exploitation of the gas, is not subject to possible interference because of the British Gas first offer position. The subsection already permits use by the original licensees, but I am prepared to look again at the position of a person or company who is not a licensee but who purchases gas off-shore and needs to operate a terminal. Having given those undertakings, I hope noble Lords opposite may feel it possible to withdraw the Amendments.

Lord STRATHCONA and MOUNT ROYAL

We are grateful that the noble Lord has entirely hoisted on board the point about "original". I would venture to suggest that if we are now saying that "original" does mean the chaps who have joined him, I should have thought there was a clear case for amendment. I welcome the noble Lord saying that the Government will see what they can do about drafting a suitable one. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.41 p.m.

Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 20F: Page 8, line 29, leave out from ("licensees") to end of line 30, and insert ("or any of them or a company associated with them in the same group or any of them,").

The noble Lord said: I should like to add one or two things on this Amendment because I do not think the noble Lord covered all the points I was intending to raise under it. Again, I am grateful to him for his evident willingness to take care of the points that are worrying us. There are several questions which arise. What happens where you have consortia under this clause? If you have co-licencees, the worry is that you can get two companies who join together in a licence and you do not want to bring either of them under the provision of this clause if they are genuinely part of the co-licence. I find it difficult to express myself, but I do not think that this point was covered by the noble Lord.

The other point is that in consortia-type licences, each member of the consortium takes on a "several and joint liability", that dreaded thing which the banks always want you to do when you guarantee an overdraft. The suggestion we are making is that if it is right for members of consortia to take on joint and several liabilities, is it not also right that they should jointly and severally enjoy the benefits which one of them, the principal one, is entitled to under the licence. That was the point I was trying to cover and I am not sure the noble Lord covered it in his answer. I beg to move.

Lord LOVELL-DAVIS

I do not think I can give the noble Lord a direct answer to that particular point. I am not fully aware of the situation so far as consortia are concerned. I understood that "a company associated with them in the same group" refers to subsidiary companies. It is the fact that the group is literally one group under a parent company. Having said that, I do not think I can add more. I am not really aware that any other situation will be covered by this subsection to Clause 8. I will have another look at this to see whether I can give any further enlightenment to the noble Lord in writing.

Lord STRATHCONA and MOUNT ROYAL

I am grateful to the noble Lord. If he is saying that he will consider these points, I would ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord S IRATHCONA and MOUNT ROYAL moved Amendment No. 20G: Page 8, line 30, at end insert ("and except supply and use of quantities of gas which are produced as surplus in the process of meeting a specification laid down by the British Gas Corporation,").

The noble Lord said: This is again one of those famous double negative clauses that we find so difficult to follow. We have introduced an Amendment here to discuss the gas produced as a surplus. I think this may commend itself to the Government; at least, I hope so because I think this is in line with the Government's intention. When the gas industry was nationalised and, I dare say, at the time of the 1972 Gas Act; the British Gas Corporation was to be given a monopoly of public supply of piped gas for fuel purposes. The intention was not to let the monopoly encroach into chemical manufacturing simply because gases are used to make chemicals.

Parliament did not extend the monopoly to encroach on the sale of bottled LPGs which are different in their constitution from the British Gas Corporation specification gases. These are points we have been discussing already.

The purpose of this Amendment is to establish that the British Gas Corporation does not have to be given a further opportunity to purchase gas which has been extracted as a by-product in making a supply available to the Corporation's requirements. The natural gas which the BGC takes is prepared in accordance with a specification agreed with the Corporation. In order to meet this specification, the raw gas is processed and unwanted materials—unwanted by the BGC—are extracted.

Having once specified the supply they need, it would be somewhat of an extension of the monopoly of the Gas Corporation powers if, having satisfied their first option, we then extend their option outside the range of the specification gases. It could also mean that the Gas Corporation was in a position to impose upon a supplier an obligation to invest in separation facilities which would really be wholly and solely for the benefit of the British Gas Corporation. Since it seems to me that this was never the intention, I hope that this Amendment, or something like it, may commend itself to the Government, I beg to move.

Lord LOVELL-DAVIS

This Amendment would allow consent to be given for the supply and use for industrial fuel purposes of gas produced as a surplus to the process of meeting a British Gas specification, without requiring the gas first to be offered to British Gas at a reasonable price. I am not quite clear as to what is meant by "surplus", but I assume that it means the heavier natural gases which are extracted from the offshore natural gas during the treatment to bring the gas to the British Gas specification.

These are gases which are to be supplied for industrial fuel purposes and I cannot see any reason why they should be excluded from the "first offer" régime which applies to the supply of all other offshore natural gases. The situation is that if the British Gas Corporation does not want the gas because of its different quality, it will say so and the Secretary of State will be free to grant or withhold his consent. Frankly, I can see no reason for making this so-called "surplus" gas a special case and I can only recommend that the Amendment be rejected.

Lord STRATHCONA and MOUNT ROYAL

I am not going to press this Amendment at this stage. I do not think that we agree with what the noble Lord has told us; but I think we had better study what was said on both sides. It may be necessary to come back to this on Report. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord CAMPBELL of CROY moved Amendment No. 20H: Page 8, line 30, at end insert ("or use in the operation of receiving terminals.")

The noble Lord said: With this Amendment I suggest we discuss Amendment No. 20VA, which is the definition which accompanies this proposal. I beg to move Amendment No. 20H. The noble Lord, Lord Lovell-Davis, said earlier that in his reply to previous Amendments, he would be touching on the point we raise in this Amendment. I listened intently; but I do not think he dealt with the particular point which this Amendment raises so I will now spell it out. The Bill as drafted could result in anomalous treatment for the use of offshore natural gas for terminal operations on shore. These are terminals where the natural gas arrives. For example, there is an enormous terminal being built in the Shetland Islands at Sullom Voe, and there are other terminals in preparation, particularly in Scotland. At present no prior offer to the British Gas Corporation is required as a condition for consent if the terminal use is by the licensee for his own use; that is, the licensee supplying gas. Consent for such use by a supplier who is not a licensee requires a first offer to the BGC under the provisions of the Bill. So one has the anomaly that if the supplier is using his own terminal facilities, then he does not have to make a prior offer to the BGC; but if that is not so he does.

Where there is more than one licensee using terminals, there could be administrative problems in determining whether or not the licensee's use was confined to his own equipment. In this situation, and considering the small amount of natural gas involved—taking the total that we are dealing with into account—we suggest that the easiest way of dealing with the anomaly is to remove the requirement for any prior offer to the BGC as a consent for permission for any terminal use proposed. We suggest the anomaly might be removed by this simple Amendment.

Lord LOVELL-DAVIS

I have already referred to Amendment 20H which seeks to ensure that the use of natural gas for terminal operations is not subject to possible interference because of the British Gas first offer position. As I have said, this subsection already permits use by the original licensees, but I am prepared to look again at the position of a person or company which is not a licensee but which purchases gas off-shore and needs to operate a terminal. Amendment 20VA is of course consequential upon this. I agree that if the term "receiving terminal" were used in subsection (4), it would be desirable to define it in subsection (7). Since I have undertaken to consider whether we can meet the point about terminal use by someone other than the licensee, whether or not we shall need a definition of "receiving terminal", will of course depend on how we decide to meet the point. I hope that the undertaking that I have given will meet the noble Lord's case and that Amendment 20VA will automatically follow from whatever we are able to do about Amendment 20H.

Lord CAMPBELL of CROY

I accept that of course the definition is simply the second part which will accompany the main Amendment if it were made to the Bill. I am grateful to the noble Lord for having seen the anomaly to which I have drawn attention. I should add that the kind of use to which the natural gas would be put at such terminals would be process heat and generators. This is the internal use which we foresee. This anomaly is something which the Government, from what the noble Lord has said, realise ought to be avoided if possible. In the hope that the Government will put down an appropriate Amendment, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Lord STRABOLGI

My Lords, before we embark on this next Amendment, it may be convenient to the Committee if we had a break here. The Committee has now been dealing with business since three o'clock this afternoon. Also, to break at this stage will enable the House to take other legislation. If this is agreeable, it is proposed that the Committee stage of this Bill should be resumed at about eight o'clock. In the meantime, I beg to move that the House do now resume.

Moved accordingly and, on Question, Motion agreed to.

House resumed.