Select Committee on European Union Forty-Ninth Report


MANAGEMENT OF OIL OR GAS STOCKS (12228/02)

Letter from the Chairman to The Lord Sainsbury of Turville, Parliamentary Under-Secretary of State for Science and Innovation, Department of Trade and Industry

Thank you for your Explanatory Memorandum dated October 2002 which Sub-Committee considered at its meeting on 28 October.

  As you are undoubtedly aware from our report on the Commission's Green Paper, [9]we are strongly opposed to the Commission's proposals. We agree with the arguments advanced in paragraph 23 of your Explanatory Memorandum. We see no role for the Commission in the management of oil or gas stocks. The International Energy Agency has for 30 years managed OECD oil stocks effectively. We agree, too, that the first priority for gas must be full liberalisation of the EU electricity and gas markets. In this lies the greatest security of supply.

  Under the circumstances, we wish to maintain the Scrutiny reserve on this document, and we should like to be informed regularly of the progress of negotiations in the Working Groups—particularly if there is any inclination by other Member States to support the Commission.

30 October 2002

Letter from the Chairman to Mr Brian Wilson, Minister for Energy and Construction, Department of Trade and Industry

  Thank you for your supplementary Explanatory Memorandum dated 30 October which Sub-Committee B considered at its meeting on 2 December.

  We note that your Department estimates the additional overall cost to the UK for meeting the Commission's proposal on oil stocks to be between £2 billion and £2.3 billion in start-up costs for the first year, with subsequent maintenance costs of approximately five per cent per annum thereafter.

  We find the failure of your Regulatory Impact Assessment (RIA) to estimate costs for gas stocks surprising. It makes it difficult for the Committee to form a view of the impact of the proposed Directive. Has such an assessment been made?

  We agree with you that full market liberalisation is the real way towards security of gas supply. We also recognise that access to stocks is an important aspect of crisis management but we remain to be convinced that the proposed new obligation for all member states to hold mandatory gas stocks, accountable to the Commission, will provide a realistic and cost effective means of guarding against an interruption of supply.

  The figures for oil, in themselves, add weight to the position adopted in Lord Brabazon of Tara's letter of 30 October 2002 to Lord Sainsbury of Turville. We therefore maintain the Scrutiny reserve on this document, and reiterate our wish to be kept closely informed of the way in which negotiations in the Council proceed. This is an important and potentially costly proposal, and one which we would expect the Government to resist to the extent possible.

4 December 2002

Letter from Brian Wilson MP to the Chairman

  Thank you for your letter of 4 December.

  It is not at present possible to provide the Committee with estimates for the cost of the European Commission's gas stocking proposal as I have done for the oil stocking proposal. This reflects the difference in the current position of the two sectors and of the two proposals.

  In the case of oil, internationally agreed emergency stocking arrangements are in force, which the Commission proposes to adapt. It is therefore possible to estimate what the additional cost would be.

  In the case of gas, no internationally agreed emergency measures are in place, nor is there any agreement as to what form they might take if established. The EU's proposal has the potential to require us to increase the levels of gas stocks held in the UK, but there are other ways in which the Commission's objectives of improved security of supply might be achieved, which are allowed for in the proposal and are harder to cost. These include monitoring and reporting of import contracts and requirements for Member States to assist others affected by localised disruption. Most important, as you note, are the improved security to be gained from a liberalised gas market. We have told the Commission that it is our view that this must be secured before we discuss stock levels and other detailed security measures which might be meaningfully costed and I believe that they accept this.

2 January 2003

Letter from the Chairman to Mr Brian Wilson

  Thank you for your letter of 2 January 2003 which Sub-Committee B considered at its meeting on 13 January 2003.

  We are relieved to hear that, in your view, the Commission has accepted your contention that the completion of the liberalised gas market must precede any discussion of stock levels and other detailed security measures effecting gas supplies. We, therefore, accept that you have a very valid reason for not being able, at this stage, to put forward a regulatory impact assessment (RIA).

  Presumably, however, the Treasury must have been alerted to the possibility that such a requirement might eventually have to be accepted and will have formed some idea of the overall costs involved. It would be very helpful to know what the Treasury's view is on this proposal.

15 January 2003

Letter from Brian Wilson MP to the Chairman

  Thank you for your further letter of 15 January in reply to mine of 2 January.

  My officials have consulted the Treasury about the cost of the gas proposal, as you suggested. The Treasury agree with us that the gas proposal cannot at this stage be meaningfully costed. They also agree with the line we have taken that the proposal is premature in advance of further progress in liberalisation of the EU gas market.

  Both the oil and gas proposals have been strongly opposed by Member States in discussions so far, but the Commission and Presidency intend to proceed with a view to a discussion at the Energy Council on 14 May. My officials will be in touch with yours, and with the Commons Committee, to ensure that any scrutiny debates needed take place in good time before then.

12 February 2003

Letter from the Chairman to Brian Wilson MP

Thank you for your letter of 12 February which Sub-Committee B considered at its meeting on 24 February.

  It was good of you to let us have the Treasury's views, and also to tell us that the oil and gas proposals have been strongly opposed by other Member States in the discussions so far.

  We note that your officials will be in touch with the Clerk well before the Energy Council on 14 May to ensure that any Scrutiny of documents can take place in good time and we look forward to receiving such documents.

26 February 2003

Letter from Brian Wilson MP to the Chairman

  Thank you for your letter of 26 February, regarding the European Commission's proposal on security of supply and oil and gas stocking (12228/02 COM (2002) 488), on which your Committee is maintaining a scrutiny reserve.

  Our previous correspondence has made clear that you share our view that the oil proposal is unnecessary, costly and potentially damaging and that the gas proposal is premature. We and other Member States continue to oppose the proposals and discussions are continuing without any sign of early conclusion, but the Commission and Presidency have put the proposals on the agenda ("orientation debate/(possible) political agreement") at the Energy Council on 14 May. On the oil proposal, our view is that it might be ready for agreement by 14 May if it is weakened enough to remove Member States' objections, but that this is unlikely to satisfy the Commission. On the gas proposal, our view is that it will not be ready for agreement by 14 May. On both proposals, the Commission allow for discussions continuing under the Italian Presidency in the second half of 2003. However, I might have to vote on the proposals on 14 May. I am therefore writing to ask you to raise your scrutiny reserve in time for me to do so.

  If your officials wish to discuss the details, they should contact Owen Jenkins (020 7215 5223) or Sue Harrison (020 7215 2778) in the Energy Markets Unit here.

1 April 2003

Letter from the Chairman to Brian Wilson MP, Minister of State for Energy and Construction,

Thank you for your letter dated 1 April 2003 which Sub-Committee B considered at its meeting on 28 April 2003.

  On oil-stocking, we understand why you want the Scrutiny reserve lifted on this document, and we are prepared to accept your judgment and to lift the Scrutiny reserve on this particular proposal. It appears that our views and yours are close on this issue. Neither of us cares for the proposal and both of us regard it as potentially harmful to UK interests.

  We hope that political agreement will not be ceded on terms that come anywhere near the Commission's position.

  We understand that the proposals for gas-stocking will be negotiated well into the Italian Presidency. Frankly, we do not see how HMG can agree to the proposal for gas until it has been clarified and an attempt made to assess costs and benefits in the form of a regulatory impact assessment (RIA).

  We look forward to hearing your report of what transpires at the Energy Council on 14 May 2003.

29 April 2003


9   Energy Supply: how secure are we?, 14th Report Session 2001-02, (HL Paper 82) Back


 
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