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Sixth Standing Committee
on Delegated Legislation
Wednesday 8 May 2002
[Mr. Bill O'Brien in the Chair]
Draft Offshore Chemicals
The Minister for Industry and Energy (Mr. Brian Wilson): I beg to move,
That the Committee has considered the draft Offshore Chemicals Regulations 2002.
The regulations apply the provisions of a decision by the Ospar convention on the protection of the marine environment of the north-east Atlantic. The decision covers a harmonised mandatory control system for the use and reduction of the discharge of chemicals employed in the offshore oil and gas industry. It was adopted in June 2000 and represents an international commitment that we propose to meet through these regulations under the Pollution Prevention and Control Act 1999.
Under the regulations, operators of offshore oil and gas installations will need to apply to the Secretary of State for permits covering their use and discharge of chemicals. A major component of each application will be a risk assessment of the effect on the marine environment of the discharge of chemicals from the installation.
The risk assessments will be examined by my Department's technical advisers, who will make recommendations about the acceptability of what is proposed and, if necessary, recommend conditions to be included in permits. All offshore operations that involve the use and discharge of chemicals will be covered: daily production, the drilling of wells, discharges from pipelines and discharges that may occur during decommissioning activities.
The regulations build on voluntary arrangements that have been in place for many years. Under the voluntary offshore chemicals notification scheme, offshore operators notified my Department of chemical use and discharge, which enabled us to provide advice on those chemicals and on the amounts that could be discharged. In applying the voluntary scheme, offshore operators have adopted a sensible and pragmatic approach to safeguarding the marine environment. The time has come, however, for a more comprehensive regime for chemicals used by the offshore industry.
The stated purpose of the Ospar decision is to
''ensure and actively promote the continued shift towards the use of less hazardous substances (or preferably non-hazardous substances) and, as a result, the reduction of the overall environmental impact resulting from the use and discharge of offshore chemicals.''
It seeks to achieve that through the screening of chemicals against specified criteria to identify those that might be hazardous and for which substitutes should be sought. It also calls for the ranking of chemicals according to their potential hazard to allow
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informed selections to be made by operators and the appropriate issuing of permits. The Government support the new requirements and believe that they will ensure even greater protection for the marine environment.
There has been wide and extensive consultation on the regulations, on the accompanying guidance notes and on the regulatory impact assessment. Therefore, we are aware of, and have taken into account, the views of stakeholders to ensure that the introduction of the regulations is carried out as smoothly as possible. In addition to the mandatory consultation, my Department has held a number of workshops with the industry, as well as carrying out informal consultation on various aspects of the regulations, such as the charging scheme and the regulatory impact assessment. The responses to the various consultations have supported the introduction of the new controls, and virtually all the comments received were points of clarification, rather than points of real substance.
Inevitably, those comments raised, among other things, the question of costs. As the regulatory impact assessment shows, the costs to the industry will arise from two areas—the administrative costs to government, which will be subject to full cost recovery, and the additional costs to industry of preparing permit applications. Over the first two years, the costs to government are estimated at £1.2 million, and the additional costs to industry at £2 million. Obviously, those are not insignificant sums, but I do not believe that they are excessive, particularly in the context of the overall costs of offshore operations—in 2001, the offshore industry spent almost £8 billion in total—and they will bring benefits by ensuring that the environment is further protected. Once the offshore industry has become more familiar with the permitting process, those costs will be reduced, as the industry has acknowledged.
In introducing the regulations, we have sought to keep to a minimum the burdens that they will impose. For example, we accepted the industry's suggestions that only one permit should be issued to the operator of an installation if there are fields tied back to that installation, and that permits covering daily production should be open-ended with a review every three years. Thus operators would have to apply for permits only once. We also accepted the request that only in certain circumstances should applications for permits be subject to public notice.
We appreciate the constructive nature of the industry's comments, and believe that the regulations strike a sensible balance between enhancing protection of the marine environment and the concerns of the offshore oil and gas industry. I commend the regulations to the Committee.
Mr. Robert Key (Salisbury): May I say what a pleasure it is to serve under your Chairmanship, Mr. O'Brien? I recall serving on Committees of the House with you back in 1983 and more recently in 1990, when we were heavily involved in the poll tax legislation. The regulations, however, are not quite so
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controversial—as long as the Minister can answer my questions.
When the legislation was first proposed, it looked very good. We welcome the motive behind its introduction. After consulting the industry and satisfying ourselves that there had indeed been wide consultation and that the Department had progressed with the industry, we were able to welcome the proposals and look forward to their implementation.
We are talking in very technical terms, and I must congratulate the Minister and his officials on the excellent guidance notes on the regulations, produced by the Department of Trade and Industry. I only have the first edition. I do not know whether there have been further editions, but it is hard to imagine that they could be much better than the first. I wish that all legislation, including secondary legislation, was accompanied by such good guidance notes. I say that with some feeling, because for lay people, such as most of the members of the Committee, it is difficult to understand the implications of the complicated formulas and the arrangements for charging, which are explained, to my satisfaction at least, in the notes.
We are dealing with a very sensitive ecosystem. I had not realised just how sensitive it was until I visited the Southampton Oceanography Centre, which is a joint venture between the Natural Environment Research Council and Southampton university, and learned of the work on the sea shore that is being done there. The delicate ecological balance is easily upset when things go wrong in the North sea or anywhere else on the continental shelf. Last month, I spoke to the chairman of the Atlantic Frontier Environmental Network, Anne Walls. She assured me that there had been sensible consultation and that the network was relatively content with the measures. Of course, she is in a privileged position, as a scientist, and I treat her advice as something to which I should listen and heed. I also ensured that there was consultation not just with the United Kingdom Offshore Operators Association but with individual oil companies. They, too, seemed to be pretty content.
To the layman, we are talking about a sensitive environment. The flotsam and jetsam on the sea shore is easily visible and understandable, but it is much more difficult to understand the chemical composition of the water in which the fish do or do not swim and do or do not survived and prosper. There have been several examples over the years of ecological upsets caused by offshore chemicals, such as the Torre Canyon disaster off Cornwall. There has been the problem of the effect of anti-fouling paint on molluscs. That effect was not intentional on the part of the paint manufacturers or the shipping companies, but we became aware of it and did something about it. There have been problems with the translocation of species, with certain types of Chinese crab appearing in the Thames, for example. Surprising ecological events can upset what we are used to, and I am sure that the layman will perceive the regulations in that context.
I do not wish to detain the Committee, but some questions still need to be asked. To start with, I would like to ensure that the Department for Trade and Industry has done all that it can to help industry to
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adjust to the new regulations. I would start with the question of permit applications. I was impressed and delighted to read in the guidance notes, under the heading ''How to apply for a permit including public notice requirements'', that we have moved into the 21st century. Paragraph 6.1 states that
''all permit applications and eventually subsequent issue of the permits will be carried out electronically. The system to achieve this allows on-line completion and submission of applications to the Environment Operations Unit in Atholl House.''
Paragraph 6.2 states:
''Although all permit applications will be processed electronically, the procedure will vary according to the type of activity involved''.
That is splendid news. I am sure that the industry will welcome it because it is heavily computerised and a big user of information technology systems. However, I was not so thrilled when I turned to annex C headed ''Suggested form of public notice''. I was quite surprised when I read it, because in paragraph 6.12 of the guidance notes we were told:
''The next step is for the notice to be published in local newspapers by the applicant. A suggested version of a notice is at Annex C.''
I could not believe what I read in annex C. It speaks in terms that would be more appropriate to the 1990s, when you, Mr. O'Brien, and I were duelling over the poll tax. It states:
''In accordance with requirement of regulation ??, copies of the application including the accompanying Risk Assessment may be inspected between 10 am and 4 pm on business days at [address of applicant] until the close of business on [date]. Copies of the application may be obtained . . . subject to a payment''—
I almost expected it to cost 6s 8d or 13s 4d. It continues:
''Members of the public who avail themselves of this have until [the same date as above] to make representations . . . in the form of a letter marked with the reference . . . and addressed to the Secretary of State''.
But no, it is all right; we were not back in the 1970s because it stated that letters can be faxed.
What a contrast. The oil companies have to do everything electronically, whereas the public—perhaps those who live on the Isle of Rousay—will see at the West Highland Free Press headquarters in Broadford that a form of notice has been published and that everyone must troop off, perhaps to the offices of the oil company in Aberdeen, to inspect the notices between 10 am and 4 pm. For goodness' sake, why this nonsense of newspaper advertisements in local papers with a prescribed formula without also saying that there is a website? Furthermore, I checked the West Highland Free Press website today and, like any other newspaper, it has an advertising section. There is nothing to stop the oil company advertising in the West Highland Free Press, which can then publish it on its website. Why cannot we move the public notice section of the regulations into the electronic age? I hope that the Minister will consider improving on what is otherwise an excellent suggestion.
I want to examine what flexibility will be given to operators within the two-year implementation time frame. On page 13 of the guidance notes, under the heading ''Transitional arrangements under the regulations'', paragraph 5.4 states that
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''the Secretary of State can specify target dates by which individual operators will need a permit and notify those operators accordingly. The Department has prepared a database of all existing activities and verified it with operators. Using this database, a timetable has been drawn up for the rolling start and operators notified accordingly.''
I wonder in whose interest that is. I hope that it is in the interest of the industry, but will the Minister clarify the matter and tell us whether the industry is aware of the arrangements and is content with them? Will the industry be bounced on to a list drawn up by the Department, on which it may default for one reason or another? A little reassurance for the industry would be welcome.
Who will act as inspectors? The section of the explanatory notes on inspectors looks fine, except that nowhere does it say who the inspectors will be. It says that the Secretary of State will appoint the inspectors, but will those inspectors be civil servants, the staff of an agency of the DTI or of the Scottish Executive, or will they come from an independent laboratory, company or operating unit? It is important to know that, because the regulations will stand or fall on the success of the inspectors and on the respect in which they are held.
On a slightly technical point, will the chemical levels defined in the statutory instrument be different to suit different offshore installations? That point may be too technical and scientific to answer now, but it is important, given the different operating conditions in the different parts of the continental shelf. Dilution seems to be of the essence, and the different tidal regimes will play an important part.
Another issue of importance is the unforeseen use of chemicals, as mentioned in paragraph 4.11 on page 12. I am concerned about that reference. What would happen if something went wrong when drilling in mid-winter, in the middle of the night in a gale force 8 wind, and dramatic action had to be taken by the management on the rig? The paragraph states:
''It is acknowledged . . . that in very rare circumstances the unforeseen use of chemicals may be required at very short notice. On such occasions it may be impractical for operators to apply for, or for the Department to issue revised permits within the required timescale. Nevertheless, such use must be discussed with the Department as soon as possible before that use occurs. This can be done either by telephone or electronically to Atholl House who will consult CEFAS or FRS as appropriate.''
That is fine, but can we be sure that in the middle of the night in mid-winter, 365 days a year, staff will be on stand-by at Atholl house, at the Centre for Environment, Fisheries and Aquaculture Science and at the Fisheries Research Services in case there is a North sea emergency? I suspect that it will be impossible for the Minister to say yes to that question, although they will make their best endeavours.
I am seeking to avoid the situation in which an operator is prosecuted—not necessarily by the DTI. An organisation such as Greenpeace may say, ''This is what it says in the regulations, but you didn't do it. It was an emergency and you took the correct action, but it was illegal.'' Will the Minister make it clear that
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there is no intention to create a loophole through which the industry might be penalised, as I have suggested might be possible?
Of course, we welcome improvements to the protection of the marine environment. We must ensure that the administrative burden does not deter operators from exploiting North sea oil and gas. Another charge is being made on the oil industry—yes, it is only small, but nevertheless it is another burden, and it comes in the same month as the Budget introduced a 10 per cent. supplementary charge on North sea profits. The United Kingdom offshore oil and gas industry was surprised and upset at that decision, especially in Scotland. The industry expressed fears that the move could undermine investor confidence and, in the long run, the viability of the North sea, when it is going to such lengths to ensure that every last drop of oil and puff of gas is extracted from those reserves.
Those questions apart, I welcome the regulations and look forward to the Minister's reply.