DPRR/14-15/47

INFRASTRUCTURE BILL

Supplementary Memorandum to the Delegated Powers and Regulatory Reform Select Committee

INTRODUCTION

  1. This Supplementary Memorandum identifies the provisions relating to land use for petroleum and deep geothermal energy inthe amendments to the Infrastructure Bill which confer power to make delegated legislation. It explains the purpose of each delegated power proposed, why the matter is to be dealt with in delegated legislation, and the nature and justification for any parliamentary procedures that are proposed.
  1. All of the delegated powers are to be exercised by the Secretary of State by statutory instrument.
  1. The provisions relating to land use forpetroleum and deep geothermal energy in the Bill contain four individual provisions for delegated legislation.
  1. The descriptions of the powers are arranged in the order that they appear in the Bill.

PROVISIONS FOR DELEGATED LEGISLATION

Payment scheme

Power conferred on:Secretary of State

Power exercisable by:Regulations made by statutory instrument

Parliamentary Procedure:AffirmativeResolution

  1. This power allows the Secretary of State to make regulations about a payment scheme for the use of land at least 300 metres below surface level for the purposes of exploiting petroleum or deep geothermal energy. This power is supplemented by the provisions in subsections (1) to (4) of the new clause“Payment and notice schemes: supplementary provision”.
  1. The petroleum and geothermal industries have agreed to establish a voluntary scheme which will provide the local community with one or more payments in return for use of land below 300metres. Industry representatives have publicly stated their intentionto provide a £20,000 one-off payment to communities for each unique lateral well that extends by more than 200 metres laterally, except where these wells vertically overlap.
  1. It is our intention that if relevant energy companies do not adhere to the voluntary payment commitments or if the Secretary of State considers that the voluntary payment scheme is not functioning satisfactorily, then the Secretary of State will introduce regulations to bring in a statutory payment scheme. Scenarios under which we would expect regulations to be made include:
  1. any relevant energy company failing to make payment and not being willing promptly to remedy this to the satisfaction of the Secretary of State;
  2. one or both industries withdrawing their voluntary agreement (in the case of the former, regulations may be laid in respect of the petroleum industry and not geothermal, or vice versa); or
  3. therebeing any other ongoing issues with the scheme that suggest it is not working as the Secretary of State intended.
  1. The regulations will include provisions about to whom payments will be made and the amount(s) of payments, and prescribe a means for determining the amount(s) of those payments.
  1. In setting out the details of a payment scheme, these regulations would have a significant impact on businesses and the local communities, amongst others, so it is vital that these parties’ interests are taken into account. The exercise of the powers concerning the introduction of a payment scheme will therefore be conditional upon having first carried out a consultation on the payment scheme.
  1. It is not possible to know at this stage exactly to whom payments will be made or the fairest way to prescribe for the amounts of payments. Both industries in question are at an early stage in the UK;we do not yet have enough evidence about what a typical development may look like, particularly in terms of geographical or social extent, and an attempt to legislate for a typical payment scheme at this stage is likely to result in ineffective legislation. We also expect that a voluntary approach will be more effective, as it is flexible and easily adapted to different community circumstances. There is likely to be considerable variability between communities in matters such as sub-surface geology and population density so, particularly in these early stages of both industries, flexibility is important.Sucha level of flexibility would not be possible to achieve under a statutory scheme.
  1. For all of these reasons, including the requirement for public consultation, the department considers that it is appropriate for the decisions on whether to introduce a scheme, and as to the determination of the detail of the scheme, to be delegated to the Secretary of State.
  1. The Department judges that the Affirmative Resolution procedure is appropriate as this power, if exercised, would provide for payments to be made to persons holding title to or interests in relevant land, or to other persons for the benefit of areas in which relevant land is situated. We believe it is appropriate that Parliament should have a high level of control over this regulation-making power which will set out the details of a statutory payment scheme.The amendment to clause 29 amends the Bill to make the Affirmative Resolution procedure applicable to this power.

Notice scheme

Power conferred on:Secretary of State

Power exercisable by:Regulations made by statutory instrument

Parliamentary Procedure:Affirmative

  1. This power enables the Secretary of State require to relevant petroleum or deep geothermal energy companies to give notice of the proposed exercise, or exercise, of the right of use of deep-level land, being land at least 300 metres below surface level. This power is supplemented by the provisions in subsections (1) to (4) of the new clause “Payment and notice schemes: supplementary provision”.
  1. The Secretary of State is giventhe power to require companies that benefit from the right of use to notify owners of relevant land (or interests in it), and other specified persons, of the proposed exercise, or actual exercise, of the right of use. The Secretary of State may require those companies toinclude information relating topayment scheme regulations which are in force (see the new clause ”Payment scheme”), the application of the regulations, and how to obtain payment under the regulations.
  1. Prior to exercising this power, the Secretary of State must carry out a consultation on the proposals for a notification scheme.
  1. At this very early stage in the development of the deep geothermal industry and the onshore petroleum industry (in particular in the case of shale gas and oil), it is not possible to form a view on what the characteristics of a typical site will be, nor what a typical timeframe over the life of a site will be. The Department intends for communities to be notified of any works where a company exercises the right of use that will apply 300 metres or more below the surface. Nevertheless, because we cannot with certainty foresee the way in which the industries’ activities will develop, the Department considers that to create a duty to notify at this early stage would be likely to result in a notification scheme that was unsatisfactory for all parties.
  1. Both industries are aware of the importance of notification and that it is a consideration that will need to be made as they develop their respective schemes. Encouraging a voluntary system of notification in the first instance will provide flexibility, which is critical given the nascent stage of the industries, the differing technologies, and the variety of communities involved.In the event that the Secretary of State considers that the notification scheme is not functioning satisfactorily on a voluntary basis, he will be able to exercise this power to introduce regulations requiring notification to be made concerning an exercise of the right of use and the relevant payments.
  1. Regulations made under this power would need to set out detailed procedural requirements regarding notification by energy companies of the exercise of the right of use, and we consider that it is more appropriate to set out this detail in secondary legislation. The requirements are likely to change over time in response to a greater understanding of how onshore oil and gas and deep geothermal projects function in practice and how they differ between geographical locations, for example, between urban and rural areas,Itis likely that provisions requiring notification by electronic methods will need to be updated to reflect technological advances. Because there will be changes that need to be made to the detail of any notification requirements over the course of time, the Department considers that it is appropriate to set out these requirements in regulations rather than on the face of the Bill.
  1. The Department judges that the Affirmative Resolution procedure is appropriate as secondary legislation enacted pursuant to this power will provide for a mechanism by which persons will be notified of use of deep-level land for petroleum and deep geothermal energy exploitation. We believe it is appropriate that Parliament should have a high level of control over this regulation-making power which will set out the details of a statutory notification scheme.The amendment to clause 29 amends the Bill to make the Affirmative Resolution procedure applicable to this power.

Payment and notice schemes: supplementary provision, subsections (6) and (7)

Power conferred on:Secretary of State

Power exercisable by:Regulations made by statutory instrument

Parliamentary Procedure:Negative

  1. By way of sunsetting provisions, subsections (6) and (7) of this clause establishes a one-off review of the powers underthe new clauses“Payment scheme” and “Notice scheme”after 5years.It also requires the Secretary of State to make regulations repealing those powers if they have not been used within 7 years of the commencement of the Bill provisions and if the Secretary of State is satisfied that there is no convincing case for retaining the relevant power(s).
  1. This is a delegated power which enables the Secretary of State to repeal provisions in an Act of Parliament in a very limited set or circumstances for a specific purpose. Although such a power would usually be subject to the Affirmative Resolution Procedure, in this case the Department considers that the Negative Resolution procedure is appropriate: the power is limited to repealing only new clauses“Payment scheme” and “Notice scheme” and the conditions for doing so are fully set out on the face of the Bill at subsection (7) of the new clause “Payment and notice schemes: supplementary provision”. Regulations repealingeither of theseprovisionswill only be made if the powers under those provisions have not been exercised and if the Secretary of State is satisfied that there is no convincing case for retaining them.Under these very limited circumstances, the Department considers that it would be appropriate to make Regulations repealing these provisions under the Negative Resolution procedure.The Negative Resolution procedure applies to this power by virtue of the default provision in clause 29(4) of the Bill.

Interpretation, subsection (3)

Power conferred on:Secretary of State

Power exercisable by:Regulations made by statutory instrument

Parliamentary Procedure:Negative

  1. This power enables the Secretary of State to make changes to the definition of “landward area”. The meaning of “landward area” for the purposes of new clause“Petroleum and geothermal energy: right to use deep-level land” to new clause “Interpretation”is definedby reference to the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014. Those regulations were made under a power for the Secretary of State to make regulations under section 4 of the Petroleum Act 1998.
  1. The Departmentdoes not foresee a need to amend the definition of a landward area, which was also used before the 2014 Regulations came into force, but if for any reason in future the boundary between landward and seaward areas does need to be amended for the purposes of the provisions in this Bill, this clause permits the Secretary of State to do so under section 4 of the Petroleum Act 1998. This definition is already set out in regulations, and it is of a technical nature,so the Department considers that it would be appropriate to make any amendment to that definition by regulations.
  1. The power for the Secretary of State to make regulations under section 4 of the Petroleum Act 1998 is subject to the Negative Resolution procedure. For the purposes of this clause, the Negative Resolution procedure is considered appropriate by the Department because it will provide the necessary level of scrutiny over the technical matter that is the definition of a “landward area”.

Amendment to clause 28: Consequential provision

Power conferred on: Secretary of State

Power exercisable by: Regulations made by statutory instrument

Parliamentary Procedure: Negative / affirmative procedure

  1. Clause 28 confers a power on the Secretary of State to make consequential provision in connection with certain provisions. Clause 28 has already been considered by the Committee (and the Government has tabled amendments to this clause and others in the light of the Committee’s comments in its report in respect of it). We do not propose to repeat the consideration of those issues again here, but the Committee will wish to note that the scope of the power in Clause 28 has been amended so that it also applies to the clauses dealing with maximising economic recovery of UK petroleum, the levy on holders of certain energy licences and the relevant Schedule, and the underground right of use provisions to which this Memorandum relates.