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 in the 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.
2.
All of the delegated powers are to be exercised by the Secretary of State by
statutory instrument.
3.
The provisions relating to land use for petroleum and deep geothermal energy in
the Bill contain four individual provisions for delegated legislation.
4.
The descriptions of the powers are arranged in the order that they appear in the
Bill.
PROVISIONS FOR DELEGATED LEGISLATION
Payment scheme
5.
Power conferred on:
Secretary of State
Power exercisable by:
Regulations made by statutory instrument
Parliamentary Procedure:
Affirmative Resolution
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
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supplemented by the provisions in subsections (1) to (4) of the new clause
“Payment and notice schemes: supplementary provision”.
6.
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 300 metres. Industry representatives have publicly
stated their intention to 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.
7.
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:
a. any relevant energy company failing to make payment and not being
willing promptly to remedy this to the satisfaction of the Secretary of
State;
b. 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
c. there being any other ongoing issues with the scheme that suggest it is
not working as the Secretary of State intended.
8.
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.
9.
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.
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10. 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. Such a level of flexibility would not be possible to achieve
under a statutory scheme.
11. 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.
12. 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.
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Notice scheme
Power conferred on:
Secretary of State
Power exercisable by:
Regulations made by statutory instrument
Parliamentary Procedure:
Affirmative
13. 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”.
14. The Secretary of State is given the 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 to include information
relating to payment 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.
15. Prior to exercising this power, the Secretary of State must carry out a
consultation on the proposals for a notification scheme.
16. 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
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to notify at this early stage would be likely to result in a notification scheme that
was unsatisfactory for all parties.
17. 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.
18. 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, It is 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.
19. 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.
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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
20. By way of sunsetting provisions, subsections (6) and (7) of this clause
establishes a one-off review of the powers under the new clauses “Payment
scheme” and “Notice scheme” after 5 years. 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).
21. 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
repealing either of these provisions will 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.
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Interpretation, subsection (3)
Power conferred on:
Secretary of State
Power exercisable by:
Regulations made by statutory instrument
Parliamentary Procedure:
Negative
22. 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 defined by 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.
23. The Department does 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.
24. 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”.
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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
25. 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.