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Dprr/15-16/24 DPRR/15-16/24 ENERGY BILL DELEGATED POWERS IN THE BILL MEMORANDUM BY THE DEPARTAMENT OF ENERGY AND CLIMATE CHANGE INTRODUCTION 1. This memorandum has been prepared for the Delegated Powers and Regulatory Reform Committee to assist with its scrutiny of the Energy Bill (“the Bill”). The Bill will be introduced in the House of Lords on 9 July 2015. This memorandum identifies the provisions of the Bill that confer powers to make delegated legislation. It explains in each case why the power has been taken and explains the nature of, and the reason for, the procedure selected. PURPOSE AND EFFECT OF THE BILL 2. The Government made a commitment in its manifesto to continue to support the development of North Sea oil and gas, to change the law so that local people have the final say on onshore wind applications and to end new public subsidies for onshore wind. This Bill delivers those commitments. 3. The Bill will complete the work started in the last Parliament to fully implement the recommendations in Sir Ian Wood’s review into UK offshore oil and gas recovery and its regulation. Central to this was the establishment of a new arm’s length regulatory body charged with effective stewardship and regulation of petroleum recovery. The Bill will formally establish the Oil and Gas Authority (OGA) as an independent regulator, which would take the form of a government company, transfer regulatory powers and functions to it and provide it with new powers. This will ensure it has the powers it needs to become a robust, independent and effective regulator, and enable it to maximise the economic recovery of oil and gas from beneath UK waters1. The Bill will 1 The Wood Review indicated that full and rapid implementation of the recommendations could deliver 3-4 billion barrels of oil equivalent more than would otherwise be recovered over the next 20 years. 1 DPRR/15-16/24 also enable more comprehensive charging of the offshore oil and gas industry for permits and licences for environmental and decommissioning activity. This will allow Government to continue to recover its costs for its environmental and decommissioning activity in line with the ‘polluter pays’ principle of environmental law and address a gap in current legislation. 4. The Bill also makes provision, alongside other measures being taken by DECC and CLG, for changes to the planning system to empower local authorities to have a greater say on new onshore wind development applications. In addition it provides for the early closure of subsidy arrangements under the Renewables Obligation to new onshore wind developments in Great Britain. 5. Not all of the provisions relating to the OGA will be included in the Bill at Introduction. However, the Government has prioritised the provisions so that the elements to be introduced later will be those which are not critical to establishing and operating the OGA. It is also planned that more detailed provisions regarding new onshore wind developments will be added to the Bill after Introduction. It is likely that some of these provisions will include delegated powers; therefore, a revised Delegated Powers Memorandum will be published as further provisions are added to the Bill. 6. In summary the Bill will: • Formally establish the OGA as an independent regulator, which would take the form of a government company, charged with the asset stewardship and regulation of domestic oil and gas recovery. • Transfer to the OGA the Secretary of State’s existing regulatory powers in relation to the licensing of: o offshore oil and gas exploration and production; o onshore oil and gas exploration and production (in England); o Carbon Capture and Storage; and o Gas storage and unloading. The Secretary of State’s regulatory functions in relation to the environment would not be transferred. 2 DPRR/15-16/24 • Give the OGA additional powers including access to company meetings; data acquisition, retention and transfer; dispute resolution and sanctions. • Increase the scope of fees and charges to target the costs of the OGA more closely to those who directly benefit from its services and functions. • Introduce provisions in relation to charges for the regulator’s services to the industry for the environmental regulation of offshore oil and gas. • Make legislative changes to remove the need for the Secretary of State’s consent for large onshore wind farms (over 50MW) under the Electricity Act 1989, acting in tandem with other measures to in effect transferring powers out of Whitehall to local planning authorities. • Make provision for the closure of the Renewables Obligation (RO) to new onshore wind developments from 1st April 2016. DELEGATED POWERS 7. The Energy Bill contains delegated powers that fall into the two broad categories, both of which are included in this memorandum. First, provisions which create new delegated powers. Second, existing delegated powers that will be transferred to another party (the OGA). Delegated Powers created by the Energy Bill Part 1 Clause 2(2): Power to transfer functions to OGA Power conferred on: Secretary of State Power exercised by: Regulations made by statutory instrument Parliamentary Procedure: Negative/Affirmative procedures Purpose: The clause transfers certain functions from the Secretary of State to the OGA and provides a power to transfer functions (in both primary and secondary legislation) from the Secretary of State to the OGA by regulations. It also provides a power to make consequential amendments. 3 DPRR/15-16/24 8. Justification: The intention is that powers will be transferred to Scottish and Welsh Ministers in relation to onshore licensing as part of the new devolution settlement. These functions are currently contained in the Petroleum Act 1998. The Scotland Bill was introduced on 28 May 2015 and we expect the Wales Bill to be introduced later in the first session, both of which would amend the Petroleum Act 1998 to allow the new devolution settlements to be realised. The sequencing of these Bills causes complexities with drafting textual amendments in primary legislation, as amendments would be needed to the Energy Bill provisions on its passage through Parliament to reflect any changes to the Scotland Bill. It has also not been decided when the relevant legislation will be commenced, including in which order. 9. These complexities would take up an unnecessary amount of time and resource both in the Department and in Parliament and can be avoided by transferring the Secretary of State’s functions by regulations after the Scotland and Energy Bills receive Royal Assent. We will also need to be able to make amendments to legislation as a consequence of this and have therefore made appropriate provision. The intention of this Bill is clear and this transfer power is simply there to give effect to the intention behind this Bill in the most efficient way possible. 10. There is also a power so that functions that are to be transferred to the Scottish Ministers or Welsh Ministers may be exercisable by the OGA until the transfer takes effect. This is necessary in case there is a delay in transferring functions to the Scottish or Welsh Ministers. 11. While every effort has been made to ensure all other relevant functions set out in primary legislation are transferred on the face of the Bill we may subsequently identify one or more functions, which it would be appropriate for the OGA to perform, which would need to be transferred. Given the risk that we may have overlooked functions which we would like to transfer, we think that it would be prudent to take a power so that we may transfer the relevant functions by way of regulations. We have also taken provision so that we may make relevant consequential amendments. 4 DPRR/15-16/24 12. We will also need to transfer certain functions under secondary legislation to the OGA and it is standard provision for these to be transferred by regulations. Again we have taken a power so that we may make consequential amendments. 13. We have also made clear that the power to make consequential amendments includes a power to amend licences, pipeline authorisations and storage permits. This is essentially so that they reflect the fact that the OGA rather than the Secretary of State will be exercising functions. This is standard provision. 14. We have also made clear that the power may include provision that anything commenced by the Secretary of State before the regulations take effect may be completed by or under the authority of the OGA. This is standard provision. 15. Rationale: We do not think transferring functions to the OGA will create any additional burdens on industry, so we do not propose to require the Secretary of State to consult prior to any future use of this power. Where we will be amending primary legislation, DECC accept that it is appropriate to use the affirmative procedure. Where we will be amending secondary legislation, we take the view that the negative procedure is appropriate. Where we are amending primary and secondary legislation at the same time, we take the view that it would be sensible to include the amendments in one instrument and adopt the affirmative procedure. Clause 5(1): Power to give directions to OGA as to the exercise of its functions Power conferred on: Secretary of State Power exercised by: Direction Parliamentary Procedure: None Purpose: This clause enables the Secretary of State to give directions to the OGA as to the exercise of any of its functions in the interests of national security or otherwise in the public interest. 16. Justification: There may be circumstances where national security or broader reputational, financial or other public interests are at stake in relation to the exercise of functions conferred on the OGA.
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