UK Government and oil industry at loggerheads over funding of North Sea ‘super agency’


  By Sean Martin
There was fundamental disagreement between UK Government ministers and the oil and gas industry today over plans to fund a new ‘super agency’ to regulate the North Sea.
The final Queen’s Speech of this parliament session announced plans for the body, with ministers insisting the industry itself should pay for its implementation.

As part of the Conservative-Liberal Democrat coalition’s legislative programme prior to the 2015 general election, the Infrastructure Bill has the overarching aim of maximising North Sea reserves and making the UK ‘energy independent’.

Based on Sir Ian Wood’s report on the future of the offshore industry, the proposed alterations aim to deliver up to four billion more barrels of oil over the next two decades than the industry currently produces.  It is estimated these changes would be worth around £200bn to the economy.

The ‘super agency’ will take over licensing functions from the Department of Energy and Climate Change and will have significant resources at its disposal.

However, disagreements have emerged over who should fund this new regulator.

The government programme outlined its preferred method – which includes charging the bulk of the funds from the oil and gas industry itself.

“The government will also introduce a levy, making power so that the costs of funding a larger, better resourced regulator can be paid for by industry rather than by the taxpayer as is currently the case,” the programme states.

“Clauses will be introduced later in the session to setup a new super agency for the North Sea, with a duty to support the government and industry in maximising economic recovery from this important resource.”

The industry reacted quickly to the announcement – with Oil & Gas UK saying the cost should not be placed on them.

“We must disagree with the government seeking to absolve itself from all financial involvement or responsibility for the new regulator,” Chief executive Malcolm Webb told Energy Voice.

“This is not a question of the size of the bill. Production taxes paid by this industry each year run into the many billions of pounds and the total cost of the new Regulator will be a very tiny fraction of that.

“It is rather a question of good governance, transparency and fairness that at least a part of the cost of the regulator should continue to be borne by the Department of Energy.”

The Bill also supports ‘fracking’ – the controversial mining technique of extracting shale gas – and giving companies underground access to private land to do so, whether the landowner objects or not.

In addition, it seeks to guarantee long-term investment in the road network and to boost house-building by selling off unused public land for development.

Today’s Queen’s Speech was the second shortest in the past two decades – lasting just under 10 minutes.