Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2025

Considered in Grand Committee

16:59:00

Moved by

That the Grand Committee do consider the Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2025.

My Lords, these regulations were laid before the House on 23 April and were debated and agreed by the House of Commons on 20 May. I am most grateful for the opportunity to join the Grand Committee’s proceedings. Before outlining the provisions made by this draft instrument, I will briefly provide some context. The DESNZ Offshore Petroleum Regulator for Environment and Decommissioning—OPRED—minimises the impact of the offshore sector on the environment by controlling air emissions and discharges to sea and by reducing disturbances over the life cycle of operations, from seismic surveys through to post-decommissioning monitoring. OPRED recoups the eligible costs of its regulatory functions from industry in the offshore oil and gas sector—which I shall refer to as the offshore sector—rather than from the taxpayer. OPRED’s recoverable costs are covered in two ways: first, by using regulations that are covered by the fees regulations; and, secondly, by five charging schemes that do not require legislative change and will be amended administratively. OPRED’s average annual fees income is about £6.7 million and is recovered from around 100 companies. Currently, the fees that it charges are based on hourly rates of £201 for environmental specialists and £104 for non-specialists. Environmental specialists are technical staff who carry out the functions of the Secretary of State and non-specialists are support staff. I turn to the details of this instrument. The current hourly rates have been in force since June 2022. Having reviewed the cost base, OPRED concluded that the existing rates need revising to reflect today’s costs for regulatory services. The fees regulations will therefore amend the charging provisions by increasing the existing hourly rate for environmental specialists to £210 and increasing the hourly rate for non-specialists to £114. This will allow OPRED to recover its costs but not to make a profit. OPRED’s fees are determined by adding together the recorded number of hours worked per person on cost-recoverable activities, multiplied by the hourly rates for both environmental specialists and non-specialists, respectively. The new hourly rates were approved by His Majesty’s Treasury in December 2024 and calculated in line with the Treasury’s Managing Public Money guidance. They cover the expenditure on all resources used by OPRED to support its activities—for example, staff salaries, accommodation, IT and legal services. There is no formal requirement to consult on the proposed changes. However, OPRED informed the offshore sector of the planned revisions to the hourly rates in February 2025, and no representations were received. OPRED’s fees regime guidance will be revised to reflect the new hourly rates. I conclude by emphasising that the revisions to the hourly rates introduced by the fees regulations will allow OPRED to recover the eligible costs of providing regulatory services from those who benefit from it, rather than passing those costs on to the taxpayer. I beg to move.

My Lords, we are in favour of and support these proposed changes. The original regulations allowed the Department for Energy Security and Net Zero’s Offshore Petroleum Regulator for Environment and Decommissioning—OPRED—to recover the eligible costs of providing regulatory services from the offshore sector rather than the taxpayer. It is entirely appropriate that those who benefit from these services bear the associated costs. The regulations before us simply propose to increase the hourly rate for offshore workers: for environmental specialists from £201 to £210, and for non-specialists from £104 to £114. As the Minister said, the current rates have been in force since June 2022 and these regulations have been updated in the past. OPRED has reviewed its cost base and concluded that these revised rates are necessary to reflect today’s costs for regulatory services, calculated in line with His Majesty’s Treasury’s Managing Public Money guidance. I have had a chance to look through the statutory instrument, the methods used to calculate the costs and the chargeable hours calculations, and they all look fine to me. This is basically an inflationary upgrade, and we are happy to support it to ensure that people who fulfil these specialist, vital jobs are adequately recompensed for their work. I made the mistake of looking at the debate in the other place on this, and I was a little surprised that a simple fees increase managed to be described as ideological and destructive madness driving us closer to economic decline. I wish to make it clear from these Benches that nothing could be further from the truth. Since we are here, I will ask the Minister a couple of very quick questions. The changes are minor. I recognise that there was no need to consult this time, that industry was informed and that there were no responses, but can I confirm that there is a process for consultation if there are larger changes in future? I notice that a lot of micro and minor industries are associated with this, so will the Minister confirm that, as far as the Government are concerned, there is no cumulative impact of such fee increases on them? I assume that there is not, but I take the moment to check. However, these Benches fully support this basic upgrade in people’s wages.

My Lords, this may appear to be a narrowly focused measure but it speaks to some wider strategic choices being made—or not being made—by this Government on energy, the environment and industry. It revises the fees charged by OPRED for its regulatory oversight. The current fees have been in place for a while and are being updated in line with revised cost assessments and Treasury guidance for full cost recovery, with the new rates being £210 for specialists and £114 for non-specialists, with the aim of ensuring that the industry, rather than the taxpayer, bears the cost of its own regulation. We on these Benches accept the principle that the polluter pays, and we recognise the importance of cost recovery where it is applied fairly and transparently. However, although we do not oppose the principle of updating these fees, there are several areas where greater clarity from the Government would be welcome in the broader sense. First, there is strategic clarity. This comes at a time when the Government are shutting down the North Sea oil and gas industry. A windfall tax remains in place and the long-term future of the basin is uncertain. In this context, even modest fee increases risk sending mixed signals. How do these changes align with the Government’s stated ambitions on energy security, net zero and investment in our own homegrown energy? Secondly, there is investor confidence. The Government may argue that this is a minor adjustment but, for businesses already navigating a complex mix of fiscal and regulatory pressures, predictability matters. Offshore Energies UK has said that the sector could invest up to £200 billion this decade across offshore wind, hydrogen and carbon capture. Can we be confident that the regulatory framework and its associated costs are evolving to match that ambition? Thirdly, there is the role and future of OPRED. OPRED was designed to regulate the offshore hydrocarbons industry, yet its remit is expanding to include the regulation of net-zero activities, such as offshore wind, hydrogen storage and carbon capture. How will OPRED be restructured and resourced to meet this broader role? Are the cost recovery mechanisms fit for that future? Fourthly, on fairness across the sector, the Government invoke the “polluter pays” principle, and rightly so, but is this principle being applied consistently across the offshore space? Are our non-hydrocarbon actors, such as offshore wind developers or electricity interconnectors, contributing equitably or is the hydrocarbon sector being left to shoulder a disproportionate share of the regulatory cost? Fifthly, on employment and skills, the offshore energy sector supports approximately 120,000 jobs across the UK. To preserve and grow the workforce through the energy transition, we need continuity not just in investment but in regulation. What assurance can the Government give that the fee policy is not operating in isolation from the broader industrial skills strategy? Finally, on transparency, the Explanatory Memorandum notes that OPRED reviewed its costs and consulted with the industry in February 2025 but no responses were received. Should this be interpreted as assent, or does it point to confusion—even disengagement—from an industry uncertain about what to expect from the Government? In conclusion, although the SI may be modest in scope, it prompts important questions about how we fund and structure environmental regulation in a rapidly evolving energy system. We on these Benches do not oppose the measure, but we urge the Minister to place it within a broader strategic vision—one that balances accountability with long-term investment, climate ambition and energy resilience. I look forward to hearing the Minister’s response.

My Lords, I thank noble Lords for their valuable contributions to this debate, which reflected the relatively uncontroversial— I would have thought—nature of the regulations. As I said, these fees regulations will enable OPRED to recover its costs for the provision of regulatory services under the offshore oil and gas environmental regulatory regime, as opposed to such costs being passed on to the taxpayer. The change to the hourly rates will increase OPRED’s annual fees from £6.7 million to around £7.3 million per annum, reflecting the current cost of providing environmental regulatory activities to the offshore sector. On chargeable activities, OPRED considers the environmental implications of all offshore oil and gas operations before issuing permits and consents covering areas as diverse as seismic surveys, marine licences, oil pollution, emergency plans, chemical permits, oil discharge permits and consent to locate permission for offshore isolation. This SI is not ideologically based. In essence, it is the specialists putting up the fees by £9 and the support staff doing so by £10. The work that OPRED undertakes is very important for the rest of the industry and the North Sea. I want to answer some of the points noble Lords raised. As far as micro industries are concerned, these regulations will affect only about 100 companies working in the North Sea. As far as consultation is concerned, any further fee increases will be subject to industry consultation and strategic clarity; that is important. None of those who were consulted this time round responded, but I think that this means that people were content with the fact that they were seeing these fees go up by £9 and £10, which increased the burden on the whole of the industry by £500,000. OPRED’s costs ensure that we can continue both to provide effective environmental regulatory services and to adapt to changing requirements, such as changes to the environmental impact assessment guidance. As far as the North Sea basin is concerned, I do think that it has a future; we are going to be taking fossil fuels out of the basin for decades to come. It will also be an area where we can transform from taking fossil fuels out of the sea to wind and carbon capture, to ensure that we progress to net zero and that our energy is homegrown. As noble Lords know, gas prices are sorted out internationally, so if we have homegrown energy, we will have more control over it. That is what we want to see. With that, I hope that the Committee can agree to the fees going up by £9 and £10. I beg to move.

Motion agreed.