Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2026

My Lords, the Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2026 were laid before the House on 14 May. Before outlining the provisions made by this draft instrument, I will briefly provide some context. The DESNZ Offshore Petroleum Regulator for Environment and Decommissioning, which I shall refer to as OPRED, minimises the impact of the offshore oil and gas sector on the environment by controlling air emissions and discharges to sea, and reducing disturbances over the lifecycle of operations, from seismic surveys through to post-decommissioning monitoring. OPRED recoups the eligible costs of its regulatory functions from the offshore oil and gas sector in two ways: first, by using regulations that are covered by these fees regulations; and secondly, by five charging schemes. The charging schemes do not require legislative change and will be amended administratively. OPRED’s average income from fees is around £7.3 million annually, recovered from around 100 companies. Currently, the fees that it charges are based on rates of £210 per hour for environmental specialists and £114 per hour for non-specialists. Environmental specialists are technical staff who carry out the functions of the Secretary of State, and non-specialists are support staff. OPRED’s fees are determined by multiplying the appropriate hourly rate by the number of hours worked by both environmental specialists and non-specialist staff. I turn to the detail of this instrument. The current hourly rates have been in force since July 2025. Having reviewed its cost base, OPRED concluded that the existing rates need revising to reflect today’s costs for regulatory services. During this review, OPRED also identified that some regulatory costs were not being fully recovered—in particular, the cost of statutory advice from nature conservation bodies and certain costs associated with the UK energy portal, which is OPRED’s digital system for delivering regulatory services. The revised cost base ensures that all eligible costs are met by those who benefit from these services, rather than by the taxpayer. This is consistent with HM Treasury’s Managing Public Money principles, which require full cost recovery where appropriate. The revised hourly rates were approved by His Majesty’s Treasury in January 2026. The fees regulations will amend the charging provisions by increasing the existing hourly rate for environmental specialists to £256 and for non-specialists to £130. OPRED formally consulted the offshore industry on the rate change proposals and cost base revision in February 2026. The consultation, which launched on 17 February and closed on 13 March, sought views on the proposed rates and their implementation. Five responses were received. While the responses were limited, the issues raised were broadly consistent. Respondents commented primarily on the scale of the proposed increases, including the cumulative impact over successive financial years and comparisons with inflation; and raised concerns about the transparency of the underlying cost base and timing of implementation. OPRED considered the consultation responses and concluded that the new rates accurately reflected the cost of carrying out its regulatory functions, despite being higher than the rate of inflation. OPRED acknowledged that the timing of the rate increase could cause issues for industry in relation to planning and budgeting. However, the review is an anticipated annual process, and the new hourly rates are expected to be brought into effect at the beginning of July, in line with rate changes in previous years.

My Lords, I am grateful to the noble Lord, Lord Wilson of Sedgefield, for introducing the regulations. I have a couple of questions. He said that there are 100 companies. Is the number going up or down each year? I imagine that the number of companies will probably reduce. It would be helpful to know if, for example, over the coming year, there will still be 100 companies performing this task. I would like to focus on the calculations that the Government have used to reach the rate. It seems to be quite a large increase when the original rates were in place for only one year from 2 July 2025. Even though my maths is not great, I have done a calculation on my calculator, and in each case, the increases are well over 10%. I would like to understand the basis on which that sizeable increase has been introduced, and I would like an undertaking from the department that this will not be replicated in future years. It seems very harsh on the affected companies that they will have to find this additional resource when clearly they have been paying a lower figure in the past year. I would like to understand why there has been a more than 10% increase in the hourly rate for both specialists and non-specialists and an undertaking that this will not happen in future years. I am slightly baffled by paragraph 5.4 of the Explanatory Memorandum, which states that: “The hourly rates have been calculated by taking these costs”, which it outlines in the paragraph, and dividing them by what seems to be an arbitrary number— “1,243 hours (for each staff member). The figure of 1,243 represents the average number of hours per annum spent on potentially cost recoverable activities and removes the hours spent on leave, bank holidays, staff management, etc”. Of course, there are probably the same number of bank holidays across the UK, but they are different in Scotland, England and other parts of the UK. I am having great difficulty understanding the basis on which that calculation has been made, and I would like to understand how that calculation was reached. With those few remarks, I look forward to the noble Lord’s reply.

My Lords, I thank the noble Lord, Lord Wilson, for stepping in for the Minister and for introducing the SI. The instrument revises the hourly rate used to determine fees paid by the offshore oil and gas industry for environmental regulatory services provided by OPRED. Specifically, the instrument increases the hourly rate for specialist officers from £210 to £256 an hour and for non-specialist officers from £114 to £130 an hour. We understand that these amendments are designed to ensure full cost recovery for OPRED’s activities, shifting the burden of regulation from the taxpayer under the polluter pays principle. From these Benches, we fully support the polluter pays principle as a pillar of responsible environmental and economic policy. It is right that it is in place and is being updated. On that basis, we do not oppose the instrument. Having said that, like the noble Baroness, I have a couple of questions for the Minister about the details of the SI. On the scale of the increases, there will be a rise from £210 to £256 per hour for specialists, which I calculated as nearly 22%, as well as an increase from £114 to £130 an hour for non-specialist officers. These are quite substantial increases. We note that there have been previous increases in recent years under the same mechanism. The department tells us that they reflect the application of the Treasury’s Managing Public Money to account for a share of corporate services, senior management, human resources, office services and the like. We recognise that overheads are increasing for OPRED, as they are for many businesses across the country. We are aware that inflationary pressures exist, but I am concerned that in the arrangement before us these inflationary pressures are being passed on to the industry. Can the Minister reassure the industry that OPRED is not only aware of that cost pass-through but is doing everything it can, within its power, to make sure that cost pressures are controlled and managed so that that pass-through does not happen any more than is needed? As the Minister said, there were only five responses, but transparency was raised. It is quite a big extra cost. Under the changes proposed here, we are asking the sector to absorb an extra £1.6 million a year, taking the total from £7.3 million to £8.9 million for these services. It is also important for OPRED to provide a bit more clarity. It talks about administrative services and the like. When this SI is brought back next year, can it include a paragraph that says more about what types of inflationary pressures are being placed on OPRED and where they are coming from rather than simply using “administrative pressures” and the like as a catchphrase. The industry wants a bit more clarity on that. My request to the Minister is for next year’s SI to state the key sectors and ways in which OPRED has faced inflationary pressures over the past year. I turn briefly to small operators in the North Sea. The SI says that there are not many small operators and that they will require fewer services, so although there is a cost burden for them, that it is slightly less. However, that has a danger of becoming a self-fulfilling prophecy. Will the Minister say whether any consideration has been given to a more tiered approach? There may not be many small operators within the field, but where there are, these cost burdens could have disproportionate and significant costs for the operation of their overall business. For next year, can the department give any consideration to that? Finally, as we are moving away from European measures, I want to see that we continue to ensure that we have the best practices and transparency in the management of those costs, to make sure that we are building the best relations with the industry, which is under strain, and that we support a just transition as we move away from North Sea oil to renewables. This industry has a number of pressures on it, including costs coming from different directions. We fully support the work that OPRED does and recognise its importance. The questions that I have asked the Minister are not to detract from our support for the vital environmental work that it does.

My Lords, I declare my interest as chairman of Amey, Acteon and Buckthorn Partners, which show an interest in energy transition. However, on this occasion, it is a rather tenuous link to this specific debate, since only Acteon provides global subsea services to both offshore wind and oil and gas in stations around the world. I warmly welcome the Minister to this debate. Sadly, I did not have the opportunity to spend time with him in the House of Commons, as I preceded him. He looks exceptionally young, healthy and fit, so it comes as a surprise that we did not have that opportunity. He is now approaching the 10th anniversary of the support to his constituency of three significant donors, who were very welcome to his constituency and his ability as a Member of Parliament at the time: namely, Tony Blair, GMB and Unite. Those three happen to be completely united in their opposition to the Government’s policy on issuing new licences for oil and gas in the North Sea. This is therefore an opportunity for me to question whether the Minister shares the views of those to whom he was so close in another place, all of whom were sound on the policy of oil and gas. I remind him of what they stand for and have said. On protecting jobs and energy security, Sharon Graham said: “North Sea workers are losing their jobs, at a time when the need for domestic oil and gas has never been greater”. Unite said: “There can be no blocks on North Sea oil and gas until real, comparable jobs are created. Protect jobs, protect energy security and deliver a just transition”. On the just transition and Labour’s policies, Sharon Graham said: “North Sea workers cannot be sacrificed on the altar of net zero… We should not be letting go of one rope until we have hold of another”. Gary Smith stated recently: “If the North Sea is being prematurely closed down and we are increasing import dependence—that’s bad for jobs, economic growth and national security”. I turn to the statutory instrument. It is the view on our side of the Committee that the Government need to provide far greater clarity on why they need to increase so dramatically the fees paid by our North Sea oil and gas industry, and for the second time in one year—a point echoed by both noble Lords in their contributions. Increasing costs even further will only further threaten the viability of an industry that is already struggling with the Government’s ban on new exploration and drilling licences and their decision to continue with the energy profits levy. We have already heard from noble Lords some of the results of the Government’s consultation on this subject, and some concerns, on which I might take a different angle. I quote from the consultation: “Several respondents also highlighted that the percentage increase appeared high when compared with general inflation, questioning whether the scale of the uplift was proportionate”. There were very real concerns about the timing, because “the proposal for revised hourly rates” will “take effect part-way through a financial year rather than from the start of a new financial year. Respondents indicated that introducing changes mid-year could”— I would argue that it will— “create challenges for budgeting and financial planning as many organisations set budgets annually”.

My Lords, I thank noble Lords and the noble Baroness for their questions on this. I will confront head-on the issue that is tangential to this whole debate, which the noble Lord managed to make a substantive point of in his speech. Obviously, I have known Tony Blair for a long time, longer than most people in Parliament, and the one thing he taught me was that the one thing you should be is always loyal to your Government. That is what I intend to be today. I start off by saying, as I said during the debate, that fees regulations will enable OPRED to recover eligible costs for the provision of regulatory services under the offshore oil and gas environmental legislative regime, as opposed to such costs being passed on to the taxpayer. The change to the hourly rate will increase OPRED’s annual fees from something like £7.3 million to £8.9 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 oil discharges, and permits and consents to local permissions for offshore installations, for example. I will try as best I can to answer the general points made on the use of the offshore North Sea fossil fuels. It is the position of this Government that we want to wean ourselves off it. We will be using North Sea oil and gas for decades to come, but we need to become self-sufficient in what we do. Workers in the North Sea are obviously an important issue. This is a massive change in employment, as there was in the north-east of England, where I am from, with the coal industry in the 1980s. The then Government did very little to ameliorate that; this Government are doing a lot more to secure jobs in the North Sea. We are stepping up support for workers with the North Sea jobs service, which offers tailored end-to-end support for oil and gas workers seeking new opportunities in growing industries, such as clean energy, defence and advanced manufacturing. We are supporting the expansion of the energy skills passport, an industry-led initiative overseen by RenewableUK and Offshore Energies UK, and supported by the UK and Scottish Governments, to help workers from carbon-intensive industries access opportunities in new clean energy sectors. As I think the noble Lord knows, the North Sea is a highly mature basin. Its natural decline would not be reversed by further licensing, as new licensing awards in the last decade have made only a marginal difference to overall oil and gas production. Approximately 10% of licences from our licensing rounds over the last 10 years have resulted in wells being drilled, and even fewer reached production. I am obviously in no position to talk about the Jackdaw field, for example.

Does the Minister agree that the issue is not a reduction in the oil and gas available? After all, in 1990, we were at just over 2 million barrels a day and so was Norway. By 2000, we were each producing just over 4 million barrels a day. Norway has continued to produce, because its fiscal and regulatory regime has encouraged production in the North Sea from the private sector. It still produces more than 4 million barrels a day, yet we have dived to well under 1 million. That is not to say that the oil and gas are not there but that there is no licensing, fiscal and regulatory regime in place to encourage the development of those fields—their exploration, appraisal and production. It is not as if there is suddenly no more oil and gas west of the median line. The basis of Norway’s successful investment in the North Sea is that its fiscal and allowance regime has encouraged that. That is the issue; it is not the molecules.

The issue is twofold here. If we want a secure energy supply, we have to move away from fossil fuel and we have to do it gradually. We will be using the North Sea for fossil fuels for decades to come. We cannot talk about any issues around the Finch case at the moment—or about Rosebank, Jackdaw and Cambo fields—because that is going through the regulatory system, but the Government are well aware of this. It is only fair to repeat that we need to move away from fossil fuels, which is why we are aiming to do our best with nuclear, wind farms and solar farms. It is to ensure that we have security of supply and that our energy prices are not set by a global figure for gas. We can have this debate until we are blue in the face but, to be honest, we need to get back to the SI. I will try to answer the questions. One of the questions asked by the noble Baroness, Lady McIntosh, was about the number of companies. It is about 100: it was 100 last year, it is 100 today and we anticipate that it will be 100 in the future. There was also a question about reviewing fees. The fees are reviewed annually to ensure that the charging regime is fit the purpose. This also takes the inflationary impact into consideration. I repeat that the reason that there has been a significant increase in the fees is that, in the past, we have never recovered the costs of statutory advice from nature conservation bodies and certain costs associated with the UK energy portal, which is OPRED’s digital system for delivery and regulatory services. We have done that this year and do not anticipate that there will be such a big increase next year, but it is obviously something that we will consult upon and look at. I have mentioned the number of companies. The hourly rate increase reflects higher staffing and delivery costs, including pay rises and support services; there are also other issues. The increase is greater this year because the calculation now ensures that we are recovering costs we were not recovering in the past. We will do our best to ensure that there are no higher increases in future because we like to think that the ones we have instigated this year will be a one-off, although we cannot say that for definite going into the future. The noble Baroness mentioned the figure of 1,243 hours. It reflects the average annual time spent on potentially recoverable work after deducting leave, bank holidays, management and other non-chargeable activity. There is a paragraph in the SI on the types of inflationary pressure that could come into effect. The consultation would cover issues around inflation pressures and would set out the costs and issues, which are more appropriate for the Explanatory Memorandum, rather than the SI.

The Minister said that the Government are recovering costs this year and that that is why the cost is higher than what was recovered in the past. Can he give the Committee a commitment that the increase in the hourly rate next year will not be as high as what we have seen this year?

I am not going to put a blanket ban on whether we are going to see a big increase. We anticipate that there will not be an increase as high as this year’s. We like to think that, in essence, it is a one-off because of the charges that we have been able to recover, which we were not recovering in the past. The final point from the noble Earl, Lord Russell, was about transparency and having an additional paragraph in the SI on inflation, et cetera. We will take that into consideration and look at it.