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Interpretation Of Part I

Volume 888: debated on Wednesday 19 March 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Amendment made: No. 190, in page 16, line 27, at end insert:

" crude ", where the reference is to oil being disposed of or appropriated crude, refers to its being so dealt with without having been refined (whether or not it has previously undergone initial treatment) ;'— [ Mr. Dell.]

Amendment proposed: No. 191, in page 16, line 33, at end insert:

" initial storage ", in relation to oil won
from an oil field, means the storage in the United Kingdom, the territorial sea thereof or a designated area of a quantity of oil won from the field not exceeding ten times the maximum daily production rate of oil for the field as planned or achieved (whichever is
5 the greater), but does not include—
(a) the storing of oil as part of or in conjunction with the operation of an oil refinery; or
(b) deballasting; or
(c) conveying oil in a pipe-line;
10" initial treatment ", in relation to oil won from an oil field, means the doing, at any place in the United Kingdom, the territorial sea thereof or a designated area, of any of the following things, that is to say—
15(a)subjecting oil won from the field to any process of which the sole purpose is to enable the oil to be safely stored, safely loaded into a tanker or safely accepted by an oil refinery; or
(b)separating oil so won and consisting of methane gas from oil so won and consisting of gas other than methane, but does not include—
20(i) the storing of oil even where this involves the doing to the oil of things within paragraph (a) or (b) of this definition; or
(ii) any activity carried on as part of, or in association with the refining of oil; or
(iii) deballasting '— [Mr. Dell.]

Amendment to the proposed Amendment made: ( a), in line 3, after ' exceeding ', insert—

' in the case of storage in the United Kingdom a quantity equal to '— [ Mr. Patrick Jenkin.]

Proposed amendment, as amended, agreed to.

I beg to move Amendment No. 221, in page 16, line 39, leave out "licensee" and '.

As the House will see, we are being very reasonable here and trying our best. Wherever we can find our way to accommodate an amendment, we shall seek to do it. But here we have a Government amendment that seeks to extend the definition of a "participator" in order to include sub-licensees as well as licensees and make it clear that each licensee under a joint licence is a separate participator. This is an extension that I am sure will be welcome to the House. I shall be happy to go into the matter in any kind of detail that is required of me, but perhaps this might be acceptable to the House as it is.

Although this is indeed an amendment of some substance which considerably widens the effect of the clause, it is one to which we should not wish to take objection. We see it is an improvement and we are, therefore, happy about it.

Amendment agreed to

Amendments made:

No. 222, in page 16, line 40, at end insert—

licensee "means—
  • (a) the person entitled to the benefit of a licence or, where two or more persons are entitled to the benefit of a licence, each of those persons ; and
  • (b) a person who has rights under an agreement which is approved by the Board and is certified by the Secretary of State to confer on that person rights which are the same as, or similar to, those conferred by a licence ;
  • No. 233, in page 17, line 24, leave out

    ' appropriated it to refining or other processing ' and insert relevantly appropriated it '.

    No. 192, in page 17, line 27, at end insert—

    ' "pipe-line" means a pipe-line as defined in section 65 of the Pipe-lines Act 1962 ;
    " production purposes ", in relation to an oil field, means any of the following purposes, that is to say—
  • (a) carrying on drilling or production operations within the field ; or
  • (b) in the case of oil won from the field that was so won from strata in the sea bed and subsoil of either the territorial sea of the United Kingdom or a designated area, pumping it to the place where it is first landed in the United Kingdom ; or
  • (c) the initial treatment of oil won from the field ;
  • No. 193, in page 17, line 31, at end insert—

    . "relevantly appropriated ", in relation to oil won from an oil field, means appropriated to refining or to any use except use for production purposes, and "relevant appropriation" shall be construed accordingly ;'— [Mr. Dell.]

    I beg to move Amendment No. 234, in page 17, line 36, after ' payable ', insert`—

    (but not, it is hereby declared, oil delivered) '

    Amendment No. 234 is really a consequential amendment, as is Amendment No. 237. Amendment No. 238 is the main amendment, and these amendments are necessary because of the Government's decision to take powers in the Petroleum Bill to require licensees to deliver oil in place of the cash payments of royalties, which is known as royalty oil.

    The amendment seeks to exclude the value of such royalty oil from the amounts included in the gross profits. This is a necessary consequence of such royalty oil and as such will, I am sure, be acceptable to the House.

    Regarding the substance of the royalty oil, the House will know that Parliament will obviously have the opportunity to examine in great detail the Secretary of State's proposal for this during the passage of the Petroleum Bill. This amendment is merely a clarification dealing with the measure in anticipation of the proposals which will be coming before the House.

    It would be wrong at this stage to seek to open up the whole question dof royalty oil. We shall obviously want to hear what is said on the Petroleum Bill, if and when that comes forward. However, if it is the Government's present intention for that Bill to make provision for royalty oil, it seems that it would be sensible, equally, to make provision here for the necessary consequential fiscal results of having that provision.

    We do not at this stage say Yea "or Nay" to the question of royalty oil. That depends entirely on the circumstances and on what the Government are able to tell us about what they would propose to do with it, and on that will depend our reactions as to whether or not we regard this provision as sensible.

    Amendment agreed to.

    I beg to move Amendment No. 235, in page 18, line 8, leave out ' or paragraph 4 of Schedule 3 '.

    No. 91, in Schedule 1, page 25, line 48. at end insert—

    ' 6. Any person to whom notice of a determination or new determination has been given under paragraph 4 or paragraph 5 above may within sixty days of such notice being given appeal against the determination contained therein giving the reason for his dissatisfaction and any appeal thus made shall be referred to and determined by a Tribunal consisting of three persons appointed by the President of the Institute of Petroleum '.

    Government Amendment No. 223.

    No. 106, in Schedule 3, page 38, line 32, leave out from ' authority ' to end of line 34.

    No. 107, in page 38, line 34, at end insert—

    ' (2) The appropriate authority shall, by notice in writing given to the responsible persons for the fields in question, inform them of the determination.
    (3) The responsible persons, or any one or more of them, may appeal to a Tribunal consisting of three persons appointed by the President of the Institute of Petroleum against the determination by notice in writing given to the appropriate authority within 60 days of the date of the notice of the determination.
    (4) An appeal under sub-paragraph (3) above may at any time be abandoned by notice in writing given to the appropriate authority by the responsible persons making the appeal

    9.45 p.m.

    This amendment is consequential on the deletion of the special provision in Schedule 3 for determining disputes. The main amendment is Amendment No. 223, dealing with the problem which arose in Committee, where strong objection was made to the absence of a right of appeal on the matter of the determining of the field from which the oil is to be won. A number of bodies were suggested as a means of achieving some form of arbitration into the extent of the field and its delineation.

    I said in Committee, and I remain convinced that this is so, that disputes of this kind are likely to be very rare, simply because it is in nobody's interests to delay these matters and also because at the end of it all it is in the interests of both parties to accept the objective reality of the geophysical descriptions that are produced. I therefore do not think that there will be any disputes of the kind which were so vividly suggested by hon. Members.

    However, we have made an attempt to meet the arguments which were advanced and to show that we are not doctrinaire. This is a matter on which there is no need for any stance to be taken. We have seen that some form of estimated assessment could be made in respect of the field from which it was considered that the oil had been understated. If the Inland Revenue disagreed with any licensees about the field, the estimated assessment could be made in respect of the field. As a result, the participators would be able to appeal against the assessment and the issue would fall to be determined, as a matter of fact, by the Special Commissioners in the same way as they go about determining any other appeal.

    The provision would at least channel such a dispute into fairly well recognised procedures. Any dispute about a point of law in the Special Commissioners' decision could then be taken to court under the normal tax machinery. This would meet the main purpose of the Opposition of providing a long-stop, without having all the problems of setting up a new body, to meet the rare case of a dispute. I repeat that I believe that disputes will be rare. I do not believe that the procedure is likely to be used, and, if it were to be used, I doubt whether it would be to the advantage of either the Government or the companies concerned. However, this meets the point made in Committee by the Opposition.

    The Minister of State has gone some way towards helping us. He said in Committee that he did not consider that the schedule which we are attempting to amend was as it stood

    " oppressive when both sides have a common interest, but if the hon. Gentleman "—
    that is myself—
    " really feels that this needs further examination I shall be happy to look at it again. I do not think it is a matter of great moment. but I will consider it without any kind of commitment." — [Official Report, Standing Committee D, 23rd January 1975 ; c. 375.]
    Helpful though the Government amendments are, and helpful though it is to have an indication that an appeal in a certain context will lie to the Special Commissioners where there is a dispute, the schedule, without the addition that Amendment No. 91 would secure, is unsatisfactory. I believe that the oil industry finds the schedule unsatisfactory. There is still the uncertainty arising from the character of the procedures laid down in Schedule 1 that a situation might arise in which the determination of a field can occur which does not coincide with the views of the interested companies.

    This is a very serious matter, particularly so in the light of the new provisions introduced by the Government in connection with the oil allowance. One of the important features of the allowance is that each participator's share will be attributed in proportion to his share of the oil won and saved in the chargeable period. If there is the possibility of a discrepancy between determination of the shares by the authority and the proper designation of the share which the company feels is appropriate but which is not accepted by the authority, this disparity will become even more painful, complicated and disturbing when questions of appointment of the 10 million-ton allowance are dealt with.

    This is an added illustration of the difficulties which might arise when, as the companies believe, a situation emerged in which PRT became payable by each licensee on a different share of the income accruing to them. This remains a serious concern of the industry. That concern has in no sense been completely assuaged by the Government amendments. There is a very bald and cold-blooded specification laid down in paragraphs 2, 3 and 4 of the Schedule, with the authority taking written evidence from participators in a particular field, considering the evidence and any representations made on behalf of the different participators, but finally, and in isolation, making a determination against which there is no court of appeal and no sort of reference to an external arbitrator or adjudicator.

    If the members participating in a particular area cannot reach agreement about the evidence they should submit to the authority under paragraph 2(b) of the schedule about what is an appropriate apportionment, it is unsatisfactory that the authority should have the final word without recourse to some external adjudicating body.

    What we propose would not lead to an extra loss of time—indeed, the reverse might be the case. Because of the certainty that there will be an ultimate court of appeal and arbitrator the companies may be able to expedite their submissions under paragraph 2(b) much more than if they have to get every jot and tittle cleared up finally and completely, because submission to the authority is their last chance. Therefore there may be a loss of time under the existing provisions, since no final arbitrator is proposed in the amendment.

    The companies want to get started as quickly as possible. Like the Government, they have no interest in holding things back. However, they feel that the final arbitrator, as proposed in the Opposition amendment, is necessary, and the oil allowance apportionment makes the proposal all the more relevant. If the amendment is not accepted the companies may spend extra time engaged in the most detailed, pernickety and finicky disputes and discussions among themselves before they submit written evidence.

    Nothing would be gained by not accepting the amendment. It would encourage the oil industry psychologically and practically. It would cost the Government nothing, except the necessary flexibility, to accept this reasonable proposed change in the Bill.

    If I can help the House, I am happy to do so, but I thought that I had used all the arguments which I intended to use and I did not think that on Report it would be welcomed if I were to make the same points using, perhaps, only slightly different words.

    We felt that we had gone a long way in trying to find means of meeting the point repeatedly made by the Opposition in Committee. We tried to devise a method, and we thought that we had devised a useful one. We felt that the body which had been suggested was not suitable. I thought that our attempt to do our utmost to make a concession on the main point of principle without accepting the detail consequent on that principle would be readily accepted by the House.

    I accept a further point which the Opposition have rightly made, which is that the oil allowance makes the matter a little more important than it was previously. That was an element in our thinking when being persuaded by the Opposition of the need for means of further appeal. We have given effect to the substance of the criticism without implementing exactly what right had and hon. Members opposite had in mind

    Amendment agreed to.