I move: "That the Bill be now read a Second Time."
While this is a short Bill, it is nevertheless important to ensure the delivery of a stronger overall regulatory framework governing exploration and production of oil and gas. It is also important in the interests of ensuring that the cost of such regulation on industry is kept to a minimum. I am pleased, therefore, to introduce the Access to Central Treasury Funds (Commission for Energy Regulation) Bill 2011 for the consideration of the House.
This Bill proposes to allow the Commission for Energy Regulation, to be known as the Commission to apply to the National Treasury Management Agency, NTMA, for a relatively short-term loan to meet its start-up costs in connection with the new petroleum safety functions conferred on it pursuant to the Petroleum (Exploration and Extraction) Safety Act 2010.
The 2010 Act conferred responsibility on the commission for the regulation with respect to safety of upstream petroleum activities and associated infrastructure. This effectively means all activities and infrastructure associated with exploration, extraction and production of oil and gas. Such activities include the drilling of wells for the purposes of exploration and extraction of petroleum onshore and offshore, transmission of gas by sub-sea and onshore pipelines and gas processing terminals.
The 2010 Act also gives effect to a key recommendation of the report produced by independent consultants Advantica in 2006 following its safety review of the Corrib gas pipeline to implement a new risk assessment-based safety framework with respect to gas pipelines. This approach is the commonly accepted methodology for managing safety worldwide and reflects the approach taken in the dangerous substances and chemicals legislation. The 2010 Act expanded on this concept to provide that petroleum activities generally would be governed by the new safety framework.
The 2010 Act also provides for the cost of establishing and implementing this new safety regime to be funded by way of an annual levy on the petroleum industry and the imposition of administration charges with respect to the consideration by the CER of safety case applications and the issuance of safety permits. However, before the levy can be implemented, the safety framework must be designed and the associated regulatory structure and implementation regime devised. This is a technically challenging programme and it is estimated that the full implementation of the framework will take approximately three years and will cost in the region of €5 million.
Budgetary and schedule estimates have been determined on the basis of discussions held by the commission with a number of specialists in the area of upstream petroleum safety. The commission has also drawn from its own previous experience of the implementation of the downstream natural gas safety framework pursuant to the Energy (Miscellaneous Provisions) Act 2006.
The 2006 Act extended the commission's regulatory role with regard to the operation, maintenance and development of gas transmission and distribution networks. That Act conferred responsibility on the commission for the regulation of safety for the transmission and distribution of downstream gas. The Petroleum (Exploration and Extraction) Safety Act 2010 consolidated the commission's role as the safety regulator for the whole of the petroleum and natural gas industry by conferring on it responsibility for the regulation of safety in the case of upstream petroleum activities and the associated infrastructure. Under the 2010 Act, designated petroleum activities can only be carried out once a safety permit is granted, the issuance of which will be dependent on the approval of a safety case by the commission.
The petroleum safety framework implementation project is the process by which the CER will implement the requirements of the 2010 Act in full. This necessitates putting in place the people, processes and procedures to enable the effective operation and enforcement of the petroleum safety framework once designed. The process contains five phases which include the initial scoping and planning phase; the high level design of the petroleum safety framework; the detailed design of the petroleum safety framework; internal readiness of the petroleum safety framework implementation project; and implementation of the safety framework programme.
The first phase of this programme has been completed and the commission is making steady progress with the remainder of its implementation programme. It expects to be ready to receive its first safety cases for assessment by the second quarter of 2013.
Until such time as the petroleum safety framework is in place, the commission cannot levy petroleum undertakings with respect to its properly incurred implementation costs. To meet with operational expenditure to date, the commission obtained, with the approval of my predecessor, myself and the Minister for Finance, commercial loans from financial institutions to cover the implementation costs of the project in 2010 and 2011. However, in the current economic climate, it would be more financially efficient for the commission to obtain such funding from the NTMA given that a lower rate of interest and the shorter processing time that would apply, thereby reducing the regulatory burden of the levy on industry.
To enable the NTMA to consider providing a loan to the commission, an amendment is required to the Schedule of the National Treasury Management Agency (Amendment) Act 2000 to establish the CER as a body to which such a facility could be extended. It is expected that with the enactment of this Bill, the commission will apply to the NTMA to fund its safety framework implementation project. It will then repay this funding following the phased implementation of the petroleum safety framework, commencing in 2013, through the imposition of the prescribed annual levy on petroleum undertakings. Bodies that can access funding through the NTMA include the Railway Procurement Agency and the Housing Finance Agency, as well as certain universities and regional technical colleges.
For the convenience of the House, an explanatory memorandum has been published which provides a synopsis of the Bill's provisions. There are only two sections in this Bill. Section 1 amends section 18 of the National Treasury Management Agency (Amendment) Act 2000 to provide for the insertion of the Commission for Energy Regulation as a designated body under the provisions of that Act. Section 2 provides for the title of the Bill, that is that it may be cited as the Access to Central Treasury Funds (Commission for Energy Regulation) Act 2011.
This Bill, while very short, is an important measure in facilitating the further strengthening of the overarching regulatory framework governing exploration for and production of oil and gas. By providing the commission with the opportunity to access borrowings at a lower interest rate and within a shorter timeframe, it will assist in the establishment of greater clarity and robustness of process at a reasonable cost to the industry.
I hope the context I have provided for this measure has been of assistance and I look forward to listening to the views of the Members of this House on this legislation and to their assistance in progressing this Bill into law.
