Friday, 20 April 2012

Oil stand up for the SNP for a change

The SNP's Fergus Ewing has come in for a bit of stick recently. His claim to a Westminster committee that if Scotland gains independence then the UK should stand the cost of decommissioning North Sea oil installations didn't go down too well in certain quarters.

Of course, at first glance this does seem like a rather brazen and self-serving claim, but in fact it's eminently fair and reasonable, at least regarding the past rather than what happens in the future if Scotland does separate from the UK.

Most obviously, if an oil field is depleted before the split then since the UK gained the benefit from the revenues then rUK should pay the bulk of clean up costs, with Scotland shouldering a share on a pro rata basis, as with public borrowings.

However, if the oil rig is still in operation when Scotland gains independence then the decommissioning costs would fall depending on the share of the spoils before and after. For example, if 70% of the oil was extracted prior to the split then 70% of the clear up costs would fall to the UK because it derived 70% of the benefit, whereas the 30% arising post-independence would benefit only Scotland and to that extent Scotland alone should bear 30% of the subsequent costs.

By the same token, any oil extracted from new wells post-independence would benefit only Scotland and thus Scotland alone would bear all the decommissioning costs.

Which seems to be essentially what Fergus Ewing said. But Labour's John Robertson said of Fergus Ewing's claim: "I find that absolutely incredible. Scotland has benefited as much from oil as any area within the United Kingdom."

Er, nae really. If the revenues all went to Westminster and to the extent that all areas of the UK benefit from taxpayers' money (roughly) based on population then it's stretching things to say that Scotland has benefited disproportionately. Or if he's simply saying that Scotland benefited similarly to the rest of the UK pro rata then his point makes little sense.

But in all probability John Robertson knew all that full well, but such nuances don't fit the soundbite-based narrative under which most of politics is conducted, as of course the SNP ably demonstrated in the other direction last week regarding the Economist's 'Skintland' jibe - John Swinney can demonstrably misrepresent 'bankrupt Britain' (another crude soundbite), but a joke about Scotland being unable to pay its way in the future is clearly beyond the pale.

But Fergus Ewing surely had the upper hand this week in terms of the equity of the costs being attributed to whoever the benefits accrue to.

It's that simple, but it wouldn't fit the political imperative to represent it in this way.

Update: A letter in today's Scotsman from oil expert Professor Alex Kemp points out that the bill for decommissioning will be met by the oil company licensees, thus further confusing the debate. And that's certainly slightly different from the premise on which the reported political debate was based. However, I have neither the time nor inclination to investigate this further, which I suppose helps rationalise the political motivation to obfuscate and discombobulate!

(Apologies for the excruciatingly bad pun in the title, particularly when a correspondent to the Scottish Review said this week that "puns are neither big nor clever nowadays". Oops. But on a similarly puerile and frivolous point, isn't Fergus Ewing a particularly apt name for a politician dealing with oil issues? Fergus as in North Sea oil field and Ewing as per JR and Bobby et al of Dallas fame. Oh well, suit yourselves!!)


Braveheart said...


Eminently fair minded of you, but wrong, I think.

The North Sea oil deposits and vast sectors of the indiginous oil industry were developed in large part using grant and other subsidies from the UK Government.

Without that investment the oil companies would not have been able to get the oil out, certainly not as quickly and efficiently.

So the decommissioning should fall on the soveriegn state in control when the oil runs out.

Which will still be the UK, of course. :)

Key bored warrior. said...

I am puzzled by your claim that these fields were developed using "grants and other subsidies from the UK Government."

It is my understanding that the UK government simply accepted large amounts of wonga for handing out licenses to companies who then went on to speculate and develop, making large amounts of wonga for them selves and for the UK government in revenues.

Thatcher cancelled a pipe line which has lost £Billions in wasted Gas.The Gas has been burnt off. They did not invest one penny.

The have been taking on average £10Billion in Oil tax revenues from Scotland for the last 30+ years, while landing Scotland with a 9% accrue of their debt and borrowing and Scotland never sees a penny.

The failure to invest in the gas gathering pipeline was based on Thatchers ideological hatred of Scotland and her hatred of public sector money being used to help industry.

That malicious decision killed the potential for thousands of jobs in Scotland. The Tory's are obsolete in Scotland for very good reasons we still bear the scars. So your claim does not stack up.

The oil industry put the stuff there , they enjoyed the profits, they can therefore take their stuff away when they are finished. It is standard practice in industry, especially the most polluting ones.

Angus McLellan said...

KBW: Westminster did spend money on oil development long ago. Remember "Britoil"? But it was sold to BP. And now it's mine (or a little bit of it is anyway).

Barbarian of the North said...

Mmm, playing Devil's Advocate (albeit a cynical one as usual), I think Fergus Ewing will get nowhere with this, even if it is fair in principle.

The SNP say that in an independent Scotland, basically anything in there is ours. Fair enough. So who is going to force Westminster to pay one penny towards decommissioning? (Leaving the licencee argument out for the moment).

It's like the high speed rail line. The SNP are demanding Westminster fund it all the way to Scotland. But if Scotland is going to be independent, why the hell would another country spend billions on infrastructure that will benefit someone else?

The bottom line is that infrastructure within Scottish territory is their responsibility. And with the SNP's stated intention to be closely tied with Europe, no doubt there will be some hefty fines to pay if things aren't cleaned up properly.

Stuart Winton said...

Thanks for the comments. Obviously matters like this could be negotatied between the UK and Scotland if independence/seperation does happen, but what's perhaps interesting is the extent to such issues will be settled before or after a yes vote.

Probably not, in which case the question of a second referendum perhaps comes into play, ie to say yay or nay to any settlement that's negotiated.

Angus McLellan said...

Nothing is going to be settled before a Yes vote Stuart. Nobody at Westminster is going to be daft enough - or so I thought before the Granny Tax, Dinners with Dave, chats with Cruddas, the Bridie Tax, Ms May's arithmetical troubles, and so on - to do anything that makes a Yes vote appear inevitable.

As for BotN's pessimistic view of the hypothetical negotiations, Stephanie Flanders' makes the point in her BBC school of journalism piece that in the event of a Yes vote it is in Westminster's interest to make things work so that Scotland and the rUK live together happily ever after. May be worth looking at the negotiations between the UK and the Irish Free State in the 20s and 30s - almost nothing was definitively settled when the Free State became independent - where the UK was usually fairly flexible. YMMV.

Stuart Winton said...

Thanks Angus, indeed you're absolutely right that Westminster won't want to agree on anything beforehand in the hope that the uncertainty helps promote the status quo, while of course not wanting to appear too obstructive, which the SNP have and will exploit to the full.

Not so sure about your comparison with the Irish Free State though, because I don't think the background to the split is really comparable, but since my history is a bit ropey in that regard I think I'll leave it there ;0)

Angus McLellan said...

Stuart, I agree that Ireland was a bit different. Well over two thousand people died in the war, several hundred of whom came from this island rather than that one. So we can expect that any negotiations would be just a little bit more amicable on both sides.