Ministerial Report
To: Senator I. Le Marquand, Minister for Home Affairs
Senator L. Farnham, Assistant Minister for Home Affairs
S. W. Austin-Vautier, Chief Officer, Home Affairs
Chief Fire Officer M. James
From: Deputy Chief Fire Officer P. Brown
Cc: Group Manager M. Maguire, Director of Safer Communities
Date: 25 May 2012
Subject: Petroleum Licence Fee Restructure
1. Purpose
1.1 The purpose of this Ministerial Report is to apprise the Minister of the outline case for restructuring the fees applicable to those engaged in the storage and supply of petroleum. This report is in support of an earlier verbal briefing by GM Maguire for both the Minister and Assistant Minister.
2. Background
2.1 The Petroleum (Jersey) Law 1984 concerns the keeping, storage, conveyance, handling and use of petroleum spirit and other substances. The law is administered by the Minister for Home Affairs and the States of Jersey Fire and Rescue Service acts as the enforcing authority on behalf of the Minister.
2.2 Persons wishing to keep, store, convey, handle or use petroleum in quantities which exceed 25 litres may only do so when authorised through the issuing of a licence by the Minister. Article 3 of the law makes clear that fees are applied to petroleum licenses.
2.3 Currently the Petroleum (Licensing) (Fees) (Jersey) Order 2001 sets out a very simple charging structure based only upon storage. The fees are as laid out below:
a) Storage not exceeding 2,500 litres: £118
b) Storage exceeding 2,500 litres but not exceeding 5,000 litres: £146
c) Storage exceeding 5,000 litres: £175
3. Unsuitability of Current Fee Structure
3.1 In issuing licences and enforcing the Petroleum Law on behalf of the Minister, Fire and Rescue Service officers have to maintain a substantial and complex audit and inspection regime. Whilst the current fee structure does take into account quantities of petroleum stored it takes no account of the complexity and cost of maintaining such a regime in widely varying types of petroleum storage sites which range from simple forecourts to major storage and distribution facilities such as La Collette. Under the current arrangements the fee levied for a licence to keep petroleum at the La Collette bulk fuel storage facility is the same as at a medium sized forecourt facility even though the safety measures and compliance requirements in the former are an order of magnitude greater than the latter.
3.2 The La Collette bulk fuel storage facility is a ‘Buncefield type site’ in accordance with the definition created by the UK Health and Safety Executive’s Hazardous Installations Division following the explosion and fire at the Hertfordshire based facility in December 2005. This type of very large and high complexity site requires periodic audit by specialist petrochemical industry consulting engineers with skills and experience which would and hitherto have been impossible to maintain locally. It is the intention of the Service to introduce a triennial (or possibly quadrennial or quinquennial) audit by specialist consultants. The findings and recommendations in the audits will be reflected in conditions attached to licenses issued by the Minister in order that he is satisfied at all times that the site meets best practice industry safety standards. The Service does not have the financial capacity to engage consultants to undertake this important task.
3.3 The only full and specialised audit undertaken in recent years was by Atkins consulting engineers in 2008. This was funded by the Hazard Review Group overseeing safety issues associated with the construction of the Energy from Waste Plant and resulted in over 100 recommendations being made and a considerable amount of urgent expenditure being required both by the States of Jersey and the fuel companies to rectify critical issues. One of the recommendations was to commission periodic audits undertaken by specialist consulting engineers and this was accepted.
3.4 Additionally, the current fee structure does not take into account the cost of audit and enforcement connected with the use of the site (i.e. storage, distribution or dispensing). Each of these activities bring with them unique equipment, systems and management arrangements which make the cost of (but currently not the fee for) enforcement scalable.
3.5 Finally, the fee structure does not currently reflect adequately the complexity and concomitant cost of preparing (equipping and training) for having to deal with major spills, explosions and fires that might occur at the installations.
4. Proposed Structure
4.1 The fee structure proposed in the Petroleum (Licensing) (Fees) (Jersey) Order 201- approaches the cost and fees associated with the size and complexity of sites and is therefore a complete departure from the 2001 Order. The structure is as follows:
(a) | in the case of an application to keep petroleum-spirit at premises comprising a bulk fuel storage depot | £2,500 |
(b) | in the case of an application to keep petroleum-spirit at premises for the purposes of distribution to premises used for dispensing petroleum-spirit for retail or private supply or to a person for private use | £1,000 |
(c) | in the case of an application to keep petroleum-spirit at premises used for dispensing petroleum-spirit for retail or private supply, not being premises falling within the description in paragraph (b) | £200, plus £50 per petroleum dispenser used at the premises for such supply |
4.2 Clearly, in relation to percentage increase and the anti-inflation strategy the increases at a) and b) in particular are very substantial indeed. In introducing the fee structure the intention is, in effect, to reframe the context and purpose of the fee structure in order to properly meet the needs of the enforcement body but also the site operators.
5. Supplementary Information
5.1 Earlier this year the Fire and Rescue Service conducted a formal consultation exercise on a range of proposals associated with amending fire precautions and petroleum legislation. The proposed fee structure was included in the consultation and all the fuel storage, distribution and dispensing companies participated. Whilst no increase in fees would be welcome the companies acknowledge and accept the need and the reasons for the change.
Comment from Finance Director
The change in the structure of petroleum licence fees is part of the JFRS’s CSR User Pays initiative to increase income through Fire Safety Charging.
The new fee structure better reflects the complexity and concomitant cost of preparing (equipping and training) for having to deal with major spills, explosions and fires that might occur at the installations but is difficult to compare directly with the existing fee structure.
Financial Direction 4.1 Increases in States Fees and Charges requires that the approval of the Minister for Treasury and Resources (delegated to the Treasurer) is required for proposed increases in fees of over 2.5%.
The Treasurer approved the increase in fees in December 2011 (TR-2010-DD122).
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