Saturday, May 13, 2023

DEVOLVE THE CROWN ESTATES

It’s time for Wales to be given control of Crown Estate properties worth billions. Liz Saville Roberts,  Plaid Cymru MP, said doing so could help end a "begging bowl" culture and drive prosperity. The Crown Estate belongs to the reigning monarch and the revenue from its £16 billion pound property portfolio flows directly to the Treasury.


At present the Welsh Government has control over over agriculture, forestry and fishing, education, environment and Health and social care, but devolving The Crown Estate to Wales is something the party - and others - have long called for.


The Crown Estate is an independent company which belongs to the monarch for the duration of their reign, though the revenue from its £16 billion pound property portfolio flows directly to the Treasury.


A taxpayer-funded payment, known as the Sovereign Grant, pays for the royal family's official duties each year. It is currently set at 25% of the Crown Estate's annual profits, including a 10% uplift to pay for the refurbishment of Buckingham Palace.


The estate's holdings north of the border were devolved to Scotland in 2016, and its revenue now goes to the Scottish government. In Wales nothing has been done to make the Crown Estate publicly account’s to the Senedd and the Welsh people. The Crown Estate owns the UK seabed out to 12 nautical miles. 


Ms Saville Roberts said an arrangement similar to Scotland would give Wales a direct say in how the profits from new floating wind farms planned off the Welsh coast would be spent.


The Dwyfor Meirionnydd MP has suggested that if the profits from this were in the hands of the devolved government in Cardiff Bay, it could be used to provide better energy security and lower heating costs for Welsh homes.


"One of the criticisms that any Welsh politician on the left will face is that we are forever asking for more money, that we are asking for the Barnett Formula to be revised," she said.


"I am very interested in what are the mechanisms that we could bring to Wales that would allow us to build our own economy more effectively, and not to be an adjunct."


The Plaid MP said previous attempts to raise the issue with the Conservative Westminster government had been a "non-starter" and that her party would be "certainly pushing" the cause if Sir Keir Starmer's Labour were to win the next general election.


Ms Saville-Roberts added: "I think the devolution of the Crown Estate feels fair, it feels equitable, and we could do so much with this. It could be one critical step that could make so much difference to the Welsh economy in the furthest westernmost regions of north and south Wales."


For decades, the seabed was simply an add on sideshow to the Crown Estates largely land based property empire. Over more recent years the sea bed’s value has soared in value, as a result of the rapidly expanding market for renewable energy. After rising incrementally for years, the value of the seabed doubled between 2020 and 2021. 


By 2022, the Crown Estate estimated its marine portfolio was worth £5 billion. 


Around the world, there has been a dramatic growth in ocean-based industries, with the OECD projecting that the ocean economy could exceed $3 trillion by 2030.  The UK, with its 29,000 kilometers of coastline, has been an early mover in commercializing its coastal waters beyond the traditional sectors of oil and gas, seafood, and shipping. 


The Crown Estate has facilitated and profited from much of this new activity, working in tandem with the government to rent out areas of ocean to companies that want to install offshore wind turbines, dredge up sand and gravel for the construction industry, lay cables for internet traffic and electricity, or build pipelines for oil and gas. 


The Crown Estate is also responsible for handing out the rights to store carbon—a potentially lucrative future industry. While not all the money generated by the seabed around England, Wales, and Northern Ireland funds the Royal family. 


A quarter of the Crown Estate’s profits goes to the British monarchy via a system called the sovereign grant, while the rest flows into the public purse through the finance ministry. 


In Scotland there is a different system, where the government takes 100 percent of the profits generated by the Crown Estate Scotland, a separate entity. The new monarch will preside over a royal family that is partly funded by a new era of ocean industry.


During new Monarch’s reign, Crown Estate commissioners will make decisions that will permanently change Britain’s seabed—choosing which companies and industries get priority in an increasingly busy sea. Already, the high cost of leasing the seabed to develop offshore wind projects is shutting small companies out of the process. 


And as competition to store carbon under the sea heats up, there is a danger that the new seabed economy will look disturbingly similar to the old one, with a handful of oil and gas giants dominating and locking in a future based on fossil fuels.


The Crown Estate is in the middle of process that is turning the seabed into a major source of rental income for the Crown Estate.  Historically the Monarchy has not always claimed ownership of the seabed. When oil and gas were discovered off Britain’s east coast, companies eager to start drilling demanded clarity on whose property, exactly, they were about to bore into. 


The problem was that back in the 1940’s the then foreign secretary Herbert Morrison stated that the seabed was res nullius— literally nobody’s property—effectively creating by default a decidedly legal gray area. 


So in 1964 the government passed the Continental Shelf Act, effectively passing ownership of the UK seabed to the business managing the rest of the monarchy’s property portfolio from that point onward basically everything in the marine environment, in the absence of anyone else owning it, effectively belongs to the Crown Estate. 


It wasn’t until the turn of the millenium ( under Tony Blair’s Premiership) that the Crown Estate launched what would become its most profitable seabed industry. In 2000, the first two offshore wind turbines were installed on the seabed, near the English city of Newcastle. 


Since then, the UK’s offshore wind industry has grown massively, providing almost a quarter of the country’s electricity last year, and it is now second only to China's in size. Today there are more 2,700 wind turbines off the country’s coast. The world’s biggest offshore wind farm—the size of 66,000 soccer pitches—is situated 70 miles off the coast of Yorkshire, in the northeast of England.


Encouraged by New Labour, the Crown Estate saw an opportunity in this very early on, as the Crown Estate did not simply just lease the seabed, they actually played a key role in developing the sector. Offshore seabed developments are just getting started. The UK is planning for a massive, fivefold increase in offshore wind capacity to 50 gigawatts by 2030.


So far, the Crown Estate has held four major auctions, with companies biding for the rights to build wind farms on designated sections of seabed. As the technology evolves, each auction allows wind farms to build bigger turbines that are installed farther out to sea. The offshore wind market has become so competitive that the Crown Estate is now in a position to charge companies enormous option fees—just to reserve the right to build on the seabed.


Back in 2019, a partnership between BP and German energy provider ENBW agreed to pay £231 million ($290 million) in annual option fees alone. As the offshore wind industry booms, the Crown Estate is already eyeing the next opportunity to cash in on its seabed empire: carbon storage. 


The seabed around the UK has room to store 78 billion tons of carbon dioxide—more than enough space to cram in 200 years' worth of the country’s annual emissions. Increasingly, the North Sea is being seen as a destination to store carbon captured from hard-to-decarbonize industries, including steel, cement, and fertilizer production.


Although it’s still the heart of the UK’s fossil fuel industry, the North Sea will play an important part in the country’s decarbonization plans. In 2019 the Committee on Climate Change—a public body that advises the government—concluded that carbon capture and storage is a “necessity, not an option” if the UK is going to achieve its legally binding goal of reaching net zero greenhouse gas emissions by 2050.


So far carbon storage plans have had a rocky start, in 2011 and 2015 the Westminster government canceled major carbon capture and storage projects, attracting criticism from those who say the UK has been slow to capitalize on its natural storage assets. That is starting to change.


The UK has set itself the target of capturing up to 30 million tons of carbon dioxide every year by 2030, with the first carbon capture clusters centering around industrial towns and cities in the northeast and northwest of England.


What this means is that the Crown Estate is now sitting on another valuable asset deep beneath the sea. The estate is responsible for granting the rights for carbon storage under the seabed around England, Wales, and Northern Ireland, as well as leases for pipelines that would transfer carbon dioxide to these underground stores, most of which are located in the North Sea. 


Storage licenses are approved by the North Sea Transition Authority (NSTA), a public body that regulates the oil, gas, and carbon storage industries in the North Sea.

So far, the NTSA has granted seven licenses for seabed carbon storage around England. 


One of those licenses—granted in 2013 to Shell—has expired, so there are now six active carbon storage licenses, covering five sites in the North Sea and one in the Irish Sea to the west of England. In September 2022, the NSTA closed bidding on the first public round of carbon storage licensing after receiving bids from 19 companies for the 13 carbon storage sites offered up. 


Any company that wants to transport and store carbon under the sea will also need to purchase rights from the Crown Estate. So far only one project holds an agreement for lease from the Crown Estate: a chunk of the North Sea being explored by a partnership between BP, Carbon Sentinel, and Equinor New Energy for its carbon storage potential.


The seabed is now facing a massive moment of transition, with vast potential to support nature recovery, unlock huge opportunity for renewable energy, and play a major role in energy security means it is becoming increasingly busy, with more demands on it than ever before. These demands are only set to grow in intensity in the future and the profits are only going to grow. 


As with offshore wind farms, this raises the question of who gets to cash in on the race to net zero. Of the six active carbon storage licenses granted on the UK continental shelf, five of them are owned by oil and gas companies. 


Freedom of information requests which were put in to NSTA has revealed that prior to September 2022, there had only been nine applications for offshore carbon storage licenses. So basically pretty much every single carbon storage application was successful, and all but one of those licenses went to an oil or gas company.


None of this should really surprise anyone as storing carbon under the sea will mean drilling wells hundreds of meters under the seabed, exactly the kind of thing that oil and gas companies have been doing in the North Sea for decades. 


These companies have another incentive to encourage carbon capture and storage: If the technology is used as a way to reduce emissions from fossil fuels, then it could be used to justify continued drilling for oil and gas in the North Sea. The NSTA has already licensed new areas for oil and gas exploration in the North Sea, a move decried by some campaign groups as illegal.


The transition to a lower-carbon economy means finding new uses for the ocean, but there are still serious questions over the impact that marine industries have on the seabed, and about which companies will profit from this new undersea boom. 


In the Pacific, mining firms are currently exploring the seabed for polymetallic nodules packed with metals that are essential for manufacturing electric cars. Starting in July 2023, the International Seabed Authority will start taking applications from companies that wish to mine the ocean floor. 


A whole new era of ocean exploitation beckons—this time in the name of limiting carbon emissions and adapting to climate change. For years, the ocean has suffered as a result of human activity. Marine heat waves have prompted coral bleaching, microplastics are messing with ocean food chains, and falling underwater oxygen levels mean marine animals are finding it harder to breathe. 


Human impact on the ocean ecosystem has not been good, regulation and review of offshore activity during the on going gold rush to cash in and exploit the seabed threatens to repeat the mistakes that we have made on land, particularly if much of the development is undertaken by companies whose environmental record is not good. 


The revenues do not belong to the monarch and surplus revenue from its businesses are paid each year to the Treasury. The Crown Estates revenues in Cymru / Wales are not vast at the moment, but, the assets have what could best be described as game changing potential. 


That's why control of these marine and and coastal assets particularly in the case of renewables and off shore wind generated hydrogen could our nation to opportunity to reboot our economy and make a significant contribution to fighting global climate change.


Our energy and water resources including the responsibility for sewerage for the whole territory of Wales should be the responsibility of the Welsh Government. The Crown Estate still remains largely unaccountable to the people of Wales and all profits from its holdings (which includes on and off shore wind farms) are passed to the UK Westminster Government. Profits from these holdings are likely to grow significantly mostly due to the growing demand for renewable energy. 


For way too long our natural resources have been run for the benefit of others with few real or lasting benefits trickling down to the people of Wales. Ownership and control over the Crown Estates in Wales should be transferred to the Welsh Government. 


The final say on how our natural resources are exploited and developed should be the direct responsibility of the Welsh people (and the Welsh Government) with 85% of the profits or dividends directly benefit the people who live here rather than opaque absentee landlords. 

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