Cuadrilla get the green light in Lancaster

We previously wrote about the contentious decision made by the Secretary of State for Local Authorities and Government to call-in and grant Cuadrilla’s appeal against Lancaster County Council to drill and frack eight wells over two sites in Lancaster. Unsurprisingly the decision was challenged by Preston New Road Action Group, a local anti-fracking group, and campaigner Gayzer Frackman. The group and Mr Frackman argued that the decision was flawed and had not appropriately considered the climate change risks associated with the development. However their action for judicial review was dismissed, with Mr Justice Dove stating that none of the grounds had been made out in substance. The path is now clear for Cuadrilla to complete the works on what will be the UK’s first horizontal fracking project.

The Scottish Government Consultation on Fracking

In Scotland however, the moratorium on fracking remains in place. On 31st January 2017 the Scottish Government launched a consultation to gauge views on a potential end to the current moratorium on the harvesting of on-shore unconventional oil and gas (UOG) in Scotland. Views from stakeholders and the public are sought prior to 31st May.

Since 2013 the Scottish Government has commissioned a number of reports which investigate the economic, environmental and community impacts of a UOG industry in Scotland, where the resources are concentrated in the Central Belt, where former coal fields once were. UOG covers coal bed methane extraction and shale gas extraction and while they both involve the extraction of gases from sources deep in the ground, the methods used for each are quite different.

It is thought that Scotland has significant amounts of shale gas (49.4 trillion cubic feet) and while the Scottish Government research shows that only around 2% of these resources would be commercially suitable for production, up till 2062 that still equates to 5.5 years of gas consumption in Scotland at current rates. By comparison Lancashire has an estimated 822 trillion cubic feet of shale gas available.

The main concerns are that the Central Belt is heavily populated and so any extraction of UOG could potentially affect the local population and Scotland’s current aims in energy follow the ideas of a safe supply of clean, reliable and affordable energy that will contribute to the wellbeing of Scottish society.

The Consultation is divided into three sections:-

Community Considerations

There are several wider issues concerned, including effects to natural heritage, habitats and any historic environment but the research specifically highlighted potential concerns over technical risks such as water contamination, effects to public health and seismicity, as well as more social concerns such as effect on local communities and the implications to the climate change Targets. However positive changes such as boosts to local and wider economy and improvement to landscapes were also identified.

The Scottish Government commissioned Health Protection Scotland to undertake a rigorous assessment of any health impacts UOG could have on human health. The results of this research were predominantly inconclusive, and stated that a lack of existing evidence made any determination on shale oils posing a threat to public health inadequate. As a result the conclusion is that a precautionary approach to the harvesting of UOG’s in Scotland is justified.

Another key impact that was identified is a potentially notable increase in volumes of traffic especially with HGV’s, which in turn could increase noise and air pollution. However the research concluded that though traffic may increase notably at a very local level it would not have much effect at a national or even regional scale.

A number of community benefits have also been outlined, including a reference to the system Scottish landfills use to pay out percentages of money to the communities they effect, and invest money in local projects.

Additionally in 2015 the UK government announced that it would commit up to 10% of shale gas tax revenues to a shale wealth fund, which is projected to invest up to £1 billion in shale producing areas.

Economic Considerations

The production of UOGs in North America has resulted in a positive economic impact. As well as the provision of 5.5 years of gas in Scotland there is also the possibility that oils harvested through fracking could produce 17.8 million barrels up to 2062. It is anticipated that the benefit to Scotland’s economy would be £1.2 billion plus 1400 jobs and £1.4 billion in additional tax receipts.

On the down-side establishing the UOG industry in Scotland, with gas and oil prices so low, may not be economically viable. In addition there will be potential impacts to local house prices, healthcare costs and environmental costs. Scotland is very much focussed on lowering carbon emissions and how this would sit with the UOG industry is another potentially negative factor. The research commissioned by the Scottish Government concludes that the harvesting of UOGs in Scotland would not have a notable effect on global gas prices but locally gas prices may drop as a result.

North American exploitation of UOGs has had a positive effect on the petrochemical industry. Since the harvesting of shale gas began in North America there has been increased investment in the petrochemical industry and the cost of chemicals is now around half that of chemicals produced in Europe. The production of ethane and methane, as by-products of UOG recovery, could be very beneficial to the petrochemical industry in Scotland if it is possible to harvest them in sufficient amounts.

The conclusion that the Scottish Government has reached is that the overall impact would be low but that exploitation of the UOG reserves will help to secure cost effective supplies at a local level.

Environmental Considerations

It is no secret that the Scottish Government has set targets for the reduction of greenhouse gas emissions by 80% by 2050, from 1990 levels. So what potential effect will UOG harvesting have on achieving these targets? Well, no account is taken of potential UOG harvesting in the Scottish Government’s updated Climate Change Plan, which was published last month.

The Committee on Climate Change identified potential emissions from (1) vented and unintentional leaks, (2) from burning of fossil fuels, (3) transport emissions and (4) emissions which result from a change of use of land. The Committee concluded that UOG production “would not comply with Scotland’s climate change targets, except if it were to carry things out in a very rigorous and careful manner in terms of emissions”. In practice this means that the production of UOG would have to substitute for gas and oil that Scotland imports and not just enhance that supply. There is also the issue that CO2 emissions from other activities would have to be reduced so that the production of greenhouse gases from the harvesting of UOG would not detrimentally affect Scotland’s emissions targets.

The Committee also commented that decommissioning and aftercare would have to be provided for perhaps in the way that it is currently provided for in consented wind farms and landfill sites, through the planning and environment permitting systems, with funds being deposited or financial bonds delivered. In this way reliance on the public purse will be avoided. SEPA would of course have a major role in a permitting system to ensure lowest possible pollution outcome.

Experience is that seismicity from fracking is generally very minor and is below awareness levels for individuals. The earthquakes that have been reported seem to have stemmed from the associated practice of re-injecting wastewater back into the ground.

Following discourse between the Scottish Government and the proposed main regulators, it was concluded that UOG operations should be stopped if it induced a seismic event of 0.5 on the Richter scale or greater.

Concluding Remarks

  • There are some large gaps in the evidence and research conducted which would need to be further investigated if UOG was to proceed.
  • While this deliberation period goes on Health Protection Scotland will monitor new studies related to UOG.
  • Total economic impact would be quite low.
  • UOG could provide cost effective supply for energy suppliers.
  • As production in Scotland would be relatively low it would not have any notable effect on the global market.