To some, hydraulic fracturing, or “fracking”, is the answer to the UK’s looming energy crisis. To others, it represents a backward step towards continued reliance upon fossil fuels. Either way, for better or worse, fracking is likely to form an integral part of the Government’s energy policy.
In an article published in the Daily Telegraph this week, the Prime Minister attempted to limit the damage caused by Lord Howell of Guildford’s recent comments (that fracking should take place in “desolate” parts of the North East) by saying that it is “wrong” to suggest that the Government wants “fracking to be confined to certain parts of Britain”. Apparently, the Government wants “all parts of our nation to share in the benefits – north or south Conservative or Labour”. Nevertheless, the recent protests in Balcombe suggest that not all parts of the UK want to share in such “benefits”.
Fracking combines drilling with pumping fluid into the ground at high pressure to fracture shale rocks. The fractures release gas trapped within the rock. A number of potential risks have been identified but comprehensive research into long-term impacts remains relatively scarce. The main environmental concerns relate to groundwater contamination, the abstraction of the high volumes of water and seismic events. Despite many similar concerns having been raised in the United States where fracking operations are more widespread and established, David Cameron argues that “international evidence shows there is no reason” why the process should cause environmental damage, “if properly regulated”.
When the detection of low levels of seismic activity near Blackpool was initially linked to fracking operations in 2011, the Government announced a moratorium on fracking. In December 2012, it announced that the ban would be lifted after doubts were raised about whether those operations actually caused the seismic activity. Since then, the Government has encouraged shale gas investors with a series of tax incentives. The Government now appears to be considering offering incentives to local communities affected by shale gas operations. The Prime Minister’s article represents the latest development in the Government’s fracking public relations campaign.
It is clear that the Prime Minister hopes that shale gas will meet a significant share of the UK's energy future energy demands. He believes that fracking will bring lower energy bills, new jobs and financial benefits for local neighbourhoods and hopes that public support for fracking will be more forthcoming “if neighbourhoods can really see the benefits – and get proper reassurance about the environment”.
Existing property, environmental and planning controls and legislation are likely to bear the burden of providing such reassurance by regulating the industry as it develops. The legislative and policy backdrop is complex both for potential operators and also those seeking to oppose further exploration and production.
All shale gas is owned by the state and the Government has the right to grant Petroleum Exploration and Development Licence (“PEDL”) licences to explore, drill and extract it. The award of licences is discretionary and they are issued in rounds which grant exclusivity to operators in particular locations.
Operators will need to either purchase the relevant site from the landowner or secure a lease or licence for access. If compulsory purchase legislation is used for the acquisition of land, compensation will only be payable to the extent of any loss of value and enjoyment rather than any value associated with the extracted gas.
Many stages of shale gas extraction constitute development and therefore require planning permission. The planning authority is required to publicise, and notify local residents of, applications in order to enable local communities to comment on the proposed scheme. This may provide an opportunity for those hoping to oppose such operations to voice their concerns about issues such as multiple vehicle movements, landscape impacts, noise and water consumption. Many stages are also likely to require detailed environmental impact assessments, including geological assessments to identify faults and monitor seismic activity.
Operators must gain “well consent” for exploration and Field Development Consent for production from the DECC. A number of environmental consents may also be required and the Environment Agency and the Health and Safety Executive are likely to be involved during the licence and permitting stage.
With David Cameron’s “green revolution” seemingly a distant memory, it is clear that the Government now sees fracking, and shale gas, as an important component in its energy policy. It is also clear that the applicable regulatory framework is complex with a number of stakeholders and decision-making bodies. It seems likely that the Government will have to balance its desire to enable operators to commence production with the need to be seen to be rigorous and responsible in its management of fracking operations. The enduring challenge will be winning over those among the electorate that feel strongly about fracking operations taking place on their doorsteps. It may take more than a promise of a fraction of shale gas revenues to win their hearts (and votes). Much is likely to depend upon whether shale gas brings spiralling energy bills under control. Whether the Government has sufficient influence over powerful energy companies to do this is another matter.