The UK’s nascent shale gas industry received a boost in May following the outcome of a lengthy consultation and in-depth review of environmental and public safety hazards that have been linked to exploitation of shale gas. The Energy & Climate Change Committee concluded in a report published on 23 May 2011 that a moratorium on the use of hydraulic fracturing is not necessary and there is no evidence that the process poses any risk to underground water sources.

The UK’s shale gas potential has gained increasing interest from E&P companies looking to share in the commercial success of shale exploitation enjoyed elsewhere, particularly the US, albeit amid mounting scrutiny from environmental groups responding to negative publicity of the environmental impact and public safety risks associated with shale exploration, which has been reported to present a contamination hazard to nearby groundwater stores.

Currently there is just one E&P company licensed by the UK’s energy regulator and licensing authority, the Department of Energy and Climate Change (“DECC”), to develop shale prospects in the UK. Cuadrilla Resources Corporation has drilled exploration wells at two locations in Lancashire, England and is evaluating the commercial potential of one well site using the controversial hydraulic fracturing technique (“fracking”) synonymous with shale development.

A paper published in 2010 by the University of Manchester’s Tyndall Centre for Climate Change Research concluded that there is clear risk of contamination of groundwater from shale gas extraction. This risk could be managed through the implementation of stringent construction and operation controls, but not eliminated, and campaigners called on DECC to impose a moratorium on shale gas prospecting until a broader evidence base of the associated hazards could be evaluated.

In November 2010, the cross-party Energy & Climate Change Committee launched an investigation to assess shale gas prospects in the UK and the environmental and climatic impact of its exploitation. It invited interested parties to submit evidence for appraisal of the following issues:

  • What are the prospects for shale gas in the UK, and what are the risks of rapid depletion of shale gas resources?
  • What are the implications of large discoveries of shale gas around the world for UK energy and climate change policy?
  • What are the risks and hazards associated with drilling for shale gas?
  • How does the carbon footprint of shale gas compare to other fossil fuels?

The outcome of the Committee’s consultation was designed to facilitate determination of the case for a moratorium on shale gas exploration until the environmental impacts were better understood. During the investigation the Committee received evidential submissions from a broad range of governmental, non-governmental, and commercial entities including DECC, the Environment Agency, Geological Society, WWF, petroleum geologists, and shale gas E&P companies, including Cuadrilla.

The Committee’s final report determined that whilst the UK’s shale resources could be considerable, they are unlikely to exist in sufficient commercial quantities materially to affect natural gas prices, or to proffer a long term resolution to security of supply anxieties, and are therefore unlikely to impact significantly energy policy. Fracking was not found to pose any direct risk to groundwater stores and the operational risk in developing shale potential was no greater than that inherent in exploitation of conventional resources. The report acknowledges, however, that the levels of water consumption for shale gas production could present an environmental issue. Shale gas offers a low carbon alternative to other fossil fuels such as coal, but still has a larger footprint than renewable alternatives, so the Committee concluded that its promotion will anger some green-energy campaigners.

The outcome of the Committee’s report enables DECC to proceed with its 14th Onshore Licensing Round which has been on hold pending publication of the report. DECC will shortly invite bids for onshore petroleum exploration and development licenses which could include shale gas. Licensees proposing to exploit shale gas will have to show superior technical and operational expertise and a guarded attitude to drilling and environmental risk to satisfy DECC of their competence. Onshore licenses are also subject to obtaining requisite planning permission from the local authority and obtaining access rights from landowners. In addition, where shale drilling activity will pass though formations with groundwater or involves a risk of mobilising pollutants, an environmental permit will be required. The upcoming licensing round should prove an interesting indicator of the appetite for UK shale prospects.