The early history of the shale gas industry in the UK has been fraught with controversy since the process of large scale hydraulic fracturing was touted as the next major breakthrough in onshore production. 2015 has been an interesting year in the development of the shale gas industry in the UK and we have highlighted some of the main issues and developments it has held.
The new Conservative government and Energy Secretary
With the general election in May 2015 leading to a Conservative majority in the UK for the first time in nearly two decades, Amber Rudd, the current Secretary of State for Energy and Climate Change (the Energy Secretary), enforced the Government’s support for shale in the UK and stated that the Conservatives wanted to “kick-start a shale gas revolution”.
The Preston New Road planning application
On 29 June 2015, Lancashire County Council rejected Cuadrilla’s application for planning permission to drill and test the flow of gas from up to four exploration wells at its Preston New Road Site. This rejection, which came against recommendations of local planning officers, was the strongest indication that even where applications met all requirements, local governments were still inclined to reject onshore exploration.
The decision by Lancashire County Council has brought with it the industry’s first major appeal of a planning decision. On 26 November 2015, the Secretary of State for Local Communities and Government (the Planning Minister) has stated that he will step in to make the final decision himself. This is the first action taken by the Government, outside of policy decisions, to directly influence the development of the shale industry. If the appeal is successful, it will be a clear expression of support for UK shale.
On 13 August 2015, the Department of Energy and Climate Change (DECC) in conjunction with the Department for Communities and Local Government, published guidance for local authorities relating to the treatment of planning applications for sites proposed for onshore exploration wells for shale gas.
These reforms allow the Government to identify those councils that repeatedly fail to determine oil and gas applications in a timely fashion, namely in 16 weeks, and allow the Planning Minister additional powers to step-in and determine those applications directly on behalf of these “underperforming” councils. The new guidance gives a clear indication that the government is willing to use existing powers to ensure that planning appeals for shale gas proposals are pushed through.
Award of new onshore exploration licences
August 2015 saw DECC, through the Oil and Gas Authority (OGA), award at least 27 new onshore exploration licences in the first new award of onshore blocks since 2008. An additional 132 awards within this licencing round were on hold pending detailed habitat assessment. However, the first tranche of these additional licences were awarded on 18 December 2015 in areas such as Exmoor, the Peak District and the Isle of Wight.
Support and initiatives from the Government and renewed UK landward interest from existing onshore players and new entrants alike could prove to be the catalyst for thrusting the UK onshore industry forward.
Energy policy “reset”
On 18 November 2015, Amber Rudd gave a speech regarding the forward direction for the UK’s energy policy. The speech was predominantly focused on the dilemma of power generation in the UK and the balance of fossil fuel generation with that of renewables. However, the opportunity was once again taken to make the argument for increasing domestic energy security with the development of the shale gas industry. Rudd went as far as saying that “gas is central to our energy secure future”. The fact that the Government seems to continuously take the opportunity to promote a future domestic shale gas industry is very positive for the development of shale and other onshore unconventional hydrocarbon production in the UK.
The Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015
After nearly 12 months of parliamentary debate in both the House of Commons and House of Lords, the Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015 were finally approved by the House of Commons on 16 December 2015.
These new regulations allow drilling contractors to drill horizontal wells under “protected areas” (being National Parks, Aras of Outstanding Natural Beauty, the Broads and World Heritage Sites) at depths exceeding 1,200m provided that the drilling rigs are situated outside the borders of those areas.
The passing of this legislation has been claimed as a U-turn by the Government after it promised a total ban on hydraulic fracturing in these areas in January 2015, although at that time the Government was a Conservative/Liberal Democrat coalition. The Government has countered this argument by asserting that the new regulations are essential for boosting the shale gas industry while ensuring that the environment and local people are protected.
What’s in store for the year ahead?
With such an eventful year in 2015 and the Government creating so many safeguards for the development of the industry, it will be interesting to see what 2016 will bring for the shale industry in the UK.
2016 has the potential for being one of the biggest years for shale gas yet. With the external pressures of a declining North Sea industry, tensions between the largest oil producing nations in the world, and the depressed oil price, innovation and new sources of supply are essential for securing long term domestic supplies in the UK. Such a need is often the catalyst for innovation both in public policy and in private industry. The UK therefore seems to have the perfect conditions for a new industry to develop.
Countering the presence of such a seemingly perfect canvas on which to create a new industry is a very vocal and well supported local movement against the industry before it has commenced therefore it is likely that these opposite forces will come to a head during 2016. Added to this is the imminent decision for Preston New Road which will give the Government its first opportunity to directly and clearly show its support for shale gas, beyond its policy decisions to date. It is feasible that the landscape of the UK’s onshore shale gas industry will look markedly different in 12 months’ time if the outcomes are favourable along the way.