Shale Gas

Memorandum submitted BY The Co-operative Group (SG 1 8 )

Shale GAs INQUIRY

INTRODUCTION

1 The Co-operative is a unique family of businesses, jointly owned and democratically controlled by over 6 million members. We are the fifth largest food retailer, the third largest retail pharmacy chain and the number one provider of funeral services in the UK . We also have strong market positions in banking and insurance. The Co-operative employs 120,000 people, and has around 4,800 retail outlets and branches.

2 Taking a responsible approach to business has been a guiding principle of The Co-operative since its inception. We are proud to have led UK business in our approach to combating climate change.

3 The Co-operative’s approach to addressing the issue of climate change is five-fold, embracing: energy efficiency, support for renewable energy, carbon offsetting, the provision of finance, and influencing public policy. This begins with ensuring sustain able business operations :

· Between 2006 and 2009 (the latest year for which data is available), The Co-operative achieved an absolute reduction of 21% in its operational greenhouse gas emissions.

· By 2012, we will generate 15% of our energy requirements from sustainable sources, including from our wind farm at Coldham in Cambridgeshire and other schemes under development.

· During 2009, over 98% of our electricity was sourced from good quality renewable sources.

· We’ve made combating climate change a community investment priority. For example, we’ve invested £2m in our Green Energy for Schools programme and we’re supporting the development and financing of community owned renewables across the length and breadth of the UK.

4 Strong business credentials in the UK have allowed The Co-operative to lead on public policy initiatives to combat climate change. This includes involvement in campaigns, such as the Big Ask in 2007, which resulted in the Climate Change Act 2008 becoming law. We are also currently campaigning against tar sands development in Alberta, Canada.

5 In order to inform its position on shale gas, The Co-operative commissioned The Tyndall Centre to investigate issues including its carbon footprint relative to conventional gas, scenarios for shale gas exploitation (and resulting greenhouse gas emissions) for global and UK development, and other environmental impacts potentially associated with the extraction process. The report, entitled "Shale gas: a provisional assessment of climate change and environmental impacts", can be downloaded from www.tyndall.ac.uk/shalegasreport. The contents of this submission are based on the findings of this report.

6 While, currently, information on the shale gas extraction process and its associated potential environmental impacts is patchy, a number of issues of concern were raised within the report:

· At a global level, shale gas represents a potentially very significant new fossil fuel source, that in the absence of a global emissions cap is likely to lead to increased greenhouse gas (GHG) emissions.

· Within the UK, the expansion of the shale gas industry is, at best, not in the spirit of UK climate change policy and, at worst, may act as a disincentive to investment in zero carbon energy sources such as renewables.

· At the local level, research from the United States (US) has revealed a number of chemicals involved in, and mobilised by, the hydraulic fracturing extraction process that have potential human health impacts via the contamination of groundwater (e.g. toxicity or carcinogenicity).

7 It is for the reasons stated here, and further expanded below, that The Co-operative recommends a complete and immediate moratorium on UK shale gas extraction until the risks have been properly evaluated and can be shown to be fully addressed.

Question 1: What are the prospects for shale gas in the UK, and what are the risks of rapid depletion of shale gas resources?

8 In order to examine the potential impact of shale gas in the UK, four scenarios were developed in the research: two assuming the amount of shale gas produced correlates with the figure provided by DECC (2010) – 150 billion cubic metres (bcm); and two that assumed double this (300bcm). The two 300bcm scenarios reflect the experience in the US where shale gas estimates have been revised upwards year on year (for example in 2008, the US Energy Information Administration (EIA) estimated the US technically recoverable shale gas resource at 3,539bcm and then revised this upwards in each of the successive years, with the latest 2010 assessment at 23,427bcm (EIA 2010b)).

9 For both the 150 and 300 bcm scenarios, two different rates of extraction were used: one based on a Hubbert type curve (a bell curve) that is often used as an approximation for resource extraction, which sees a rapid increase in production followed by a rapid drop in production; the other based on the kind of growth rates that are predicted for the US by the EIA (EIA, 2010b). The four scenarios are plotted below in Figure 1.

Figure 1: Shale gas production in the UK under four scenarios

10 All four scenarios see the majority of shale gas being exploited before 2050 and the cumulative emissions associated with the use of this shale gas ranged from 284-609 MTCO2 over the period 2010 to 2050. To give this some context this amounts to between 2.0 to 4.3% of the total emissions for the UK under the intended budget proposed by the UK Committee on Climate Change. Assuming that the carbon budget is adhered to, this should not result in additional emissions in the UK. For example, it is possible that UK produced shale gas could substitute for imported gas, although it would not negate the need for imports.

11 It is also possible that extracting additional fossil fuel resources could put pressure on efforts to adhere to our carbon budget by reducing gas prices and directing investment away from renewables and other low or zero carbon energy sources. It is also important to note that in a market led global energy system where energy demand worldwide is growing rapidly, even if shale gas were to substitute for imported gas in the UK, leading to no rise in domestic emissions, it is likely that this gas would just be used elsewhere, resulting in a global increase in emissions.

12 Within the UK, shale gas could theoretically substitute for coal and thereby reduce emissions. However, with a carbon budget in place, coal (without Carbon Capture and Storage (CCS)), is likely to be phased out anyway – shale gas is not required to make this happen. Given the radical reduction in emissions required and the need for a decarbonised electricity supply by the mid-2030’s [1] . Developing shale gas would risk being a major distraction from transitioning to a genuine zero-carbon grid. Given the investment in infrastructure required to exploit these resources there is the danger of locking the UK into a number of years of additional gas use, leaving unproven CCS, as the only option for lower carbon electricity. Consequently, this investment would be better made in real zero-carbon technologies that would provide more effective long-term options for decarbonising electricity supply.

Question 2: What are the implications of large discoveries of shale gas around the world for UK energy and climate change policy?

13 In order to examine the potential impact of shale gas on global GHG emissions, three scenarios were developed in the research. The starting point for the global scenarios is an estimate for the global reserves of shale gas taken from a report by the US National Petroleum Council (NPC, 2007). Three scenarios were then developed assuming that differing proportions of the total resource are actually exploited (10%, 20% and 40%). Assuming that 50% of this resource is exploited by 2050, these scenarios give additional cumulative emissions associated with the shale gas of 46-183 GTCO2, resulting in an additional atmospheric CO 2 concentration of 3-11ppmv.

14 The argument that shale gas should be exploited as a transitional fuel in the move to a low carbon economy seems tenuous at best. If we look at the US, there is little evidence that shale gas is currently, or expected, to substitute for coal (see for example projections within ‘change in US primary energy sources 2008 to 2035’ within EIA (2010a)). It is possible that some level of substitution may occur in other countries but, globally energy use is growing and, without a meaningful constraint on carbon emissions, there is little price incentive to substitute for lower carbon fuels. It is difficult to envisage any situation other than shale gas largely being used in addition to other fossil fuel reserves and adding a further carbon burden. This could lead to an additional 11ppmv of CO2 over and above expected levels without shale gas – a figure that could rise if more than 50% of the total shale gas resource were to be exploited.

15 The idea that we need transitional fossil fuels is itself open to question. For example, in the International Energy Agency scenario that outlines a path to 50% reduction in carbon emissions by 2050, fuel switching coupled with power generation efficiency only accounts for 5% of the required reductions (IEA, 2010). If globally we are to achieve the considerable reductions in carbon emissions that are required then it is energy efficiency, CCS, and renewable energy that will make the difference.

16 At the global level, against a backdrop of energy growth matching, if not outstripping, that of global GDP and where there is currently no carbon constraint, the exploitation of shale gas will most likely lead to increased energy use and increased emissions resulting in an even greater chance of dangerous climate change. While for individual countries that have a carbon cap, for example in the UK, there may be an incentive to substitute shale gas for coal, the likely result would be a fall in the price of globally-traded fossil fuels leading to an increase in demand. Consequently, there is no guarantee that the use of shale gas in a nation with a carbon cap would result in an absolute reduction in emissions and may even lead to an overall increase.

Question 3: What are the risks and hazards associated with drilling for shale gas?

Groundwater pollution      

17 A key risk associated with shale gas extraction is the potential for contamination of groundwater. From the limited evidence available from the US, it appears that the fluid used in hydraulic fracturing contains numerous chemical additives, many of which are toxic to humans and/or fauna. Concerns that the fracturing process could impact on water quality and threaten human health and the environment have prompted the US Environmental Protection Agency (EPA) to instigate a comprehensive research study into the issue, within initial findings expected by the end of 2012. While awaiting the results of this study, New York State has introduced a moratorium on any new wells.

18 Groundwater pollution could occur if there is a catastrophic failure or loss of integrity of the wellbore, or if contaminants travel from the target fracture through subsurface pathways. The risks of such pollution were seen as minimal in a study by ICF International (INGAA, 2008); however, this assessment was based on an analysis of risk from properly constructed wells. History tells us that it is rarely the case in complex projects that mistakes are never made and the risk of groundwater pollution from improperly constructed wells also needs to be considered.

19 The dismissal of any risk as insignificant is hard to justify given the documented examples that have occurred in the US, seemingly due to poor construction and/or operator error. These examples have seen high levels of pollutants, such as benzene, iron and manganese, in groundwater, and a number of explosions resulting from accumulation of gas in groundwater.

Surface pollution      

20 While it may not always be possible to pinpoint the exact cause of groundwater contamination, identifying the source for land and surface water pollution is more straightforward. There are a number of potential sources of pollution including: well cuttings and drilling mud; chemical additives for the fracturing liquid; and flowback fluid – the liquid containing toxic chemicals that returns to the surface after fracturing. There are numerous routes by which these potential sources can cause pollution incidents including failure of equipment and operator error. Unsurprisingly, a number of incidents have been reported in the US.

Water consumption      

21 Shale gas extraction requires significant amounts of water. Analysis provided by the Tyndall Centre suggests that to carry out all fracturing operations on a six well pad takes between 54-174million litres of water over its lifetime, which is equivalent to about 22-69 Olympic size swimming pools of water. If the UK were to produce 9bcm of shale gas each year for 20 years (approximately 10% of annual consumption) this would equate to an average annual water demand of 1,300-5,600million litres. This compares with current levels of abstraction by industry (excluding electricity generation) of 905,000million litres. Shale gas exploitation at this level would therefore increase abstraction by up to 0.6%. While this appears to be a small additional level of abstraction, a number of points need to be made:

· This assumes the water demand is spread evenly over the whole country. Clearly actual water requirements will be focused in the areas where shale gas is being extracted and this could add a significant additional burden in those areas;

· Water resources in many parts of the UK are already under a great deal of pressure, making additional abstraction difficult; and

· The impacts of climate change may put even greater pressure on water resources in the UK.

22 Given that the water is mainly used over a short period of time during initial fracturing, the most likely means of getting this water to the site in the UK would probably be by truck or abstraction.

Other issues      

23 For the UK, high population density and the likely proximity of wells to population centres could result in exacerbation of impacts such as noise pollution, traffic, and landscape degradation. Further information on assessment of these potential impacts is contained within the Tyndall Centre report on pages 69 and 70.

Question 4: How does the carbon footprint of shale gas compare to other fossil fuels?

24 It is assumed that the direct GHG emissions associated with the combustion of shale gas will be the same as gas from conventional sources. In considering the UK, the distribution of shale gas would be the same as conventional gas and therefore subject to the same losses. This means that the main difference between shale and conventional gas is likely to be from emissions that arise from the differing extraction processes. The limited verifiable data available makes assessment of these extraction emissions problematic. However, it was possible, using data on expected emissions from the Marcellus Shale in the US, to estimate the likely emissions associated with the different processes that occur in extracting shale gas compared to natural gas.

25 Estimated emissions are associated with a number of processes:

· Horizontal drilling;

· Hydraulic fracturing and flowback;

· Production of chemicals used in hydraulic fracturing (these emissions are unknown and have not been included);

· Fugitive methane emissions during fracturing (these emissions are unknown and have not been included);

· Transportation of water;

· Transportation of brine; and

· Waste water treatment.

26 The combination of emissions from these processes gave an estimate per well of 348-438tonnes CO2e. This figure will increase if the well is refractured, something which could happen up to 5 times, the DECC (2010) report suggests that refracturing could happen every 4-5 years for successful wells.

27 The significance of these emissions is dependent on the rate of return for the well – something which is site specific. Looking at examples of expected total production for shale basins in the US it has been estimated that, on average, the additional CO2e emissions associated with the processes above account for between 0.14-1.63tonnes CO2e/TJ of gas energy extracted. The value depends on the total amount of gas that is extracted per well and the number of times it is refractured. Examining the UK in particular, although the rate of return per well is not quoted for UK basins, it is thought that additional CO2e emissions per well would be at the higher end of estimates compared to the US, as economies of scale are against UK wells.

28 Given that during combustion, 1TJ gas would produce around 57tonnes CO2, the additional emissions from the shale gas extraction processes identified represent only 0.2-2.9% of combustion emissions. However, similar to conventional gas there will be some further emissions associated with processing, cleanup and distribution.

29 These relatively low levels of additional emissions suggest that there would be benefits in terms of reduced carbon emissions if shale gas were to substitute for coal. Combustion of coal produces around 93tonnes CO2/TJ. Clearly even with additional emissions associated with shale gas, the emissions from gas would be considerably lower. The benefits increase when the higher efficiencies of gas fired power stations compared to coal fired power stations are considered.

30 However, as noted above in our responses to questions one and two, there are concerns that at a UK level, shale gas could displace investment in renewables, and at a global level could simply lead to increased greenhouse gas emissions. Therefore, the straightforward comparison of the carbon footprint of shale gas relative to coal is not the appropriate way to analyse the issue.

January 2011

References

Committee on Climate Change (2010) The Fourth Carbon Budget: reducing
emissions through the 2020s

DECC (2010) The Unconventional Hydrocarbon Resources of Britain’s Onshore Basins – Shale Gas.

Energy Information Administration (2010a) Supporting materials for the 2010

Annual Energy Outlook , Report #: DOE/EIA-0554(2010), Release date: April 9, 2010.

Energy Information Administration (2010b) Annual Energy Outlook 2011: early release overview . Published December 16 2010

INGAA (2008) Availability, economics and production potential of North American Unconventional Natural Gas Supplies Prepared for The INGAA Foundation, Inc. by: ICF International 9300 Lee Highway Fairfax, VA 22031 USA Authors: Harry Vidas and Bob Hugman Copyright ® 2008 by The INGAA Foundation, Inc.

National Petroleum Council (2007) Topic Paper #29: Unconventional Gas, working document of the NPC Global Oil and Gas study , made available July 18 2007