1. Mitigation of the risk to water aquifers from hydraulic fracturing relies on companies undertaking the proper measures to protect the environment from pollution. However, there is no evidence that the hydraulic fracturing process itself poses a direct risk to underground water aquifers. That hypothetical and unproven risk must be balanced against the energy security benefits that shale gas could provide to the UK. We conclude that, on balance, a moratorium in the UK is not justified or necessary at present. But evidence must continue to be collected and assessed. We recommend that the Department of Energy and Climate Change monitor current drilling activity in the Bowland Shale formation extremely closely during its early stages in order both to assess the likely environmental impact of large scale shale gas extraction in the UK and also to promote public confidence in the regulation of the activity.
Prospects for Shale Gas
2. We conclude that shale gas resources in the UK could be considerable. However, while they could be sufficient to help the UK increase its security of supply, it is unlikely shale gas will be a "game changer" in the UK to the same extent as it has been in the US. It is more likely that in countries such as Polandwith a larger reliance on gas imports and greater potential shale gas resourcesthe impacts of shale gas production will be significant.
3. We conclude that it is important for the UK to monitor the development of shale gas in Polandthe "barometer of Europe" on this issueboth in terms of exploration and regulation. We are concerned that there could be adverse competitive consequences for the UK if Poland unilaterally develops its shale gas resources within the EU, particularly if their energy policy is driven by energy securityin spite of the environmental concerns associated with hydraulic fracturingowing to their reliance on imported gas.
4. In the crowded UK we cannot afford to risk the creation of contaminated and abandoned sites where shale gas production has stopped. The prospect of such a risk must be carefully considered when licences and other permissions are granted. We recommend that DECC should require that a fund be established to ensure that if wells are abandoned they can be "plugged". Such a fund could be established through a levy on shale gas well drilling or an upfront bond.
5. There is substantial evidence that UK offshore unconventional gas resources could dwarf the potential onshore supplies. While these might be economically unviable at present, "uneconomic" reserves can become economic quickly as technology and prices shift. We recommend that DECC encourage the development of the offshore shale gas industry in the UK, working with HM Treasury to explore the impacts of tax breaks to the sector.
6. Planning for any new gas transport infrastructure required to exploit shale gas should take into account the opportunity to minimise disruption and costs by sharing pipelines between different companies operating near to each other. We recommend that the Government consider amending the Town and County Planning (Environmental Impact Assessment) (England and Wales) Regulations 1999 to require Environmental Impact Assessments for smaller gas pipeline projects, with the aim of avoiding unnecessary duplication of infrastructure.
UK Policy Implications
7. We conclude that a glut in shale gas production could drive the price of conventional gas down, but there is uncertainty as to the extent of this. If there were to be a fall in prices it is unlikely to be as dramatic as that seen in the US.
8. Shale gas has the potential to diversify and secure European energy supplies. Domestic prospectsonshore and potentially offshorecould reduce the UK's dependence on imports, but the effect on energy security is unlikely to be enormous. We conclude that energy security considerations should not be the main driver of policy on the exploitation of shale gas.
9. Conventional sources of natural gas in the North Sea are diminishing. We conclude that if a significant amount of shale gas enters the UK market (whether from domestic sources, imported from another European country, or from the global market via LNG) it will probably discourage investment in more-expensivebut lower carbonrenewables. The UK needs to manage this risk in order to achieve its aim of generating more electricity from renewable and other low carbon sources This could be done through the progressive implementation of an Emissions Performance Standard (EPS) that would prevent gas power stations operating as base load providers after a certain date unless fitted with carbon capture and storage.
10. We conclude that shale gas has the potential to shift the balance in the energy markets that the Department has tried to create away from low carbon electricity generation. We recommend that the Department take account of the impact of shale gas in its decisions on reform of the electricity market and its expectations of future investment in the energy industry.
11. We recommend that UK legislation and regulation should take specific account of the challenges unique to shale gas exploration and production; specifically, the combination of hydraulic fracturing and horizontal drilling at multiple wells that requires large volumes of water and chemicals, and leads to the production of large volumes of waste water that must be managed and disposed of.
12. We note that stronger environmental regulations and increased population density means that in the UK, and Europe more broadly, shale gas development here will follow a different route to that of the US. Although energy is not an EU-level competence, the UK Government will need to work with its European partners to ensure, so far as is possible, a reasonable degree of level competition between domestic shale gas producers.
13. We recommend that the UK Government monitors carefully the regulatory approach adopted by Poland and any other EU countries where shale gas exploration and production takes place. We recommend that the Government explores the possibilities of common environmental standards within the EU for shale gas exploration and production.
Environmental Risks of Shale Gas
14. We recommend that the Government consider the future funding for the Environment Agency should the shale gas industry expand in the UK. As the situation stands, shale gas operators are unlikely to explore in areas where the Environment Agency will determine there is a risk to groundwater, so an Environmental Permit will not be necessary. However, the Environment Agency will still be expected to monitor for contamination and pollution, without being able to recover costs through the issuance of a permit.
15. We conclude that hydraulic fracturing itself does not pose a direct risk to water aquifers, provided that the well-casing is intact before this commences. Rather, any risks that do arise are related to the integrity of the well, and are no different to issues encountered when exploring for hydrocarbons in conventional geological formations. We recommend that the Health and Safety Executive test the integrity of wells before allowing the licensing of drilling activity.
16. We recommend that the Environment Agency should insist that all companies involved in hydraulic fracturing should declare the type, concentration and volume of all chemicals they are using.
17. We recommend that before the Environment Agency permits any chemicals to be used in hydraulic fracturing fluid, they must ensure that they have the capabilities to monitor for, and potentially detect, these chemicals in local water supplies.
18. We conclude that there is only a small risk that the large volumes of water required for hydraulic fracturing will place undue stress on the water supply, though this could be more significant at times of drought in low rainfall areas. We recommend that the Environment Agency should have the power to prescribe the minimum amount of water recycling that takes place during unconventional gas exploration, on a site-by-site basis that takes into account the water stresses particular to the region.
19. We recommend that DECC and DEFRA ensure that the Environment Agency monitors randomly the flowback and produced water from unconventional gas operations for potentially hazardous material that has been released from the shale formation. In order to maintain public confidence in the regulatorsand in the shale gas industrywe recommend that both water and air be checked for contamination both before and during shale gas operations.
20. We encourage the Government to insist that as the shale gas industry develops, companies are required to work together in order to optimize the use of waste water treatment plants, to minimise both the number of plants and the distance waste water has to be transported.
21. We recommend that the Environment Agency should have the powers to insist thatin collaboration with the Health and Safety Executiveplanned onshore venting and flaring of natural gas for extended periods are not permitted.
22. We conclude that the development of the UK shale gas industry will be different from the USgreater population density and stricter environmental legislation in Europe will give a greater incentive to drill fewer, better wells that take advantage of multiwell pad technology and horizontal drilling to minimise the impact on the landscape.
23. We recommend that the Environment Agency and the Department of Energy and Climate Change take lessons from unconventional gas exploration in the US, especially at the state-level where much of the expertise lies. The US has a great deal of regulatory experience of dealing with the issues of water contamination, the volume of water required, waste water treatment and disposal, air pollution, and infrastructure challenges. The UK Government must use this experience to ensure the lowest achievable environmental impacts from unconventional gas exploitation here.
Carbon Footprint of Shale Gas
24. We conclude that in planning to decarbonise the energy sector DECC should generally be cautious in its approach to natural gas (and hence unconventional gases such as shale gas). Although gas emissions are less than coal they are higher than many lower carbon technologies.
25. Shale gas could lead to a switch from coal to gas for electricity generation, thereby cutting carbon emissions, particularly projected emissions from developing economies. We conclude that this will help to reduce the impacts of climate change, but will not be sufficient to meet long term emissions reduction targets and avoid the worst effects of global climate disruption.
26. The emergence of shale gas increases the urgency of making carbon capture and storage (CCS) technology work for gas as well as coal. We recommend that both gas and coal carbon capture technology should be pursued in parallel and with equal urgency.