The Economic Impact on UK Energy Policy of Shale Gas and Oil - Economic Affairs Committee Contents

The Economic Impact on UK Energy Policy of Shale Gas and Oil

Chapter 1: Introduction

1.  In 2014, the future of shale gas in the UK hangs in the balance. America stands as an example of the huge economic impact that shale gas and oil can have. Geographic surveys suggest that Britain has substantial shale gas resources, though it is not clear what proportion could be developed commercially. Some estimates suggest that the amount of gas recoverable could be over 40 times greater than the current annual UK gas consumption. Entrepreneurial companies are ready to sink the necessary wells to establish how much of these fuels can economically be extracted. The most senior Government ministers are enthused over the prospect: the Prime Minister announced in January 2014 that the UK is "going all out for shale" as it will mean "more jobs and opportunities for people, and economic security for our country."[1] The Chancellor of the Exchequer told the Committee that he wanted "to give this industry a big boost and to get this activity going in the United Kingdom".[2]

2.  But there is also considerable opposition. An anti-shale movement has developed. At the forefront are local protestors and some local authorities who are determined to protect their immediate environment. Respected bodies such as the National Trust have argued that development activity should be banned in specific areas such as National Parks.[3] Opponents cite concerns over groundwater contamination, earthquakes and even cancer. There are also worries over the impact of increased noise and traffic, particularly during the exploration stage of shale gas. Environmental organisations such as Friends of the Earth and Greenpeace have aligned with the opponents of shale gas. Their chief concern is that the development of shale gas will get in the way of a swift transition to a renewables-based future.

3.  Despite a long and uncontroversial history of onshore drilling in the UK, the prospect of 'fracking'—the hydraulic fracturing of shale rock to release the gas it contains—has aroused strong local opposition. In Balcombe, Cuadrilla, a company publicly seen as the leading UK shale gas business, was forced to abandon its attempt to drill for oil because of public protests which the police were unable to contain—despite the fact that no fracking was planned. Local protest groups have already been formed to oppose Cuadrilla's plans to frack two wells at Roseacre Wood and Little Plumpton near Blackpool.[4]

4.  Shale gas generates contradictory views, strongly held. The aim of this report is to stand back from the passion on both sides, and focus on the facts. We have taken evidence from a wide range of witnesses, from the most fervent anti-shale campaigners to the most enthusiastic proponents. In particular, however, we have sought a wide range of the most expert advice and we have come to our best judgment from a cool appraisal of all sides of the case. Among the issues we discuss in this report are:

·  How much shale gas can we expect to see produced, and what is the range of likely availability over the next few years?

·  What further work is needed to establish a proper estimate of recoverable reserves including estimates of production costs? How much drilling is going to be necessary to enable the industry to make this estimate?

·  Why has exploration progressed so slowly to the point that as of May 2014 only one well has been hydraulically fractured?

·  What is the earliest point at which shale gas could reasonably be expected to make a material contribution to the UK's energy mix?

·  What can we learn from the American shale revolution and which lessons from the US are or are not applicable in the UK?

·  What impact might shale have, if exploited, in terms of jobs, energy prices, the balance of payments and security and diversity of supply?

·  What are the advantages and disadvantages of exploiting shale in terms of hitting Britain's carbon emissions targets?

·  Do the fears that have been raised of serious adverse consequences for health and for the environment, locally and nationally, have substance?

·  Do we have a regulatory regime which is fit for purpose, both in terms of providing adequate protection against environmental risks and in terms of permitting acceptable fracking operations to proceed with due dispatch?

·  Do we need arrangements to ensure that individuals and communities are properly compensated for the inevitable incursions shale development will make on local areas?

·  Are the authorities and in particular the Government providing a coordinated approach to possible shale development designed to reassure the public while making possible the development of the industry? Are the Government giving a lead both in demonstrating that concerns are being managed effectively, and in explaining the positive potential benefits locally and nationally of successful shale gas development?

1   See for the Prime Minister's announcement. Back

2   Evidence to Economic Affairs Committee, 4 February, Q 3. Back

3   Moore, V., Beresford, A., & Gove, B. (2014) Hydraulic fracturing for shale gas in the UK: Examining the evidence for potential environmental impacts, RSPB et al. Back

4   'Cuadrilla names fracking exploration sites in Lancashire', BBC News, 4 February 2014. Back

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