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 https://www.gov.uk/government/news/local-councils-to-receive-millions-in-business-rates-from-shale-gas-developments
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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