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

Chapter 9: Promoting shale gas development in the UK

249.  Although the potential for shale gas development in the UK appears strong, with the prospect of significant economic benefits, progress is disappointingly slow. Despite the optimism of the Prime Minister and other Ministers about the prospects for shale gas, at the current pace of development large-scale production is unlikely until well after 2020. We heard that a main cause of delay is the complexity of the regulatory process.

250.  This complexity is in sharp contrast to the simplicity of the regulatory regime under which North Sea oil and gas was developed in the UK in the 1970s and 1980s. Mr Austin told us that "a level of scrutiny and consideration has probably been given by the Environment Agency in particular, and by DECC and the planning authorities to a lesser extent, which is over and above what we have seen for conventional oil and gas exploration."[546] Mr Egan said "some of the questions that come out [of the planning and permitting process] are not strictly related to drilling 10 wells but 4,000 wells."[547]

251.  Other witnesses feared that regulatory delays would mean that the UK might miss the bus as potential investors in shale gas, who have other options, looked elsewhere: Professor Riley told us "The traditional view has always been that capital chases resources. My worry is that resources now chase capital … if the UK delays and ponders, it will not find anybody willing to invest on the scale necessary and we will only be importing [gas]."[548]

252.  Effective regulation is essential to win and retain public confidence in the face of concerns, legitimate and exaggerated, about perceived dangers of fracking to public health and the environment. As Mr Dorner put it, "unconventional gas can be produced safely but … it is of the utmost importance for the industry and for Government to take steps to ensure that the social licence to operate is in place and that they have social support".[549]

253.  A clearer, more coherent and less complex approach to regulation is needed to facilitate speedy development of the industry while providing reassurance to the public that development can go ahead safely. Only the Government can provide the leadership and reassurance needed. The Chancellor of the Exchequer's assurance to us that the Government are doing all they can to give the UK's shale industry a good start in life is welcome, but there is at present a striking contrast with the slow pace of progress on the ground and the frustration felt by the industry over regulatory complexity. The Government have failed to translate their ambitions for development of the UK's shale gas into action at the speed needed.

254.  The Government must take decisive measures to quicken the pace of exploration and development of the UK's shale gas resource, including to:

·  simplify the current unwieldy and slow regulatory structure and accelerate the decision-making timescales;

·  take the lead in reassuring local communities that with clear and rigorous regulation in place, shale gas can be developed with low risk to health and the environment;

·  set out more clearly the potential economic benefits for local communities and for the country as a whole if significant volumes of shale gas can be developed commercially.

255.  A distinct but related concern is that policy direction within Government on shale development is fragmented. At least four Government Departments are involved in decision-making, as set out in Chapter 8, including the Treasury, the Department of Energy and Climate Change, the Department of the Environment, Food and Rural Affairs and the Department of Communities and Local Government. With so many players, clear, well-coordinated and timely policy-making may be difficult.

256.  We recommend that, since several Departments share responsibility for policy on shale gas, the Government should take measures to improve coordination, clarity and speed of policy making and its implementation. We recommend in particular that the Prime Minister should establish a Cabinet Committee or Sub-Committee, chaired by the Chancellor of the Exchequer, to direct and coordinate policy on development of shale gas, with a mandate to promote well-regulated exploration and development of the UK's shale gas resource.

257.  The UK is exceptionally fortunate to have substantial shale gas and oil resources. Much work needs to be done but it is clear that successful development would bring jobs and relatively low cost supplies of fuel. It would also be of direct benefit to the balance of payments and could at least partly reduce the UK's dependence on international markets at risk of disruption from political instability. Public concerns about shale gas need to be confronted if the development of this strategic national asset is to go ahead. Although some of the concerns are ill founded, others have to be addressed through a clear and simplified regulatory regime which can build trust and promote efficient development without more delay.

258.  Exploration and appraisal of the UK's shale resource base have been too slow. Shale gas and oil are a potential economic prize which the UK should grasp without further delay. Exploration, appraisal and then development of the United Kingdom's substantial shale gas and oil resources is an urgent national priority.

546   Q 77. Back

547   Q 90. Back

548   Q 15. Back

549   Q 106. Back

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