Chapter 10: Summary of conclusions
and recommendations
Chapter 2: The UK's energy market
259. There is a growing risk of
power cuts in the UK as the margin of electricity generating capacity
over peak demand shrinks. It reflects a lack of clarity and consistency
in energy policy over many years. UK-produced shale gas could
not, of course, contribute to a short term solution. Its development
is a separate issue. Indigenous shale gas could, however, provide
in the medium term an additional source of supply which, combined
with policy changes to encourage investment in generating capacity,
could help ensure that competitively priced electricity supplies
are maintained at an adequate level for many years to come. (Paragraph 18)
260. Development of shale gas in
the UK on a significant scale could provide substantial benefits:
· enhancement of energy security
through a decreased reliance on imports;
· an affordable bridge fuel
towards renewables-based electricity generation;
· enable decommissioning of
high-emission coal fired generating capacity;
· reduce the risk of gas price
increases or even lead to falls in prices;
· reduced costs for energy
intensive businesses and the petrochemicals sector that also use
gas as a feedstock. (Paragraph 28)
Chapter 3: The US shale gas revolution and its
global economic impact
261. Shale development has transformed
energy supply in the US. It is now forecast that North America
(including Canada and Mexico) will be more than self sufficient
in energy within a decade. (Paragraph 35)
262. The US shale gas revolution
has already had far-reaching effects but the full impact on world
energy markets has yet to be seen:
· low US gas prices have displaced
US coal to other markets and as a result coal consumption in both
Germany and the UK has risen in the last two years;
· reduced import requirements
have diverted gas from the US and have limited price increases
in the international market;
· US exports of natural gas
are likely to have a greater effect on the patterns of global
trade; so too, in the longer term, would the development of large
volumes of shale gas in other countries;
· if developed at scale internationally,
shale gas and shale oil could alter the balance of the international
energy market as a whole and undermine the dominant role of energy
exporters in the Middle East and Russia, as the pattern of production
and trade in oil and gas is redrawn. (Paragraph 51)
Chapter 4: Shale gas in the UK
263. We recommend that the
Government should amend relevant legislation to ensure that subsurface
drilling for oil and gas can go ahead without undue delay or cost.
This change should ensure that the fact that UK landowners do
not own petroleum rights makes little difference to the speed
of shale gas and oil development; in practice, it may even make
subsurface drilling under third party land easier in the UK than
it is in the US. (Paragraph 64)
264. On the available evidence,
there may well be potential for economic development of shale
gas in the UK. Estimates of the UK's total onshore shale gas resource
are however still incomplete and it is impossible to tell how
much of the resource can be economically recovered until exploratory
wells are drilled and appraised. It is vital that we get on with
it. (Paragraph 73)
265. The evidence we heard suggests
that large-scale production of onshore shale gas in the UK is
unlikely before the next decade unless effective and immediate
action is taken to bring forward exploration and appraisal. (Paragraph 74)
266. Despite Ministerial encouragement
and eagerness on the part of the industry to get on with exploratory
drilling, progress on the ground has been at a snail's pace while
industry and officials come to grips with a dauntingly complex
regulatory regime for onshore shale gas and oil. (Paragraph 76)
267. We welcome the industry's introduction
of community benefit schemes for localities where drilling for
shale gas is to take place. We also welcome the Government's support
for the industry's schemes, which should be given the chance to
prove themselves. We consider that the industry, as well as the
Government, will also need to present the case for shale development
more effectively to local communities, including clarity of plans
and meticulous compliance with regulation as well as local economic
benefits. (Paragraph 86)
268. At the national level, there
is little hard evidence of public opinion on shale gas development
and what there is shows mixed results. There is some strident
local opposition to fracking. There is a chicken-and-egg aspect
to public acceptability: the most convincing argument for onshore
shale gas development in the UK would be a successful working
example. (Paragraph 90)
269. We welcome the Prime Minister's
and Chancellor's commitment to development of shale gas in the
UK. We also welcome Government support for the industry's community
benefit schemes and the tax and rates measures the Government
have announced to encourage development. But industry's investment
decisions will turn mainly on estimated costs and production volumes.
These cannot be assessed without exploratory drilling and appraisal,
which are being delayed by regulatory constraints and vocal opposition
from some groups. The Government must be much more forceful in
their public advocacy of the economic benefits of well-regulated
shale development. They must also explicitly address the safety
issues. (Paragraph 95)
Chapter 5: Potential economic impact of the UK's
shale gas
270. Even if its economically recoverable
reserves of shale gas prove substantial, the UK is not likely
to see gas price cuts on the scale of those in the US. Indigenous
production would however be cheaper than imports of liquefied
natural gas (LNG), improve the balance of payments and provide
better security of supply. (Paragraph 102)
271. Substantial shale gas production
in the UK could help retain and develop energy intensive industries
and provide feedstock to petrochemical plants. If however there
is no prospect that the UK's shale gas resource will be developed
within a reasonable timescale, energy intensive industry is likely
to move elsewhere. (Paragraph 104)
272. The UK's shale gas and oil
could help create a new, viable and internationally competitive
industry attracting investment, creating jobs and skills which
would make a strong regional impact in areas such as North- West
England, providing secure energy and yielding revenue. This would
be a valuable prize, obviously better in the national interest
than increased, costly and perhaps unreliable imports which would
weigh on the balance of payments. But the benefits cannot be quantified
until exploratory drilling and appraisal show what the UK's economically
recoverable reserves of shale gas and oil are. (Paragraph 107)
Chapter 6: Shale gas and climate change
273. We find persuasive Professor MacKay's
conclusion that the carbon footprint of shale gas, including fugitive
methane emissions, is similar to that of conventional gas production
and substantially less than coal. We endorse the recommendation
in his report for a monitoring programme, jointly managed by the
Government and the industry, to measure the level of fugitive
methane when shale gas extraction begins in the UK. (Paragraph 117)
274. We consider that development
of shale gas in the UK is compatible with the UK's commitments
to reduce greenhouse gas emissions. There is an acknowledged role
for gas in the UK's energy mix as it moves towards fulfilment
of its commitments. The carbon footprint of home-produced shale
gas would be smaller than that of imported LNG (which needs to
be processed and transported). Substitution of home produced shale
gas for imported LNG should therefore make a positive contribution
to achievement of the UK's commitments on climate change. (Paragraph 124)
Chapter 7: Environmental impact of development
of shale gas in the UK
275. Concerns about pollution of
groundwater by fracking fluid seem largely based on reports of
past practice in the US, where greater transparency is now enforced.
The position in the UK is clear: the regulators require full disclosure
of chemicals used in fracking fluid, they do not permit use of
hazardous chemicals and operators do not use them. Provided that
the regulator enforces this prohibition, hydraulic fracturing
fluid poses no risk to groundwater in the UK. (Paragraph 133)
276. The weight of scientific opinion
is that the risk of methane migrating up natural faults and into
aquifers is "difficult to conceive" and "hard to
imagine" in the UK. With strict regulatory oversight and
monitoring, the risk of methane contamination of aquifers through
natural fractures is very low. (Paragraph 142)
277. The only significant risk posed
to groundwater by hydraulic fracturing is of methane or wastewater
entering aquifers as a result of a poorly constructed or sealed
well. This is also a risk for conventional onshore gas and oil
production. The risk is low as long as independent monitoring
ensures that wells are properly constructed and sealed. (Paragraph 147)
278. In the US, disposal of flowback
water after hydraulic fracturing has in recent years aroused some
environmental concerns, now being addressed. In the UK, by contrast,
flowback water is subject to the regulations on mining waste and
its disposal and treatment is carefully controlled. (Paragraph 158)
279. Fears of water shortages arising
from shale gas development have been overplayed: demand for water
from onshore shale operators, even at high levels of activity,
would be comparable to demand by other industrial users; regulators
will not permit levels of water consumption that threaten household
supplies; and technological advances such as the substitution
of saline water and recycling of flowback water are likely to
reduce demand for fresh water. (Paragraph 164)
280. The Government have introduced
stringent planning and monitoring requirements governing the activities
of onshore oil and gas operators which might lead to induced seismicity.
On the evidence we have heard, there should be no risk that seismic
activity caused by hydraulic fracturing would be of sufficient
magnitude to constitute any risk to people and property. (Paragraph 173)
281. Public Health England (PHE)
has recently reviewed all the available evidence on the risks
to public health arising from air emissions from shale gas activities,
including US studies brought to our attention by opponents of
shale gas development. We find persuasive the conclusion of PHE's
preliminary report that the risks to public health from shale
gas exploration and production are low with proper regulation.
(Paragraph 180)
282. We find persuasive the view
of Public Health England that shale gas development would be very
unlikely to have a significant effect on radon levels in homes.
(Paragraph 181)
283. The Committee recognises that
development of shale, like any other industrial activity, would
cause an increase in traffic and disruption in some places, especially
during periods when wells were being drilled. Although planning
controls may mitigate disturbance, there should be a role for
the industry's community benefits scheme to compensate those affected
individually. (Paragraph 185)
284. On the evidence available to
us, Cuadrilla's operations at Balcombe appear usually to have
observed prescribed noise limits, with occasional minor lapses.
(Paragraph 189)
285. It is widely believed, by opponents
and others, that exploration and production of shale gas in the
UK would pose dangers to the environment and to public health.
Government, regulators and the industry need to take these fears,
legitimate and exaggerated, seriously and tackle them. We heard
an impressive amount of scientific evidence that with a robust
regulatory regime the risks to the environment and public health
are low. With such a regime in place, we consider the environmental
risks to be small, whereas the benefits if shale gas development
takes place are substantial. (Paragraph 191)
Chapter 8: The UK's regulatory system
286. We heard from the Secretary
of State for the Environment and from the Environment Agency of
plans for standard permits to be issued on reduced timescales.
We consider that changes on these lines would be highly desirable
but doubt if they will happen without the changes we recommend
to simplify the regulatory framework. (Paragraph 206)
287. The UK's regulatory framework
for onshore exploration and production applies to conventional
as well as shale gas and oil. There is no special regime for shale
gas and oil, except that extra rules govern hydraulic fracturing.
Applicable regulations in the UK are rigorous and thorough and
address the environmental and health risks. We heard that they
are well respected internationally. We were also told of measures
to improve coordination in the system so as to deal more effectively
with development of shale gas and oil. (Paragraph 220)
288. The regulatory framework is
however unnecessarily complicated, with responsibilities shared
between various Departments and agencies. Wytch Farm apart, it
has no track record of dealing with large scale onshore operations.
Bureaucratic complexity and diffusion of authority are not the
best basis for clear and effective regulation of a new and fast-evolving
industry. It is not clear how long the whole regulatory process,
or its various stages, would take. We set out recommendations
below to reduce the complexity and increase the transparency of
the regulatory regime. (Paragraph 221)
289. We agree with the Royal Society
and the Royal Academy of Engineering that a single body to regulate
onshore development of shale gas and oil would be desirable in
principle. We fear, however, that the necessary reorganisation
would cause delays. We therefore recommend a more coordinated
and responsive regulatory approach within the existing framework,
with a lead regulator identified by the Government, following
the five principles of good regulation advocated by the Better
Regulation Task Force and adopted by the present Government:
TRANSPARENT
We recommend that the Government should
consolidate the applicable provisions in the confusingly titled
and potentially misleading Offshore Installations and Wells
Regulations and Borehole Sites and Operations Regulations
into one clearly labelled set of regulations for onshore oil and
gas operations.
As recommended by the Royal Society
and Royal Academy of Engineering, the consolidated regulations
should specify that well integrity is to be considered from an
environmental perspective as well as a health perspective. The
Environment Agency and Health and Safety Executive should make
it much clearer to the industry and the public exactly
how and when they would inspect well sites.
ACCOUNTABLE
The Government should provide a single,
clear appeals process for operators in the event that an application
for planning permission is refused by a local authority.
PROPORTIONATE
Operators are often required to submit
the same information to different regulators. The Office of Unconventional
Gas and Oil should provide a single point for data input to remove
duplication and reduce costs for operators.
CONSISTENT
The Government should ensure that operators
are able to make all the required planning and permit applications
in parallel, in order to speed the process. There is room for
much greater coordination, particularly in relation to information
sharing between local authorities and the Environment Agency.
TARGETED
A targeted approach by the regulators
should include a clear timetable for decision-making, agreed beforehand
with the operators. (Paragraph 231)
290. We recommend that regulations
should make explicit that the well examiner for onshore oil and
gas operations should be independent of the well operator. (Paragraph 235)
291. We recommend that, as proposed
by the Royal Society and Royal Academy of Engineering, rules should
be introduced to monitor wells abandoned in future, and a common
liability fund established by the industry in case of default
by an operator. (Paragraph 240)
292. We agree with the Government
that there is no need for new European legislation on shale gas.
(Paragraph 247)
293. The regulatory framework governing
development of shale gas in the UK is dauntingly complex and largely
untested. Industry, public and even regulators seem uncertain
how it would apply in practice. No single body has clear lead
responsibility. We do not believe there is any trade off between
speed and rigour in the regulatory process; complexity does not
increase the quality of regulation. Unless the Government act
to streamline the system so that regulation is effective as well
as rigorous, the UK will be unable to take full advantage of the
economic opportunity offered by shale gas. (Paragraph 248)
Chapter 9: Promoting Shale Gas Development in
the UK
294. 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. (Paragraph 253)
295. 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. (Paragraph 254)
296. 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. (Paragraph 256)
297. 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. (Paragraph 257)
298. 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. (Paragraph 258)
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