Shale Gas and Oil (EAC Report)

Baroness Verma Excerpts

Tuesday 4th November 2014 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)]

My Lords, I want to put on record our appreciation of the work of the Economic Affairs Committee for this report. I thank in particular my noble friend Lord MacGregor and all noble Lords who have contributed to the debate today, as well as to the report, for the opportunity to discuss this really important issue.

We welcome the committee’s conclusion that realising our shale potential in a safe and sustainable way could enhance energy security and provide jobs and opportunities for economic growth. The Government have not been, and are not, complacent about responding quickly and being able to ensure that realising the potential for shale oil and gas is not hindered by unnecessary regulations. I hope that during the passage of my contribution, noble Lords will feel reassured that the Government are taking active steps to ensure that the environment in which this is happening is streamlined as quickly as possible. We are working very closely with other departments.

Home-grown gas, just like home-grown renewables and new nuclear, will of course assist our energy security, be compatible with our climate goals and provide jobs and tax revenue for our society. The Institute of Directors estimated that UK investment in shale gas could, at peak, reach £3.7 billion a year and, as my noble friend Lord MacGregor rightly points out, support 74,000 or 75,000 jobs in the oil, gas, construction, engineering and chemicals sectors, mostly highly skilled and highly paid. The Royal Society, the Royal Academy of Engineering and Public Health England have concluded that the risks in shale development are manageable if industry follows best practice, enforced by regulation.

I hope that my comments will illustrate to noble Lords, as my noble friend Lord Ridley pointed out, that we are supporting every opportunity and taking every action to ensure that opportunities to explore shale gas and oil are there for companies to take advantage of. The Government are putting legislation through this House to ensure that drilling for shale oil and gas can go ahead without undue delay or cost and with the right environmental protections in place. The right to underground access, which is part of the Infrastructure Bill, will simplify the procedure for onshore gas and oil and deep geothermal developers to get underground drilling access. These new rules will help us unlock exploration for shale gas and deep geothermal, as we move towards a low-carbon economy.

This does not take away from our strong regulatory system, which provides a comprehensive and fit-for-purpose regime for exploratory activities. As has already been said, the UK has more than 50 years’ experience of regulating the onshore oil and gas industry to draw on. This is supported by an authoritative review of the scientific and engineering evidence on shale gas extraction conducted by the Royal Academy of Engineering and the Royal Society in 2012. This concluded:

“The health, safety and environmental risks associated with hydraulic fracturing … as a means to extract shale gas can be managed effectively in the UK as long as operational best practices are implemented and enforced through regulation”.

My department’s Office of Unconventional Gas and Oil will work closely with regulators, such as the Environment Agency and the Health and Safety Executive, and industry to ensure that regulation is robust enough to safeguard public safety and protect the environment, imposes no unnecessary burdens on operators and is as simple and easy to understand as possible. On the point made by the noble Baroness, Lady Worthington, about the resourcing of the Environment Agency and the Health and Safety Executive, they have both said that they have at this time enough resources to meet current demands. Of course, if the demand gets bigger, we will review the situation.

We have already put in place appropriate measures to address seismic issues. As rightly pointed out by my noble friend Lord Lawson, seismic risks measured previously have been very small. I want to assure all noble Lords that it is very much the will of this Government to ensure that we have a regulatory road map so that operators and citizens can see the overall process and how it applies to the different nations in the UK. It confirms the roles and responsibilities of all the different regulators. We have also looked for opportunities to simplify regulations and speed up processes, while continuing to maintain a robust system. For example, we are reducing permitting times for low-risk activity from 13 weeks to around four weeks. Already, all onshore oil and gas projects, including shale gas, are subject to scrutiny through the planning system, which addresses impacts on local residents such as traffic movements, noise, working hours and so on.

Planning guidance has been produced by the Department for Communities and Local Government, making clear the planning and appeals processes for operators. It also encourages the planning authorities to engage with the regulator at an earlier stage, identify any issues and ensure that they are all involved at that earlier stage, rather than later, as has been the case in the past. The guidance also makes clear that operators can make all relevant required permit and planning applications in parallel.

In November 2012, the Health and Safety Executive and the Environment Agency published a “working together” agreement for shale gas sites, which specifies when and at what stages they will conduct joint inspections. It confirms that they together must be satisfied that wells are designed, constructed and operated to standards that protect safety and the environment. The Health and Safety Executive is also committed to visiting jointly with the Environment Agency all shale gas sites during the current exploratory phase of shale gas development.

The Office of Unconventional Gas and Oil based in my department co-ordinates across Whitehall. We have a very close working relationship with all departments to ensure that the policy is well informed, coherent across government, alert to the risks and challenges and delivered in the right order at the right time. That is why we have not sought to set up a sub-Cabinet committee on this. It is being led at the front by the Prime Minister and the Chancellor. They are fully supportive of it. We think that the work we are doing across government satisfies all the concerns and issues raised as we are making progress.

Planning permission underscores the need to engage the public. Noble Lords have rightly pointed out that by properly engaging we will gain support and take communities with us. That is why the Government believe that a social licence is key to operate, so we are ensuring that there is access to evidence-based information that can address any questions the public may have. We have a range of materials on the gov.uk website which help to explain the processes involved in shale gas operations to the public. We agree with my noble friend Lord Shipley that proper public engagement is crucial.

All noble Lords have identified that the benefits that can be brought to communities are potentially huge. The communities that would benefit most are those where this potential has already been identified. We want to work actively with local communities. At their request, staff from my department regularly take part in events held by local councils and residents. We engage, address concerns that are raised and explain policy and regulation, and we bring along regulators and expert scientists so that we have proper public engagement. Events range from national events to local authority exhibitions and parish level. We engage at that level as well because we want to work with local communities and local authorities to ensure that concerns raised by some groups are addressed and the public are well informed about what will happen in their localities if exploration takes place there.

[Viscount Ridley]

I came across an important point. We often say that we have to win public trust before we can do this, but the best way of winning public trust turns out to be to drill a well. I was told this about Poland. People’s reaction is: is that all there is? Is that little box of tricks behind that hedge all that is needed?

[Baroness Verma]

I accept my noble friend’s comment but evidence has also shown that real engagement, right from the start of the process, explaining what will happen within those communities, how it will impact on those communities and the benefits that come with the exploration ensures that you have public opinion on side before anything has to take place. That evidence is perhaps slightly more informed than the example my noble friend gave.

We are working with the industry, and the industry has committed that it will include at exploration stages £100,000 in community benefits per well where fracturing takes place, and 1% of revenues from wells that go on to production will be paid to communities. That could be worth between £2.5 million and £10 million for a typically producing well. These are key benefits to local communities. Each operator will have to publish evidence of how it has met these commitments.

The industry is looking to present positively the case for shale gas developments. It has recently launched a campaign called Let’s Talk About Shale” which has been providing answers to public concerns on shale. Both the Government and the industry continue to work with the public to present the positive case for shale development. We cannot do enough. It has huge potential, but there are questions to be answered, so it is right that we engage thoroughly.

At this stage, I shall quickly touch on some points that were raised by noble Lords before I finish with my concluding remarks. The noble Baroness, Lady Worthington, asked about the independence of well examiners. They will be separate from and in addition to the Health and Safety Executive well inspectors. The well examiners will be employed by the company but, under health and safety legislation, the company will be responsible for the safety of its operations. The HSE has also undertaken that well inspectors will visit and inspect all shale sites during the exploratory phase.

I refute the opening remarks by the noble Lord, Lord Hollick, who asserted that this Government have done nothing to respond to the massive underinvestment that the energy sector faces. I remind him that this underinvestment went on for many years while his party was in government. It knew that 20% of our energy supply would be coming offline by 2020. As the noble Baroness pointed out, we need to have a sensible debate about investment in the infrastructure to ensure that we do not face the massive underinvestment that we are seeing today. That inevitably puts costs on to consumer bills because we are having to catch up now; whereas we should have spent many years looking at how the ageing infrastructure needed to be upgraded as it was coming offline. Since we came into government, we have seen more than £40 billion-worth of infrastructure investment as well as the biggest reform of the electricity market through the Energy Act, which came into force in 2013.

The noble Lord asked if there would be an expert group set up to look at shale gas. A task force has been set up which will be independent of government. It will be chaired by the noble Lord, Lord Smith, the former chair of the Environment Agency, and it will provide impartial opinions on the impact that the exploitation of shale gas will have on the UK. The Government look forward to reading its report.

My noble friend Lord Shipley referred to the Bowland basin. The probable amount of gas in there is estimated at around 1,300 trillion cubic feet, so there is huge potential. We are at the exploratory stages. Noble Lords asked when we would see first drilling. We hope to see something happening in the new year. Other noble Lords asked about water contamination. My noble friend Lord Lawson and the noble Baroness, Lady Blackstone, referred to the fact that drilling is so deep down—over 1,000 metres below groundwater—that the layers of rock in between stop gas and fracking fluids from escaping into the water. Any wastewater will be stored in closed metal tanks before being treated, in accordance with strict environmental regulations. This is common practice, as with other industrial processes, so we are sure that water contamination will not take place.

A lot of work has been done in preparation for this new industry. There is still much to be done. We look forward to further debates as to how we can take this huge potential forward. There are challenges ahead but we need to ensure that the public are informed with a proper, evidence-based debate. I hope this will be the start of it.