UK Shale Gas

Alan Whitehead Excerpts

Thursday 18th July 2013 Westminster Hall

[Eric Ollerenshaw]

It is an interesting model, but there are serious problems with the definition of what the council can spend money on. If the council spends money on certain things and gives financial recompense to the residents, they will face tax anyway, and that is the issue.

I turn to the subject of certainty. We are talking about a voluntary community compensation scheme. I had hoped that we would be dealing with something more substantial, preferably underpinned by statute. We need to ensure that there is no wriggle room. Local residents and councils need to know that there will be no about-turn, that promises will be lived up to and that changes in company control will not lead to changes to the commitments made by companies now.

Additionality is important. Basically, I want a guarantee from Ministers that if local councils receive extra funds through the community compensation scheme, that will not be used against them when calculating normal standard local government grants. Put simply, I do not want to see a case of robbing Peter to pay Paul. There must be extra money to compensate local communities for the problems that they will have to deal with in hosting shale gas extraction, and that compensation must not be seen by the Government, of whatever hue, as an alternative to normal grant funding. That might be achieved by using a separate fund, as the hon. Member for Wells (Tessa Munt) has already suggested, rather than by paying money into the usual revenue streams—almost a Lancashire sovereign wealth fund. Such a fund would be managed by professionals according to a strict charter, for the benefit of the most closely situated residents on the one hand and the whole of the county on the other. Obviously, it would have to work closely with local authorities of all tiers, to deliver genuine and tangible benefits for local residents and the county.

I hope there might be room for negotiation on the amounts involved. One per cent of revenues of £366 billion is interesting and a good figure, but we hope that it is just a starting negotiating point. If we are to have a profusion of wells, which I remind hon. Members are not like oil wells and need to be located every few miles across the patch or move round the patch—that is my understanding, but those more expert than I am may correct me—we want a fund able to invest for the time when the gas goes, as surely it must, given its nature.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The hon. Gentleman may find it helpful to consider—certainly looking at US experience—that a fracking pad in production is about twice the size of a football field and has six different wells, each of which last seven to eight years before a new well needs to be drilled. He is right that a number of wells and pads would be required in any area to sustain substantial shale gas production over a period.

[Eric Ollerenshaw]

I thank the hon. Gentleman for his technical expertise; that is also my understanding. I remind hon. Members that I am talking about rural Lancashire, the vast majority of which is defined as an area of outstanding natural beauty. I have fought wind turbines owing to the impact of their look on the area, and in the same way, shale gas development raises serious questions about protecting such areas, of which we have few left.

My obsession with compensation should not be taken as support for a move to full-scale fracking. Ministers have to understand how fracking is perceived at the moment. All they read in their national papers are new figures building on new figures and the huge possible bonanza, while my constituents sit on those possibilities. Too often, Lancashire has seen itself used to generate profits that did not return to the county. As the hon. Member for Brighton, Pavilion said, constituents in the affected areas have done a hell of a lot voluntary work to look at fracking at all levels. A farmer in the Bleasdale area of my constituency pointed out at the end of an involved meeting—I hope you accept the reference, Mr Bone—“Eric, this gas has been down there millions of years; there can’t be harm in waiting a little bit longer. It will still be there when we want it.”

--- Later in debate ---

[Mr Lilley]

Even that is not true. The most recent generation of gas turbines are so much more efficient than the previous ones that the savings from replacing all our gas turbines with the most recent generation would probably be greater than the savings in CO_2, emissions from using wind. I will, if I may, make some progress.

Until we find a way of controlling CO₂ levels in the atmosphere that will not cost more than the benefits of doing so, we should not impoverish this generation. My respect for the hon. Lady and her colleague, the hon. Member for Worsley and Eccles South (Barbara Keeley), begins to evaporate when they abandon their real belief, which is that we should not burn any fossil fuels, and start to concoct fabricated fears and spurious arguments against fracking. Their first argument is that there will not be much there—that was what they originally said. Now the British Geological Survey says that there is probably an awful lot there, but that we will not know until we have drilled it.

The hon. Lady went on to say that the process will be so costly that it will cost more than the price, in which case no one will extract it, so her fears can evaporate. She clearly does not believe her own argument otherwise she would not even bother to attend this debate because it would not be important. She alleges that it will be more difficult geologically to extract shale in this country than in the United States, and that the geology here is less attractive than there, but that is simply not the case.

When the Select Committee interviewed Cuadrilla and BHP Billiton in the States, we asked them how thick the shale beds were in the States that they typically extracted from. They said 300, 400 or 500 feet thick. How thick is the Bowland shale? It is a mile thick; up to 20 times as thick as in America, which means that from one surface pod, we can get up to 20 times as much fracking as they can in the States—perhaps it is only a dozen times.

[Dr Whitehead]

indicated dissent.

[Mr Lilley]

The hon. Gentleman can intervene if he wishes to put me right.

[Dr Whitehead]

The right hon. Gentleman will lose time from me intervening, so I am sorry about that.

[Mr Lilley]

If the hon. Gentleman can be quick.

[Dr Whitehead]

Thickness is not necessarily the final indicator.

[Mr Lilley]

If the hon. Gentleman does not have anything interesting to say, then he should not waste my time.

[Dr Whitehead]

Well, it relates to geological faulting, clay, extractability, tightness—

[Mr Lilley]

Thank you very much. I am grateful to the hon. Gentleman. That was not very helpful to the debate in general.

The second and more plausible argument is that, even if there are large quantities of gas here and we will not know that until we have drilled, it will not succeed in bringing down prices in the UK, because our prices are fundamentally set by marginal suppliers from Europe. That is both plausible and possibly true, but either we will have so much here, and there will be so much elsewhere, that gas prices will come down, or they will not in which case the tax revenues from producing gas in this country will be substantially greater—three times as much per cubic metre extracted as in the States. With those extra tax revenues, we will be able to reduce our other costs on the economy or other tax bills that people face.

Shale is ubiquitous; it is incredibly widespread across the world. For the hon. Lady to suggest that it will be extractable only in the States is really to express the belief that God is an American, that he has created a particularly unique situation in America with shale that is so different from shale elsewhere in the world and with a technology that will only apply there, and that he has maliciously arranged things so that the technology will not apply to the shale in the UK, France, Poland, China or elsewhere in the world. I simply do not believe that that is true. In all probability, we will see a shale gas revolution worldwide that will probably keep gas prices low. It is certainly likely to prevent them going up, and it may even bring them down as it has done in the States.

When pessimism about reserves and prices fails, some people resort to fabricated scares, which are as irresponsible and as unjustified as the MMR scares, which stopped people taking advantage of vaccination. I hope that we will not allow similar scares to stop us taking advantage in this country of the potential resources that exist beneath our soil.

The letter from the people in Balcombe from which the hon. Lady quoted says that fracking is considered to be an uncertain and risky technology. It is far from being uncertain and risky. The first gas well was fracked on 17 March 1949. Since then 2 million wells have been fracked in the United States, and 200,000 in the last year, without anyone being poisoned by contaminated water, or any buildings or people suffering damage from minuscule seismic tremors.

The Royal Society and the Royal Academy of Engineering dismissed fears about water contamination. They concluded that any health, safety and environmental risks associated with hydraulic fracturing can be managed effectively in the UK as long as operational best practices are implemented and enforced.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The debate here falls into two categories: a wider category and a narrower category. It is undoubtedly true in terms of the wider category that we will have to leave a lot of the carbon that we otherwise could get out of the ground in the ground over the next few years. Indeed the understanding of the Department of Energy and Climate Change of this process in terms of what will need to be done with regard to gas as a component of wider energy sources in the 2030s reflects that in the way in which gas will need to be used at a much lower level and fairly sparingly in the running of gas-fired power stations. But that is also an issue in terms of what we do with oil, coal and a variety of other mineral sources of energy under our soils.

We are talking specifically about shale gas in the UK, and I want to address the narrow issue of what the consequence would be of our deciding that we really were going to go for a shale gas “bonanza” in this country and try to extract as much shale gas as possible in order to underpin our energy economy. First, there is indeed a large amount of shale gas reserve under the ground in the UK. How much of it is recoverable is another matter. If we recovered what looks to be a possible level of recoverability from the present fairly uncertain estimates of how much shale gas there is, shale gas could perhaps underpin 10% of our overall necessary gas supplies in this country.

[Mr David Amess in the Chair]

For shale gas to do that, we would have to have just over 100,000 shale gas wells. There is a popular misconception that drilling for shale gas is like drilling for offshore North sea gas, but that is not the case, as we have already heard. A large number of small wells would be the order of the day; in themselves, they would not produce a large amount of gas but collectively they would produce quite a large amount of gas. Perhaps there would be about 100,000 to 107,000 wells. Admittedly, they would not be separate wells. Usually, there would be about six or seven wells on one pad, going outwards from the pad, which would create a need for about 18,000 pads. So, if we did a straightforward division between the constituencies of this country, each constituency would have to support 164 wells. Obviously, the wells would not be distributed constituency by constituency, because there would be concentrations in different parts of the country, but I can well understand the concerns expressed by the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) and my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley).

[Barbara Keeley]

Whatever number of wells my hon. Friend thinks each constituency would have to bear, does he think that there are particular issues in urban areas that already have very high levels of pollution, such as the ones I outlined?

[Dr Whitehead]

My hon. Friend is absolutely right. Indeed, in the US shale gas drilling takes place right in the centre of a number of towns, such as Fort Worth. There are very considerable concerns about that, precisely on the grounds she refers to, not because shale gas will kill us all but because of particular concerns about how the shale gas is extracted: what happens with the waste water; what happens with the operation of the shale gas facility itself; and indeed the arrangements in the US relating to mineral rights that cause that drilling to take place. That would not be the case in this country, so I would not for a moment suggest that we will get a rash of shale gas wells in the middle of town, because there is an entirely different mineral regime in the UK. Nevertheless, she makes an important point.

How would those 100,000-plus wells be built? Well, as I have mentioned, it would be on the basis of pairs of football ground-sized pads across the country, concentrated in particular areas, perhaps including my own area. Hampshire and Sussex would be one area where there would be a fairly large number of those wells, if that is the sort of ambition we wanted to achieve.

[Dan Byles]

I am not sure if the hon. Gentleman has seen the report by the Institute of Directors that was published two months ago, which did some modelling of what a UK shale gas industry could look like. The IOD concluded that potentially we could meet up to a third of UK peak gas demand by 2030 from 100 two-hectare sites across the country.

[Dr Whitehead]

Well, those are entirely different points. At a particular point we could meet a larger supply, but what I am talking about is the overall question of supply over a period of time that would be possible to underwrite as a result of that sort of level of shale gas production—two different points.

The additional point that needs to be borne in mind about shale gas wells is that they do not last very long. Research from the US demonstrates that the average life of a shale gas well is about seven years or so. That is because shale gas wells produce a lot of gas to start with, but they deplete very rapidly. So, after about seven years they are producing negligible amounts, even—as has happened in a number of instances—on the basis of refracking. Refracking of a well produces a little increase, but the well still dries over a fairly short period. Therefore, to maintain that sort of level of production over a longer period, one would need to redrill a number of those wells. That is the sort of scenario that we would set for ourselves if we were to introduce a level of shale gas production that would support the sort of intervention in the gas market that I have mentioned.

My second concern is this: would shale gas production actually reduce prices for everybody, if we went for it to that extent? The clear answer is no. The intervention of the shale gas itself would not reduce prices because of the way that gas is traded on the international markets, particularly in this country. There are three international markets for gas trading. Gas is not particularly transportable, except through vessels such as liquefied natural gas carriers, which make a marginal difference in terms of supply; gas is largely transported by pipelines. Gas is traded on the European market, the far east market and the north American market. The north American market has seen substantial price decreases because of the concentration of shale gas within that one particular market. We would need to have a similar amount of shale gas produced throughout Europe in order for the European traded gas market to come down significantly in price compared with what it is currently, notwithstanding LNG imports coming into the European market overall. So shale gas might make a marginal difference over a period of time, but probably not—for the reasons I have given—unless there were fundamental changes in gas trading.

[David Mowat]

I am trying to understand the point that the hon. Gentleman has just made. Is it that because there is not enough shale gas in Europe potentially, it will not have enough of an impact on the European gas price vis-à-vis what has happened in the US? Is that the point?

[Dr Whitehead]

If every country in Europe produced the same amount of shale gas that is being produced in the US, yes, that is possible, in terms of the trading in the European market, but that probably is not going to be the case. Therefore we have to look at the relevant prices of gas within the markets. It is a question of trading in a market, not a question of the gas being plugged into someone’s home and therefore creating a reduction in price there.

[David Mowat]

rose—

[Dr Whitehead]

I am sorry, but I cannot give way any more; I would lose the rest of my time.

What happens with those large numbers of wells in terms of the fracking process? That process involves the use of between 2 million and 7 million gallons of water, and 5,000 gallons of chemicals, per frack; whether we know what is in the chemicals or not, that is the sort of volume of chemicals needed. As has been said, that water cannot be injected into seams deeper than the fracking itself, as is the case in America, but would have to be disposed of by other means. Also, unless the fracking companies brought the water with them, water would have to be taken from the water table within the area where the fracking was taking place, which has implications for the integrity of the water tables in those particular parts of the country. That is an important but largely forgotten point.

The final thing that I want to say, given the short amount of time I have, is about the policy implications of going for a large amount of fracking. If we went for a large amount of fracking, as I have said we could perhaps supply—over a period—10% of overall UK gas supplies. If we went for a large programme of anaerobic digestion, we could provide 10% of the domestic gas supply. A farm-sized anaerobic digestion plant costs about £2 million to build—

[Mr Lilley]

What’s stopping them?

[Dr Whitehead]

The right hon. Member may well have asked a very valid question. As I was saying, such a plant produces about a third of the gas over a 20-year period that a fracking well would produce over 7.5 years, but anaerobic digestion plants will produce gas continuously because the cows that provide the stuff that produces the gas continue to produce the feedstock, as do we from our own waste and our food. Therefore, anaerobic digestion plants do not deplete. A long-term strategy for gas supply security might concern itself with anaerobic digestion and biogas, rather than going for a gas bonanza. We ought to look at all these factors when looking at the future of gas supply in this country.

--- Later in debate ---

[Dan Byles]

Although I said that we would be using broadly the same amount of gas, the hon. Gentleman is right; we will probably be using it in a different way, for back-up and peaking plant, which clearly would be less efficient—ceteris paribus—than using it for base load.

[Dr Whitehead]

Does the hon. Gentleman concur—I think that he already is concurring—that the notion of that supply might make a difference to our balance of payments, but because one would purchase those supplies through the European market, and could not do otherwise, the cost would be based on the prevailing price in that market at that time, not on an artificial price for the UK?

[Dan Byles]

I agree. I do not think that the hon. Gentleman could accuse me of saying that lower prices is the reason why we should do this. In fact, later on I will mention other reasons why this is useful for the UK economy. Actually, lower prices are not the be-all and end-all of why we should develop shale gas, because, of course, we are part of a European gas market.

In terms of importing LNG, the Committee on Climate Change said:

“Our recent assessment of lifecycle emissions showed that well regulated shale gas production within the UK could potentially have lower lifecycle emissions than imported liquefied natural gas.”

The IOD, in a comprehensive report published two months ago, estimated that a domestic UK shale gas industry could, by 2030, halve our import requirement and meet up to a third of peak UK gas demand. The key thing here is that, unlike imported gas, every pound’s worth of domestic gas that we produce generates tax revenue for the Government—for the nation, not the Government; I am not socialist—and jobs. The IOD estimates up to 74,000 direct, indirect and induced jobs across the country.

With lower imports and lower life-cycle emissions than LNG, tax revenues, jobs and inward investment, an argument does not have to be made about the price of gas to argue that developing a UK shale gas industry could bring tangible economic benefits to the country. A few days ago in this Chamber, we debated the need for those tangible economic benefits to be shared directly with the local community, where shale gas is likely to be developed, in the forms of jobs and infrastructure and the community benefit fund, as we discussed. That is right. Communities that host shale gas developments should benefit from what are, in effect, their own natural resources.

It is right—I agree with hon. Members who have said it today—that industry and Government need to do more work to explain to people many of the basic facts and processes of shale gas and hydraulic fracturing. It is true that people get concerned, particularly about uncertainty. I agree, again, with my right hon. Friend the Member for Hitchin and Harpenden, who said that we have heard some scary and inaccurate comments today, from Members of Parliament.

[Dan Byles]

I agree. If companies are implying that there will be almost no impact whatever, they should look at that. I often make the point that this is an industrial process, although I am making a slightly different point when I say it. I am saying that this is not a scary process; it is simply an industrial process that should be managed like any others. In my experience of looking at new nuclear at Hinkley and at this, most people are often more concerned about the generic construction type blight—about truck movements, and so on—than about the intrinsic nature of a nuclear power station or shale gas.

I want briefly to mention a few points that have already been made. The Royal Society and the Royal Academy of Engineering were commissioned by the Government last year to investigate induced seismicity—earthquakes, for want of a better word—and they were clear in their findings: the intensity of the earthquakes caused or induced by hydraulic fracturing was lower than natural UK background seismic activity.

We heard that the public do not want it. I think the hon. Member for Brighton, Pavilion (Caroline Lucas) said that people do not want shale gas or fracking. Actually, only one organisation that I am aware of—Nottingham university—has been conducting regular background public opinion monitoring. Since 2010, it has monitored background public opinion on shale gas, approximately every quarter, using YouGov, with proper balanced samples. It has found that acceptance of shale gas is slowly rising and fears about it are slowly falling. Its most recent survey, with 2,200 respondents, done in the past month or so, found that levels of recognition are rising—more than 60% of people know what shale gas is when asked—and of those who can identify what it is, nearly 60%, although not quite, say that fracking should be allowed. The evidence is not clear that people are, on the whole, in aggregate, afraid of or concerned about fracking. I think people recognise it for what it is: that it is not particularly scary; that it needs to be managed properly; but that it could benefit the country.

Impact on water resources has been mentioned as well. I am not talking so much about fears about pollution of water, but about access to and quantities of water. Again, the Royal Society and the Royal Academy of Engineering assessed the impact of water use. They concluded:

“estimates indicate that the amount needed to operate a hydraulically fractured shale gas well for a decade may be equivalent to the amount needed to water a golf course for a month; the amount needed to run a 1,000 MW coal-fired power plant for 12 hours; and the amount lost to leaks in United Utilities’ region in north west England every hour”.

The idea that access to quantities of water is an issue is probably another myth that needs to be busted.

[Dr Whitehead]

Does the hon. Gentleman accept that the use of water would not be on a regular basis over 10 years, but would be intensive during the period of fracking, re-fracking and clearing up?

[Dan Byles]

The hon. Gentleman is right. It peaks and then trails off, but in that entire 10-year period, including the peak, it is one hour’s worth of lost water from United Utilities. I agree with him.

On the impact on climate change, I find that often people who oppose shale gas increasingly no longer refer to earthquakes and some other issues, because I think a lot of people understand now that that is not an issue. The most common issue being raised with me now is the one that the hon. Member for Brighton, Pavilion mentioned, in respect of bigger picture climate change issues, with people saying that fossil fuels should stay in the ground. There is a discussion to be had in that regard, but I still believe that the elephant in the room for climate change is coal. Some 600 GW of new, unabated coal-fired plants are estimated to be coming online globally by 2030. I am amazed at the effort being put into opposing gas by some people when they should be opposing coal.

I shall end by quoting the Committee on Climate Change, from its report published in May this year. It said:

“The overall picture, therefore, is one in which well regulated production of shale gas could have economic benefits to the UK, in a manner consistent with our emissions targets, while reducing our dependence on imported gas.”

Other hon. Members want to speak, so I will give them an extra 15 seconds.