Energy: Fracking

Baroness Verma Excerpts

Monday 17th March 2014 Grand Committee

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

My Lords, I thank my noble friend Lord Borwick for the measured and informed way in which he introduced the debate. He made a clear and eloquent case for the importance of shale gas development, including on why those who combat man-made climate change should support it.

Gas is a critical part of our energy mix. Our projections, and those of National Grid and others, show that we are likely to use almost as much gas in 2030 as we do today. Half the gas we use is for domestic heating and cooking and a quarter for industrial and commercial uses. These will be difficult to substitute.

I am glad that there was general acceptance, except by the noble Baroness, Lady Jones, that shale gas will play an important part in the contribution of gas to our energy needs. We all recognise that there is a long way to travel in order to be in receipt of those benefits. However, the debate has once again demonstrated that we need to have these debates. We need informed debates and to bust the myths that keep being generating around this issue. It was my noble friend Lord Ridley who said that you bust one myth and another crops up.

We import half of the gas we consume, and by the middle of the next decade, without shale gas production, it could be more than 80% as conventional gas production declines. The UK has invested in facilities to make sure that gas is easy to import, but we cannot be complacent. There is a compelling energy security case for shale gas development. There are economic benefits, as suggested by my noble friend Lord Borwick. The Institute of Directors published a study last year in which it estimated that a UK shale gas industry could support more than 70,000 jobs at peak production, with £3.7 billion of annual investment and significant tax revenues. The institute forecasts that production levels could reach a level of more than a third of the gas we consume today.

We support exploration activity to see what the actual commercial viability of UK shale is, but we are clear that we will allow only activity that is safe, sustainable and properly regulated. The UK has a strong regulatory system that provides a comprehensive and fit-for-purpose regime for exploratory activities, and we need continuously to improve it, as my noble friend Lord Caithness rightly 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 that,

“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 in England, the Health and Safety Executive and industry to ensure that regulation is robust enough to safeguard public safety and protect the environment while imposing no unnecessary burdens of operators. We have also put in place appropriate measures to manage seismic risk. Of course, we would not proceed with shale development if it conflicted with our climate objectives.

A recent report by my department’s chief scientific adviser, David MacKay, and Dr Timothy Stone concluded that the carbon footprint of UK-produced shale gas would be likely to be significantly less than coal and lower than imported gas. The report made a number of recommendations further to mitigate any emissions from shale gas operations and the Secretary of State will respond positively to that report shortly.

I appreciate that there may be concerns about the impact on local areas, and it would be helpful briefly to explore them. A site will be smaller than a cricket pitch, and although it might produce shale gas for around 20 years, there will be certain periods when most of the activity takes place—for example, during set-up or in preparation for fracture. These operations should have broadly similar impacts on health, local amenities and traffic movements to those from existing onshore gas and oil extraction methods. Each application’s local impact is carefully considered via the local planning system. The industry has made a commitment to work with local communities to minimise the impact of shale gas and oil operations wherever possible and is researching methods and technologies that will reduce traffic movements to and from the site.

I am sure noble Lords will agree that it is important that local communities benefit from hosting shale gas developments. That is why we welcomed the package of benefits industry has announced. At exploration stage, £100,000 in community benefits will be provided per well site where fracking takes place, and 1% of revenues at production stage will be paid out to communities. Industry estimates that that could be worth between £2.5 million and £10 million for a typical producing pad. Each year, operators will have to publish evidence of how they have met their commitments. The benefits will be reviewed as the industry develops, and operators will consult further with communities. This is a new sector developing. My department is working hard to help people to understand the facts about shale gas, particularly with local communities.

A few questions were raised so I will quickly address them in the time I have left. My noble friend Lord Lawson said that we need to reduce regulation on shale. The Environment Agency has—

[Lord Lawson of Blaby]

I never said anything of the sort, as my noble friend should recall. I said we need rigorous regulation, but it must be clear and as speedy as the rigour allows.

[Baroness Verma]

I apologise for misrepresenting what my noble friend said—absolutely. The Environment Agency is developing a single application form for permits. In 2014, the Environment Agency will aim to reduce the time for low-risk activity from 13 weeks to approximately two weeks. I hope that that addresses the point raised by my noble friend. Of course, it is not about reducing regulation; we do not want to see regulation reduced, but we also do not want to see barriers where they do not need to be in place.

My noble friend Lord Teverson mentioned CCS projects. As my noble friend is aware, we were able to go forward with two of them at Peterhead and White Rose—the Drax project. The Government have committed £1 billion to CCS—a commitment from this Government to make sure that we are not lacking in ambition for CCS. My noble friend also mentioned dependency on Russian gas. I reassure him that only a small percentage of our gas comes from Russia. By and large we are better connected, with 50% being our own gas and a larger proportion of what is left coming from Norway.

[Lord Teverson]

I entirely realise that and was talking about a broader European perspective. Actually, we import a lot of Russian coal.

[Baroness Verma]

I think my noble friend will agree that that is a different debate.

My noble friend Lord Caithness asked whether shale gas was more leniently regulated at European level. I reassure him that shale gas is regulated in the same way as any other energy sector. A recent proposal in the European Parliament to require environmental impact assessments in all shale projects did not proceed. We welcomed this because we do not want minor impact drilling such as taking core samples impeded.

The noble Baroness, Lady Jones, said that fracking would cause water contamination and that there was evidence to prove it. We have seen no evidence. The Environment Agency is one of the most respected regulators globally, as are many of our regulators, and we would be careful to consider the advice that we were given by our regulators before we proceeded to do anything that would allow any kind of contamination. Hydraulic fracturing will take place more than 1,000 metres below groundwater level, where there are impermeable layers of rock which will stop the gas and fracking fluids escaping into the water.

The noble Baroness also touched on tackling cold homes and fuel poverty. The Government have done a lot to respond to those challenges and measures are in place to address the issues that she has raised. There is much more to be done but this Government have been very proactive about addressing the issues where the people who need help most and quickest are getting that help.

The noble Baroness, Lady Worthington, said that shale gas cannot be seen as a panacea. The Government have never suggested that shale gas is a panacea. We have said that it is important that we explore the possibilities that shale gas will bring because we need energy security. If shale gas is explored and exploited, it will become an important part of the energy mix. We all know that gas and oil will still play a large part in our wider energy mix.

I am not quite sure from the noble Baroness’s remarks that she understood her own party’s position on fracking. However, it would be unhelpful to close down the debate on the real benefits that shale gas can bring. I recommend that we have further informed debates because this debate has explored a number of arguments in this critical policy area. I look forward to those debates, but let us bring them forward as debates on fact, not on ideology. We need to reduce our dependency on external energy sources and ensure that the people of the UK have affordable energy and energy security but understand that the sector is properly regulated, can deliver all those things and can contribute towards our economic growth.

This has been an interesting debate. I am grateful to my noble friend Lord Borwick for raising it. I suspect that we will have many more debates on the issue.

Committee adjourned at 7.18 pm.