Exploration for Shale Gas

Ed Davey Excerpts

Thursday 13th December 2012 Written Statements

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

Shale gas development has been of increasing importance in the US for some years, but exploration has only just begun in the UK. The potential of producing shale gas from a suitable formation can only be established by fracturing the rock, and it happens that the fracturing of the first shale gas well in the UK, at Preese Hall near Blackpool last year, resulted in noticeable seismic tremors. These were not at a level which could cause any damage, but seismic activity at this level was not an expected consequence of the fracking activity, and DECC therefore suspended all fracking operations for shale gas pending a thorough investigation of the causes of these tremors and the scope for mitigation of seismic risks in any future operations of this type. I am announcing today the outcome of that investigation and the way forward on exploration for shale gas in the UK.

Having carefully reviewed the evidence with the aid of independent experts, and with the aid of an authoritative review of the scientific and engineering evidence on shale gas extraction conducted by the Royal Academy of Engineering and the Royal Society, I have concluded that appropriate controls are available to mitigate the risks of undesirable seismic activity. Those new controls will be required by my Department for all future shale gas wells. On that basis, I am in principle prepared to consent to new fracking proposals for shale gas, where all other necessary permissions and consents are in place.

This opens the way to a resumption of work on exploration for shale gas, though I stress the importance of the other regulatory consents, and planning permission, which are also necessary for these activities, and which must be in place before my Department will consider consent to individual operations. In practice, it will be well into next year before any new exploration work has all the necessary consents to proceed. Whether any production operations may be proposed will depend on the success of the exploration work, but, in any event, this is likely to be some years away yet.

The background is that, in most oil and gas fields worldwide, the oil or gas is extracted from a relatively porous rock, usually a sandstone or calcareous rock, in which it has been accumulated or trapped. The original source of the petroleum however lies elsewhere, in deeper formations of non-porous rocks classed as shales. These shale source rocks are widely distributed around the world, and exist in many areas of the UK.

It has long been recognised that very substantial quantities of oil and gas were trapped in these shales, but the scope for its economic extraction seemed small—largely because the rock in its natural state allows the oil and gas to flow into a well only at very low rates. In the last 20 years, however, further development of oilfield technology, first in the Barnett shale in Texas, has enabled economic large-scale extraction of gas, and oil, from these source rocks.

One of the key technologies involved is hydraulic fracturing, or fracking. This is carried out by pumping water at high pressure into the shale formation, which forms blade-like fractures, a few millimetres wide and extending several hundred feet away from the well bore. Once the fractures have started to form, sand or a similar material is pumped in, to hold the fractures open once the pressure is released. The fractures can continue to grow only so long as pressure is maintained. When the fractures have sufficiently developed, the pressure is released and the frac fluid, followed by the released gas, can flow into the well. The process is not novel and is also widely used in conventional oil and gas production. It is however, more intensively used in the production of shale gas.

It has been recognised for some time that injection of large quantities of water into the subsurface can cause seismic tremors. This has happened, for example, in those areas of the US in which disposal of waste water into deep injection wells is permitted. However, the quantities of water used in fracking are substantially smaller, and up until the time of the Preese Hall tremors, no association had been recognised between injection of these smaller volumes and any seismic activity. The analysis carried out by Cuadrilla’s advisers, and confirmed by our independent panel of experts, has however concluded that the most likely cause of the tremors is the movement of the frac fluid into and along a fault which was already under stress. The additional pressure of the fluid allowed the fault to move, releasing the energy stored in the fault and resulting in the perceived tremors at the surface.

Our experts advise that there are many other faults in the Lancashire area which similarly have unrelieved stresses, and could in a similar scenario likewise result in tremors. Because of the relatively weak nature of these rocks, the amount of energy likely to be stored in these faults is not large, and the largest earthquake likely in this area from such a cause is assessed at magnitude 3. While this is not large enough to cause significant material damage, it would be perceptible and disturbing. I consider that new controls to minimise disturbance to those living and working nearby, and to prevent the risk of any damage, are now a prerequisite for further exploration.

I am therefore announcing new controls to mitigate these risks, which will be applied to all future fracking operations for shale gas. As this is a developing area of knowledge, I stress that we will be moving forward with appropriate caution. The controls are not at this stage to be regarded as definitive, but as appropriate precautionary measures for our present state of knowledge. Initial operations under these controls will be subject to careful scrutiny to ensure the effectiveness of the controls. And they will be reviewed, as experience develops, to ensure that they are proportionate to the risks. The controls will be enforced by my Department, though the data obtained will of course be shared with other regulators.

Operators will first be required to review the available information on faults in the area of the proposed well to minimise the risk of activating any fault by fracking, and required to monitor background seismicity before operations commence. Real-time seismic monitoring will also continue during operations, with these subject to a “traffic-light” regime, so that operations can be quickly paused and data reviewed if unusual levels of seismic activity is observed.

We will also be requiring operators to take a more cautious approach to the duration and volumes of fluid used in the fracking itself. A fracking plan will be required to be submitted to my Department before consent is given to any fracking. The fracking plan should be progressive, starting with the injection of small volumes of fluid and analysing the resulting data carefully before the full stage. Each stage of the frac will be carefully designed to use just enough fluid to create a fracture sufficient to enable gas to flow. A flow-back period will be required immediately after each stage to rebalance the pressures. Real-time recording of earthquakes during and for 24 hours after each stage of the frac will be analysed to look for abnormal induced events amidst the normal background seismicity.

Operators will also be required to monitor the growth in height of the frac away from the borehole. This will allow the operator to evaluate the effectiveness of the frac, but also ensure that the actual fracture is conforming to its design, and that it remains contained and far away from any aquifers.

So far as Cuadrilla’s current exploration programme in Lancashire is concerned, the remedial action level for the traffic light system (that is, the “red light”) will be set at magnitude 0.5 (far below a perceptible surface event, but larger than the expected level generated by the fracturing of the rock). I consider that this is an appropriately precautionary approach. We received representations in our consultation that this is too cautious, by comparison with the control protocols established for geothermal energy, construction and quarrying projects. I emphasise that this level is adopted only for fracking operations for shale gas, and the reasons for setting it at this level are entirely specific to the context. And it may well prove to be the case that, as our experience of applying this type of control to fracking operations develops, it can be confirmed that trigger levels can be adjusted upwards without compromising the effectiveness of the controls.

For the first few operations, DECC will have an independent expert on site to observe the operator’s conformance to the protocols we have established and to monitor the operator’s interpretation of data. We will therefore be able to learn as much as possible from these first operations and to put the lessons promptly into effect. But it would clearly not be right, in our present state of knowledge, to attempt to establish definitive standards, and I have preferred to start on an explicitly cautious basis.

At the present time, no applications for consent to fracking operations for shale gas are outstanding, and it is too soon to say exactly how the new protocols will be applied to any such proposals which may come forward in other basins. I can say that we will apply the same principles, of careful prior analysis of the risk of seismic activity, progressive design of the fracking process and feedback from the emerging data, and systematic monitoring by the operators before, during and after the operations. We will also expect operators to make monitoring data promptly available to the public.

As I have noted, fracking is not exclusively associated with shale gas extraction, and fracking operations using smaller volumes of fluid have been carried out both onshore and offshore in the UK for many years. These have not to date been associated with any seismic risk, nor is there any evidence for such risks from elsewhere. However, DECC will apply proportionate scrutiny to the possibility. Oil and gas operators proposing fracking will be required to submit an analysis of the risks of any seismic activity being caused by the proposed operations, to conduct appropriate monitoring, and to inform planning authorities and local residents. Appropriate levels of control will be imposed by DECC where the assessed risk is not negligible.

These new controls on seismic risks do not remove any of the existing regulatory controls and requirements. Consistent with previous practice, my Department will not give consent to specific fracking operations until all other consents are in place, including in particular planning permission, the obtaining of environmental permits from the Environment Agency or the Scottish Environment Protection Agency (SEPA) as the case may be, and scrutiny by the Health and Safety Executive (HSE). Separate guidance is available from local planning authorities and regulators on how to acquire the relevant permissions and permits. Both the Environment Agency and SEPA have published sector-specific guidance for the shale gas industry.

However, I am well aware, in particular from the responses to our consultation on the report of our independent experts, that many people, including residents of Lancashire and other areas where shale gas exploration may be contemplated, have many other concerns besides the seismic risks, and it is only right that I should say how these other concerns are being addressed.

The development of shale gas in the US has been accompanied by an increasing level of debate on its environmental impacts. Many of the incidents reported have, on investigation, not been shown to be connected with oil and gas activity. However, they have given rise to concerns which in themselves are entirely reasonable. Residents in those areas want to be assured that their water will not be contaminated with gas or toxic chemicals, and the air will not be contaminated with noxious gases; that there will be no threat of damage from earthquakes; and that other kinds of disturbance such as traffic, lights and noise will be kept under control. In considering these concerns, I have had the benefit of the earlier report on shale gas by the Energy and Climate Change Committee, and many authoritative reports from the US, including two from the Secretary of Energy’s Advisory Board.

I have also had the benefit of the comprehensive and authoritative review of the risks of fracking by the Royal Society and Royal Academy of Engineering which I have already mentioned. I can announce that the Government accept all the recommendations of the academies’ report addressed to it. Work is already in hand to implement these recommendations, so far as the current phase of exploration activity is concerned. One further recommendation is being considered by the research councils to whom it was addressed.

The reports from US regulators and review bodies do confirm that gas developments there have, on occasion, led to water contamination. There are relatively few confirmed instances of this—most complaints on investigation have proved to be attributable to causes other than gas production. And no case has yet come to light in which it has been confirmed that fracking has contaminated an aquifer. But the instances of contamination which have occurred confirm the need for the industry to consistently apply good practice, and the need for proper scrutiny and oversight of the industry to ensure that this is in fact done.

So far as the UK is concerned, I believe that the industry has a good record, and that there are already in place robust regulatory controls on all oil and gas activities. On water contamination, first, all such operations are subject to scrutiny by the appropriate environment agency (the Environment Agency in respect of England and for the time being of Wales; and the Scottish Environment Protection Agency in respect of Scotland). It is an offence to cause or knowingly permit poisonous noxious or polluting matter to enter controlled waters, which include ground waters. The environment agencies are statutory consultees in the planning process, and have to be consulted on all proposed borehole operations. A permit from the Environment Agency is required where fluids containing pollutants are injected into rock formations that contain groundwater. A permit may also be needed if the activity poses an unacceptable risk of mobilising natural substances that could then cause pollution. The permit will specify any necessary limits on the activity, any requirements for monitoring, the chemicals which may be used, and any appropriate limits on permissible concentrations. Regulators will take a risk based approach, and if the activity poses an unacceptable risk to the environment, it will not be allowed.

The academies’ report, and that of the Select Committee, also emphasise the importance in this context of the integrity of the well. This issue is central to the regulation of the safety of well operations by the HSE. The Executive have to be notified of all drilling operations for oil or gas, and will scrutinise the well design and operational plan. Additionally, the regulations require a full review of the proposed and actual well operations by an independent competent person, the “well examiner”. The academies in their report commented that this independent review is highly valuable, and made recommendations for strengthening it, which we of course accept and are already working on.

So far as the use of chemicals is concerned, the environment agencies take a risk-based approach to the regulation of the use of chemicals in shale gas fracking activities. The hazard potential of all substances proposed to be injected into the ground will be assessed and the use of substances hazardous to groundwater will not be permitted. The identity of all substances proposed for injection, and the agency’s conclusions on their hazard potential, will be publicly available.

Concern has also been expressed about the quantities of water used in fracking, or the disposal of waste water from the process. The water used may of course be obtained from licensed suppliers, but if directly abstracted by the operators, requires a licence from the environment agency. Licences will only be given where the agency is satisfied that a sustainable supply is obtainable.

Equally, disposal of waste water is subject to scrutiny by the agencies and will require a permit. The waste water from the operations in Lancashire has been found to contain low levels of radioactivity. A case-specific radiological assessment is required in support of any application for a permit for the disposal of radioactive waste. The agency will critically review any such assessment, and will only issue a permit if satisfied.

Concern has also been raised about the possibility of fracking leading to subsidence, but this is not considered a risk because of the strength and load-bearing characteristics of these rocks. And this is borne out by practical experience, because there is no report from the US of subsidence attributable to fracking, although the number of wells which have been tracked for shale gas is now in the hundreds of thousands.

A further major area of concern was with the impacts of normal operations in terms of noise, traffic, impacts on health, etc. All proposals for oil and gas exploration require planning permission from the relevant minerals planning authority. The national planning policy framework requires planning authorities to assess applications for all minerals developments so as to ensure that permitted operations do not have unacceptable adverse impacts on the natural or historical environment or on human health, including from noise, dust, visual intrusion, or migration of contamination from the site. In doing so, they should take into account the cumulative effects of multiple impacts from individual sites and/or a number of sites in a locality. Conditions can be placed on working hours at the site, numbers of traffic movements etc., to ensure that any such impacts on local residents remain within acceptable bounds.

Other concerns which have been expressed are not to do with the current phase of exploration work but with the implications of a possible future move to production operations, if the exploration is successful. It is by no means certain that any such operations will ever be proposed, but if they were, a different set of considerations would arise, which I address further below. But as regards the concerns which have very reasonably been expressed about the current phase of exploration operations, I consider that the consistent application of good practice by the industry, supplemented by the additional action to control seismic hazards which I am announcing today, will ensure that there will be no unacceptable damage to the environment, or threat to the health of local residents, or interference with their lives.

I also consider that the existing regulatory framework already provides the means to ensure that the industry does apply good practice throughout its operations; and that it will do so consistently. But we are taking further steps to reinforce the regime. We have already set up a strategy group on shale gas at senior official level, with representation from the main Departments engaged in shale gas regulation, the Environment Agency and the HSE, to ensure that the work of the various bodies is well co-ordinated. That group can already point to some successes in improving the co-ordination of regulation, for example, planned joint inspections of fracking operations by the HSE and the EA. And in the gas generation strategy published last week, I announced that a new Office of Unconventional Gas and Oil will be set up in DEGG to support this work as well as providing a single point of contact for investors and ensuring a streamlined regulatory process.

Accordingly, I am satisfied that fracking for shale gas can now in principle resume, and I will be prepared to consent to new proposals, subject to case-by-case scrutiny by my Department, to the new requirements to mitigate seismic hazards, and to confirmation that all other necessary permissions and consents are in place.

I should also mention one further outcome of the investigation of the tremors at Preese Hall. DECC has come to the conclusion that Cuadrilla’s response to the occurrence of the tremors demonstrated some weaknesses in its management of environmental risks. This conclusion has been discussed with the company, and they have in consequence reinforced their overall management structure, including by assigning to one board member specific responsibility for health and safety measures, and by reinforcing technical skills within the operational team. The effectiveness of these changes, and the resulting revised structure, is at present being reviewed for Cuadrilla by external consultants. Further fracking operations by Cuadrilla are in any case dependent upon the obtaining of new planning permissions and Environment Agency permits: but my final consent to new fracking operations will not be given until the conclusions of the external consultants have been discussed with the company, and any remaining points of concern addressed to the Department’s satisfaction.

As regards the implications of any future move to large-scale production, the concerns are principally of two kinds: on the one hand, concerns about the local or regional impacts on questions such as traffic movements, noise, night-time lighting etc., or on the health of people living in the vicinity, or on regional water resources, or on tourism and other aspects of the local economy; on the other, concerns about wider issues including the implications of large scale shale gas production for climate change, for the UK’s climate change policies or for renewables investment.

As regards the local or regional impacts, it should be noted that the planning system requires permission to be obtained separately for exploration and production activities (and for any appraisal phase where distinguishable). There will therefore be a full opportunity to consider the local and regional impacts, including cumulative impacts, of any proposals to initiate production activities, before any such development takes place.

Planning procedures of course already provide for full consultation with communities who may be affected, and the planning authorities may require an environmental impact assessment to be carried out. However, the academies have in addition recommended that an environmental risk assessment should be mandatory for all shale gas operations, involving the participation of local communities at the earliest possible opportunity, and that this assessment should address risks across the entire lifecycle of shale gas extraction.

DECC will therefore take steps to enhance the existing frameworks for consultation and consenting to these activities, in line with these recommendations. Licensees will be required to carry out a comprehensive high-level assessment of environmental risks, including risks to human health, and covering the full cycle of the proposed operations, including well abandonment; and to consult with stakeholders including local communities, as early as practicable in the development of their proposals. The scope of these assessments would naturally be framed by the operations proposed, so that prospective future production operations would not be in scope for an assessment drawn up for exploration activities. Cuadrilla has been asked to conduct such an assessment in relation to their proposals for further exploration work in Lancashire.

This high-level assessment may inform the work entailed by risk assessments already required, for example under the environmental permitting regulations, and which are consulted on separately by the Environment Agency, as well as work entailed by any environmental impact assessment which may be required by the local planning authority. And together, these assessments will provide a full picture of the risks and impacts to inform effective engagement with local communities.

On health impacts, the Health Protection Agency is currently reviewing the evidence base on the health impacts of shale gas, with a particular focus on the health impacts of emissions to air, land and water. This review will identify any potential health risks, and inform both future regulation and any future health impact assessments that may be carried out.

As regards the wider concerns about the implications of large scale shale gas production for the UK’s climate change policies etc., it is in general too early as yet to make any meaningful estimate of what these might be in the absence of any convincing estimate of what future production might be. But as there has been particular concern about the carbon footprint of shale gas operations, and in particular the possible impacts of fugitive emissions of methane, I should note that all shale gas operations will be subject to my Department’s long-standing policy on flaring and venting of methane. Venting of methane, which has been widely unregulated in the US prior to the recent proposals from the Environmental Protection Agency (EPA) for a new controls, is already required in the UK to be reduced to the minimum technically possible. Flaring of methane will also be required to be reduced to the economic minimum, so that where cost-effective routes for economic use of the gas are available, these must be used. These controls mean that UK oil and gas operations already meet the standards which the EPA is introducing, but the new office will ensure that these work consistently with new controls which may be introduced by the Environment Agency in applying their legislation, and that methane emissions will continue to be minimised.

At the present time, methane emissions from oil and gas operations onshore are a very small part of our GHG emissions. The current estimate is that they contribute less than 1% to the total. And the relatively small number of wells which might be drilled in the current exploration phase will not in any case substantially increase that contribution. I therefore intend to commission a study into the possible impacts of shale gas extraction on greenhouse gas emissions. This will consider the available evidence on the lifecycle greenhouse gas emissions from shale gas exploitation, and the need for further research. I have invited Professor David Mackay, my Department’s chief scientific adviser and Dr Tim Stone, the expert chair of the Office of Nuclear Development to undertake this work.

We are also taking steps to prepare the way for any future production phase, though this is likely to be some years away. We have commissioned more detailed work on the shale gas resources of Great Britain from the British Geological Survey (BGS) and this will be published early next year. I emphasise that this will provide only an estimate of the resource, the gas in the ground, and not the reserves, the amount of gas which can in practice be produced economically from that resource. Until more exploration work has been done, a significant number of wells tracked and production patterns established over time, it will not be possible to make any meaningful estimate of likely economically recoverable resources of shale gas in the United Kingdom.

Also, we will be acting on the academies’ recommendations that the regulatory bodies should assess the requirements for effective regulation of a significant future production phase, and that existing co-ordination should be maintained and strengthened. The new Office of Unconventional Gas and Oil will be taking this forward in collaboration with the other departments and agencies concerned. And the Environment Agency is already conducting a review of the implications of shale gas for its regulatory responsibilities, including the question of whether further controls and monitoring requirements are appropriate in respect of methane emissions. To facilitate future development, further consideration is being given to ensuring a streamlined and transparent regulatory process for environmental permitting.

We will also be taking steps to open the way to new onshore licensing. DEGG had already commenced a strategic environmental assessment in 2010, with a view to further onshore licensing, and conducted a public consultation in the latter part of that year. Work on the SEA has however been in abeyance following the seismic tremors in 2011. DEGG will now commission further work on the environmental implications of further licensing, taking account of all new knowledge arising since the earlier assessment was compiled, and will conduct a full public consultation on the extended assessment. The results of this consultation will be fully considered before any decisions are taken on new licensing.

Many more questions of detail have been raised over the last year or so, particularly in the course of our consultation, and in this statement I have sought only to cover the principal issues of interest to the greatest number of respondents. I have today placed in the Libraries of both Houses and placed on my Department’s website a full synopsis of the questions raised and of the Government’s responses to them as well as a response on all of the recommendations of the academies’ study group.