UK Shale Gas

Eric Ollerenshaw Excerpts

Thursday 18th July 2013 Westminster Hall

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

It is a pleasure to serve under your chairmanship, Mr Bone, and to have your understanding that I may have to nip out and see a Minister about a school. I hope that I will also have the understanding of other hon. Members.

I congratulate the hon. Member for Brighton, Pavilion (Caroline Lucas) on ensuring that we could have this debate. I think that this is the fifth time in 18 months that we have had such a debate, and my right hon. Friend the Minister has had the pleasure of my company and that of other hon. Members only in the last few days on pretty much the same topic. I will try to take a different tack from the hon. Member for Brighton, Pavilion, given that I represent a constituency that sits on the majority of the Bowland shale, which apparently is becoming the nirvana of plugging our energy gap. That is how it seems to many of my constituents, who are worried on a number of grounds.

Personally, I have always tried to take the middle ground. I am not, and never have been, completely set against the use of shale gas in the UK’s energy mix. However, following conversations with constituents and having done my own research, I do have concerns about the safety and the environmental aspects of the fracking process. That includes, in particular, the integrity of water supplies for those who draw water from their own boreholes and not from the mains supply. That is an issue that I keep raising, and I have raised it in meetings with companies and civil servants, who still do not seem to understand that there are people in Lancashire who do not have a mains water supply. They are clearly concerned about the possible contamination that may occur with a process that goes on below the water table; but more importantly, they are also concerned about the quantities of water taken from the water table to use in this process. They are still waiting to have those questions answered.

My constituency is right next to where the small earth tremors happened. Test drilling at Preesall in the Fylde constituency was stopped to check what was going on. As hon. Members can imagine, in a county that was already seeing the speed at which people were trying to get to the shale gas but hearing few answers, the fact that a small tremor happened—whatever one wants to argue about the tremor itself—led to extremely serious worries among my constituents.

I accept that, since then, the Secretary of State for Energy and Climate Change has put in place a number of additional safeguards. Certainly, the regulatory system has been beefed up. He has also confirmed that all data from the exploratory process will be monitored to assess further the environmental impacts. The additional safeguards; the monitoring of seismic activity; a strengthening of the regulations in relation to wellhead integrity; and—this is the important one for me and I am grateful to the Energy Secretary for it—the presence of an independent expert on-site, while fracking takes place, are all moves in the right direction. They are important measures, but I believe that more can be done to strengthen things further, particularly the water safety element.

I understood the hon. Member for Brighton, Pavilion to refer to the DCLG in terms of the planning regulations, and we in Lancashire are waiting to see the nature of them. I hope to see very strong roles for the Environment Agency and the Health and Safety Executive throughout this process. There needs to be some understanding that the area of the Bowland shale is rural Lancashire, so there are extreme concerns about the impact not just on the ground, but on some of the most outstanding countryside that we have in this country. We need to be assured that each site will be assessed on its own merits in terms of how it affects the local landscape. I have always made the same point in relation to applications for wind turbines, and it would be wrong of me to approach planning consents for shale gas well pad sites differently. Local people must be allowed to have a full say in the planning process.

I will now return to a familiar theme. Hon. Members have heard this long and hard from me, but the issue still concerns me. If we are to have large-scale extraction of shale gas, how will that represent a bonanza for the local community? The mineral rights belong to the Crown, to the duchy or to the county, and local residents will not see the sums that communities and landowners in the US or Europe could get. Moreover, the statements on the number of jobs that will be available are not convincing enough for me. Promises are being made, but I do not believe that this activity will create large-scale employment opportunities across Lancashire.

I accept that a move to industrial-scale production of shale gas has not been advocated by the Energy Secretary at this stage, but it does look as though there is more and more evidence that economically viable extraction is possible. I have seen a reference to £366 billion-worth of extractable gas from the Bowland shale. Therefore, the community’s share of the profits needs to be sorted. I am determined that if Lancashire is to produce shale gas that benefits Lancashire and the rest of the country, Lancashire residents will get financial recompense.

We have now heard that a community compensation scheme will be established, which is good news. However, we are told that it will be a voluntary scheme, run by the United Kingdom Onshore Operators Group. The plan is to provide £100,000 per well at the exploration stage, and once production starts, 1% of all revenues generated during the well’s lifetime will be allocated to the local area, with one third going to the county and two thirds to the local community. That is a good start, but I and others in this Chamber would like to see a lot more. We want to see more clarity, more certainty, a guarantee of additionality and, ideally, more money.

[David Mowat]

My hon. Friend is making a number of strong points on behalf of his community in Lancashire, and I agree with them all. I will just draw his attention, though, to the unemployment figures that came out yesterday. The three constituencies with the lowest unemployment in the country are all around Aberdeen, and that has been achieved without community transfers. Does my hon. Friend not think that there will be a bonus in terms of economic activity, potentially centred on his constituency?

[Eric Ollerenshaw]

On balance, my hon. Friend makes a fair point. It has been put to me that, if the area were the first where fracking went ahead, the potential for university research, engineering and skills would be an advantage, but as I have tried to explain, against that is the fact that we have had one test drill, which caused an earth tremor. We have seen nothing else, and we need to see what one of these well pads does to the environment. No one has seen that yet.

[Dan Byles]

I know that my hon. Friend is looking at the issue carefully, as well he should. Does he agree that we will be able to answer these questions only if planning permission is granted for the next series of exploratory wells? Only when we have wells being drilled and operated can people look, sniff and prod, and we will then know what the wells look like and what the impact will be.

[Eric Ollerenshaw]

My hon. Friend makes an extremely valid point, but he must understand that we then get the argument that, because we have had exploratory wells, we obviously need to go ahead since we have spent all that money on exploration. My constituents need assurances that the wells are exploratory, that they are part of a pilot and that there is the possibility that we can close down the whole thing if something else goes wrong. Those are the kinds of assurance that they want.

The community fund that the Onshore Operators Group will apparently be in charge of will provide more money locally, but there are still questions about what the local community is. Will funds go to community groups, parish councils or even district councils in my area, such as Wyre borough council or Lancaster city council? They are all below county council level and there is a huge spread of locality between them. What will the money be spent on? Could it come in the form of cash payments, reduced energy bills, building community facilities, reduced council tax bills or affordable housing contributions? If that kind of money is spent in those ways, there are possible tax implications, which is how the problems with the Shetland Charitable Trust developed.

[Tessa Munt (Wells) (LD)]

The hon. Gentleman is probably already aware of the Sullom Voe agreement, under which community benefit is brought into the community at parish level. I believe that for every barrel of oil taken from Shetland Island waters, a number of pence—totalling something like £23 million or £24 million—goes to the Shetland Islands council for it to distribute. That is probably a good model for us all.

[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.”