Fracking

Julian Sturdy Excerpts

Tuesday 25th November 2014 Westminster Hall

[David Mowat (Warrington South) (Con)]

It is a pleasure to speak in the debate and I congratulate the right hon. Member for Lewes (Norman Baker) on securing it. I agreed with the first part of his speech, when he said that energy policy has three components—low cost, security of supply and decarbonisation—but we perhaps parted company afterwards.

There is no contradiction in supporting renewables and supporting fracking. In this country, renewables represent one tenth of the energy we get from coal and oil. I would like renewables to grow faster, but part of reducing carbon—I will say more about this later in my remarks—is the displacement of coal, which is very polluting, by gas. In the United States of America, there has been a massive reduction in carbon due to the shale revolution.

People have said that we should not bet the whole farm, or the whole world, on shale, and I agree. Nobody is saying that shale is a panacea to fix everything. However, we should evaluate the potential of shale in a safe, constructive and thoughtful manner. That is all I am saying.

People sometimes ask, “Should we frack or not frack? Should the world go down this route?” The world has already started down that route, and it is worth pausing to consider what has happened in the USA during the past 10 years. Yes, part of the picture is that gas prices have fallen from $10—roughly speaking, that is still the price in the UK—to something like $3 or $4, or by a factor of about a third. The consequence of that is lower domestic prices, less fuel poverty and a much revitalised manufacturing industry, as well as lower costs of feedstock for use in the petrochemicals industry, which has seen a renaissance in the USA.

We may not want a part in any of that—in Lewes, it may not matter, but it matters on Teesside, where marginal chemicals investment decisions are being made on whether to put the next production unit or piece of kit on the eastern seaboard of the USA or in our country. It also matters in what I have heard described as the “desolate north-west”, where a large number of jobs depend on energy-intensive industry. About 900,000 people in our country work for industries that rely on relatively cheap energy. For us to say that that does not matter, or that we should ignore it, strikes me as arrogant, wrong and disappointing.

I have heard it said, including today, that fracking will not reduce the price of gas in Europe. That argument is a reasonable one. We have a European gas system and get most of our gas from Europe—in fact, from Russia—and not than from the UK, although we are getting some from the UK. It is true that fracking will not automatically reduce cost but, generally, when there is more of something, the price comes down.

[Julian Sturdy (York Outer) (Con)]

My hon. Friend was probably coming on to the point I want to make. Is it not the case that oil prices are currently falling as a result of the worry in the middle east about competition from the US in the form of shale gas?

[David Mowat]

My next sentence would have been that oil prices have fallen by about a third in the past three or four months, because the USA, which was a large global market for oil, is no longer importing oil. The result is huge in terms of geopolitics and the position of countries such as Saudi Arabia. Of course, that cost reduction would happen with gas, too.

It is not only the cost of the material that matters, but the economic activity that comes with exploiting it. Such activity is not a displacement of renewables. Aberdeen and the areas around it have the four parliamentary constituencies with the lowest unemployment rates in the UK—the rates are lower even than those in the south-east of England and London. That record has been built on the back of the North sea oil industry, and some of that activity will happen if shale reaches its true potential.

People have said that that potential may not be there. I believe I heard the right hon. Member for Lewes say that the reserves may not all be recoverable. That is true. The assumption is that 10% of the technically available reserves will be recoverable. If so, that means 50 years of supply in the UK. It may not be that 10% is recoverable—it may be 1%—but let us find out, because a load of MPs in a room talking about it will not allow us to understand whether the true figure is 1%, 10% or 15%.

I mentioned our energy security and gas imports. They mostly come from Norway, but increasingly come from Qatar. The first contract between Centrica and Gazprom has been signed, starting now, so gas is also starting to come from Russia. The gas situation has changed in the past 15 years. Previously, we were a gas exporter, but no longer.

It is also true that we have security of supply problems in terms of keeping the lights on in this country. During the past decade or two, we have failed to replace power stations. We are turning off our coal-powered stations—we are the only country in Europe doing that at scale. The consequence is that the capacity margin here for next year is thought to be 2%. We are not building any kind of power stations. That needs to change. The Minister might well talk about that in his remarks.

Any student of the subject who does not believe that nuclear power globally is part of the decarbonisation solution does not have a thoughtful response to offer. Last year and the year before, 87% of the world’s energy came from fossil fuels. Of that, by far the majority came from coal and oil. If we could replace that coal and oil with gas—that is a big aspiration and it will not be done overnight—it would be equivalent in decarbonisation to the world increasing by nine times existing global renewables.

--- Later in debate ---

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

It is great to follow the hon. Member for Brighton, Pavilion (Caroline Lucas) and my hon. Friend the Member for Warrington South (David Mowat), because my view sits somewhere between Brighton and Warrington in this great war of experts, which has not helped our discussions.

If I have only got a few minutes, I will focus specifically on the situation in my constituency, where 23% of the land is open to licensing to test and explore fracking sites for shale gas. My hon. Friend made a cohesive speech and talked about there being no bonanza. Unfortunately, to many people in my constituency, it sounds as though people in London are saying that there is a bonanza. There has been talk about £366 billion of recovery gas under the Bowland shale, which crosses my constituency. As he said, there has been talk of us having the revolution that has happened in America, but when we enter into the argument and say, “Can we possibly have a share of that bonanza?”, we hear, “The costs of developing this are quite high and you don’t understand.” What is it to be? Are there vast profits to be made from this or not?

The sheer fact that has taken a great deal of time to land is that England is not the USA. Whether someone thinks that that is a good or bad thing is entirely up to them. I think that its development might be a good thing, because I have faith in our regulatory systems and their accountability. Those systems are a measure far above the USA and can provide security to people. The biggest area is that local landowners and residents do not receive any return from any possible development of shale. In fact, the Government’s Infrastructure Bill removes the age-old right for someone to have a say on who drills under their land and their house. That is a heavy-handed manoeuvre, which reinforces the view in my part of the world that the Government are bowing down too easily to international oil and gas companies and their financial interests.

There are international companies and American examples, experts are legion, and fundamental rights are being taken away. Is it any wonder that conspiracy theorists are having a field day across the north-west? The only response is that fracking is in the national interest in terms of energy needs and that the areas to be fracked will get a financial return after all. A Government press release states:

“Companies have pledged…to provide community benefits in areas where shale is commercially extracted.”

The north-west has seen company pledges for community benefits from offshore wind farms, but we are yet to see any money, because the companies decide who they give it to and what they will give it for.

We are told that £100,000 and 1% of revenues for every production site—estimated at between £1 million to £7 million a year—will apparently be given to communities near wells, but a number of issues then arise. Who is the community? Is it those on top of fracking sites or the local government ward or parish where fracking takes place? How will the money be distributed? Will that be done by household or through the local council? Can it be spent on anything or will the companies decide? Who guarantees that companies will pay up following takeovers and so on? Nothing in this is statutory. The Government have also promised that, on top of the 1% of revenues, local councils will now get 100% of business rates, which is a late addition to the financial promises.

All that is welcome, but it is confusing and last-minute when for months we in Lancashire have attempted to argue on a cross-party basis that such promises miss the point. There is no definition of “community”. There is no statutory guarantee. There is no guarantee that a future Secretary of State for Communities and Local Government will not take the financial rewards into account when deciding on central grants, so that nothing extra will be gained from fracking.

[Julian Sturdy]

My hon. Friend makes a powerful point. The potential benefits of fracking may prove transformative, but they will only ever be achieved with local community support and the necessary safeguards. Community benefits play a key role in that. Communities need to know exactly what their rights are, but they do not at the moment.

[Eric Ollerenshaw]

For once, I agree with a Member from Yorkshire. My hon. Friend makes a real point. I pay tribute to my hon. Friends the Members for Wyre and Preston North (Mr Wallace) and for Fylde (Mark Menzies), with whom I have been working to argue for some form of sovereign wealth fund for Lancashire, into which the funds will be paid. It would have representatives from local authorities, so it would not be part of the local authority grant system and would represent something extra in return for fracking. As the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) said, the reserves will not last for ever, but the fund would represent something that we can say we got in return. It is great to hear the Chancellor and the Minister recently make positive noises about such a wealth fund and INEOS talk about a 4% share of revenues, rather than just 1%. In addition, basing the new national college for onshore oil and gas in Blackpool is a positive move that demonstrates the possibility of long-term jobs to benefit the most-affected areas.

In conclusion, we need to know the scale of investment into the fund—if it happens—the area covered by the fund and the statutory underpinning that will accompany the fund. Only then can we hope to get back the majority political consensus across Lancashire that we had a few years ago.