Shale Gas and Oil (EAC Report)

Lord Borwick Excerpts

Tuesday 4th November 2014 Lords Chamber

[Lord Borwick (Con)]

My Lords, the report of the Economic Affairs Committee is extremely sensible. It quite rightly stresses the urgency with which the Government must act to start the shale revolution. We have seen what economic benefits gas extraction can bring. North Dakota’s economy grew by 13.4% in 2012, according to a report by the US Bureau of Economic Analysis. That was nearly three times the next fastest state, Texas, and dwarfed the national average of 2.5%. I would love to see that kind of growth in the north-west and other regions of the UK. However, the community benefit schemes seem to be a tax pretending to be something else. Are local councils the winners here, rather than local people?

By giving these taxes a nice name, we seem to be just trying to make them more acceptable, although one up side is that this shows that tax has become a dirty word. However, it just goes to show that Governments devising new taxes would rather not call them what they are. Most key services are funded through a central government grant anyway, so it would be a tragedy if new revenues were used badly, or squandered on pet projects. Therefore, these community benefit schemes may mean that the central grant is reduced, leading to a further reliance on hidden revenue streams such as this. Of course, those living in an area that sees a boom from gas extraction should benefit, and they will. Shale extraction will bring new industry, more jobs, more skills and knock-on growth for the whole local economy. It just seems to me that the local authority need not be the conduit for those benefits, as I am not convinced that the proposed methods will actually benefit people as much as they should.

We should also consider the environmental benefits of shale extraction as an economic opportunity. It has been estimated, most notably by Peter Atherton of Liberum Capital, that the cost of renewing our energy infrastructure and implementing both the EU carbon reduction strategy and our own renewables strategy will run into the hundreds of billions of pounds. In short, meeting renewables targets and pursuing them with inefficient methods of energy production will be very expensive.

The environmental benefits of fracking should not be forgotten. As an excellent paper by Professor Richard Muller for the Centre for Policy Studies found, shale gas extraction can reduce not only greenhouse gas emissions but a deadly air pollution known as PM2.5. It is currently killing more than 3 million people each year worldwide, primarily in the developing world, where traditional fossil fuels are still burnt in larger proportions than in the western world.

Of course, the IPCC announced just last week that the use of fossil fuels should be phased out entirely by the end of the century. But even if the IPCC’s target was feasible—or desirable—surely the switch from coal to natural gas must be encouraged as soon as possible. Perhaps we can then rethink our energy mix—and relieve taxpayers and bill payers of the burden of massive subsidies for inefficient methods of energy production.

We should not forget that climate change is a global issue. The volume of CO₂ produced worldwide is the problem, not just the amount produced in the UK. The task is huge. What we do here is of course important, but a year’s worth of reducing our CO₂ emissions would be wiped out in a matter of days by China’s energy growth. That is why time is of the essence with regard to shale extraction, and we should be sharing the technology across the globe.

Perhaps the most important benefit of getting on with shale extraction will come from increased energy security. At the moment Europe imports about 30% of its natural gas from Russia—and the Russians certainly want it to stay that way. At a global economic conference last year, Putin said fracking means that, “black stuff comes out of the tap”. He has also previously said that shale extraction would directly reduce Europe’s competitiveness, as it would be “more expensive” than Russian gas and oil. That indicates he is worried about Europe breaking free of dependence on Russian resources. Again, we can look elsewhere to see how crucial it is to break that dependence.

On current projections, America will be energy self-sufficient by 2035, with some predicting it might come even sooner. The pattern is the same elsewhere. Estonia is the world’s first country to meet all its power needs from shale gas. It even has enough left over for fuel exports for the shipping industry. We should be doing all we can to emulate that here.

The Economic Affairs Committee made a very sensible suggestion; namely, its recommendation that a Cabinet committee should be established to ensure that the Prime Minister’s commitment to shale gas extraction is matched with action. But the Government’s weak response is easily mistaken for that of a Civil Service that does not understand the importance of action. Will my noble friend the Minister assure me that that is not the case?