Shale Gas

Lord Prior of Brampton Excerpts

Tuesday 7th March 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, I too thank the noble Lord, Lord Truscott, for tabling the debate this evening. It has been a really well-informed debate, even if the noble Lord did not necessarily receive the support he was hoping for. It was so well informed that I find that everything that I was going to say in my speech has already been said by noble Lords, so I will just run through the main issues that have been raised.

First, I do not think I agreed with a single thing that the noble Lord, Lord Truscott, said in his speech, with one exception, when he said that Poland was an example of where fracking has not worked—the shale was too tight and the gas would not flow—and that therefore you should not count your chickens. Of course he is right about that: we should not count our chickens about the prospects for shale gas, because we have not done the exploration work to know whether or not we can count the chickens. Until we do the work, we are never going to know what we have, so I could agree with him in that respect.

My noble friend Lord MacGregor, who chaired the Select Committee looking at fracking, said that the committee was unanimous that the benefits of fracking exceeded the risk, and his criticism of the Government was not that progress was too fast but that it was too slow. He drew attention to the fact that in the US, the cost of production now has come down, from probably over $50 per barrel of oil equivalent when they started, to $25. It is now taking 20 days to drill a well. The success in the US has been phenomenal, which is something to be celebrated—it has been transformational. It has transformed the American economy and geopolitics. It has of course been hugely resented by many producers in the Middle East and in Russia, as my noble friend Lord Ridley pointed out, because the price has come down. Economies such as the Russian one have suffered hugely as a result.

The noble Lord, Lord Young, referred to the fact that we have some of the toughest safety regulations in the world—probably the toughest. He referred to the fact that we have 50 years of experience in onshore and offshore oil and gas exploration and to the irresponsible scare stories, which are not just limited to us in the UK but are also there in the US. Much of the US production would have come more quickly without those scare stories. It is worth pointing out that in 2000, there were 26,000 fracked wells in the US, accounting for 7% of US total natural gas production. By 2015, the number of wells had grown to 300,000, equating to 67% of total natural gas output in the US. It shows what can be done. What they have done in the US is an extraordinary achievement.

The noble Lord, Lord Young, also mentioned the huge economic benefits to employment and wealth that have been created by fracking gas. It is not just the direct employment consequences—it is the impact on the economy as a whole. My noble friend Lord Ridley—in a point picked up later on by the noble Lord, Lord Mair—said that there was no evidence of any groundwater contamination in the US, and that it had cut greenhouse gases. He went on to say that fracked gas and the LNG that comes from it are vital feedstocks for the chemical industry. This point was also raised by the noble Lord, Lord Polak. It is an absurd situation where we are now bringing LNG from the US into Grangemouth to be used as a feedstock there, or, indeed, piped over to Teesside to be used as a feedstock in Teesside. Not only is the carbon footprint much larger, but, of course, it is much less economic for the chemical industry in this country. There is a risk, of course, that the USA now, instead of shipping LNG, will convert that gas in the US into other products, therefore undercutting our chemical industry in the UK.

The noble Lord, Lord Mair, referred to the work done by the Royal Society and the Royal Academy, which sounded pretty conclusive. They found that fracking was unlikely to contaminate groundwater, and that the earth tremors were minimal, so long as there was proper regulation and monitoring and the well operations were properly managed. He said that scare stories and mistruths abound, and he is absolutely right in that regard. The noble Lord, Lord Smith, not only chaired the task force on shale gas but was, at the same time, chairman of the Environment Agency. Again, his conclusion was a very clear one—that, on balance, shale gas was a good thing for the UK.

On the point made by the noble Lord, Lord Hodgson, about the shale wealth fund, he was slightly putting the cart before the horse when he referred to the Norwegian sovereign wealth fund being £850 billion. We have not yet got any gas out of the ground over here. It would be a lovely problem to have. As he knows, the Government are consulting about forming a sovereign wealth fund equivalent, which would be funded by 10% of tax revenues; that is still being consulted upon.

Of course, I do not want to minimise the points made by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Grantchester. There are, of course, environmental issues. It would be foolish to pretend that they should not be taken into consideration. However, gas is the cleanest fossil fuel when combusted, producing half the carbon emissions of coal and it is expected to have a carbon footprint comparable to that of LNG. Shale gas could, therefore, act as an effective lower carbon bridge technology while we develop renewables, improve energy efficiency and move towards a lower carbon economy.

The Infrastructure Act 2015 inserted safeguards for licensing onshore hydraulic fracturing into the Petroleum Act 1998. These include the assessment of environmental impacts, groundwater monitoring and community benefits, and the guarantee that the associated hydraulic fracturing will not take place within “protected groundwater source areas” and “other protected areas”.

We have banned fracking within 1,200 metres of the surface, in national parks, the Broads, areas of outstanding natural beauty, World Heritage Sites, and areas that are most vulnerable to groundwater pollution. We are confident that these measures will protect our most valuable areas for the future.

In conclusion, the potential benefits of fracking in the UK are enormous. We have seen how transformational they have been in the US. If we have the right regulatory system around it, and take the right measures of protection for our environment, then this is something that this Government are wholly in favour of.