Energy: Fracking

Lord Teverson Excerpts

Monday 17th March 2014 Grand Committee

[Lord Teverson (LD)]

My Lords, I, too, thank my noble friend Lord Borwick for introducing the debate, which has all sorts of strong international, let alone national, relevance at present—Ukraine has already been mentioned.

It is not often that I would almost entirely agree with a report from the Centre for Policy Studies. It is not necessarily a body of intellectual stimulation that I look to—I look more to Policy Exchange or even the IPPR—but in this instance, I think the report is on the whole excellent. For a start, it takes the whole issue of global warming to be important in terms of environmental pollution. It also deals with the fact that we have all sorts of pollutants now from the various ways that we create energy that cause real health problems in the short term. I was pleased to read that the most important policy action is to reduce energy demand and increase energy efficiency, so that we do not have to do as much of all this. That is the cheapest and best economic approach to this, although clearly, we know that we will always need energy in a global and national economy.

To me, from a UK perspective, shale is an important resource that should be developed. From the most basic point of view, our North Sea oil and North Sea conventional gas production is falling very rapidly. For our national strategic energy and economic needs, it can be at least a substitute. Not only that, as the noble Lord, Lord Lawson, said, we have one of the best environmental records in the world. We should not be afraid of the environmental aspects and threats of shale gas and oil; we need absolutely to ensure that we enforce the right standards. I have every confidence that that is possible for us to do that from our long and deep experience in that area and our very successful track record. However, we should be aware that we have doubly to make sure to begin with, because if we have a problem at the beginning of this exploration and exploitation, there is a serious reputational risk for the industry.

One of the main themes of the report—this is absolutely right—is that the most important thing that shale gas has done so far and should do for the future is to substitute for coal, which is an absolute no-no fuel in terms of environmental damage. The report is quite kind to the UK about coal. It points out strongly that with Germany now at 50% and the increasing coal capacity in China, despite all the renewables investment and everything else, in the UK over the past 18 months or two years, we have been at 40% in our coal energy production. Of course, most gas in this country is used for heating rather than for providing electricity. If shale gas means that we manage to reduce the wholesale gas price or at least hold it steady, which seems to be critical, that is a great thing for consumers and fuel poverty.

However, in the longer term, we have to remember that carbon is a problem. We cannot keep on pumping it out into the atmosphere at an increasing rate, however bad we are as an international community at solving that problem. So this has to be an intermediate, medium-term strategy, not a long-term strategy, unless the long-promised carbon capture and storage happens. I tend to be slightly sceptical in that area, but I am sure that the Minister will put me right on that, as I know that she has done and continues to do important work in that area, and there has indeed been progress.

It is not necessarily predictable how successful shale gas will be. We all hoped that Poland would push it forward—again for reasons of energy security, Gazprom and Russia—but, as I understand it, Poland has not been that successful in developing that fuel. So there is a risk and hence the need for exploration and pushing the project forward.

In terms of displacement, we found that coal has been substituted very benevolently and positively in the United States, but of course large amounts of that coal have come to our shores and been used as a substitute for conventional gas in electricity generation. That coal is going to go somewhere, even if we displace it from existing economies or where shale gas is strong. We need to have a strategy for that, and obviously I would suggest an international emissions performance standard which we would all need to comply with. However, that is not something which is going to happen too quickly.

On the environmental challenge, the quantity of water needed for the process is a genuine issue which we need to prove can be solved. I am not technically or scientifically competent to talk about the move to using brine, but it sounds promising and certainly something we need to make sure happens. Despite the floods we have had, particularly in my part of the world, I am sure that water shortages will come back to haunt us in due course. I welcome the report. Shale gas is important to this country and globally, but what happens to the coal that it will displace? That is a key issue.

The paper makes some important points about methane leakage, and I would be interested to hear what research the Government are undertaking into the value of methane leakage and what the quantities are.

On the energy security side in the macro area, once again we are in a position where our reactions to the Russian Federation on Ukraine and Crimea must be tempered by the fact that to a certain degree our hands are tied behind our back because of our dependence on Russian gas. It is to be hoped that shale gas might substitute for it in the medium term. The Nabucco pipeline project is seen as pretty much dead, but I would like to understand what Britain and her European partners are doing in terms of reconsidering how we transport conventional gas supplies to eastern and central Europe without going through Russian Federation territory.

--- Later in debate ---

[Baroness Verma]

I apologise for misrepresenting what my noble friend said—absolutely. The Environment Agency is developing a single application form for permits. In 2014, the Environment Agency will aim to reduce the time for low-risk activity from 13 weeks to approximately two weeks. I hope that that addresses the point raised by my noble friend. Of course, it is not about reducing regulation; we do not want to see regulation reduced, but we also do not want to see barriers where they do not need to be in place.

My noble friend Lord Teverson mentioned CCS projects. As my noble friend is aware, we were able to go forward with two of them at Peterhead and White Rose—the Drax project. The Government have committed £1 billion to CCS—a commitment from this Government to make sure that we are not lacking in ambition for CCS. My noble friend also mentioned dependency on Russian gas. I reassure him that only a small percentage of our gas comes from Russia. By and large we are better connected, with 50% being our own gas and a larger proportion of what is left coming from Norway.

[Lord Teverson]

I entirely realise that and was talking about a broader European perspective. Actually, we import a lot of Russian coal.

[Baroness Verma]

I think my noble friend will agree that that is a different debate.

My noble friend Lord Caithness asked whether shale gas was more leniently regulated at European level. I reassure him that shale gas is regulated in the same way as any other energy sector. A recent proposal in the European Parliament to require environmental impact assessments in all shale projects did not proceed. We welcomed this because we do not want minor impact drilling such as taking core samples impeded.

The noble Baroness, Lady Jones, said that fracking would cause water contamination and that there was evidence to prove it. We have seen no evidence. The Environment Agency is one of the most respected regulators globally, as are many of our regulators, and we would be careful to consider the advice that we were given by our regulators before we proceeded to do anything that would allow any kind of contamination. Hydraulic fracturing will take place more than 1,000 metres below groundwater level, where there are impermeable layers of rock which will stop the gas and fracking fluids escaping into the water.

The noble Baroness also touched on tackling cold homes and fuel poverty. The Government have done a lot to respond to those challenges and measures are in place to address the issues that she has raised. There is much more to be done but this Government have been very proactive about addressing the issues where the people who need help most and quickest are getting that help.

The noble Baroness, Lady Worthington, said that shale gas cannot be seen as a panacea. The Government have never suggested that shale gas is a panacea. We have said that it is important that we explore the possibilities that shale gas will bring because we need energy security. If shale gas is explored and exploited, it will become an important part of the energy mix. We all know that gas and oil will still play a large part in our wider energy mix.

I am not quite sure from the noble Baroness’s remarks that she understood her own party’s position on fracking. However, it would be unhelpful to close down the debate on the real benefits that shale gas can bring. I recommend that we have further informed debates because this debate has explored a number of arguments in this critical policy area. I look forward to those debates, but let us bring them forward as debates on fact, not on ideology. We need to reduce our dependency on external energy sources and ensure that the people of the UK have affordable energy and energy security but understand that the sector is properly regulated, can deliver all those things and can contribute towards our economic growth.

This has been an interesting debate. I am grateful to my noble friend Lord Borwick for raising it. I suspect that we will have many more debates on the issue.