Shale Gas Profits

Debate between Mark Hendrick and Lord Barker of Battle

Wednesday 19th December 2012 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

I congratulate my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw), who yet again demonstrated why he is known as such a formidable, and probably unequalled, champion of the interests of his constituents. He also demonstrated his strong commitment not just to his own constituency, but to the wider area of Lancashire. Indeed, he successfully secured a wider debate a few months ago on energy and infrastructure in Lancashire, in which shale gas was also covered. That builds on his tireless work on this issue, which he continues to go at, terrier like, on behalf of his constituents.

I apologise for my croaky voice, Mr Bayley, I hope that it lasts. The focus of this debate—the community share of shale gas profit—comes from a slightly different perspective than the previous debate secured by my hon. Friend. I note that he is joined by those equally formidable constituency Members of Parliament, my hon. Friends the Members for Fylde (Mark Menzies) and for Redditch (Karen Lumley), who have been here throughout the debate.

The question in this debate is how development of new energy sources, such as shale gas, can provide benefits not just to the country as a whole, but as my hon. Friend the Member for Lancaster and Fleetwood rightly says, to the communities where they are developed. As the Secretary of State said only last week, shale gas may have an important part to play in our national energy mix and our economy, but we must ensure that communities benefit and that there is proper environmental regulation.

I understand the issues that were rightly raised by Government colleagues and by the hon. Member for Preston (Mark Hendrick), not just about sharing the benefits, but about the need to ensure that the highest levels of environmental integrity are achieved, and about what that means.

I make it clear at the outset that we recognise that there is an important issue of fairness here. We do not yet know whether shale gas in this country is a commercial proposition at all. We hope that it is, but we are even more unsure what scale of development may be proposed and if it can be established that there is a geological potential for an economic development. It is still early days. But it is clear, from looking at what has happened in the US, that if shale gas production proves economic, the scale of development that might be proposed could be substantial, or “industrial”, as my hon. Friends have said.

I stress that the important word is “might”. It is already clear that the Bowland shale in Lancashire is not an exact analogue for any US shale, and it is not to be assumed that the pattern, or patterns, of development which have been followed in the US will necessarily work here. But there is at least the possibility that proposals for one or more large-scale gas production projects in the UK would involve large numbers of wells drilled over a substantial period of time. I have no doubt that if such proposals are made, the planning authority will do what they can to make the impacts of such a development, in terms of noise and general disturbance, traffic movements and night-time working—all the many ways in which an industrial development can impact on the lives of those who live nearby, particularly in a quiet, tranquil rural area—as small and acceptable as possible. I have no doubt that the planning authority will do what it can to minimise and mitigate such impacts. Even so, there is no question but that a large project of such a kind would have impacts on the lives of the people living in the areas around.

In such circumstances, it is only right and reasonable that the communities that suffer the inconvenience of the development should have a share in the economic benefits. However, while I and my colleagues at the Department of Energy and Climate Change wholeheartedly agree with the principle articulated at length by my hon. Friend—perhaps we can call it the Lancaster and Fleetwood principle—at such an early stage I am afraid that we simply cannot propose exactly how that would be done or what mechanisms might be appropriate.

[Mark Hendrick]

Will the Minister give way?

[Gregory Barker]

I shall make some progress, if I may, because I want to reply to the many important questions raised.

I hope that my hon. Friends the Members for Lancaster and Fleetwood and for Fylde, who have engaged in the debate sensibly and robustly, take comfort from my reassurances but appreciate our position given our state of knowledge and understanding of the sector. As such understanding grows, there can be genuine dialogue and discussion between the company proposing the project and the communities that might be affected. The Government will take a clear interest in such developments.

Shale gas has been of increasing importance in the US for some years, but exploration has only just begun in the UK. The potential to produce shale gas from a suitable formation can only be established by fracturing the rock. The fracturing of the first shale gas well in the UK, however, at Preese Hall near Blackpool last year, resulted in noticeable seismic tremors. Seismic activity at such a level could not cause any damage, but was not an expected consequence of the fracking activity, so DECC rightly suspended all fracking operations for shale gas pending a thorough investigation of the causes of the tremors and of the scope for mitigation of seismic risks in any future operations of that type.

The coalition Government carefully reviewed the evidence, with the aid of independent experts and of an authoritative review of the scientific and engineering evidence on shale gas extraction conducted by the Royal Academy of Engineering and the Royal Society, and concluded that appropriate controls are available to mitigate the risks of undesirable seismic activity. The new controls will be required by DECC for all future shale gas wells. In principle, on that basis, we are prepared to consent to new fracking proposals for shale gas if all other necessary permissions and consents are in place. In practice, it will be well into next year before any new exploration work has all the necessary consents to proceed. Whether any production operations are proposed will depend on the success of exploration work but, in any event, that is likely to be some years away yet. The new controls on seismic risks do not remove any of the existing regulatory controls and requirements. Consistent with previous practice, my Department will not give consent to specific fracking operations until all other consents are in place, including planning permission, the obtaining of environmental permits from the relevant environment agency and scrutiny by the Health and Safety Executive.

We are conscious that many people, including residents of Lancashire and other areas where shale gas exploration might be contemplated, have other concerns besides the seismic risks. Indeed, for most people, they are not of most concern, as my hon. Friend the Member for Lancaster and Fleetwood eloquently pointed out. In the US, the development of shale gas has been accompanied by increasing debate on its environmental impacts. Many of the incidents reported have, on investigation, not been shown to be connected with oil and gas activity, although they have given rise to concerns that in themselves are entirely reasonable. Residents in such areas want, therefore, to be assured that their water will not be contaminated with gas or toxic chemicals, that the air will not be contaminated with noxious gases, that there will be no damage from earthquakes and that other kinds of disturbance such as traffic, lights and noise will be kept under control. We understand that. In considering the concerns, we have had the benefit of the earlier report on shale gas by the Select Committee on Energy and Climate Change and of many authoritative reports from the US, including two from the Secretary of Energy’s advisory board.

In the UK, the industry has a good record, and robust regulatory controls on all oil and gas activities are already in place. On water contamination, which my hon. Friend discussed, all such operations are subject to scrutiny by the appropriate environment agency, the Environment Agency in England and for the time being Wales and the Scottish Environment Protection Agency north of the border. It is an offence to cause or knowingly permit poisonous, noxious or polluting matter to enter controlled waters, which include groundwater. The environment agencies are statutory consultees in the planning process and must be consulted on all proposed borehole operations. A permit from the agency is required if fluids containing pollutants are to be injected into rock formations that contain groundwater. A permit may also be needed if the activity poses an unacceptable risk of mobilising natural substances that in themselves could cause pollution. The permit will specify any necessary limits on the activity, any requirements for monitoring the chemicals that may be used and any appropriate limits on permissible concentrations. Regulators will take a risk-based approach; if the activity poses an unacceptable risk to the environment, it will not be allowed.

The reports I mentioned also emphasise the importance in such a context of the integrity of the well. That issue is central to the regulation of the safety of well operations by the HSE, which must be notified of all drilling operations for oil or gas and will scrutinise the well design and the operational plan. Additionally, the regulations require a full review of the proposed and actual well operations by an independent competent person, the well examiner.

The use of chemicals in frack fluids is another matter that occasions much concern. Again, the environment agencies take a risk-based approach to the regulation of the use of chemicals in shale gas fracking activities. The hazard potential of all substances proposed—

[Mark Hendrick]

Will the Minister give way?

[Gregory Barker]

I will not, I am afraid. I am close to coming to the end of my—

[Mark Hendrick]

I thought the Minister wanted to make some progress.

[Gregory Barker]

I do, to get to the end of the points made by my hon. Friend the Member for Lancaster and Fleetwood.

The hazard potential of all substances proposed to be injected into the ground will be assessed, and the use of substances hazardous to groundwater will not be permitted.

[Mark Hendrick]

On a point of order, Mr Bayley, the subject of the debate involves the benefit to the people of Lancashire. The Minister is going into a great deal of technical detail about the safety issues, when he should be discussing the benefit to the people of Lancashire.