Shale Gas (Lancashire)

Michael Fallon Excerpts

Tuesday 16th July 2013 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

May I join colleagues in welcoming you to the Chair, Mr Benton? I congratulate my hon. Friend the Member for Fylde (Mark Menzies) on securing an important debate on this subject and on his constructive approach. If I may say so, I congratulate Members on the tone that they have adopted throughout their contributions. I will try to answer the various points that have been raised.

My hon. Friend began by rightly raising the interests of communities, and the debate has clearly demonstrated that community interests have a number of dimensions and apply to all potentially affected communities across our country. I will group my comments into four areas: first, local communities should be clear on the Government’s policy on shale; secondly, they should be clear on when they will be engaged locally and by whom, and have access wherever possible to objective information; thirdly, they should be reassured about shale development and that it will be carried out safely and in a way that protects the environment; and finally, they should know exactly what benefits should flow from hosting shale gas developments. I will tackle each in turn.

As a Government, we believe that shale has the potential to provide this country with greater energy security, an incentive to growth and more jobs. Through the co-ordination of the Office of Unconventional Gas and Oil, we are creating the framework to accelerate the development of shale responsibly. Looking at the big picture to see how our various energy sources fit together in the market as we transition to a low-carbon future, we quickly realise that oil and gas will form a key part of our energy requirements for some decades to come. We need to recognise that shale gas development is part of a historic continuum in the development of our domestic resources. Over 2,000 conventional oil and gas and coal bed methane wells have been drilled in the UK. Fracking, of course, is an established exploration technique used around the world. I see unconventional resources as a part of the bigger picture and continuum.

As Members will know, the British Geological Survey has now estimated the total volume of gas in the Bowland-Hodder shale, which includes Lancashire, at some 1,300 trillion cubic feet. Effective exploration of that resource is necessary to help us understand how much of that gas is technically or economically recoverable. We are therefore encouraging the safe and environmentally sound exploration that will help us determine that. With robust regulation now in place, there is nothing to prevent licensees from bringing forward new drilling plans and seeking the necessary permissions. In Lancashire, Cuadrilla has recently announced further plans for exploration, and of course we welcome Centrica’s recent investment in its licence in the area. We are therefore likely to see Lancashire lead the way in the exploration phase, which if proven will provide local communities with real benefits and opportunities.

Early community engagement by companies in the industry is essential to gaining public acceptance of and support for shale gas development. We have worked closely with the industry to encourage strong engagement that addresses local concerns. We are therefore pleased that the industry—through its trade body, the United Kingdom Onshore Operators Group—has recently collectively adopted a community engagement charter. One of its objectives is to identify and proactively address local issues and concerns. In addition, each operator will engage with local communities and other stakeholders, beginning in advance of any operations or any application for planning permission. For our part, the Government have a role to play in supporting public engagement by ensuring access to evidence-based information that can address the questions raised and inform public debate.

My Department is looking urgently at how we can swiftly take forward the suggestion from my predecessor, my hon. Friend the Member for Wealden (Charles Hendry), which has also been touched on this afternoon, to ensure that we provide clear information to the public on the myths that tend to surface about shale, so that we can help the public to separate fact from the fiction. An objective of the Office of Unconventional Gas and Oil is to help people understand the facts about shale gas, and that includes supporting local authority engagement with communities where it can assist in resolving issues and allowing projects to proceed where appropriate. Officials are developing plans for how we can do that in practice and will be engaging with local authorities—particularly Lancashire, at this stage—on what assistance is needed from central Government to best deliver support.

Some of that is already happening. The Lancashire shale gas forum, established by the Environment Agency, already brings together county and district councils, regulators including the Health and Safety Executive, my Department and the Office of Unconventional Gas and Oil to discuss strategic shale gas issues and matters of concern to local communities. That forum is meeting today.

[Mr Marsden]

The Minister will have heard my comments about the effects in Blackpool. He referred to district and county councils. Can he tell us whether Blackpool council, which is of course a unitary council, is included in that group?

[Michael Fallon]

I am not able to confirm that immediately, but I may be able to do so shortly. I certainly understand the question. My information was that the group included Lancashire county council and the district councils, and my assumption was that that would include Blackpool. If I am wrong, I will let the hon. Gentleman know as swiftly as I can.

I turn to regulations that ensure safety and protect the environment. In our country, we have more than 50 years’ experience regulating the onshore oil and gas industry. Our system of regulation is comprehensive and fit for purpose for exploration, but we are not complacent. We want continuously to improve it, and local communities will expect no less. A number of regulatory bodies and Departments are involved, including the Environment Agency, the HSE, my Department and the Departments for Environment, Food and Rural Affairs and for Communities and Local Government. The Office of Unconventional Gas and Oil, which has no regulatory functions, co-ordinates activity across Government on unconventional gas and oil, including on the regulatory process, while ensuring that shale development remains safe and the environment is protected. We are making good progress. The Department for Communities and Local Government will shortly publish planning guidance for industry, mineral planning authorities and local communities on how shale gas developments should proceed through our planning system.

For its part, the Environment Agency recently published a statement of actions to simplify the regulation of exploratory activity by the oil and gas industry while maintaining environmental protection. As a first step, it will publish draft technical guidance for consultation by the end of July, setting out its requirements on operators and giving them, local communities and stakeholders more certainty. The Environment Agency and the HSE have already agreed to work closely together and have developed a joint approach to inspecting new exploratory shale gas operations under a memorandum of understanding, which directly addresses one of the points that my hon. Friend the Member for Fylde made. That means that they have agreed a joint programme of inspection for the next series of fracturing operations in England and Wales. They will meet new and first-time operators, advise them of their legal duties and conduct a joint inspection of key operations, including cementing and the verification of cementing and the main hydraulic fracture.

In addition, the Department of Energy and Climate Change will check that the HSE and the Environment Agency, or its Scottish equivalent the Scottish Environment Protection Agency, have no objections before it consents to drilling operations. Furthermore, if hydraulic fracturing for shale gas is intended, we will require measures to address the risk of induced seismicity, namely prior analysis of geological risks and the submission of a detailed fracturing plan, including a traffic light control protocol.

On the community benefits, I think we all agree that it is vital that communities that host shale benefit from the developments. As part of the recently published charter, the industry has set out its benefits proposal, which is, as has been said, to provide communities with £100,000 per fracked well site at the exploration stage and 1% of revenues at the production stage. The industry estimates that that amounts to as much as £5 million to £10 million per pad, and some £1.1 billion overall for communities in the UK. We welcome the offer from the industry. It represents a good deal for communities at this stage in the development of the UK shale industry. I am pleased that the industry has pledged to keep the offer under review and to consult communities about it in the light of operating experience.

At this stage, the operators group envisages that community funding will be split, with two thirds going to a local-level community fund and one third to a wider fund at county level. That need not mean the local authority itself; it might be a charitable or other foundation operating at county level. The operators have pledged that at each stage they will work with the local community funds to set out what level of benefits would be provided on a per household basis, so that even though communities may choose to use the funds to pay for community-wide measures residents will understand what their share of the benefits is at the household level.

The industry plans to publish further details of the proposals later this year, setting out more on the funding allocation and on how the charter will operate in practice. As the industry develops the details further, it will engage with interested parties and the local authorities involved, so I urge interested Members also to engage in the process and to help shape the proposals further. I assure Members that we in the Government will continue to work with the industry to ensure that it delivers on its commitments and, importantly, to keep the offer under review as we learn more about how the industry is likely to develop in the UK.

Finally, one of the potential benefits of shale gas production is job creation. My hon. Friend referred to the importance of the supply chain. Building partnerships to encourage job creation and growth is part of the work being led by the Department for Business, Innovation and Skills under the Government’s growth strategy, and DECC will work closely with BIS to assess the need for skills development.

The oil and gas sector strategy has already identified how the sector and the Government can work on the skills challenges the offshore sector faces, and it points out that links could be made with opportunities in other sectors, including that of shale gas. Work on supply chain mapping is also being commissioned. To improve the responsiveness of the skills system to the needs of business, BIS is promoting much greater employer leadership and closer collaboration between business, higher education and further education colleges. We are already seeing signs of that in Lancashire, and I hope that other companies and institutions will follow the lead of Cuadrilla and the university of Central Lancashire.

In the brief time remaining, I want to respond to the points that have been made, but if I cannot cover them all I hope that colleagues will allow me to write to them in detail. I was asked how we will monitor seismicity. The monitoring system will include a prior assessment conducted by operators. A fracking plan will have to be submitted. There will be a traffic light warning protocol and real-time monitoring, and if any activity over 0.5 on the Richter scale is detected the operation will be halted and further steps taken. The British Geological Survey has a national earthquake monitoring system that will, of course, alert us all to any changes in natural background seismicity.

I was asked how we would maximise local job opportunities and improve apprenticeships. The industry commits in the charter to encouraging that wherever reasonably possible. I was also asked about greater public engagement by the Office of Unconventional Gas and Oil, which I have already mentioned. We are developing plans, as has been suggested, and we are committed to reinforcing how the public can have access to more independent information.

On transparency and the type of organisations involved in enjoying community benefits, I was asked whether we should share benefits directly, for example through reductions in bills. I have already said that I welcome the industry’s commitment to flexibility, to engaging with communities and to consulting them over the autumn. Even if it is decided to take the benefit more generally—the new swimming pool that was mentioned, for example—I want local households to be clear what the benefit would be if it were a reduction in their individual bills, so that everyone understands the contribution that shale gas can make. The operators have committed to publishing each year how they are adhering to the charter, once the system of benefits starts to operate. The information about each local arrangement will be made public, and the next community down the line will be able to see it and decide whether it wants a similar package.

I was asked whether the benefit is per well. In the charter offer it is per well site, but that is one thing that the industry will consult on in the autumn. The disruption and the impact of the whole operation is at the well site, but the length of horizontal drilling means that some of the activity takes place a long way from the site. That is one of the issues that will be clarified a little later on.

I hope that I have responded to the main points that were raised, but I undertake to pick up any others later. I thank all Members who have contributed to the debate. I think we have shown that it is perfectly possible to approach the development of this entirely new industry as neither zealots nor victims but in a practical, constructive way, working through the issues one by one and ensuring that our communities get the benefit of what is potentially a very exciting development.