UK Shale Gas

Michael Fallon Excerpts

Thursday 18th July 2013 Westminster Hall

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

I, too, thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for starting this debate, and all those who have contributed to it. For those of us who were here on Tuesday, this has been a slightly livelier debate, but none the worse for that. I will try to set some context, say more about the way in which the industry is being regulated, deal with some of the myths, and then turn to some of the specific questions and worries that have been expressed. I hope that colleagues will bear with me.

I start by saying that oil and gas are vital for our economy. About three quarters of our current energy demand is met by oil and gas. Even as we move to lower-carbon sources, which we all want to do, 70% of the primary energy we consume here will come from oil and gas by 2020. They are a vital part of our economy and will remain so for some decades to come, even as we move to a low-carbon economy.

Before I deal with some of the specific questions, let me debunk some of the myths about shale gas: that it is a recent technology, that it is new technology, and that accelerating its exploration involves increasing the risks. Let me take those three myths in turn. The first is that onshore oil and gas production began recently. In fact, we have been exploiting oil and gas onshore for nearly 100 years.

The first production well was drilled onshore in 1919 at Hardstoft in Derbyshire. Since then more than 2,100 conventional wells have been drilled, and onshore production continues to take place throughout our country from the south of England up to Scotland. Just last week, I visited IGas operations in the South Downs national park in Sussex, which is a very good example of how oil and gas operations can work even in the most sensitive environments. We have nearly a century of experience of oil and gas production with no history of chemical spills or gas leaks comparable with the experience in the United States. During that century, we have put in place robust regulation to ensure that oil and gas operations are safe for people and the environment. Given that century of onshore exploration and the expertise and robust supply chains that exist as a result of extraction in the North sea, we are very well placed as a country to make the right decisions about shale.

The second myth is that fracking is new. It is not. As my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) said, some 2.5 million hydraulic fracturing operations have been performed at oil and gas wells worldwide. It is thought that as of 2010 around 60% of all new oil and gas wells are hydraulically fractured. Some 27,000 wells were drilled in the United States in 2011 and most of them were fracked. Even here, that has been happening in some form for the past 60 years. We have already had some 200 wells fracked in this country. With all that activity, there is still no confirmed evidence of contamination of aquifers caused by fracking.

[Caroline Lucas]

Will the Minister give way?

[Michael Fallon]

If the hon. Lady will excuse me, I will not give way.

The United States has felt the great difference that shale gas can make. It has reinvigorated the economy, gas prices have halved, reducing costs for industry and consumers, and billions of dollars of new investment and thousands of jobs have been created. Nations across the globe, including India and China, are looking in on that boom and joining in. We must start to think seriously about shale. We must get on and explore the resources that are there and understand the potential, to see whether shale gas can be extracted here as economically and as technically efficiently as it has been in the United States.

The third myth I must deal with is that we are somehow accelerating shale gas and that that means increasing the risk. Conditions vary from country to country, of course, and it is already clear that the shape and development of the industry here will be significantly different from that in the United States. We have the advantage of learning from experience in the United States, but we are, as the hon. Member for Worsley and Eccles South (Barbara Keeley) said, a much more densely populated country, which has implications for where and how we can drill. The geology of our shale, as has been said, is much thicker in some areas, but we are committed to ensuring that the industry can prosper here if the conditions are right.

[Barbara Keeley]

Will the Minister give way?

[Michael Fallon]

I will come to some of the hon. Lady’s concerns a little later.

First, we announced last December that fracking could resume with robust regulation, and I emphasise that nothing now prevents a licensee from bringing forward new drilling plans. Secondly, we provided the industry with much fuller geological data on the gas resource in the Bowland-Hodder basin, thanks to the work of the British Geological Survey, and our knowledge of shale resources will be further enhanced when we publish estimates for the Weald basin in the south of England by March next year. Thirdly, we have been very active in creating the right framework to accelerate shale gas exploration in a responsible way. Let me be clear. Accelerating shale gas exploration does not mean that communities will be put at risk.

We have a long history of successful onshore oil and gas production. Getting it right will benefit the industry where it matters in the long term, and across Government we are creating a coherent and concerted approach to shale. We have created the Office of Unconventional Gas and Oil to co-ordinate the activities of the regulatory bodies and Departments. We have a world-class safety and environmental regime with a joint approach to inspecting new exploratory operations, and for new and first-time operators, their key operations will be inspected, including the cementing and the main hydraulic fracture.

We are providing tax incentives to create a fertile ground for shale to prosper. We will consult shortly on a new pad allowance to help to unlock investment and to provide significant support to the industry, particularly during the critical exploration phase. I have already announced that next year we will launch a new round of onshore licensing, in which we expect a great deal of interest.

I turn to the planning and regulatory system, which will have a high degree of local scrutiny and prior consultation, which we are setting out in guidance that we will publish very soon. That guidance will not cover every issue when considering proposals for shale gas. It must be read alongside other planning guidance and the national planning policy framework, but it will carry weight in the system. The Government have heard loud and clear what the industry and others in the community have said about the importance of clarifying that the main focus of planning should be on the surface issues—traffic, noise, visual impact and so on.

Responsibility for regulating activities beneath the surface rests largely with the other key regulators. For example, seismic activity is regulated by my Department under our licensing arrangements; potential pollution of ground water falls to the Environment Agency; and design and integrity of the wells rests with the Health and Safety Executive. It will, of course, be critical for planning authorities to be content at the planning decision-making stage that the issues that fall to the other regulators will be adequately regulated.

The Environment Agency and the Health and Safety Executive 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. That means they have agreed a joint programme of inspection for the next series of hydraulic fracturing operations in England and Wales. For new and first-time shale operators, they will meet and advise them of their legal duties, and conduct a joint inspection of key operations, including the cementing and verification of cementing, and the main hydraulic fracture. In addition, my Department will check that the Environment Agency or its Scottish equivalent, the Scottish Environment Protection Agency, and the HSE have no objections before consenting to drilling operations.

If hydraulic fracturing for shale gas is intended, we will also 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, before my Department gives any consent for fracking operations.

It remains our strong view that there should be early and constant engagement by the operators with local communities and the key regulators before any planning application is submitted. I therefore welcome the industry’s commitment, in the community engagement charter, to engage earlier with local communities and to be transparent in their activities. However, close engagement with the regulators by such firms is also beneficial, helping to identify issues to be addressed as part of the planning application and other approvals at an early stage. That is the right approach to create a sound basis for a shale industry that can provide more energy security, jobs and investment.

The industry has said that we can expect about 20 to 40 exploration wells to be drilled here in the next couple of years, but I am clear—this point was also made by the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex)—that success will come only if development is done in true partnership with communities. That means a responsibility to the communities that host shale operations, and there are two vital areas in achieving that: first, it is about engaging communities right at the start of every shale application, and secondly, it is about ensuring that where shale operations are hosted, local people feel that they are getting their fair share of benefit from the development of shale. The community charter that has just been adopted will now be consulted on in the autumn, and its proposals, I hope, will be developed further.

I now want to try to answer some of the questions that were put to me. The hon. Member for Worsley and Eccles South asked me about the impacts on adjacent wildlife sites, which are important issues to be addressed in the planning system. Where an environmental impact assessment is required, such issues will have to be addressed in the report. They will have to be consulted on and considered again by the planning authority on the basis of that report, before any decisions are made. If any SSSI or other European protected site might be affected, a habitats assessment must be made, and that, too, must be similarly considered by the planning authority before any decision is made on planning permission.

The hon. Lady also asked whether the Growth and Infrastructure Act could allow shale and gas projects somehow to bypass local authorities’ planning permission. The Act allows for certain business and commercial projects, defined by regulation, to go directly to the national regime for obtaining planning permission. The Department for Communities and Local Government has consulted on the possible inclusion of oil and gas projects in that process, but in light of the responses to that consultation, I can tell her that that option is not being pursued for the moment. We want those planning decisions to remain with the minerals planning authority in the normal way.

The hon. Lady also asked about the Columbia university study on the domino effect, where distant quakes in one place can trigger quakes at other water disposal sites. It is important to point out, as my hon. Friend the Member for North Warwickshire (Dan Byles) did, that the research relates to waste water disposal wells involving volumes of water much greater than those used in fracking. The injection of very large volumes of water can trigger quakes in the ground. That is not news; it has been understood for some time. However, as he also pointed out, that particular technique of disposing of waste water is not used at the moment in the United Kingdom, and it is very unlikely that it would be approved if it were proposed.

[Barbara Keeley]

Will the Minister give way? There is a point that he has not moved on to, and I think there is time.

[Michael Fallon]

Of course.

[Barbara Keeley]

The potential site I mentioned is in a heavily populated urban area, and I spoke about pollution. There is a concern that the air quality is already poor enough and that pollution is exceeding what it should be, but there will no longer be a duty on local councils to monitor that. How can we go forward given that we already have very poor air quality and nobody will be monitoring it?

[Michael Fallon]

I must apologise to the hon. Lady. A large number of points have been made during this three-hour debate and I was not, I am afraid, going to attempt to answer each of them today. I will pick them up and, if I may, write to colleagues whose points I have not had time to consider.

The hon. Lady asked about pollution. During construction and drilling of the well, the operator will monitor emissions at the site, and that will have to be a permanent feature of operations should the activity proceed to commercial development. The Environment Agency has also recently published research to understand how emissions from a well can affect air quality, how they can be monitored and what controls are available. If I can give her any further information on that, I certainly will.

My hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) had concerns about borehole users and whether there would be a reduction in their supplies. It is likely that most operations will use public water supplies so far as practicable, because that is the most likely way to reduce truck movements to and from sites. However, where operators want to extract water directly from aquifers, again, they will need a permit from the Environment Agency that will not be given if the quantities that they require are not sustainable.

The hon. Member for Brighton, Pavilion made a very large number of points, and I am afraid that I may have to reply to her in writing about some of them. She specifically asked me about the disclosure of the use of chemicals. The answer to her question is yes, the Environment Agency will require disclosure of all substances proposed for injection into groundwater that might affect the water, and it will only approve the use of those chemicals if they are assessed as harmless in that context.

[Tom Greatrex]

The Minister will be aware that the Environment Agency requirement is for self-certification of what those chemicals are. Will he say any more about ensuring, particularly in any early exploration, that the Environment Agency, or the Scottish Environment Protection Agency is on site when the chemicals are injected, so that it can be absolutely sure about what is going into the process?

[Michael Fallon]

It is certainly the responsibility of the operator to disclose that; but obviously, it is for the Environment Agency or SEPA to ensure that what is disclosed is accurate. If the hon. Gentleman will allow me to write to him on that point to ensure that there is a procedure whereby that information is verified, I would be happy to do so.

[Tessa Munt]

I hope that the Minister will forgive me a brief intervention. In my experience, the Environment Agency always gives at least a week’s notice, sometimes more, of a visit to inspect when it is looking at procedures. I wonder whether the Minister, while he is writing about the subject, might consider ensuring that spot checks and investigations take place without a period of notice given to the body that is doing the drilling.

[Michael Fallon]

I will certainly consider that suggestion, and if I may, I will write to my hon. Friend about it.

The hon. Member for Brighton, Pavilion also asked me about the differences in well designs between operations here and in the United States and about the possibility that we might have methane leaks on the scale that we have seen in Pennsylvania. I visited the United States to talk to experts, and I am aware that the standard of environmental regulation has varied widely across the different states of America. They do not have the overall, national regulatory system that we have. Practices appear to have been tolerated in some states that would not be acceptable in others.

I understand that the repertoire of well design technology is essentially the same as in the United States, but the regulatory framework in the United Kingdom is quite different. Here, we have a national regulator—the Health and Safety Executive—which will require a full review of well design and construction by an independent competent person. I should point out to the hon. Lady that the Royal Academy of Engineering commented that that was a highly valuable feature of the United Kingdom’s system. We can certainly learn from the experience in the United States, but I want to emphasise to her that we start from a position of having what the United States did not have—a system of national regulation.

[Caroline Lucas]

The Minister has referenced, now and at the beginning of his winding-up speech, the fact that our regulations are essentially much stronger. In that respect, I wonder why he would think that it is all right, perhaps, that Britain’s offshore rigs and platforms have leaked oils or other chemicals into the North sea on 55 occasions in the last month alone, according to the figures from DECC. The idea that our drilling regulations generally are somehow much better than those elsewhere is more questionable than he suggests.

The Minister also spoke earlier about the number of countries that are falling over themselves now to go down the fracking route. He did not talk about countries such as France, Bulgaria, the Czech Republic, Austria, the Republic of Ireland, Spain, Denmark and Germany, all of which have full or partial bans or moratoriums on fracking. That gives a slightly different picture.

Finally—this was one of the key questions that I asked the Minister—why have the planning guidelines been delayed; what does “very soon” mean; and if he is seriously genuinely concerned about consultation with local people, why are those planning guidelines not open to some discussion with the communities?

[Michael Fallon]

I am coming to the point about planning guidance—I was due to do that—if the hon. Lady can contain herself, but first let me deal with the point about the North sea.

[Caroline Lucas]

Honestly!

[Michael Fallon]

I was coming to the point about planning guidance. The hon. Lady has somehow suggested that I was not or that I had missed it. Let us just deal with her slur on the North sea. The North sea has one of the most extensive safety regimes in the world. Of course, we have learned from the accident on Piper Alpha, which sadly took place 25 years ago this month. Of course we have learned from that, but if she compares operations in the North sea with operations in other seas right around the world, she will see that we have one of the best and safest regimes there is. The proof of that is precisely the fact that the incidents that she referred to have to be reported to the Heath and Safety Executive, which is at present in Aberdeen. They have to be monitored; explanations are required from those involved. I think that it is rather remiss of the hon. Lady to try to suggest somehow that there is laxity in our regime in the North sea.

[Caroline Lucas]

On that point—

--- Later in debate ---

[Michael Fallon]

The hon. Lady raised two other questions in her last intervention, but I will give way if she wants to intervene again.

[Caroline Lucas]

I should like to intervene again, first to say to you, Mr Amess, that I think that this is yet another example of the kind of patronising tone that we hear again and again from Government Members, particularly towards women in this Chamber, and I absolutely deplore it. Secondly, and more to the point of the debate, the Minister says that I am casting a slur on the North sea somehow. The facts are that there have been 55 leaks in the last month. Is he or is he not comfortable with that fact?

[Mr David Amess (in the Chair)]

Order. This is a very warm afternoon. I just appeal to hon. Members on both sides of the Chamber to bear that in mind. We are the mother of all Parliaments. Let us continue to have a civilised debate, but obviously I have heard what has been said.

[Michael Fallon]

Yes, I am content that the safety regime in the North sea is fit for purpose. It is kept constantly under review. I was struck during the events to commemorate the Piper Alpha disaster that I attended by the commitment of those involved—the Health and Safety Executive and others—continuously to improve the safety regulation regime in the North sea, and that is what they are doing.

The hon. Member for Brighton, Pavilion asked me about the fact that some countries now do not want to go down the fracking route. That is perfectly true. Some have decided not to do so, but there is fracking in other countries right across Europe. In Poland, fracking is taking place. It is taking place right across the globe and as far away as Australia. As I said, there is worldwide interest in the success of shale gas in the United States and other unconventional oil and gas in Canada. I think that it would be a little unfortunate if we were to close our minds to that.

The hon. Lady asked why we have not consulted on planning guidance. The Government do not normally consult on planning guidance. We consult on planning policy. We have prepared the guidance in line with the principles set out by Lord Taylor of Goss Moor. This is a living, web-based resource that is easier to read alongside other parts of planning guidance. It will be on the website shortly, and it will be easier to adapt if we need to do so on the basis of experience.

[Barbara Keeley]

We were expecting something to be published today; the word “publish” was used. The Minister seems to be saying that it will be published only on a website. Some of my constituents live in a deprived area and will not necessarily have the internet. Is he saying that no printed version of the guidance will be available?

[Michael Fallon]

I will certainly check that, but the point of putting the guidance on the website is that it is a living document that can be and is adapted the whole time in the light of experience. That is what it is up there for and that is obviously more difficult with hard copies, but I will of course look into whether hard copies can be made available for colleagues in the House. We were hoping to get the guidance out before the House rose for the recess. It is possible now that we will miss that deadline by a few hours or a day or two. We have been trying very hard not to do that, but it will not be long now before that guidance is available to everyone involved.

As we move to a low-carbon future, oil and gas will continue to be a key part of our energy mix for decades to come. We believe that shale gas has the potential to provide the United Kingdom with greater energy security, more investment and more jobs. We have a strong regulatory system, which provides a comprehensive and fit-for-purpose regime for exploratory activities, but we do want continuously to improve it. We have taken important steps to streamline the regulatory framework, but that is not at the cost of robustness. It is about ensuring that the regulation does not duplicate things and is clear, simple and understandable not just for the developers, but for the public and the local communities that will be asked whether they are prepared to host shale exploration and production. It is very clear—it is even clearer after this debate—that to get those basics right, we must also work tirelessly to engage people with clear, evidence-based information, so that they have hard facts on which to make an informed decision about fracking.

I think that I concluded Tuesday’s debate in Westminster Hall on this subject by saying that we should approach shale gas neither as zealots nor as victims, but looking at the evidence and going step by step to ensure that the potential of shale is thoroughly understood, analysed and explored, so that if it really can benefit our economy and our people in the way that it has benefited those in the United States, it will be able to do so.

[Mr David Amess (in the Chair)]

I was not anticipating that any time would be left, but would the hon. Member for Brighton, Pavilion like to speak again?