UK Shale Gas

Peter Bone Excerpts

Thursday 18th July 2013 Westminster Hall

[Caroline Lucas]

I think it will be made commercially viable through the sort of tax breaks that the Government are already beginning to give. I will return to the situation in the US later, but it is vastly different. The regulatory regime is different, as are the geology and the issue of exports. Time and again, people from the International Energy Agency downwards have been saying that it is irresponsible to think that we can simply read across the impacts in the US and assume that we will see those here in the UK.

I was giving examples of reputable organisations that are warning that UK shale gas will not bring prices down. Those warnings come from Deutsche Bank, Chatham House, Ofgem, and the International Energy Agency. Even the CBI has warned that there is only one direction for gas prices, and that is upwards. The highly respected former Energy Minister, the hon. Member for Wealden (Charles Hendry), has warned that the reverse is true, saying that

“betting the farm on shale brings serious risks of future price rises”.

The Government’s independent advisers, the Committee on Climate Change, have confirmed that relying on gas would be expensive, adding up to £600 extra on household electricity bills compared with low carbon power, which would add only £100 and would be a good insurance policy against high prices in the future.

Exploitation of the UK’s significant shale resources is unlikely to result in low natural gas prices as well, according to Bloomberg:

“The cost of shale gas extraction in the UK is likely to be significantly higher than in the US, and the rate of exploitation insufficient to offset the decline in conventional gas production, meaning market prices will continue to be set by imported gas.”

Professor Paul Stevens, Chatham House analyst and a recent winner of the prestigious OPEC award for outstanding oil and energy research, has said that the Chancellor’s view that gas will be cheap in the future, based on the views that that will be driven by a shale gas revolution as happened in the US, is “misleading and dangerous.” Here he comes to exactly the point that the hon. Member for Warrington South just mentioned, saying:

“It is misleading because it ignores the very real barriers to shale gas development in the UK and Europe more generally. The US revolution was triggered by favourable factors such as geology, tax breaks and a vibrant service industry amongst many others. However, in Western Europe the geology is less favourable notably with the shale containing a higher clay content making it more difficult to use hydraulic fracturing.”

At a meeting for concerned residents at a potential fracking site in West Sussex, a Cuadrilla representative was asked to comment on whether shale gas could drive down customers’ energy bills. Mark Linder, who is responsible for Cuadrilla’s corporate development, said:

“We’ve done an analysis and it’s a very small…at the most it’s a very small percentage…basically insignificant”.

In the article to which I am referring, a company spokesperson is reported to have said:

“Cuadrilla’s never said it…will bring down prices…We don’t think it will bring down prices, although it does have the potential to.”

The spokesman went on to stress that shale gas exploitation was about security of supply, rather than price, so now I will turn to that.

There is a broad consensus among gas analysts that little, if any shale gas will be produced commercially in the UK before 2020, so we should not expect domestic shale gas to have any impact on gas prices in the short to medium term. That time scale is very important, because so much of the energy debate focuses on the rest of this decade, for which shale gas is basically irrelevant. If we are talking about energy security perhaps in the 2020s, what that looks like obviously depends on how much gas is extractable. The British Geological Survey recently reported that the Bowland shale in Lancashire and Yorkshire may contain 1,300 trillion cubic feet of gas. It stresses that it is a highly uncertain estimate and that it is not an indicator of the volume of gas likely to be extracted, which will depend on economic, technological and environmental considerations. However, if 10% of that gas were extracted, it would equate to approximately 41 years of UK gas consumption, but defining energy security as security of supply, DECC believes that it is still too early to come to a firm conclusion on whether shale gas in the UK or elsewhere in Europe is likely to have a significant effect on security of supply.

The House of Commons Energy and Climate Change Committee recommended that the

“Government should not rely on shale gas contributing to the UK's energy system when making strategic plans for energy security”,

which seems extremely sensible given all the uncertainties. Indeed, given those uncertainties, a much less risky way to reduce the energy security risks associated with the UK’s growing gas import dependence is massively to increase investments in renewable energy generation—we know what the costs of fuel for solar and wind generation are, for example—and dramatically improve energy efficiency and reduce overall demand.

Much of the discussion on the climate change impact of shale gas centres on its relative emissions intensity compared with coal. That matter is of interest, but it must not distract from the most climatically relevant issue of the absolute quantities of emissions from the global energy system. When people get very excited that shale gas in the US is cutting emissions by displacing coal, they need to remember that that coal is simply being exported and the emissions created elsewhere, so that does not help very much with the overall reduction of emissions required in order to tackle climate change. Regardless of the precise life cycle in terms of the greenhouse gas impact of shale compared with other gas, the direct carbon content of shale gas means that its widespread use is incompatible with the UK’s international climate change commitments.

We hear a lot that the Committee on Climate Change says that we need to cut emissions from power generations to 50 grams of CO₂ per kilowatt-hour by 2030, but we hear less often that that needs to be a step on the way to a zero carbon grid very soon afterwards. Yes, shale gas is lower carbon than coal, although the methane leakage question is still to be resolved, but it is still a high-carbon fuel. Arguing otherwise is not dissimilar to an alcoholic justifying a barrel of 7% cider on the grounds that it is less harmful than a crate of 13% wine.

What about carbon capture and storage, which is usually raised at this point as the get-out-of-jail-free card? At commercial scale, CCS will be significantly less than 100% effective at capturing carbon dioxide, but more importantly, CCS is unlikely to be commercially viable for at least another 10 years and probably more. The Opposition Front-Bench team have been very outspoken about the need for a 2030 decarbonisation target in the Energy Bill. I welcome their strong stance, and indeed, that of Members on both sides of the House on that crucial issue. The Opposition Front-Bench team are clearly trying to create an impression that they understand, more than the coalition, the pace and scale of carbon emission reductions needed. I hope that they would agree that rebuilding cross-party consensus in favour of urgent action on climate change is crucial, too.

However, from all the evidence that I have seen, if we take a scientific, evidence-based approach to tackling climate change, it simply does not make any sense to exploit the UK’s shale gas reserves, however much may be economically or technically recoverable. That is not only a green or environmental argument. As John Ashton, who was the UK’s former head climate diplomat for 10 years, including under Labour, told the Energy and Climate Change Committee,

“the issue here is not emissions, it is the security and prosperity of 60 million British citizens.”

I want to take issue with the view of the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) that those who oppose shale gas are taking an absolutist position. He said on Tuesday that people who are against shale exploration have a principled position, but their views are “ideological objections” that must be separated “from legitimate environmental concerns”, and that regulation is the way to do that. However, is he really suggesting that opposing shale gas extraction on climate grounds is not a legitimate environmental concern? Will he still be saying that when the next set of Intergovernmental Panel on Climate Change reports come out and we are all reminded of what is at stake and the consequences of a rise of more than 2°?

I say to the hon. Gentleman that such a position is neither ideological nor absolutist; rather it is a position that is honest about the science of climate change and the massive risks of our current emissions trajectory. The lack of realism and integrity is to be found not among shale gas opponents, but on the Opposition Benches for as long as they remain in thrall to the fossil fuel lobby and in favour of adding a new source of carbon-emitting fossil fuel to our energy mix.

In Tuesday’s debates, not once did the words “carbon” or “climate” pass the lips of an Opposition Member. It is clear that the shadow DECC team have seen the analysis by Carbon Tracker, which found that between 60% and 80% of existing fossil fuels cannot be burned if we are to have any hope of staying below 2°. The hon. Member for Liverpool, Wavertree (Luciana Berger) has asked questions about those unburnable high-carbon assets, and the International Energy Agency conclusions on burnable carbon are broadly the same. Perhaps today we will hear from the Opposition, as well as the Minister, exactly how they think that the exploitation of new sources of fossil fuels, including shale gas, is remotely compatible with the action needed to avoid catastrophic climate change and with the UK’s international commitment to keeping global warming below 2°, which was reiterated just last month at the G8.

In conclusion, I want to return briefly to the issue of the inappropriate corporate influence in Government. I believe that that is doing huge harm to our democracy and is at the core of the coalition’s irrational enthusiasm for shale gas and fossil fuels more widely. This fossil fuel obsession, or addiction, is preventing us from making the most of the UK’s indigenous renewable resources. Worse still, it means that we are seeing policies designed to maintain the status quo, where power is literally and metaphorically concentrated in the board rooms of big energy companies such as the owner of British Gas, Centrica, which recently bought shares in Cuadrilla.

Before the cold snap last winter, Centrica raised prices by 6%. Its full-year profits before tax were reported in May to be £602 million, with the group’s full-year earnings after tax expected to be 2% higher than last year at £1.4 billion. Therefore, I think it is reasonable to ask why it is remotely acceptable, for example, that Lord Browne, a former BP boss, is now holding a key cross-departmental role as the head non-executive director at the very same time as he holds significant shares in Cuadrilla. Lord Browne reports to the Minister for the Cabinet Office and Paymaster General, the right hon. Member for Horsham (Mr Maude), in whose constituency Cuadrilla wants to drill. The right hon. Gentleman explains that Browne

“has a cross Government role convening Non-Executives from the best of business and the third sector...The code of practice on good governance in government departments requires the board to record and manage conflicts and potential conflicts of interest appropriately. There is no conflict of interest in this case.”

However, a recent freedom-of-information response from DECC seems to undermine such assurances. It states:

“After a trawl of our Ministers’ private offices and very senior civil servants at DECC we can confirm that there have been four meetings with Lord Browne during the period specified”—

in other words, the past three years. Those all took place in DECC’s offices, and I am told that although DECC does not have minutes for the first two meetings, Cuadrilla’s activity plans and shale gas were discussed. The minutes that do exist are heavily redacted on the grounds that attendees were in a private discussion with the Minister. The response states:

“It would be likely to prejudice the commercial interests of Cuadrilla and inhibit communications with this organisation on an ongoing basis if we were to release details”.

Another non-executive director is old Etonian Sam Laidlaw, who has also had a long career in the oil and energy industry, including top roles at Enterprise Oil and Chevron. He is currently in charge of—guess what?—Centrica. I am therefore genuinely concerned that policy making on shale is skewed in favour of the companies, such as Centrica and Cuadrilla, and that the interests of our constituents are not being put first, as they should be, when it comes to the risks of fracking, keeping energy costs down or tackling climate change. I would like to know whether the Minister shares my concerns about the access and influence that these companies have in relation to policy making across the Government.

I want to highlight some questions that my constituents and other members of the public have asked me to put to the Minister during this debate. Will the Government confirm that they will mandate that fracking companies must name the chemicals that they use and their toxicity? Can he explain how fracking is compatible with the sustainability and emission reduction aims of what is meant to be the greenest Government ever? Where is the assessment of the risks of fracking, and how will those risks be properly managed? I would be grateful for answers to those questions as well.

I want to end my speech by saying a few words about the positive energy future that we could decide to pursue, instead of this headlong rush to exploit every last drop of oil and gas. It is a future in which we are free from our fossil fuel reliance and on a path towards climate security, not catastrophe. It is an energy system in which the big six energy companies are replaced by independent generators and a blossoming of community and co-operatively owned renewable schemes—local, sustainable and democratically controlled.

The Centre for Alternative Technology launched just this week “Zero Carbon Britain”, showing how Britain could eliminate emissions by 2030, and not just from our energy system. It is the latest of many reports that show, from a technological perspective, that fossil fuels are fast becoming redundant. I recommend it to anyone who thinks that the only way to keep the lights on is to fry our planet and condemn young people and future generations to unmanageable climate impacts, not least on water and food security. As many have said, what we are lacking is not technological solutions to end our fossil fuel addiction and tackle climate change; it is political will. I hope that this debate will be one step further in generating that will.

[Mr Peter Bone (in the Chair)]

I should like to tell right hon. and hon. Members that I will call the first Front Bencher no later than 10 minutes past 4. The Chairman of Ways and Means has given the Chairman of this debate permission to impose a time limit. I will not do that at the moment. Nine Back Benchers want to speak, so Members can do the arithmetic.

[Mr Lilley]

For Members who cannot do the arithmetic, can you tell us how long we have to speak, Mr Bone?

[Mr Peter Bone (in the Chair)]

No, you are quite capable of doing that, Mr Lilley.

--- Later in debate ---

[Mr Lilley]

Show some leadership.

[Mr Peter Bone (in the Chair)]

Order.

[Barbara Keeley]

I do not know about the particular developer we will have or the particular process that it will undertake. To be perfectly frank, in the current environment I do not know whether I have the resources to get into that anyway, so it would be helpful if the information could be provided.

--- Later in debate ---

[Several hon. Members]

rose—

[Mr Peter Bone (in the Chair)]

Order. Because of the number of Members who have indicated that they wish to speak, with the authority of the Chairman of Ways and Means, I am imposing with immediate effect a time limit on Back Benchers’ speeches of eight minutes, with added time for two interventions.