Shale gas hosting communities to be rewarded
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Communities that sign up to host controversial shale gas drilling sites will be rewarded with financial incentives, the Department of Energy and Climate Change (DECC) has announced today (27 June).
Building on its long-term infrastructure investment plan, outlined in the Spending Review yesterday (26 June), the government has unveiled a package of reforms to ‘enable shale gas exploration’.
As part of this, communities situated near each exploratory hydraulic fracturing well will receive £100,000 and one per cent of revenues from every production site.
The package also includes:
- A community engagement charter, setting out industry’s commitments to ‘consult openly and honestly with communities at all stages, including in advance of planning permission applications’;
- A requirement for operators to publish annual evidence of how community commitments have been met;
- New guidelines on the planning and permitting regime for shale gas developments to ‘make the process for approving developments clearer and more streamlined’.
According to the Environment Agency (EA), the new guidelines were drawn up as part of the EA’s commitment to ‘ensuring that people and the environment are protected’ and that the simplified regulation ‘does not impose unnecessary costs or delays on industry’.
The streamlined regulation of onshore oil and gas exploratory activities will see the EA:
- ‘immediately’ extend the remit of its shale gas unit to include all onshore oil and gas exploration, ‘ensuring a single point of contact for the industry’;
- publish draft technical guidance for consultation by the end of July; and
- ‘significantly’ reduce the time it takes to obtain environmental permits for exploration, including:
- by August, developing a single application pack for mining waste and radioactive substances permits;
- by September, issuing permits within the standard 13-week period (but in some cases, seeing them issued in as little as six weeks);
- by February, issuing permits within two weeks, by developing standard rules for onshore oil and gas exploration activities.
Writing on its website, the EA said: ‘We are committed to working closely with the UK Onshore Operators Group as we develop our work as well as listening to and taking into account the views of local communities, environmental organisations and other stakeholders.’
A consultation on tax incentives to encourage exploration of shale gas areas will also open to stakeholders. Government has said it expects ‘considerable interest’ from developers in the 14th onshore licensing round, set to launch next year.
Speaking of the package, Energy Minister Michael Fallon said that shale gas represents an “exciting new potential energy resource for the UK”, and could play an “important part” in the UK’s energy mix.
He said: “The next step for industry is to establish how much gas is technically and commercially recoverable. With the package announced today on planning, environmental regulations, and community benefits, it is clear that we want to encourage a shale industry that is safe and that doesn’t damage the environment. Development must be done in partnership with local people. We welcome the commitments from industry on community benefits.
“This will provide a welcome boost for communities who will host shale exploration and production as well as offering strong assurances that operators will engage with them and work to the highest health, safety and environmental standards.
“From money off bills, playgrounds, sports halls or regeneration schemes, people will see real and local advantages from shale gas production in their area.”
Britain to be at “the forefront of exploiting shale gas".
While introducing the Spending Review for 2015/16 yesterday (26 June), Chancellor George Osborne he wanted to “put Britain at the forefront of exploiting shale gas".
This follows on from a report released today by the British Geological Survey (BGS), commissioned by DECC, which found that UK shale gas resources could be 'greater than thought'.
The ‘Carboniferous Bowland Shale gas study: geology and resource estimation’ marks the first independent study into the potential volume of shale gas in 11 UK counties, and found that there is around 40 trillion cubic metres (1,300 trillion cubic feet) of shale gas in the ground in one area alone. Shale gas reserves are notoriously difficult to estimate accurately, however, with Poland, for instance, originally estimating it had reserves totalling 5,300 billion cubic metres (bcm), but later reducing the figure to just 346-768 bcm.
DECC has said that while this does not mean that this amount could be extracted for use, it will ‘give industry and regulators an indication of how best to plan future exploratory drilling, so that they can determine how much of the gas would be able to be commercially recovered’. However, it warns that this is expected to be ‘substantially lower’ than the total amount of gas in place because of ‘technical and commercial limitations on the level of extraction’.
Shale gas is expected to be much more difficult to extract from European terrain because of several factors including the small size and deep location of shale plays, as well as the high clay content compared to reserves that are already being exploited in the US.
Shale gas exploration background
The exploitation of shale gas, known as ‘fracking’, involves pumping water, chemicals and sand into rock beds to artificially induce fractures through which natural gas can flow.
Though the technology has gained ground in the US, where 12 per cent of the country’s total gas production comes from shale gas – the technology is relatively new in the UK.
To date, no wells have been commercially fracked in the UK, though UK energy company Cuadrilla has done some exploratory drilling in Lancashire and estimates there is some 200 trillion cubic feet of shale gas within its licence area. Further, Centrica plc, parent company of British Gas, recently announced that it had acquired a 25 per cent interest in the Bowland exploration licence in Lancashire from Cuadrilla Resources, for the price of £40 million.
However, the process has caused much controversy, with some saying that two earthquakes recorded in the Blackpool area in 2011, were caused by Cuadrilla Resources’ Preese Hall shale gas drilling site. Due to the ‘similar waveforms’ of the hydraulic fracturing processes used at the site, and those of the earthquake, as well as the similar location, the BGS determined that ‘the timing of the two events in conjunction with the fluid injection at the Preese Hall drill site suggests that they may be related’. Cuadrilla agreed to pause hydraulic fracture operations until a geomechanical study was undertaken (yet to be finalised).
DECC says that once this is complete, it will – along with the BGS, EA and the Health and Safety Executive – review the results of the analysis and recommendations on how to ‘mitigate the risk of induced seismicity’ before any decision on the resumption of shale gas hydraulic fracturing operations is made.
Further to seismic activity, opponents of fracking say it also contributes to climate change and causes air pollution, uses unsustainable amounts of water while potentially contaminating drinking supplies with methane and toxic chemicals and wreaks havoc on landscapes and settlements through heavy industrialisation.
Commenting on new shale gas estimates announced today, Friends of the Earth Energy Campaigner Tony Bosworth said:"Shale gas is not the solution to the UK's energy challenges. Its potential has been hugely over-hyped and there's little evidence it will drive down fuel prices.
"Extracting shale gas will have a significant effect on local communities and our environment - the more that's extracted, the bigger those impacts will be...We need a 21st century energy revolution based on efficiency and renewables, not more fossil fuels that will add to climate change."
Even without the addition of unconventional gas to the mix, the UK has been warned by its climate change advisors that it is not keeping pace with legally-binding cuts in carbon emissions, and the International Energy Agency has warned that the world can only burn a third of proven fossil fuel reserves before risking serious climate destabilisation.
Despite this, government has been increasingly leaning on shale gas as an alternative source of energy, in the hopes of staving of power cuts due to falling gas reserves.
Read more about hydraulic fracturing.
