Fracking for shale gas in England report
Progress in establishing a shale gas industry in England has been slower than government planned, according to a recent report by the UK’s National Audit Office (NAO).*
The UK government has supported the development of a shale gas industry in England amid public concern over the environmental and public health risks from hydraulic fracturing (fracking). In response, the NAO has reviewed the current landscape of fracking of shale gas in England.
The Department for Business, Energy and Industrial Strategy (BEIS) does not know how much shale gas can be commercially extracted in the UK. In 2016, the Cabinet Office expected up to 20 fracked wells by mid-2020. Three wells have been fracked to date.
BEIS has encouraged operators to determine the viability of the industry and introduced measures to support the planning process. Operators have said the system to protect against the risk of earthquakes is stricter than that used internationally and has hindered their ability to develop the industry.
BEIS does not expect shale gas production to lead to lower energy prices, but believes it could provide greater energy security and have economic benefits. However, it has not analysed the benefits or costs of supporting the shale gas industry because it thinks this would not be meaningful due to the current uncertainty about how much shale gas can be extracted, says the NAO.
Public support for shale gas development is low and has reduced over time. Concern has centred on the risks to the environment and public health from greenhouse gas emissions (GHG), groundwater pollution and fracking-induced earthquakes, as well as the adequacy of existing regulations. The government has told the NAO that it is confident the regulatory regime can manage these risks. Regulators have so far focused on the current exploratory stage and mainly rely on a system of statutory self-reporting by the operator, which presents risks. Should the industry ramp up to full production quickly, the Environment Agency (EA) is confident it can respond at pace, notes the NAO.
BEIS believes it can meet its climate change objectives while developing shale gas, but it has not yet developed the necessary technology. The Committee on Climate Change states that the development of carbon capture, usage and storage (CCUS) technology is critical to reducing GHG emissions, because it would provide a way to use fossil fuels, including shale gas, in a low-carbon way. BEIS held two unsuccessful competitions in 2007 and 2012 to develop and implement CCUS. In 2018, it set out its aim to develop the country’s first CCUS facility in the mid-2020s.
Fracking has already placed financial pressures on local bodies, including local authorities and police forces, and other costs have been borne by a range of government departments and regulators. The full costs of supporting fracking to date are not known by BEIS, but the NAO estimates that at least £32.7mn has been spent by public bodies since 2011. This includes £13.4mn spent by three local police forces on maintaining the security around shale gas sites to date.
BEIS recognises its responsibility for decommissioning offshore oil and gas infrastructure, but not for onshore wells, including shale gas wells, notes the NOA. In March 2019, the Committee of Public Accounts set out concerns about BEIS’ arrangements for ensuring the cost of decommissioning shale gas wells do not fall to taxpayers. BEIS says landowners may be liable for decommissioning costs of shale gas wells should an operator be unable to fund them, but arrangements are unclear and untested. In May 2019, it informed the Committee of Public Accounts that the EA could pursue operators and landowners under the Environment Liability Directive and Environmental Damage Regulations. However, in October 2019 the EA determined that it is unable to use these powers to pursue insolvent operators and landowners. The EA may be able to pursue landowners under other statutory powers, but these are untested in the oil and gas sector. BEIS could not explain what would happen should a landowner be unable to meet decommissioning costs.
*The National Audit Office (NAO) helps Parliament hold government to account for the way it spends public money. It is independent of government and the civil service.