Dan Byles is the Member of Parliament for North Warwickshire, and a member of the Energy and Climate Change Select Committee. Follow Dan on Twitter.
The problem with trying to debate energy policy these days is the tendency for the argument to quickly polarise into two extreme views. Mediums such as twitter reduce discussion to over-simplistic view points, and nuanced debate can be virtually impossible. You're either a rabid green or a climate change denier. No middle ground allowed.
Discussions about shale gas and hydraulic fracturing (fracking) epitomise this problem. In the air war of soundbites and 140 character manifestos, shale gas is either a golden bullet and the answer to all our energy needs, or fracking is a dangerous and unproven activity that pollutes drinking water and could even cause Somerset to disappear under a volcano. As is usually the case in the real world rather than twitterland, the truth is almost certainly somewhere in the middle.
I take a close interest in UK energy security and affordability, and shale gas has interested me for some time. Until now I have broadly been of the view that UK shale gas reserves were likely to be useful, but not game changing. This is pretty much the official view on shale gas, and is the conclusion the Energy & Climate Change Select Committee (on which I sit) came to following our inquiry into the subject last year. However, this is an industry that is developing and learning rapidly.
Last week I attended the UK Shale Summit in London to learn what the current state of play is, and to see where industry and geological experts think UK shale gas potential now stands. I spoke at the conference on the politics of energy and shale gas. We have also seen a spate of recent reports on shale gas from some highly credible organisations. The Royal Society and the Royal Academy of Engineering, the Institute of Mechanical Engineers, the International Energy Agency and the Institute of Directors have all published reports in the last few months that are at least broadly positive for shale gas.
The first point to note is, it looks increasingly likely that the UK has a lot of shale gas. Much more than previously estimated.
The Institute of Mechanical Engineers (IMechE) report "UK Energy: Shale Gas" suggests UK shale gas reserves are in the region of six trillion cubic metres – around sixty years of current UK gas consumption.
The Institute of Directors (IoD) report "Britain's shale gas potential" states:
"British onshore shale gas reserves, estimated at 5.3 trillion cubic feet (tcf) in 2010, are now believed to be much larger – with the British Geological Survey estimate expected to be revised upward later this year, possibly to as much as 200 tcf. Exploration companies themselves have identified resources of nearly 300 tcf so far. Offshore reserves – which are harder to extract – are estimated to be 5-10 times larger than those onshore."
Estimates of UK shale gas reserves are often discounted by critics by arguing that much of the gas trapped in shale deposits far below ground will never be accessible. Clearly this is as true of shale gas as it is of any mineral resource. But the consensus of the conference was that a lot of the shale gas under our feet is most certainly accessible, and accessible safely.
It's also worth bearing in mind that, given the size of reserves we are now looking at, even a tiny recovery rate would produce a lot of gas. As energy consultant Nick Grealy notes, for a 200 tcf figure:
"…a 5% recovery rate for example still would supply over four years of total UK usage. That sounds like a yawn until understanding at today's prices it would have a value of…£70 billion pounds…"
Comparisons with the US are usually made to downplay the situation here in the UK – shale critics note that US mineral rights and environmental regulations are very different. That is true. But there are other differences that might rebalance potential extraction rates back in the UK's favour. For example, in the US sites that have so far been exploited, the gas bearing rock is typically only up to 100m thick. The Bowland basin in Lancashire currently being explored by Cuadrilla potentially holds gas bearing rock up to 1,000m thick or more. That could allow significantly more gas to be extracted from each individual drilling pad.
So there is a lot of shale gas in the UK. But will it be a 'game changer'? Well, that depends on how you define that term. I think it is increasingly clear that the impact on the UK is going to be a lot greater than many of us thought just a year or two ago.
The IoD report is particularly bullish. It estimates that exploiting shale gas could lead to 35,000 jobs and supply 10% of UK demand for over a century. The FT reported last week that shale gas could bring £95bn of investment and account for a quarter of UK consumption in 20 years (under the bizarre heading "UK will miss US-style shale gas transformation"). The benefit of import substitution alone could be highly significant. The IMechE report notes that on current predictions the UK will be importing 80% of our gas by 2030. Replacing a decent slice of those imports with domestic shale gas will benefit our balance of trade by £billions. And don't forget – the effective tax rate reaped by the Treasury from oil and gas production is 62%.
Whether the overall impact of shale in the UK will be as large as in the US is still uncertain, and conventional wisdom still seems to think not. But it doesn't have to be as big to still be pretty impressive. Take Pennsylvania alone. In just four years a state with a population of around 12 million went from producing zero natural gas, to producing more gas than the entire UK North Sea and employing almost 160,000 people in the sector.
So is it all good news? Not necessarily. If UK shale production takes off there are two obvious potential downsides. Firstly, there are serious concerns around the environmental impact of fracking, including questions about possible water contamination and the recent earthquakes in Lancashire. Secondly, more and/or cheaper gas will surely mean higher CO2 emissions, right?
Well let's look at the environmental impact first. I'll leave aside the film 'Gasland' for now. The claims made in that documentary are highly controversial and many have been strongly challenged. There is now a counter film, "Truthland", floating around YouTube that ConHome readers may find interesting. Rather than base my opinion on sensationalist journalism (on either side of the debate), I'll look at what the experts are saying.
The consensus from the credible organisations is quite clear. Fracking can cause problems, but they are almost entirely related to poor practice and poor well integrity rather than intrinsic to the fracking process. So it would be more accurate to say it can be the drilling which can cause problems, rather than the fracking itself – which takes place significantly deeper than drinking water aquifers, far too deep for direct contamination to be feasible. Strong and effective regulation, which we have a good track record of here in the UK, can ensure that the drilling process and the well integrity are of a high standard. The International Energy Agency recently published a set of "Golden Rules" in terms of best practice that should be adopted to meet public concerns about developing shale gas.
The Government's Chief Scientific Advisor recently asked the Royal Society and the Royal Academy of Engineering to review the evidence and report on the risks associated with fracking. The summary of their conclusions notes: "The health, safety and environmental risks can be managed effectively in the UK…Fracture propagation is an unlikely cause of contamination…Well integrity is the highest priority. More likely causes of possible contamination include faulty wells."
The IoD report concludes: "With a proper regulatory structure, fracking is no more risky than other hydrocarbon extraction, and should be allowed to proceed in the UK."
This mirrors our own findings on the Select Committee. And in the official response to our report the Government stated pretty clearly:
"The technologies used in shale gas operations are not generically novel or unfamiliar. Hydraulic fracturing, water injection and lateral drilling, individually or in combination, are all familiar techniques that DECC and the other regulators have had to deal with robustly for a long time."
With regard to earthquakes, the expert consensus is clear – not a problem. The Royal Society report states: "Seismic risks are low…Seismicity induced by hydraulic fracturing is likely to be of smaller magnitude than the UK’s largest natural seismic events and those induced by coal mining." The IoD note that in the 50 days leading up to publication of their report, the UK experienced three naturally occurring earthquakes on a par with the Blackpool fracking earthquakes or bigger, none of which caused any damage. There is widespread agreement that seismic activity should be closely monitored, but unless we are about to shut down our remaining coal mines on the grounds of seismic disturbances it is hard to see why fracking should be held to a higher standard. And the volcano story I referred to earlier – sheer, laughable nonsense.
So what about the risk of higher CO2 emissions? Once again, the picture is complicated. If a UK shale gas revolution accelerates a dash for gas and squeezes out investment in lower carbon technologies, then there could be cause for concern. However, even under the most optimistic realistic low carbon scenarios, gas will continue to play a major role in our electricity generation for decades to come. The National Grid estimate that 27% of UK electricity generation will still be fuelled by gas in 2030. If domestic shale gas replaces imported gas and unabated coal, we could see significant economic benefits without a negative impact on UK CO2 emissions.
The conclusion I draw from the most up to date evidence is that shale gas is likely to provide major benefits for the UK and, with the right regulatory regime in place, there is no reason to believe that it can't be developed as safely as conventional onshore oil and gas. In an era of soaring domestic and industrial energy bills and rising fuel poverty, I don't think we can afford to drag our feet over putting that regulatory regime in place and getting on with it.
The Energy and Climate Change Select Committee will shortly be conducting a second inquiry into shale gas, specifically on The Impact of Shale Gas on Energy Markets. I shall consider the latest evidence with great interest, and I wonder if this time the committee as a whole will still conclude that shale gas won't be a game changer.