What Now for UK Shale Gas?
Plans to frack for shale gas in the UK are currently on hold in spite of the pro-fracking Conservative Party securing a majority in the country's Parliament in May's General Election. The main company pioneering efforts to develop a shale gas industry in the UK, Cuadrilla Resources, has faced one obstacle after another in its attempt to explore for shale gas at two locations in Lancashire, England.
The latest stumbling block is Lancashire County Council's refusal to allow Cuadrilla to explore for some of the 2,281 trillion cubic feet of shale gas that the British Geological Survey estimates could be contained within the Bowland Basin in northwest England.
In late June the council's Development Control Committee rejected Cuadrilla's applications to drill at the company's Preston New Road and Roseacre Wood exploration sites due to too much noise and traffic. Cuadrilla itself has pointed out that the council's planning officer had in fact recommended approval of the Preston New Road planning application while the firm believes it can reroute traffic to the Roseacre Wood site in order to get around the council's concerns about more vehicles passing through the area.
Recently, Rigzone caught up with Ken Cronin – chief executive of the UK Onshore Operators Group (UKOOG) – to find out how he thinks things will play out now.
First of all, Cronin is dismissive of the idea that the resistance to fracking by the environmental lobby, certain sections of the public and, now, Lancashire County councillors means that the industry is dead before it has even really begun in the UK – as some commentators in the UK media have been suggesting recently.
"The reality is that 12 years ago my opposite number in the wind industry was shouting from the rooftops that planning was the problem … and [the wind industry] would never get planning for onshore windfarms through, etc. Ten years before that we had a nuclear power station that went through a seven-year planning cycle. So adverse planning decisions are not just something that's unique to this [the shale gas] industry," Cronin told Rigzone.
"It's an issue that onshore energy production has. You have national policies and local decision-making, and those two are always going to rub."
In fact, Cronin thinks that those interested in seeing the development of a shale gas industry in the UK should look at the positives from Lancashire County Council's recent decisions.
"We had a planning officer's recommendation after a very detailed and elongated process in which basically he said: 'All of the above, including the local issues, I've looked at and I give a recommendation to approve.' That was backed up by legal advice, it's backed up by advice from third-party consultants for noise and transport, and the reality is that the councillors rejected it on the basis of very local decisions: noise and landscape.
"So, I think there are a lot of positives to look at. Is one adverse planning decision going to stop the industry? No. There are a number of applications in the pipeline across the country and we shall see those coming through towards the end of the year. When will we see the first frack? We are at the vagaries of planning decisions but I'm hoping to see activity next year."
Planning Decisions Need to be Made More Quickly
As well as being optimistic, Cronin is also pushing for a faster approach when it comes to planning permissions. The lengthy time taken by authorities to allow fracking at a particular site is similar to the long, drawn out planning decisions faced by the wind industry more than a decade ago.
"The Cuadrilla decision from applications being submitted took 15 months for a 16-week process. And the reality is that you cannot plan on that basis. You cannot invest on that basis. We have to have a system that is more streamlined, both for the industry and for the communities involved," Cronin said.
It seems that because fracking has become such a politicized issue in the UK, with several protests springing up around the country against onshore drilling activity, local authorities are spending longer over granting permission to drill.
"If you compare 2013 with 2014 average planning times have gone from three-to-four months to 12 months, so we've seen a big increase," Cronin said.
"I think with the onset of the 'anti' movement these decisions have become much higher up in terms of public interest and that's the reason you're seeing decisions having to go to planning committee and therefore taking a much longer period of time."
Meanwhile, although the UK's central, Conservative-dominated, government has expressed a great deal of interest in encouraging the development of a shale gas industry and wants to win hearts and minds among the public in support, the government departments it controls are proving to be somewhat of a liability.
At the start of this month the details of a Department of Environment, Food and Rural Affairs (Defra) internal report into fracking were made fully public at the request of the Information Commissioner's Office. The report – first released under UK freedom of information laws last year with several of its sections blanked out – has proved somewhat embarrassing to the government.
No Data to Suggest Fracking Will Hit House Prices
This is because, among other concerns it highlights about fracking, the report – “Shale Gas: Rural Economy Impacts” – suggests that house prices in close proximity to shale gas exploration sites could fall by up to 7 percent. In the property-obsessed UK, such a revelation is like gold dust to the anti-fracking movement.
The study also suggests that properties located up to 5 miles from a fracking operation could face greater insurance costs to cover potential losses from an explosion on the site, and that the cost of renting homes near fracking sites could be pushed up by people coming to work on them.
Much was made of the Defra report in the UK media in the following days, but Cronin told Rigzone that the context under which the report was written needs to be understood. The report, he said, was an internal document written by a junior member of Defra's staff for a more senior member of staff.
"It wasn't an official report by government. It was a piece of research that was done by a junior member of staff. In my opinion it should never have even got to the stage where it was redacted because it was clearly a very internal piece of research," he said.
"It picks up a number of issues on the negative side. So, house prices? Well, I think there are two things to say there. First of all, all of the research both evidential and anecdotal in this country is that there are no issues with house prices next to oil and gas sites."
A report produced earlier this year by Jones Lang LaSalle, for instance, found that property prices near Cuadrilla sites in Lancashire have outperformed those of other parts of northwest England over the period that work has been conducted at these sites.
"And we've seen data from Singleton and Witch Farm down in the south [of England] that shows house prices there exceed the average," Cronin added, referring to two of the UK's already-existing producing onshore oilfields.
The Defra report also mentioned issues around transport, noise and the visual impact of shale gas sites.
"The reality is that although these are construction sites to start with, you end up with visually, and noise wise, a very benign site. But it does involve construction, it does involve truck movements and it does involve an element of noise.
"If you look at the Lancashire example, they got the noise down below the UK regulations and below the worldwide health authorities' absolute minimum. So, again all of these things can be managed and all of them in the Cuadrilla example were sufficient to pass muster with the planning officer. But I do accept that during the construction period there will be truck movements, just like creating a Tesco [supermarket] or a wind farm or a solar farm or any construction activity."
But, while pointing out that the Defra report is a red herring, Cronin is keen to state his commitment as head of UKOOG to defending the UK's burgeoning shale gas industry against criticism such as this.
"A large proportion of the media has written it in such a way that it was an official report and it wasn't. It was a piece of research done by a junior member of staff … It causes debate and I'm very happy to just give the facts," he said.
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