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Volume 545: debated on Tuesday 22 May 2012

I am delighted to have secured this debate on fracking—or, to give it its proper title, hydraulic fracturing. I hope that by the end of the debate we shall have laid some myths to rest, and that the House will be satisfied that the opportunity that fracking presents is being explored in a responsible manner.

I would not describe myself as either pro-fracking or anti-fracking; I support the exploration of any new energy source as long as it is safe. We need a mix of different energy sources, so that we are never reliant on one in particular. I think that we all agree with that. I understand that the Minister who would usually respond to the debate, my hon. Friend the Member for Wealden (Charles Hendry), is unable to be here and I thank his colleague, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), for stepping in. Both my hon. Friend the Member for Wealden and his Parliamentary Private Secretary, my hon. Friend the Member for Fylde (Mark Menzies), have done a huge amount to help explore the important technology in question, while dealing with the safeguarding of our constituents and calls for tighter regulation. The House owes them a debt of gratitude for their tireless work.

I suppose I should explain my interest in this subject. The Bowland basin is not in my constituency, but many of the people who would work in the industry are. Furthermore, Morecambe and Lunesdale is one of the biggest energy producers in the UK. Heysham 1 and 2 produce 4.5% of the national grid’s capability; Centrica’s liquefied natural gas support station brings gas in from across the world to the UK; a number of offshore drilling operations exist in Morecambe bay; and, most controversially, wind farms, if they cannot be built in the lakes, are threatened in our area.

Engineering and energy production are major exports for my constituency and the whole of north Lancashire, so we are positive about any opportunities, especially given that 5,600 jobs could be created nationally—and, potentially, 1,700 in the wider Morecambe and Lunesdale area. Obviously, when local people are trained to do that sort of work they will have opportunities to go abroad, as happened in Aberdeen after the North sea oilfield opened—something that became known as the Aberdeen effect.

Fracking is not a new technique; it has taken place in the UK for decades. What is new is that the established technology is being used to extract shale gas, which has revolutionised gas production in north America. In the past, the USA and Canada had a shortage of gas, but today their industry is booming. The rise in shale gas production is striking, going from 28 billion cubic metres in 2006 to 140 billion cubic metres in 2010. Gas reserves are now at their highest since 1971—an amazing thought, given the dire predictions for their supplies a few years ago. I think we would all like the UK to benefit from that kind of gas supply.

The industry is keen to point out that we are unsure how much shale gas we have in the UK, but one estimate by Cuadrilla suggests that the Bowland site alone could have 5.6 trillion cubic metres. Obviously, not all that gas can be extracted, but that estimate would make the field comparable in size to the second most productive field in America—the Barnett shale in Texas.

In 2010, the Department for Energy and Climate Change predicted that gas prices would rise by 21% by 2030. Suddenly, by taking into account more and more shale gas, they revised that estimate down to 11%, so shale gas may well halve the rise in gas bills over the next 20 years—a welcome thought to those struggling to pay energy bills.

I congratulate my hon. Friend on securing this debate on an important issue. I am a supporter of the economic and environmental benefits of shale gas. Does my hon. Friend agree that the data show that it has cut carbon emissions in a way that wind, solar and biomass have singularly failed to do?

Yes, I agree, and we should be striving towards a lower-carbon economy. Shale gas would contribute to that. It is better for the environment than other energy sources—that has already been acknowledged—and it now helps to meet Government targets for low emissions, as my hon. Friend has just said. Research by Policy Exchange states that if China were to switch from coal to shale gas that would cut its emissions by five times the UK’s total carbon output, so there is a big prize. If we get things right and sort out the concerns, we can have a good and healthy market in the UK.

At the end of the process, we will need to know that we made the best use of our technology and natural resources, but in an environment that protects the public, so I want to ask the Minister to clarify some points. What steps are being taken to ensure that waste water does not contaminate the environment? How will we prevent fugitive emissions? What steps are being taken to reduce seismic activity? What rights will landowners and local communities have to benefit from mineral rights? Overall, what steps are the Government taking to ensure that our regulatory environment is fit for purpose?

I congratulate my hon. Friend, and neighbour, on securing the debate. On the issues he listed, does he agree that what is not understood by the powers that be is that the water source for residents in my area—particularly in Bleasdale—is their own bore holes? Residents are extremely worried about a process that involves the water table, which fracking seems to hit. My hon. Friend talked about mineral rights; again, it is not understood that in most parts of my constituency the mineral rights do not belong to the landowners, but to the Duchy of Lancaster, even if the land is sold on. There is little direct benefit to the farmers who own the land on which the fracking will potentially take place.

I thank my hon. Friend, whose constituency is next to mine, for the work that he has done locally on the issue. There are issues to be addressed in the contexts that he mentioned. Like him, I am worried about contamination of water supply in the area. I want to touch later on the possibilities of mineral rights for landowners.

I am sure that my hon. Friend is coming on to this point. I endorse the comments of my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Just as mineral rights and the benefits from wind power are felt not by the wider community but by an individual farmer or energy company, so it is with fracking. I suggest that if mineral rights were to benefit the whole community, rather than an isolated individual, fracking would be a great deal more popular and bring much more benefit to the community.

Hear, hear! I agree with everything that my hon. Friend said.

We have all seen things go wrong in certain parts of America, but we must also bear in mind that last year the Americans drilled 45,000 wells, with very few problems. They are also operating much older wells that exist in a less strict regulatory environment than here in the UK. That must be understood. I hope that we can benefit from their success and, most importantly, learn from their mistakes.

Today we stand at the beginning of a revolution in UK gas production. We have a community with the expertise. Lancaster university, the nuclear power industry and small and medium-sized enterprises are already geared up to exploit that resource and we look forward to falling energy bills as a result. I hope that the Minister can clarify my concerns. Most of all, will he assure me that DECC is doing everything it can to push this project forward in a safe and responsible way? That is the road to a safe, profitable and cheap supply of energy for the 21st century.

I congratulate my hon. Friend the Member for Morecambe and Lunesdale (David Morris) on securing the debate and giving the issue such rigorous, thoughtful and well researched attention, as it deserves.

The role of unconventional gas and hydraulic fracturing, or fracking, is indeed topical. I have just come back from the United States, and no one there who takes the slightest interest in the energy or climate change agenda can fail to be moved by the huge impact that it is having on the economics and politics of energy—the huge potential benefits to the US economy, the challenges presented to other parts of the energy sector, and the questions raised about the long-term climate change implications of the new fossil fuel.

I am grateful to the Minister for giving way and I apologise for interrupting his speech just as he was gaining momentum. He talks eloquently about the way in which America is transforming its energy provision and dramatically reducing its energy bills. In his State of the Union address in January 2012, President Obama said that any company drilling on Government land would have to disclose the chemical used for fracking so that

“America will develop this resource without putting the health and safety of our citizens at risk.”

Is not that the right way for us to be going ahead as well?

Absolutely. I could not agree more, and I will elaborate on those points during the course of my speech and endeavour to answer the questions that have been raised.

There are not only huge opportunities here for us, but some big challenges. We need to be rigorous and thoughtful in addressing this issue, not least because of the significant impact that the exploration and development of shale gas is having on the US, and stands to have in the UK, Europe and Asia.

The resource has, as I have said, revolutionised the energy market and allowed the US significantly to increase its indigenous production and benefit from lower gas prices, which have not proportionately flowed through into lower electricity prices to consumers. None the less, there are benefits feeding right through to the manufacturing base, which obviously raises the question of what impact shale gas would have on the UK and its energy supplies. I hope to shed some light on that pertinent matter during this debate.

As my hon. Friend the Member for Morecambe and Lunesdale will be aware, the Government are considering the implications of the seismic tremors that occurred last year in the Blackpool area, adjacent to his constituency. The Royal Society and the Royal Academy of Engineering are currently conducting a study of the potential risks of shale gas extraction. For the UK, therefore, the subject is very much in the public eye, and the debate here is timely.

Let me be clear about the Government’s position. This weekend, press stories suggested that there has been a sudden reversal in the Government’s position on shale gas, but I am afraid that that is not the case. The Government’s position has remained cautious but balanced throughout. If there is a change, it is only in media perceptions.

There has been some rather breathless speculation that shale gas in the UK could be the “game changer” that it genuinely is in the US. What has happened in the US has been dramatic. Shale gas production has grown from a very small base in the 1990s to supply about a fifth of US demand today, and it is set to increase still further. However, there have been problems, such as the reported pollution of drinking water, and there are concerns about the fracking process on which shale gas production depends.

Our position on UK unconventional hydrocarbon resources is a balanced one, and matches that which we take towards conventional oil and gas exploration and development. We support the tapping of these resources where it is technically and economically viable. As imperative as it is that we meet our climate change targets, it is also a matter of common sense that we continue as an economy and nation to be dependent on fossil fuels for many years to come. Wherever there is an opportunity to harvest or extract those fossil fuels in the UK or in our territorial waters, of course we should do so, provided that it can be carried out with full regard to the protection of the environment.

May I raise another problem on top of the two that I raised with my hon. Friend the Member for Morecambe and Lunesdale (David Morris)? The north part of Lancashire, which is in the constituency of my hon. Friend the Member for Fylde (Mark Menzies), faces shale gas exploration, and across the river Wyre from Fylde, there is a proposal to excavate salt mines to store imported liquefied gas. We also have a proposal for new wind farms to be sited off the Isle of Man, and the National Grid is proposing to bring in the power down the river Wyre—between fracking on one side and the storage of gas on the other. At the top end of my constituency, near the seat of my hon. Friend the Member for Morecambe and Lunesdale, there is a proposal for another nuclear power station. Added to that, National Grid wants to bring power from existing wind farms off Cumbria through even bigger pylons that will be sited in the middle of my constituency, adjacent to the M6 motorway. Although people in Lancashire recognise the nation’s need, they wonder who will secure a balance in relation to what they will get out of it. Will Lancashire be left covered with pylons, transmission towers, and wind farms on the hills and out at sea? After the extraction underground of everything in the region, will Lancashire even exist in 25 years?

But apart from that—[Laughter.] No, my hon. Friend makes a serious point and I understand his concerns. No one could suggest that Lancashire is not taking more than its fair share of the burden of the energy economy. However, there are many opportunities to be gained. Each of the points that he raises bears serious consideration. Let me assure him that my Department not only looks at these things individually, on their own merits and in their own right, but takes into account the wider picture that is created by these individual interventions.

I welcome the point about the wider picture. In Northumberland, which is no less deserving than Lancashire, there are applications for two open-cast mines. Given that those open-cast mines will exist for years and will produce barely eight to 10 days’ worth of coal for particular power stations, and that fracking has the potential to produce about 150 billion cubic metres of gas, one has to add up the relative benefits. The people of Northumberland, and of the wider country, want an energy strategy that takes into account these points. On that issue, I endorse entirely what was said by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw).

My hon. Friend’s eloquent intervention is on the record, and I certainly take on board his points. I now want to crack on because I want to reply in some detail to the serious points that my hon. Friend the Member for Morecambe and Lunesdale raised in his opening speech.

I very much welcome the cautious way in which the Minister is explaining this issue to the Chamber. It is important that we balance the apparent short-term gain against the serious danger of long-term detriment, which will be impossible to reverse once the process is under way.

There are good reasons to think that, whatever the resource may be, shale gas will not develop as dramatically here as it has in the US. Britain is a much more densely populated country, and shale gas is still in its very early days here. Just one well in the UK has been drilled and fracked, so the production prospects are simply unknown at this stage. Whatever they may be, the Government will continue to seek full economic recovery of UK hydrocarbon resources—both conventional and unconventional—when that can be done safely and with environmental integrity.

I am very grateful to the Minister for giving way; I know that time is of the essence. Regarding the environmental integrity that he has just mentioned, can he tell us what cross-cutting work he is doing, first with the Department for Environment, Food and Rural Affairs in respect of the concerns about the possibility of groundwater contamination, and secondly with the Department of Health in respect of the health concerns about the potential risk of air pollution?

I will come to the points about groundwater pollution later in my remarks—if I am able to get to them. In respect of the work with the Department of Health and DEFRA, I fear that I will have to write to the hon. Lady to let her know about that work in more detail.

I turn now to the role of gas and carbon capture and storage in UK energy supply, because changes in the UK energy sector during the next 10 to 20 years will create new sources of gas demand. We will need gas to retain sufficient electricity generation capacity margins in the face of coal-nuclear closures, to manage intermittency from increased use of renewables, and to continue to meet the majority of our heating needs. Equally, we are taking steps to address the possible use of fossil fuels in the low-carbon energy economy of the future.

In the long term, there will be a fundamental shift in the role of gas in electricity supply. By 2050, a major role for gas as a base load source of electricity will only be realistic with large numbers of gas CCS plants. One of our key policy objectives is to enable cost-competitive deployment of CCS by the early 2020s. Last week, we announced the names of the companies who have indicated their interest in the new UK CCS competition, which is a flagship policy for this Government. I am very encouraged by the high level of interest that those companies have demonstrated. It shows that we are on track with CCS, a key technology that is enabling us to make use of fossil fuels while protecting, enhancing and driving forward our climate change objectives.

I now turn to shale gas specifically. It has been said that it is still very early days for shale gas in the UK. However, I am told that the pattern of development of a new shale gas basin in the US has shown roughly three phases: first, initial discovery and the use of appraisal wells to prove the presence of the gas and the size of the resource; secondly, an experimental phase in which the explorers work out the best techniques to obtain production from the particular type of shale; and thirdly, the production phase, in which an efficient pattern of production wells can be drilled to extract the gas on a commercial basis.

Clearly we are right at the beginning of this whole process; only a handful of wells have been drilled and their production potential has yet to be quantified. However, it is encouraging that Cuadrilla believes that there are good quantities of shale gas in the rocks underlying its licence area in Lancashire. Nevertheless, it is still too early to say whether those resources can be extracted economically and safely.

The answer to the question, “What contribution might shale gas make to UK energy supplies?” is even more uncertain. I will not speculate on that issue today. However, if shale gas can be safely and economically exploited here, the Government would obviously welcome any positive contribution it would make to energy supplies, jobs and the economy.

I will now address the specific questions put by my hon. Friend the Member for Morecambe and Lunesdale. First, what steps are being taken to ensure that waste water does not contaminate the environment? That question was echoed by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Secondly, how do we prevent fugitive emissions, which is a big problem in the US? Thirdly, what steps are being taken to reduce any seismic activity? Fourthly, there is the overall question of what steps the Government are taking to ensure that our regulatory environment is indeed fit for purpose?

In response to the first question, which was about water waste, I must say that my hon. Friend the Member for Morecambe and Lunesdale made a very important point, which was echoed by my hon. Friend the Member for Lancaster and Fleetwood. It is essential that any waste water or flow-back fluids that come from fracking operations are handled carefully and treated properly. Disposal of waste water falls within the regulatory responsibilities of the Environment Agency, which has a range of regulatory powers to ensure that such operations are carried out without causing harm to the environment. The agency will consider all proposed operations and will only permit them if it is satisfied that the intended disposal route will not harm the environment. The waste water could either go to a waste treatment plant that is already permitted, or specific disposal arrangements would need to be agreed with the agency. With regard to Cuadrilla’s current operation, the return fluids are currently being retained on-site by the company and stored in double-skinned tanks. A permit for correct disposal of them is required, and Cuadrilla is in discussions with the Environment Agency.

Secondly, how do we prevent fugitive emissions? That is a very important issue; indeed, I was also asked about the control of fugitive emissions. Most aspects of shale gas operations—for example, the construction of the well, the well-head equipment and any pipeline—use exactly the same technology as conventional gas production. Provided that that technology is competently constructed, there is no reason to think that unintended emissions from shale gas will be different from conventional gas emissions or will pose new problems. At present, methane emissions from gas production are estimated to comprise less than 1% of our total greenhouse gas emissions, so fugitive emissions from current gas production activities are not a major contributor to greenhouse gas emissions.

At the exploration stage, however, it is normally necessary to dispose of any produced gas by venting or flaring, as there will not be any export facilities in place. Nevertheless, my Department imposes controls to ensure that venting—the release of methane—is minimised, so far as it is technically possible, and to ensure that any gas that is released is flared, which reduces the greenhouse warming potential of the gas by a factor of at least 20.

However, there is one aspect of shale gas production that is different from conventional gas production: with shale gas production, the rock is, of course, fracked by injecting water under pressure. Much of that water flows back and is collected at the surface. That flow-back water will then contain methane, which could add significantly to emissions if it was simply allowed to escape. Having said that, there is technology available—described as green completions—that can capture that methane. If the well is purely for exploration, the gas can be flared; as I have said, that reduces its greenhouse warming potential. In production, the gas will be exported and sold. As we have no proposals for production as yet, it is too soon to say precisely how that aspect of production operations will be controlled, but my Department will continue to control flaring and venting, and the Environment Agency is also considering how its powers might apply if there is production.

What we can safely say at this stage is that both my Department and the Environment Agency will expect all shale gas projects to demonstrate best practice, including green completions, and they will apply suitable controls to the operations in question, with exploration or production to ensure effective control of emissions.

Thirdly, what steps are being taken to reduce any seismic activity? If any future shale gas operations are allowed to commence, it is vital that they do not result in further seismic activity at the level that was experienced near Blackpool last year. That is why detailed analysis has been undertaken to determine the linkage between the seismic activity and the fracking, and to consider the best way to mitigate the risk that such events will occur again.

An expert study was commissioned by my Department, which found a link between the fracking and the seismic tremors near Blackpool, and it recommends a number of measures to mitigate the risks in any future operations. They include micro-seismic monitoring on the site and a traffic light system that would shut down operations if early signals suggest that seismic events are being generated. However, the Government have not yet decided whether to allow fracking to recommence. We will not be finalising a view on that issue until we have considered all the additional comments that have come in as part of the consultation process, which finishes this week.

Finally, what overall steps are the Government taking to ensure that our regulatory environment is fit for purpose? Although we do not have a robust regulatory regime for the onshore industry—[Laughter.] Sorry, we do have a robust regulatory regime for the onshore industry. I apologise; my contact lenses are a bit blurry. However, it is important that we consider how that regime sits for any longer-term development of shale gas. Consequently, we are proactive in relation to the regulatory position.

My Department, the Health and Safety Executive and the environmental agencies work closely together to share relevant information on shale gas activities, to ensure that there are no material gaps and to ensure that all material concerns are addressed. We consider that the regime and the co-ordination of the work of the regulators are adequate, at least for the current exploratory phase of shale gas activity. However, with a view to ensuring the continued adequacy of the regime if shale gas proves to be commercial and moves into the development phase, the Environment Agency is currently undertaking a detailed environmental assessment of shale gas extraction, so that it has all the information it needs to ensure that regulation is appropriate to protect the environment. Other regulators, including my Department, will contribute to that review. Furthermore, the Royal Academy of Engineering, along with the Royal Society, is currently conducting a review of the risks posed by shale gas extraction. That review is expected to report in the summer.

The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry), or I will be delighted to meet my hon. Friend the Member for Morecambe and Lunesdale to address any further concerns he has that have not been addressed in this debate.