Lords Grand Committee Debate on CPS fracking report

Energy: Fracking

Question for Short Debate

Asked by Lord Borwick

From Hansard.

To ask Her Majesty’s Government what assessment they have made of the report by the Centre for Policy Studies, Why Every Serious Environmentalist Should Favour Fracking.

Lord Borwick (Con): My Lords, I declare my interests, recorded in the register, in a land company and as a trustee of the British Lung Foundation.

I have, at my own cost, visited Williamsport, Pennsylvania, in the United States. It is widely known as the heart of “Frackistan”—a place where shale gas extraction is growing apace. What I saw in Williamsport is a new city built to service a new industry, and beautiful countryside that was still beautiful. Behind the trees might be the top of a drilling rig, but when we went to the production site, there were only a couple of acres of stones. Only underneath them could you see the plastic membrane put down to protect the environment from minute spills that rarely happen. Such rainwater as falls on those membranes is prevented from seeping into the ground. Instead, it is gathered

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and used in the production process. At the natural gas well we saw, there was nothing much higher than five metres. It comprised a Christmas tree, a compressor and a meter hut for measuring the wealth produced in that site and put into the major gas pipelines that eventually flows into homes and factories. I am grateful to Anadarko for letting me see its site, its safety processes and the enormous efforts it pursues to prevent pollution. Those guys are working hard and succeeding to make sure no harm occurs.

When you think about fracking—pumping water, sand and chemicals into shale formations far below the Earth’s surface—perhaps you might think that it would involve a great deal more machinery, equipment and land space. However, it reminded me somewhat of Winter Wonderland, an amusement park that stands in Hyde Park for a couple of months around Christmas. It is put up in one of the most protected and lovely green spaces in the whole country, but the point is that Winter Wonderland is temporary and goes away pretty soon. There is noise, there are lights and there is extra traffic, but they go away and you would not even know the site was there. The same happens with a shale site. Once the initial flurry is over, the actual production phase is pretty benign. The intrusion stops but the wealth carries on.

The air quality in Shanghai today is rated at 155. That means it is classified as “unhealthy” and:

“Everyone may begin to experience health effects”.

In Beijing, air quality has recently reached levels of 551—extremely dangerous. This matters in the environmental debate on shale, because that bad air is largely caused by coal. Extracting shale gas seems to be the perfect way to mitigate global emissions while stimulating global economic growth. As the paper by the Centre for Policy Studies suggests, shale gas technology should be advanced as rapidly as possible and shared widely, to cut emissions and improve air quality.

I have known Professor Muller, one the authors of the CPS paper, for some years. He is a scientist, not a politician. Professor Muller is a physicist of world standing, receiving distinguished teaching awards from Berkeley. He assesses facts and then comes to a conclusion. He does not try to make his work embrace preconceived ideas. Professor Muller co-founded the Berkeley Earth organisation at the University of California in 2010, to examine historical temperature records. He returned to the base data, to check them without the hot air of politics. After much work, he concluded that climate change exists and that the levels of change are quite small. He also concluded that the change was correlated enough with the rise in carbon dioxide to say that it is manmade.

After extensive work, Professor Muller has shown in this CPS paper that shale gas extraction will actually reduce emissions. After all, global warming is a global problem: a tonne of Chinese CO2 is as bad as a tonne of British CO2. It is global warming, not British warming. Crucially, extracting shale gas instead of burning coal will also reduce the amount of harmful particulate matter 2.5 in the air. PM2.5s are tiny dust particles that penetrate deep into human lungs. The presence in the air of PM2.5 causes people to die:

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75,000 a year in the US and 400,000 a year in Europe. Its levels still go unregulated in the developing world and it currently kills more people annually than either AIDS, malaria, diabetes or tuberculosis. Shale gas offers an opportunity to cut massively PM2.5’s presence in the air. If extraction expertise were shared, we also could see a big drop off in CO2 emissions in the developing world.

There are many environmental concerns about shale but Professor Muller takes each one in turn and dispels them all. The first is that shale gas production depletes limited supplies of fresh water. However, shale extraction sites have lots of salty water reserves underneath, too. It is becoming standard, and cheaper, for brine to replace fresh water at all sites. Already in the US about half of the water used is brine.

The now famous short film “Gasland” highlighted another potential environmental issue—the “flaming faucets”. In the film the director, Josh Fox, is shown in the home of a landowner near a shale site igniting gas from a tap with a cigarette lighter. He later admitted that the taps were leaking long before shale extraction started.

Noted scientist Yoko Ono also chipped in with a series of adverts warning that,

“fracking makes all water dirty”.

The best way to combat pollution is to apply tight regulations and big penalties if any companies were to contaminate the Earth—much the same as happens now with companies supplying oil or natural gas.

Perhaps the most notorious environmental concern in the UK debate is that of fracking-induced earthquakes. The argument goes that if we start drilling under Blackpool, the whole of Lancashire will be rocking. However, let us not forget that earthquakes are recorded almost every day in the UK, and a brief glance at the list of the most recent events tells us that most of them occur at New Ollerton in north Nottinghamshire. It is a big coal-mining area. There was one there on Friday evening at 9.30 pm with a magnitude of 1.5, and across the UK there have been 38 in the past 30 days. The point is that energy extraction causes very minor tremors. In any case, the Government are ensuring safeguards that immediately stop extraction if tremors of 0.5 or more on the Richter scale are recorded. It may be that that level is too low because that is barely more than the shock felt of 10 Lords a leaping.

Professor Muller has provided a robust environmental case for proceeding with shale extraction. However, he is not the only one. In 2012, the Royal Society and the Royal Academy of Engineering found that the health, safety and environmental risks of shale extraction can be managed effectively in the UK. We have a track record for extracting a lucrative natural resource with little environmental impact. For instance, people said that we would cause lots of environmental damage when drilling for oil in the North Sea but, with the right research and regulation, we managed it.

Rightly, the Government have promoted the power of localism. People should have the right to have a say on the factors that affect them locally. With drilling for shale, the community will certainly have a say. Those who are afraid should be reminded that the Health and Safety Executive and the Environment Agency

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can both put a stop to drilling, even if the council gives the all-clear. Throughout the planning industry, though, localism is limited by a duty to co-operate—one area’s localism must not ruin another area’s locality.

With shale, there will be a duty to co-operate within government—that is, among departments. The Treasury, the Department for Business, Innovation and Skills, the Department for Communities and Local Government, the Foreign Office, the Ministry of Defence and the Department for Work and Pensions should all work with the Department of Energy and Climate Change to get it done; they are all affected in some way. Energy security has an impact on the Foreign Office and defence. Europe imports about 30% of its natural gas from Russia, which has frightening implications. As Fraser Nelson remarked in the Telegraph:

“Of all the weapons in America’s arsenal, its new energy power is perhaps what the Kremlin fears most”.

Let us also remember that America’s shale revolution, which produces oil as well as gas, has allowed it to disengage from the Middle East.

The economic benefits could be extraordinary, which should interest the Treasury. There should be a surge in tax revenues and reduced costs in imports. As a deficit-cutting measure, it should be right at the top of the top of the list . For the DWP, shale gas extraction could create around 74,000 jobs, with geologists in Lancashire and mechanics in Sussex. Councils could see a surge in business rate revenue, too.

Shale gas is the sort of subject that this House excels at because it affects so many different government departments. The Select Committee report on ageing was another example of this. Our economics committee has been considering this subject, and I very much look forward to hearing its views. Perhaps there should be a Lords Select Committee study into the cross-departmental benefits of shale gas extraction, to ensure that this industry gets going as soon as possible.

6.21 pm

Lord Lawson of Blaby (Con): My Lords, I congratulate most warmly my noble friend Lord Borwick on securing this debate on a very important subject, and on the contribution that he has just made in opening the debate, which has covered all the ground that needs to be covered.

Although I am a member of the Select Committee on Economic Affairs in this House, and although we are in the process of producing a report on UK shale resources, I cannot speak for the committee; I can give only a personal view. The committee will be producing its report in due course and I hope it will be a useful one. On the whole I think that reports by the Economic Affairs Committee of this House have tended to be useful over the years, and I hope this will be another one. However, I cannot speak today for the committee. I speak personally.

I have been interested in the energy scene for a very long time. I think it is 33 years since I was appointed Secretary of State for Energy, and I have watched how the energy scene has changed and developed throughout those years and I have retained an interest in it. In all that time, I have never known any development that was as exciting, promising, game-changing and beneficial

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as this technological development, a mixture of horizontal drilling and fracking—the fracturing of the shale rock—which has enabled access to reserves of shale gas, and indeed, increasingly, as my noble friend said, shale oil. Geologists have known these to exist for many decades but it has only just been discovered—remarkably, as a result of small-scale enterprise, not by any of the big oil companies—how they could be accessed economically.

The amounts involved are massive. It used to be said that the world was running out of oil and gas, and that fossil fuels had a finite life. We now see a greater abundance than there has ever been of gas and oil, which produce the energy on which all our economies rely. That is of course in just this development, which is huge—massive. But other people are interested in the development of offshore coal bed methane. On a much larger scale of particular interest is Japan, which is doing a great deal of development on this front, on methane hydrates. That is a further stage for the future, but shale gas is here with us now. As my noble friend said, the recent troubles in Ukraine have pointed out not merely that this is of great economic benefit but that it has important geopolitical consequences. For Europe in particular, to be much less dependent on Russian gas cannot but be a huge geopolitical plus.

We are lucky in this country, because it is quite clear in the surveys done by the Geological Society that we have a particular abundance of shale resources—particularly, as my noble friend pointed out, with the Bowland shale in Lancashire and other parts of the north-west. The Government have said from time to time that they want to rebalance the economy, by which they mean having more activity and success in the north of England rather than simply in the south. That is where the shale gas is. However, we do not know how much of it is economic because virtually no drilling has gone on. My noble friend was absolutely right to point out the fallacies in a lot of the so-called environmental objections to fracking. Nevertheless, virtually nothing is happening, which is of great concern. We really will not know what we have in this country until we can do the exploration. Once we have done that and have an assessment of what we have, there will then be the question of whether to do the production. However, there has to be the exploration so that we can know what we have got.

Perhaps the biggest single problem at the moment is the question of environmental regulation. It is very important that there is a rigorous environmental system of regulation. I do not think that anybody questions that, but the system needs to be not only rigorous but clear and as speedy as is consistent with that rigour. Nobody could say that our system is clear; certainly, nobody could say that it is speedy. The Government and the agencies which are part of the Government—the authorities generally, including the Government—really have to get their act together. The present system is absurd.

As for the environmental objections, not only are they entirely without substance but you have only to go, as my noble friend has, to the United States to see that there is not an environmental problem. There is an environmental problem with windpower, which is despoiling large tracts of the British countryside. I know

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that beauty is in the eye of the beholder and that there are some who feel that the English countryside has been greatly enhanced by these forests of wind turbines. However, that is not a majority view and it is not a view that I share. It is reckoned that 10 square miles of fracking can produce as much energy as all the wind farms that we have in this country at present, and indeed more. My noble friend pointed out how small its footprint would be within those 10 square miles. I strongly support him in the Motion that he has brought before the Committee today.

6.30 pm

Lord Teverson (LD): My Lords, I, too, thank my noble friend Lord Borwick for introducing the debate, which has all sorts of strong international, let alone national, relevance at present—Ukraine has already been mentioned.

It is not often that I would almost entirely agree with a report from the Centre for Policy Studies. It is not necessarily a body of intellectual stimulation that I look to—I look more to Policy Exchange or even the IPPR—but in this instance, I think the report is on the whole excellent. For a start, it takes the whole issue of global warming to be important in terms of environmental pollution. It also deals with the fact that we have all sorts of pollutants now from the various ways that we create energy that cause real health problems in the short term. I was pleased to read that the most important policy action is to reduce energy demand and increase energy efficiency, so that we do not have to do as much of all this. That is the cheapest and best economic approach to this, although clearly, we know that we will always need energy in a global and national economy.

To me, from a UK perspective, shale is an important resource that should be developed. From the most basic point of view, our North Sea oil and North Sea conventional gas production is falling very rapidly. For our national strategic energy and economic needs, it can be a least a substitute. Not only that, as the noble Lord, Lord Lawson, said, we have one of the best environmental records in the world. We should not be afraid of the environmental aspects and threats of shale gas and oil; we need absolutely to ensure that we enforce the right standards. I have every confidence that that is possible for us to do that from our long and deep experience in that area and our very successful track record. However, we should be aware that we have doubly to make sure to begin with, because if we have a problem at the beginning of this exploration and exploitation, there is serious reputational risk for the industry.

One of the main themes of the report—this is absolutely right—is that the most important thing that shale gas has done so far and should do for the future is to substitute for coal, which is an absolute no-no fuel in terms of environmental damage. The report is quite kind to the UK about coal. It points out strongly that with Germany now at 50% and the increasing coal capacity in China, despite all the renewables investment and everything else, in the UK over the past 18 months or two years, we have been at 40% in our coal energy production. Of course, most gas in this country is used for heating rather than for providing

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electricity. If shale gas means that we manage to reduce the wholesale gas price or at least hold it steady, which seems to be critical, that is a great thing for consumers and fuel poverty.

However, in the longer term, we have to remember that carbon is a problem. We cannot keep on pumping it out into the atmosphere at an increasing rate, however bad we are as an international community at solving that problem. So this has to be an intermediate, medium-term strategy, not a long-term strategy, unless the long-promised carbon capture and storage happens. I tend to be slightly sceptical in that area, but I am sure that the Minister will put me right on that, as I know that she has done and continues to do important work in that area, and there has indeed been progress.

It is not necessarily predictable how successful shale gas will be. We all hoped that Poland would push it forward—again for reasons of energy security, Gazprom and Russia—but, as I understand it, Poland has not been that successful in developing that fuel. So there is a risk and hence the need for exploration and pushing the project forward.

In terms of displacement, we found that coal has been substituted very benevolently and positively in the United States, but of course large amounts of that coal have come to our shores and been used as a substitute for conventional gas in electricity generation. That coal is going to go somewhere, even if we displace it from existing economies or where shale gas is strong. We need to have a strategy for that, and obviously I would suggest an international emissions performance standard which we would all need to comply with. However, that is not something which is going to happen too quickly.

On the environmental challenge, the quantity of water needed for the process is a genuine issue which we need to prove can be solved. I am not technically or scientifically competent to talk about the move to using brine, but it sounds promising and certainly something we need to make sure happens. Despite the floods we have had, particularly in my part of the world, I am sure that water shortages will come back to haunt us in due course. I welcome the report. Shale gas is important to this country and globally, but what happens to the coal that it will displace? That is a key issue.

The paper makes some important points about methane leakage, and I would be interested to hear what research the Government are undertaking into the value of methane leakage and what the quantities are.

On the energy security side in the macro area, once again we are in a position where our reactions to the Russian Federation on Ukraine and Crimea must be tempered by the fact that to a certain degree our hands are tied behind our back because of our dependence on Russian gas. It is to be hoped that shale gas might substitute for it in the medium term. The Nabucco pipeline project is seen as pretty much dead, but I would like to understand what Britain and her European partners are doing in terms of reconsidering how we transport conventional gas supplies to eastern and central Europe without going through Russian Federation territory.

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6.37 pm

The Earl of Caithness (Con): My Lords, I thank my noble friend Lord Borwick for introducing this important debate. I must say that I was delighted to hear the speech of the noble Lord, Lord Teverson. There is clearly hope on the left wing of the coalition, so I recommend to the noble Lord more Centre for Policy Studies papers for bedtime reading.

I was fortunate enough to serve on EU Sub-Committee D, which published a report in 2012-13 entitled, No Country is an Energy Island: Securing Investmentfor the EU’s Future. We looked at energy in its widest sense, and it was alarming to realise just how dependent Europe is on imported energy supplies. Evidence to the committee showed that more than 50% of its energy supplies are imported. It is even worse from the UK’s point of view. In 2003 we were a net exporter of gas, but by 2025, a mere 12 years hence, we will be importing 70% of our gas. There has been a dramatic change, and we are slowly waking up to the energy crisis that is about to hit us even harder than the committee anticipated in its report 18 months ago.

We must also bear in mind the trilemma of the problem when considering the energy crisis. Not only do we want to produce low carbon energy, we want security of supply, which I will come back to, and we want to keep our energy cheap. That is a difficult policy for any Government to implement successfully.

We looked at shale gas, and there is no doubt that it is a potential asset in the armoury of a Government who wish to secure wide diversity of supply. I fully support that policy. We should not put all our eggs in one basket, and the supply base should be as broad as possible. However, I still agree with our committee’s report and recommendation: shale gas would not be a panacea for this country. Indeed, the Government in their reply to our report said, in paragraph 57, that,

“it should not be assumed that it will bring impacts comparable to those seen in the US”.

There is a good expectation from shale gas, but we should not think that it will be an instant solution.

The UK has an enormous amount of experience in drilling and wells. More than 2 million wells have been hydraulically fractured—or fracked—worldwide, mostly in the USA. From our point of view, shale gas is much the same as North Sea gas. We have more than 50 years’ experience of getting North Sea gas out of the ground. More than 2,000 wells have been drilled onshore in that time. There is a very good case for Britain taking the lead in developing shale gas in Europe.

As has already been said, what we require is strict regulation. Regulation for shale gas should be exactly the same as for other forms of conventional oil and gas drilling. I was therefore alarmed to read in the papers—of course I am very sceptical of anything I read in the papers and am glad that the Minister had not read the Mail on Sunday article because I would not trust that—that the European Parliament reduced the standards for shale gas in a recent discussion. Could the Minister update us on the situation in Europe? It is important that it is not perceived that shale gas gets any particular benefit.

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Another bit of evidence given to us supports what my noble friend Lord Teverson just said: people in Europe expect Britain to take the lead on this. We are the experts. Poland will not fulfil its potential with shale gas until Britain gives the lead. There seems to be a blockage. Given our experience that I have just mentioned, we are the ones Poland is looking at to set the standards, regulations and monitoring so that it can follow. I totally agree with my noble friend Lord Lawson about the Ukraine and Russia. Russia, perversely, might have actually done a benefit to Europe. The EU reacts really well only when there is a crisis. It will now be faced with a massive energy crisis, and that might just shake it enough to get its act together and make progress in a field where it has dragged its heels.

A difficulty with shale gas is, of course, that it does not always appear in unpopulated areas. In fact, there is quite a lot of shale gas where the country is very densely populated. England is the most densely populated nation in Europe, with more than 400 persons per square kilometre. Up in Scotland, at home, we have 40 persons per square kilometre. Texas, where we hear of all this wonderful drilling in the central part of America, has 35 persons per square kilometre. So there will be an inevitable problem, and that has already shown up, particularly in the south of England.

Lord Lawson of Blaby: My noble friend is right about the relative population densities in the United States and United Kingdom, but in fact parts of the United States have a very high population density, and fracking has been allowed there and gone very successfully. High density of population does not matter. Even in the suburbs of Los Angeles it can be done and managed. The point my noble friend made is interesting but in actual fact does not prove anything.

The Earl of Caithness: My noble friend has just completed my paragraph for me. That is exactly what I was going to say. Despite the high density of population, it can be done and has been done very successfully. It is not surprising that when you live in an area where houses are expensive, you do not mind at all that there is industrialisation of the fine Scottish landscape with turbines but you will not have anything on your own doorstep. There has to be a way for the Government to get around that hurdle of environmental intolerance by some people in the south of England.

The noble Lord, Lord Borwick, mentioned air pollution. Paris has got such bad air pollution that cars now are being driven on alternate days.

Lord Wallace of Saltaire (LD): This is a timed debate.

The Earl of Caithness: Perhaps I may conclude because I allowed for interruptions. There has been a recent report, Are We Fit to Frack?. The reason these so-called wildlife bodies do not like fracking is that there might be cracks in the pipework. That is what regulation is about. Those people drive cars, which are hazardous. There also is lots of light pollution. People will probably object to the very good idea of building a new town at Ebbsfleet because of light pollution.

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6.46 pm

Viscount Ridley (Con): My Lords, I declare my interests in various forms of energy as detailed in the register, especially in coal. I congratulate my noble friend Lord Borwick on this extremely timely debate. As he probably knew, today is the 65th birthday of fracking. Through the wonders of Twitter, I found out this afternoon that it was on 17 March 1949 in Archer County, Texas, and Stephens County, Oklahoma, that the first commercial hydraulic fracturing operation happened. During those 65 years, there have been extraordinarily few environmental problems. Ken Salazar, who was Secretary of the Interior in the first Obama term, recently said that,

“there’s not a single case where hydraulic fracking has created an environmental problem for anyone”.

He continued:

“We need to make sure that story is told”.

Obviously, the oil industry and the gas industry cause problems but hydraulic fracturing itself has not produced a single environmental problem.

From Hansard.

Date Added: Tuesday 18th March 2014