Shale Gas and Oil (EAC Report) — Motion to Take Note

Part of the debate – in the House of Lords at 6:09 pm on 4th November 2014.

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Photo of Lord Lawson of Blaby Lord Lawson of Blaby Conservative 6:09 pm, 4th November 2014

My Lords, I shall follow the noble Lord, Lord Hollick, our new chairman—who I welcome most warmly to a job that he has been carrying out with aplomb and finesse—and my noble friend Lord Shipley in paying tribute to my old and noble friend Lord MacGregor. He knows what a high regard I have for him. From the bottom of my heart,

I thank him for his brilliant service as chairman of the Economic Affairs Committee. The report that we are debating was the last report produced under his chairmanship. It is an excellent report and he deserves more credit than anybody else for it, and for the other reports that we have done.

It is well over 30 years since I was Energy Secretary, and since then I have followed the energy scene quite closely. In all that time, I have never known as big a game-changer as the technological revolution which has made it possible to extract economically the vast amount of shale gas and shale oil distributed over the world. Geologists—and all of us, I think—have long known that this existed, but there was not a means of extracting it commercially and economically. Such means now exists and it is a huge game-changer. As has been pointed out, there has been a game-change in the American economy and it has dramatically changed the strength of the American economy. Indeed, the main reason why the American economy has recovered considerably better from the banking meltdown of 2008 than the European economy has, despite the subprime crisis and all the banking difficulties, is the development of shale gas and shale oil in the United States.

It is not just a game-changer for the American economy; it has been a game-changer for the world energy scene. I have never been a believer in the peak oil thesis. When I was appointed Energy Secretary in 1981, one of the first things I did was to ask the chairmen of the two British-based oil majors—Shell and BP—to come and see me. They came to see me and I said, “Tell me what I need to know”. They said, “The first thing you need to know, Secretary of State, is that there are only 30 years of commercially exploitable oil left in the world”. That was in 1981, 33 years ago, but it has always been like that. They never need to look beyond 30 years in their plans, so why should they be interested in beyond 30 years?

It is true that, through a thoroughly incompetent energy policy—I shall not go into it now as I am sure there will be another occasion to do so—we have managed to get very close to peak electricity in this country. However, that is a different matter altogether. Oil and gas have never been in greater abundance in the world. We see that in the declining prices of oil and gas, which are highly beneficial to all those who use energy—not that it ever happens in this country. Unlike other countries, prices have not fallen in this country. Again, that is because of the energy policy that I alluded to earlier. However, shale has completely changed the global energy scene.

The question now—and this is what our report addresses—is whether shale could be just as big a game-changer for the United Kingdom. The answer is that we do not know. The British Geological Survey has shown that the actual mineral resources of shale gas and shale oil in the United Kingdom, particularly the Bowland shale, in the north-west and particularly in Lancashire, are absolutely massive. The Bowland seam is a particularly thick one, which is good.

The potential for something possibly on the scale of North Sea oil and gas—which is now in decline—is before us. On the other hand, some people say that it might be very much less. Nobody knows because nothing has happened. Until the exploratory drilling takes place it is impossible to know whether we have the biggest bonanza since North Sea oil and gas or something rather small. We need to find out. It is all very well for the Prime Minister and the Chancellor of the Exchequer to wax enthusiastic about UK oil and shale but we need action, not words. So far it has been all talk and no action.

The problem lies partly in the lack of real interest or enthusiasm but more particularly because of the nature of our regulatory system. I disagree with my noble friend Lord Shipley on only one point—when he referred to the regulatory system in the United States. There is no regulatory system in the United States. The United States has decided that this should be at the discretion of the individual states, so each individual state has its own policy towards shale and its own regulatory system. That is why, in some states, they have developed shale tremendously; in others they have not developed it at all. The regulatory systems vary considerably in efficacy from state to state. It is pretty good on the whole, but not in all of them.

A proper regulatory system is needed here, as it is in many other areas, such as—to confine myself to energy—for nuclear power. We have a good, strong and rigorous regulatory system for nuclear power. We need a similar system here but we do not need anything as cumbersome, as inefficient or as time-consuming in this case because it creates an almost impossible barrier.

The biggest company seeking to operate in this country is Cuadrilla, in which Centrica has about a 30% stake. After almost interminable talks and discussions, five months ago, Cuadrilla put in a complex, detailed planning application for two wells in Lancashire to Lancashire County Council. It has now been told that it has to wait for another three months. After that, there will probably be a further delay. That is just Lancashire County Council. The Environment Agency is equally slow moving. There is enthusiasm in words but not in deeds from DECC. So nothing happens at all.

We took evidence on the environmental issues, as my noble friend Lord MacGregor said. Under pressure, it became quite clear that the nature of the objectors’ objection was to fossil fuels in principle, despite the fact that gas has only half the carbon emissions of coal. The environmental objections are all completely spurious. I will mention three. First, there are the so-called earthquakes. These are minor tremors which happen from time to time. They are considerably less than the tremors that regularly occur both in coal mining and in nature. They are about on the scale of a heavy lorry passing along the road—that sort of thing. Then there is the contamination of groundwater. That would be very difficult to achieve, even if you wanted to, considering that fracking happens at least a mile if not more below the surface, while the groundwater is, as its name implies, near the ground. The risk of contamination from one to the other is negligible—it is nonsense; in fact, it is zero. As for the chemicals, as my noble friend Lord Shipley says, dangerous chemicals are not used in the mixture that Cuadrilla proposes and which will be used elsewhere. It is 99.95% water and sand and 0.05% polyacrylamide, which is widely used in the manufacture of cosmetics. No dangerous chemicals are involved in the slightest.

We have got to get to grips with this problem—which is impeding this development, this possible huge game-changer for the British economy—of the regulatory system. Again, shale is a game-changer in a particular way. Some points have already been mentioned but I will mention just one other which has not. North Sea gas is running down and we are going to be reliant on imported gas. I am not concerned about the so-called security problem of imported gas. However, the only way that you can import gas is first to have it liquefied into liquid natural gas, which is a very expensive process; and then when it comes to the country of destination—to this country—it has to be gasified again, which is also very expensive. Therefore the overall transport cost of gas is far higher than the transport cost of anything else because of the process that it has to go through. The Government have to get their act together.

As my noble friend Lord MacGregor said, we proposed that a government committee or Cabinet sub-committee should put everybody together in order to knock heads together, but that was rejected by DECC. There is an extraordinary number of Cabinet sub-committees dealing with totally trivial matters but there is no Cabinet committee or sub-committee dealing with something as important as shale. That is despite the fact that a large number of different departments—this is why onshore is different from offshore, which involved just the energy department—have a locus and their own point of view, and a number of government agencies also have a locus. If anything needs co-ordination, this does. People used to talk about joined-up Government. How about joining up the governance of shale? Nothing could be less joined up than it is at present. People have decided that it is not worth investing in UK shale if you cannot even get to the exploration stage. Other countries, such as China and Argentina, are going ahead with it—America is by no means the only one although it was first in the field—and we are left languishing behind.

Many people recognise that there is a malaise in this country. It might not exist exclusively in this country but it is certainly here. There is a great gulf between the people and the elites. Elites are needed, but they are needed to provide leadership in the interest of the people, and the people do not feel that they are acting in their interest at present. We could make a start in changing that by making the development of UK shale “an urgent national priority”, to quite the concluding words of our report—and we did not say that lightly. Action, not words, is needed, and not just for the economy. It might restore a sense of optimism in place of the debilitating pessimism that is so prevalent in our country at present.