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Report (3rd Day)

Part of Infrastructure Bill [HL] – in the House of Lords at 6:00 pm on 10th November 2014.

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Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 6:00 pm, 10th November 2014

My Lords, I am extremely grateful to the noble Baroness for putting forward the amendment and to all noble Lords who have contributed to this very informative debate. We are absolutely clear that shale development must be safe and environmentally sound. We agree with the Opposition that the issues they raise should be thoroughly addressed but that the existing regulatory regime does so in a robust and proportionate manner. I am minded to repeat some of the contributions that have been made already today because it is necessary and important to do so. I hope that over the next few minutes I am able to allay the fears of those noble Lords who are supportive of these amendments.

As noble Lords have said, we must ensure that the public are properly informed. I agree with my noble friend Lord Deben that fracking must not be seen as a silver bullet. It can offer huge potential to ensure that we have a home-grown supply in a diverse range of energy mixes. It has been pointed out by my noble friend Lord Deben and others that evidence in the United States referencing shale developments has, on occasion, led to public mistrust. However, it is important to note that the latest evidence continues to show that such cases in the States are due to faulty surface operations or faulty well construction rather than hydraulic fracturing.

On another issue again rightly raised by most noble Lords today, it is important to emphasise that in the UK we have an entirely different regulatory system to the US. The UK benefits from a comprehensive and stringent set of statutory and non-statutory requirements. My noble friend Lord Jenkin and other noble Lords rightly pointed that out. In the US, practice between different states varies considerably and regulation is in some respects less stringent. For example, unlike some US states, we do not allow open-pit storage of chemicals or waste fluids and we require independent verification of the design of the wells. I will respond to the questions raised towards the end of my contribution.

The UK’s globally recognised expertise in the offshore oil and gas industry is well known. Noble Lords, including, I think, my noble friend Lord Caithness, referred to the fact that the UK has more than 50 years’ experience in regulating onshore oil and gas production. We are confident that the regulatory system will continue to provide robust protection for the environment. Our position is backed up by reports from the Royal Society, the Royal Academy of Engineering and Public Health

England. These reports have considered a wide range of evidence and have looked at the UK regulatory system. Their advice has outlined the risks and concluded that, overall, as my noble friend Lord Jenkin, pointed out, they can be managed or are low if industry meets all regulatory requirements.

I will now turn to each of the areas raised by the noble Baroness. First, where there are likely to be significant effects of a proposed scheme on the environment, environmental impact assessments are prepared by companies at an early stage in the development of proposals. They have a key role in informing regulators, planning authorities and the public about the likely significant effects of a proposed scheme on the environment. They enable mitigation measures to be identified to reduce or avoid significant effects. If the significant environmental effects cannot be mitigated, planning permission could be refused.

The UK has a strong track record in assessing the potential environmental impacts of development and in ensuring that they are appropriately mitigated. This is based on more than twenty years’ experience of adopting a proportionate, evidence-based approach to the environmental impact assessment. But what is proposed here misunderstands its purpose. Existing regulations already require the assessment of all proposals which are likely to have significant effects on the environment. Legislating to force mandatory environmental impact assessments on all shale sites, even where significant effects are not considered likely—bearing in mind that hydraulic fracturing may not even be proposed—would be disproportionate and unnecessary. Not only would it slow down or delay development for no discernible environmental benefit, it would create a damaging precedent for other new industries in the future, both in the energy sector and beyond.

The proposal to make EIAs mandatory for all shale gas activities was discussed during the recent negotiations on the revision of the environmental impact assessment directive and was roundly rejected by member states, including the United Kingdom. We appreciate the importance of building public confidence in the shale gas sector and the fact that this includes being open about environmental impacts and how they are to be addressed. The existing EIA regime is already well suited to meeting these requirements.

Changes here would also affect other areas of development. There is an ongoing issue with planning authorities taking an overly cautious approach to environmental impact assessment. To gold-plate the requirements of environmental impact assessment in this way could significantly impact upon developments such as housing. We are therefore keen to maintain the existing rigorous and consistent approach across all sectors of the economy. We welcome the industry’s public commitment to carry out environmental impact assessments for all exploration wells that involve hydraulic fracturing. This commitment has already been seen through in the planning applications that have been recently submitted by Cuadrilla in Lancashire and we will support the industry in delivering on this commitment over the coming years.

The second area concerns well inspections. The integrity of the well is critical to ensuring the safety of the site and protecting the environment. For this reason the Health and Safety Executive checks the design of all wells and approves them prior to any construction taking place. The HSE also monitors well construction based on weekly reports to its well specialists. It is the well operator’s responsibility to appoint an independent well examiner separate from the immediate line management of the well operations. This allows a scheme of quality assurance and quality control, where an operator’s employee is not responsible for verifying their own work. This approach is flexible in that it allows in-house checks but only where the appropriate safeguards are in place. In this context, it is the competence of the well examiner that is most important. In reality, due to the size of shale gas operators, the well operator will generally appoint a company to act as its well examiner.

The third area relates to chemical disclosure. One of the problems we have seen in parts of the United States is where companies have refused to disclose the chemicals used in their fracking fluid, which raises safety concerns and alarms the public. In the UK in contrast, full disclosure is already required of every chemical the operator proposes to use, ahead of any fracking being allowed to take place. The environmental regulator requires this information when companies apply for the relevant permits to assess the safety of what is proposed and any potential risks to the environment. The Environment Agency has confirmed that it will publish the permit with this information, including naming each chemical and the maximum concentration of each at each well. In addition, the industry has committed to publish this information itself at each well along with the total volume of fluid used.

The fourth area concerns water companies. We recognise the importance of ensuring that water companies are fully engaged in shale gas development. Their role underpins the strict controls that are in place to protect the quality and availability of water supplies. The environmental regulator is already required to check the potential impact on groundwater of any shale gas proposal for which permission is sought and will not grant a permit where our water supplies could be affected. The Opposition are seeking to ensure that oil and gas operators will consult with the relevant water company. However, the water industry and shale operators have already agreed a memorandum of understanding to engage early and share plans for water demand and wastewater management. Making this a legal requirement does not add any value to an existing arrangement.

The fifth area is baseline monitoring of environmental indicators, including methane levels in groundwater. Good quality baseline monitoring, prior to operations, is essential to enable a rigorous assessment of any subsequent changes. It also provides local communities with information on the current state of their environment, potentially preventing those unfounded scare stories later. The UK already has a good set of regional groundwater data, thanks to the work conducted by the British Geological Survey since early 2012. At the more local level, the Environment Agency has confirmed that it would typically require baseline monitoring of groundwater methane for each specific site proposing to undertake fracking. It would not normally require this where no fracking is proposed, because there is no discharge to the environment. Moreover, the environmental regulator has the powers to require baseline monitoring of those environmental indicators it considers appropriate and for the length of time that it deems suitable for each site.

For fracking sites, the precise length of the period of monitoring the Environment Agencywould require would depend on its expert assessment of the characteristics of that particular site and any risks associated with it. Typically, this would be a minimum of three months, not 12 months, although the regulations afford the agency the flexibility to require a longer period of monitoring should this be deemed necessary. For other indicators, such as surface water and biodiversity, the degree to which these will be relevant and the time required to monitor them will vary so much between sites that any fixed requirement would be inappropriate. Setting fixed requirements on monitoring will not strengthen these protections; they will simply impose unnecessary obligations in cases where environmental experts do not believe they are required.

The sixth and last area is fugitive emissions reporting. We already report the UK’s greenhouse gas emissions annually as part of our international reporting obligations to the UN Framework Convention on Climate Change and under the EU’s monitoring mechanism regulation. This reporting includes an estimate of fugitive emissions from onshore energy extraction, is done in accordance with guidelines produced by the Intergovernmental Panel on Climate Change and is audited annually by a group of international experts. Our obligations mean that we will be required to include emissions from shale gas exploration and extraction in this reporting once these activities begin in the UK. Fugitive emissions from conventional onshore oil and gas extraction were estimated at around 0.03% of the total UK greenhouse gas emissions in 2012.

The MacKay-Stone report entitled Potential Greenhouse Gas Emissions Associated with Shale Gas Extraction and Use responded to a request from the Secretary of State in 2012 to assess potential greenhouse emissions associated with shale gas extraction and use. The report found that if properly regulated—as the noble Lord, Lord Young, highlighted—local greenhouse gas emissions would represent a small proportion of the carbon footprint. In April 2014, my department accepted the recommendations in the MacKay-Stone report, four of which relate to emissions monitoring, and a research project is planned to measure on-site emissions in line with the development of UK shale gas operational activity. The research will address uncertainty relating to fugitive emissions and inform decision-making on future monitoring. As we already have a robust process in place for reporting of fugitive emissions, and have plans in place to monitor and report any emissions from shale gas exploration and extraction once these activities start in the UK, additional reporting in this area would be redundant.

I hope that noble Lords have been reassured that we have examined closely each of the concerns in detail and are confident that these are fully reflected in the existing regulatory system, which has been operating well for decades for onshore oil and gas development.

The noble Baroness asked how the regulators would be funded, as did my noble friend Lord Deben. The regulators have confirmed that they have sufficient inspectors to deliver the regulatory regime they are responsible for during the current shale gas exploratory phase. If large numbers of wells are drilled to produce shale gas, the regulators may need to increase their resource accordingly, and they have plans in place to review that at relevant times.

The noble Baroness, Lady Farrington, asked how confident we are that fracking will not cause earthquakes, although there was a difference in the definition of whether they would be earthquakes.