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“Onshore oil or gas activities—effect on water environment
13A (1) Without prejudice to the operation of Regulation 35(2) and paragraph 5(1)(d) of Schedule 10 and of Regulation 35(2) and paragraph 7(j) of Schedule 20, the regulator shall refuse an application for the grant or variation of an environmental permit or for the transfer in whole or in part of an environmental permit if—
(a) the regulated facility to which the application for or transfer of the environmental permit relates is to be carried on as part of an onshore oil or gas activity; and
(b) the regulator is not satisfied that the applicant or the proposed transferee has made or will make adequate financial provision for preventing or mitigating pollution of the water environment, by ensuring all of the following—
(i) operation of the regulated facility in accordance with the environmental permit;
(ii) compliance with any enforcement notice or suspension notice or prohibition notice or mining waste facility closure notice or landfill closure notice which may be served on the applicant or transferee by the regulator under these Regulations;
(iii) compliance with any order of the High Court which may be obtained against the applicant or transferee under Regulation 42 for the purpose of securing compliance with any of the notices listed in sub-paragraph (ii).
(iv) compliance with any order of any court issued under Regulation 44 against the applicant or transferee; and
(v) recovery by the regulator of its costs upon any exercise of its power against the applicant or transferee under Regulation 57;
(c) for the purpose of this paragraph ‘onshore oil or gas activity’ means any activity for the purpose of exploration for or extraction of onshore oil and gas;
(d) for the purpose of this paragraph ‘adequate provision by way of financial security’ means financial provision which is sufficient in value, secure and available when required.”.’.
It is a pleasure to serve under your chairmanship, Mrs Riordan. I seek to take some of the burden off the shoulders of the shadow Minister, who is struggling against a Minister on good form in defence of his Bill, showing excellent defensive qualities.
New clause 35 would amend the Environmental Permitting (England and Wales) Regulations 2010 and introduce a liability guarantee—in other words, a bond—to ensure that fracking companies have the funds available to pay for the cost of the clean-up should an accident occur. Such a precaution is essential to ensure that the public purse is not hit if something goes wrong. Companies involved in fracking have said that the risk of pollution to groundwater is extremely low. We have also heard assurances that our regulatory regime for fracking is the most stringent in the world. If that is true, a bond is not a big issue, but it is important.
It is true that, if properly implemented and enforced, existing regulation could mitigate many of the risks posed by fracking, but we should still plan for the low-probability, high-risk scenario of a pollution incident. The amendment would simply ensure that, if the worst did happen, there was clear liability in place and the cost of clean-up did not fall on the public purse.
New clause 35 builds on the lessons learnt from the experience in the United States, which has shown that there is a need for a strict regulatory regime. For instance, the peer-reviewed study of aquifers in Pennsylvania and New York uncovered convincing evidence of methane contamination of drinking water linked to shale gas extraction. We need to know that provisions are in place for dealing with drinking water contamination. This amendment would also prevent the repetition of past mistakes in the UK. As it currently stands, even if liability for an accident can be proven, there remains a risk that fracking companies will go bankrupt, leaving taxpayers or water companies with a cost.
I welcome the hon. Gentleman to this important debate. He is obviously aware of the Water UK memorandum of understanding that was signed in the past couple of weeks. Does he feel that it is sufficient cover for the issues that he is addressing, or does he have further concerns?
I am trying to get the Minister’s understanding of that situation placed on the public record. I have some experience in my constituency, not of fracking but of extractive industries that have left areas in a very poor state. For instance, the Nant Helen opencast process in my constituency was given planning permission—initially having been refused by the local authority—by an inspector who put in place no restoration conditions. We are left with a fantastic bit of scenery that is now in very poor condition. I met the commoners recently who find that a third of the area on which they depend for grazing is lost to them, with no hope of restoration in the future. That is not what we want to occur if problems happen as a result of fracking.
Members of this Bill Committee know only too well that we cannot afford to pollute aquifers that are a vital source of water for drinking, for agriculture and for the natural environment. Such a pollution incident could occur, however, due to a fault in the production well, and clean-up would be costly and could take decades. An example of this was referred to by my hon. Friend the Member for Wells (Tessa Munt) on Second Reading. The contamination of a chalk aquifer near St Albans in Hertfordshire in 2000 led to extensive contamination of the public drinking water supply. The cost of clean-up, which took a decade, was in the region of £16 million.
New clause 35 will ensure that if and when fracking goes ahead, there is public confidence in assurances from industry that there is no risk to our water supplies. In the autumn statement, the Chancellor confirmed that the UK will have the most generous tax regime in the world for fracking. It surely stands to reason that companies that benefit stand by their assurances and commit to paying the costs of clean-up if something goes wrong.
I rise in support of the amendment in the name of the hon. Member for Brecon and Radnorshire. I support fracking, which has happened in Nottinghamshire for the past 50 years, but it is essential that that very technical process is done by the professional bodies that are good at doing what they do and that we can be assured that it will not lead to the contamination of watercourses.
This amendment allows that process to happen by guaranteeing a bond—a public liability insurance, in effect—to make sure that those companies will pay to mitigate any damage to the aquifers through which they are drilling. This is not new technology. Anybody who lives in Nottinghamshire will know that every deep mine in that county went through the Bunter sandstone, through the aquifer, so it is quite technically possible to go through this process, but we need to make sure that the companies that deliver this technology are sufficiently competent. I think this bond will ensure that those companies are valid and competent so that, to put it in Sherwood language, we do not allow cowboys into the industry who may simply walk away from the damage they cause.
I congratulate the hon. Member for Brecon and Radnorshire on tabling the new clause and the hon. Member for Sherwood on his useful and productive contribution. We welcome the new clause and understand that it is a probing amendment. The hon. Gentleman will probably be more effective than I have been in winning over the Minister. A memorandum of understanding has been reached between Water UK and the fracking industry which Ministers south of the border find acceptable. However, Scottish Ministers have expressed concerns about it. I should be grateful if the Minister could tell us whether the Scottish Ministers have shared those concerns with him.
I suspect that the reason why Scottish Ministers are a lot more concerned than Ministers south of the border is that, to go back to the point the hon. Gentleman made when he introduced his new clause, we have had some quite bitter recent experiences with extractive industries as a whole. Indeed, in my constituency, ATH Resources went into liquidation recently and has left a huge, gaping hole in the ground without a sufficient bond to meet the cost of repairing it. ATH Resources had inherited from Scottish Coal responsibility for maintaining the water table. Without going into the details, there is a long-standing commitment to stop pollution draining off the open casts and the surrounding mines and seriously damaging the water table.
The concern that the hon. Gentleman raises is a legitimate one. If sufficient bonds are not in place, the disasters that we have seen in Scotland with open casts collapsing will be repeated. I hope that will be rare, but it could happen if a fracking company found itself in the same situation. We support the new clause and hope that the Minister can give specific reassurances about the MOU.
I concur with the hon. Gentleman about the helpful contributions from my hon. Friends the Members for Brecon and Radnorshire and for Sherwood. I apologise that he has not yet reached that level of accord with me on so many issues that he can share in the kind message from my hon. Friend. We have more sittings to come and we will see where we get to with that. I may be about to lose my hon. Friend with some of the comments I am about to make, but I hope not.
The new clause would require onshore oil and gas operators to provide financial security when applying for an environmental permit so that funds would be available to deal with any water pollution incident caused by the operator. It would have an impact on both the conventional and unconventional oil and gas services whose activities also have the potential to cause pollution. I would like to make a few key points to explain why the Government cannot support the new clause.
As the Secretary of State mentioned at Second Reading, we believe that the existing regulatory framework is fit for purpose for the exploration and exploitation of onshore oil and gas activities. There are a great number of checks and controls available to us to ensure that operators comply with the requirements of their permits and deal with the wider pollution risks without adding to existing regulation. For example, at the outset of the process for permitting applications for onshore oil and gas activities in England, the Environment Agency carries out an operator competence assessment, which looks at an operator’s financial capacity as well as its technical ability to comply with the permit conditions. These checks have served us well to ensure that only technically competent and financially able companies are allowed to operate in this field. In addition, there are existing requirements for financial guarantees under the mining waste directive for highe- risk extractive waste industries. In the event of serious damage to surface or ground water, the environment agency and Natural Resources Wales already have powers under the Environmental Damage (Prevention and Remediation) Regulations 2009, and the equivalent Welsh regulations to serve a notice requiring that the polluter pays to clear up the pollution.
These powers apply to a wide range of operations and activities undertaken by different industries, and I do not think that it is necessary to create any specific provisions for the oil and gas industry. I hope that I have reassured the hon. Member for Brecon and Radnorshire that his amendment is not necessary, as we already have adequate controls in place to prevent pollution from oil and gas activities, and to ensure that any problems that do emerge will be effectively dealt with and remediated without costs falling on public funds.
Before I respond to the point on the memorandum of understanding, I will give way to the hon. Gentleman.
Perhaps he is about to come on to this, but I raised specific points about Scottish Ministers and I hope he has had some inspiration to help answer those.
The hon. Gentleman has helpfully informed the Committee that a memorandum of understanding has now been signed by Water UK and the UK Onshore Operators Group. It offers co-operation in a bid to minimise the effects on water resources and the environment from shale gas operations. I hope that the hon. Member feels that the water companies are on a side that he supports and recognises that their key concern in their operations is the water quality, which is ultimately their responsibility as they supply water. They are raising the issues with which he is concerned.
I have not seen the details of the MOU, but I very much welcome the fact that Water UK and the UK Onshore Operators Group will be working together to identify and resolve risks around water. This will provide further reassurance and even greater safeguards to ensure that our water quality is not compromised and that water resources are properly managed as the shale gas industry develops on top of the existing regulation.
On the point about Scottish Ministers, I am happy to look at what I have received and get back to the hon. Gentleman. I have not met or discussed this in person with Scottish Ministers, but I am happy to look into what correspondence we may or may not have received.
I thank the Minister for his very detailed reply. He obviously has got a good grip of this issue and the concerns that many people have. I am sure that he will be making every effort to ensure that the problems we have pointed out to him do not occur in practice. On the basis of the reply I have had from the Minister, I will not press my new clause.