Amendment 2 addresses the term “any substance,” which was introduced by the Government in another place and permits the use of any substance in fracturing. The Government will be aware of the level of public concern about the use of chemicals in both drilling and the extraction of unconventional gas. Many of us have been made aware of reports, mostly from the US, of hazardous chemicals being used and then leaking into the wider environment, which is the basis of some of the concerns that the public have about this form of energy, regardless of whether such practices will, in truth, be permitted in the UK.
I have questioned Ministers numerous times about the use or non-use of hazardous chemicals in shale in the UK. For the record, can the Minister clarify whether the prohibition on hazardous chemicals relates to the process of high-volume hydraulic fracturing, as I understand it does, and whether it also covers the more conventional process of drilling the well and the contents of what is commonly referred to as mud, although it is not the mud that we remember it from our primary school days or find in our gardens?
The Government amendment in the House of Lords touched on that point. I suspect—the Minister may well confirm this—that the intention of that amendment was never to open the door to the use of all substances in the hydraulic fracturing process. The use of substances in the extraction of shale, or in any other mineral extraction, should be subject to the proper scrutiny by the Environment Agency; indeed, that is partly what the agency is there for.
Our amendment helps to clarify that point by qualifying the use of “any substance” to apply to those approved by the body that I am sure the Minister will shortly tell us will have a role in approving and monitoring the use of various substances in the drilling process. I therefore suspect that she will suggest that our amendment is not necessary, for the reason that I have just set out, but I argue—again, we will return to the point about public confidence and concern—that including in the Bill words as provocative-sounding as “any substance” is not only needlessly open-ended but, as I have seen in correspondence from my constituents and others, has raised concerns that must be responded to and allayed. It would be much better if the qualification, which I think she is about to say exists in reality, were reflected in the wording of the clause, to provide clarity for everybody with an interest in the subject. I therefore hope that she will consider the amendment in the spirit in which it is proposed.
There has been some confusion about this line in the Bill, which has sometimes been taken out of context and interpreted to mean that any substance—including, some suggest, even nuclear waste—could be stored underground, so I am grateful to the hon. Gentleman for giving me the opportunity to clarify what it means. I stress that that is not true. The clauses clearly limit the right to use deep-level land to the exploitation of petroleum and deep geothermal energy. The right does not extend to substances used in other activities.
As for the substances used for the purpose of exploiting petroleum and deep geothermal energy, clause 39(4) makes it clear that the right of use in the clauses does not grant operators any more rights than they have under the existing system, in which operators are granted access rights by a landowner. An operator exercising the right of use will still be subject to the same obligations or liabilities as under the current system, meaning that an operator will need to obtain all the necessary permissions, such as planning and environmental permits. The Environment Agency, for example, assesses the hazards presented by fracking fluid additives on a case-by-case basis and will not allow the use of substances hazardous to groundwater. Operators must demonstrate that where any chemicals are left in the waste frack fluid, it will not lead to the pollution of groundwater.
I understand that the hon. Gentleman’s amendment seeks to reaffirm the role of the Environment Agency. However, the meaning of “substance” here is wider than just fracking fluids. It includes electricity and any other intangible thing that might be needed for the purpose of exploiting petroleum and geothermal resources. I hope that that point answers his question about the wider use, which includes mud.
I emphasise again that the right to use deep-level land will not affect any of the existing regulatory regimes that manage the potential risks of hydraulic fracturing. There is, therefore, a risk that this amendment is not only superfluous but would require functions—such as granting well consents—to be transferred to the Environment Agency, and would require the agency to approve substances such as electricity, creating additional regulatory burdens rather than clarifying the existing regime. While I share the hon. Gentleman’s enthusiasm and concern about reassuring the public every step of the way that we are taking the right action and providing the right protections for them and the environment, the amendment does not add to that. I think that it would be wrong to try to incorporate it into the Bill and therefore I hope that the hon. Gentleman will withdraw it.
I am afraid I am not convinced by the argument that the Minister has set out. This is an important point and we need absolute clarity for those who are concerned about these issues. The Minister said, as I anticipated she would, that the intent is not for there to be the use of any substance at all and that the proposal is in line with what is approved and regulated and, indeed, with what is monitored by the Environment Agency. It is important that that safeguard is made clear in the legislation, so I seek to divide the Committee on amendment 2.
With this it will be convenient to discuss new clause 17— Community benefit for schemes provided by companies engaged in hydraulic fracturing—
(1) The Secretary of State shall by regulations make provision for community benefit schemes to be provided by companies engaged in the extraction of gas and oil rock by means of hydraulic fracturing.
Amendment 3 follows amendment 2, which is logical in relation to the content and the issues. Again, there is concern about what may be construed as rather loose language in the Bill’s drafting in relation to the condition in which land is left following any exercise of the right of use. I will not labour the points I have just made about “any substance”, but the same case applies.
New clause 17 is about community benefits. We have had a lot of public discussion about community benefits, both in this place and outside. Members of all parties have expressed concerns about ensuring that community benefits are properly captured and that people who live in affected areas actually derive benefits. I am sure that the Minister will wish to tell us that the Chancellor has suggested that there might be a sovereign wealth fund for the north—I am not sure whether it is the north or the north-west.
That is an important point, and we have had various discussions about this. The Energy Secretary, in the same Government but from a different party, has suggested that there should be a national—by which I think he means UK-wide—sovereign fund. This has been mooted in various different ways. Obviously, it is far in advance of there being any actual revenue to invest in any sovereign wealth fund or ahead of any community benefit being derived, given that we have had no significant activity from which there might be benefit. I highlight those points to make the case. As the intervention from my hon. Friend the Member for Hyndburn made clear, this is something in which people are very interested. As a Member representing a constituency close to the part of Lancashire where there may well be early applications, he is as concerned as many of his constituency neighbours .
I want to explore the hon. Gentleman’s thinking about a sovereign wealth fund for the north, or that line of thinking, which may or may not be his; he did not make that clear. Does that potentially open up some difficult implications? One could argue, for example, that the proceeds of the so-called mansion tax, which heavily falls on London and the south-east, should be retained in London and the south-east, as the Mayor of London argues. If we go down the path of regions hoarding the wealth that they generate, that may well not be in the interests of parts of the country, including the north-west.
Perhaps without realising it, the hon. Gentleman is tempting me into the constitutional and fiscal debates that we have had in Scotland over the past couple of years, which I do not think anyone on this Committee, and certainly not you, Sir Roger, will thank me for rehearsing, because I can go on for some time.
The hon. Gentleman’s underlying point about how any sort of proposed sovereign wealth fund would be constructed and its boundaries is an important part of the consideration. I think that is probably why the Energy Secretary expressed a different view from that of the Chancellor, and why we have heard different views from Members of all parties who consider that their areas are among those where early activity or extraction may happen. I know that the hon. Member for Lancaster and Fleetwood has made several comments at various points, which are not always completely in line with those of the Chancellor and others.
Exactly how these benefits are best derived is a live and current debate. It originates from a very sound and salient case which is that, if there is disruption, and inevitably there will be local environmental disruption, that is somehow reflected in an appropriate benefit to the people affected. We know, for example, that in some different types of energy infrastructure, community benefits currently accrue in reduced tariffs, or people may take a share in a particular energy development. There are various ways of doing it.
The point of the new clause is to ensure that any community benefits are properly encapsulated in the schemes and the legislation. There have been a number of debates about how this is to be structured. There is a very different position from that which the trade body proposed: a one-off payment of £100,000 per well and a share of the revenue from each well currently set at 1%. In the past, Ministers have sometimes suggested that there may be almost an opening offer rather than a formal final position. INEOS, which announced an investment of £640 million in shale gas in Scotland, not so much for the energy used, but more interestingly as a feedstock for its business based in Grangemouth, is offering 6% of revenues to the community. Different approaches have been proposed, not just by Members and other commentators, but by some of those who may come to be operators in time. That means that there is not consistency or clarity about exactly what people can or should expect to derive, or what should be derived. There is therefore a risk that the appropriate level of community benefit does not accrue to those affected.
Will the Minister expand a little on current thinking? She may wish to take her lead from the Chancellor or from the Secretary of State in her Department; I will leave that to her. What is her current thinking? What would constitute an appropriate use of community benefits, and how might they be structured, particularly given the point that the hon. Member for Taunton Deane made in his intervention? What are the Minister’s expectations about the size and definition of the community to receive those benefits? As far as I understand it, there is not a guarantee of what is proposed by the trade body; it is part of its best practice. It is an industry promise; it is no more binding than that. Operators currently in that trade body may in time cease to be so. Other operators might come into this who are not part of that trade body. They will not be bound by something that is suggested and may be subject to change without notice or warning.
The amendment, which the Local Government Association supports, would require the Government to step in and provide assurances to communities that the benefit due to them was not simply contingent on the whim of those companies. It would require the Government to establish a framework for the delivery of that benefit. That framework should not be too prescriptive; there would need to be flexibility for different solutions to different scenarios, sites and places. Some communities might wish to opt for longer-lasting energy-efficiency measures. Some might want a reduction in their bills, seeking to derive benefit that way.
It is not for the Government to constrain those options, and I do not think the Minister intends to do so, given some of the issues about community benefits and co-operative energy models we discussed in the early stages of our deliberations. It is for the Government to guarantee that there will be meaningful community benefit, which cannot be taken away on the whim of a potential operator. I think it is the case—perhaps the Minister could confirm this—that there will be nothing to stop a potential operator offering no community benefit, or reneging on one. If the Minister is not happy with that, will she undertake to ensure that her Department develops a framework to ensure that community benefits accrue in the ways that we have discussed and I have described?
It is a pleasure to serve under your chairmanship, Sir Roger. I wish to make a few comments about amendment 3. My hon. Friend the Member for Rutherglen and Hamilton West has just given an excellent exposition of why community benefit is so important. Part of that community benefit is likely to be delivered through a set of planning conditions, including land restoration or improvement. It is important that the planning conditions are followed through. I am sure that the Minister knows that many communities will be concerned about fracking in their area and will rely on planning conditions to give them some protection, and to make what might otherwise be an undesirable planning application at least palatable to a degree.
The lack of regulation in some areas—as outlined in our discussions this morning, particularly our deliberations on the need for new clause 3, led by my hon. Friend the Member for Southampton, Test—and the Government’s response will not necessarily lead to greater reassurance being felt in many areas of the country. I would therefore like to press the Minister further on amendment 3. Does she agree that effective planning conditions must not only be set, but adhered to? Does she agree that they should not be subject to deemed discharge, given how contentious fracking is likely to be in some areas? Does she agree that it is important to deliver land restoration and improvement as is set out in the planning conditions?
I shall take each of the concerns in turn, starting with amendment 3, which the hon. Member for City of Durham has just spoken about. The Government have been very clear in both Houses that clause 39 does not affect the various other permitting and consenting regimes which apply to shale and geothermal developments. Clause 39(4) clearly states that the right of use does not grant operators any more rights than they have under the existing system. An operator will still be subject to the same obligations, and will need to obtain all the necessary permissions, such as planning and environmental permits. An operator will not be allowed just to leave any substance or infrastructure under ground. The question of leaving substances or infrastructure under ground clearly goes beyond the granting of planning permissions.
Before any oil or gas operation can begin in the UK, operators must gain environmental permits from the Environment Agency or an equivalent agency. Operators must, for example, demonstrate to the Environment Agency that, where any chemicals are left in the waste frac fluid, this will not lead to pollution of groundwater. Furthermore, all operators must comply with a comprehensive set of regulations on well design and operation, which are monitored by the Health and Safety Executive. Attaching the proposed condition to the right of use would not change or improve the existing system, and it ignores the other relevant permissions. I particularly refer the hon. Member for City of Durham to the regulations on well design monitored by the Health and Safety Executive which, we feel, cover the majority of her concerns.
I turn now to community benefits, about which the hon. Member for Rutherglen and Hamilton West spoke. The Government believe that communities that host shale gas developments should share in the benefits that are created. The industry has put forward a community benefits package as part of its community engagement charter. This stands to provide significant economic benefits to affected communities. The industry will pay £100,000 to communities per hydraulically fractured well site at exploratory stage, and 1% of revenue if it successfully goes into production. This is similar to other community benefit packages for technologies such as wind. Operators will publish evidence each year of how these commitments have been met. In addition, the industry has confirmed that operators will contribute a voluntary one-off payment of £20,000 for the right to use deep-level land for each unique lateral well that extends by more than 200 metres, and will notify the public when exercising this power. This is a separate, additional offer to the community benefits package. We consider that the voluntary nature of these schemes offers a multitude of benefits to communities when compared with a statutory system. A voluntary industry approach ensures that the schemes can be flexibly applied and tailored to the community’s need.
The shale industry is at a formative stage, and it is not yet clear exactly what development may look like. As such, any community benefit scheme will be more effective if it is organically flexible and can adapt to changing circumstances. The Government are convinced that in these circumstances a statutory scheme would remove some of the flexibility, as it would need to include broad requirements which may not be suitable for every situation, and would of course be more difficult to alter in future. The community benefits charter and offer to communities will be regularly reviewed as the industry develops and operators consult communities further.
The industry will work with UK Community Foundations on two pilot exploration schemes. UK Community Foundations is an independent registered charity, which is experienced in engaging with and consulting communities and in dealing with funding allocation. This will ensure that these community benefit schemes are independent of the industry and that communities have the lead role in identifying local priorities for the funds. In terms of the payment scheme, in return for the right of use, the current provisions already allow the Secretary of State, if not satisfied with the schemes, to introduce regulations to set up a statutory payment or notification mechanism. The focus should now be on exploration, so that we can first know how much shale gas we can really extract, to see what benefits will actually go to communities.
The hon. Member for Rutherglen and Hamilton West mentioned sovereign wealth funds. He is right that my right hon. Friend the Chancellor of the Exchequer raised this issue, and we support this. It is a little early to try to specify how a sovereign wealth fund would be set out. As I have already said, the important thing is to try to find the shale gas and to try to generate the benefit for communities, before we work out just how we are going to spend it. There is no doubt that this will also be in the interests of the country and local communities.
It will, of course, be in the industry’s clear interests to honour its commitments, given the importance of continued public acceptance for its activities. We are confident that the imposition of a statutory power will be neither beneficial nor necessary. I hope that the hon. Gentleman has found my explanation reassuring and will withdraw his amendments.
Thank you. In relation to community benefits, the Minister has made a number of fair points. I want to reiterate, however, that there is a concern and a danger that potential community benefit schemes will be removed at the whim of a trade body, or by operators who are or are not in the trade body. As these things are developed, Ministers should be aware of that. Ensuring that that is not the case should be high on their agenda, so that any potential benefits accrue in the most appropriate way possible.
When we get to that stage, I do not intend to push new clause 17 to a Division. However, on amendment 3, and following the points made by my hon. Friend the Member for City of Durham, some important points have not been fully addressed by the Minister. There is still some merit in that amendment so I seek to divide the Committee on it.
(a) The right of use shall be conditional on operators undertaking site-by-site measurement, monitoring and public disclosure of existing and future fugitive emissions.
(b) In this section, “fugitive emissions” shall mean releases arising from, but not limited to, flaring, venting, storage and transportation leakages.”
With this it will be convenient to discuss the following:
‘( ) Before a well design is commenced or adopted in connection with the exploitation of petroleum the right of use requires the Health and Safety Executive to inspect the well so as to satisfy itself that—
(a) so far as is reasonably practicable, there can be no unplanned escape of fluids from the well; and
(b) risks to the health and safety of persons from it or anything in it, or in strata to which it is connected, are as low as is reasonably practicable.
( ) Where the Health and Safety Executive is satisfied that a condition in subsection ( ) is met, it shall give notice to the Secretary of State.
( ) The Secretary of State shall publish the information received from the Health and Safety Executive in accordance with sub-paragraph ( ).”
New clause 2—Underground access: environmental protection—
“(1) All sites extracting petroleum under the provisions of section 38 must—
(a) carry out an Environmental Impact Assessment;
(b) ensure that independent inspections are carried out of the integrity of wells used;
(c) publicly disclose the chemicals used for the extraction process, and the proportions in which they are used on a well-by-well basis;
(d) consult with the relevant water company; and
(e) carry out monitoring over the previous 12 month period.
(2) The Secretary of State shall by regulations specify what data shall be required under paragraph (e).
(3) Regulations under subsection (2) must specify as required data the levels of methane in the groundwater and ecological studies, that data shall include but is not limited to levels of methane in the groundwater and ecological studies.
(4) Regulations under subsection (2) must be made by statutory instrument and may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
New clause 7—Petroleum extraction: environmental base line data—
“All sites extracting petroleum under the provisions of section 38 must publish all environmental base line data collated over the designated period, in a manner that allows it to be subjected to scientific peer review.”
There are a number of amendments and new clauses in this group which I wish to speak to. They are all in different ways relevant to the full and proper regulation of activity in relation to the exploration and extraction of unconventional gas.
Amendment 4 deals with fugitive emissions and fugitive methane emissions. Those of us involved in the debate know that concerns are frequently expressed about these. The emissions accruing from the gas production may not be significantly different—indeed may, in some cases, be less than from other forms of gas. The Committee on Climate Change looked at this in relation to imported liquefied natural gas and assessed that it is possible that indigenous shale gas may have a lower carbon footprint, but that was dependent on leakage rates of below 2%. Therefore, the way in which fugitive emissions are captured and dealt with is significant in ensuring that the potential development of shale gas is carried out in a way that does not contradict with our binding emissions commitments. That is not to say that I do not think it could be done. It certainly could be, but it requires two things.
First, it requires an approach similar to that which has, belatedly, become the norm in the US, after several years of less robust practice—that of so-called green completion, which means capturing emissions. Secondly, it is important that the level of fugitive emissions is properly measured and assessed. That is the purpose of amendment 4, because it is clear that the potential impact on climate change from shale gas is highly dependent on the effectiveness with which fugitive emissions are measured and controlled.
Placing a duty on operators to measure, monitor and publicly disclose the level of fugitive emissions on a site-by-site basis is an important safeguard, as a point of information for the regulator and the wider public, and for those operators who are therefore able to be in a position to provide robust evidence and objective information about how far they are contributing—or not contributing—to greenhouse gas emissions.
Will the Minister comment on the Government’s assumption of the leakage rate of shale production in the UK? The Committee on Climate Change talked about a leakage rate below 2%. Is that a level that the Government recognise? Have the Minister’s Department or officials made any assessment of the total carbon dioxide equivalent contribution of methane leaked arising from a single well or well pad, or overall forecasts of UK shale gas operations? Will she clarify—it is an important point—the regulations on flaring and venting in shale gas extraction, which has been a point of concern to a number of people and commentators of late?
Amendment 5 has arisen from discussions that I have had with a number of people, including issues that have been raised by people working for the Health and Safety Executive on independent inspection of wells before they are put into use. The amendment seeks to correct a flaw in the existing situation, which allows for the independent inspector to be an employee of the company under inspection. It is not appropriate for that to be the case—for people to be able to mark their own homework, as it were—particularly on an issue that is of as much current concern as this. At present, the Offshore Installations and Wells (Design and Construction, etc.) Regulations 1996 state that
“independent and competent persons, of any part of the well, or similar well, information, or work in progress, and the making of such reports and recommendations, as are suitable for ensuring (with the assistance of such other measures as the well-operator takes) that the well is so designed and constructed, and is maintained in such repair and condition, that—”.
Professor Robert Mair, who chaired the Royal Society and Royal Academy of Engineering group that produced a comprehensive, detailed and robust report on shale in 2012, which from time to time Ministers and, indeed, the Prime Minister have referred to stated:
“In some cases, under existing practice, that well examiner can be an employee of the operator’s organisation. We felt that that was undesirable and that the well examiner should be truly independent.”
I agree with Professor Mair. Our amendment would effectively implement that recommendation from the Royal Society and Royal Academy of Engineering report, by ensuring that the independent Health and Safety Executive should carry out that work in terms of the overall assessment and, importantly, the people involved.
Adequate well inspection is a necessary pre-requisite to many other regulations on shale gas, particularly relating to protections for groundwater such as those we have discussed today, which might have a shale gas well shaft passing through it. That is an important point. It has been raised in another place and is something that the Government should consider adopting.
New clause 2 covers a number of different regulatory points, several of which are part of a framework of six regulatory conditions that I set out in March 2012—getting on for three years ago. It goes to the point that the hon. Member for Taunton Deane made earlier about ensuring that the regulation is not only robust but proportionate and appropriate. We need to get the balance right between providing robust and objective information and providing reassurance where it is required, though not in a way designed to make something impossible by default. I do not believe that any of our amendments or new clause 2 would do that. They are about safeguarding.
In relation to the six points I referred to, which include the aspects of new clause 2 we are discussing, I have had the opportunity for discussions with a number of operators. The Minister will be aware that both the trade body and the individual operators have said that they do not have a problem with those points. In many cases, they think that they would be helpful. That should be borne in mind when we decide on new clause 2. Some of those measures are within the best practice of the industry. However, I go back to the earlier point that best practice via a trade body is no guarantee that it will continue or that all current and future operators will remain or join the code of best practice.
The first point in new clause 2 relates to environmental impact assessments, which are required under the Town and Country Planning (Environmental Impact Assessment) Regulations 2011, which implement an EU directive. It requires an EIA for installation such as shale gas drilling pads, but only if they exceed one hectare in size. Determining whether a shale gas well will need to an environmental impact assessment on the basis of its surface area seems arbitrary, given that much of the exploration will happen over a much larger sub-surface area.
Calculations have been made that some of Cuadrilla’s Lancashire sites, for example, are 0.99 hectares, just below the one hectare threshold for environmental impact assessment. That is not a sensible and appropriate position. It is clear that for shale gas operators, an EIA should be required for all sites, even those of a surface area slightly below one hectare, as a number are.
The second aspect of the new clause relates to disclosure of chemicals. We discussed some of the points around content of fluid earlier in the amendment on substances. At present the contents of the frac fluid are disclosed to the Environment Agency as part of the operator’s permitting application. The Environment Agency in turn publishes on its website a generic list of approved additives. However, I think it is appropriate for that and information about chemicals used in frac fluid in these processes to be made known to the public. That is an important part of meeting the public acceptability test that we referred to. That should be as transparent as possible and open to public scrutiny. The best way to do that is to ensure that it is done on a well-by-well basis.
The industry recognises the appetite for transparency. The trade association, United Kingdom Onshore Oil and Gas, has said that the contents of the frac fluid will be disclosed on a well-by-well basis. Cuadrilla has released the composition of a fluid used at Preese Hall, for example. However, as I have said, an industry pledge to disclose on a well-by-well basis is not the same as a statutory requirement. Since the Environment Agency is already informed of the contents of the frac fluid, the amendment is unlikely to alter the chemicals used, but it would ensure that the process is subject to the appropriate level of public scrutiny and discovery. It will also help to address some of the concerns expressed and rectify some of the statements that turn out not to be completely accurate.
New clause 2 also relates to the water industry, and would make the water companies statutory consultees. All the most prominent environmental concerns over shale gas extraction relate to water. As the Minister is aware, the volume of water used in fracturing for shale gas, when viewed in isolation, can seem quite large, but as the Chartered Institution of Water and Environmental Management has said,
“when set in the context of national or regional water supply, it constitutes a very small fraction and compares with other industrial uses.”
Given that, and following conversations and discussions I have had with Water UK, it is clear that the water industry does not, for the time being, appear concerned about its ability to supply a shale gas industry at this point. However, there may be locally significant impacts, particularly when multiple sites are developed in an area where on-site abstraction is not possible. That is why the Chartered Institution of Water and Environmental Management has said:
“There may be local consequences should a significantly sized production industry develop, particularly in some catchments in the south east which are already water stressed. It will be up to the water companies to decide if they are able to supply the water or the relevant environmental agency if it is to be abstracted.”
Its view, which sits behind this amendment, states:
“It is therefore considered that water supply issues will be local and early engagement by shale gas companies with the environment agency and water companies is essential to establish the nature of any risks and manage them accordingly.”
On the basis of that recommendation and the discussions I referred to with Water UK, we have included the matter in the new clause.
As the Minister and other members of the Committee may be aware, Water UK was initially highly critical of the attitude towards water consumption. That provoked a welcome and detailed discussion, which led to a memorandum of understanding being signed by UKOOG and Water UK in November 2013. In recognition of the recommendation that water companies should be consulted early on in the planning process, our amendment would make the local water company a statutory consultee. As such, of course, a water company would have to provide a substantive response to a planning application within 21 days, as other statutory consultees have to.
The legal definition of a substantive response is prescribed in article 20 of the Town and Country Planning (Development Management Procedure) (England) Order 2010. The substantive response should include reasons for the consultee’s views, so that where these views have informed a subsequent decision made by a local planning authority, the decision is transparent. That is an important principle in relation to water use and reuse for potential applications. If we incorporate the local water company as a statutory consultee, local authorities will be able to make a judgment on planning permission, or part of that judgment, with a proper understanding of the potential impact on local water supplies, informed by those who have a statutory responsibility to provide and safeguard water supplies.
The next part of new clause 2 relates to the baseline monitoring of methane in groundwater. The important point here is to give the Environment Agency access to information that it would not otherwise hold. That information could trigger further action under existing protocols. To demonstrate that a shale operator was polluting groundwater, the Environment Agency would need to demonstrate that there had been an increase in the level of methane over the course of operations. That self-evidently requires a site-specific baseline, which was one of the key recommendations of the Royal Society’s 2012 report. It stated:
“Operators should carry out site-specific monitoring of methane and other contaminants in groundwater before, during and after shale gas operations.”
The Minister and others will be as aware as I am of the comments that are sometimes made about the pollution or contamination of groundwater with methane when methane can and does occur naturally in groundwater in some instances. It is important, for the baseline to be properly set, that there is a requirement to have baseline monitoring before we start, so that there can be a proper, authoritative and full assessment of whether there has been any impact. The current position is that claims will be made that are not possible to refute, prove or disprove, because is no baseline information to assess them against.
If an operator pollutes groundwater, the Environment Agency can take action under existing regulations. The power to step in and close down a site found to be polluting groundwater is already contained in the Environmental Permitting (England and Wales) Regulations 2010, and similar regulations exist in Scotland under the auspices of the Scottish Environment Protection Agency, which is responsible to Scottish Ministers.
The obligation to make use of those powers is contained in the water framework directive, which obliges the regulator to prevent inputs of hazardous substances into groundwater and limits any inputs of all other pollutants into groundwater to prevent pollution, deterioration in status or any significant and sustained upward trends. That also extends to non-hazardous substances, thereby encompassing all chemical components of frack fluid as long as the pollution exhibits a significant and sustained upward trend.
The chain of events leading to the closure of a polluting site can be initiated only if the Environment Agency has the information in the first place to demonstrate that there has been a change in the level of methane in the groundwater, so the requirement and need for the baseline are clear-cut, particularly if, as the Minister and others have said, they want to be able to trust the expertise of the Environment Agency. If the Environment Agency is unable to take such action because it does not have a baseline against which to make an assessment, that makes the existing regulations, which I have just described—they are comprehensive and have been introduced over recent years—effectively redundant. The baseline monitoring of methane is an important consideration. Again, the trade body and individual potential operators have said to me in discussions that not only do they not object to it, they would find it particularly helpful. As I have said, that is also a recommendation of the 2012 Royal Society report.
The final component of new clause 2 relates to the time frame for monitoring. Levels of various chemicals in groundwater could be subject to variation over time, which is why, in the ongoing national methane baseline assessment done by the British Geological Survey, a subset of boreholes are sampled quarterly over a 12-month period. The danger is that without an extended or prescribed monitoring period, a single, one-off assessment could produce an inaccurate result for all forms of baseline monitoring. If the BGS sees fit to conduct its own baseline assessments over a 12-month period, site-specific monitoring should clearly be held to a similar standard. Again, that is important to provide confidence in and robustness of the data, with which we will then be able to prove or disprove some of the charges made as the impacts of developments are considered and discussed in public debate and in communities around the UK.
I have looked carefully at amendments 4 and 5, which cover a significant amount of the ground covered by clause 39. It is my view that new clause 2, taken together with new clause 7, provides an opportunity for a broader debate relating to any other issues that might arise from clause 39. I say this now because I think it highly likely that by the time we reach the end of the debates on these amendments and new clauses, we shall not require a stand part debate. Hon. Members may wish to make a note of that.
I rise to support my hon. Friend the Member for Rutherglen and Hamilton West and speak to new clause 7, which stands in my name. I will start where my hon. Friend left off, by discussing the variation that exists in local naturally occurring and industrially created contaminant levels, particularly methane in this case.
My constituency has a principal petrochemical manufacturing operation, and when things have gone wrong from time to time, it has suffered from the downside of having those valuable jobs in the community. It is inevitable, of course, that any leakage will impinge on the way that the clause is written. Given that a significant number of sites in the north-west of England are closely associated with existing petrochemical industries, it is impossible to do any sensible monitoring of the impact of hydraulic fracturing without proper baseline monitoring.
I reflect back some years to when a power company was burning Orimulsion—an emulsion from the Orinoco—in what was then Ince power station, now a major glass-producing site. The company told me that when the power station was burning at full blast—both Ince A and Ince B—the site had the lowest level of industrially created pollution in the area. It failed to point out that it was talking about the time of the three-day week. You therefore get some very misleading data if you do not take into account what is happening in the locality, plant by plant.
We cannot have a system that simply looks at baseline data in general. It has to be site-specific and carried out for a decent period of time prior to any fracturing processes. That would mean that any challenges to the integrity of the pollution data put out by the extraction company could be made with some care. Even then, it would be quite difficult to do. Given that point, plus the fact anything that is measured has to start from somewhere, it is daft to consider agreeing to the fracturing provisions in the Bill without proper baseline monitoring.
“What I want to see is, obviously, a robust regulatory and environmental permissions regime, which I believe we have. I also want us to get on with recovering unconventional gas because I think the greatest proof of how safe this technology is and how good it could be for jobs and energy costs in our country is to demonstrate where it is actually working in some wells. My fear is that many in the other place, and indeed in this place, want to cover this new industry with regulation so that it simply does not go ahead”.—[Official Report, 22 October 2014; Vol. 586, c. 898-99.]
A few colleagues in the House hold that view, but it is not my view and it is not where I am coming from in speaking in support of my hon. Friend the Member for Rutherglen and Hamilton West on new clause 2 and in speaking to new clause 7. It is a fact that, if we are going to have meaningful data, we have to start by measuring the baseline. We cannot escape from that.
On new clause 7, colleagues may not all be fully familiar with what a scientific peer review is. A couple of Members in the Committee, particularly the hon. Member for Suffolk Coastal, certainly are aware. I looked very closely at a number of papers she published when she was at UCL and I have read her papers in Chemicals Communications in Polyhedron in 1993. Excellent papers they were too. They were very heavily peer-reviewed. The hon. Member also served in a distinguished capacity as a board member of the Parliamentary Office of Science and Technology, on which I, too, serve and have been privileged to serve for a number of years. POST publications are here to help us understand science in very complex areas and I am looking at one entitled Short Lived Climate Pollutants, published last October. Like all POST documents, this is significantly peer-reviewed. Indeed, the hon. Member for Suffolk Coastal would agree with me that it is probably peer-reviewed to a higher level than anything she published, because on the board of POST we make sure that the information in these briefings is accurate. One of the subjects in this particular document is about the second most abundant greenhouse gas after carbon dioxide, which is methane. That is a key issue that we should be seeking to monitor as we go on.
The importance of the new clause that I have tabled is to ensure that we do not get into the kind of situation that has occurred before, sometimes in publicly-funded science and sometimes in privately-funded science. A good example was the “climategate” saga at East Anglia university. The Select Committee looked very carefully at East Anglia university and we have absolutely no doubt about the integrity of the science that was undertaken. The problem was the way it was put in the public domain, which was ham-fisted, as if saying: “Well, the public aren’t going to be interested in this; it’s massive data; nobody can read it.” It created a belief that there was something fishy going on at the university. There have been plenty of other examples where people have been a bit slapdash about the way they have put things in the public domain.
The purpose of this—as my hon. Friend said, from a sedentary position—
That was from this morning’s debate; perhaps the Minister will respond to that in due course. The purpose of this new clause is to ensure that baseline data is not simply put into the public domain in a series of charts and loads of data, but is published in a meaningful way that a rational scientist could interpret and provide commentary on for the public in a way that is scientifically valid. I am afraid that some companies—coming back to my example about the way that power company operated, slightly mischievously, being selected with the data—would fall foul of that test. We have got to make sure that the degree of transparency and the standards that exist in some industries about public data—a good example is the nuclear power industry, where there is a great deal of data and it is subject to public scrutiny—exist in this industry.
The hon. Member for Rutherglen and Hamilton West referred to the trade body UKOOG. In its document Guidelines for the Establishment of Environmental Baselines for UK Onshore Oil and Gas, which was circulated, it said:
“A site specific baseline ground-gas sampling and analysis programme should be developed in line with current best practice guidance, desk study and walk-over information and the CSM. Ground-gas monitoring should be undertaken using best available techniques.”
I could not agree with that more, but as my hon. Friend quite rightly said, not every developer will necessarily be a member of that trade body and be bound by the standards of that code of practice. We should congratulate UKOOG in creating that code of practice and reinforce it by establishing it in law.
I finish with a couple of points. Colleagues will have received an e-mail yesterday from the Country Land and Business Association—not exactly an organisation which I would normally expect to find supporting me, founded as it was by eminent people such as the late Earl of Onslow. People of that ilk support this amendment, along with environmental groups. I think it is important. I remind the Government again of their own Command Paper, Cm 8980, published in December, which deals with a whole raft of issues about openness. It notes in a paragraph that I did not refer to this morning that the Government are very much committed to ensuring that scientific data is in the public domain in a meaningful way. On page 12, with reference to scientific changes and developments by researchers and innovators, the paper says:
“These changes open up science to democratic scrutiny in new and exacting ways. Science can benefit from coming under challenge. For instance, less latitude is now given to non-reproducibility of scientific studies, driving greater rigour.”
That is the case. There will be scrutiny from the public. It is vital that the public are entitled to scrutinise and challenge and therefore to create a better understanding among the public about the data. It is important that the data are made available to the public in a form that can be subject to scientific peer review.
It has been very interesting to hear hon. Members’ contributions and I hope to address the points raised. I will take each of the concerns in this group in turn, starting with fugitive emissions in amendment 4.
We report the UK’s greenhouse gas emissions annually as part of our international reporting obligations. The report includes an estimate of fugitive emissions from onshore energy extraction. The reporting is done in accordance with guidelines produced by the Intergovernmental Panel on Climate Change, the IPCC, 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. I can reassure the hon. Member for Rutherglen and Hamilton West, and all hon. Members, that we take these obligations very seriously.
In 2013, Professor David MacKay and Dr. Timothy Stone published their assessment of the potential greenhouse gas emissions associated with shale gas extraction and use. Their report concluded that the carbon footprint of UK-produced shale gas would likely be significantly less than that of coal and also lower than that of imported liquefied natural gas. It determined that, with the right safeguards in place, the net effect on greenhouse gas emissions from shale gas production will be relatively small. The Government have accepted all the recommendations in the MacKay-Stone report, four of which relate to emissions monitoring, and a research project is planned to measure and understand the scale of on-site emissions in line with the development of UK shale gas operational activity. That, I hope, answers the request by the hon. Member for Rutherglen and Hamilton West for more detail on emissions in this sector. It is simply too early for accurate assessments. I will take the opportunity to point out to the hon. Gentleman that fugitive emissions for conventional onshore oil and gas extraction was estimated at 0.03% of our total greenhouse gas emissions for 2012. Given the small scale of emissions from this source in the UK at the moment, we do not believe that on-site monitoring of emissions at conventional sites is necessary beyond the regulatory requirements that are in place, but we will of course keep that under review. I hope the hon. Gentleman agrees that additional statutory measures in this area are not necessary because we already have a robust process in place for reporting fugitive emissions, and we have plans in place to monitor and report any emissions from shale gas exploration and extraction once these activities start in the UK.
Turning now to well inspections, I would stress that health and safety legislation in the UK places responsibility for controlling and managing risks in the hands of those best placed to do so: those that create the risk. In this case, as he has set out, that is the well operators. The well examiner then provides independent oversight and assurance to make sure the operators are operating within the legal requirements. Existing legislation requires the Health and Safety Executive to assess well designs, and requires site operators to appoint an independent well examiner and provide weekly reports to the Health and Safety Executive on the site operation. Indeed, well design is scrutinised by the Health and Safety Executive before construction through the well notification system. The Health and Safety Executive also monitors well construction based on weekly reports to its well specialists, and inspects the well site. Any significant changes to well construction are subject to the same robust scrutiny.
These regulatory checks have operated effectively for both offshore and onshore oil and gas wells for a number of years. The well operator is legally required to appoint an independent well examiner for the complete life cycle of the well. This requirement has been in place in Great Britain for almost 20 years, and as such has stood the test of time as part of an effective health and safety regime that is seen to be world-leading. It is the well operator’s responsibility to appoint this independent well examiner, who is separate from the immediate line management of the well operations. This is to allow a scheme of quality assurance and quality control, where an operator’s employee is not responsible for verifying their own work.
It is worth noting that to date, onshore operators have used external companies to supply this service; it has not been delivered in-house, as the hon. Gentleman suggested could happen. This clearly places the duty to ensure the safety of the well on the site operator. It is flexible, as it allows in-house checks but only where appropriate safeguards are in place. In this context, it is the competence of the well examiner that is most important. This approach has now been adopted as part of the new offshore safety directive, which is due to come into force across the European Union in 2015. There is no evidence to suggest that the existing arrangements and legislation do not work effectively for wells drilled to exploit unconventional oil and gas reserves onshore. I hope that the hon. Gentleman has found my comments reassuring.
Concerning environmental impact assessments, we understand that the Opposition’s desire for mandatory environmental impact assessment of all petroleum development is designed to reassure the public that the environmental impacts of shale oil and gas will be robustly assessed. However, the environmental impacts are already robustly assessed. Planning authorities are already required to ensure, as part of granting planning permission, that mineral developments such as shale will not have unacceptable adverse impacts on the environment. Where a development is likely to have a significant effect on the environment, an environmental impact assessment is required. Critically, if any significant environmental effects that cannot be mitigated are identified by an assessment, then planning permission can quite simply be refused. This approach works well in practice and is consistent with our European obligations, ensuring that environmental impact assessment is only undertaken where it adds value.
Legislating to force mandatory environmental impact assessment of all petroleum development, even where significant effects are not considered likely—bearing in mind that hydraulic fracturing may not even be proposed—would be unnecessary. An environmental impact assessment involves substantial work, often taking up to a year to develop. Requiring assessment in all cases, even when it is known that significant effects are not likely, would slow down or delay development and add to the costs, for no discernible environmental benefit. Because the environmental impact assessment regime applies to all sorts of projects, changes here could also create a damaging precedent for other new industries in the future, both in the energy sector and beyond.
There is concern from developers that planning authorities sometimes take too cautious an approach to environmental impact assessment. To gold-plate the requirements of the environmental impact assessment directive in the way proposed could be seen as sanctioning an unnecessarily cautious approach, with no actual environmental benefit.
The Government fully understand the need to build public confidence in the shale sector. That is why we welcome the reassurance provided by the industry’s public commitment to carry out environmental impact assessments for all exploration wells that involve hydraulic fracturing. We are pleased to announce that the industry has also agreed to produce an annual report listing the shale sites that have produced an environmental impact assessment.
I hope all of that reassures the hon. Gentleman that the existing approach strikes the right balance in terms of assessing the environmental impacts of shale development in a rigorous and proportionate manner.
Turning now to chemical disclosure, I would like to remind the hon. Gentleman that the UK has decades of experience in safely conducting surface activities and constructing onshore gas wells, regulated by the Health and Safety Executive. Our construction standards are robust and regulators have the tools to ensure that our groundwater supplies are accorded a high degree of protection. There is evidence that in the United States shale developments have, on occasion, led to water contamination. However, it is important to note that the latest evidence continues to show that such cases are due to faulty surface operations or faulty well construction, rather than the hydraulic fracturing itself.
In the UK, as the hon. Gentleman is aware, we have an entirely different regulatory system from the United States. Unlike the USA, in this country operators are required to disclose fully the composition of fracturing fluid additives. As part of the application for environmental permits, the Environment Agency requires operators to disclose all the chemicals they propose to use and the maximum concentration of each one, which enables the agency to assess any potential risk to the environment. The Environment Agency will not allow substances hazardous to groundwater to be used where they may enter groundwater and cause pollution.
The Environment Agency has also already confirmed that it will publish permits with that information, including naming each chemical and the maximum concentration of each at each site, along with information on the total daily discharge of hydraulic fracturing fluid into the ground. In addition, the industry has committed to publish this information for each well along with the total volume of fluid used.
The hon. Gentleman provided reassurance that the industry has committed to do that already on a voluntary basis. Like him, we recognise that there are still concerns about the industry meeting its commitments. We have listened carefully to those concerns and I can confirm that the Secretary of State for Environment, Food and Rural Affairs will now direct the Environment Agency to oblige the agency to publish the information on chemicals that it requires operators to disclose to it. Indeed, the application and effect of such an obligation is similar to that of an amendment to the relevant regulations, as the hon. Gentleman has proposed, but can, in fact, be achieved much more quickly. I hope that my explanation, together with the undertaking to issue a ministerial direction, is sufficient to reassure the hon. Gentleman.
On the subject of water companies, the Government 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 existing regulatory framework ensures that issues relating to water are addressed in a robust, joined-up way. The environmental regulator is already required to check the potential impact on groundwater of any shale gas proposal, and will not grant a permit where our water supplies could be affected.
Anyone seeking to use or supply the volumes of water involved in such schemes from groundwater or surface water sources requires an abstraction licence from the environmental regulator, which sets the maximum amount of water that can be used. In granting those licences, the regulator checks that the implications for water resources are acceptable. If the shale operator wants to secure water supply through a water company, the water company needs to be confident that it can supply the requested amount within the parameters of the licence without impacting on its existing or probable future obligations.
To aid engagement and support the regulatory framework, the water industry and shale operators have already agreed a memorandum of understanding to engage early and share plans for water demand and waste-water management.
The scope of the amendment that the Opposition have tabled is unclear, but they have previously asked that the commitment to involve water companies be strengthened by making them statutory consultees for shale gas planning applications. The Government are aware that that proposal has the support of Water UK, and can see the argument for making that change if it would reassure the public. We are therefore consulting on whether to make water companies statutory consultees in respect of those applications as part of a broader consultation on statutory consultee planning arrangements. The consultation is concerned with secondary legislation, rather than the Infrastructure Bill, because the list of existing statutory consultees is contained in secondary legislation. Subject to the response to the consultation, which closes at the end of the month, we would seek to introduce any necessary secondary legislation in this Parliament. I hope that the hon. Gentleman found that explanation reassuring.
Finally, turning to the issue of baseline monitoring, I reassure the hon. Gentleman that, in principle, we certainly support the use of baseline monitoring. It can help local communities to see what the state of their environment is before operations commence, and is essential to enable a more rigorous assessment of any subsequent changes. The industry, as he pointed out, is in favour in principle, and the hon. Member for Ellesmere Port and Neston made a strong case for the need for effective and accurate baseline monitoring.
The issue is about the appropriateness of the monitoring period and the requirements involved. The environmental regulator already has the powers to require baseline monitoring of those environmental indicators that it considers appropriate and for the length of time that it deems suitable for each given site. That may include monitoring of soil, air, surface water and groundwater for a range of pollutants. The regulator adopts a risk-based approach to its assessment, taking into account the specific characteristics of each site. As such, environmental monitoring will be required under the conditions set in the environmental permit, appropriate to the activity and the environmental setting. The operator will report that information to the Environment Agency, which will place it on the public register, subject to commercial confidentiality provisions. Some operators have committed to publication of this information on their own sites as well.
Baseline monitoring is measuring information that exists before the operator comes on to the site. How can any of that be commercial in confidence?
On that particular point, it rather depends what element of baseline monitoring is to be covered. It is not for us to judge in different areas that may be monitored by different companies. Once more, I ask the hon. Gentleman to have more confidence in the Environment Agency to make those judgments; it can issue those requirements and has been capable of doing so for onshore oil and gas, and we should allow it to continue to do so.
Can the Minister tell the Committee whether the Environment Agency, which I do trust, has given her any examples of baseline monitoring issues that could be commercial in confidence?
That is okay; it does not mean that they are not there, as I am sure the hon. Gentleman will agree. In order to satisfy him on that point, I will come back to him with a fuller answer.
I will just continue on baseline monitoring, which is important to him and to us. The UK already has a good set of regional groundwater data, thanks to work conducted by the British Geological Survey since early 2012. At the more local level, the Environment Agency has confirmed that it will typically require baseline monitoring of methane in groundwater for each specific site where it is proposed to undertake fracking. It will not normally require that where no fracking is proposed, because there is very little risk of discharge to the environment. However, we acknowledge that there are still some concerns over the development of this nascent industry; that was reinforced by the speeches of hon. Members on Second Reading of the Infrastructure Bill in the Commons. We have since engaged constructively with the amendments tabled by the Opposition and carefully considered strengthening the safeguards in the area.
Following that, I can confirm that the Secretary of State for Environment, Food and Rural Affairs will now direct the Environment Agency to require operators to undertake at least three months’ baseline monitoring of methane in groundwater before hydraulic fracturing can commence. I would expect that to be done in a clear, scientific and transparent way that satisfies the hon. Gentleman and is of use to everyone in the community and specifically to scientists who want to look at it. The minimum monitoring is three months and, in practice, the Environment Agency may require a longer period of monitoring where appropriate. The degree to which other indicators such as surface water and biodiversity will be relevant and the time required to monitor will vary so much between sites that any fixed requirement would be inappropriate.
I hope that hon. Members are sufficiently reassured by the explanations I have given, the new measures I have announced and the satisfaction that I hope to have given in addressing the concerns we share about making the public content with the care we are taking to ensure that hydraulic fracturing will always be safe in their communities. I therefore hope that the hon. Member for Rutherglen and Hamilton West will withdraw the amendment.
I am grateful to the Minister for going through a series of detailed points. I am also grateful to her for moving, in some regard, on some of the points raised. I said at the outset of our discussions on this part of the Bill that our intention was to ensure that the regulation was robust and that the monitoring was comprehensive, so that there was public confidence. I am grateful to her for signalling some changes in the Government’s approach to address some of the points made by myself and colleagues in the Committee, as well as by others in the House, notably on Second Reading but also in various recent discussions.
I want to go through a couple of the points made by the Minister. We may wish to come back to a few points once we have had a chance to look in more detail at what she said about the changes being made. She rightly said that there was already a duty to provide information about the level of methane emissions. That includes onshore oil and gas. However, she said that the monitoring was partly done on the basis of an estimate. The important point is that that is done on a site-by-site basis, so that information which may be relevant to particular local communities is available. I still think there is something that she did not address in her comments but needs to be addressed.
In relation to the independence of well inspections, the Minister referred—if I heard her correctly—to the fact that companies are using external individuals or companies to do this on their behalf, therefore allaying the concerns that I have expressed and, indeed, the Royal Academy of Engineering expressed in its report. However, it strikes me that contracting an external individual is not necessarily the same as being independent. That is still a contractual relationship between the company involved and the individual or company engaged to undertake the monitoring. I am still concerned. While the information is useful, that does not address the nub or the root of the concern that we highlighted.
In relation to environmental impact assessments, the Minister referred to our approach as gold-plating and leading to unnecessary conditions. However, I am sure she will recognise that the point about the 0.99 hectares is of significant concern. If that is the case, as it appears to have been on at least one site, it seems to be at that level only to enable people to avoid the current conditions for environmental impact assessments.
I was pleased to hear what the Minister said about the disclosure of fluid. That is a positive development which I am sure will be welcomed widely for the reasons I set out and, indeed, the reasons she set out in her response. Will she clarify that that is on a well-by-well basis?
I also welcome the point about statutory consultees with water companies. I hope that there will not be undue delay that would mean that the consultation could not be put into effect. It would be welcome if the consultation could conclude before the end of this Parliament. I am grateful to hear that the Minister has had discussions with Water UK and accepts and understands its concerns. I am also conscious that some of these matters fall within the remit of her colleagues in DEFRA, rather than of her Department, but that they interact.
In relation to baseline monitoring, we welcome the move to at least three months, which is an important point. We will have a look at that. From what she said today, or at least from what I heard and hope I understood, that is a positive development as well. The points that we have put—which have been well established for almost three years—are about ensuring that the legislation is robust. I think there has been some positive movement here which I hope Members of the Committee will be able to welcome. However, there remain some issues with some of the earlier amendments which we may wish to come back to. I wish to put amendment 4 on the issue of monitoring future emissions on a site-by-site basis to a vote.
With respect, Sir Roger, the Minister said that she would communicate with me again. Subject to that communication, that might be the case.