Bad for the Environment, Good for Trading?

US shale gas reaches Scotland and UK approves fracking in Lancashire – will this re-ignite the fracking debate?

This article was written by Michael Hinton, Chief Customer Officer and Senior Vice President Products and Solutions at Allegro Development.

A freighter carrying 27,500 m³ of US shale has recently reached Grangemouth, the site of Ineos’ petrochemical plant in Scotland. The company, that has invested £1.6 billion in a virtual pipeline between the US, the UK and Norway, will extract ethane from shale gas to create plastic pellets for general manufacturing.

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The chemical multinational argues that, in the face of global competition and with North Sea ethane supplies declining, US shale shipments will provide sufficient raw material to run its olefins and polymers business in Grangemouth at full rates, something that has not been possible in recent years. The gas would also help secure the future of the plant’s 1,300 workers.

It’s hard to say. While the UK government is openly pro-fracking and has just approved fracking at one Lancashire site in a landmark ruling, the Scottish government has placed a moratorium on all fracking on Scottish soil while waiting for the findings of a study into its impact on the environment. So, what does the future hold for fracking in the UK?

A recent history of fracking in the UK

Only last year, Cuadrilla Resources, the main company pioneering shale gas development in the UK, was refused permission to explore the Bowland Basin in northwest England regardless of the fact that 2,281 trillion cubic feet of shale gas are estimated to be contained within this area. This was just the last in a series of obstacles the company had encountered in its endeavour to explore for shale gas in Lancashire.

Despite the original planning officer’s recommendation to grant permission to proceed with exploratory drilling at Cuardilla’s Preston New Road and Roseacre Wood sites, and the fact that Cuadrilla assured it could reroute traffic, the application was rejected. Lancashire Council’s Development Control Committee cited an increase in both noise and traffic as the reasons for turning the application down.

Another obstacle was – and still is – the many anti fracking demonstrations that take place and that extend the already lengthy time authorities take to grant permission to drill at a particular site. The Cuadrilla decision for instance, took 15 months to be made since its initial submission which makes it very difficult for companies to plan – and to invest.

Cuadrilla appealed the LCC’s refusal to grant planning consent at Roseacre Wood and Preston New Road. Additionally, the UK’s Communities Secretary said back in November 2015 that he would decide the appeals after a public inquiry.

This week, the government has given fracking in Lancashire the go-ahead.

Additionally, not long ago Island Gas Limited (iGas) was granted planning permission to drill four exploratory groundwater monitoring boreholes in Nottinghamshire. The drilling may be used to support a future fracking application.

It looks like the end is not here yet for the UK shale industry as there still seems to be sector supporters within the UK government in favour of having a real go at shale exploration.

What are the anti-fracking arguments?

In Ineos’ specific project instance, environmental campaigners in Scotland are citing ‘the devastating local impacts of fracking, the utterly disastrous climate consequences of extracting yet more fuel and the disgraceful fact that Scottish money is tied up in the project’.

If we look at the whole of the UK, while the domestic shale gas industry is on the government’s agenda, in some departments the government controls are putting a spanner in the works in spite of its attempts to win public support.

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In July 2015, at the request of the Information Commissioner’s Office, the Department of Environment, Food and Rural Affairs (Defra) published the details of an internal report into fracking which highlights several concerns and which has therefore put the government in an awkward position.

One concern is the fall in house prices in areas near shale gas exploration sites. Another concern is that the cost of rental properties near fracking sites could be pushed up by people coming to work at them.  Additionally, there is also the likelihood of greater insurance costs for properties located up to five miles from a fracking site, in case of explosions.

While these anti fracking arguments may all be valid, there is no data to back them. What we do know is that there is no evidence of falling house prices near oil and gas sites.

As for the issues around noise, traffic and the visual impact of shale gas sites that the Defra report mentions, these can be applied to any construction site, be it a block of flats, a shopping centre or a shale gas site. In all instances, the noise, increased transport and landscape will go back to previous levels.

While the concern around house prices would have to be looked into in more detail, the issue about noise and traffic can be appropriately managed to ensure minimum disruption.

Conclusion

Drilling for shale gas is only at an exploratory phase in the UK and, in political terms, remains highly controversial. The arrival of US shale to Scottish shores will undoubtedly re-ignite the debate but it’s hard to tell whether public opinion will shift in favour of shale.

The truth is, environmentalists and the anti-fracking movement in general are making much more noise and presenting more anti-shale facts than the pro-fracking minority. The UK government will have to increase its efforts and reassure the public that every possible measure will be taken to prevent environmental damage, and ideally get the devolved Scottish administration on-side.  In contrast though, as supplies continue to dwindle from the North Sea reserves market demand will put pressure on pricing which can sway public opinion as well.

Nothing is 100% risk free in life. Shale gas has the potential to diversify the UK’s energy mix and minimise our dependence on dominant suppliers. It also promises to boost employment, create investment opportunities and move the UK off the current path to more and more coal consumption.

We do not know whether domestic and European shale production can ever have the same impact as in North America but, to find out, exploration needs to be given a chance and start now.

 

 

 

 

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