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Law Society Public Debate: Castle Debate on Shale Gas

Fracking October 9th 2012

1. Background

Over the past 18 months there have been ten Castle Debates1 on a wide range of

environmental matters (see: www.castledebates.org.uk for details). The main theme which

has emerged is the need for increased public awareness and engagement.

The Debates contribute to increased awareness by bringing together a panel of leading

experts who: a) set out the essential elements of the issue of concern; b) clarify the

applicable law and regulations; and c) shed light on current Government policy.

2. Introduction:

Shale gas, a natural gas consisting primarily of methane, is obtained from shale (a fine-

grained sedimentary rock which is found onshore and offshore around the UK), by hydraulic

fracturing or ‘fracking’.

The technique requires pumping water, sand and chemicals to shatter the rock and to

release the gas and often involves extensive horizontal drilling. Concerns over earthquakes,

habitat destruction and the leakage of chemicals into water sources surround the

technique. In addition, there is concern as to whether the development of shale gas will

have a detrimental effect on the development of renewable sources of energy.

However, an independent report commissioned by DECC has recommended that it can

continue in the UK as long as stronger restrictions are put into place. Furthermore, on

October 8th 2012 the Chancellor of the Exchequer2 announced that the Government will

take action to stimulate shale gas extraction with a ‘generous tax regime’, even though the

Energy and Climate Change Secretary of State, Ed Davey, has struck a more sceptical note3.

1 The topics and dates for the third series of the Castle Debates in 2013 are as follows: 12th February:

Genetically Modified Crops; 20th March: Nuclear Power; 23rd April: The Environmental Impact of

Aviation; 22nd May: Wind power; 18th June: Population Growth.

2 http://www.hm-treasury.gov.uk/press_92_12.htm

3 He has commented: “In principle, I’m all in favour of exploiting new resources. I would welcome as much as anyone a

way to boost Britain’s indigenous gas supplies and to reduce energy prices to consumers and businesses alike. But I make no apology for being a little more patient than those excited commentators. I want to base our approach on the evidence, as

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3. Speakers

Professor Robert Mair, Head of Civil and Environmental Engineering,

Cambridge University and Chair of the Royal Society’s and Royal Academy of

Engineering’s Review of Shale Gas (‘the review’)4

Professor Mair presented the findings of the June 2012review which concerned shale gas

extraction in the UK. The main conclusion was that shale gas fracking can be managed

effectively if operational best practice applies together with strong regulation.

The review was requested by Sir John Beddington, FRS, Government Chief Scientific Adviser.

The terms of reference for the review were tom provide an independent review of scientific

and engineering evidence, identifying the major risks associated with hydraulic fracturing to

extract shale gas (including geological (i.e. seismicity) and environmental (e.g. groundwater

contamination).

Estimates of the global potential shale gas resource vary, in part because different concepts

are sometimes applied:

‘Gas in place’ – means the entire volume of gas in rock formation;

‘Proved reserves’ – means the volume of technically recoverable resources that can be

economically and legally producible;

‘Technically recoverable resources’ – means the volume of gas considered to be

recoverable with available technology. This is the most practical definition.

we do for all fuel sources, and I know that industry analysts do see shale as a rather different proposition here than in the US. Questions about regulatory oversight and the involvement of local communities need to be answered rather than simply dismissed. And, of course, the deployment of any new energy source must be consistent with our Carbon Plan and Carbon

Budgets”. See: http://www.decc.gov.uk/en/content/cms/news/gastech_ed/gastech_ed.aspx 4 See: http:/royalsociety.org/uploadedFiles/Royal_Society_Content/policy/projects/shale-gas/2012-06-28-

Shale-gas.pdf

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It can be seen that whilst the UK’s has shale gas reserves, these are dwarfed by the

recoverable reserves of France and Poland which, in turn, are dwarfed by those in North

America; Argentina and China.

The key concerns considered by the review were:

Seismicity – small earthquakes occurred in Blackpool area April-May 2011 associated

with hydraulic fracturing. The review found that earth tremors induced by hydraulic

fracturing are likely to be of a smaller magnitude than the UK naturally experiences

(especially in the West of England, Wales and Scotland) or than is related to coal

mining activities (themselves low by world standards – akin to the effect of traffic

passing along a busy London street).

Environmental – with widespread concern in USA following incidents of

contamination of groundwater and drinking water supplies. The review found that

the risk of contamination of aquifers from fractures is very low - provided that shale

gas extraction takes place at depths of many hundreds of metres. The blue- black

line indicates the depth of the aquifer whilst the red line indicates the much greater

depth at which fracking would take place in the Barnett Sands:

The review found that the risks posed by exploratory activities are managed at various

stages of the UK’s regulatory system: under the conditions of Petroleum Exploration and

Development Licences and the conditions of local planning permission; via notifications of

well construction and the well examination scheme; and pursuant to the conditions of

environmental permits

The review made a number of key recommendations to Government:

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Allocating lead responsibility for regulation of shale gas extraction to a single

regulator;

Strengthening the UK’s regulators, including providing additional resources as

needed;

Baseline surveys and monitoring for contamination throughout lifetime of operation;

Strengthening the system of well inspections to ensure well designs are considered

not only from a health and safety perspective but also from an environmental

perspective;

Appropriate well integrity tests as standard practice;

Mandating and enforcing Environmental Risk Assessments for all shale gas

operations, which should be submitted to the regulators for scrutiny:

o More extensive inspections and testing to ensure the integrity of every well;

Ensuring robust monitoring of methane in groundwater, seismicity and methane

leakages before, during and after hydraulic fracturing; and

Establishing integrated management processes to ensure water is used sustainably

and to minimise wastes.

Professor Mair drew attention to a number of other important considerations for all

stakeholders to take into account:

Uncertainties relating to fracking may increase if the scale of production activities

develops exponentially;

Climate risks associated with extraction and use of shale gas must not be

overlooked; and

Government should not take for granted public acceptability of shale gas extraction,

bearing in mind the UK’s energy, climate and economic policies.

Professor Alan Riley, Law School, City law School, City University

Professor Riley described the British approach to regulating shale gas extraction, highlighted

a number of shortcomings and recommended fresh ideas to improve regulation in this area.

Following the Piper Alpha disaster in 1987, safety has been the paramount consideration for

policymakers responsible for regulating the development of our hydrocarbon resources.

Lessons from Piper Alpha were collected in the Cullen Report. This recommended that

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regulators responsible for licencing and health and safety should be split to avoid the

conflict of interest for the licensing body to ‘get more licences out’.

An overview of the British regime applicable to oil and gas exploration (and, by extension, to

shale gas fracking5) was provided. Professor Riley observed that the British approach is

‘good’ when compared to the rest of the world.

Regulation recognises that oil and gas exploration is a two stage process:

Exploration Phase

There is a requirement for a Petroleum Exploration & Development Licence from DECC:

o The Petroleum Act 1998 vests all oil and gas resources on and offshore in the Crown;

o In the UK there are no landowner subsoil rights because these vest in the Crown

(unlike US) and this should make the exploitation of shale gas reserves less

complicated6;

o General licences are required for petroleum and gas exploration;

o However, there is no references to shale gas in the relevant legislation; and

o A petroleum and gas exploration licence brings with it no right of access to land and

no direct right to drill.

There is also the need for a Local Planning Consent. This is the principal local democratic

input into onshore fossil fuel development:

o It assesses the need for an Environmental Impact Assessment and considers broader

environmental and disturbance concerns;

o HSE and Environment Agency are both statutory consultees to the planning process;

and

o It provides a mere 21 day notice period in which members of the public can register

their objections to an application for planning consent.

Production Phase

After planning permission has been secured but before drilling consent has been provided,

DECC consult both HSE and the Environment Agency. In addition,

o The Environment Agency will be approached for an environmental permit and an

abstraction licence. Conditions may be applied to these instruments based upon risk 5 The British approach has not yet recognised or reflected the need for regulations which are dedicated to the

particular issues relating to shale gas extraction. 6 Larger areas may be licenced for fracking than, say, the USA allowing the use of better modern equipment.

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profile, type of facility, quantity of waste, type of emissions released, area risk

receptors;

o Pursuant to the Borehole Regulations 1995, the HSE review the drilling operators’

plans for the design, construction and operation of the well. The HSE has

responsibility for issuing and regulating drilling consents, but the regime is designed

for small numbers of wells (if large scale fracking occurs this may put a lot of

pressure on regulators).

A similar parallel regimes with environmental and health and safety regulator working in

tandem applies to fracking in Northern Ireland and in Scotland.

The areas of concern in relation to Britain’s regulatory system include:

There is an inherent belief amongst policymakers (which may not always be well

founded) in the ‘superiority’ of a generalised, goal-orientated approach to

regulation, as opposed to a more prescriptive approach. There is a danger here of

complacency;

There is danger in the current multi-agency approach to regulation – there are no

clear lines of responsibility between the Environment Agency and the Health &

Safety Executive;

Local communities are given insufficient notice (21 days window of opportunity to

oppose an application for planning consent – see above) of proposed fracking

activities in their areas;

Local communities will be affected by shale gas extraction (e.g. large number of lorry

movements) but may not be adequately compensated for its impact; and

Greater levels of surveillance may be needed given that there will be so many wells.

This will be required to establish or reinforce public trust, as well as to ensure

compliance and environmental protection.

Professor Riley argued that all European states are likely to struggle with scalability. He

described it as a ‘major issue’. There are insufficient regulators and they are not well

trained. The overall environmental footprint of shale gas fracking may not have been

properly estimated – e.g. very large numbers of waste and water treatment plants will be

required and how and where these will be sited may not have been evaluated.

Professor Riley advocated the setting up of a ‘Shale Gas Trust’. This would carry out

research into shale gas development and regulation. It would provide the public with

information it can trust. It would train and perhaps certify regulators - there is an issue of

capacity and this would address it. It would assist industry. It might even carry out on-site

inspections.

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Lastly, a series of significant practical challenges were identified for UK and EU regulators

and fracking companies:

o Effective regulatory structures and sufficient regulatory capacity is urgently required

o Dealing with scalability (see above);

o Maintaining public consent – e.g. considering a statutory community payment to

compensate for the impact on the community of shale gas fracking activities.

In summary Professor Riley observed that it will be a serious challenge to deliver shale gas

fracking due to practical and regulatory difficulties.

David Baldock, Executive Director, Institute for European Environmental

Policy.

David Baldock explained how EU policy currently addresses shale gas fracking. He concluded

that the current policy framework has a number of deficiencies and he explored how these

might be tackled. He also pointed out that an area of concern is whether the effect of

bolstering shale gas extraction (e.g. by introducing an attractive tax regime as proposed by

the UK Government) will draw away investment from renewable energy ventures.

Indirectly, it may be said that the role of gas and shale gas in energy supply is affected by

national energy and climate policies, which have an EU dimension. However, looking at the

current legal framework, it is notable that shale gas fracking per se is not currently the

subject of major dedicated policy measures in the EU or UK. There are a number of

significant differences between Member States in overall policy orientation regarding the

desirability of fracking (e.g. France has substantial reserves but is not in favour of exploiting

them at the present time; the Polish Government is very keen to exploit its reserves to

achieve energy independence from Russia; and the UK Government is keen to exploit this

opportunity too).

a) The specificities of shale gas – why is it different and why it might merit dedicated

regulation?

The main environmental impacts of shale gas extraction are as follows:

Fracking will contribute to climate change (indeed, fracking may be incompatible

with the UK meeting it climate change targets).

A lot of chemicals are used during the process of hydraulic fracturing, they include

toxic, carcinogenic and mutagenic substances, and substances harmful to the

environment used as additives such as biocides;

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The amount of flow back water contaminated with radioactive substances such as

radon and uranium and other heavy materials;

There can be a large number of drilling sites and infrastructure : pipes, road, storage

etc.;

High amount of water used for the fracturing fluid;

Visual impact – there may be some parallels with wind farms7: the amount of plant a

and equipment associated with the fracking process is not inconsiderable; and

Potentially high emissions of methane from the well completion

There are a few differences for shale (unconventional) gas in comparison with conventional

gas extraction, including:

The use of more significant volumes of water and chemicals compared to

conventional gas extraction

The lower yield of unconventional gas wells compared to conventional gas wells

means that the impacts of HVHF processes can be greater than the impacts of

conventional gas exploration and production processes per unit of gas extracted.

The challenge of ensuring the integrity of wells and other equipment throughout the

development, operational and post-abandonment lifetime of the plant (well pad) so

as to avoid the risk of surface and/or groundwater contamination;

The challenge of ensuring that spillages of chemicals and waste waters with potential

environmental consequences are avoided during the development and operational

lifetime of the plant (well pad);

The challenge of ensuring a correct identification and selection of geological sites,

based on a risk assessment of specific geological features and of potential

uncertainties associated with the long-term presence of hydraulic fracturing fluid in

the underground;

The potential toxicity of chemical additives and the challenge to develop greener

alternatives;

The unavoidable requirement for transportation of equipment, materials and wastes

to and from the site, resulting in traffic impacts that can be mitigated but not

entirely avoided;

7 David Baldock anticipated that this might well be a ‘big issue’ for the UK.

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The potential for development over a wider area than is typical of conventional gas

fields;

The unavoidable requirement for use of plant and equipment during well

construction and hydraulic fracturing, leading to emissions to air and noise impacts;

and

Runoff and erosion during early site construction, particularly from storm water, may

lead to silt accumulation in surface waters and contaminants entering water bodies,

streams and groundwater8.

The potential risks to the environment from shale gas extraction include:

Land take: shale pad takes approximately 3.6 hectares per pad for high volume

fracturing vs 1.9 hectares per pad in conventional drilling. This is particularly

important regarding the development of shale exploitation in densely populated

areas;

It may not be possible fully to restore sites in sensitive areas following well

completion or abandonment, particularly in areas of high agricultural, natural or

cultural value;

Emissions to the ground: drinking and groundwater contamination and land

contamination;

Emissions to the air: diesel fumes from fracturing liquid pumps and emissions of

hazardous pollutants, ozone precursors and odours due to gas leakage during

completion, there can also be pollutants escaping after the operation if the well is

not properly sealed, greenhouse gas due to methane release; and

8 This is a problem common to all large-scale mining and extraction activities. However, unconventional gas

extraction carries a higher risk because it requires high-volume processes per installation and the risks increase with multiple installations. Shale gas installations are likely to generate greater storm water runoff, which could affect natural habitats through stream erosion, sediment build-up, water degradation and flooding. Mitigation measures, such as managed drainage and controls on certain contaminants, are well understood. Therefore the hazard is considered minor for individual installations with a low risk ranking and moderate hazard for cumulative effects with a moderate risk ranking. Road accidents involving vehicles carrying hazardous materials could also result in impacts on surface water. If engineering controls are insufficient, the risk of accidental release increases with multiple shale gas wells. Cuttings produced from wells also need to be properly handled to avoid for instance the risk of radioactive contamination. Exposure to these could pose a small risk to health, but the study concluded that this would only happen in the event of a major failure of established control systems. No evidence was found that spillage of drilling muds could have a significant effect on surface waters. However, in view of the potential significance of spillages on sensitive water resources, the risks for surface waters were considered to be of moderate significance.

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Accidents outside the operating sites: transport on roads and landfill of waste.

b) The EU Legislative framework:

A range of EU measures are relevant to the establishment and operation of gas wells

including unconventional sources. The question is whether the resulting patchwork of rules

is ‘fir for purpose’ – a debate which is really only just starting within the EU.

The European Parliament has identified an incredible 36 separate EU measures which are

applicable to shale gas extraction, including:

i) Directives relative to the extractive industry:

These include:

Directive on the management of waste from extractive industry (mining waste

directive, applies to the contaminated water handling)

Directive on safety and health protection of workers in surface and underground

mineral-extracting industries

Directive concerning safety and health protection of workers in the mineral

extracting industry through drilling

Directive concerning the conditions for granting and using authorisations for the

prospection, exploration and production of hydrocarbons

Each Member State has, in addition, several Acts clarifying the conditions of access to the

market etc.

ii) Additional important Directives;

There are a number of other miscellaneous diretives which apply to the use of chemical,

emissions, etc, including:

1. Ambiant air quality Framework Directive

2. Integrated Pollution Prevention and Control Directive (IPPC)

3. Industrial Emissions Directive

4. Major Accident Hazards Directive (COMAH)

5. Regulation of Chemicals (REACH)

6. Environmental Liability Directive

7. Waste framework Directive

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8. IPPC Directive

9. Seveso II

10. EIA Directive / SEA Directive

11. REACH

12. Habitats Directive (Natura 2000)

13. Birds Directive

14. Groundwater Directive

15. EQS Directive

16. Drinking Water Directive

17. Water Framework Directive

18. Noise Directive

Notwithstanding this plethora of regulation, David Baldock considered whether there might

be gaps in the regulatory framework which need to be filled so that fracking can be

addressed adequately. He concluded that there are some gaps and shortcomings:

1. EIA Directive Threshold Set Too High:

The threshold as defined by Annex 1 of EIA Directive is 500,000m3 daily extraction rate for

natural gas wells above which an EIA is compulsory. It would seem that a lot of the

exploitation of shale gas does not reach this threshold and therefore EIAs are not carried

out.

2. IED gap:

There are no specific provisions for fracking in the Industrial Emissions Directive.

3. Long-term effects of use of chemicals:

A variety of additives are used by companies extracting shale gas, but not in all cases are the

constituent parts declared sufficiently due to trade secrets. This has been made quite

obvious in the US. Some of these chemicals will remain in the ground and there needs to be

a mechanism for regulators to consider the possible long-term effects of this.

4. Lack of best practice guidelines to assist industry and regulators:

The IPPC Bureau has not produced any guidelines on hydraulic fracturing. It should list

current best practice and techniques and processes used in the sector, current emission and

consumption levels, as well as techniques to consider in the determination of Best Available

Technology and emerging techniques.

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5. Sewerage Treatment Plants:

From the US experience, we have seen there were problems in relation to water processing

capabilities of sewage treatment plants that discharged water to rivers. We need to ensure

before extraction commences that the capacities to treat the waste water are sufficient.

6. Lacuna in the Water Framework Directive (WFD):

Hydraulic fracturing is not included in the WFD, notwithstanding that there may be a high

risk of surface and groundwater contamination at various stages of the well-pad

construction, hydraulic fracturing and gas production processes, and during well

abandonment. Cumulative / multiple fracking activities in a localised area could further

increase this risk.

Lastly, David Baldock made the following three recommendations:

1. Lower EIA threshold for fracking projects; could be extended to all commercial wells;

2. Include of hydraulic fracturing in Industrial Emissions Directive, including the Best

Available Technology reference document; and

3. Introduction of an EU regulatory instrument addressing hydraulic fracturing

specifically in a more holistic way.

4. Summary

Shale gas fracking is both an opportunity and a threat. Fracking will produce greenhouse

gases which will contribute to climate change. In addition, fracking may have a negative

impact by attracting investment away from sustainable, renewable energy. However, the UK

Government seems set to press ahead with full scale exploitation, even though the current

regulatory regime may not be fit for purpose. There is a case for getting the regulatory

regime right first; otherwise public trust may be lost at the outset.

Stephen Sykes

November 19th 2012