SHALE GAS INQUIRY

As the summer progresses the Welsh Affairs Committee is quietly holding a series of short inquiries on our countries energy issues – the first energy issues that they are looking is focusing on shale gas. Shale gas is natural gas (mostly methane) found in shale rocks.

Natural gas produced from shale is often referred to as unconventional because of the methods used to extract it from rock beds. Advances in technology, notably hydraulic fracturing or ‘fracking’ over the last decade have made shale gas development economically viable. Shale gas is making a significant contribution to US gas production — having risen from around 2% of US production in 2000, to 14% in 2009, and it is forecast to continue rising to more than 30% by 2020.

There are serious concerns over the environmental impact both of the gas itself and the methods used to extract it. Unconventional gas development in the UK is at an early stage. Planning permission has been given at a number of sites in Wales for exploratory drilling for shale gas. 

Further planning permission would be required for a full-scale extraction process. Concerns have been raised from environmental groups about the local environmental impact of shale gas extraction, including the risk of earthquakes and the contamination of groundwater.

The Welsh Affairs Committee has invited written submissions and requests observations on the following issues:

• the importance of gas to the UK’s overall energy needs and the potential role shale gas could play within it
• The potential for shale gas exploration and commercial level extraction in Wales
• The potential environmental and climate change impact of extraction and use of the gas
• Whether the current regulatory regime covering such activity is adequate; and
• The potential economic impact of shale gas production in Wales
• The role of the Wales Office and the Welsh Government in developing a policy framework for the exploration of shale gas

The Committee asks for written submissions on this issue in accordance with set guidelines, and the deadline for written submissions is noon on Wednesday 14^th August 2013.

Submissions for this inquiry should therefore be sent via the Welsh Affairs Committee website.

AN INDEPENDENT THOUGHT?

Petrol prices have risen again (locally from 129.9 to 133.9 per litre) but as most of us will have noticed by now when it comes to fuel (energy) prices they mostly tend to go up and stay up over the longer term regardless of occasional short-term drops in price. Despite the recession related blips general longer term trend for hydrocarbon prices in much of the world appears to remain steadily upwards.

Partially this is unavoidable due to increasing demands for more energy (particularly from energy hungry India and China), the growing planetary population and the short term nature of our planet’s hydro carbon fuel reserves. This trend is relatively easy to plot (even in the short term) and the medium and long-term consequences of being dependent upon energy resources that you don't actually control should be pretty self evident to even the dimmest Westminster politician.

That said it’s worth noting that there are basically two types of energy resources primary and secondary. Primary energy is energy that is largely supplied without being transformed e.g. crude oil, natural gas, and coal and secondary energy that requires a transformative (often energy intensive and sometimes polluting) process to refine it before it can be used to produce energy.

As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) happened in 1999, and Peak gas production took place back in 2000. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.

By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

The writing is not so much on the wall as on TV, as last Tuesday saw the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League.  Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.

Russia (with full coffers) has ridden out most of the consequences of fluctuating oil prices and appears to have managed to avoid any real consequences of declining cash reserves despite its economy being heavily reliant on oil and gas exports. While some countries subsidise their fuel prices (just how sustainable that is over the medium to longer term is open to debate), in the UK this does not happen, so everybody wins, Government gets more tax revenue, the oil companies get more profit, and us the ordinary punters get consistently fleeced.

As for gas, some states have made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2009 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate, in the UK had a storage capacity which would have lasted for only 15 days (2009 figures). Some countries discuss the issue of energy independence at the highest level here in the UK such talk is best avoided.

New Labour took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete failure in strategic energy planning. The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.  

The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher domestic energy prices and potential power blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them.

We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers. The Con Dem’s solution to was to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Anyway that was the plan, although the wheels seem to be coming of that particular wagon.

Now Cameron (and Westminster’s) focus is on Shale Oil/Gas as the great panacea for the UK’s energy problems – the problem is unlike primary energy sources the extraction and preparation of shale oil/gas is energy intense and certainly based on the Canadian experience exceptionally polluting. Even if Europe chooses not to chase Shale then developments elsewhere in the world could mean that as had been said elsewhere we can effectively kiss goodbye to curbing climate chance for ever and bequeath rising sea levels, wild weather and pollution to our descendants.

Even if the environmental and pollution issues could be addressed (and we don’t appear to be anywhere close to doing that at the moment ) there are other significant issues. For one, Shale oil/gas is a finite resource, there is just like oil, coal and gas, there is little chance of extracting 100% of reserves. What we may be talking about extracting something like 40 or 50% of it – which might last around 10 years – the big question is what happens then? While we use the brief window of Shale based energy are we going to develop secure energy supplies for the future or is this merely short term fix?

What successive Westminster Governments (since 1997) should have done was to  work with the devolved governments and the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources run by not for profit companies. They should have developed a flexible self-sufficient energy development strategy that encourages decentralised microgeneration. This could create jobs, useful skills and bootstrap the economy out of the recession as well as helping consumers by delivering community beneficial energy schemes – significantly successive Westminster governments have chosen not to do this.

Wales needs direction not Carwyn’s platitudes when it comes to the development of safe and secure energy resources. The renewable energy sector can play a key role in creating sustainable green energy jobs for local people, not damage the environment and provide our communities with a long-term viable economic energy future, that’s should be the real future dividend for our communities rather than the shareholders in the City or provide well paid jobs on the board for former Westminster politicians. 

A QUIET SENSE OF URGENCY...

There is an increasingly desperate search for secure energy supplies, which is one of the reasons why George Osborne jumped in with both feet in relation to exploitation of Shale Gas reserves, hence the creation of the Office for Unconventional Gas and Oil. Just exactly how that fits in with the concept of Devolution in Wales is open to question? The chancellor also started the ball rolling on yet another Conservative driven dash for gas by approving the construction of potentially up to 30 new gas-fired power stations, to be built over the next two decades.

The UK Westminster government wants up to 26 GW of new gas generating capacity by 2030 much of which may come from the potentially environmentally questionable process known as fracking. Back in March 2011 the House of Commons Energy Select Committee came out in favour of fracking as an option for ‘secure energy’ simply stating that any environmental problems associated with fracking in the US would be overcome by tight regulation and good industry practice.

Options for energy exploitation (South Wales)

I am a big believer in developing Wales’s secure energy potential; unlike the Chancellor and the Con Dems I actually believe that we should have secure sustainable energy supplies. I also think that they should be community beneficial and just happen to think that we in Wales should have control of them. One inescapable part of the problem is that we (the population of the planet) are running out of easily (relatively) accessible hydrocarbons (oil, gas, etc) no matter how you spin it they are a finite resource.

The search for conventional hydrocarbons (oil) is becoming increasingly costly. Work on the Kashagan oil island in the Caspian Sea, off Kazakhstan has cost $46 billion dollars or around £ 28.8 billion pounds to develop. It is one of Kazakhstan's most ambitious project and just happens to be the world's largest oil find in the past 40 years. Kashagan may be as good as it can get for the Kazakhs and the Oil companies, but, one inescapable fact is that the field holds approximately 13 billion barrels worth of recoverable oil or around enough oil to fuel the world for nearly five months.

At the moment much of the UK’s gas supplies come from Qatar (in the Persian Gulf) which while being relatively stable has some Human Rights issues. As stable as it is, the problem is that the Middle East and the Gulf region are unstable. If some of Qatar’s despotic and repressive neighbouring rulers (run out of rubber bullets, tear gas and live rounds) and fall to popular unrest (at some point the repressed will lose patience and then it comes down to a simple if bloody numbers game) then we could be talking about lights out in the UK and flickering lights for much of Europe.  

Options for energy exploitation (North East Wales)

Hence the Chancellor’s quiet sense of urgency surrounding exploiting the Shale gas reserves. Now there are potentially sizeable reserves of Shale gas under some parts of our country with an estimate of recoverable gas reserves, possibly worth £120bn something which have got some people and some of the energy companies salivating.  Oddly enough Gazprom, the monopolistic gas producing arm of the Russian State, with its hands tightly gripped on the gas pipe, of most of Eastern Europe, does not favour Shale Gas production.

Now this all sounds good, but, the potential impact of the hydraulic fracturing technique (fracking) on people's health and environment is potentially pretty grim. The process can use a combination of water, sand and chemicals which are pumped into rock formations under high pressure. Something which has led to a sizeable number of environmentalists to raise real concerns about the fracking method could which can contaminate drinking water supplies.

Something else that is worth thinking about is that to make the extraction process work economically there is a requirement to drill lots of wells in close proximity to each other to aid extraction. Something that might lead to a far more significant environmental footprint during and after the gas is gone. In parts of south and north east Wales, whether with deep mined or open cast coal mining we have seen how the post mineral extraction clean up works.

One unanswered question is what will happen to any tax revenues, drilling permit fees, etc from Shale gas extraction. The Labour Party in the late 1970’s and the Conservatives through the 1980’s failed to pump revenues into an oil and gas fuelled sovereignty fund (like Norway did) choosing to blow the lot on subsidies for inefficient nationalised industries and tax cuts for the rich.

Ultimately Shale gas is also a one off, literally a one hit wonder, once gone it’s gone for goods. UK reserves, even if 50% was extracted might last 10 years, and then what? Over the last 15 years successive UK governments should have been working hard to develop non hydro carbon dependent sustainable energy supplies. Rather than do something they simply left energy planning and energy development to the whims of a cartel dominated nominal free energy market.

The main beneficiaries at the moment for Shale exploitation would by the UK Treasury (tax) and the Crown Estates which with its urban, rural and marine holdings across the UK, including the seabed and large areas of land, stands to profit from renewable energy developments and off-shore dredging. Any shale gas extraction should be regulated, supervised and approved (but only after a full and comprehensive environmental assessment) here in Wales, not in Westminster.

Any tax or licence revenues raised should go into a ring fenced all Wales sovereign energy fund which the National Assembly should avoid plundering for short term financial fixes. As we in Wales will have to live with any consequences (both long and short term) of an environmental disaster it is only reasonable that our natural resources should be controlled by and developed for the benefit of the Welsh people.

THE RIGHT DECISION

The decision to say no the application for drilling for shale gas at a site in Llandow in the Vale of Glamorgan yesterday is to be welcomed. There is a definite need for a pause for thought and a real need for the Welsh government to develop coherent policy in relation to test drilling for shale gas in Wales.

Environmentally there are still too many unanswered questions in relation to the environmental price that can be paid extraction of shale gas. In USA, the Shale Gas extraction industry made headway because it was exempted from groundwater protection laws, with some pretty dire consequences for some US communities.



US land laws also helped as it grants landowners under whose land the gas is extracted a share of the proceeds, encouraging many of them to ignore wider environmental concerns. this, however, is not the USA, in the UK people don't have that option as we have the Crown Estates.

Interestingly enough, there are potentially some parallels with the headlong and equally ill-thought out dash for gas in the 1980's (for Con Dems read Conservatives) with the possibility of a potential if short term revenue stream that may well be something that's excites the Conservatives. Ironically money aside what is actually driving this potentially seriously environmentally damaging and polluting shale gas extraction industry are belated thoughts of energy security.

Serious questions need to be asked as to who exactly reaps the financial benefits and who pays the price for the rapid expansion of the home grown energy sector? Whether it's relatively remote rural mountain top wind farms, open cast coal mines, large cross country electricity pylons close to some of our communities (rural or urban) or off-shore wind farms established in our coastal waters.

The Welsh government can rightly be criticised for passing the buck by insisting that county councillors had enough power, knowledge and control to make their own decision, whether that be test-drilling or developing policy for future fracking for shale gas. Simply calling for the Westminster government to work to develop policy on fracking with the devolved governments across the UK is not good enough, the Labour Government in Cardiff is not standing up for Wales, it is sleepwalking for Wales.

FRACKING HELL!

The House of Commons Energy Select Committee, without waiting until research into the environmental effects of mining shale gas have been fully researched and studied, has come out in favour of developing this energy resource in the UK. Perhaps, considering the potential damage to our environment MPs should have called for a moratorium on shale gas and waited until research into allegations about the technology is complete.

MP's say that any environmental problems associated with it in the US could be overcome by tight regulation and good industry practice here in the UK. Even MPs, despite their haste to develop what is seen as a secure energy resource, have stated the Westminster government would need to be particularly vigilant to ensure the technology did not pollute water or produce excessive greenhouse emissions.

Shale gas is gas trapped in rocks that can be released through new horizontal drilling techniques and by breaking open the rocks by pumping in water and mix of chemicals (or hydraulic fracturing) which is known as fracking. Here in Wales, the initial focus is on the shale gas reserves that may be found some 7,000 feet below the village of Llandow in the Vale of Glamorgan.

Interestingly enough Manchester University's the Tyndall Centre and the Cooperative Bank have released a report on the wider environmental impact of shale gas extraction, which is well worth a read. If you get the chance and watch Gasland, the film is based on the real life experiences faced by communities in the US, who have lived with (and are living with) the consequences of the dramatic increase in shale gas extraction.

In America, the Shale Gas extraction industry was boosted when it was exempted from groundwater protection laws, with some pretty dire consequences for some US communities. US land laws also helped as it grants landowners under whose land the gas is extracted a share of the proceeds, encouraging many of them to ignore wider environmental concerns - in the UK we have the Crown Estates.

Now interestingly enough, there is a resemblance to the headlong ill-thought out dash for gas in the 1980's (for Con Dems read Conservatives) with the possibility of a potential if short term revenue stream that may well be something that's exciting the Conservatives. Ironically money aside what is actually driving this potentially seriously environmentally damaging and polluting shale gas extraction industry are thoughts of energy security.

That aside for the moment, serious questions need to be asked as to who exactly reaps the financial benefits and who pays the price for the rapid expansion of the home grown energy sector? Whether it's relatively remote rural mountain top wind farms, open cast coal mines, large cross country electricity pylons close to some of our communities (rural or urban) or off-shore wind farms established in our coastal waters.

If we have commercial companies moving into Wales; to mop up grants and the incentives to establish alternative energy facilities that take advantage of our natural resources yet deliver scant material or any other benefits to the Welsh people, then we should rightly ask what's going on? And if all of this is taking place with the apparent (or actual) approval of an Uncle Tom Welsh Government in Cardiff then are we merely repeating what happened to us in the nineteenth century? Surely we can do better than this?

All that aside for the moment, one question that the Westminster MP's seem to have largely or deliberately avoided is that, according to British Geological Survey estimates that onshore shale gas reserves in the UK may be able to supply 1.5 years of the UK's total gas needs. So when its gone and we are all living with the potentially grim environmental consequences of the messy (to put it mildly) process then what?