Fracking – the view from London

The British Geological Survey estimates that there may be 1,300 trillion cubic feet of shale gas present in the north of England, 10% of which is extractable with current fracking technology. Eager to exploit this resource, the Conservative UK Government has permitted Cuadrilla Resources to explore for shale gas in the English county of Lancashire and announced plans to offer the world’s “most generous” tax breaks to developers of UK shale gas. These moves have provoked a considerable backlash from sections of the UK public, who have come out in their hundreds to protest against shale development and fracking. Juliet Langton spoke to Matthew Pencharz, Senior Advisor – Environment & Energy to the Mayor of London Boris Johnson, to hear the Mayor’s argument for shale development in the UK.

JL: What are your observations on shale development in the US?

MP: If you remember Obama’s first election in 2008, there was the slogan, ‘Drill baby drill’ from the political Right in the US – the message to ‘drill any hole you can find in order to get oil’. Yet when it came to Obama’s latest election last year, it wasn’t an issue at all. I think it’s very interesting to observe that energy just dropped off as a political issue in the US – at least that’s how it appeared to an observer in the UK. Fracking is old technology, it’s been in use for 50 years, but now they can dig down and sideways to get a lot more oil and gas out the ground. It really has done amazing stuff for the US energy market, and I think it’s interesting that it didn’t come up as an issue in Obama’s re-election.

JL: Why does the UK need shale gas development?

MP: I think there are a few reasons. The first is the money thing. If you think of what North Sea Oil did for us in the late 70s and early 80s, it really transformed the fortunes of this country. It created lots of jobs and put a huge amount of money into the Treasury and into the companies as well. The exploitation of shale resources has a similar potential – again to revitalise the industrial base of the country, and to bring in huge revenues to the treasury, which is for the benefit of all of us.

Second is that energy policy – and I think the former [Labour] government has quite a lot of the blame here – did not plan ahead to around now and in two years’ time as we turn off some of the older nuclear and coal plants to meet EU rules. There’s nothing to immediately replace them. The problem with wind is that you can’t turn up the wind at any given period, so you need some kind of base load which could be nuclear or fossil fuels. Nuclear takes a while to build. So we’re going to need natural gas for a while, because we didn’t invest in a technology 10 years ago that could have given us that reliable base load, i.e. nuclear.

The question to answer then is, where do you want the gas to come from? Do you want it to come from places that aren’t necessarily the most politically friendly to the UK, or places that are unstable, or may have problems that could affect supply? Or do you want to get it from underneath your feet? I think that question answers itself really, and those that oppose fracking, or the exploitation of our natural resources in the UK, have to answer that question. We need to keep the lights on.

Answering the question with, ‘we need to become more energy efficient,’ is not a sufficient answer. Yes, absolutely we need to retrofit our buildings to make them more energy efficient – that is absolutely the case, without a doubt. And we are doing as much as we can in London, and the Mayor has a huge retrofitting programme. But the point is that London’s electricity demand is still going up by 4% every year due to big developments, so we do need to keep the lights on and it’s got to come from somewhere. And because of the state energy policy of the past, we don’t have a reliable base load going forwards and it has to come from gas, in the medium term at least.

That gas has to come from somewhere, and the Mayor says that it should come from beneath our feet, rather than from abroad. It would also help stabilise energy prices. Obviously they have become a huge political issue, and there is a reason why they are going up: increased world demand. If we can add to that supply by getting energy from beneath our feet in the UK, you can see there’s obvious benefit there.

JL: In 2011, Cuadrilla suspended its shale gas test drilling near Blackpool in Lancashire when it was judged to be the “likely cause” of two minor earthquakes in the area, registering 2.3 and 1.4 magnitude on the Richter scale. Is this no longer a worry?

MP: There were tremors, but they were the kind of tremors you would get if a train were to go past your house. The evidence in the US suggests that there have been basically no earthquakes caused by fracking, and those it has been linked to have been of a similarly low magnitude. So we’re not talking about serious, building-threatening kind of movements – there’s been no proof of that whatsoever.

[It’s worth mentioning here that Cuadrilla attributed the quakes to an “unusual combination of geology at the well site” and said these conditions were “unlikely to occur again”.]

JL: Do you think George Osborne [Chancellor of the Exchequer] is right to offer tax breaks to companies developing shale in the UK?

MP: I would say that this is really a matter for the Treasury to decide, and the Mayor is not privy to the figures of investment. So it’s hard to say yes or no from our position. But I would say that the Mayor and his office are very keen that companies do come and invest, and go forward with exploiting shale reserves, subject to all the normal environmental and planning rules and ensuring that local communities are properly awarded, and there has been talk of that [Osborne mentioned plans to force shale gas companies to give local communities at least £100,000 per well as compensation for fracking near their homes]. So what the level of incentive should be, I don’t think it’s really for us to say. But we do need some investment in this industry and if that requires some form of tax incentive then that’s what we have to do.

JL: Some of the public are concerned that these tax breaks are just the beginning of shale gas companies making huge profits while the UK public sees little benefit.

MP: The balance has to be right, but it’s worth noting that the UK’s shale reserves actually belong to the crown; they do not belong to the landowners. It’s different from in the US, where if you own a great big farm in Pennsylvania then the stuff below it belongs to you. In the UK’s case it belongs to the crown. This means the UK is going to make huge revenues out of this, and some of that should go towards concessions for the landowner and the community. Clearly there’s going to be profit for the companies, and investors are not going to fund someone if they’re not going to make some money out of it. It will be a balance between the community benefit, the money the treasury can get to help take the pressure off all of us UK taxpayers and to invest in development, and the profits for the company that is taking the risk and doing the drilling.

JL: Will developing the UK’s shale gas resources lead to cheaper energy for the public?

MP: I think it will definitely stabilise the prices. What people in the UK are understandably cheesed off about is that energy prices are going up and up and up, and this is at a time where we’ve all had our incomes frozen while the cost of living, including the payment of unavoidable bills, is going up. So it’s absolutely right that the Government does what it can to ease this pressure, without disrupting the market so much that it kills off future investment. At the moment, because we have to import so much gas, we get battered by what’s going on in the wholesale market a lot. Whereas if we can get our own energy from beneath our feet, clearly we are insulated somewhat from the effects of external forces.

JL: Some have said it’s not right for London to support fracking and shale development, because it’s not going to happen in London – it’s going to happen in rural areas. Is it unfair for London to have a big say in this matter, when the city is not going to be directly affected by any of the developments?

MP: The first thing to point out is that there are now plans for an exploratory well in the Weald Basin in West Sussex. Some of that development may stretch into the Greater London area, but we’ll see. And the Mayor has said that, subject to the normal planning and environmental rules, he would support shale exploitation within the London borders. He has said that very clearly and wrote letters to The Times newspaper along those lines. So we’ll see.

But the Mayor is a politician leading a very rapidly expanding city, heading towards 9 million residents and 10 million in the next 20 years or so. And I think it’s absolutely right to respond to what is going on – to the fact that this country will have energy capacity headroom of around 5% in two years’ time. It’s clear that the Government needs to do what it can do, what it must do, in order to keep the lights on. In the case of London specifically, we’re developing very fast, there’s a very rapidly growing population and our energy demands have to be met. And the good news about natural gas is that if it is burnt in these Combined Heat and Power plants that we are encouraging to be developed in London, it becomes low-carbon energy because we’re using it so efficiently, using the heat rather than losing it up the chimney.

JL: Large numbers of people in the UK are protesting against fracking. In pressing ahead with shale development, is the UK Government ignoring these people?

MP: I would say that it’s a small number of very vocal people – it is not necessarily lots of people. And if you have a small number of extremely active, motivated people, they can drown out the quieter – I would say more rational – people who broadly support this development.

I think the sorts of characters you see at the large anti-fracking protests who don’t actually live in the affected areas, but rather travelled to join the demonstration, are in large part the same people who were involved in the Occupy demonstrations in London. And I’m afraid to say that they tend to oppose this kind of progress whenever it goes on.

Of course, they are an important voice to hear. And there is an argument – though I don’t accept it – that we should stop all fossil fuel extraction whatsoever and rely completely on renewables. But as I said earlier, I’m afraid to say that renewables at the moment cannot meet our energy needs, because you cannot turn up the sun or the wind at the right times so their energy can’t supply a reliable base load. Of course we should listen to all parts of the community, but we shouldn’t be blindsided by a very small group of very motivated, noisy people, especially as when it’s explained, when the myths are debunked, you realise that some of the more extreme things you hear from anti-fracking activists are simply incorrect.

JL: Do you think this opposition is fuelled in part by stories that appear in the media?

MP: Yes, but that’s the world we live in. It’s up to the Mayor and others in the Government to make a tempered, rational case for shale gas extraction, and to try and explain why this is – why we know it has real potential to get the country out of a few holes that we blame the former government for getting us into.

JL: Accidents are always possible in the oil and gas industry. What makes you think that fracking is worth the risk?

MP: The US has an excellent safety record for this method of extraction, and I think that our rules in the UK are just as, if not more stringent than those in the US. I would suggest that, while nothing is risk-free, it has been proven that this can be done in a way that should minimise the chance of accidents. There has been no evidence in the US of the water supply being poisoned and the video footage of the tap water going up in flames – well, I think we know that that is scaremongering by that filmmaker. It’s not a rational criticism to make.

JL: Do you believe that the UK could see the same kinds of benefits the US has seen as a result of shale development?

MP: It will be different because we are so plugged into the market, with all the international connections that we have, that it wouldn’t be quite the same as it is in the US and I don’t think anyone’s pretending it could be. The UK is thought to have very large quantities of natural gas, but we are a very densely populated island, meaning there are fewer places to extract it. Although it is worth noting that a fracking pad only requires the space of a cricket pitch, so we’re not talking about the kind of huge footprints that coal mines used to have. And when the extraction is done, the well can be closed without leaving a mess.

But to reiterate, shale development would be a boon to the Treasury, to our industrial base, and it would definitely stabilise energy prices. We’re never going to go back to the energy prices we had 20 years ago, that’s just not going to happen. But securing our own supply of natural gas will stabilise them. And with a combination of fracking and retrofitting buildings for greater energy efficiency, we will be able to ease the load on British families and businesses that have to pay these energy bills, which have gone up pretty quickly over the last 10 years or so. 

Matthew Pencharz Photo Credit: www.london.gov.uk

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