New UK Government set to kick-start shale ambitions

Former Prime Minister David Cameron
Former Prime Minister David Cameron

The UK’s new Conservative government could take control of planning decisions to speed up the development of shale gas and prevent investor money from drying up, lawyers say.

The UK is estimated to have enough shale gas trapped below its surface to meet its gas needs for decades.

But deployment of the controversial fracking technology required to release gas trapped in rocks has been slow as planning hurdles and environmental protests have prevented companies from digging in the ground.

Prime Minister David Cameron, facing dwindling resources of North Sea oil and gas, and eyeing the shale boom that has set the United States on the path to energy independence, has promised to go “all out for shale”.

His Conservative party’s decisive election win on May 7 and the appointment of shale supporter Amber Rudd as energy minister indicates the government will now try to speed up exploration.

“I support it because I think we can do it in a way that is safe and secure and is going to continue to support reducing energy prices,” Rudd told her constituents in the town of Hastings, southern England last month.

Only one shale gas well in Britain has been hydraulically fractured — also referred to as fracking. The project near Blackpool, northwest England, was abandoned after it triggered an earth tremor that resulted in an 18-month ban on fracking, which was lifted in 2012.

Since then, only three shale gas fracking applications have been made, two by shale gas explorer Cuadrilla Resources and one by energy company Third Energy.

Obtaining planning permits has been the biggest obstacle to shale gas development.

Cuadrilla’s applications for Britain’s first shale gas wells have been held up for months because local government councillors keep requesting further information.

“Our industry has four different regulators. That takes time and that can be quite difficult,” said Ken Cronin, Chief Executive of the UK Onshore Operators Group, which also represents shale developers.

Energy and planning lawyers recommend the government give shale gas fields the status of a ‘nationally significant infrastructure project’, which would allow Rudd, rather than local councillors, to approve planning permits.

The government is expected to set out its shale gas and other policies in next week’s Queen’s Speech.

“The government supports exploration of this domestic energy resource and it is happening within strong environmental safeguards and with local benefits,” said a spokesman for the energy ministry.

Analysis by the Institute of Directors estimated shale gas production could generate 74,000 jobs and attract investment of 3.7 billion pounds ($5.8 bln) a year at its peak.

Environmental campaigners, however, highlight the risks of groundwater pollution from chemicals used in the process and possible earth tremors triggered by breaking rocks at high pressure.

The previous coalition government led by Cameron was forced to do a U-turn in January and ban fracking in national parks after the opposition Labour party called for tighter controls. Scotland has imposed a moratorium on fracking on environmental concerns.

The new government’s majority in parliament, however, should make it easier to pass legislation in England and Wales.

“There’s going to be less need for fudges, there’s going to be clearer direction,” said Jason Lovell, partner and energy expert at law firm Eversheds.

Rudd could also speed up allocations of onshore oil and gas licences. Results from the latest government tender, including for shale, are months overdue, to the frustration of developers.

“We are at a very crucial point where if the forerunners like IGas IGAS.L and Cuadrilla don’t get through this process soon people will start to lose interest,” said Julie Vaughan, senior associate at law firm Herbert Smith Freehills.