Speech

Government’s vision for shale gas in securing home grown energy supplies for the UK

Andrea Leadsom's speech at the Shale World UK 2016 conference in London

Introduction

Shale is a fantastic opportunity for the UK. It will create a significant number of local jobs meaning financial security for hard working people and their families, boost our economy and strengthen our energy security. But let me be clear, safety is absolutely my priority.

The UK’s regulations are some of the strongest in the world, and with over 50 years of successful and safe onshore and offshore oil and gas extraction; I am confident that the protections in place for the environment and for people are totally rigorous.

Shale will only ever be developed in a safe way – for people and the environment – and will only take place in appropriate locations.

A few months ago, I visited a conventional gas drilling site in the countryside which, while not a fracking site, was very similar to how one would look in the future.

I talked at length to local residents to find out what they thought about the site. They told me that while they had concerns when the site was proposed, in reality it was “practically invisible” and very quiet. Having visited the site I saw this for myself.

You could walk along a nearby pathway and have no idea that this site was even there. The drill heads were only six feet high, very quiet and the entire site, which is gravelled, was only about the size of two football pitches.

This site was welcomed by the local community because it was providing real benefits.

As well as being a reliable site of home-grown gas for the UK; it was also providing skilled, long term jobs for local individuals – helping to boost economic growth and local investment.

This gas site, while conventional, clearly illustrated the benefits a shale industry can bring to the UK in the future.

Need for Gas

Gas currently accounts for over 60% of household energy use. We use gas in our homes for heating and cooking, and it’s also used in factories up and down the country to produce products like soaps, paints and textiles for clothes, as well as the plastics found everywhere from our mobile phones and computers to sterile medical equipment.

The choice the UK faces is not whether we want gas or don’t want gas. The choice we face is how much we want to rely on gas from abroad – some of which may or may not be reliable. Or whether we would prefer to extract more from the UK.

Need for Shale

Energy Security

Britain used to produce so much gas that we sold it to other countries. But today we are forced to import much of what we need, and that share will continue to rise unless we make the most of our home-grown energy supplies.

Our energy security is absolutely vital.

But it is also vital that our energy supply is safe, low cost and low carbon.

Low Carbon Bridge

The UK is currently dependent on coal for around 30% of our electricity needs. This is unsustainable if we want to move to a lower carbon world. We are therefore making a significant move away from coal in the coming years, aiming to remove it entirely from the mix by 2025.

We will have to replace this energy capacity with lower carbon sources.

Gas is the cleanest fossil fuel and shale gas can provide an effective “low Carbon Bridge” while we move to renewable energy.

Jobs and Growth

As a home grown energy source, shale gas will also provide a significant opportunity to create jobs in communities across Britain.

Ernst & Young has estimated a thriving shale industry could mean 64,500 jobs nationally, with more than 6,000 highly skilled jobs on shale gas pads themselves.

But we are not just talking about jobs for geologists, drilling specialists and chemical engineers.

We are talking about jobs for construction workers, truck drivers, water treatment experts, and people working in local retail and service industries.

Jobs that will make a real difference to local areas and provide new opportunities for communities.

It is clear to me that the UK’s shale resources have the potential to bolster our energy security, create jobs and provide a bridge to a greener future. But to do this, two things are critical.

Pre-requisites to a successful industry

Safety

Firstly – safety. This must always be – and will always be – absolutely paramount.

The UK has decades of experience in safely regulating oil and gas exploration and we are bringing this experience to bear on shale. We have world-class independent regulators who will not allow any operations which are dangerous to local communities or the environment.

The Environment Agency will not grant operators a permit if the risks to the environment or groundwater are unacceptable. They will impose strict conditions to make sure there is proper protection of the environment, and to prohibit all activities which pose unacceptable risks.

The Health and Safety Executive will make sure operations are safe – they will scrutinise well design and monitor its progress to make sure the operators manages risks effectively throughout the whole life cycle of operations.

And now, through the Infrastructure Act, we are putting in place a range of further measures to provide the public with confidence that this industry is being taken forward in a balanced way, including measures on protected areas, environmental impact assessments and groundwater monitoring.

Government has taken clear action to protect our most valuable areas.

We have passed regulations to ensure that hydraulic fracturing cannot take place within 1,200 metres beneath the surface of National Parks, the Broads, Areas of Outstanding Natural Beauty, World Heritage Sites and areas that are most vulnerable to groundwater pollution.
We are also committed to ensuring that hydraulic fracturing cannot be conducted from wells that are drilled at the surface of our most valuable areas, and have formally consulted with industry on how best to implement this commitment.

Strong controls are also in place to mitigate seismic risks. Operators must monitor seismic activity – in real time – before, during and after operations. If a tremor of magnitude 0.5 is detected (which is similar to a door slamming) all operations will halt.

I would like to stress that we have a very strong regulatory regime in place for exploratory activities and we will look to continuously improve it as the industry develops.

I urge industry, academia, local authorities and NGOs to continue to work with us to develop world class protections that will make sure that shale is developed safely.

Public Engagement

But having a world class regulatory regime is not enough.

We need to challenge the misinformation about the industry which is being spread, and clearly explain that shale exploration will always be conducted safely.

Therefore the second critical factor in developing a successful UK shale industry is public engagement.

The public need to receive objective and scientific information which explains how fracking occurs, how it is being regulated, and what it means for them. There is a role for everyone here today in providing this information.

Government needs to provide scientific and objective information to the general public, which will inform the debate and allow individuals to form evidence-based views on shale. We are working hard to do this, regularly attending public meetings across the country to better understand local issues and where additional information would be helpful.

Industry needs to engage early and often with local communities, answering questions and providing reassurance. I am therefore very pleased to hear that the industry body, UKOOG, has established a Community Engagement Charter where operators will engage local communities, residents and other stakeholders at each of three stages – exploration, appraisal and production. This is additional to the public consultation which is required through the planning application.

Regulatory bodies need to continue to clearly explain the strong regulations which have been set up to make sure that the industry is developed in a safe way – for people and for the environment. I am pleased to hear that the major regulatory bodies have been visiting communities where shale applications have been lodged, and have been working with local authorities and industry to better communicate the regulatory regime.

Local communities are at the heart of the developing shale gas operations which will bring benefits for the whole nation.

We must all continue to engage with the general public about the actions we are taking to enable shale development, and to challenge the myths and misconceptions about shale.

What we’ve done

But this Government isn’t just talking about shale gas. We are taking action to make sure that the industry has the right conditions to succeed.

Planning

With the potential for shale gas to support our energy security and to help create jobs and growth, the Government is understandably keen to press ahead and get exploration underway so that we can determine how much shale gas there is and how much we may be to use.

Doing this requires close partnership working between planning authorities, the industry, regulators and local communities.

In August 2015 my Department and the Department for Communities and Local Government issued a joint policy statement stating that planning authorities should deal with applications for shale within the statutory time-frame of 16 weeks or risk being identified as underperforming.

The Communities Secretary will actively consider calling in applications to make a decision if the local council does not do it within the timeframe, and all appeals for shale development will be prioritised and dealt with as quickly as possible.

We need to tackle the issue of extensive planning delays head on if we are to reap the benefits which shale gas offers to our energy security, jobs and wider economy.

And firms that want to explore for shale need to be confident that their applications will be processed in a timely way and examined purely on a planning basis.

The new measures we’ve introduced will help make this happen. We are addressing a problem that causes unnecessary delays and benefits no-one.

This does not change the processes that a shale application has to go through. There will still need to be strict environmental and health assessments. This is just about speeding up the initial stage.

All this is on top of measures already in place to make sure that the UK has the most competitive tax regime in Europe for shale gas.

Operators or potential operators have the regulatory and fiscal environment they need to enable developments.

Community benefits & Shale Wealth Fund

But while we make sure the shale industry has the tools it needs, we must also make sure that those that most affected by shale gas activities see benefits too.

We strongly believe that communities hosting shale gas developments should share in the financial returns they generate.

The Government welcomes the shale gas companies’ commitment to make set payments to these communities, which could be worth £5-10m for a typical 10-well site, and we want to go further.

As announced by the Chancellor in the 2014 Autumn Statement, we are determined to make sure that local communities share more of the proceeds and feel more of the benefits, using a proportion of the tax revenues that are recouped from shale gas production.

We will running a consultation later in the year on how this Shale Wealth Fund will be designed.

And don’t forget that councils will also be able to retain 100% of the business rates – doubling the 50% rate retention previously allowed – which could be worth up to £1.7m a year for a typical 12 well site. It will be directly funded by central Government.

Current status

We know the shale industry is eager to press forward and the Government shares this desire for action.

A clear demonstration of this enthusiasm can be seen in the results of the 14th Onshore Oil and Gas Licensing Round, where the Oil & Gas Authority announced that 159 onshore blocks, incorporated into 93 licenses were being formally offered to successful applicants.

Around 75% of those 159 blocks offered relate to unconventional shale oil or gas.

This is in addition to a number of companies which have existing licences in place and are in the process of seeking permissions to drill exploratory wells.

Some 7,300 square miles of Great Britain is already under licence, including significant areas likely to contain shale.

Conclusion

To conclude, home-grown gas can secure our energy future in a time when our traditional sources are in declince and we are seeking to move away from expensive foreign imports.

It can provide jobs for our people and tax revenues for our society.

And it can help the UK to decarbonise while we move away from coal to lower-carbon energy sources.

Secure energy.

Economic growth and job creation.

A bridge to a greener future.

Unlocking the shale gas deep underground is too big an opportunity to pass up. It must be done safely and securely, but we can’t throw that opportunity away.

Thank you very much.