Small business lobby is scathing of Commons fracking report

The Onshore Energy Services Group, a trade association that represents small businesses in the onshore oil and gas supply chain, has reacted angrily to a report published by the House of Commons Environmental Audit Committee, which recommends a fracking moratorium.

The Onshore Energy Services Group says that the report fails to take account of the expert opinions of its members, submitted in written evidence to the committee in December, and draws a number of flawed and inaccurate conclusions.

Lee Petts, interim chief executive at the OESG, said: “We are very disappointed with this report, which appears to ignore crucial expert evidence about the safety and regulation of shale gas and other forms of energy extraction.

“Its timing, and the haste with which the inquiry was undertaken, coupled with conclusions that could almost have been written in advance, all suggest that this is just a fig leaf for an attack intended to torpedo the Infrastructure Bill.

“There can be no justification for a further fracking moratorium. Every aspect of shale gas extraction has been carefully and thoroughly assessed in the last three and a half years, with a range of independent academics and institutions all concluding that it can be undertaken safely. Further delay now will only mean that Britain continues to miss out on the environmental and economic benefits of domestically produced shale gas.

“The future prospects of supply chain SMEs are being put in jeopardy by elected representatives using shale gas as a political football, threatening jobs and deterring investment.”

The group points points out that over 99% of all British businesses are SMEs, and that they employ around 60% of the entire UK workforce, accounting for a significant proportion of the voting public.

But it fears that attempts to undermine so-called ‘big oil’ fail to recognise the knock-on impacts for British SMEs in the supply chain that depend on it for survival, and says that smaller companies are disproportionately impacted by the continuing uncertainties.

The climate case for shale gas

Currently, over half the gas we use in Britain is imported.

These imports are responsible for greenhouse gas emissions as a result of pipeline transmission losses from the continent, and the carbon intensity of supplying Liquefied Natural Gas.

But the Commons report overlooks, and therefore fails to take account of, the pipeline losses associated with bringing in natural gas from Norway, Belgium and the Netherlands, over significant distances and through harsh environments. Shale gas, produced onshore in Britain and much closer to the point of consumption, could significantly avoid these pipeline losses of methane, which is a more potent greenhouse gas than carbon dioxide. These savings need to be considered in any assessment of the impacts of shale gas production on carbon budgets.

The report recognises, but then ignores, the findings of the Intergovernmental Panel on Climate Change, the former Chief Scientist at the Department of Energy and Climate Change, and the Government’s own advisors, the Committee on Climate Change, all of whom have concluded that shale gas production can be consistent with our climate targets.

Wider air quality benefits

In 2013, the charity Health and Environmental Alliance published a report claiming that old-style coal fired power stations in the UK are responsible for 1,600 premature deaths every year, and that health complications lead to 360,000 lost working days – putting additional strain on the health service and employers.

Dr Michal Krzyzanowski, visiting professor at King’s College London and formerly with the European Centre for Environment & Health (ECEH) of the World Health Organisation, said: “The scientific evidence that air pollution causes disease is no longer in doubt. Ambient air pollution is recognised as a leading determinant of health globally and in western Europe – and coal combustion is an important source of this pollution. Energy policy must seriously consider the significant health costs resulting from the use of coal.”

Shale gas, being a much cleaner burning fuel, would be responsible for sizeable cuts in air pollutants linked to ill health, such as small particulate matter and heavy metals, if it were used as a substitute for coal in electricity generation.

The Commons report, whilst considering the local air quality impacts of fracking itself, overlooks the much more significant gains that could be made at the national level.

The current regulatory framework is adequate and fit-for-purpose

The report concludes that there is a “fundamental need for a more coherent and more joined-up regulatory system, and one that needs to be put in place before further fracking activity is contemplated.”

Whilst we accept that UK health, safety and environmental laws can appear disjointed to those that are unfamiliar with them, we believe that the regulations that apply to shale gas extraction are nonetheless in place and adequate. There would be little to gain from the expensive and time consuming process of drafting specific new laws, which we consider would be a wasteful use of taxpayer monies.

However, we agree that there would be some merit in producing guidance for public stakeholders that sets out much more clearly the duties imposed by the regulations, how they are enforced, and the consequences of a failure to comply with them, in order to boost public confidence.

Resourcing fracking regulation

The report appears to express some doubt about the ability of the Environment Agency to effectively regulate shale gas in development and production, citing recent budget and staffing cuts.

However, it fails to take account of the fact that, as a regulated activity, operators must pay to obtain the raft of environmental permits that are required, as well as paying an annual subsistence charge to maintain them. Estimates vary because not every location will require the same number and range of permits, and we do not yet know precisely how many active multi-well sites will be necessary to extract the resource – but permitting income could exceed £13 million over 20 years if 100 pads are developed nationally as predicted by the Institute of Directors in 2013.

The social licence to operate

In discussing the requirement for shale gas developers to acquire the so-called social licence to operate, the report fails to consider the proven advantages that smaller supply chain companies offer when it comes to public acceptance.

According to the Edelman Global Trust Barometer in 2013, 78% of Britons said they trust small companies compared to just 48% that said they trusted big businesses.

Until now, despite performing much of the work, supply chain SMEs have had very little visibility or opportunity to engage with public stakeholders.

The OESG is eager to remedy that, and believes that smaller businesses can have a big role to play in changing public attitudes to shale gas.

A further halt cannot be justified

The report concludes that “A halt is also needed on environmental grounds, and it is essential that further independent studies into the impacts of fracking in the UK are completed to help resolve the environmental risk uncertainties.”

We fundamentally disagree.

Given the amount of independent scrutiny to which shale gas and other forms of onshore energy extraction have already been subjected, it is difficult to see what more could be gained from further study that either hasn’t already been considered or couldn’t be better understood by conducting more exploratory drilling.

And just this week, council officers in Lancashire recommended the refusal of two planning applications for shale gas exploration on the basis of noise and traffic impacts and, but importantly not the long list of health, safety and environmental concerns that have featured so prominently in the debate thus far.

The potential economic benefits should not be shunned

The report queries whether UK shale gas could ever be commercially viable, or scale sufficiently to deliver the identified economic potential of extracting the resource. It also suggests that, even if it does scale successfully, it may take too long to do so in order to deliver the anticipated environmental gains.

Calling for a further and unnecessary moratorium at this moment in time would simply delay progress even further.

Given the UK’s reliance on imported gas, which creates no jobs or inward investment and is responsible for a net cash outflow, it is clearly desirable for Britain to produce its own gas instead, but without further exploration, it won’t be possible to fully determine if this is likely. If it does prove possible to recover the gas in commercial quantities, Ernst & Young predict that the supporting supply chain could one day be responsible for a spend of £33 billion whilst employing over 64,500 people. If the majority of the supply chain functions can be performed by British SMEs, that are more likely to recruit and train new people in order to grow, and that pay taxes in Britain, the economic advantages will be amplified.