The UK’s Communities Secretary Sajid Javid recently approved plans for fracking at Cuadrilla’s Preston New Road site at Little Plumpton in Lancashire in what the BBC has called a “landmark decision”. For the first time, after many years of regulatory struggle and public debate, fracking may really start in the UK. Professors Alex Russell and Peter Strachan argue that the plans if they go ahead will result in environmental and economic disaster.
There are distinct similarities between the 1848-1855 gold rush and the recent US frenzied rush to tear apart its shallow shale beds regardless of cost to people and the environment. Greed drives the free world to the strangest activities which are then justified by the buying of scientific ‘objective’ evidence in support of its folly.
Both ‘rushes’ were short lived and mining communities sprang up only to disappear again with the low oil price being the culprit in the case of shale fracking around 2014. True, the US shale industry is fighting a rallying rearguard action to restart large scale production. Unfortunately the US-led shale revolution and its resultant production turf war with OPEC (basically Saudi), which drove down oil prices, has been the single biggest reason for the loss of 120,000 North Sea oil-related jobs.
An alternative and credible explanation for the sustained drop in prices is that the US decided it could live with low oil prices in the short-to-medium term and cooperated with its ally Saudi Arabia to reduce oil prices and thereby attempt to bring oil dependent Russia and Iran to their economic knees for reasons connected with issues in the Ukraine, the Crimea and in Syria. In both scenarios US action has led to UK North Sea job losses.
Even if onshore gas extraction can eventually prove to be economically feasible, the benefits accrued by the Treasury and the few people who will share the spoils, must be balanced against the need to protect the climate and public health
Incredibly, Westminster has been so transfixed by the overhyped so-called special relationship between the UK and the US that rather than saying ‘wait a minute you guys, what the hell are you doing’, they beg for a piece of the shale action. It seems that the UK government is happy to abandon the North Sea to focus their full attention on fracking apart the onshore shale beds of England and Scotland.
Being shallow in depth, fracking involves drilling mile after mile horizontally into the shale and carrying out explosions on the way, then injecting a water driven toxic mixture of sand and chemicals to keep open the pores of the shattered shale beds that have taken nature millions of years to put in place. The prospect of seeing pollution of our aquifer, air pollution from the leakage of methane and benzene from probably 5% of the thousands of wells based on the US experience, the problem of disposal of contaminated sludge, and thousands of journeys by heavy lorries, and earthquakes, is as unedifying as setting up home on Scotland’s Gruinard Island shortly after it was contaminated by biological warfare testing by the British military in 1942.
Little wonder that, from Lancashire in England to Glasgow in Scotland, communities are fiercely disputing the wild claims and railroading tactics of the Tories and shale industry, that fracking will ensure security of gas supply and further be good for the economy and environment. Does anyone really believe that all will be well and any public health risks can be effectively regulated away in such a politically charged business vortex?
To believe that onshore gas will keep the lights on, and our homes warm for decades ahead, is surely living in a dream world. Significant doubts remain over how much of this resource can actually be economically extracted and the US shale fiasco indicates any UK venture would be a short lived and toxic affair.
The financial viability of any reserves found are very much dependent on current and future oil and gas prices. In addition, UK shale gas extraction will be more expensive than that produced in the US and there is a real danger that the industry will require such high levels of public subsidy that it will end up costing taxpayers and consumers dearly.
The likely short-term nature of extractable reserves and the financial viability of them has led all credible energy experts to conclude that UK onshore fracked gas will not lower electricity and heating bills!
Bringing home the bacon?
Sustained lower international oil and gas prices are working against the economics of the UK shale industry.
Significant levels of private finance will be required to build new pipelines and storage facilities, and to buy kit including fracking rigs, haulage and other specialist equipment. But with the ongoing financial problems experienced by the US shale and conventional oil industries resulting in the near catastrophic write down in the value of their reserves, it is likely that neither the UK nor the international banking sector would be willing to provide affordable finance to get the industry started in any big way.
A further problem in the UK is that no skilled supply chain exists, and it will require significant diversification by a range of sectors including: production; engineering; haulage; storage; and, facilities management. This supply chain can be developed but it will take time and add to the operating costs of the industry.
Would Chinese and Japanese consumers be so keen to buy high quality Scots malt whiskey distilled in a fracking contaminated UK, whether or not the distillery was near a fracking play
Significant sums of public money will also need to be invested. New and improved road infrastructure will be required to avoid congestion and accommodate thousands of lorry journeys. Hundreds of journeys are required to transfer the millions of gallons of water required to frack just one pad, and then to remove the byproduct of highly toxic sludge. As existing treatment facilities will not be able to cope, significant amounts of public money will be required to build new ones.
Even if the private and public finance does become available high capital and operating expenditure will reduce the amount of tax take for the Treasury. If any profits are eventually generated they may well be channeled offshore to overseas investors, who are likely to have provided the upfront finance.
There may be some short-term job creation and the use of skilled people from the offshore oil industry, that could boast Pay as You Earn (PAYE) tax take, but these jobs will be subject to volatile gas and oil prices, and are likely to be short lived. In the current downturn in the North Sea, tens of thousands of jobs have already been lost, with many more losses expected in the next two years. Any future onshore industry will not be immune from such employment shocks. Finally, it is also likely that the industry would favor American frackers, and we could see a flood of unemployed shale workers come to the UK, with little net benefit to employment here.
Dishes, drinks and desires fit for the Gods
In the US, fracking has been associated with damaging environmental and public health impacts. There is every likelihood that UK fracking would adversely affect other key industries such as tourism, food and drink. These sensory delightful and desirable sectors are highly dependent on England and Scotland’s reputations for having a beautiful natural environment free of harmful water, land and air pollution. For UK Plc fracking will undoubtedly damage the aforementioned sectors and the brands that they have cultivated over generations. For example, would Chinese and Japanese consumers be so keen to buy high quality Scots malt whiskey distilled in a fracking contaminated UK, whether or not the distillery was near a fracking play?
Does Scotland dare to oppose a Donald Trump- and Theresa May-type view of the (fracking) world? We certainly hope so
Even if onshore gas extraction can eventually prove to be economically feasible, the benefits accrued by the Treasury and the few people who will share the spoils, must be balanced against the need to protect the climate and public health. One major concern here is that opening up new fossil fuel reserves is incompatible with the need to cut global carbon emissions. Burning new fossil fuels will merely lock us in to a fossil-fools future. It will certainly derail our low carbon transition.
Even with a world leading environmental protection agency, the US has seen significant regulatory and permitting failings. These violations have resulted in significant environmental, safety and public health concerns. If one looks to the State of Pennsylvania for example, it provides a clear case of the very destructive effects of onshore shale gas extraction.
I’m all right Jack
In the UK we are told that all will be “ok” and that we have learnt from the US experience and can formulate appropriate regulatory oversight. But if one takes time to reflect on UK environmental and health protection over the past 200 years, it soon becomes clear that it can take years, decades, and sometimes generations, for appropriate safeguards to be formulated and put in place. The activities of the fracking industry are no different and it is delusory to think otherwise.
Westminster, perhaps contaminated with too close ties to the fracking fraternity, seems hell bent on forcing fracking on its disbelieving countryside communities. For a whole raft of cogently argued reasons, Scotland has so far boldly imposed a moratorium on fracking. The world will look and wonder if Scotland has the backbone to continue its principled and indeed economically sound stance. Does Scotland dare to oppose a Donald Trump- and Theresa May-type view of the (fracking) world? We certainly hope so. To do otherwise may be a cause for deep regret.
Professor Alex Russell is Chair of the Oil Industry Finance Association. Peter Strachan (follow me on Twitter @ProfStrachan) is Professor of Energy Policy, Robert Gordon University.