UK Fracking – Picking Up Energy or Still on Go Slow?
On 11 April 2016, the Environment Agency granted the necessary environmental permits to allow the UK-based company Third Energy UK Limited to carry out hydraulic fracturing, or “fracking” as it has become known, for shale gas at the so-called KM8 Well, an existing borehole in North Yorkshire. Despite opposition, the Environment Agency maintains that the decision followed a rigorous assessment of Third Energy’s proposal as well as two public consultations. It states that it feels confident that the environmental permits have the right conditions to ensure that people and the environment are protected.
On the face of it, this would seem like another step forward for fracking. However, obtaining environmental permits is, as those involved know, only a small part of the process in carrying out a successful fracking operation. Third Energy still needs other permissions, including the appropriate planning permission, before it can go ahead.
Despite strong UK Government backing in relation to fracking, there remains a long list of permits and licences required by any company wishing to carry out a fracking operation in the UK. To make matters more difficult, these permits and licences are issued by a number of different regulators. Required consents may include a Petroleum Exploration and Development Licence issued by the Department of Energy and Climate Change (DECC), a coal licence from the Coal Authority, borehole consents from the Department of Health, planning permissions from the Local Authority, groundwater investigation licences, abstraction licences and environmental permits from the Environment Agency, and a Protected Species Licence from Natural England. This is often in addition to struggling to obtain the necessary access rights from landowners in the vicinity of the wells.
There is no doubt that the Government is trying to help the process where possible. For example, the Government has removed hurdles to obtaining access rights from stubborn landowners by introducing a statutory right of underground access to enable shale gas exploration and exploitation. Under the Infrastructure Act 2015, a statutory right to use deep level land for the purpose of exploiting petroleum (which includes shale gas) was introduced in England and Wales from 13 April 2015. This Act prevents landowners who have not agreed to allow drilling access to operators from claiming there was a trespass. The statutory right to access deep level land provides that it must be at a depth of at least 300m below the surface, measured vertically above the point where works take place and within the landward area. Regulations requiring companies to make payments in return for the right of the use to owners or those with interests in land were also provided for.
So once all the permits, access rights and planning permissions have been obtained, what will an operator like Third Energy find? The answer is we don’t know.
Although fracking fever has swept through many European nations, in particular Poland, which has seen more shale exploration than any other country in Europe, there has been limited success so far in achieving any real output. Despite several years of exploratory drilling, there are currently no commercial shale gas wells in Europe. Tests of shale potential across Europe to date have led to slightly disappointing results for operators. Taking Poland as an example, of the 72 wells drilled by the end of 2015, 25 were successfully fracked to release gas. However, these wells yielded only about one-third to one-tenth of the flow that would be required to turn a profit, the Polish University of Science and Technology commented.
In the UK, there is a similar lack of information as to how exploitable any shale gas resources actually are. Some commentators are still hopeful the UK will see a fracking boom like that in the US. Others are more pessimistic; one commentator from Total stated that, given the current cost for shale wells, they were “very, very far in Europe from profitability”. However, the UK is home to some recent attempts to tap shale gas and Third Energy’s success in getting necessary permits may put some vigour back into the shale gas movement. Any new permissions to drill will help to reveal whether the UK shale deposits will yield any shale gas goldmines, but to figure out whether there is potential, companies must potentially drill as many as 50-100 wells which requires significant input. Given some of the predictions of large resources under the Bowland Shale there is still promise in the UK, but currently, fracking in the UK is clearly not moving forward at the pace that the Government and many operators would like.