Utility Week

UTILITY Week 27th May 2016

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UTILITY WEEK | 27TH MAY - 2ND JUNE 2016 | 17 Policy & Regulation Market view O n the 6 April 2016, section 50 part 6 Chapter 7 of the Infrastructure Act 2015 came into effect. It introduced amendments to the Petroleum Act 1998 con- cerning when and how the energy secretary can issue a well consent and a hydraulic fracturing consent, which are just two of the many consents required in relation to the exploration and production of shale gas from fracking. Subsequently, there have been accusa- tions, mostly based on research by professor Haszeldine of Edinburgh university, that the legislation introduces loopholes in the safety controls that apply to fracking operations in the UK. A well consent relates to the location of the proposed fracking operations. A hydrau- lic fracturing consent relates to the actual fracking activity. The loophole is said to exist because a hydraulic fracturing consent is required only if the volumes of fluid to be injected will exceed more than 1,000 cubic metres of fluid at each stage or expected stage or more than 10,000 cubic metres of fluid in total. This is a reference to the fluid that is pumped into the ground in order to fracture the well and release gas. Aer undertaking some studies in the US, professor Haszeldine suggested that many wells in the US were fracked using volumes of fluid that fall below these thresholds. His study of more than 17,000 wells fracked between 2000-10 showed that 43 per cent of those wells would not have required a hydraulic fracturing consent. It is technically correct to say that if the amounts of fluid to be used fall below the thresholds, then consents might not be required for fracking operations, but it is unlikely to be used or exploited by opera- tors in the UK. And even if they did choose to adopt this approach, the associated risks are likely to be minimal because of the addi- tional protection provided by the other con- sents an operator is required to obtain. At the outset of fracking operations, it is doubtful an operator would be able to pre- cisely determine the volumes of fluid to be used. In light of all the time and expense involved in establishing a fracking opera- tion, it is unlikely that an operator would not seek a hydraulic fracturing consent because of the risk this would pose to the operations. An operator does not want to get to the point of having used 999 cubic metres of fluid and then have to stop while an application is processed. Further, the information required for a hydraulic fracturing consent will have been gathered by an operator in obtaining the other consents required, and so it is more of an administrative step – one introduced by the government to give the public con- fidence that fracking operations could not begin until the required suite of consents is in place. Planning permission is required Fracking loopholes? Media reports of loopholes in the consents regime for fracking are unfounded, says Simon Colvin. In practice, safety is paramount for the government and for those trying to sink wells. alongside consents and approvals from the Environment Agency and the Health & Safety Executive. In addition, it is worth remembering the level of public scrutiny of fracking opera- tions in the UK. It is unlikely an operator would want to expose itself to public criti- cism by not seeking a hydraulic fractur- ing consent. Even if an operator was brave enough to take such an approach, it should be noted that a wide range of other consents required would be in place. The key consideration at the moment in relation to the growth of the shale gas indus- try in the UK is the global oil price. While this remains low, the economics of frack- ing do not add up. The global price of oil is expected to rebound in the future and when that happens it is highly likely that we will see the rapid growth of the fracking industry in the UK. For now, Middle Eastern countries continue to keep the production of oil high in order to keep global oil prices down in an effort to harm the US shale gas industry and to limit the global growth of shale. While all this is going on, what we have seen in the UK are moves by the government to align the consenting regime for fracking operations with significant developments taking place in the past five years. We have a consenting jigsaw puzzle that many believe is nearly fit for purpose. The last piece of that jigsaw, which does not quite fit at the moment, is the role of Mineral Planning Authorities (MPAs) in granting planning per- mission for fracking operations. The Cuadrilla example in Lancashire has demonstrated that in fact fracking is oen such a contentious issue that MPA's find it hard to act impartially. The government has called in the Cuadrilla application and appeal. Many believe we will see moves to include fracking operations in the Nation- ally Significant Infrastructure Project regime. That would mean the decision being taken out of the hands of local MPAs and passed to the secretary of state. Such a change is surely in the pipeline within the next year or two. Simon Colvin, partner and national head of environment team, Weightmans LLP UK OIL AND GAS EXPLORATION LICENCES (NEW LICENCES AWARDED IN DECEMBER 2015) Source: Oil and Gas Authority Barrow in Furness York Skegness Sheffield Bolton Bournemouth New licences Current licences Horsham

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