Overviewof Report This report has been prepared by The MSSD for the Secretary of State for Communities and Local Governments. This report will be looking at the effectiveness of the regulatory framework of the fracking industry, it will assess the current framework, evaluating whether the framework is fit for purpose, and if not, propose alternatives considering that a lighter touch to regulation is the approach wanting to be taken. Because we are only at the exploratory phase of drilling in the UK, the main focus will be on pre-drilling regulations.Whatis Fracking?Wewill briefly look at what Fracking is and how it works, and looking at thiswill also allow us to be able to assess the most pressing environmentalconcerns and the controversies surrounding fracking. Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside. Water, sand and chemicals are injected into the rock at high pressure which allows the gas to flow out to the head of the well. The process can be carried out vertically or, more commonly, by drilling horizontally to the rock layer and can create new pathways to release gas or can be used to extend existing channels. The term fracking refers to how the rock is fractured apart by the high-pressure mixture.[1] In the UK, drilling is only at an exploratory phase, however, there are plans for this to intensify as shale gas reserves have been identified across the UK. Impacts and Concerns Having looked at what Fracking is, we willidentify its impacts on the environment and its most pressing concerns. Theextraction of shale gas is a topic that is highly controversial in the UnitedKingdom, this is mainly because of the environmental concerns it raises. One ofthe major concerns is the water usage in the extraction, the volume of waterthat is needed. Vast amounts of water are required for the process and thismust be transported to the fracking sites[2].The water tends to be transported to the sites, which has its own environmentalimpacts, though some sites could use the local water resources and the volumeof water that is required could place a strain on local water resources. Inaddition to the amounts of water, the water is mixed with chemicals, thismixture could escape and could spill or contaminate groundwater in thesurrounding areas. Anotherconcern is that fracking could lead to small earthquakes. This was the case inthe town of Blackpool, where two tremors struck, one registered a magnitude 2.3and the other 1.3. Both tremors occurred near the local drilling site. Thiscaused the operation to suspended, the site operators, Cuadrilla, commissioneda report, which found that Most likely, the repeated seismicity was induced bydirect injection of fluid into the fault zone[3]The report goes on to question whether further earthquakes are to be expectedfrom fracking, it says the earthquakes occurredbecause of a rare combination of circumstances: the fault was already understress, was brittle enough to fracture and had space for large amounts of waterthat could lubricate it. The report says this is unlikely to happen again atthe Preese Hall site.[4]To reduce the risk of earthquakes, it has been proposed that seismic activitymonitoring is introduced around fracking sites. Advantages and Disadvantagesof Fracking The mainadvantages of fracking include, an increase in the production of natural gas,some could argue that this would ease the burden on finite resources such asfossil fuels, fracking would thus diversify our energy supplies. A furtheradvantage is that this is a relatively clean energy source, providingenvironmental benefit. The gas produced emits less carbon per calorie of energyproduced than other fossil fuels. It is easy to inject and it can betransported directly, shale gas requires very little infrastructure investmentbefore it can be injected into the national gas grid, thus proving to be aneconomical benefit. Fracking is also the most natural way to pump gas from theground. An abundant supply of natural gas makes prices relatively cheap toproducers and consumers. The disadvantages of fracking include, Risk of groundwaterpollution, Risk of localised earthquakes (probably not a huge risk whenwell-regulated in the UK), Localised noise and traffic congestion, Loss ofamenities, when fracking wells are sited in areas of natural beauty andnational parks, A high water demand for the process water needed by thefracking technology used, potentially entailing additional stress on watersupplies, Planning blight on local properties, and suffering by thoseunfortunate enough to live near a proposed site for a fracking well. [5]EnvironmentalPolicy Context Fracking also poses wider questions about currentthinking on sustainability and the environment. [6]John Allen writes, the shale revolution has the potential to provide the UKwith local, low cost, clean sources of energy and potential for local energy independence[7]from a sustainable development viewpoint, this makes for positive reading. Iffracking is low cost and a cleaner source of energy, it enables sustainable development.However, looking at the intricacies of fracking, this may not seem the case.For the process to take place, a vast number of resources are needed, and hereyou look at whether fracking, as an industry, is sustainable. The shale gasindustry consumes materials such as water, sand, chemical treatments, drillingfluids, all of which require transport by road and rail. Perhaps one of thebiggest challenges is the use of water, the volume required is vast, and tosustain that, there must be an infrastructure in place and policies in place toensure that whilst providing the water to sites, there is no inconvenience tothe water flow in the local area and if being transported via tank to the site,this must be done in a way where the environment is put first. If we are looking at this from the standpointwhat is best for the environment, surely the question would be, why does thepolicy not encourage the use of no oil and gas in the UK, because this would bethe best policy for the environment. The answer to this would be severalfactors, mainly economical and convenience, the ecosystems we live with and inare so adept to using those resources, that to prohibiting use would mean thatour systems would fail to exist. A middle ground has been established, wherebythe environment is somewhat protected and that human needs are met, and thisneeds to be the case with fracking, whilst there are signs that there arebenefits, economically the policy must promote sustainable development. History shows us that whenever we can extract fossil fuels, short term gain, usually trumps long- term consequence. Much has been made, on both sides of the argument, of the US experience, but fracking has not found universal welcome. France, for instance, is in the process of banning it, and Poland is currently deciding whether to develop the industry, or concentrate on other forms of energy. [8] John Allen If there is regulation and procedures in place to negate the downsides,surely a cleaner alternative is beneficial long term. Regulationof Fracking Now wewill be looking at the regulatory framework that is in place for the industry.This section will be split into three parts: 1) An overview of the regulatoryframework, 2) Assess and analyse the strengths and weaknesses of theframeworks, 3) Consider whether any improvements can be made to the framework,looking at different types of regulation. Overviewof Regulation The Environment Agency (EA) in England and Wales, and ScottishEnvironment Protection Agency (SEPA) are the environmental regulators whomonitor the environmental aspects of shale gas fracking. The key regulationthat governs how shale gas fracking operators comply with environmental laws isthe Environmental Permitting Regulations 2010.[9]Figure 2: https://www.gov.uk/government/publications/about-shale-gas-and-hydraulic-fracturing-fracking/developing-shale-oil-and-gas-in-the-uk#regulation Theframework that surrounds fracking is one that is quite complex. Companieswanting to explore must have permission from a number of regulatory bodiesbefore they can proceed. In order to explore and produce shale gas, operatorsmust pass rigorous health and safety, environmental and planning permissionprocesses.[10]The first stage is obtaining a Petroleum Exploration and Development License,(PEDL), these are issued by the Oil and Gas Authority. The Oil and GasAuthority work closely with other regulatory partners to ensure that theexploration and development is safe and sustainable. [11]A PEDL obligates companies to follow its terms. Key PEDL terms include: conferralof the right to get petroleum, payment of fees in return, parameters of thefield licensed to the operator, obligation to obtain written consent prior todrilling, operators obligation to work the licensed area in accordance withgood oilfield practice and termination and surrender provisions. PEDLS are licenseswhich grant exclusivity to operators in the license area, they do not giveimmediate consent for drilling an exploration well or any other operation. Briefing paperAfter a PEDL has been granted, the operator of the proposedsite must then obtain local planning permission from the Minerals PlanningAuthority, as shale gas operations involve the extraction of minerals. The MPAinvolves local authorities including representatives from districts and countycouncils.[12] Planning applications require the submissionof a standard application form, supported by plans and drawings, certificatesof ownership relating to the application site and design and access statements.An operator must also negotiate access with landowners. A PEDL and planningpermission alone do not give operators consent to conduct theiroperations, access must be secured by the operator, this tends to be through alicense or a lease to be taken that are conditional on the grant ofsatisfactory planning consent. When a decision is made on a planningapplication, only planning matters called material considerations can betaken into account. There is no exhaustive list of what constitutes a materialplanning consideration, although there are some principal issues for consideration,shown in Figure 3 [13]MPAs are screened to determine whether any proposalsrequire an Environmental Impact Assessment (EIA), the Environment Protection Agency an EIA describe thisas the process by which the anticipatedeffects on the environment of a proposed development or project aremeasured. If the likely effects are unacceptable, design measures or otherrelevant mitigation measures can be taken to reduce or avoid those effects.[14]This, however, is a contentious issue, as its not clear whether operators areobliged to conduct and EIA and submit an environmental statement under the EUsEIA Directive[15]to accompany their application. Under the EU law, all projects require anenvironmental statement, though those under Annex 2 require a case-by-caseexamination, and considering certain criteria, it is determined that such aproject is likely to have significant effects on the environment. Even if anEIA is not required, environmental and health impacts can be addresses throughthe conditions of planning permission. Mineral Planning Authorities areresponsible for ensuring operators comply with these conditions. The MPA, in determining an application, will consider theadvice of a variety of statutory consultees with regards to the protection ofthe environment and the public. Local planning conditions can address theaesthetic impacts, as well as contributions to local noise, traffic and airpollution. The density of local population may be considered in the localplanning permission process. There will also be conditions for when operationsfinish, the operator would be responsible for safe abandonment of the well andfor restoring the well-site to its previous state or a suitable condition forre-use. The authority which granted permission would require suitablerestoration as a condition of the planning permission. [16]The next part of the regulatory process is that operatorswill probably require a number of environmental permits issued by theEnvironment Agency under the Environmental Permitting (England and Wales)Regulations to conduct onshore activities. The environment agency takes a risk-basedapproach to regulating, thus the regulation of each site is bespoke to thatsite, as the they take into account local site characteristics and sitespecific environmental risks. The Environment Agency ensuresthat any shale gas operations are conducted in a way that protects people andthe environment. The Environment Agencys environmental permitting regulationscover: protectingwater resources, including groundwater (aquifers) as well as assessing andapproving the use of chemicals which form part of the hydraulic fracturingfluid, appropriate treatment and disposal of mining waste produced during theborehole drilling and hydraulic fracturing process, suitable treatment andmanagement of any naturally occurring radioactive materials (NORM) and disposalof waste gases through flaring.[17] With regards to water, if operators arewishing to abstract more than 20 cubic meters per day for operational purposes,they will need to obtain a water abstraction license under section 24/24A ofthe Water Resources Act 1991[18]The licenses are issues by the Environment Agency. A factor to bear in mindhere is the Environment Agency make it clear that water availability at site isnot guaranteed, this links back to the planning permission stage, as if theoperators are unable to have a pipeline, they will have to transport the waterto the site, which is expensive, but also, with regards to the environment,transporting tanks of water would be something they would have to consider. Another element to be considered is the element ofinduced seismicity. The MPAs should consult the British Geological Survey(BGS) to advise on induced seismicity and help to identify suitable locationsfor well, drawing on a national and site-specific understanding of geology. [19]Under s.23 of the Mining Industry Act 1926[20]firm sinking boreholes greater than 100ft (30m) deep must give writtennotification to the Natural Environmental Research Council. Operators are underseveral other continuing obligations, such as keeping records of theiroperations and retain specimen cores. Oncethe above has been completed, the operator must notify the Health and Safety Executiveat least of 21 days in advance of any drilling operations, The Borehile andOperations Regulations 1995[21]require this. A coordinated regulatory effort is required to ensure that shalegas wells are designed, constructed and operated to standards that protect bothpeople and the environment, it must be noted that it only protects those inproximity of sites. HSE monitors shale gas operationsfrom a well integrity and site safety perspective. We oversee that safe workingpractices are adopted by onshore operators as required under the Health andSafety at Work Etc. Act 1974, and regulations made under the Act. Thesespecifically are: The Borehole Site and Operations Regulations 1995 (BSOR) appliesto shale gas operations. (These regulations are primarilyconcerned with the health and safety management of the site). The Offshore Installations and Wells(Design and Construction, etc.) Regulations 1996 (DCR)[22] apply to all wellsdrilled with a view to the extraction of petroleum regardless of whether theyare onshore or offshore. (These regulations are primarilyconcerned with well integrity). HSE works closely with the Environment Agency(EA) and the Department of Energy and Climate Change (DECC) to share relevantinformation on such activities and to ensure that there are no material gapsbetween the safety, environmental protection and planning authorisationconsiderations, and that all material concerns are addressed. [23]Drilling operations must not be commenced unless a health and safety policy isprepared which demonstrates that adequate measure will be taken to safeguardthe health and safety of the persons on the site. Oncethe HSE step is completed, we arrive at one of the final steps in the regulatoryprocess. This is the Oil and Gas Authorities consent to drill. Operators areobliged to seek the OGAs written consent prior to the start of drillingoperations. OGA consent is one of the final, and coordinating consents in theshale gas process. In considering whether to issue consent to drill, the OGAwill have regard to the suite of regulatory controls discussed above, includingensuring that planning permission is in place, environmental permits and consentshave been obtained, and that the HSE has received notice of intention to drill.Planningpermission is one of the approvals required before any activity may start on asite. The planning authority decides whether the activity is acceptable at thatparticular location, after local communities and other interested people havehad the opportunity to set out their view on the benefits and impacts of theproposal. On receipt of OGAs consent to drill, andsubject to the finalisation of a hydraulic fracturing plan and agreed methodfor monitoring induced seismicity (where fracking is going to be conducted), anoperator has in place the requisite consents and may continue its operations.This concludes the pre-drillingregulatory framework, there is a duty in place whilst drilling takes place, andas mentioned, conditions are set out for after the drilling process has beencompleted. Strengths and Weaknesses One of the main strengths with theframework presented above, in my opinion, is that the process to start drillingis so rigorous. There are many steps an operator must take in order to startdrilling, this has a lot of cost and time investment necessary, so theserigorous checks and procedures ensure that the operator is competent andensuring the environmental protection necessary to offset any negative impactsof fracking in the main. Another strength with the framework isthe fact that a condition of granting permission to drill, there must be plansin place on how the site will be restored to ensure that it becomes usable landagain, showing that the regulation is offering a protection measure. However, it could be argued that thereare more weaknesses with the regulation. One of the majorones that comes across with the regulation framework provided above, is oneconcerning Environmental Impact Assessments (EIA). An operator may have tocarry out an EIA, if the MPA deem necessary when screening the proposalpresented, however, there is no obligation to do so, it only has to happenshould the MPA feel it is a necessity in this case. There isnt a one size all fits approachhere, its bespoke. Environmental Risk Assessment (ERA) hasbecome best practice in non-shale gas industries[24],however like the EIA, an ERA is not mandatory, an ERA, unlike an EIA wouldassess not only the impacts of hazards, but also their likelihood. In theirreport, the Royal Society recommended[25], thatto manage environmental risks, an Environmental Risk Assessment should bemandatory for all shale gas operations, involving the participation of localcommunities at the earliest possible opportunity. I would agree with thisstatement, an EIA and ERA should be a mandatory step, for all potentialoperators and cases of fracking, not just some, it should be a universalrequirement when applying to drill for shale gas. In her Article, Emily Gosden writesthat the Fracking Regulations may inadequate, with regards to climate change[26]. Fromthe regulation mentioned above, it does not tackle issues such as climatechange in much depth, whilst it looks at environmental factors, it seems thatthis isnt the most pressing matter on the agenda. The article reports thatBritains fracking regulations may be inadequate to prevent environmentallydamaging methane leaks, and that the current regulatory regime fell short ofthe minimum necessary standards. [27] Prof JimSkea, one of the reports authors, said that the law instead gave quite a lotof discretion to the Environment Agency (EA) over what monitoring it wouldrequire of future shale gas production. Here, I would agree, the EA can oftenbe quite vague when it comes to these matters, an example mentioned above wouldbe the water abstraction licenses requirement, the EA are very vague when itcomes to a definitive answer. This could be something that could be further considered.Another weakness in my opinion is that thecurrent framework at present, isnt very environment focused, and even if itis, a lot of the environmental factors arent factors that are mandatory foroperators or regulators to take into account, as already mentioned, the EIA notbeing mandatory is one part. The regulation does not look at in enough detailissues such as climate change, air pollution, water pollution, and other meansof contamination, these factors should be of more importance when coming toregulate the shale gas industry, yes, they may be considered, but even that atbest is brief. Alternate Proposals The current framework that has been looked at inthis report can be seen to be rigorous in the main, there are a number of stepsan operator must take before being able to start the process. The currentframework could be seen as being on the heavier side of regulation, and inthe brief, a theory was posited that there be a lighter touch on regulation, inthis section, we will look at whether this can be the case, and if so, how canit be the case. With regards to regulation, there are twoapproaches that can be taken. There is Direct Regulation, which can often bereferred to as the command and control regime, this is where standards areset, as are penalties for failing to meet them, there are often several ways ofdrafting direct regulation. [28] Theother approach is Indirect Regulation. Whereas direct regulations focus on thepolluting activity itself, indirect regulation tends to centre on economicinstruments, the effect of which will be to impose higher burdens on higherpolluters, there is also self-regulating, whereby you can apply methods such asvoluntary environmental agreements and codes of conducts to regulate. Thesesystems tend to have vague standards and are flexible and non-interventionistin their nature.We will look at whether we stay with acommand and control approach adopted, or would a self-regulating approach bemore effective in this situation. Before we start that, we will briefly look atwhether the current framework we have looked at is effective in its purpose,however looking at the effectiveness of the framework is an area where onestruggles as in the UK, we are not at the stages where there is mass productionof shale gas, we are merely at the early exploratory stages of the process. Theonly real working example is the Cuadrilla site as mentioned at the start ofthis report. Though some regulation, such as the induced seismicity wasintroduced because of that site. Self-regulating such an industry seemsimpractical considering the disadvantages mentioned earlier in the report. SimonSneddon writes that this method of regulation is more flexible than thetraditional command and control methods, and this method is non-interventionistin nature and that these methods are criticised for having vague standards andfor being unaccountable, and there is no realistic enforcement system. This, asa regulation method would not work with an industry such as fracking. Anindustry where there are many impacts both environmental and economic and assuch a framework of command and control would be better suited, there is a setof rules, or steps put in place and there are penalties and fines for operatorsshould they fail to abide. This is very similar to the current framework inplace. The risks that fracking entails, it would be a uncertain approach tohave a light touch to regulation. However, when there is more data to analyseonce further fracking takes place, it may be the case that we could adopt a self-regulatingframework or one that is lighter than the one in place, but until then, thecurrent command and control framework is one that is effective and sufficientfor use. Conclusion The regulation in place at present is severalsteps that an operator must take before they are able to drill for shale gas.The procedure is one that is described as rigorous and upon evaluation thisseems to be the case, though as mentioned when looking at alternatives, thereis no way of knowing how effective the regulation is in the UK, until there aremore working examples of fracking. [i][1] Bbccouk, What is fracking and why is itcontroversial? (BBC News, 16 December 2015)
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