To frack or not to frack? The other side of shale gas

Fracking, the large-scale release of carbon-based shale gas, highlights the UK’s commitment to carbon reduction.

David Kilduff, Walker Morris
David Kilduff, Walker Morris

In search of cheaper energy, government policy has developed to support fracking – to counter anxiety about disruption and environmental harm, developers are being encouraged to offer benefits to affected communities. Such benefits typically go beyond anything contemplated in statutory schemes such as the Community Infrastructure Levy or Planning Obligation.

Tensions were highlighted at a recent UK shale gas summit looking at the Government’s planned development of shale gas, but are equally applicable to a range of proposals, including energy from waste facilities, wind turbines and solar. 

Developing a basket of energy sources as the most resilient strategy to fuel the UK’s future energy demand is almost unarguable. It is the level of subsidy where the debate rages and causes issues for project developers, investors and lenders.

In 2012 the Government announced a fresh wave of gas-fired power stations. In reality this was to fill the gap created by the combined failure to bring forward the nuclear programme and renewable energy projects to address the impact of decommissioning ageing coal-fired power stations. The UK will have to import up to 75 per cent of its likely gas consumption requirement in the next 20 years, whereas the norm is that gas is mainly a regional market with typically 80 per cent of it provided within the country (compared to nearer 40 per cent for oil).

This is where shale gas comes into the equation.

In North America, the energy market has been transformed by fracking, with significant reduction in energy costs. 

The UK’s current strategy risks floundering under the impact of localism, particularly where local planning authorities seek to perform their quasi-judicial functions in the application of national and local policies to projects that are consistent with national energy policy. 

Add to this a backcloth, if not backlash, of public opinion and inevitably this finds its outlet in the political context of local government, leading to heightened uncertainty of outcome and delays in the process.

The age of shale gas has arrived, albeit commercial exploitation may be a few years away. Despite the tensions and rhetoric, shale gas affords a real opportunity for developers to work in partnership with local authorities, to find a balance between profit and public responsibility, development and wider economic growth. Authorities need to understand the dynamic of this emerging marketplace to capture the opportunities that exist.

David Kilduff is a partner at Walker Morris