Although drilling for shale gas in the UK is only in its exploratory phase, the British government is aggressively pursuing shale gas and oil development. While the UK still has not achieved commercial levels of shale production, multiple studies indicate that the country’s shale basins contain substantial volumes of recoverable reserves. For example, a report published in 2012 by the UK’s Department of Energy and Climate Change (DECC) observed that, by analogy with comparable shale gas plays in America, the UK’s recoverable shale reserves could be as large as 150 billion cubic meters (bcm) (or 5.3 trillion cubic feet (tcf)). By comparison, DECC estimated that the undiscovered conventional onshore gas resources in the UK are between 2–6 bcm.
The UK has two major onshore shale gas formations (each comprised of a number of basins):
- The Northern Petroleum System – includes isolated structural basins and troughs stretching across northern England and southern Scotland. These formations contain organic-rich shale formations of Carboniferous age. The Bowland Shale is particularly noteworthy, as it has been the focus of the small amount of exploration drilling that has occurred to date.
- The Southern Petroleum System – includes the Wessex and Weald basins in southern England, which extend from central England to the English Channel. These basins contain Jurassic-age, oil-prone shale. Also encouraging for the country’s nascent shale industry is the government’s desire to achieve a more self-sufficient energy sector and to reduce the country’s reliance on dwindling oil and gas reserves in the North Sea.
DECC's report entitled "The Unconventional Hydrocarbon Resources of Britain's Onshore Basins - Shale Gas" (August 2011)
Despite the government’s outspoken support, the industry has not gained as much momentum in the past few years as its proponents may have wished. First, hydraulic fracturing remains controversial. Scotland, for example, announced a temporary moratorium on shale gas extraction in January 2015, and in June 2016 the Scottish parliament voted in favor of a ban. Opposition to fracking is also present in the remainder of the Kingdom, with prominent members of the Labour Party continuing to call for a UK-wide moratorium or, failing that, stricter regulations. Second, some experts contend that there will not be significant shale gas production until the early 2020s, in part because of the current status of exploration. Indeed, commentators report that progress on exploration remains slow, noting that only 11 new exploratory wells for shale gas were due in 2015.
Still, there is cause for optimism for the future of the UK shale gas industry. A move for a UK-wide moratorium was defeated in January 2015 (though the pro-fracking government was forced to accept certain proposals to tighten environmental regulations on fracking), and, in December 2015, an independent Task Force on Shale Gas published a report concluding that exploratory drilling in the UK should begin in earnest. Moreover, the Oil and Gas Authority held the 14th round of onshore licensing in December 2015, awarding 159 new “blocks” under 93 licenses. Given that 75% of these blocks are reported to be shale related, this suggests that exploration will forge ahead despite controversy. Finally, Prime Minister Theresa May’s new government appears poised to continue the UK government’s support of the shale industry. For example, in August 2016, May proposed a plan whereby a new Shale Wealth Fund would route a portion of tax revenues derived from shale exploration in their area directly to households.
Statutory and Regulatory Framework
Even though industry has expressed great interest in developing the UK’s shale gas industry, some portions of the British public have expressed strong reservations about the environmental and health and safety impacts of shale operations. Environmental concerns over the exploration of shale gas became prominent in the UK following allegations that the hydraulic fracturing activities caused two minor earthquakes registering 1.5 and 2.3 magnitude on the Richter scale in April-May 2011 near its well site in the Northern Petroleum System.
As a result of the earthquakes, the government halted shale operations in the UK from May 2011 until December 2012. During this moratorium, the Royal Society and Royal Academy of Engineering studied the risks associated with hydraulic fracturing, and published a 2012 study concluding that such risks can be effectively managed through enforced operational best practices. The study recommended new regulations for groundwater monitoring, well integrity, and seismic surveys near shale gas wells. After considering these recommendations and input from other groups, DECC crafted a new regulatory regime for shale development. Beginning in December 2012, UK shale gas operators were required to evaluate potential seismic hazards posed by hydraulic fracturing, implement seismic monitoring of each well site area, and propose steps to reduce the likelihood of future earthquakes caused by hydraulic fracturing.
Companies must receive a Petroleum Exploration and Development License (PEDL) from the UK government in order to explore and develop shale gas and other petroleum resources. Field development requires the consent of both the national and local governments. Until April 2015, DECC was the licensing authority for the UK; this task now falls to the Oil and Gas Authority. In the most recent Onshore Oil and Gas Licensing Round held in December 2015, the British Government awarded 93 onshore petroleum licenses to explore 159 “blocks” of land. However, shale gas projects in the UK are still in the early stages of exploration and commentators predict that drilling will not begin soon given the onerous planning process.
Though not explicitly mentioned in the legislation, shale gas is governed by existing UK legislation relating to the exploration and production of petroleum resources—namely the UK Petroleum Act 1998. For example, the Infrastructure Act 2015 amended the Petroleum Act 1998 to establish additional safeguards for hydraulic fracturing activities in England. The Act places restrictions on hydraulic fracturing that occurs less than 1000 meters below ground and more stringent controls on hydraulic fracturing that occurs more than 1000 meters below ground. Additionally, the Secretary of State may only issue a consent to drill a well covered by an onshore license if that consent:
- generally prohibits hydraulic fracturing at a depth of less than 1000 meters; and
- requires a hydraulic fracturing consent activities at a depth of 1000 meters or more (known as a “Hydraulic Fracturing Consent”).
Before the Secretary of State may issue a Hydraulic Fracturing Consent:
- an environmental impact assessment must be carried out;
- independent inspection of the well’s integrity must be made;
- methane levels in groundwater must be monitored in the period of 12 months prior to hydraulic fracturing;
- methane emissions into the air must be monitored for the period of the permit;
- the area must not be within a “protected groundwater area” and “other protected areas” (these terms were later defined by regulation issued in March 2016);
- the substances to be used in hydraulic fracturing operations must be approved by the relevant environmental regulator (the UK Environment Agency, for wells situated in England, or the Natural Sources Body for Wales, for those in Wales).
As noted above, the terms “protected groundwater area” and “other protected areas” were defined by regulations that were approved by Parliament in March 2016. Under the new regulations, “protected areas” are defined to include land up to 1200 meters in depth in national parks, areas of outstanding beauty, and world heritage sites.
Prior to commencing any drilling operations, licensees must also notify the UK’s Environmental Agency, which will advise the licensee on the permit requirements for the activities being proposed. Environmental permit regulations cover, among other things, the protection of water resources, the approval of the use of chemicals in hydraulic fracturing fluid, waste treatment and disposal, management of any naturally occurring radioactive materials, and flaring activities.
At least 21 days prior to drilling operations, operators must also notify the UK Health and Safety Executive, who will examine well design and confirm whether the proposed drilling operations pose any risks to health and safety.