My Lords, in the UK, gas provides around three-quarters of our heating needs and a third of our electricity. However, North Sea gas is declining. By 2025 we expect to be importing close to 70% of the gas we consume. Natural gas from shale could play a crucial role in supporting UK energy security, building on our 50-year history of onshore oil and gas exploitation. I ask noble Lords to bear that in mind when weighing up the amendments we lay before the House today. I know some will, rightly, raise concerns about the impact of shale gas development on our climate goals. I see shale as a part of the transition to a low-carbon economy.
Shale gas has a role to play in this. The carbon footprint of UK-produced shale gas would likely be significantly less than coal and also lower than imported liquefied natural gas. As the Committee on Climate Change said last year, for flexible power supply and for heating and industrial use, the UK will,
“continue to use considerable, albeit declining, amounts of gas well into the 2030s”,
which will leave,
“a considerable gap between production of North Sea gas and our total demand”.
It argues that this demand,
“can either be met through imports or UK production of shale gas”,
and concludes that,
“if anything, using well-regulated UK shale gas to fill this gap could lead to lower overall lifecycle greenhouse gas emissions than continuing to import LNG. It would also increase the proportion of energy produced within the UK, improving our energy sovereignty”.
So the benefit to the UK of using home-grown shale gas is clear. It can displace a proportion of gas and oil imports. We have to face it: North Sea gas production is falling and we are becoming increasingly reliant on gas imports. Domestic shale gas could increase our energy security by cutting those imports. It can benefit the UK in terms of jobs, tax revenues and growth, mitigating some of the falling revenues from the North Sea. Ernst & Young’s recent supply chain report found that industry could support around 64,000 direct and induced jobs. It can support the UK’s transition to a low-carbon economy by helping balance the intermittent supply of renewable energy.
The Government therefore support the development of shale gas and oil. However, it has become clear that difficulties in obtaining underground access pose a barrier to exploring this new industry. The same problem also applies to the deep geothermal industry, which is likewise at an early stage of development in the UK. There is growing interest in the role that geothermal district heating networks could play as part of the transition to low-carbon heating.
Currently, petroleum and deep geothermal energy companies must attempt to negotiate an access agreement with each landowner through whose land activities pass, no matter how deep the works. For new lateral drilling methods which can cover much larger areas underground, existing means of obtaining underground access can be disproportionately costly and time-consuming in relation to the potential benefits. Where a single landowner, or a group of landowners, refuses access, this can create significant delay and in the case of geothermal is likely to stop the project entirely. This is despite the fact that allowing underground access at depths below 300 metres is unlikely to affect the landowners’ use of their land.
These amendments therefore seek to simplify the current process by granting use of land below 300 metres in order to access petroleum and geothermal resources. Let me be crystal clear: we are not proposing any changes to surface access or to the regulatory system that deals with the potential risks associated with drilling and hydraulic fracturing. These regimes will remain the same. The Government have been clear that shale development must be safe and environmentally sound. A company looking to develop shale or geothermal would still need to obtain all the necessary permissions, such as planning and environmental permits. In addition, the onshore oil and gas industry has committed to engage with communities early at each stage of operations, as well as consulting through the planning application process. I reassure noble Lords that there are robust
regulations in place to ensure on-site safety, prevent water contamination, mitigate seismic activity and minimise air emissions, and the Government are not proposing to change them.
The government amendment before the Committee follows a 12-week public consultation on our proposals. The consultation attracted a large number of responses and provided an opportunity for the public to voice their concerns. The majority of respondents included campaign text opposing hydraulic fracturing or the proposed change to underground access legislation but did not specifically address the questions to the consultation. Surveys have shown higher public support. For instance, a recent University of Nottingham survey shows that among people who are aware of shale gas, support is more than 50% and more people support its extraction than oppose it. Support for the consultation proposals among stakeholder organisations that provided detailed responses on specific issues was considerably higher than the individual responses. Stakeholder responses from the petroleum and geothermal industry unanimously supported the legislation, as did wider industry, such as manufacturing, the steel industry and engineering associations. There were diverse views among local authorities and land and farmers’ associations, with a majority of local authorities and consultancies in favour of the proposal. Most public institutions and law societies remained neutral to the proposal, often agreeing with the proposal’s rationale, but raising specific issues. Environmental groups and various civil society organisations opposed legislation. Having carefully considered the various issues raised within the consultation responses and whether any compelling new arguments had been presented, we firmly believe that the proposed policy is the right approach. The full government response has been published on our consultation website.
I will now outline our proposals, as set out in these clauses. The first new clause seeks to introduce a right to use land at least 300 metres below the surface for the purpose of exploiting petroleum or deep geothermal energy. The right is limited to these purposes. For deep geothermal energy, the right to use Scottish deep-level land is limited to cases where the sole, or main, use of that energy is the generation of electricity.
The second new clause provides details on the scope of the right of use, and further clarifies the types of ways in which the right may be exercised and the sorts of purposes for which it may be exercised. This clause includes references to passing substances through or into land at depth and includes leaving substances in that land. This applies only in relation to the use of the land for the purposes of exploiting petroleum or deep geothermal energy, so it would not, for example, create any provision for nuclear waste. It does not replace any of the existing regulatory regime, so an operator will still require all the necessary permissions, like planning and environmental permits. Indeed, this clause also ensures that the provisions grant only a right of use and nothing more, so companies will have to comply with existing regulatory requirements.
The third new clause provides the Secretary of State with a delegated power to require companies, by regulation, to make payments to landowners under
whose land the right is exercised or other persons as defined by the regulation in return for the right of use. The regulation may also introduce a requirement for companies to provide specified information on these payments. The provisions are included only as a reserve power because both industries have made voluntary commitments to make a one-off payment of £20,000 to affected communities for each unique lateral well that extends by more than 200 metres. The key advantage of such a voluntary approach is to enable flexibility on the detailed arrangements. Different sites may require different arrangements depending on their characteristics. However, in case these voluntary payment schemes are not honoured, this clause will ensure that the Secretary of State can through regulation render them mandatory. Any such regulation will be subject to prior consultation.
The fourth new clause provides for a similar delegated power for a notice scheme. As with the payment scheme, the details of a statutory notification scheme would be set out in regulations following consultation. For now, both industries have committed to notifying communities of works taking place at depth, outlining the area of underground land accessed and the payment to be made. At this very early stage in the development of the shale gas, shale oil, and deep geothermal industries, the typical characteristics of a site and the typical timeframe for development are unknown. We cannot with certainty foresee the way in which industries’ activities will develop in different areas across the UK. A voluntary notification scheme is flexible so it can be adapted as the industries develop. The reserve power to create a statutory notification scheme would be applied only in case the voluntary approach proves not to be satisfactory.
The new fifth clause contains supplementary provisions concerning the powers to introduce payment and notice schemes. The clause contains provisions for the enforcement of statutory payment and notice schemes, including financial penalties for companies that breach the requirements. It also permits statutory schemes to confer functions on certain people, including the Secretary of State, such as a duty, or a requirement to consult. A sunsetting provision is included, which provides that the Secretary of State must review the payment and notice scheme provisions after five years and repeal the relevant sections if a power is not exercised within seven years and if the Secretary of State is satisfied there is no convincing case for retaining it. The Delegated Powers and Regulatory Reform Committee has recommended that regulations made by the Secretary of State to repeal these provisions be subject to the affirmative resolution procedure, and we will be looking to table an amendment to this clause before Report to that effect.
The sixth clause contains the relevant definitions and interpretations. Areas that are “onshore” are currently identified by the definition of “landward area” in regulations made under the Petroleum Act 1998. This clause includes a power to make changes to that definition.
Finally, the amendments seek to update Clauses 28 to 31 to reflect the inclusion of the new clauses on the right of use, and set out matters such as when the new clauses will come into force. We have also introduced an amendment to update the title of the Bill.
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It is important to note that the issue of underground access we are proposing to address here will not make any changes to the existing regulatory regimes that govern and manage the potential risks of petroleum, deep geothermal activity and hydraulic fracturing. The proposals also provide wider engagement opportunities for individuals. It is also important to stress that the right of use in these provisions will apply at depths so far below the surface that the right will not have any impact on the landowner’s use of the land. For example, the deepest point of the Channel Tunnel is 75 metres; hydraulic fracturing will typically take place at a depth of 1,500 metres. At the same time, the rights of those affected by the development at the surface will not change.
The clauses we have put forward in the Bill will help us unlock exploration for shale gas and deep geothermal, as we move towards a low-carbon economy. Our robust regulation will protect residents while allowing this source of home-grown energy to develop in a way that is fair to communities. I beg to move.
Amendment 95ZBCA (to Amendment 95ZBC)