Official Report: Minutes of Evidence
Committee for the Economy, meeting on Wednesday, 9 March 2022
Members present for all or part of the proceedings:Dr Caoimhe Archibald (Chairperson)
Mr Matthew O'Toole (Deputy Chairperson)
Mr Keith Buchanan
Mr Stewart Dickson
Mr Stephen Dunne
Mr John O'Dowd
Ms Claire Sugden
Mr Peter Weir
Witnesses:Mr Aidan Stennett, Northern Ireland Assembly
Onshore Fracking (Prohibition) Bill: RaISe Briefing
The Chairperson (Dr Archibald): We will now receive a briefing on the Onshore Fracking (Prohibition) Bill. I welcome Aidan Stennett, who is a research officer in the Research and Information Service (RaISe). I will hand over to Aidan to make an opening statement and then bring members in for questions.
Mr Aidan Stennett (Northern Ireland Assembly): Thank you, Chair. Can everybody hear me?
The Committee Clerk: Yes.
Mr Stennett: Great. I have a quick presentation to make to you. As you mentioned, Chair, I will talk to the Committee about the Onshore Fracking (Prohibition) Bill, which is before the Committee at the moment. I will cover some background, essentially setting out where the various jurisdictions in the UK and Republic of Ireland are with regard to hydraulic fracturing. I will look at what the Bill proposes in its one substantive clause and set out some considerations that arise from that clause that the Committee may want to think about. I will then look at some of the broader considerations that could arise from the Bill's desire to prohibit hydraulic fracturing in Northern Ireland.
First, I will give you a quick tour of where hydraulic fracturing is in the UK and the Republic of Ireland. In Northern Ireland, since 2011, there has been a presumption against planning permission for developments that seek to exploit unconventional hydrocarbons. Interestingly, that is a presumption against hydrocarbon exploitation in general rather than hydraulic fracturing in particular.
In England, following studies by the UK Oil and Gas Authority on the risk of seismic activity from hydraulic fracturing, the UK Government have decided to no longer support the activity. That has been the case since 2019. Prior to that, there were protections in place in England and Wales that prevented the activity in certain areas, such as areas of natural beauty, and a number of steps had to be passed before fracking activity could take place.
In Scotland and Wales, there are policy moratoria on the exploitation of unconventional oil and gas. In both jurisdictions, those were secured using the planning system and came in quite recently: 2019 in Scotland and 2018 in Wales.
The Republic of Ireland is unique among the five jurisdictions that are examined in the paper. Legislation was passed in 2017 that made onshore fracking unlawful in that jurisdiction. There are similarities and differences between that legislation and what is proposed in the Bill, which I will draw the Committee's attention to over the next few slides.
What does the Onshore Fracking Bill propose? It proposes to amend the Petroleum (Production) Act (Northern Ireland) 1964, which provided the Department with the power to:
"search and bore for and get petroleum"
in Northern Ireland's strata. That includes the onshore water and the internal waters that are adjacent to Northern Ireland. The Act also provides DFE with the power to grant licences to do the same, namely search and bore for and get petroleum in those areas.
The one substantive clause in the Bill seeks to amend that Act to make onshore hydraulic fracturing unlawful. It would also prevent the issuing of new licences in Northern Ireland and ensure that the permission to frack in any licences that had previously been issued under the 1964 Act will no longer have effect. In the Bill, "onshore" is defined to include the strata beneath Northern Ireland but not the foreshore, the internal waters adjacent to Northern Ireland nor the UK territorial sea adjacent to Northern Ireland. I will come back to that.
A number of considerations arise from that clause. First, there are questions over the definition of "hydraulic fracturing". Those questions were raised during the Second Stage debate and concern two specific aspects. It was questioned whether the definition applies to petroleum only. The Bill refers to fracking in restricted contexts and will, if enacted, ensure that the Department has no right to search, bore for and get petroleum by way of onshore hydraulic fracturing. Additionally, it will ensure that the Department is unable to grant licences to do so under the Petroleum Act 1964. So the Bill seems explicit in its reference to petroleum; indeed, it does not mention fracking in any other context.
The second question is whether the Bill refers to both low- and high-volume fracturing. The difference between the two methods is set out in various literature, including academic and regulatory literature. Essentially, the volume referred to is of fracking fluid or water that is used in the process. Low-volume fracking is generally used in the exploration of conventional oil and gas, whereas high-volume fracking is generally associated with the exploration of unconventional oil and gas, such as shale gas.
The Bill's definition of fracking is:
"the generation of mechanical fractures in the shale or strata encased in shale by means of the physical process of pumping fluid at high pressure, which is carried out in connection with the use of a well to search or bore for ... petroleum."
So it does not mention the volume of fluid that is used.
The Westminster Infrastructure Act 2015 defines hydraulic fracturing with reference to the volume of water that is used. There are two measures in that: either 1,000 cubic metres in any specific stage of the fracturing process, or 10,000 cubic metres in total. That definition only applies in England and Wales and was criticised when the 2015 Act was passed because the volumes chosen would have only captured around 43% of all the wells that had been fractured in the USA at the time.
The second area of consideration is the geographic extent of the proposed prohibition. As I mentioned on the previous slide, the Petroleum Act 1964 vests the rights of petroleum that is found in Northern Ireland to the Department, which includes petroleum that is found onshore and in Northern Ireland's internal waters or the internal waters that are adjacent to Northern Ireland. The proposed prohibition is limited to offshore, so it will not include the internal waters that are adjacent to Northern Ireland, even though those rights are vested with the Department. That is not the case with the legislation that was introduced in the Republic of Ireland, which extends to adjacent internal waters. Those are considerations that the Committee may wish to tease out with the Department, the Bill sponsor and other stakeholders in order to determine whether the definition and the geographic extent are appropriate for the purposes of the Bill.
The final matter arising from the Bill that the Committee may wish to consider is the consequences for breaching the proposed prohibition. The Bill makes onshore hydraulic fracturing in Northern Ireland unlawful, but it does not set out any penalties for breaching the proposed prohibition. The 2017 Act in the Republic of Ireland does include such penalties, so any individual who is found to have broken the prohibition there can be fined or even imprisoned. Research has also identified fines being used at state level in the USA and Australia.
I will move on to some general considerations. I preface those by saying the research paper was prepared in the absence of the Hatch report, which was commissioned by the Department to investigate the economic, social and environmental impacts of developing petroleum and unconventional oil and gas exploration in Northern Ireland. That report has not been published, but at the Bill's Second Stage the Minister stated his intention to do so. The Minister also mentioned that the report had found only minor positive impacts from such development in Northern Ireland and that the preferred option was to support a moratorium or ban. In the absence of the Hatch report, the research that you have today draws from a number of other papers and studies to look at the general consequences of prohibiting hydraulic fracturing in Northern Ireland.
The first of those potential consequences is from the impact on the public purse. DFE, in its guidance on petroleum licences, mentions three revenue sources for the public purse: corporation tax, a supplementary charge and royalties. Research commissioned by the Scottish Government noted that pursuing unconventional oil and gas in that region over 45 years could lead to approximately £1,400 million in additional tax revenue, which works out at roughly £31 million a year. On the flip side, a National Audit Office examination in England found that, between 2011 and 2020, around £32·7 million from the public purse had been spent on shale gas exploration. However, those were only the known costs and included expenditure by the Department for Business, Energy and Industrial Strategy as well as expenditure by police forces on policing protests at proposed fracturing sites. It is important to note that that expenditure in England occurred despite there being no commercial exploitation of shale gas there during that period.
There are also potential economic implications. Studies in Scotland and Wales found that pursuing unconventional oil and gas in those regions would have positive gross value added (GVA) and job creation impacts. For example, in Scotland, the central estimate found that GVA would increase by an average of £27 million per year over the 45 years that were examined. Wales looked at the period of 2015 to 2019 and estimated GVA impacts of £1·4 million to £3·1 million per year in that time. The difference in the magnitude of the impact was really down to the estimated resource that the studies assumed.
It is also important to note that those economic and fiscal benefits did not measure against the counterfactual. They did not examine what the impact of alternative strategies might be on jobs, GVA and the public purse, nor did they include the costs associated with the potential negative impacts of pursuing unconventional oil and gas, such as environmental damage or health impacts. Additionally, it is worth pointing out that, despite the identified benefits in Scotland and Wales, neither jurisdiction has pursued unconventional oil and gas exploration.
I mentioned the social, environmental and health considerations, which are outlined in greater detail in the members' pack. I just want to mention that the academic and other literature finds potential benefits and harms of pursuing unconventional oil and gas development, including environmental, social and health-related benefits and harms. Those include things like emissions, possible seismic activity, possible water pollution and potential health impacts on those who live close to wells. It is interesting that the recent literature shows that the emissions impact is really dependent on what you are measuring it against. The emissions associated with the exploration of unconventional oil and gas were found to be lower than those for coal but higher than those for conventional oil and gas.
Finally, there are considerations on the security of gas supply. There have been recent calls on the UK Government to reassess their position on hydraulic fracturing and shale gas in England. Those calls cite, amongst other things, energy security and the need to increase the supply of gas in the region, and have been made against a background of unstable global energy markets and diminished conventional natural gas supplies in the UK. It is interesting to note that, despite that context and those calls, the UK Government have not changed their position on unconventional oil and gas or hydraulic fracturing in England.
Chair. I am happy to take any questions that you and the Committee have.
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scrutinising this to the point of taking decisions around the various clauses. However, the background information
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Those things have been raised with us already and we can flag up them in our report as things that will need to be considered in a future Bill.
Obviously, as Aidan pointed out, we were expecting the Hatch report to be published. Perhaps we can ask the Department for a timeline for that, because when he was setting out his preference for the future petroleum licensing policy, the Minister indicated that it would be published. There was an expectation that that would happen.
I do not have any specific questions. Is anyone in the room indicating?
The Committee Clerk: Mr O'Dowd is, Chair.
Mr O'Dowd: Thank you for the very useful presentation. Can I just confirm that the Bill, in your opinion, refers simply to the extraction of petroleum and gases and has nothing to do with the extraction of water?
Mr Stennett: Based on the definition that is set out in the Bill, that seems to be the case. It specifically refers to petroleum.
Sorry, I am just trying to find the place in the Bill. It states that hydraulic fracturing, in the context of the Bill, is:
"the generation of mechanical fractures in shale or strata encased in shale by means of the physical process of pumping fluid at high pressure, which is carried out in connection with the use of a well to search or bore for ... petroleum."
It does not mention hydraulic fracturing in any other context. However, I caveat that by saying that I am not a lawyer. If you have concerns, it may be good to get some legal advice on the implications of that definition.
Mr O'Dowd: That is a good lawyer's answer. [Laughter.]
That is great; thank you.
The Committee Clerk: We have no other questions, Chair.
Mr Stennett: Thank you, Chair.