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David Cameron’s ‘all out’ dash to embrace fracking is a risky gamble

 
Pro-fracking Graffiti in U.S.

A pro-fracking graffiti on barn in Bradford County, Pennsylvania, US. The UK government wants to emulate US but drilling for shale gas remains controversial and is attracting a lot of protest. Photograph: Les Stone/Corbis

 

Powered by Guardian.co.ukThis article titled “David Cameron’s ‘all out’ dash to embrace fracking is a risky gamble” was written by Fiona Harvey, environment correspondent, for theguardian.com on Monday 13th January 2014 14.44 UTC

The message from Downing Street could not be clearer: David Cameron announced on Sunday the government would be going “all out” for fracking, in an effort to bring to the UK the shale gas revolution that has sent gas prices plummeting in the US, and transformed huge swathes of its landscape.

Cameron’s plans involve a giveaway of millions to communities that allow fracking, through a scheme whereby councils will retain all of the business rates liable on the sites, and payments to local communities from fracking companies of £100,000 upfront and 1% of revenues thereafter. These measures are supposed to unleash a wave of investment in hydraulic fracturing, the controversial method of extracting gas from dense rocks by blasting them with high-pressure water and chemicals.

The timing could not have been better, as the French company Total confirmed plans for the first big investment by a major oil company in fracking in the UK.

If the prime minister’s plan is to win over opponents of fracking, he has plenty of work to do. The first major poll on fracking, carried out by the Guardian last year, found public opinion evenly split, with 40% in favour of fracking near their homes, 40% against and the rest undecided. Protests around the country have resulted in arrests, gathered angry meetings in town halls, and given rise to warnings from environmental campaigners of the dangers of water stress, pollution and climate change.

Cameron’s enthusiasm for fracking – in stark contrast to the Conservatives’ increasing rhetoric against renewables and “green” energy – highlights the number of unanswered questions on fracking in the UK.

First are the economics of investment. Total’s initial pledge of £30m is far from the biggest slug of cash to be sunk into the UK’s fledgling fracking industry. By early last year, the UK’s fracking pioneer Cuadrilla – the only company to have fracked in the UK since modern techniques became available – had already spent more than £100m on its explorations, which comprised a single fracked well and three further exploratory sites in Lancashire. That was before last summer’s drilling operations began at the site in Balcombe, in Sussex, where protestors gathered for several weeks last year. The company has yet to produce any gas or oil in the UK.

In an interview with the Guardian last year, Lord Browne vowed to spend “whatever it takes” to make fracking a commercial reality in the UK, but it is still unclear how much that is likely to be.

The size of the boost to the UK’s broader economy is also the subject of debate. In announcing the business rates bonanza, Downing Street chose to quote a single estimate, of a £3.7bn a year benefit to the UK economy – taken from a report which was commissioned by the Institute of Directors and paid for by Cuadrilla. Its estimate of benefits and of 74,000 jobs includes such intangibles as people being employed in local shops to sell sweets to the site’s security guards. Fracking sites require workers during the initial drilling phase, but once they are in production they are essentially empty.

What seems certain is that shale gas production will not bring down UK gas prices. The industry and independent experts are in agreement on this, and tellingly Cameron did not mention it in his statement, despite having claimed last year that shale would cut energy bills.

Energy company chiefs have repeatedly insisted that shale gas will not be a “game-changer” in the UK as it was in the US, in part because the quantities of the fuel available here are likely to be smaller and much more expensive to extract. In terms of price impacts, the US has operated as what the International Energy Agency terms a “gas island” – with exports all but impossible, the fuel has been used domestically, resulting in a drastic reduction in prices to as little as $2 a unit, compared with $10 to $12 in Europe and Japan.

Gas produced in the UK can easily be exported, however, and so will continue to fetch the same price as in Europe, and experts say those are highly unlikely to come down in the next decade. That could mean a boost to shale companies from a lucrative export market, but will do nothing for hard-pressed consumers.

Then there is the question of how many wells will be needed. Fracking companies like to point out that, after the initial drilling operations, the visual impact of each well is relatively small. A tall hedge can hide a wellhead, according to Francis Egan, chief executive of Cuadrilla, who calculates hundreds of wells will be required.

 

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