UPDATE 2-Oil prices slip on profit-taking as investors await U.S. stockpile data
* Inventory data the dominant news for Asian investors -CMC Markets
(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, March 13 "We believe commercial shale gas extraction should only go ahead in the United Kingdom if it can be objectively demonstrated that the regulatory framework is fit for purpose," six leading conservation organisations wrote in a report on Thursday.
"Our analysis suggests that the current regulatory regime is not fit for purpose and therefore unable to adequately manage serious environmental risks," according to the study's principal authors from the Royal Society for the Protection of Birds, the country's largest conservation charity with more than 1 million members ("Hydraulic fracturing for shale gas in the UK", March 13).
In a summary, the authors highlight risks to groundwater, wildlife habitats and climate change. To mitigate them, the charities make ten recommendations, including the establishment of shale gas exclusion zones in sensitive areas, mandatory environmental impact assessments and "requiring shale gas operators to pay for a world-class regulatory regime" ("Are we fit to frack?" March 13).
Effective regulation is vital to ensure energy resources are developed in a socially acceptable way that respects local communities, landscape, wildlife and the country's historic heritage.
But the report fails to make a convincing case the current system is inadequate or that additional requirements would balance conservation with the need for more domestic energy production.
The report's authors note that there is no shale-specific legislation in Britain, but all oil and gas operations are already subject to a long list of regulations.
These include the Wells (Design and Construction) Regulations 1996, the Boreholes Sites and Operations Regulations 1995, the Town and Country Planning Act 1990, the Environmental Protection Act 1990 and the Environmental Permitting Regulations 2010.
Before drilling and fracturing a well, a company must obtain more than 10 separate permits from the Department of Energy and Climate Change (covering exploration and production issues), the local authority (covering planning consents and infrastructure), and the Environment Agency (water-related issues).
With so many rules already, there is no need for additional shale-specific requirements. Existing legislation and regulations should be properly enforced.
If all these existing laws, regulations and permits are not enough, something is seriously wrong. If there is a problem, which is questionable, the solution is to update the law for all users, not just the shale industry.
CONCERNS OVER CLIMATE CHANGE
The report cites specific risks to wildlife and the environment from fracking, some of them demonstrated, others more speculative. These range from well blow-outs, earthquakes, water contamination and water shortages to noise, light pollution and loss of important habitats.
Fracking exclusion zones, environmental impact assessments and requirements to use best available techniques for waste management could allay some of those concerns.
But underlying these specific risks is a broader concern about the impact of fracking for shale gas on climate change.
Britain has committed to reduce greenhouse gas emissions to help keep the rise in global average temperatures below 2 degrees Celsius by 2050. Specifically, the country has made a legally binding pledge in the Climate Change Act to cut greenhouse emissions 80 percent below the 1990 baseline by 2050.
"Shale gas exploitation is not compatible with (climate change) goals," the authors conclude. Natural gas produces half the emissions of coal when burned for power generation, but its carbon footprint is nonetheless 16 times higher than wind farms, according to the researchers.
Given its continued emissions, which may be understated owing to fugitive methane emissions from fracked wells, natural gas cannot reliably be considered a transition or bridge fuel on the road to carbon-free power generation (see main report pages 42-44).
The report leaves the reader with the impression no amount of tinkering with permits could make large-scale fracturing acceptable. If fracking for gas is ruled out on big-picture climate-change grounds, no amount of changes to the permitting system to mitigate impacts at local level could make campaigners comfortable with it.
A sceptical reader might wonder whether all the specific objections related to wildlife and habitats conceal a more far-reaching policy of trying to keep gas locked in the ground by making regulations so onerous that exploration and production companies give up because they cannot comply.
Indeed, the authors cite estimates that two-thirds of global fossil fuel resources must stay locked in the ground to meet the 2 degrees target and favourably cite other research that "large-scale extraction of shale gas cannot be reconciled with the climate change commitments enshrined in the Copenhagen Accord".
STRANGULATION BY REGULATION
The strategy might be called strangulation by regulation. It has proved remarkably effective in the United States. By making regulatory barriers and the permitting process insurmountable, environmental organisations have been able to stop most fracking on lands controlled by the U.S. government.
"America's total energy production has increased dramatically in recent years. But within those numbers is a serious dichotomy," Senator Lisa Murkowski said on Tuesday ("Global Energy Security and the Benefits of the American Energy Revolution", March 11).
"Nearly the entire oil and gas production resurgence in the United States has occurred on state and private lands, not the millions of acres managed by the federal government," according to Murkowski, the top Republican on the Senate Energy and Natural Resources Committee.
"Combined hydrocarbon fuel production on federal lands actually fell from 2008 to 2012," she complained.
It has proved nearly impossible for would-be drillers on federal lands to comply with all the requirements imposed by the Department of Interior and a host of environmental regulatory agencies.
Reading the UK fracking report, the sceptical reader might wonder whether the sponsoring organisations want to ensure something similar occurs in Britain. Fracking would be allowed in theory, but not in practice.
That view is short-sighted. The alternative to developing more domestic gas and oil supplies is not increased reliance on wind power but higher imports from volatile regions such as the Middle East, North Africa and Central and Eastern Europe, many of which have weaker standards of environmental protection.
Stopping fracking in the United Kingdom will not reduce fossil fuel production and climate change - it will simply shift the impact to parts of the world where regulations are weaker.
Britain will probably never develop enough onshore oil and gas to eliminate its need to import fossil fuels. But the more petroleum that is produced in politically stable areas such as the UK, the rest of Western Europe and the United States, which have high environmental standards, the more secure our energy supplies will be and the lower the environmental impact. (Editing by Dale Hudson)
* Inventory data the dominant news for Asian investors -CMC Markets
BAKU, Sept 27 A fire at Azerbaijan's Guneshli oil field was extinguished on Tuesday, the state energy company SOCAR said.