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Delivering a regulated shale gas industry in UK should be "urgent" government priority, says House of Lords committee

Out-Law News | 08 May 2014 | 2:08 pm | 2 min. read

The "urgent" creation of a properly regulated UK shale gas industry would bring important economic benefits to the country, as well as boosting national energy security, a House of Lords committee has said.

“The House of Lords Economic Affairs Committee said in a new report, that exploration and appraisal of the UK's substantial shale gas and oil resources was urgently needed in order to establish their economic potential.”

Committee chair Lord MacGregor said that the government's commitment to go "all out for shale" had to be backed by a simplified and easier-to-understand regulatory regime.

"Only exploratory drilling with hydraulic fracturing, then appraisal, can show how much of the UK's shale resource can be developed economically," he said. "But there seems to be a regulatory logjam."

"The government has made attempts to simplify the regulatory regime for development of shale but these measures have not gone far enough. Our report shows that unnecessary duplication and diffusion of authority are still rife throughout the regulatory process. The government must do more to simplify regulation to ensure that exploratory drilling and development can go ahead. Regulation around shale should be robust, but should move quickly and be easy to understand," he said.

The report found that some of the concerns raised by the press and campaigners about the environmental and other impacts of fracking had been exaggerated, but said that "legitimate" concerns could be resolved by effective and appropriate regulation. The UK's regulatory framework, although complex, was well regarded internationally, it said; however, the committee has suggested some modifications to the regulatory regime to "strengthen public confidence", including a requirement that well inspectors be independent and not employed by the drilling company.

Energy law expert Paul Rice of Pinsent Masons, the law firm behind Out-Law.com, said that the report acknowledged the "important role" that shale had to play in diversifying the UK's energy mix and improving the country's security of supply.

"We are still at the early stages of shale exploration in this country," he said. "To truly understand the impact this burgeoning industry could have on security of supply and domestic economic stability, kick-starting exploration is essential."

"Our regulatory regime is respected worldwide for good reason - almost every aspect of shale gas development, from initial exploration right through to the decommissioning of wells, is already covered by existing legislation. This has the effect of making shale gas development one of the most regulated activities in the energy sector. We should trust in the processes we have in place and give developers the opportunity to assess shale gas reserves across the UK," he said.

Shale gas is natural gas trapped within shale formations at significant depths below ground. It has become an increasingly important source of natural gas in the US, particularly over the past decade. A combination of drilling and 'fracking', which involves pumping water at high pressure into shale rock to create narrow fractures through which trapped gas can flow out and be captured, has facilitated access to large volumes of shale gas that were previously uneconomical to exploit.

An industry survey conducted by Pinsent Masons earlier this year found widespread support among the industry for the creation of a single regulatory regime covering the necessary planning, environmental and health and safety permits needed for fracking projects. Almost every aspect of shale and coal bed methane exploration and production is already covered by existing regulatory regimes overseen by the Department for Energy and Climate Change (DECC), local authorities, the EA and the Health and Safety Executive, amongst others.