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08/11/16 14:40

Publication of Unconventional Oil and Gas in Scotland

Energy Minister's Parliamentary Statement on the Publication of Unconventional Oil and Gas research.

Presiding Officer, I would like to take this opportunity to update Parliament on the progress of our research into Unconventional Oil and Gas in Scotland.

The Scottish Government has adopted a clear and consistent approach to emerging technologies that could develop Scotland’s onshore hydrocarbon resources.

Our approach to Unconventional Oil and Gas is one of caution while we gather and consider evidence on those new technologies that have been proposed by industry.

That process has already resulted in the decision last month not to proceed with Underground Coal Gasification in Scotland.

Against the backdrop of our cautious, evidenced approach, there are some, such as the UK Government, who wish to pursue a gung-ho approach to support the industry, or others who seek an immediate ban who do not want to wait for research and evidence and who have put forward their views without concern for the differing interests and views of those who would be affected across Scotland.

I have no doubt both are sincere in their views and beliefs.  But it is the job of government to base our decisions on evidence– taking proper account of public opinions – and to seek a collective way forward and we are deeply sceptical of the approach of the UK Government. 

There is much heat on this issue – it is our intention to go through a process that sheds light on these issues.
 
In doing so we must also remember that shale resources in Scotland are located across the central belt – in the ‘Midland Valley’ – one of the most densely populated areas of Scotland. 

Those communities would be directly affected by any unconventional oil and gas development, and must be given genuine opportunities to explore and discuss the evidence and issues in depth and at length.

Presiding Officer, our precautionary, consultative approach is the right approach, and it is one that has been widely supported by communities, industry and other interested parties.

To allow us to gather a comprehensive body of evidence and prepare for an inclusive debate and consultation, we put in place a moratorium on Unconventional Oil and Gas in January 2015.  This means that no such projects can take place.

For the avoidance of any doubt, this moratorium covers hydraulic fracturing, also known as fracking, and coal bed methane technologies.

Presiding Officer, today we have reached a major milestone in this process, and I can confirm that the research reports have now been published in full.

The research was carried out by leading independent experts in their respective fields, and the findings will deepen our understanding of the issues.

At this stage, the Scottish Government is not making any judgements on the findings. 

As we set out when we established the moratorium, the publication of the research will now be followed by a period where we and the public can scrutinise, question, challenge, and discuss the findings, before we begin a public consultation.

We have provided the Chamber with hard copies of the executive summaries of the research, and I encourage you all to read the reports at your leisure.

I would now like to draw attention to some of the main aspects of the research that I believe demonstrate the value and significance of the work that we have published today.

Central to this work is the economic impact research carried out by KPMG which has identified a number of potential industry development profiles in Scotland, which have informed the other studies.

These scenarios are based on estimates of potential oil and gas resources that have been informed by discussions with stakeholders, including those representing industry and environmental interests. 

The study has quantified the associated economic impacts of any prospective activity to the Scottish economy using a range of measures, including expenditure, GVA, tax revenues and employment.

A number of projections for economic benefit and employment have been put forward previously.  This report presents an impartial assessment of the potential impact an industry in Scotland could have.
KPMG conclude that under their central scenario, 20 well pads of 15 wells each could lead to cumulative direct expenditure of £2.2 billion in Scotland over the period through to 2062, which would create supply chain impacts and other induced economic impacts amounting to an additional £1.2 billion over the period, and be responsible for supporting up to 1,400 direct, indirect and induced jobs in Scotland at its peak.

To put these economic impacts into context, the report states that on an annual basis this represents, and I quote: “on average, 0.1% of Scottish GDP in our Central scenario…”

The report also discusses a number of other potential economic considerations, including the use of gas as feedstock in the petrochemical industry, the impact on local house prices, road use, agriculture, visual amenity, environmental costs and health costs.

Given our commitments to carbon reduction and climate change, these impacts must be considered alongside any economic impact.

The Committee on Climate Change were asked to examine the impacts on territorial carbon emissions of unconventional oil and gas activities in Scotland, and to consider how the impacts might vary over time.

The study sets out three tests which would need to be met for the development of unconventional oil and gas to be compatible with Scottish climate change targets. These tests are:
• Emissions are limited through tight regulation;
• Scottish unconventional oil and gas production displaces imports, rather than increasing domestic consumption;
• Emissions from production of unconventional oil and gas are offset through reductions in emissions elsewhere in the Scottish economy.

The study also provides a quantitative analysis of potential emissions under a number of regulatory and production scenarios. 

The Committee estimate that under a high production scenario, CO2 equivalent emissions in 2035 could be between 1.1 mega tonnes per year and 2.6 mega tonnes per year depending on the strength of regulation.  Under the central production scenario, emissions are estimated to be 0.6 mega tonnes per year in 2035 if the minimum necessary regulation were adopted. 

The overall conclusion of the Health Impact Assessment, conducted by Health Protection Scotland is that, and again I quote: “the evidence considered was ‘inadequate’ as a basis to determine whether development of shale oil and gas or coal bed methane would pose a risk to public health, if permitted in Scotland.”

If an industry were to proceed, the report discusses a precautionary approach that would be proportionate to the scale of the hazards and to the potential health impacts.  Health Protection Scotland note that this “could be based on a range of mitigation measures involving operational best practice, regulatory frameworks and community engagement.”

The study examining transport impacts carried out by Ricardo estimates that an individual well pad could require traffic movements to be sustained at around 190 per week for a period of approximately 2 years during the development phase.

Riccardo note that the main factor affecting traffic flows is the requirement for transportation of water. If that can be avoided (for example by use of pipelines or re-using wastewater), Ricardo conclude that the impacts can be significantly reduced.

Ricardo also observe that any increase in vehicle movements could result in an increase in noise, vehicle emissions, road damage or traffic accident risks.  Ricardo note that, and I quote: “Provided the planning and EIA [Environmental Impact Assessment] system is properly implemented, any significant impacts would be avoided through the use of appropriate mitigation measures.” 

However, the report also states, and I quote: “…local communities would nevertheless experience an increase in traffic numbers, potentially for an extended period of a number of years.”

The decommissioning study carried out by AECOM and seismicity study carried out by the British Geological Survey have each reviewed international literature and practice to draw conclusions on potential hazards and what, if any, steps could be taken to mitigate those hazards, including regulatory actions.

AECOM conclude that, and I quote: “There is a low risk of post-decommissioning well failure”.  AECOM also note that there is potential for improvement in existing regulatory provisions.

The study undertaken by the British Geological Survey concludes that hydraulic fracturing is generally accompanied by microseismicity, and I quote: “the probability of felt earthquakes caused by hydraulic fracturing for recovery of hydrocarbons is very small.”

The study also observes that improved understanding of the hazard from induced seismicity and the successful implementation of regulatory measures to mitigate the risk of induced seismicity are likely to require additional data from a number of sources, including improved monitoring capabilities.

As we committed to doing as part of the moratorium, the Scottish Government has hosted a workshop with regulators. A record of that meeting is now available to view on the Scottish Government website. 

And finally, to ensure that the full range of environmental issues are given due consideration, a full strategic environmental assessment will also be prepared and considered before a final decision is taken.

Presiding Officer, I am confident that the reports we have published today deepen our knowledge of the evidence, and shed light on the issues and choices that this industry presents.
As I hope the Chamber can tell from the summary of the research, no one study can give a conclusive view on this industry and whether or not it has a place in Scotland’s energy mix. 

Some will say that this research shows the economic impact is low and the risks too great, others that the risks can be managed and the potential economic gain cannot be ignored.  The reports, rightly, do not make recommendations on whether UOG should be permitted or not.

The science and evidence informs the debate, and it is now time for that debate to take place. 

I am able to confirm today that our consultation on unconventional oil and gas will launch, on schedule, early in the New Year.

In view of the importance of discussing unconventional oil and gas in the context of both wider energy use and climate change matters, I can also confirm that the launch of the consultation will be coordinated with the publication of our Climate Change Plan, and the consultation on Scotland’s draft Energy Strategy.

The consultation, which will cover hydraulic fracturing and coal bed methane, will not simply be an opinion poll - I do not believe that that would do justice to the broad and complex range of issues that people care about and that need to be debated.

The consultation will continue the process of presenting evidence, encouraging discourse, and will allow the public and stakeholders to set out their views. 

Presiding Officer, our consultation will give everyone who has an interest in this issue an opportunity to express their view.  This is what the public and stakeholders expect, and this is what we are delivering.

Once the consultation closes and the results have been independently analysed and published we will make our recommendation on the future of Unconventional Oil and Gas and allow Parliament to vote on it.

After which, the Scottish Government will come to a considered judgment on the future of unconventional oil and gas in Scotland.

I know that everyone in this chamber recognises the different opinions that exist on the development or otherwise of Unconventional Oil and Gas.  This government has maintained a consistently sceptical and precautionary approach throughout. 

In reaching a final decision, as a government and as a parliament, it is imperative that at every step we take a careful, considered and evidence based approach and that we do so alongside an informed public debate.

Given the significance of the issue, that is the right and proper way to proceed.