(MENAFN - ProactiveInvestors)
A new government report has cast doubt over plans to exploit Britain’s shale gas potential.
The Environment Audit Committee (MP) has called for a new moratorium on the controversial fracking process which is used to extract gas from tight rock formations such as shale.
The EAC also deems the “extensive production of unconventional gas through fracking” as being inconsistent with the UK’s obligations under the Climate Change Act and it questioned whether the current regulations can protect the environment.
“Despite the assurances from some that environmental risks can be safely accommodated by existing regulatory systems an extensive range of uncertainties remains over particular hazards” the report said.
“A moratorium on the extraction of unconventional gas through fracking is needed to avoid both the inconsistency with our climate change obligations and to allow the uncertainty surrounding environmental risks to be fully resolved.”
City broker Westhouse says the EAC report highlights the ‘Catch-22’ facing Britain’s nascent shale gas industry.
In its reasoning the EAC report questioned the economic benefits of shale saying there is little evidence to suggest that fracking could be undertaken at the scale needed to be commercially viable in the UK or that it will bring gas prices down significantly.
The trouble however is that many of the economic parameters remain unanswered without the planned next phase of evaluation which requires fracking.
Westhouse analyst Mark Henderson points out that the drilling and fracking of test wells is necessary to either validate or disprove the case of UK shale.
Industry lobbyist United Kingdom Onshore Oil and Gas (UKOOG) meanwhile called the EAC report “rushed” and said the report’s conclusions ignored most of the evidence of a properly regulated and safe industry in the UK.
“Calling for a moratorium achieves only one thing: increasing the levels of gas coming from outside the UK at a substantially higher environmental cost and with significant economic consequences” said UKOOG chief executive Ken Cronin.
“The government has already announced that the next shale gas sites will not only be regulated by the four different regulators in line with 17 EU directives requiring up to eight environmental permits per site but also will be overseen by independent academics.
“No evidence exists of a failure in the current multi-regulated arrangements.”
The EAC’s recommendation comes at a critical moment for UK shale.
Today parliament will debate the proposed Infrastructure Bill which among other matters s to simplify the planning process for horizontal drilling - it will mean that oil and gas companies could drill underneath properties at depths of 300 metres or more without having to get consent from the landowners at surface.
Projects will still need to be granting planning permissions at local authority level.
A shale project in Lancashire faces delay after a local planning report last week recommended against a proposed drilling and fracking programme near Blackpool on the basis of noise pollution and potential impacts on local traffic.
The project operator Cuadrilla which is partnered with British Gas owner Centrica has since said it is prepared to add additional noise mitigation measures and requested a deferral of the scheduled planning decision to allow for further consultation relating to these additional measures.
The new uncertainties hit IGas Energy’s quoted shares which fell 30% on Monday morning.
IGas like Cuadrilla has shale gas projects in the Bowland basin in North West England and it intends to drill and frack wells in the UK.
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