Shale
gas fracking companies should be made to offer incentives, such as cash payments or rebates on
energy bills, to people living near their sites, according to an influential committee of MPs.
But
the demand for sweeteners to help overcome opposition to fracking came
as one of the world's leading insurance groups warned that those
drilling in shale areas, deep waters or the Arctic risked
"company-killing" reputational and environmental damage.
The
energy and climate change committee says on Friday that substantial
incentives would be needed to overcome local opposition to shale gas
drilling, which has been associated with water, ground and air pollution
in the US, and which green groups say is incompatible with moving to a
low-carbon energy supply. The MPs also warn that, even if fracking does
take place on a wide scale in Britain, there is no guarantee it will
lower energy bills.
Tim Yeo, chairman of the committee, said: "We
believe the UK's shale resources should be exploited, but that looks
difficult given local opposition to drilling. There has to be a way of
getting to communities."
He warned, however, that the government
should not set too much store by shale gas when formulating its energy
policies, because it might not have the positive impact that some have
claimed for it. "We shouldn't base energy policy on the supposition that
we have 50 years' worth of this gas to exploit. Some people seem to
think shale gas is in the bag, that it is the answer to our energy
problems, but it would be very rash to make that judgement now. We don't
know enough about it."
Yeo said that shale gas might not have
much of an impact on UK gas prices, because of soaring demand for fuel
in Asia, which would drive up prices across the board. He said it was
unlikely that the UK could become self-sufficient in gas, which is
becoming the case in the US thanks to the shale gas boom there.
The
incentives that could be made available to communities must be
substantial, Yeo said, if opposition was to be overcome. "It's not just a
question of building a new car park or a bypass. It might be cash
incentives, and it might have to be very local – not to a borough
council but to individual villages near the sites."
The
committee's central recommendation of incentives for communities to be
paid for by drilling companies is at odds with the views of Cuadrilla,
the only shale gas fracking company in Britain. Papers seen by the
Guardian under the Freedom of Information Act show the company has
written to ministers calling for taxpayers to foot the bill for
incentives.
Francis Egan, chief executive of Cuadrilla, said: "I'm
delighted with the committee's central conclusion that exploration
companies like Cuadrilla should receive strong support from the
government to get on and drill, in order to establish the extent of the
recoverable resources of natural gas. We agree with the committee's
conclusion that substantial recoverable shale gas could limit future UK
energy price rises, reduce our reliance on imported gas and generate
considerable tax revenues." He pledged "strong community engagement" to
areas where drilling is licensed to go ahead.
But green groups
said the committee had not made a strong case for fracking. Friends of
the Earth energy campaigner Tony Bosworth said: "This report does little
to back the case for a UK shale gas revolution … Fracking is dirty,
unnecessary and a threat to our climate and environment – it's little
wonder so many communities are in opposition."
Leila Deen of
Greenpeace said: "This report confirms that what we know about UK shale
gas is that we don't know much.The only thing most experts agree on is
that it won't reduce bills.
"Fracking remains a fantasy and
a dangerous distraction from renewables, which continue to fall in
cost. The government needs to start backing energy winners, instead of
gambling with consumers' pockets and the climate."
Meanwhile,
global insurance broker Marsh said that shale was one of the new
frontiers for oil and gas companies which offered substantial rewards
but also significant reputational risks if anything went wrong.
Andrew
George, chairman of Marsh's energy practice, said the chances of an
accident were not high but the stakes had never been higher, whether it
was fracking for shale, drilling deep-water wells or working in the
Arctic. "Reputational risk must be factored in much, much more. In the
internet age a well can blow out in the morning and a company's survival
could be at stake in the afternoon."
This meant insurers had to
offer the right products, but also that exploration companies had to
recognise the scale of the new risks and insure themselves accordingly.
Asked whether some were failing to do this, he would only say:
"Different kinds of buyers [oil companies] have different levels of
sophistication."
In a statement ahead of a new report – Managing
Risk on the New Frontiers of Energy Exploration – Marsh said oil and gas
companies had the capacity to blow off course the whole global economy
by getting into trouble.
It said one single accident could trigger
a wider drilling ban or financially sink a business: "While the global
energy sector is playing an increasingly pivotal role in stimulating
economic recovery, the industry's failure to mitigate the risks
associated with the new frontiers in exploration and production could
jeopardise future growth."
