Fracking and its Impact on the Fylde

Most people living in the UK should by now be aware of the proposals to allow the use of the controversial technique of gas extraction known as hydraulic fracturing or “fracking” in some of the UK’s rural areas. The first area being targeted is above the Bowland Shale, here on the Fylde coast. Exploratory work is already underway, but was halted in 2011 when two earthquakes caused damage to local properties. In 2018 Cuadrilla Resources were given final permission by the BEIS to commence fracking at their site at Preston New Road near Blackpool.

Fracking’s supporters make extravagant claims for its benefits, whilst some of those who are opposing it make what can sometimes seem, to the uninformed, like an alarmist case against it. To make sense of the opposing views we have to sift the information presented to us and balance the realistically achievable benefits for our community and the UK as a whole against the likely risks.

With the government having overruled Lancashire County Council’s planning permission refusal and granted permission for Cuadrilla to frack at Preston New Road (PNR), we all need to look at what fracking might mean to the economy and environment.

So what is the reality? Cuadrilla, the company exploring on the Fylde now, have spent large sums to persuade local people that fracking will bring us many benefits such as employment growth, contributions to the local economy, a reduction in the UK’s dependency on foreign energy and the creation of a constraint on gas prices.

Let’s take employment first. In a report that they commissioned themselves, Cuadrilla talk of as many as 1,700 jobs being created in Lancashire (which is, of course, not quite the same thing of course as 1,700 jobs for Lancashire residents). However, even in their high-end scenario involving 800 wells, the peak rate of employment would only last for a single decade (1). The claims for huge employment benefits were further torpedoes by Cuadrilla’s own Environmental Statement produced for their PNR site, which made it clear that only 11 net Full Time Employee Equivalent jobs would be created, and that local jobs were likely to be only low paid security staff.

Cuadrilla claim that fracking will inject huge amounts of money into the local economy, but we do need to be careful before accepting such claims at face value. Cuadrilla claimed some time ago that their geo-physical survey contributed over £1.5 Million to the local economy but an analysis of their own data, using their own methodology, showed that barely half this figure was justifiable (2). The truth is that only a small fraction of the money spent by the fracking companies will find its way into the local economy after taxation, savings and the propensity to spend elsewhere are taken into account. In an environment where new employment opportunities in rural areas are scarce we should be careful about disregarding any of them, but we do still need to weigh up the potential downsides, before blindly accepting a relatively small and temporary economic gain as a real benefit.

Many people I speak to believe that fracking will benefit everyone in the UK by bringing us cheap gas and energy security. While Cuadrilla are careful not to make this specific claim in their publications, they do point out the downward spiral in gas prices in the USA and presumably hope that we will draw our own inferences. Unfortunately for the advocates of fracking, sources as reputable as Deutsche Bank and the Director General of the CBI (3) have stated that they don’t see shale gas fracking as having any significant downward effect on wholesale or retail energy prices in the UK. Even Cuadrilla themselves have admitted this. At a 2013 meeting in Sussex Cuadrilla’s public relations spokesman Mark Linder of Bell Pottinger said “We’ve done an analysis and it’s [the influence on prices] a very small…at the most it’s a very small percentage…basically insignificant.”

One reason for this is that the volumes of gas recoverable each year are likely to be small, and so is hardly going to have a huge impact on the nation’s energy security either. Indeed the two reports on Energy Security in the UK (GAS SECURITY OF SUPPLY – A strategic assessment of Great Britain’s gas security of supply) and A Review Of Gas Security Of Supply Within G Reat B Ritain’s Gas Market – From The Present To 2035 both state that we have no serious security of supply issues and neither feels it appropriate to take shale gas into account in their forecasts.

Other reasons why prices won’t fall as they did in the USA include the fact that the cost of the huge volumes of water required is up to 10 times more here in the UK, and our shale plays are up to 3 times deeper down than in America.  Incidentally the use of water in fracking is reported to have increased  hugely since 2011 with an increase of 1400% in the amount of toxic waste water being produced in the first year of each new well’s production period.

We need to be very clear that fracking in the UK will not be the “game changer” that it has been reported as being in the USA. In any case, the much vaunted (but apparently temporary) drop in wholesale gas prices there has the fracking companies in disarray as their exploitation of these hard to recover resources has, in many cases, become economically unviable, even with their relatively low cost structures. Many wells have been closed and won’t be operated again unless the gas price rises enough to make it worth while. Recent years have seen a slew of bankruptcies in UK drilling companies and those that are left are reportedly saddled with huge interest charges on their debt.

We should also bear in mind that the lion’s share of any financial rewards will largely flow to the foreign corporate investors as dividends. Although Cuadrilla’ boast that they are a UK based company is technically true (Cuadrilla Resources Ltd is registered in Leyland, Lancashire) that company is, in turn, wholly owned by Cuadrilla Resources Holdings Ltd. Cuadrilla Resources Holdings Ltd is owned jointly by Australian company Lucas Cuadrilla PTY Limited (40.9%), Cayman Islands based Riverstone / Carlyle Global Energy and Power fund IV (Cayman) LP (40.9%) and its international management team (18.2%). If they are allowed to frack the Fylde it looks as though, instead of paying the Americans and the Qataris for our gas, we shall paying foreign businesses and investors instead. A large chunk of AJ Lucas is owned by the Chinese via a Hong Kong intermediary. There is not much of an obvious improvement here for the man in the UK street there is there?

Whilst the fracking companies may have offered local communities some flowers for an “In Bloom” competition, a contribution to paint a local village hall or a wad of cash for a local rugby or football club, I don’t think this should really be exciting any of us given the billions that the corporate stakeholders stand to make from what they are doing. I’m sure most of us are intelligent enough to see those gestures for what they really are.

It seems then that the benefits, such as they are, are temporary and not over-exciting for the local residents or indeed for the UK as a whole. So, what are the potential downsides?

Much has been said about the potential environmental impact of shale gas drilling. It is clearly a developing technology, and nobody who has read any of the reports coming from the United States can be left in any doubt that without stringent and properly enforced regulation it is potentially a very dangerous technology indeed. Obviously any environmental accidents could have a devastating effect on the local economy.

It would be wrong to suggest that our experience in the UK will exactly mirror that of communities in the USA. There are too many differences of geography, geology, demographics and regulation, but those of us who have read, with increasing concern, about the now well-documented environmental and health impacts of fracking on previously rural communities have genuine and reasonable concerns for the future of our area.

When we read the industry’s continued insistence, against all the emerging evidence, that there is no proven link between fracking and water contamination or between fracking and health problems, we are inevitably reminded of the tobacco industry and its similar insistence that smoking does not cause lung cancer. It is perhaps no accident that the same Public Relations company that for decades created the PR strategy for the tobacco industry to combat reports that cigarette smoking caused cancer, Hill and Knowlton, have been hired by America’s Natural Gas Alliance to convince people that fracking, too, is safe. On the other side of the argument stands the mounting evidence from the USA, where fracking has been going on for some time which is collated in the Compendium of Scientific, Medical, and Media Findings Demonstrating Risks and Harms of Fracking by the group The Concerned health Professionals of New York. Now in its 5th Edition the body of evidence grows by a greater amount every year. Nearly one quarter of the now more than 1,300 available studies was published in 2017 alone.

For those of you who remain convinced that environmental and health concerns are being exaggerated, here is the risk assessment table that was published by the EU in September 2012.

EU Risk Assessment

EU Risk Assessment

This is not just about the potential environmental and health issues though. Even safely executed fracking might have an extremely negative impact on the amenity value of our surroundings. By that I mean the things that make us want to live and work somewhere, buy houses somewhere and bring up our kids somewhere.

Many of us choose to live in and around rural environments because of the associated tranquility. Fracking is an industrial process that requires rural land to operate so there is an immediate source of tension here. In 2012 Cuadrilla’s high end scenario was 800 wells in their permitted development area. That would have meant we would have 80 well pads of around 20,000 square metres in size each, spread across the Fylde countryside. Their more recent estimates suggest 80-100 well pads with between 40-60 wells on each. That’s now a massive 3,200 to 6,000 wells. It would mean that you could, on average never be further than a mile from a fracking pad.

Some in the USA might consider this size and number of pads acceptable, but here in the Fylde our population density is 12 times higher than it is over the Barnett Shale in Texas and 100 times higher than in North Dakota, which means that any impacts on the local environment will be far more noticeable.  Even 6,000 wells would only provide 18 TCF of gas using the Institute of Directors assumptions for average individual well productivity. It is simply staggering that most local people have no idea of the size of the train which is about to hit us, and continue to be more offended by short traffic delays caused by protesters than by the industrialisation of their countryside.

The MP for Fylde, Mark Menzies, appeared to understand this issue. He stood up in parliament in October 2012 and said “Knowing the countryside of Fylde as I do, I know it would be completely unacceptable to take many sites to extraction phase.” However, in saying this he has placed himself on collision course with his senior colleagues at the Department of Energy. He also claimed at a public meeting in St Annes that even 80 wells (not pads, and not 6,000 wells) in the Fylde would be totally unacceptable to him. It is something of a mystery therefore, why he is now apparently quietly accepting the prospect of 75 times that many.

Whilst not all the wells would be in operation simultaneously, we would still have to get used to a huge amount of disruption and change. In the development phase we would see the creation of the necessary infrastructure such as pipelines, power stations and access roads completely changing the character of our rural area. In the exploitation phase we would have to live with a huge number of transport movements of rigs and of tankers laden with undiluted toxic chemicals and contaminated flow back waste, gas wells being drilled and flared, and fugitive methane emissions and drilling dust contaminating the air. On top of all of these are the risks from further unexpected earth tremors. If you think these are minor risks then ponder the fact that some property owners in America have already had damage from fracking excluded from their cover by their insurers (6). All of these things will have a significantly detrimental impact on the amenity value of the locality by affecting its look, feel, smell and sound.

This amenity value is tremendously important for existing industries like leisure and tourism in the area and it is why we buy houses here and it is why people choose to come here to spend their money in local hotels and shops.

If we allow it to be degraded because of some questionable and transitory benefits, then we risk the very prosperity, which makes most of us want to live in and visit this area. Ask yourselves how attractive this area will seem to the visitors driving down the M55 with fracking pads being serially developed on either side of them. I have a hunch that these new Blackpool Illuminations won’t be considered as much of a tourist attraction as the originals.

Of course, we do need companies to invest in rural areas if we are to retain our prosperity, but we must be careful what we wish for. Tourism already provides around 16,500 jobs across the Fylde, Wyre and Blackpool (7). A temporary increase of 10%, which might eventually risk them all, looks like a very bad bet from where I am sitting. It is Net Employment which is important here.

If we allow our countryside to be ruined by ill-advised and unnecessary industrialisation then we will have to accept that people may no longer want to come here to holiday and that other companies may not be able to persuade employees to remain in or relocate to our area, thus reducing still further the likelihood of more sympathetic and acceptable inward investment. Our existing industries will decline and our investments in our own homes will suffer as a result.

What will the effect of this loss of amenity value be on our property prices? That is, of course, hard to predict, but a report in the Daily Mail on Sunday on 4th November 2012 (8) suggested that houses within 2 miles of a fracking well might lose up to 24% of their value. With 800 wells planned for the Fylde that would mean that most of the housing stock in the area would be affected, as few of us would live more than 1 mile from a well pad. With the average house price in the Fylde standing at £165,904 in 2017 that’s quite a high price to ask us all to pay to secure a couple of years worth of UK gas consumption. A study by the University of Bristol found that the two highly publicised minor earthquakes linked to exploratory fracking near Blackpool in 2011 caused a three to four per cent reduction in house prices nearby.

Amazingly Cuadrilla publicly blame this impact on “misleading claims from a minority of people” rather then the potential impact of their own operations.

So, does the evidence in favour of fracking stack up? It is clear that the minimal gain to the UK as whole cannot even start to justify the wholesale industrialisation of a beautiful rural area and the price we would individually be asked to pay. Whatever benefits there might be from this exercise are transitory and will mostly flow out f this country. Unfortunately this does not seem to matter to our government who appear intent on allowing fracking, regardless of its potential impact on our local environment, as long as it allows them to skim some tax revenues before the bulk of the cash leaves our shores. With the tax arrangements of companies like Starbucks, Google, Amazon , Boots , Vodafone and Topshop very much in the news, one has to wonder how effective HMRC will be at even extracting that small benefit for our country efficiently from Cuadrilla’s international owners.

Our government is not only taking a strong pro-gas position, but certain prominent ministers are pursuing an actively anti-renewables agenda. Speaking about wind farms in the Daily Telegraph recently, former energy minister John Hayes said “We can no longer have wind turbines imposed on communities. I can’t single-handedly build a new Jerusalem but I can protect our green and pleasant land.” Here in the Fylde we can only hope his government feels the same about fracking wells. I have a horrible feeling though, that their vision of a ‚”green and pleasant land” doesn’t stretch quite as far North as Junction 32 of the M6, and that we shall soon be seeing dark satanic rigs looming over most of our fields here in the Fylde.

If like me you don’t find that a positive prospect, then please take action now. Do your research, share your information and make sure that our birthright isn’t sold off for a mess of pottage to some foreign speculators before it is too late!


Notes:

1. http://www.cuadrillaresources.com/wp-content/uploads/2012/02/Full_Report_Economic_Impact_of_Shale_Gas_14_Sept.pdf

2. http://stopfyldefracking.org.uk/latest-news/guest-blogger-local-management-consultant-john-hobson-investigates-cuadrillas-claim-for-a-1500000-contribution-to-the-local-economy/

3. http://www.businessgreen.com/bg/news/2208266/cbi-rejects-calls-for-allout-dash-for-gas

4. http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenergy/writev/isg/m17.htm

5. http://www.ogfj.com/articles/2012/11/upcoming-changes-in-shale-fracturing-can-impact-proppant-use.html

6. http://www.huffingtonpost.com/2012/07/13/nationwide-insurance-fracking_n_1669775.html

and

http://www.nationwide.com/newsroom/071312-FrackingStatement.jsp

7. http://www.nomisweb.co.uk/reports/lmp/la/2038432055/subreports/abi_compared/report.aspx?

8. http://www.thisismoney.co.uk/money/news/article-2227344/Shale-gas-redraw-economic-map-Britain–price-houses-nearby-wells-fall-24.html?ito=feeds-newsxml

9. http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/30uf.stm