The extraction of unconventional oil and gas is an industrial process and, as with most industrial processes, if not appropriately undertaken and controlled, it could result in adverse impacts to the environment and to local communities.
This section summarises and discusses the studies we commissioned in 2016 to examine climate change, decommissioning and risks of induced seismicity. The section also discusses regulation and how it could be strengthened.
Unconventional oil and gas, and Climate Change
The Scottish Parliament has set ambitious climate change targets to reduce emissions of greenhouse gases by 80% by 2050, from 1990 levels.
As of 2014, we have delivered a 45.8% reduction from baseline levels  meeting our annual target for that year and exceeding our 2020 target for a 42% reduction, six years early.
The Scottish Government's third Climate Change Plan, which was published in draft on 19 January 2017, shapes and sets out our approach to tackling climate change and paving the way for Scotland's transition to a low carbon economy.
More information on Scotland's draft Climate Change Plan can be found at: http://www.gov.scot/publications/draft-climate-change-plan-draft-third-report-policies-proposals-2017/
The current policy on unconventional oil and gas is a moratorium, pending a decision after this public consultation. As such, the draft Climate Change Plan does not consider the potential role of, or emissions from, unconventional oil and gas.
Greenhouse gas emissions can occur at different stages of an unconventional oil and gas development. Some of these emissions will be carbon dioxide ( CO 2), and others will be methane. The UK Committee on Climate Change note that the Fourth Assessment of the Intergovernmental Panel on Climate Change indicates that a tonne of methane emitted is equivalent to 25 tonnes of CO 2 in terms of its warming potential.
The Committee on Climate Change have identified the following main sources of emissions from an unconventional oil and gas development:
- Fugitive emissions, which include both vented emissions and unintentional leaks. Vented emissions are a result of planned releases, where permitted, as a result of maintenance operations and safety concerns. Unintentional methane leaks include those from valves and pipe joints, compressors, well heads, and accidental releases above and below ground from the well, through to injection into the grid or before being put to use.
- Combustion emissions that occur from on-site burning of fossil fuels. The emissions come from engines, such as those used for drilling and hydraulic fracturing, as well as from any flaring of gas.
- Indirect emissions that result from transporting materials and waste to and from a site.
- Land-use change emissions, which include the CO 2 released when land is converted from one use to another, as well as any emissions relating to land remediation during decommissioning.
Research findings: potential climate change implications
In response to the potential significance of emissions from unconventional oil and gas to Scotland's ambitious climate change agenda, we asked the Committee on Climate Change to provide us with advice on the potential impact of unconventional oil and gas on Scottish and global greenhouse gas emissions.
To examine these issues, the Committee on Climate Change used the production scenarios developed by the study exploring economic impacts, which are discussed on PDF page 29.
A summary of the main research findings is provided below.
What would be the impact of unconventional oil and gas production in Scotland on our greenhouse gas emissions?
- The Committee on Climate Change's assessment is that exploiting unconventional oil and gas reserves on a significant scale is not compatible with Scotland's climate change targets unless:
- Emissions are limited through tight regulation. Within this, much greater clarity is necessary over the respective roles of different actors in the regulatory system, particularly around fugitive emissions.
- Fossil fuel consumption remains in line with the requirements of Scottish emissions targets. Scottish unabated fossil energy consumption must be reduced over time within levels previously advised by the Committee. This means that Scottish unconventional oil and gas production must displace imported gas rather than increasing domestic consumption.
- Emissions from production of unconventional oil and gas are offset through reductions in emissions elsewhere in the Scottish economy.
- Central estimates are for emissions from unconventional oil and gas to reach 2.6 Mega tonnes per year (Mt) CO 2 equivalents in 2035 for unregulated production under the economic impact and scenario development High Production scenario. Emissions fall to 1.6 Mt under a 'minimum necessary regulation' scenario, and to 1.1 Mt with fuller technical mitigation.
- Under the central production scenario, emissions are estimated to be 0.6 Mt per year in 2035 if the minimum necessary regulation were adopted.
- To put these figures into context, the annual emissions target in 2032 is 26.4 Mt of CO 2 equivalents.
- The high level of ambition embodied in Scottish annual emissions targets means that finding offsetting effort elsewhere in order to accommodate even moderate additional emissions from unconventional oil and gas production or other sources ( e.g. aviation) would be challenging.
- The implications for greenhouse gas emissions of unconventional oil and gas exploitation are subject to considerable uncertainties, both regarding the size of any future industry and the emissions footprint of production. The research sets out a number of potential emission trajectories under a number of different scenarios.
What would be the impact of unconventional oil and gas production in Scotland on global greenhouse gas emissions?
- The overall emissions footprint of Scottish shale gas, if tightly regulated, is likely to be broadly similar to that of imported gas. Tightly- regulated domestic production may provide an emissions saving when displacing imports of liquefied natural gas, and would provide greater control over the level of emissions associated with supply.
- Initial evidence suggests that tightly-regulated shale gas production is likely to have a broadly neutral impact on global emissions, with emissions savings due to switching from higher-carbon fossil fuels approximately offsetting emissions increases due to increased use of unabated gas.
- Within the context of a world committed to decarbonisation, it is likely that domestic production of hydrocarbon liquids would displace high-cost production elsewhere in the world, rather than increasing overall oil product consumption or driving fuel switching.
How might these impacts vary over time?
- The emissions relating to production grow over time, broadly in line with the growth in hydrocarbons produced, peaking slightly after 2035 under each scenario.
Research findings: Decommissioning and aftercare
Recent experience with the remediation of open-cast coal sites in Scotland has highlighted the importance of robust decommissioning and restoration regimes. Robust regimes mean ensuring operators comply with their obligations, and communities and the public sector aren't left to deal with restoration and aftercare issues and costs.
The Expert Panel report summarised the key issues relating to decommissioning and remediation, including potential risks arising from well integrity. The Expert Panel report also highlighted potential gaps in aftercare requirements and long-term monitoring.
To understand these issues in more detail we commissioned research to tell us more about potential environmental risks, industry best practice, and the adequacy of regulatory controls over decommissioning, including for long-term monitoring.
A summary of the main research findings is provided below.
What steps can be taken to ensure decommissioning, site restoration and aftercare can be undertaken in a way that minimises impacts on communities and the environment?
- Scotland has a mature framework for the regulation and control of unconventional oil and gas development which is at least the equal of those examined in other countries or other industries. With appropriate regulatory oversight and monitoring, the framework is sufficient to manage risks of well leakage consistent with the aim of providing suitable protection for communities and the environment.
- The risk of leakage from abandoned wells is likely to be low, and international experience suggests that long-term well integrity can be achieved by implementing best practice during well construction and abandonment operations under a strong regulatory regime.
- There is a risk that a small proportion of wells may fail. Leaks may occur from these wells if there is a source of oil or gas under pressure (which is generally not the case). Therefore it may be appropriate to monitor for leakage from decommissioned wells for as long as Scottish Environment Protection Agency consider necessary.
What forms of financial guarantee provide robust security against liabilities?
- It is essential that unconventional oil and gas operators have sufficient funds available to cover liabilities associated with the abandonment and decommissioning of wells.
- Taking lessons from open cast coal mining there are financial mechanisms available which can minimise the risk of operators failing to honour their commitment to decommissioning.
Research findings: Risk of increased seismicity
Many activities involve small amounts of induced seismicity (ground vibrations or earthquakes) including construction, quarrying and many commonly occurring drilling operations.
The Expert Panel also noted that data compiled from American sources suggests that induced seismicity from hydraulic fracturing is typically minor and unlikely to be felt by individuals. Nevertheless, a more significant seismic event was attributed to hydraulic fracturing operations in Lancashire in north-west England in April and May 2011.
Experience from North America suggests that disposing of wastewater from hydraulic fracturing by re-injecting it into the ground can result in an increased risk of seismic activity.
We therefore commissioned research to develop a better understanding of the risks of seismic activity that could be presented by unconventional oil and gas developments in Scotland.
A summary of the main research findings is provided below.
What levels of induced seismic activity could be associated with unconventional oil and gas developments in Scotland?
- Hydraulic fracturing is accompanied by seismic events of low magnitude. The magnitudes of these events are usually less than 2.0 making them too small to be felt by people.
- The process of hydraulic fracturing as presently implemented poses a low risk of inducing felt, damaging or destructive earthquakes.
What regulatory and non-regulatory actions can be taken to mitigate any noticeable effects on communities?
- Recent increases in earthquake rates and significant earthquakes in many areas of the United States where hydraulic fracturing is undertaken have been linked to the disposal of wastewater by injection into deep wells rather than hydraulic fracturing itself.
- In the UK, following induced seismicity near Blackpool in 2011, the UK Government put steps in place to mitigate risks. This included identifying a limit of 0.5 ML where operations should be halted. An event of this magnitude is unlikely to be felt, does not pose any seismic hazard, and would only be detected by sensitive monitoring equipment in the vicinity of the epicentre.
- The study concludes that a dense network of monitoring stations is essential for reliable detection and discrimination of induced seismic events, and to allay public concern.
Regulation of unconventional oil and gas
As outlined by the Expert Panel, the existence of a potential impact does not mean that it will occur, and effective regulation, best practice and other assessments can reduce, or eliminate, adverse occurrences.
A regulatory framework already exists in Scotland, which covers the vast majority of activities requiring control and monitoring as part of unconventional oil and gas developments. Figure 9 summarises some of the main controls.
The Expert Panel observed that this framework is generally well coordinated between the main regulatory bodies.
The following section provides information on the current regulatory framework for unconventional oil and gas developments. This is followed by a discussion of areas where the framework could be strengthened.
The current regulatory framework
As discussed on PDF page 13, rights to oil and gas in a given area are governed by a licensing system. There are currently three licences for unconventional oil and gas in Scotland, all of which were issued by the UK Government. The Scottish Government moratorium means that there is no unconventional and gas activity in these areas.
The licences do not give the licence-holder automatic permission to begin exploration, appraisal or extraction as a range of other planning and environmental permits are required before a development can commence.
Figure 9: Examples of regulatory controls to minimise or mitigate impacts.
The focus of the planning system is on determining whether a proposal is an appropriate use of land, but other regulatory regimes covering health and safety and environmental protection would be relevant to the consideration of an application or planning permission.
Underground operations as well as above ground development can only be undertaken once planning permission has been granted. Planning Authorities are responsible for considering planning applications for works associated with an unconventional oil and gas development. Further information on factors considered during a planning application is provided on PDF page 33.
The Scottish Environment Protection Agency ( SEPA) regulate specific activities that may cause pollution or pose other risks to the environment. For example, SEPA consider applications for licences under the Pollution Prevention and Control (Scotland) Regulations 2012, to control emissions to air, land and water and the Water Environment (Controlled Activities) (Scotland) Regulations 2011, to control borehole construction, abstraction of water from surface water or groundwater, and activities that are liable to cause pollution of
the water environment.
The Health and Safety Executive regulate to ensure the operator is managing the health and safety risks appropriately throughout the life cycle of an unconventional oil and gas development. Operators must notify the Health and Safety Executive about the design, construction and operation of wells and must prepare a health and safety plan which sets out how health and safety risks are managed on-site. Health and Safety Executive specialist inspectors scrutinise the information provided by the operator and further information provided each week during the abandonment process to ensure that the well is being abandoned to the correct standards.
Local Authorities are responsible for Environmental Health matters, which includes protecting the public from the harmful exposures they may encounter in the environment. Local Authorities also require waste to be managed in a way that minimises risk to human health and the impact on the environment, and are regularly required to review and assess air quality against the objectives contained in the Air Quality Strategy for England, Scotland, Wales and Northern Ireland.
Scottish Natural Heritage consider potential impacts to wildlife, protected species, and scenic and special conservation areas.
The Scottish Government has prepared a more extensive overview of the current regulatory framework, which can be found at: http://www.gov.scot/Resource/0050/00509369.pdf.
Areas where the regulatory framework could be strengthened
The Expert Panel concluded that 'The regulatory framework is largely in place to control the potential environmental impacts of the production of unconventional oil and gas in Scotland, although there may be gaps to address'.
The Expert Panel highlighted the strength and quality of regulation in Scotland, and that there are considerable legislative safeguards to ensure that potential impacts are not realised. The Expert Panel also identified specific regulatory issues that could create gaps in the regulatory framework and where regulation could be strengthened or transparency enhanced.
In response to the Expert Panel's conclusion, and to inform this consultation, the research projects commissioned by the Scottish Government were asked to examine relevant regulatory issues and lessons from international best practice. The Scottish Government also hosted a workshop in October 2016 with the main regulators to discuss regulation and the issues identified by the research projects and the Expert Panel.
A summary of the workshop, which includes a summary of areas were regulation could be strengthened (BOX 7), can be found at: http://www.gov.scot/Resource/0051/00510364.pdf
BOX 7: Examples of areas where regulation could be strengthened
Air Quality: The Independent Expert Scientific Panel noted that some air emissions, including fugitive emissions, may not be fully regulated under current arrangements. The Committee on Climate Change also observe that greater clarity is necessary over the respective roles of different bodies to ensure full coverage of greenhouse gas emissions.
The Scottish Government considers that amendments to legislation to bring overarching coherence to the regulatory framework for air emissions would be necessary, which could include a single or lead competent authority to regulate all sources of emissions across the lifetime of a project.
Decommissioning: The decommissioning study noted that there is currently no power to require specific arrangements for well decommissioning and aftercare if a company fails financial tests after consent to drill a well has been given. The study observed that financial strength tests could be run regularly, with greater emphasis on testing the sufficiency of funds to cover decommissioning and restoration costs. Where a company fails a financial test, provisions such as Parent Company Guarantees, insurance, bonds or letters of credit or payment into escrow accounts could be required.
The study also observed that there is a low probability of well failure. If such a failure did occur, long-term insurance products, or a mutual-fund, could be required to cover the costs of repairing wells that fail following decommissioning, and any accompanying remediation.
Induced Seismic Events: The UK Government has issued guidance that operations should cease if seismic events of 0.5 ML or greater are induced. The study examining seismicity notes that existing monitoring networks are not capable of reliable detection and location of these magnitude levels, and that improved monitoring and measurement are required to implement the system successfully.
Further observations from the research on how regulation could be strengthened:
A Health Impact Assessment, Environmental Impact Assessment and Traffic Management Plan could be required for all planning applications relating to unconventional oil and gas developments.
Improved engagement with the local community could be required, including release of data to enable communities to scrutinise operational standards, and increased transparency of chemicals used.
Improved baseline monitoring of environmental and health data to allow any environmental and health impacts to be effectively identified.
Establishment of appropriate setback distances, in order to minimise risks to residents and to address risk perception issues.
The delegates at the workshop held in October 2016 agreed that the following points should guide any future analysis of the regulatory framework:
- the observations on regulation made by the researchers and during the workshop would form a basis for organising work to examine how regulation could be strengthened if that was to be required;
- that an effective approach, in the event that it is required, to advancing such work would be the formation of an Expert Regulatory Group, chaired by the Scottish Government with representation from the regulators present at the workshop; and
- the group would require access to technical and legal resource, would make use of existing professional networks and would consider community impacts and involvement.
SCOTTISH GOVERNMENT OBSERVATIONS ON THE EVIDENCE
An unconventional oil and gas sector in Scotland is likely to have a broadly neutral impact on global greenhouse gas emissions if it is tightly regulated.
However, within the context of Scotland's climate change legislation, an unconventional oil and gas industry would create challenges in meeting Scotland's ambitious and world-leading climate change targets.
In respect to environmental regulation, the research project findings are broadly consistent with the findings of the Independent Expert Scientific Panel, which concluded that 'The regulatory framework is largely in place to control the potential environmental impacts of the production of unconventional oil and gas in Scotland, although there may be gaps to address'.
The study examining seismicity concludes that the risk of felt earthquakes from unconventional oil and gas developments is low. However, where disposal of wastewater by reinjection into a hydraulically-fractured well has been permitted in North America, there is evidence it has increased the risk of earthquakes. We note that this form of wastewater disposal is not a practice that has been proposed by industry in the UK.
We are committed to undertaking all relevant statutory assessments in coming to a final position on unconventional oil and gas, including undertaking a Strategic Environmental Assessment, which would be required regardless of the form of our final decision.
The regulators are confident that the research we have commissioned has provided a clear analysis of where regulation could be strengthened in key areas.
This section discussed potential environmental and climate change implications of an unconventional oil and gas industry in Scotland, and the findings from the evidence we have commissioned to examine these issues.
In answering the following questions, please consider whether, in your view, there are any specific gaps in the evidence presented.
Q5: What are your views on the potential environmental impacts of an unconventional oil and gas industry in Scotland?
Q6: What are your views on the potential climate change impacts of unconventional oil and gas industry in Scotland?
Q7: What are your views on the regulatory framework that would apply to an unconventional oil and gas industry in Scotland?