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UK Parliament votes against moratorium on fracking – but there may be a catch

Perhaps unsurprisingly, yesterday afternoon’s House of Commons debate on the Infrastructure Bill did not result in the introduction of the explicit moratorium on further attempts to develop a UK shale gas industry that had been proposed by a number of MPs opposed to fracking.  However, two significant changes have been made to the Bill’s provisions on shale gas exploitation in the UK.

Pre-match build-up

The debate was at the Bill’s “Report” stage in the Commons: this is the first opportunity that the full House, rather than the Committee which has done most of the line-by-line scrutiny work, has to vote on changes to a Bill.  (It is also the last such opportunity, unless the House of Lords subsequently disagrees with changes made by the Commons.)  A large number of amendments had been tabled, mostly seeking either to restrict fracking in some way or requiring further investigation of and reporting on its impacts on climate change, for example as a result of fugitive emissions of methane from fracking sites.  Whilst both the Government and the official Labour Party lines are that fracking should be allowed subject to proper safeguards, there are differences of view as to how far existing legislation and institutions provide sufficient protection for the environment.  And there are a number of MPs of all parties who disapprove of fracking in any circumstances.

This strain of opposition to fracking in principle was demonstrated when the House of Commons Environmental Audit Committee (EAC), which has been considering fracking, chose to publish its report on the morning of the debate.  The report puts the case against developing a UK shale industry on the grounds that it would inevitably be inconsistent with the UK’s climate change emissions reductions targets to do so.  The EAC argue that the Government is wrong if it argues that shale gas is good because it will displace coal as a fuel for electricity generation and so reduce emissions.  They believe that a flourishing shale industry would be bound to breach the UK’s carbon budgets, set under the Climate Change Act 2008.  Essentially, they see the UK’s apparent shale reserves as a prime example of “unburnable carbon“.  The Committee also express concern about the uncertainty surrounding some other impacts of fracking, e.g. on water, and cite “a lack of public acceptance” for the technology.  They conclude that “a moratorium on the extraction of unconventional gas through fracking” is required to “allow the uncertainty surrounding environmental risks to be resolved”.

By a further happy coincidence, The Guardian simultaneously published a leaked letter from George Osborne to Cabinet colleagues on fracking.  The letter demonstrates in some detail the extent of the efforts being made by central Government to ensure that it does everything that it can properly do to facilitate consent for fracking through processes that it does not entirely control (because planning and other consents are administered by local government or the Environment Agency).

Finally, in the days between the end of the Committee sessions and the debate, there was a slow drip-feed of anti-fracking amendments being published and trailed in the media – and Vivienne Westwood and others turned up to protest outside Parliament on the day.

The main event

In the end, as often happens, the debate itself was something of an anti-climax.  The Government used its control of the House to confine the debate to less than two hours, which was followed by votes on a more or less representative sample of the amendments.  Some of the debate generated (in participants’ own words) more heat than light.  Attention was paid to the fate of a report by Defra on the impact of shale gas on the rural economy, which has so far been published only in redacted form.  Some suspect that the Government is suppressing unwelcome analysis.  Ministers have done little to dispel this by saying that the report should not have been produced, is not analytically robust and would not help the debate.  A fair amount of time was also devoted to the question of whether or not MPs had received a copy of a letter from a Minister following up on an earlier debate.

But there was also a considerable amount of substantive discussion.  For example, the arguments from the EAC report were rehearsed, and rebutted by a number of speakers, who pointed out the continuing importance of gas to our heating, as well as electricity generation needs, and that the life-cycle carbon emissions of LNG (on which we are likely to depend in the long-term if we do not find new sources of indigenous gas) have been found to be higher than those associated with shale gas.

The question of further devolution of powers to Scotland was also raised: if legislative competence for the licensing of onshore oil and gas exploration and extraction is to be devolved to the Scottish Parliament, as the Government has proposed following the recommendations of the Smith Commission, should the Government not wait before awarding further licences in Scotland?  Unsurprisingly, Ministers were not persuaded by this view.  After all, they are not proposing to devolve the actual granting of licences to the Scottish Government.

If you don’t want to know the result, look away now…

In the end, only two substantive amendments have been introduced into the Bill in relation to shale gas as a result of yesterday’s debate.

  • A Government amendment requiring the Secretary of State to request the Committee on Climate Change (CCC) to provide advice on the impact which “combustion of, and fugitive emissions from, petroleum got through onshore activity” is likely to have on the Secretary of State’s ability to meet the Climate Change Act duties to reduce greenhouse gas emissions by 80% by 2050 and to meet each of the carbon budgets set under the Act in the meantime.  Future Governments will be obliged to report on the conclusions they have reached after considering the advice of the CCC – a sort of “comply or explain” mechanism.
  • As was expected, the Government allowed a Labour front bench amendment to pass.  The intention of the new clause it introduced is said to be: “to ensure that shale gas exploration and extraction can only proceed with appropriate regulation and comprehensive monitoring and to ensure that any activity is consistent with climate change obligations and local environmental considerations”.  Politically, accepting the new clause was clearly the expedient course.  From a legal point of view, it may cause more problems than it solves.

The new clause lists 13 things that must happen before “any hydraulic fracturing activity” can take place in Great Britain.  The list is a mixture.  Some of the pre-conditions it sets reflect existing legislation – for example requirements to carry out an environmental impact assessment; for planning authorities to consider the cumulative impact of fracking proposals in a given area; and to seek Environment Agency approval of fracking fluids.  Others include monitoring of the site for 12 months before fracking begins; “site-by-site measurement, monitoring and public disclosure of existing and future fugitive emissions”; independent inspection of well integrity; avoidance of groundwater source protection zones; a statutory requirement for the kind of community benefit schemes the industry has already promised; bans on fracking in “protected areas” (undefined), or at depths of less than 1,000 metres; and notification of residents in the area “on an individual basis”.

The House of Lords will now have an opportunity to consider the amendments made by the Commons.  Unless some changes are made to clarify the less tidy parts of the new clause’s drafting, uncertainties over what it requires may lead to a moratorium on GB fracking by the back door if and when the new clause comes into effect.

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UK Parliament votes against moratorium on fracking – but there may be a catch

Coal still counts (2): decision time for generators (or it will be soon)

In a previous post we looked at how the UK’s existing fleet of coal-fired plant had been saved from being made subject to the “emissions performance standard” or EPS under the Energy Act 2013 provisions for Electricity Market Reform (EMR).  This happened when the Government reversed an amendment that would have applied the EPS to existing coal-fired plant if its operators were to choose to keep it running in the long term by fitting the equipment necessary for it to comply with the new limits on emissions (in particular of NOx) that will apply to it from 2016 under the Industrial Emissions Directive (IED).  In this post, we explore the choice which operators have to make under the IED – and why the Government may have thought it worth keeping them out of the EPS. 

Existing plant faces a choice under IED.  In broad terms, it must either upgrade to meet the new emission limits, or run for a limited number of hours – for example, by opting for the “limited life derogation” (LLD).  The LLD allows plant to run in its current form for 17,500 hours before closing no later than 2023.  Subjecting existing coal-fired plant to the EPS if and when it upgraded to comply with IED NOx limits would have made it likely that its operators would opt for the LLD rather than upgrading, and at the load factors at which UK coal plant has been operating recently, most plants would probably burn through their 17,500 hours by 2020, if not before.

Why should that worry us?  Wouldn’t it just be another example of EU legislation that isn’t about climate change being more effective at tackling CO2 emissions than the EU Emissions Trading System?  (Most UK coal plant closures to date have been driven by the Large Combustion Plants Directive, which the IED replaces, and which was designed to combat effects such as acid rain rather than “global warming”.)  To understand why the Government was so keen to keep existing coal plant out of the EPS, we have to look at the work it is doing in the generating mix. 

In 2012, the UK’s total combined cycle gas turbine (CCGT) capacity (35.57GW) exceeded its total coal and oil-fired “conventional steam” generating capacity (30.97GW) for the first time.  But that same year, gas’s share of electricity generation fell from 40% (in 2011) to 28% and coal’s rose from 30% to 39%.  (Greenhouse gas emissions from the UK energy supply sector increased by almost 6 per cent as a result.)  Coal’s high share of UK generation persisted, and appears to have increased slightly, in 2013. 

Why is this?  Coal-fired power over this period has simply been cheaper than gas-fired power (partly because the availability of shale gas has hit US coal prices).  It can keep the lights on at lower cost.

Much of our coal-fired electricity comes from just 10 coal-fired plants, with a combined capacity of over 18 GW – about a fifth of generating capacity connected to the grid.  Now that the 1 January 2014 deadline for indicating their operators’ intentions as regards the LLD has passed, and with the threat of EPS removed, we might expect that there would be some clarity as regards their future, but in fact there is still a degree of uncertainty about most of them.

  • The future plans of three (Drax, Eggborough and Rugeley, together representing some 6.8GW of capacity, and all owned by generators who are not in the “Big 6”) appear to depend in part on plans to convert to burning biomass.  The success of these plans is likely to depend on whether they are allocated EMR Contracts for Difference (CfDs), and meet the conditions for those CfDs to take effect (more on all this in a later post).
  • One (E.ON’s Ratcliffe, 2GW) appears fully prepared for IED compliance.  Another (SSE’s Fiddler’s Ferry, just under 2GW) has development consent to fit the necessary equipment.  A third (Scottish Power’s Longannet, 2.3GW) is testing new technology to comply with IED.
  • The operators of four of them (Aberthaw, Cottam, Ferrybridge and West Burton, representing together some 7.5GW) have provisionally decided not to invest in the equipment necessary to comply with the IED.  Instead, EDF, RWE and SSE have said they plan to use the LLD. 

The story is clearly not over.  EDF, RWE and SSE have all indicated that they may still choose to upgrade some of their plants to IED standards.  So their choice of the LLD may be more about keeping their options open than representing their preferred long-term option for these four plants.  RWE commented: “Only after we have political clarity on how the energy market will operate under the Government’s new energy legislation as well as any other political changes to be enacted, will we be able to make [a] final decision with confidence.”.

The reference to the uncertainties still surrounding a number of aspects of  EMR reminds us that some existing plant may be looking to the EMR capacity market as a means of funding investment in IED compliance.  More on how the capacity market may work for coal and other types of plant in further posts.  For the moment, though, note two more points.  First, if operators wish to revisit their decision to choose the LLD and opt back in to the IED, they will be relying on, and will need to fit in with, the UK’s Transitional National Plan (TNP).  The TNP permits plants to ease in to IED compliance by 2020 rather than 2016.  But the UK’s TNP has so far not been approved by the European Commission as required by the IED.  Second, according to Defra, RWE, EDF and SSE do not have to reach a final decision on IED until the end of 2015.  This may be a very convenient deadline, since it comes after the next election, when operators will know whether Labour’s ambitious “Green Paper” proposals for further market reform are likely to be enacted.   

So, we are a long way from having heard the last of the power-politics of coal – although there are a few more legal elements to the debate than there were in the good/bad old days of the 1960s and 1970s.  There is no doubt that coal still counts, but it looks as if we will have to wait a little longer to see how far we can still count on some of our existing coal-fired plant.

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Coal still counts (2): decision time for generators (or it will be soon)