10 Jun 2011

Tremors in Lancashire

The recent seismic events near Blackpool in Lancashire, while at very low orders of magnitude, have drawn a substantial amount of public attention to the risks and controversy associated with onshore drilling for shale gas.  The operations of Cuadrilla Resources, a company that has been making relatively low-profile investigations into shale gas potential in the UK since 2007, are now under the spotlight.

The potential of shale gas as an unconventional source of hydrocarbons is of keen interest within the global energy industry.  Shale gas is currently produced in quantity only in the US.  However last month a strategy paper from the European Centre for Energy and Resource Security (EUCERS) presented shale gas as a "game changer" for energy security in the European Union.  Based on preliminary analysis shale basins in the UK, Poland and the Netherlands show particular promise for economic development.

Against that, campaigners in North America have increasingly raised concerns about perceived environmental dangers associated with shale gas drilling.  The 2010 documentary Gasland was critically acclaimed and introduced hydraulic fracturing ('fracking', or 'fracing' as the practice is better known in the gas industry) to a mainstream audience.  The US Environmental Protection Agency (EPA) is conducting a study to better understand potential impacts of hydraulic fracturing on drinking water and groundwater.   In New York State legislators have imposed a moratorium on new permits for hydraulic fracturing until June 2012.

Cuadrilla in the UK

Cuadrilla Resources is a private equity vehicle, registered in the UK but owned principally by AJ Lucas and Riverstone LLC.   Lucas is best known as a supplier of drilling services in Australia's coal and coal seam gas industries.  Riverstone is a leading investor in the global energy sector, based in New York, and operates mainly through a joint venture with the Carlyle Group.

Cuadrilla was granted exploration and development licences for onshore drilling in two areas of England, by the BERR in 2008.  Responsibility for energy policy, and licensing of oil and gas activities, has subsequently been transferred to the Department of Energy and Climate Change (DECC).

To date Cuadrilla has received planning permission and regulatory approval to commence exploratory drilling for shale gas at five sites in Lancashire, as well as at least one site in West Sussex.  Under the licence terms Cuadrilla is not obliged to publicly disclose its findings on the commercial potential for gas production in the test areas until 2015.

Cuadrilla began test drilling at its Preese Hall 1 site, near Poulton-Le-Fylde in Lancashire, in August 2010.  It moved into a second phase of activity, which includes hydraulic fracturing, earlier this year.

Cuadrilla test sites

The maps below shows the locations of sites in Lancashire and West Berkshire where Cuadrilla Resources has received planning permission for drilling of exploratory boreholes and testing for hydrocarbons, based on public planning documents.  The yellow outlines show the extents of the two onshore areas of the UK where Cuadrilla is licensed to conduct operations.

Hydraulic fracturing

Hydraulic fracturing is the process of drilling a wellbore into a rock formation and injecting fluids, at depth and under high pressure, to induce fractures in the rock and release gas.  This EPA graphic (not to scale) illustrates the general concept:

The majority of public concern about hydraulic fracturing has focused on the components of the fluid solution pumped into the rock, and potential for contamination of water supplies and groundwater resources either by chemicals in the solution or by released gas itself.  In the US there is strong evidence for a link between shale gas extraction and contamination of drinking water in the Marcellus and Utica shale formations of northeastern Pennsylvania and upstate New York.

However according to Cuadrilla the fracking fluids used in its Lancashire operation are 99.75% water and sand.  Cuadrilla also points out that drinking water in Blackpool is supplied from the Fylde sandstone acquifer, which is geologically separate from the Bowland Shale formation in which they are drilling.  The DECC notes that environmental regulations in the US are relatively permissive and that operating conditions are different in the UK.

The Blackpool earthquakes

British Geological Survey seismographs recorded earthquakes in the vicinity of Cuadrilla's Preese Hall drill site on 1 April and 27 May 2011, of magnitudes 2.3 and 1.5 ML respectively.

The circumstantial evidence linking the two earthquakes to the Preese Hall drilling location is compelling.  The Blackpool area normally has a very low level of seismic activity even by UK standards; the coincidence of two events with epicentres close to the site was unusual.

The BGS said in a statement:  "We understand that fluid injection, between depths of 2–3 km, was ongoing at the Preese Hall site shortly before both earthquakes occurred.  The timing of the two events in conjunction with the fluid injection suggests that they may be related.  It is well-established that fluid injection can induce small earthquakes."

Cuadrilla suspended drilling for an estimated eight week period following the seismic event on 27 May, in order to undertake a geomechanical study and facilitate further work by the British Geological Survey and Keele University.

Public scrutiny

Last year the DECC ran an inquiry into unconventional gas as part of its normal departmental activities.  The BGS, under contract to the DECC, produced a paper 'The Unconventional Hydrocarbon Resources of Britain's Onshore Basins - Shale Gas' (PDF) intended as a geologic framework to examine the potential for shale gas exploration in the UK.

DECC was subsequently criticised before the House of Commons Select Committee on Energy and Climate Change for failing to call for public evidence in their inquiry and in particular for not contacting Cuadrilla, then the only shale gas operator in the UK.  According to the energy minister Charles Hendry, "the degree of interest that is in shale gas at the moment wasn't there at the time and this was seen as a more routine process."

In January this year the Tyndall Centre for Climate Change Research produced a report on behalf of The Co-operative Group, 'Shale gas: a provisional assessment of climate change and environmental impacts'.  The report was broadly sceptical of the claims made for the potential of shale gas in the UK and urged a precautionary approach to development.

In early May the Energy and Climate Change Committee published its own Shale Gas report, based on formal written and oral evidence from numerous interested parties including the DECC and Cuadrilla.  The report found no evidence that the hydraulic fracturing process itself posed a direct risk to underground water aquifers, and concluded that the energy security benefits that shale gas could provide to the UK should be balanced against this "hypothetical and unproven risk".

However none of the above reports make more than a passing mention of the known potential for small earthquakes from processes that injects pressurised water into rocks at depth.  Following the recent events in Lancashire local MPs have called for an additional safety inquiry into hydraulic fracturing.

Evaluating the risk

It is generally understood that any large industrial process that injects pressurised water into rocks at depth has the potential to produce small earth tremors.  By themselves the two recent events recorded near Blackpool are little more than curiosities, and will remain so while shale gas operations in the UK are at an exploratory stage.  However it is clear that the relationship between hydraulic fracturing and seismic activity has not been considered in any detail by UK policymakers.

In central Arkansas geologists have recently speculated on the correlation, after the number and strength of earthquakes there dropped noticeably following the shutdown of two injection wells.  Whether this subject becomes a real safety concern in the UK will depend on the scale of development of shale gas operations.  With the 14th UK Onshore Licensing Round underway this year, there is a strong argument that the DECC should give this subject proper consideration now rather than later.

At the local level there is scope within the planning and regulatory processes for additional scrutiny of the location of drill sites in relation to critical infrastructure, taking into account any new information generated about the seismic effects of hydraulic fracturing.  For example two of Cuadrilla's current locations (the Preese Hall site in Lancashire and the Lower Stumble site in Balcombe, West Sussex) are very close to rail lines, and planners should additionally consider the proximity of drill sites to large raised reservoirs.