Unconventional oil and gas policy: BRIA

Business and Regulatory Impact Assessment

Title of Proposal

Policy on the development of onshore unconventional oil and gas in Scotland

Purpose and intended effect

This Business and Regulatory Impact Assessment (BRIA) of the development of unconventional oil and gas policy in Scotland forms an element of the Government's policy-making process in determining the role of onshore unconventional oil and gas in Scotland's energy mix.

The BRIA is part of a suite of evidence, including independent research, statutory assessments, and public consultation, which have been considered by Scottish Ministers in finalising their policy on unconventional oil and gas.

The Minister for Business, Innovation and Energy set out, via parliamentary statement on 03 October 2017, that the Scottish Government's preferred policy position was, subject to statutory and other assessments, that it does not support the development of unconventional oil and gas in Scotland.

A Strategic Environmental Assessment (SEA) Environmental Report on the Scottish Government's preferred policy position was published in October 2018, alongside the preferred policy position statement (updated to reflect the devolution of onshore oil and gas licensing which occurred in February 2018) and a partial BRIA. Views were invited on the contents of these documents during an eight-week consultation from October to December 2018.

The responses received to the 2018 statutory assessments consultation led the Scottish Government to form the view that it would be helpful to provide some further clarification on a number of points raised in response to the consultation documents, specifically regarding the preferred policy position and its objectives. On 30 April 2019, the Scottish Government published an addendum to the SEA Environmental Report, the preferred policy position statement and the partial BRIA, and invited further comments on the points covered over an eight-week period.

Responses to the 2017 Talking "Fracking" consultation^[1], 2018 consultation, and 2019 addendum consultation have all been considered by Scottish Ministers as part of the finalisation of unconventional oil and gas policy in Scotland.

Background

Scotland's Energy Strategy and Climate Change

Scotland's Energy Strategy (published 20 December 2017) sets out a vision for the future of energy in Scotland. It will guide the decisions that the Scottish Government, working with partner organisations, needs to make over the coming decades and support work already underway to achieve Scotland's long term climate change targets and transition to a low carbon economy.

Action to mitigate climate change is a key component of the Scottish Government's aim to create a growing, sustainable and inclusive economy.

The Intergovernmental Panel on Climate Change (IPCC) report on global warming, published shortly after the SEA Environmental Report itself was published, makes clear that all countries, as well as businesses and individuals, need to act now if the Paris Agreement goals are to be met. The IPCC report says the world needs to be carbon-neutral, defined as net-zero emissions of carbon dioxide, by 2050.

The First Minister declared a global climate emergency at the end of April 2019 and in May the UK Committee on Climate Change (CCC) advised that Scotland could achieve net-zero emissions of all greenhouse gases by 2045, and the UK by 2050.

The Parliament's Environment, Climate Change and Land Reform Committee voted in June 2019 to accept the Government's amendments to the Climate Change Bill to increase Scotland's targets in line with the CCC's advice. The UK Government introduced secondary legislation setting a net zero target for 2050.

In response to the global climate emergency, Scottish Ministers' high ambition will be matched by on-the-ground delivery. The Climate Change Plan will be updated, looking across Scottish Government responsibilities to make sure the policies that are working are continued, areas where more can be done faster are identified.

The Scottish Energy Strategy sits alongside our Climate Change Plan 2018-2032, which sets out how we will continue to drive down emissions over the period to 2032 and the Climate Change Plan is due to be updated in 2020. One of the three key aims of the Energy Strategy is a stable energy transition towards renewable energies and the priority moving towards 2050 of championing Scotland's renewable and low carbon energy potential, creating new jobs and supply chain opportunities.

The Strategy acknowledges the important role of gas in the inclusive transition to a low carbon energy future. The Strategy also reflects the conclusion of the independent Committee on Climate Change report on Unconventional Oil and Gas (2016) that the high level of ambition embodied in the (then) Scottish emissions reduction targets means that finding additional emissions reductions from elsewhere in the Scottish economy to accommodate even moderate additional emissions from unconventional oil and gas production or other sources would be challenging. The current, more stringent overall emissions reduction targets pull this advice into even sharper focus.

Unconventional Oil and Gas

Unconventional oil and gas can contribute to the provision of natural gas for energy or energy production and natural gas liquids as a raw material for the petrochemical industry.

The term 'unconventional' in unconventional oil and gas refers to the types of geology in which the oil and natural gas are found. For the purpose of this BRIA, unconventional oil and gas is understood to include:

• Gas extracted from onshore shale sources using hydraulic fracturing (commonly known as 'fracking');
• Associated liquids extracted from onshore shale sources using hydraulic fracturing; and,

• Coal bed methane (CBM).

Most of Scotland's unconventional oil and gas deposits occur in and around former coalfields and oil shale fields in Scotland's Central Belt which contains some of the most densely populated areas of the country, as well as in areas in South East Scotland.

Unconventional Oil and Gas – Policy Development Process

The Scottish Government has taken a cautious, evidence-led approach to considering onshore unconventional oil and gas in Scotland. This included the establishment of an Independent Expert Scientific Panel ('the Expert Panel') to examine the evidence on unconventional oil and gas, including hydraulic fracturing and coal bed methane extraction.

Following the publication of the Expert Panel's report^[2], in January 2015 the Scottish Government announced a moratorium on onshore unconventional oil and gas development in Scotland. The moratorium created space to explore specific issues and evidential gaps identified by the Expert Panel, and undertake full public consultation. A series of independent research studies^[3] were commissioned covering issues such as climate, seismic activity, transport, health impacts and economic impacts, and a public consultation, which received over 60,000 responses, was held from January to May 2017.

On 24 October 2017, the Scottish Parliament voted in favour of the Scottish Government's preferred policy position of not supporting onshore unconventional oil and gas development in Scotland.

The Scottish Government was statutorily required to undertake a SEA ahead of finalising the policy on unconventional oil and gas. In addition, a BRIA was also undertaken. An addendum to these documents, and the preferred policy position, was published in April 2019, and consulted on over an eight-week period.

Following careful consideration of both the statutory and other assessments and consultation responses to them and all the previous evidence the Scottish Government has assembled, Scottish Ministers have concluded that an unconventional oil and gas industry would not be of sufficient positive benefit to Scotland at this time. Therefore, based on current evidence and social acceptability, the Scottish Government has agreed that its finalised policy position is of no support for unconventional oil and gas development in Scotland. This means development connected to the onshore exploration, appraisal or production of coal bed methane or shale oil or shale gas using unconventional oil and gas extraction techniques, including hydraulic fracturing and dewatering for coal bed methane.

The adopted policy will also be reflected in the draft of the next iteration of the National Planning Framework (NPF4). This draft is expected in the parliamentary session 2020/21. When they come into force, the provisions of the Planning (Scotland) Act 2019 will mean that Ministers cannot adopt the National Planning Framework unless Parliament have approved it – a significant change from previous iterations.

In addition to the policy of no support for unconventional oil and gas being a material consideration for planning decisions, Scottish Ministers will discharge their devolved licensing powers having regard to the adopted policy position of no support for unconventional oil and gas in Scotland.

Objective

This BRIA sets out considerations regarding the potential impacts of the proposals for Scotland's unconventional oil and gas policy on businesses and other organisations.

The information in this BRIA is drawn from the existing evidence base and references the relevant documents where appropriate: specifically the suite of research on unconventional oil and gas commissioned by the Scottish Government and the responses to the public consultation, Talking "Fracking". It also includes views from both internal and external stakeholders received as part of the consultation on the partial BRIA in late 2018, and the consultation on the addendum to the statutory and other assessments in 2019.

In reviewing the research findings, the Scottish Government has identified particular concerns over the insufficiency of epidemiological evidence on health impacts highlighted by Health Protection Scotland.

The compatibility of an unconventional oil and gas industry with Scotland's world leading climate change targets is an area of further concern.

The study commissioned by the Scottish Government to examine climate change implications, which was undertaken by the Committee on Climate Change, concluded that unconventional oil and gas extraction in Scotland would make meeting our existing climate change targets more challenging.

As the Committee states in their report, in order to be compatible with Scottish climate change targets, emissions from production of unconventional oil and gas would require to be offset through reductions in emissions elsewhere in the Scottish economy.

The Scottish Government is also aware that the potential activity associated with an unconventional oil and gas industry would be likely concentrated in and around former coalfields and oil shale fields in the Central Belt of Scotland, which are among the most densely populated parts of the country.

It is clear from our consultation, Talking "Fracking", that communities across Scotland, particularly in areas where developments could take place, have yet to be convinced there is a strong enough case of national economic importance, when balanced against the risk and disruption they anticipate on matters such as transport impacts, risks of pollution, and on their general health and wellbeing.

Although the Scottish Government is confident that an unconventional oil and gas industry would aim to work to the highest environmental, and health and safety standards, it is also our responsibility as a government to make a decision we believe is the best for the people of this country.

The Scottish Government considers the development of an onshore unconventional oil and gas industry in Scotland would make achieving our energy and climate change commitments more challenging. Whilst acknowledging the important role of gas in the transition to a low carbon energy future, Scotland is a net exporter of natural gas and the addition of an onshore unconventional oil and gas industry would not promote our ability to meet our greenhouse gas emissions targets or objectives in relation to protecting and enhancing the environment.

Rationale for Government intervention

Powers over onshore oil and gas licensing were devolved to Scottish Ministers in February 2018. These include the granting and regulation of licences to search and bore for and get petroleum (including unconventional oil and gas) within the Scottish onshore area.

The powers were recommended for devolution by the Smith Commission in November 2014, and devolved as part of the Scotland Act 2016. As a result, Ministers acknowledged the need to arrive at a policy position regarding onshore unconventional oil and gas in Scotland.

In previous years, the UK Government issued Petroleum Exploration and Development Licences (PEDLs) in Scotland. There are currently three PEDLs held in Scotland, two of which are held by companies with the intention of targeting unconventional oil and gas.