Onshore unconventional oil and gas in Scotland: analysis of responses to consultations

9. The partial BRIA (Q6)

9.1 The SEA and preferred policy position were accompanied by a partial BRIA (Business and Regulatory Impact Assessment). A BRIA sets out an assessment of the potential impact (costs and benefits) of a proposed policy on businesses and other relevant organisations.

9.2 The partial BRIA set out the policy background relating to onshore unconventional oil and gas in Scotland and the Scottish Government's preferred policy position. It then presented an assessment of the benefits and costs, in terms of businesses, other organisations and the wider economy, of the preferred policy position (referred to as option 1) and the two alternative policy options: that is, 'business as usual' (option 2) and 'pilot project' (option 3). Question 6 asked for views as follows:

Question 6: What are your views on the opportunities and challenges that each of the 3 options set out in the partial BRIA could have for businesses?

9.3 Altogether, 156 respondents (31 organisations and 125 individuals) commented at Question 6.

9.4 Respondents offered a range of points relating to the opportunities and costs of the three options considered in the partial BRIA. In many cases, the points made reflected, or repeated, points already made with regard to the SEA more generally.

Key messages

9.5 Overall, across the three options, the predominant view was that option 1 (preferred policy position) provided the best basis for certainty and opportunity for investment for the business sector, while also being in line with a commitment to a low-carbon economy. These respondents also thought that any minimal economic benefits offered by option 2 (business as usual) and option 3 (pilot project) would be outweighed by negative impacts.

9.6 The alternative view, expressed by business / industry respondents and a few individuals, was that option 2 (business as usual) offered the best opportunities for the business sector. They thought the partial BRIA had understated the potential positive benefits of option 2, and they queried the assumptions made regarding costs and challenges related to operational practice, regulation and monitoring.

9.7 The main issues raised by respondents are discussed in the sections below which provide a summary of the comments on each of the options in turn.

9.8 The following should be noted:

• A range of respondents offered views on the three options, or noted their preferred option, without giving any substantive comment on the opportunities and challenges for businesses or other organisations, or on the assessment provided in the partial BRIA.
• A few respondents, all individuals, expressed the view that business would adapt and evolve, whatever the final decision regarding the development of the unconventional oil and gas industry.

9.9 The views of these respondents are not included in the analysis presented below which focuses on the views of those who commented on the opportunities and challenges for businesses and other organisations of each of the three options.

Opportunities and challenges of option 1 (preferred policy option)

9.10 The partial BRIA assessment noted that option 1 would bring benefits in terms of certainty to communities and industry stakeholders and relevant public bodies, while still giving businesses the option of targeting other hydrocarbon resources. A further benefit of option 1 was noted to be the possibility of increased attractiveness of investment in other industries. Identified costs (for unconventional oil and gas businesses and the wider economy) related to the lost opportunity to pursue planned projects, and the related decommissioning and after care costs of sites. Costs to public bodies were identified as negligible. Respondents' comments on these opportunities and costs are summarised below.

9.11 There were two main viewpoints on the opportunities and challenges of option 1 (the preferred policy position), as follows:

• The predominant view (expressed by a range of organisations and most individuals) was that option 1 would remove uncertainty for both communities and business (including those involved in the unconventional oil and gas industry), and would create opportunities for the development of other businesses – including those related to the renewable energy and low carbon technology sectors, and those that made use of Scotland's natural environment (e.g. tourism, farming and the food and drink industry). It was thought that opportunities for other businesses would compensate for any lost opportunity in the onshore oil and gas sector. Respondents said that this option was the only one compatible with a low-carbon economy, and would provide the best environment for a range of businesses to thrive.
• Business / industry respondents and a few individuals disagreed that this option would bring certainty, given that the proposed planning policy could be set aside at any time in the future. Rather, they argued that the adoption of the preferred policy position would bring about the effective shutdown of the onshore industry in Scotland and would have wider economic repercussions in terms of reputational cost for Scotland regarding its commitment to science and technology, and its ability to attract investment in this sector. Moreover, they did not think that option 1 would lead to investment in other sectors. These respondents also highlighted a range of issues which they thought had not been properly accounted for in the partial BRIA: (i) the cost (environmental as well as economic) of importing gas and feedstock to replace that which have might have been sourced in Scotland; (ii) the cost to the chemical industry of importing feedstock; (iii) the lost opportunity for supply chain investment, and (iv) the potential (negative) impact on the deep geothermal heat industry.

9.12 Additionally, there were different views on two further issues:

• The opportunity to target other hydrocarbons: Oil and gas business and industry respondents argued that this option was unrealistic as a business opportunity – they highlighted the lack of evidence on the presence of other hydrocarbon resources that could be exploited on a commercial basis in the geographic areas covered as well as the lack of clear government policy in this area. Other respondents did not think it was appropriate to include this as a potential 'opportunity', given the Scottish Government's stated commitment to a low-carbon economy.
• Decommissioning costs: Oil and gas business and industry respondents argued that such costs should be met by the public purse, with compensation paid to operators who had invested in PEDLs in good faith, while other respondents thought that decommissioning obligations should be enforced against operators where licences either expired or were surrendered.

Opportunities and challenges of option 2 (business as usual)

9.13 The partial BRIA assessment identified opportunities for those involved in the unconventional oil and gas industry (including current PEDL holders) to proceed with plans, which would then have wider implications (albeit difficult to quantify) for businesses and jobs in related economic sectors. Identified costs for industry included exploratory work and activities to secure necessary licences, permissions, etc., with likely opposition from local communities seen as a compounding factor. Wider costs included (i) the implementation and operation of adequate regulatory regimes, although these were noted as being difficult to quantify, and (ii) the need to offset carbon emission through reductions elsewhere in the economy. No impact on energy prices was anticipated.

9.14 In terms of the opportunities and challenges offered by option 2 (business as usual), there were two main views among respondents:

• The predominant view (offered by a range of organisations and most individuals) was that any benefits would be minimal and would be confined to businesses in the oil and gas industry. Furthermore, these benefits were not worth the likely negative impacts for the environment, for communities and for other businesses. Amongst these respondents there were concerns that the partial BRIA and the underlying work had underestimated and / or did not take full account of (i) the negative impacts that development of a unconventional oil and gas industry would have on other businesses and economic sectors, or (ii) the risks involved in unconventional oil and gas operations and the costs that might be incurred as a result of operational accidents and failures, or the costs related to development and operation of a satisfactory regulatory regime.
• The alternative view (expressed by business / industry respondents and a few individuals) was that the partial BRIA understated the economic benefits of unconventional oil and gas development as it had failed to take account of a wide range of issues including (i) the economic and social benefits to communities in PEDL areas arising from increased jobs and prosperity, (ii) the benefits offered to the country by self-sufficiency in gas, (iii) the benefit to other industries and the wider economy, and (iv) the fiscal benefits accruing from community benefit payments, increased tax revenues, including via business rates, and payments to a sovereign wealth fund. In addition, there was a view that the assessment of financial benefits needed to be revisited in order to take account of (i) recent increases in the price of gas, and (ii) benefits that would accrue on a UK-wide basis. These respondents also thought that the partial BRIA (as with the Environmental Report) should have assumed a level of up-to-date 'best practice' and high standards relating to regulation and mitigation (in line with arrangements in place in England), and should have taken account of ongoing technological industrial advances both of which would reduce the risks and related costs associated with unconventional oil and gas operations.

9.15 In commenting on option 2, both groups expressed concerns about the Scottish Government-commissioned KPMG report on the possible impact of an unconventional oil and gas industry in Scotland, and how the findings of this work had been used to inform the partial BRIA.

Opportunities and challenges of option 3 (pilot project)

9.16 The partial BRIA stated that the benefits and costs outlined for option 2 would be relevant to the third option of running a pilot project. An additional identified benefit was that of increased understanding of the extent of unconventional oil and gas resources and the impacts associated with its extraction. An additional identified cost was the funding that would need to be provided by project partners.

9.17 Respondents were less likely to comment explicitly on option 3 (pilot project) than on options 1 or 2. However, amongst those that did there were two main views:

• The predominant view (expressed by both organisations and individuals) was that the opportunities and challenges related to option 3 were similar to those related to option 2. Some also thought this option would extend uncertainty for communities and businesses, and / or queried whether a small-scale, localised pilot could offer any significant value in terms of increased knowledge.
• The alternative view (expressed by business / industry respondents and a few individuals) was that option 3 would provide opportunities for business by enhancing knowledge and informing future debate on onshore unconventional oil and gas extraction (and Scotland's energy policy more widely) and by contributing to a positive economic future for the Central Belt. However, some in this group thought there was insufficient information provided on this option and / or queried the practical and financial feasibility of the type of research-led pilot proposed in the SEA.

Comments on the BRIA approach and methods

9.18 As with the SEA, business / industry respondents offered a range of comments and criticisms about the approach to carrying out the partial BRIA, and the information that it was based on. These comments largely reflected those made about the SEA (as summarised in Chapter 3), with respondents reiterating their view that the options had not been treated equally. Additionally, and more specifically, they argued that the partial BRIA or the evidence it drew on:

• Should have taken a UK-wide view in considering costs and benefits (economic and environmental)
• Should have used medium-price (rather than low-price) estimates for fuel
• Should have included a full review of the impact on consumers and taxpayers of importing more gas
• Should have outlined the legal changes needed to facilitate the different options
• Had been inconsistent in its approach to carbon accounting regarding fuel imports
• Had prioritised public opinion over scientific evidence.

9.19 These respondents argued that the overall effect had been to understate the potential positive benefits of the unconventional oil and gas industry while overstating the potential negative impacts.