Expert Scientific Panel on Unconventional Oil and Gas report

Chapter 7: Regulation and legislative background

Introduction

7.1 There are a number of regulators and permissioning frameworks that have a role in permitting, assessing and managing on-shore hydrocarbon activities, including those termed as unconventional gas. This chapter describes those regulatory bodies and their roles and tools that are applicable to Scotland.

Regulation Landscape - European Context

7.2 On 22 January 2014, the European Commission announced a recommendation on minimum principles for the exploration and production of hydrocarbons using high volume hydraulic fracturing (European Commission, 2014). The minimum principles aim to address environmental and health concerns and the regulatory gaps identified in a series of studies undertaken by the European Commission and during stakeholder consultation (Philippe and Partners, 2011; AEA, 2012a; AEA 2012b; European Commission, 2012; European Commission, 2013).

7.3 The non-binding criteria are designed to build on and complement the existing EU environmental legislation and should be implemented by Member States within six months of the announcement. The recommendation invites Member States to:

• Plan ahead of developments and evaluate possible cumulative effects before granting licences;
• Carefully assess environmental impacts and risks;
• Ensure that the integrity of the well is up to best practice standards;
• Check the quality of the local water, air, soil before operations start, in order to monitor any changes and deal with emerging risks;
• Control air emissions, including greenhouse gas emissions, by capturing the gases;
• Inform the public about chemicals used in individual wells, and
• Ensure that operators apply best practices throughout the project.

7.4 The Commission plans to review the effectiveness of the recommendation in July 2015. This review will not only assess the application of the recommendation, but will consider the application of the relevant Best Available Techniques ( BAT) reference documents (also known as BREF Documents) and the progress of the BAT information exchange. The Commission will further decide whether it is necessary to put forward legislative proposals with legally-binding provisions, such as a new directive to set a regulatory framework for shale gas extraction using hydraulic fracturing.

7.5 The Commission has focused on shale gas extraction using fracturing techniques. Although these recommendations and principles do not directly apply to other unconventional gas, where similar activities such as CBM are being carried out, the recommendations and principles would appear to be transferable.

European Directives of relevance to unconventional oil & gas

7.6 The directives of relevance to unconventional gas activities, using fracturing, as identified by the European Commission ( AEA, 2012a) are given below. Some directives are relevant for all phases whereas others are only relevant for certain stages. It is also worth noting that some directives may not apply if fracturing is not undertaken and the Commission have not completed a similar assessment for non-fractured unconventional gas activities:

• Strategic Environmental Impact Assessment Directive (2001/42/ EC) (relating to plans and programmes only);
• Environmental Impact Assessment Directive (2011/92/ EU) ;
• Integrated Pollution and Prevention Control - Directive (2008/1/ EC);
• Industrial Emissions Directive (2010/75/ EC);
• Mining Waste Directive(2006/21/ EC);
• Environmental Liability Directive (2004/35/ EC);
• Waste Framework Directive (2008/98/ EC);
• Water Framework Directive (2000/60/ EC);
• Groundwater Directive (2006/118/ EC);
• Noise Directive (2002/49/ EC);
• Air Quality Directive (2008/50/ EC);
• Habitats Directive (1992/43/ EEC);
• Birds Directive(2009/147/ EC);
• REACH (Regulation 1907/2006/ EC);
• Biocidal Products Directive (98/8/ EC);
• Authorization (for the prospection, exploration and production) of hydrocarbons Directive (94/22/ EC);
• SEVESO II Directive (1996/82/ EC);
• 1992/29/Euratom Directive;
• Urban wastewater Directive (97/271/ EEC).

Scottish Regulatory Framework

7.7 The flow chart in Figure 7.1 indicates the regulatory bodies that have a role in regulating unconventional gas exploration operations in Scotland. It is worth noting that environmental permits can be sought at any point in the process, but all permissions need to be met before any activity can commence.

7.8 The remits of relevant government and regulatory bodies are given below.

Office of Unconventional Gas and Oil

7.9 The Office of Unconventional Gas and Oil ( OUGO) established in March 2013 aims to: "promote the safe, responsible, and environmentally sound recovery of the UK's unconventional reserves of gas and oil… The Government wants to see any growth potential realised, to enhance our energy security where possible, and to safeguard the environment and public safety in the process."

Figure 7.1. Public authorities involved in regulating unconventional gas.

7.10 OUGO published a Regulatory Road Map ( DECC, 2013) for the exploration of unconventional gas in December 2013, which identified that, although energy is a reserved matter, environmental controls and planning are devolved. This roadmap provides the legislative frameworks specific to the different countries in the UK and identifies required actions and best practices at various stages

Department of Energy and Climate Change ( DECC)

7.11 Oil and gas licensing in England, Wales and Scotland is governed by the Petroleum Act 1998, the Petroleum (Production) (Landward Areas) Regulations 1995, and the Hydrocarbon Licensing Directive Regulations 1995. The 1998 Act vests all rights and ownership of petroleum resources (oil and gas) in the UK government, which then grants a Petroleum Exploration and Development Licence ( PEDL) in competitive licensing rounds for the exclusive exploration, development, production and abandonment of hydrocarbons in the licence area. Licences are not specific to a hydrocarbon, e.g. shale gas or coal bed methane, so apply to both conventional and unconventional extraction.

7.12 DECC assesses the licence applicant on technical competence, environmental awareness, financial viability and capacity.

7.13 Once granted, the PEDL holder must obtain all necessary drilling/development consents, planning permissions, health and safety, and environmental permits before commencing. Consent of individual landowners will also be required, although a ruling by the UK Supreme Court has confirmed that where a landowner "unreasonably refuses to agree access, where he demands unreasonable terms, or where the fragmentation of land ownership means a licensee cannot agree terms with everyone" then the Mines (Working Facilities and Support) Act 1996, as modified by the Petroleum Act 1998, can be used in order for the licensee to obtain access rights (House of Commons, 2011). However, the UK Government has recently launched a consultation on proposals to allow onshore oil and gas operators statutory rights of access to land at depths greater than 300 m ( DECC, 2014).

7.14 As described earlier in this report, DECC have implemented a traffic light monitoring system for seismicity that operators must follow. This control requires operators to monitor seismic activity in real time and stipulates action the operator must take in response to the seismic activity recorded:

• if no seismic activity is detected (green) injection can go ahead as planned;
• if seismicity of up to 0.5M _L is detected injection can proceed with caution, possibly at reduced rates and monitoring is intensified (amber);
• if seismicity above 0.5M _L is detected, injection is suspended immediately (red).

7.15 An alternative proposal (Westaway and Younger, 2014) has been made suggesting that the existing regulatory limits applicable to quarry blasting ( i.e. peak ground velocities ( PGV) in the seismic wavefield incident on any residential property of 10 mm per second during the working day, 2 mm per second at night, and 4.5 mm per second at other times) can be readily applied to cover such induced seismicity. Levels of vibration of this order do not constitute a hazard as they are similar in magnitude to the 'nuisance' vibrations that may be caused by activities such as slamming doors, or by large vehicles moving close to a building.

7.16 DECC has consulted on a Strategic Environmental Assessment ( SEA) for the 14th Round of Onshore Licensing, and in December 2013 consulted on an Environmental Report which outlined the likely significant environmental effects (and other environmental effects with the potential to be significant) of further onshore oil and gas licensing. Once the consultation responses have been taken into account the UK Government will issue a "Post-Adoption Statement", summarising how it intends to proceed in relation to further onshore licensing. ( DECC, 2014)

Local Planning Authorities

7.17 Following the granting of a PEDL, the operator is still required to obtain all relevant planning permissions before exploration can commence. The Town and Country Planning (Scotland) Act 1997 as amended by the Planning etc. (Scotland) Act 2006, states planning permission is required for the carrying out of any development of land.

7.18 'Development' includes the carrying out of building, engineering, mining or other operations in, on, over or under land. Full planning permission is to be considered and granted separately for each of the exploration, appraisal and production phases. Any requirements relating to local amenity, such as noise and lighting, will be covered by the inclusion of specific conditions within the planning permission.

7.19 As part of the planning permission process, the planning authority must determine if an Environmental Impact Assessment ( EIA) is required. The Town & Country Planning (Environmental Impact Assessment) (Scotland) Regulations 2011 require an EIA to be carried out for all developments in Schedule 1 of the Regulations and certain developments under Schedule 2 of the Regulations. Further guidance on EIA procedures is contained in the Scottish Government's planning Circular 3/2011 (Scottish Government, 2011).

7.20 The Management of Extractive Waste (Scotland) Regulations 2010 state that all planning applications involving extractive waste must be accompanied by a waste management plan. The waste management plan should include measures to prevent or minimise all extractive waste. This may include drill cuttings, drilling muds, waste gas and flowback and produced water returned to the surface. In Scotland, the Local Authority is responsible for implementing these regulations.

7.21 The Local Air Quality Management regime requires Local Authorities to review and assess local air quality in their area to determine whether the objectives and standards set out in the National Air Quality Strategy ( DEFRA, 2007) are being met, or are likely to be met. Pollutants with objectives provided by the National Air Quality Strategy include benzene, 1,3-butadiene, carbon monoxide, lead, nitrogen dioxide, PM10, PM2.5, polycyclic aromatic hydrocarbons ( PAH), ozone and sulphur dioxide.

7.22 However it should be noted that Local Authorities may not necessarily monitor for all of these pollutants. For example, ozone and PAHs are monitored at a national level. Other air pollutants relating to unconventional gas activities which are not included in the strategy are methane, higher hydrocarbons and some volatile organic compounds.

The Coal Authority

7.23 The Coal Authority regulates access to, intersection and disturbance of Scotland's coal.

Scottish Environment Protection Agency

7.24 The regulatory role of the Scottish Environment Protection Agency ( SEPA) is to protect the environment and human health. This role in relation to unconventional oil and gas exploration and production is summarised in SEPA's guidance ( SEPA, 2012).

7.25 Through the Water Environment (Controlled Activities) (Scotland) Regulations 2011 ( CAR), the operator requires an appropriate authorisation for specific activities with the aim of preventing significant adverse impacts on the water environment. The following activities all require CAR authorisation:

• the construction of the borehole;
• the discharge of fracturing fluid to ground or surface water, including assessing hazards presented by fracturing fluids on a case-by-case basis;
• ground or surface water abstractions.

7.26 Where the Pollution Prevention and Control (Scotland) Regulations 2012 ( PPC 2012) apply, for example a refining activity (Listed activity 1.2a), SEPA will require the operator to effectively manage risks to air quality, land and surface and ground water resources. SEPA's objective is to provide a robust regulatory framework and SEPA is currently in discussions with Scottish Government to clarify aspects of the role of the PPC regime.

7.27 SEPA is responsible for regulating the management of wastes that contain naturally occurring radioactive materials ( NORM). Regulatory controls in respect of the radioactive content of waste are not required if the operator generating such wastes ( e.g. waste waters, sediments and scales) can demonstrate that the NORM is below threshold levels set by the Radioactive Substances Act 1993 ( RSA 93).

7.28 If concentrations of NORM are above the threshold levels in RSA 93, the management of NORM containing wastes, including their disposal to the environment, is regulated by SEPA. SEPA will impose conditions that require the operator to treat and dispose NORM in a manner that minimises the impact on the public and environment. The treatment and disposal options available to the operator will be specific to the degree and type of contamination and will be assessed and controlled by SEPA on a site-specific basis. Any storage that is necessary prior to treatment or disposal is also regulated by SEPA under RSA 93.

7.29 Other controls imposed by SEPA are:

• to ensure the appropriate treatment and disposal of waste produced during exploration, appraisal and production;
• to be a statutory consultee in the planning and Environmental Impact Assessment process and provide advice to local authorities on individual gas extraction sites;
• to enforce the Environmental Liability (Scotland) Regulations 2009, if applicable, which requires operators to take remedial measures where there is an imminent threat of environmental damage or their activities have caused environmental damage;
• to enforce the Control of Major Accident Hazards Regulations 1999 ( COMAH), where applicable, alongside the Health and Safety Executive;
• to enforce the Water Environment (Oil Storage) (Scotland) Regulations 2006, where applicable.

Health and Safety Executive

7.30 The Health and Safety Executive ( HSE) is the regulatory body responsible for regulating the safety of workers, for example during drilling operations. The primary regulatory tools include:

• The Borehole Site and Operations Regulations 1995;
• The Offshore Installation and Wells (Design & Construction etc.) Regulations 1996;
• The Health and Safety at Work etc Act 1974 is focused on general occupational health, including workers being exposed to noise and safe lighting when working out-with daylight hours;
• The Control of Major Accident Hazards Regulations 1999 (as amended) (joint competent authority with SEPA);
• Pipelines Safety Regulations 1996 (where required).

Marine Scotland

7.31 Marine Scotland is responsible for marine issues around Scotland, including marine planning. However, matters relating to oil and gas licencing are reserved to Westminster ( DECC). Marine planning matters in Scotland's inshore waters, i.e. up to 12 miles, are governed by the Marine (Scotland) Act 2010, an Act of the Scottish Parliament, and in its offshore waters by the Marine and Coastal Access Act 2009, an Act of the UK Parliament.

7.32 Through these Acts, the National Marine Plan is currently being produced (and consulted on) which sets out the strategic policies for the use of Scotland's marine resources. Marine Scotland and other public bodies, such as the Local Authority, will take authorisation decisions in accordance with the National Marine Plan. The National Marine Plan includes a section on Oil and Gas.

Other Parties of Note

Scottish Government

7.33 The Scottish Government's current position on unconventional oil & gas is set out in Scottish Planning Policy (Scottish Government, 2010) and the Draft Electricity Generation Policy Statement (Scottish Government, 2012). The Scottish Government announced that it plans to strengthen Scottish Planning Policy relating to onshore unconventional oil and gas (Scottish Government, 2013), as follows:

"The new Scottish Planning Policy, which comes into force next year, will reinforce environmental and community protection and community consultation guidance in relation to planning applications for unconventional gas extraction. It also introduces the need for buffer zones in relation to such planning applications. Amongst the changes to the policy it states that the planning system must 'minimise the impacts of extraction on local communities, built and natural heritage, and the water environment".

British Geological Survey ( BGS)

7.34 The BGS is not a regulatory body, but requests notification of intent to construct new wells and boreholes. There is also a legal duty on all drilling operators to pass to BGS information on all boreholes drilled to depths greater than 30 m for mineral exploration and 15 m for water supply assessment ( BGS, 2014).

Potential Regulatory Gaps

7.35 In 2012, a report for the European Commission report ( AEA, 2012a) highlighted a number of regulatory gaps, uncertainties and issues. The Commission's 2013 Work Programme included further Member State engagement and the completion of an Impact Assessment to further clarify the European regulatory framework.

7.36 The Impact Assessment included options on possible legislative frameworks, ranging from doing nothing, to issuing guidance on the application of existing relevant directives (which was the favoured option of the UK government), to developing a tailor-made directive (European Commission, 2014). The outcome was that the Commission proposed a number of recommendations and principles for member states to meet.

7.37 A detailed assessment of the recommendation and principles outlined by the Commission (European Commission 2014), has not been carried out by the Expert Scientific Panel.

7.38 In Scotland, the Pollution Prevention and Control (Scotland) 2012 Regulations ( PPC) apply where an activity named in Schedule 1 of those regulations, such as refining, is carried out. However, typically these activities are not carried out during the exploration or appraisal phase.

7.39 Currently, where a PPC activity is being carried out, any flaring and venting being proposed within the PPC permit boundary will be regulated as being directly associated. However if there is no PPC activity being carried out then any flaring occurring cannot be regulated under PPC, as it is not in itself a named activity. This differs to the Environmental Permitting Regime in England and Wales where some flaring and venting is regulated.

7.40 The Management of Extractive Waste (Scotland) 2010 Regulations, enforced by the planning authority, may include a requirement for waste gases ( e.g. fugitive methane emissions) to be managed, however these may not always be engaged. Where neither a PPC named activity nor an extractive waste activity are being carried out, fugitive emissions at any treatment facility or wellheads may not be regulated.

7.41 There is debate whether source magnitude used in DECC's traffic light system for seismicity is the best measure when considering seismicity limits (Westaway and Younger, 2014). Surface velocities may provide a better indicator of surface damage and would not penalise unconventional gas operations relative to quarrying, which is already regulated for vibration on surface velocity, not local magnitude.

7.42 Post-production long-term monitoring and responsibility is another potential gap. Once the operator has surrendered the CAR authorisation and met HSE well-abandonment requirements and, later, when the PEDL post production requirements have ceased, there are no long-term monitoring and control requirements to ensure that well integrity is retained and pollution is not occurring. However, operators have an open-ended liability to remediate any ineffective abandonment.

7.43 A proposed clause (clause 35) to the Water Bill requiring 'onshore oil and gas operators to provide financial security when applying for an environmental permit so that funds would be available to deal with any water pollution incident caused by the operator' has not been supported by the UK Government. The UK Government believes that the existing regulatory framework is fit for purpose for the exploration and exploitation of onshore oil and gas and no further controls are required. This could lead to uncertainty with regards to responsibility for remediation if the operator goes bankrupt.

7.44 A review of 35 Environmental Statements ( ES) prepared within the offshore oil and gas industry in conjunction with interviews with regulators, operators, consultants and advisory bodies found a mixed picture of EIA performance. The main findings were:

• a significant number of ESs fell short of satisfactory quality;
• the process appeared to be driven by compliance rather than best practice (Barker and Jones, 2013).

7.45 An earlier review of EIAs conducted in the Scottish forestry industry (Gray and Edwards-Jones, 1999) found instances of good practice in the assessment process, but overall poor quality of EIA and ES production.

7.46 The recurring elemental failure, which subsequently led to additional difficulties, was the absence of a full scoping phase. Thus, assessments were unfocused, did not adequately investigate the key issues and wasted effort on irrelevancies. This resulted in inadequate baseline data collection, and made the task of assessing the magnitude and significance of impact extremely difficult (Gray and Edwards-Jones, 1999).

7.47 Further, the current EIA methods can take little account of the socio-economic impacts of pollution ( e.g. Jarvis and Younger, 2000), with predictive EIA strategies for future discharges lacking, and a sense that the water environment and groundwater may be under-considered ( e.g., Kuma et al, 2002).

7.48 Baseline measurements need to accommodate natural temporal variability and other ES findings could inform future EIAs. Developments to ensure excellence in the EIA could be undertaken using identifiable protocols shaped by stakeholder feedback, in addition to statutory requirements. Additionally, in the UK there is no mandatory review stage in the assessment process (Gray and Edwards-Jones, 1999), although this is being reconsidered as part of the EIA directive review (European Commission, 2013). Incorporating this may support the development of excellent ES.

Conclusions

• A regulatory framework already exists in Scotland, which covers the vast majority of activities requiring control and monitoring as part of unconventional oil & gas developments. This is generally well-coordinated between the main regulatory bodies ( DECC, HSE, Local Authorities, SEPA, the Coal Authority).
• The recommendation and principles outlined by the Commission (European Commission 2014), have not been reviewed by the Expert Scientific Panel;
• Where an activity named in Schedule 1 of Pollution Prevention and Control (Scotland) 2012 Regulations ( PPC) regulations, such as refining, is not carried out, typically during the exploration or appraisal phase, then there may be a gap in regulation. This applies particularly, but not exclusively, to flaring and venting;
• The Management of Extractive Waste (Scotland) 2010 Regulations ( MEW), enforced by the planning authority, may include a requirement for waste gases ( e.g. fugitive methane emissions) to be managed; however these may not always be engaged. Where neither a PPC named activity nor an extractive waste activity is being carried out, fugitive emissions at any treatment facility or wellheads may not be regulated;
• Where neither PPC nor MEW applies there will be a gap in the regulation of monitoring and management of air quality within the gas extraction site;
• Post-production long term monitoring and responsibility is another potential gap;
• It is recognised that the Environmental Statement and the EIA process, when applied to unconventional gas development, must be comprehensive with total awareness of all possible short and long-term, local and regional impacts.