ENLISNHS 1.an EIHJ. AEI .LNEISNOD GNOAEQ HO NQIHLIM CIEIHVHS EIEI 01 SI 51.! HO SIH.L ON 13v EIHJ. wouawwoa) s17 CINV (EIDNEICIHNOD Nl I17 swcamas uaaNn asvznau prd-deaxa aw Slaw manmsmoa 511 my CINV 130.533 SIHJ. 13v NOINWHOHNI EIHJ. uagmn aasvmu as 01 51 saalanaddv 511 HO SIHJ. 13ch ON CINV EIEIV Si! GNV SIH.L 9 LOZ iudv amp deep nun uonmueweldwl wag?$0 EBUEQBO Based on a request from N010 Policy Unit, the Implementation Unit has. reviewed the perspectives of industry and others. on the potential state of the UK shale industry by 2020.. Whilst it is known that the UK has signi?cant shale reserves in the North of England (plus smaller reserves in the South of England Scotland and Wales) it has not yet been proven that their extraction is technically possible and commercially viable To date, three operators have submitted four planning applications for shale sites in the North of England, none of which have received planning consent yet. Further operators are due to enter the industry in 2018 as part of 14?? .Licensing Round, planning to bring forward potentially game-changing shale developments- Given this context, this review has focused on four key questions: What is the potential state of the UK shale industry in 2020? What are the key challenges and barriers to progress that industry faces in the run?up to 2020? How can the Government address these challenges and help accelerate industry progress? What can we learn from the evolution of other shale markets (esp US CAN ARG POL) about the potential development of the UK shale industry? in line our brief our work has concentrated on the state of the UK industry in 2020 However our interviews have also offered a range of insights on the state at the industry in 2025 which we have captured where appropriate To address these questions we have spoken to 28 shale stakeholders, including Ten industry players a Nine government departments; and Nine other shale industry experts (with experience in the UK and other international markets) The development of the UK shale industry over the next 5 10 years is subject to great uncertainty? most importantly because the viability of the UK shale reserves is not et proven There-fore, our ?ndings are? estimates otthe potential state at the industry only, based on aperators? latest plans and selected assumptions. - 2 Executive .su no; No shale wells have been fully tracked and flow-tested in the UK so far. lt has therefor? not yet been proven that UK shale reserves can be explored commercially. This is the focus of the current early ?exploration and appraisal? phase - So far, three operators have submitted four shale planning applications; initial appeals planning decisions due May-July "lB . New 141? Onshore Licensing Round (LR) licenses. cover large shale areas; expected to go live July?1 6 (delayed from April) . Whilst unlikely, if all 14th LR licensees were to fulfil all their well commitments would deliver 12 horizontal fracked wells. and up to 63 wells in shale areas could be vertical non-necked 2021. .. Interviews with operators I industry experts suggest that in principle the viability of UK shale can be proven quil kly, and that the UK industry could take off quickly thereafter. But also suggests that the could close down quivkly it early sites are unsuccessful. Developments :in next 5?10 are therefore crucial to estab-lisih long-term viability of this industry . interviews suggests 20-30 successful wells in 3-5 areas are enough to convince operators of geological viability; expe ie-nce in other shale markets shows exponential acceleration in number of wells fracked possible tillers-after - But recent example of Poland shows. industry could also close down quickly if geology not viable: in 2010?15, ?47-0 vert cal non? fracked wells and ~25 fracked wells were drilled, before gas flow rates were deemed. insull?cient and the market was -. bandon-ed However, to date, progress in the UK shale industry has been slow. agree that the root cause for 'ihiS is the current low public acceptance of shale, which drives a set of more practical barriers. Operators highlight that the most significant barriers by far are the long decision ti-m-e'lines and uncertainty experienced in local plannim system - Public opposition driven by eg. concerns re: local quality of life and safety, environmentaliprotection, crowding out of enewables - Drives several practical: barriers, with the most significant for operators so far being. long tilmelinesi uncertainty in local planning - Statutory time for local planning authority to decide a shale planning application is 1-6 weeks. Of 4 applications so far: refused after 12-13 months, now in appeal (exp. further -13,5m); 2 still pending, total time exp. ~El-10 months each. Uncertain - for operators due to continued changes in decision deadlines perception that non-planning iconsiderations might play inc decisions DECC is already undertaking crucial work on communications to increase public acceptability of shale - E.g. creation of objective information materials, development of pro-shale nationallregionall narrative, ?Shale Champio 5? But this will take time to bear fruit. industry and HMG stakeholders agree that in the n?ean time, increasing pub-l acceptance of shale will require fracking early sites to demonstrate true impact and pptential benefits to local pa pulations Against this backdrop, this report reviews what state the UK shale industry can realistically reach by mid-2020 land mid? 2025, where possible). it also sets out indUStrv?s views on key practical barriers and how HMG can help adores those (though public acceptability concerns. may remain at least until several wells fracked We incident). Gar finding regarding those barriers are on slides ?lit-?21 and our recommendations on how to address liberal are summarized: on article 22-2? 3 We cannot say with certainty what the state of UK shale will be in midazmlj. But assessing industry latest plans and assuming that the current status quo (esp long local planning timelines) broadly persists suggests that by mid 2020 the UK shale industry will still be firmly in the exploration and appraise phase? Specifically it suggests that 529 horizontal ?d reater uncertain? Assuming good early flow tests and. applying previous assumptions suggests that key operators will have likely established the viabilt of their own licenses d-urin- 2020~25+ b- 2025. could be in recess of brin in: forward lane sites Beyond this, early operators? progress couid encourage new industry entrants. Further boost possible from 14?? Licensing Rg-cund {area development plans due in 2026, plus potential reallocation of licenses on which or droptcommitments it were not met), and potentially from 15*? LR (but timing: still tbc, and effect likely small as key shale areas li?ensed in 14?? LR) However current and future operators stress clearly that they will ggly bring forward large sites if current long planning times and perceived uncertainty is reduced is. unless this can be resolved, UK shale will not take off even if ?zeoloi; -. dyes. Beyond this, interviews highlight that industry success beyond 2020 increasingly depends on .- finding ways of bridging the lack of. UK shale supply chain, and managing the risk of pot. EU regulation on shale. Barriers to industry development tcwards 2&26 {and be'yend'} and potential HMG actions to address these: industry interviews highlight a range of practical immediate barriers that industry is experiencing As per the previous page industry understand that the root cause for many of these Is the current lack of public acceptability of shale They understand that DECC has extensive work in progress on this which is welcomed. 4 Beyond this, industry; .9. those too have been welcomed by industry (and are referenced throughout 2015 SOS written ministerial statement committing to ?active considerati the prioritization of shale appeals; DCLG ?0.84 .2m local authority shale support fund; HM authorities; creation of permitted development rights to allow drilling of groundwater monitoring boreholes wlo a planni: However, our inte-Niews with industry and HMG suggest that, accepting that public so there continues to be more that HMG could do to accelerate indust HMG has also already taken very useful steps. to seek to address some 0? re ress that evil fthe practical barriers higl his document) on? of call-ins of shale applic wau-nded shale skills training ceptability of shale takes affect shale in 2020 and interviews highlight 11 speci?c areas for potential action focused especially on timescales uncertainty in loca . Accelerating long timelines and reducing uncertainty in the local planning system Ensure local authorities do not duplicate work conducted by the EnvironmentAgency, miss deadlines for their input do not delay the planning process overall. Also consider councillors?) shale skills and incentives to process applications in thei 6 week statutory and that local statutory cons how local planning authentic timeline could be improved Ensure that the existing alternative routes through the planning system work effectively, in part. that operator app-e planning decisions, or for non-determination) are indeed processed quickly (as per DE whether making use of DCLG SOS option to call-in applications is desirable (but note i DCLG SOS WMS), and DECC (as per CX request) is also due to decide in Nov?l? 'whetherto move shale from local planning into the sire; national planning regime, and if so for what type of site this is possible and? interviews suggest 3 key areast further, in~depth consideration as DECC develops its proposal: industry less aligned national planning; (ii) need to better understand risk of legal challenge-s on DECC SOS planning; and how this varies with inclusion criteria; timelines for decision in. nation Review scope for accelerating planned DEC-C work on developing options for the settl prevent this from becoming a potential source of further delays in the local planning sy Addressing perceived challenges around licensing dates), permitting timelines, regt Central government to continue to seek. to accelerate release of 14"? Lic. Round licens Regulators to seek. to improve. their engagement with the local in addition to planned Regulations Champion} Spokesperson; also does refer to changing regulatory EnvironmentAgency to continue to consider how to accelerate permitting timelines wit driven by public opposition and dwarfed by long local planning timelines; but timelines [Lower urgency] Support industry engagement with National Grid re: future grid conne This review also suggests that there is scone for HMG to improve its joint understanding of operators? plans and next regulatory! planning implications of these Finally, whilst this review speci?cally focused on options for accelerating Industry progress highlights 4 messages (see p.18) that industry consistently suggest should be included in ?rte-Mews suggest this is less ilighted by aliens and 3 for local 19 application has to build, ieycnd. planning: ultees who 3? (in part. further. als (on local consider attractive) amlined hat. require. than anticipated on desirab decision to move shale into al planning pot. longer than stem in the future public at local engagement sessions (Note: this .is c: gime itself) host increasing. risk (cu-r Will still need. to improve to ctions to ensure this (process. lists-rel local community en es (expected July; requires s, ?lily! timing of na?onal expected ement of shale long-term to gagement Itid slot) ifferent and ent delays yards 2020) vs at pace -teps, and the Reviewing industry plans in light of experience so far and the assumptions outlined above sie-ggeete that the UK shale ii adustry wit-l. still be firmly in the exploration and appraisal stage by 2020.. A total of ~5~230 horizontal ear-em; could be freaked by however; the totei wi'il Elikeiy he eige?ifieemiy to 5 than 2-8 we?e it will need ta Low/Inportance/ High importance/ urgency urgency Recommendations 0 Dela sin obtainin lannin consentin local lannin stem Importance Urgency Rec 1: Clarify and reinforce MPA remit vs. Environment Agency (EA) and local statutory consultees . a - EA remit: DCLG to review MPA vs. EA responsibilities to better understand ?grey areas? (considering higher-level Planning Guidance already available).? Based on this, to issue more detailed uidance to MPAs on MPA vs EA responsibility. - Local consultees: DCLG to explore options to increase confidence in dealing with local consultees who fail to submit input on time. As first step, get legal advice on whether ?timing out? such consultees increases JR risk Rec 4: {with Planning lnspectorate) to review how to accelerate long timelines for local planning appeals process (affecting operator appeals of MPA decisions future appeals for non?determination) @335 DCLG and PINS to proceed with planned review of lessons learnt from Cuadrilla appeal (due to start Ma 2016 . m: would ideally have improved process in place ~mid 2017, To avoid potential further future delays, DCLG to also review PINS resourcing Rec 9: EA, HSE (and PHEI OGA where relevant) to develop ?community friendly? narrative of their role . As per industry input focus on one single coherent narrative that addresses local con- and (ii) explains how iointly regulators can offer end -to- end coverage of environment/ health and safety concerns - HIgh level work (led out of Defra due to resourcing) ongoing already - to be re#1forced arid focused on the above Rec 10: DECC and (PHEI OGA where relevant) to appoint ??gurehead? with strong communication skills to lead their engagement' In local community sessions (with all regulators still attending all sessions) N6te: is different and In addition to planned Regulatory Communications Champion] Spokesperson ?Note: industry Is in favour of current regulatory regime. This recommendation relates to engagement with icommunities only. Specifically, this is recommending a single, merged ?super-regulator? (see p.17 for detail) . lFigurehead becomes first point of call in local engagement sessions first to address questions raised by local ipublic. Gives first pass at answer, and passes on to regulator if/when more detail is required. Provides new E?community friendly? narrative (as per above: addressing local concerns, stressing end-to-end coverage) . EThis is required In addition to planned Regulatory Communications Champion (which was highly welcome by industry). For this, DECC aiming for ex senior regulatory staff to lead national regional comm?s on ishale regulation). This person can attend local engagement sessions too "and contribute - but industry suggest gthat in the end, current regulators will have to field the local community?s question, therefore need ?figurehead? R6011: DECC and EAIHSE OGA where relevant) to review scope for more streamline, standardized attendance planning for local engagement sessions to handle planned large increase in app. volumes . Regulators have so far handled all local engagement session ?manually?, with ke reculatory staff Eattendin- ~15 local engagement! shale training sessions so far this year alone. approach will likely have to_ _be_s_tand_ar_di_zed;and streamed from ??d?OIs 24 High importance! 0 Low importancex .. .. .. urgency urgency I importance Urgency Rec 12* ?119; to review new to accelerate timeiines without increasing risk of Jae 4 - Note? delays on EA permit not major issue so far. But could become bottleneck if MPAprocessing times can be .- improved. Atso earlier EA permits could help address current perceived; delays from MPAJEA duplication (see p.14 - short-medium term EA to continue to assess on case-by-case basis whether extension of consultation 3 times from 4 weeks to 8 weeks each so far can be avoided w/o increasing JR risk. Also consider scope for reducing MPA processing times (avg 445months so far), e.g. via reducing resources invested to request additional information from industry in longer term push to move from two to one consultation per permit (perception'that JR r'sk too high oorrent-ly) - Lows'imporfance/ High impedance-f; urgency urgency Q60: . importance Urgency hddihehai 511:1 1.1111111111111111: cJ-ejser H111G i-eie-ee 111111 indushe Hee and GCLG where possibie to review 111111110 gain more in?dep?ih of 1111s ace c1111. 1n the shcr1 term a. 1111111edia1e 11e111 s1e a and medium term . sca?ih 1.11 If} opera are 8138 81199 811118. nerease 1n app. V0 ?13183 era [3 ear scope 0 191113311: 1'0 8 of DECC Industry lead to conduct role full-time ideally, would not only liaise with operators directly, but 1 HSE to be 1111 11- to date on seoarate discussions 1ihe hold with indast - 1ec 1G: regulators 1c he11e1 understand 11.11am upcemmg c1he1 egalamw 1equ11emer11s 1111 each curreh1 1:11 new shale site 1 Interviews suggest th1s1s not fully clear to MG yet scope to improve MG~w1de understanding of which aspects of a shale site ?lifecycle are covered vs. not by each currentfupcoming application (each one so far with different approach). Required to understand whether! when further rounds of planning! permit applications might be required, which in?uences medium-term timelin-es for the site/ might cause future delays 1 As a result industry also selectively suggest that it has not yet :re-ceived?sufficient communications from HMG on these requirements. HMG to consider scope for clari?cation, where required [Note: this would be purely factual planning advice} OFF 101.1311. SENSWWE - 25