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Fracking Splits Coalition Government Over Future For British Energy

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Terry Macalister, The Observer

With exploratory drilling about to restart, clear differences are apparent between the Tory chancellor and the Lib Dem energy secretary over Britain’s shale gas reserves

Cuadrilla's exploratory fracking site near Blackpool.

Cuadrilla’s exploratory fracking site near Blackpool. Photograph: Phil Heywood

Cuadrilla Resources, the tiny company pioneering shale gas exploration in Britain, caused two minor earthquakes with its drilling near Blackpool. But the business, which has former BP boss Lord Browne on the board, has triggered much larger political tremors in London.

These culminated in Ed Davey, the energy and climate change secretary, giving the go-ahead in parliament last Thursday to what optimists believe will be a shale “revolution” similar to the one that has sent gas prices spiralling downwards in America.

But it has also unleashed a war of words with environmentalists, who not only believe that the chemicals used in fracking are dangerous but, more widely, argue it will trigger a new “dash for gas” that will tie the UK into fossil fuels and break climate change targets by creating higher CO2 emissions.

There is no doubt that the enormous financial benefits of shale, as experienced in the US, are real enough. The price of gas has fallen 85% from a high in 2005 to just above $2 per million British thermal units earlier this year. Economists see cheap power as one of the keys to an American economic recovery, with Lakshmi Mittal, Britain’s richest man and the chief executive of leading steelmaker ArcelorMittal, saying recently that cheap shale gas made him “much more optimistic” about investing in the US.

In fact, gas prices across the Atlantic have risen slightly this year to nearly $3.50 per million BTU; but that is still less than half the amount paid in Britain and continental Europe.

At a time when the UK’s North Sea gas is running down fast, nuclear power stations are being taken offline due to age and coal is being phased out for pollution reasons, it is little surprise that British manufacturers have seized upon the idea of a domestic shale industry as a saviour from the problems of rising power prices and a looming “energy crunch”.

Typical of the responses is one from Corin Taylor, senior economic adviser at the Institute of Directors, who said it was “excellent news” that shale exploration could go ahead: “Shale gas has great potential to create new engineering jobs, reduce our reliance on dirty fuels like coal and cut down on costly foreign imports.”

Natural gas from conventional sources plays a key role in the UK energy network: it currently accounts for almost half of all fuel used for electricity generation.

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