1. Managing environmental risks from shale gas exploration – the UK’s experience so far Dr Tony Grayling Head of Climate Change and Communities Environment Agency of England and Wales Bulgarian Energy Forum Sofia, 11-12 December 2012

2. Overview of presentation Current situation in the UK Environmental risks and regulation Next steps

3. State of play on shale gas in UK UK still at a very early stage: three wells drilled by Cuadrilla in Lancashire, one partly ‘fracked’ Further fracking suspended for investigation of two small earthquakes at first well Independent review recommended fracking could safely resume with strict monitoring and controls Other holders of petroleum licences showing interest, but have plans only for drilling Too early to speculate on reserves or possible production

4. UK Government perspective Gas will continue to play a major role in UK energy on a path to decarbonisation If it can be shown to be economic and safe, UK shale gas could offer a significant opportunity Department of Energy and Climate Change (DECC) will establish an Office of Unconventional Gas and Oil Treasury consulting on tax regime for future production Announcement on fracking expected shortly

5. Shale basins in Great Britain

6. Estimates of UK shale gas resource BGS first estimate 150 billion m 3 gas (recoverable resource) in Bowland shale – estimate made before any exploration US EIA estimate 2,700 billion m 3 gas in place in Bowland shale, of which 540 billion m 3 technically recoverable; 57 billion m 3 gas in place in Weald/Wessex, of which less than half is technically recoverable Company estimates 6,000 billion m 3 overall estimate of gas in place for their concessions (c.f. UK annual gas consumption 90 billion m 3 )

7. Current proposals for shale and coal bed methane exploration in England and Wales Five sites in Lancashire - Cuadrilla Three sites in South Wales, Neath, Maesteg, Llandow - Coastal Oil and Gas Ltd. Woodnesborough, Kent + others? Coastal Oil and Gas Ltd. Possibly three sites Mendip Hills: UK Methane and Eden Energy Balcombe, W Sussex: Cuadrilla Beverley Rathlin Energy

8. Public concerns Energy firm Cuadrilla discovers huge gas reserves under Lancashire theguardian Shale gas drilling rig of Cuadrilla Resources near Blackpool. Photograph Christopher Furlong/Getty Images GREEN Party leader Caroline Lucas is calling for licences for hydraulic fracturing, also known as fracking, to be withdrawn in the UK Bath hot springs concerns on fracking proposal

9. Regulatory authorities in Great Britain Department of Energy and Climate Change (DECC) Environment Agency (England and Wales) (EA) Scottish Environment Protection Agency (SEPA) Health and Safety Executive (HSE) Local Authorities (LA)

10. Regulation in Great Britain - exploration DECC checks with HSE/EA/SEPA issues well consent DECC: online well application for <96 hr testing DECC: 90-day extended well test (EWT), if required, setting limit on hydrocarbons produced, vented or flared. DECC: award of exclusive Petroleum Exploration & Development Licence after open competition Local Authority Planning Permission HSE 21 day Notification/ Well integrity EA/SEPA Notices Abstraction licences Discharge & RSR permits EA/SEPA Statutory Consultee Exploration Well

11. Clean water Possible Aquifer Confining Layers Water Table To river or STW Gas emissions to atmosphere Well pad Storage tanks Production Zone Environmental risks of exploration Contamination of groundwater due to mobilization of solutes or methane Contamination of groundwater due to poor well design or failure Fugitive emissions of methane Contamination of soil, surface or groundwater due to spills of chemicals or return fluids Inadequate transport or treatment of waste waters Impact on water resources from water used in hydraulic fracturing Inadequate transport or processing of produced gas Inadequate treatment/disposal of drill cuttings

12. Environmental controls (England and Wales) RiskControls Groundwater pollution Water Framework Directive and Groundwater Daughter Directive through the Water Resources Act and Environmental Permitting Regulations (EPR): Regulate discharges to groundwater, require disclosure of chemicals. Borehole regulations (HSE) also protect the environment. Surface spills Planning regime for site construction standards. EPR regulates discharges to surface water and groundwater. Disposal of used fracking fluid Mining Waste Directive through EPR: Waste management plan must be approved by the Environment Agency. Euratom Treaty if naturally occurring radioactive materials, via EPR. Over abstraction of water Abstraction licensing under the Water Resources Act. Fugitive methane emissions Mining Waste Directive through EPR. Conditions under Petroleum Licences (DECC) for flaring and venting. Borehole regulations (HSE).

13. Environment Agency position All exploratory shale gas operations will require environmental permits Current regulation is adequate for small scale exploration, but keeping under review We are looking at ways to streamline the existing permitting process We continue to work closely with the UK and Welsh governments and other regulators

14. Next steps for the Environment Agency Publish our guidance note setting out our approach to regulating exploratory activities Determine permits for Cuadrilla sites in Lancashire Develop detailed technical guidance for operators Streamline and strengthen the permitting process Develop our position for full scale development