FAQ: Onshore Gas Exploratory Development at Pontrhydyfen

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1 FAQ: Onshore Gas Exploratory Development at Pontrhydyfen Frequently Asked Questions: proposed onshore gas exploratory borehole development in Pontrhydyfen The information in this document is intended to provide responses to the frequently asked questions associated with the proposed onshore gas exploratory development at Pontrhydyfen. The responses are based on Natural Resources Wales initial consideration of the permit application, and as we assess the potential environmental and health impact of the proposed activities, we will update the responses to reflect the most up to date information. This document is intended for a non-technical audience, and aims to provide a broad understanding of the issues, as opposed to a detailed analysis. It is advised that this site specific FAQ is read alongside the more general FAQ. 1. Outline of the proposed development 1.1 What activity does UK Methane Ltd propose to undertake in Pontrhydyfen? The developer has applied for an environmental permit to safely manage waste generated from the drilling and testing of an exploratory borehole. UK Methane Ltd proposes to drill an exploratory borehole to test the Westphalian and Namurian strata for coal bed methane and shale gas reserves. A borehole of a maximum diameter of 300mm, will be drilled to an approximate depth of 1,500 metres. Borehole casing will be installed to a depth of 430 metres and will be fully cemented. No casing will be installed in the rest of the borehole. The testing will include removing a sample of rock for laboratory analysis, and undertaking prolonged leak-off and formation integrity tests to determine the strength of the rock: Leak off testing is the testing of a rock formation to establish reservoir engineering data and at what pressure the rock formation becomes permeable (i.e. allows fluids or gases to pass through). An isolated section of the rock is subjected to hydraulic pressure until the fluid begins to leak into the rock and it begins to fracture, this determines the leak-off pressure. This enables porosity to be measured and checks the pressure at which fracturing occurs, thereby establishing the criteria for future exploration activity. This is significantly different to hydraulic fracturing for gas extraction as the volumes of fluid used are only around 10 cubic metres (hydraulic fracturing for gas extraction would typically require in excess of 1,000 cubic meters). Page 1 of 10

2 A Formation Integrity Test is where the rock is subject to a predetermined pressure below the leak off pressure to monitor well integrity. The proposed development at Pontrhydyfen is limited to exploratory activities only. UK Methane does not have planning permission for gas extraction activities, and have not applied for an environmental permit for commercial gas extraction activities. 1.2 What type of gas is UK Methane Ltd exploring at the site? UK Methane Ltd will drill the exploratory borehole to test for the presence of coal bed methane and shale gases. UK Methane will collect core (rock) samples from the borehole which will be tested in a mobile laboratory that they will have on site. Shale gas refers to gas held in fractures and pore spaces, or gas adsorbed on organic material within shale rock. Shale gas is mainly methane, and is extracted by creating narrow fractures in the rock using hydraulic fracturing techniques (see our FAQ for further information on hydraulic fracturing). Coal bed methane refers to the natural gas (mainly methane) extracted from un-mined coal seams. 1.3 What are the different stages of oil and gas development? The exploitation of coal bed methane and shale gas reserves typically occurs in four key phases. Exploration typically involves the drilling of a borehole to assess the rock formations and the potential quantity of resources available at a specific site. Appraisal is likely to include an increase in the number of boreholes and a small element of oil or gas extraction, to assess the technical feasibility and costs of extracting the oil or gas at a specific site. Production refers to full-scale commercial extraction. This is likely to require a larger number of boreholes and associated surface operations (for example gas storage and processing facilities). Site remediation and abandonment refers to the permanent removal of wells and infrastructure. In the event that the exploratory activities detailed in section 1.1. and 1.2 demonstrate that there are economically viable gas reserves, UK Methane will need to apply for, and obtain, new planning permission and environmental permits before any commercial gas extraction can take place. Page 2 of 10

3 2 Regulation of exploratory activities 2.1 Which bodies are involved in issuing consents for the proposed Pontrhydyfen development? The regulation of unconventional oil and gas activity in Wales is managed by a number of governmental bodies, each with a specific role and remit. There is a regulatory roadmap on GOV.UK to explain the roles of the different organisations and the permissions and permits required. The table below highlights how the regulatory road map applies to the proposed development at Pontrhydyfen. Consent from all of the bodies listed will be required before any drilling activity can start. Government Body Role Pontrhydyfen Details Oil and Gas Authority Local Planning Authority (planning reference - P2015/0031) Natural Resources Wales A developer must obtain a Petroleum Exploration and Development License (PEDL) license from the UK Government Department of Energy and Climate Change, via the Oil and Gas Authority (OGA), before any further permissions can be obtained (see section 3). Companies seeking to undertake exploratory investigations must apply for planning permission from the local planning authority (which in Wales is the local authority). The local planning authority will consider issues such as noise, light, traffic, flood risk and air pollution. Companies must apply for the necessary environmental permits associated with any activity that is captured by the relevant environmental legislation. DECC issued UK Methane Ltd with PEDL No. 215 as part of the 13 th onshore licensing round. PEDL No. 215 was issued in Planning permission to carry out exploratory drilling at Pontrhydyfen was granted to UK Methane Ltd by the local planning authority (Neath Port Talbot County Borough Council) in March We received a permit application in July 2015, and consulted publically on the application between 10 th September and 11 th October. We are now assessing the application, and the potential impact of the proposed development on the environment and people s Page 3 of 10

4 Health and Safety Executive (HSE) The Coal Authority Oil and Gas Authority The HSE regulates the health and safety risks to people. In particular they are responsible for ensuring the appropriate design and construction of a well casing for any oil and gas boreholes. HSE requirements for ensuring well integrity also contribute to mitigating environmental risks. Responsible for granting consent for activity which cuts across, disturbs or enters coal seams. Issues final consent for each borehole drill. health, and will decide whether or not to issue a permit(s). The technical aspects of the drilling will have to be assessed and approved in writing by the HSE Oil and Gas Division, the Coal Authority and the Oil and Gas Authority before work starts. 2.2 What is Natural Resources Wales role in onshore oil and gas regulation at the exploratory phase? We are the environmental regulator for unconventional onshore oil and gas operations in Wales, where the environmental permitting regulations or any other relevant environmental legislation applies. We will help ensure that oil and gas operations are conducted in a way that protects people and the environment. We do this by assessing applications for permits, issuing permits when appropriate, and ensuring compliance with the permit conditions through inspections and compliance checks, and providing advice and guidance to developers. We are legally obliged to issue a permit if a business can show that the development meets all the legal, environmental, technological and health requirements of UK and European law. However, we will not issue a permit or allow companies to start work unless they can demonstrate how they will provide a high level of protection to people and the environment. 2.3 Which environmental permits will UK Methane Ltd need from Natural Resources Wales to explore for gas at Pontrhydyfen? This will depend on the agreed methods to be used by the developer, the geology of the site, and the outcome of our permit application determination. For a typical exploratory borehole, the developer may require up to twelve different consents, licences and permissions from NRW before they could start any drilling operations (in addition to the Page 4 of 10

5 necessary consents from the other bodies listed in section 2.1). The permits cover a range of activities, which manage groundwater, radioactive substances, mining waste, water abstraction, flaring, water discharge and flood defence. To obtain the necessary permits, the UK Methane Ltd will need to demonstrate that they understand the risks to the environment from their operations and show how they will reduce those risks to as low a level as possible. It is important to note that for exploratory borehole drilling activities, Natural Resources Wales generally only regulates the developer s activities related to the management of extractive waste generated from the exploration of unconventional oil and gas resources. The technical aspects of the drilling will have to be assessed and approved in writing by the Health and Safety Executive Oil and Gas Division, the Coal Authority and the Oil and Gas Authority before work starts. 2.4 Has UK Methane Ltd applied for permission to undertake gas extraction, hydraulic fracturing or any other form of well stimulation? The activities applied for are outlined in section 1.1 and 1.2. The proposed development at Pontrhydyfen is for an exploratory borehole and testing only. UK Methane Ltd is not seeking permission to extract shale gas or coal bed methane, or to apply well stimulation techniques such as hydraulic fracturing. 2.5 Will Natural Resources Wales consider Standard Rules Permits for leak-off testing? We are not considering the use of Standard Rules Permits for leak-off testing activities. The Environment Agency has recently consulted on a standard rules permit for leak-off testing in England, but this approach is not being considered in Wales. 2.6 What is the role of Natural Resources Wales as a land manager? We own land in various parts of Wales where exploration may take place. We are also the land manager of the Welsh Government Woodland Estate which may fall within the boundaries of a Petroleum Exploration and Development Licence (PEDL) issued by the Oil and Gas Authority (see section 3). For proposed developments on land that is managed by Natural Resources Wales, we will ensure that there is clear separation of duties, clarity of role and transparency in the way which we administer our functions. To demonstrate a clear separation of our roles as land manager and as regulator, land access arrangements are managed via our Enterprise team and the permit application by our Regulatory/Permitting Services teams. Each team follows the appropriate statutory, internal and best practice guidance. Page 5 of 10

6 2.7 What are the land access arrangements between UK Methane Ltd and Natural Resources Wales for the Pontrhydyfen site? The proposed development at Pontrhydyfen is situated within the Welsh Government Woodland estate that is managed by Natural Resources Wales. An access licence agreement to establish a drilling site at Pontrhydyfen was requested by UK Methane Ltd. In accordance with the duties imposed on it by the Natural Resources Body for Wales (Functions) Order 2013, NRW granted a time-limited and conditional access licence to UK Methane Ltd (entered in to on 1 st September 2015 for a 12 month period). The licence grants access for limited purposes (drill and test a borehole) to a small area of land that we manage. The licence is strictly conditional upon UK Methane Ltd gaining all the necessary consents, including planning and environmental consents. UK Methane Ltd is not entitled to conduct activities without first gaining all the necessary consents. 2.8 Does granting a license to access the land in Pontrhydyfen indicate Natural Resources Wales support for the onshore oil and gas industry? The decision to grant the access license will not pre-judge the outcome of the permit application determination process (the developer carries the risk of the permit application being refused). As an environmental regulator, our role is to determine whether exploration and development activities can be done in a way that protects people and the environment. We take the environmental risks associated with oil and gas exploration and production very seriously, including hydraulic fracturing for shale gas. Our regulatory controls are in place to protect people and the environment. If the activity poses an unacceptable risk to the environment, the activity will not be permitted. We are satisfied that the current regulations are sufficient to protect the environment during the exploratory phase of the industry's development. We continue to review our regulatory approach as the industry develops so that high standards of environmental protection continue, protecting people as well as the environment. 2.9 How are people being consulted on the proposed development at Pontrhydyfen? Details of the permit application were publicised via our website and widely communicated by means of social media (NRW Twitter and Facebook Page). We consulted on the permit application between September 10 th to 11th October 2015, and invited interested stakeholders to submit their thoughts and concerns regarding the application. The permit application will also be retained within our Public Register. Arrangements to view the public register can be made by contacting: enquiries@naturalresourceswales.gov.uk Phone: (Mon - Friday 8am - 6pm) Page 6 of 10

7 Should we request further information from UK Methane Ltd that was not part of the original environmental permit application, the request and response will also be made available through the public register How will Natural Resources Wales determine the permit application? In making an application for the relevant permits, UK Methane Ltd submitted the relevant application forms and supporting documents and outlined the specific details of the proposed activity (further information on this process can be found on our external website). We will assess the details of the permit application, and check that the proposed activity will not have an unacceptable impact on the local environment. We will also assess the proposed activity against the requirements of EU and domestic legislation. Should we determine that an environmental permit can be granted, we will include permit conditions that provide the necessary protection to the environment and public health. If we consider that an activity poses an unacceptable risk to the environment we will not grant any permits What is the timeline for the permit determination? We have four months in which to make a decision on environmental permit applications and our deadline for Pontrhydyfen is 24th December. We can, however, extend this deadline if we find that we need to ask the applicant for additional information. In this event, both our request for information and the applicant s reply will be available on our public register How does Natural Resources Wales apply the precautionary principle in relation to oil and gas activities? UK Methane Ltd submitted a risk assessment as part of their permit application, and this will be assessed and form part of our consideration on whether to issue an environmental permit. We will only grant an environmental permit if we are satisfied that the applicant demonstrates to our satisfaction that the risk of causing pollution is absolutely minimal and that the risk assessment provided meets the requirement to protect the environment and human health. Any permit we may issue will include appropriate conditions to protect human health and the environment Will the developer be required to collect baseline site condition data prior to commencing any permitted activities? The developer was required to provide a site condition report as part of the permit application, and this will be assessed as part of our permit application determination. Further details on the content we would expect in a site condition report can be found on our website. Page 7 of 10

8 As part of our consideration of the permit application, we will assess what, if any, additional baseline monitoring is required. The nature and scope of any baseline data requirements is assessed on a site-by-site basis, and will depend on the nature of the specific activity proposed by the developer, local environmental conditions and the site condition report. The type and period of baseline monitoring will depend on the risks from particular activities at particular sites. At the time when the developer wishes to vacate the site, they will be required to surrender their environmental permit. When applying to surrender their permit, the developer will be required to provide an updated site condition report. Natural Resources Wales will not allow the developer to surrender their permit until we are satisfied with the contents of the report If the applicant is granted permission to go ahead, how will they monitor the environment during and after drilling takes place? The nature and scope of any environmental monitoring that is required on the part of the developer will be considered as part of our permit application assessment process. The exact requirements will be based on the nature of the specific activity proposed by the developer, local environmental variables, and UK and EU law. These requirements will be set out in the permit conditions. As part of UK Methane s permit application, they have proposed to undertake daily monitoring of protective surfaces, regularly inspect the fuel storage tanks and water bowser, and during the drilling process, an onsite methane monitor will measure exposure to methane. Should we determine that additional monitoring is necessary, we will include conditions within the permit that would outline these monitoring requirements Will Natural Resources Wales carry out site inspections following the commencement of drilling? What do we monitor? If we determine that it is appropriate to issue a permit, it will clearly set out the conditions for operation of the site and will include, but not be limited to, conditions on groundwater, surface water, emissions, safe storage of waste, noise and air pollution caused by site operations. We undertake inspections to ensure compliance with these permit conditions. We focus our inspection work on those sites where we believe the risk of harm to the environment or local communities is higher or where the community has particular concerns about a site. Natural Resources Wales does not need to give companies operating sites in Wales any notice of inspections and can make unannounced visits. Should we decide to issue a permit to UK Methane Ltd, our waste regulation officers will prepare a site inspection programme to assess compliance with the permit conditions. Page 8 of 10

9 3 PEDL licences 3.1 What is a PEDL Licence? PEDL stands for Petroleum Exploration and Development Licence. It is awarded by the Oil and Gas Authority (OGA), a newly created Executive Agency of the Department of Energy & Climate Change (DECC), and gives a company exclusive rights to explore for and develop oil or gas in a particular area. PEDL licenses for the 13th onshore licensing round were awarded in The 14th round licenses are being awarded in A PEDL licence is initially time-limited to 6 years for exploration, but extensions can be applied for. No exploration can take place without a PEDL, plus the required planning, environmental and HSE permissions. More details on PEDL can be found on.gov. 3.2 Have PEDL licenses been suspended in Wales? DECC, following consultation with Welsh Government, decided not to issue any PEDL within Wales as part of the 14 th onshore licensing round (as licensing powers will be devolved to Welsh Government through the Wales Bill). Therefore, there will be no new PEDL areas within Wales pending the full devolution of the licensing powers and the Wales Bill becoming and Act. However, PEDL awarded as part of the 13 th onshore licensing round in 2008 are still active and developers are still entitled to prospect for oil and gas reserves within these existing PEDL areas, subject to the terms of the PEDL and subject to obtaining the necessary planning and regulatory consents. 4 Shale Gas and Hydraulic Fracturing 4.1 Is there a moratorium on shale gas in Wales? The Welsh Government has adopted a precautionary approach to the development of unconventional oil and gas resources in Wales. In support of this approach, the Minister for Natural Resources has issued a Notification Direction to all Welsh Local Authorities. From the 16th February 2015, local authorities in Wales are subject to The Town and Country Planning (Notification) (Unconventional Oil and Gas)(Wales) Direction The Direction requires that where a Local Authority proposes to approve a planning application for an unconventional oil and gas development, which would involve using hydraulically fracturing technology (or other unconventional extraction techniques), it must refer the planning application to Welsh Ministers. The intention of the Direction is to provide Welsh Ministers with an opportunity to consider whether appropriate scrutiny has been given to environmental and public health concerns, as these may raise issues of more than local importance. The Welsh Ministers may Page 9 of 10

10 choose to call in the planning application for further consideration, or if appropriate issue a Direction that the application may not be approved. This Direction is only applicable to developments involving the onshore exploration, appraisal or production of coal bed methane or shale oil using unconventional extraction techniques, including hydraulic fracturing. The Direction does not apply to the making of exploratory boreholes which do not involve the carrying out of such unconventional extraction techniques. 4.2 Has Natural Resources Wales carried out studies on the environmental risks of shale gas? The Environment Agency has published a comprehensive risk assessment of the environmental risks of shale gas. The risk assessment focuses on the exploration stage, which matches the current stage of development of the Welsh shale gas industry. Natural Resources Wales consider this risk assessment to also be applicable to Wales (on the basis that is was partially prepared prior to the formation of Natural Resources Wales, the regulations/legislation referenced are applicable in Wales and the risks identified are generic and not site specific). Page 10 of 10