Transatlantic Fracking
Britain Restarts Stalled Shale Ambitions

It was a long time coming, but a UK county council finally issued a ruling on exploratory fracking this week, choosing to approve the country’s first such application since 2011. The FT reports:

North Yorkshire county councillors voted seven to four in favour of the plans despite huge public opposition—a decision that could restart a controversial industry plagued by planning delays. The government welcomed the decision. Andrea Leadsom, the energy minister, said on Tuesday fracking was a “fantastic opportunity”. […]

Third Energy will frack for shale gas at an existing well outside the village of Kirby Misperton to test if the rock below is suitable. It would then need further permission to produce on a large scale, which could lead to several hundred wells across the hills of North Yorkshire.

Public opposition effectively grounded Britain’s shale industry before it was ever able to get off the ground. Unlike the United States, the UK does not afford landowners the rights to what lies underneath the surface of their property, so while here in America a discovery of oil or gas reserves on one’s land would be cause for celebration, in the UK and most other countries in the world it is cause for lamentation. Energy companies have agreed to pay affected communities a flat fee for exploration and a portion of revenues if wells turn out to be profitable, but the fact that this relationship is intermediated by a local council must certainly weaken the incentive for local residents to support the controversial drilling process.

But this exploratory drilling permit was issued in spite—not because—of public opinion (which has recently plumbed new lows), and it’s far from smooth sailing for fracking in the UK now. Future drilling will once again be subject to council approval and will undoubtedly set off new rounds of protests, but perhaps even more concerning for the pro-shale Cameron government is how companies will be able to make a profit off of these projects. The FT reports:

Spot gas prices, at about 30p per therm, already trade below estimates of what it would cost to produce shale gas from UK fields. IGas, which had been exploring in old coal seams, has decided not to bother. Meanwhile, US gas output rises every year and storage there is nearly full. Exports are on their way to Britain.

But if American shale companies have proven anything, it’s that it’s unwise to discount their ability to find new ways to profitably tap new resources. We’ll have to wait and see if that same innovative spirit is transferrable across the Atlantic, but with an estimated 1.3 quadrillion cubic feet of untapped shale gas lying fallow in the UK, there’s certainly plenty of incentive there.

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