Fracking drilling into British consciousness

The people of the southern counties of England are often accused by their northern compatriots of being somewhat softer. It is not too surprising that they are known as the Home Counties. However, when residents of a village in West Sussex last week responded to moves by an energy company to begin exploratory drilling in the area, the response was an angry blockade of the entrance to the work site and the suspension of work for days.

Although the protest itself was eventually thwarted, with energy company Cuadrilla Resources beginning work six days after the ‘blockade’ by a hundred or so people began, the Balcombe events are a demonstration of a wider debate that has been rumbling in the background in the UK for some time and is now taking centre stage. The conflict is over shale gas and the methods used for extracting it, and the problem at its heart is the UK’s increasing need for energy independence.

The last twenty years has seen a revolution in how the world views energy sources. Collectively, countries have recognized the impact of climate change and acknowledged its seriousness, with varying results, while the search has begun in earnest for renewable or at least sustainable energy sources.

In terms of renewable energy, the UK has been investing heavily in wind power, and its windmills, depicted as a blight on the British landscape, have made the nation the eighth biggest producer of wind power worldwide. However, when the issue is energy to power a country, nothing beats shale.

Shale oil and gas and its exploration were invested in heavily by the US government during the 1990s until companies discovered a way of extracting it that was economical. Now, its growth is unstoppable. Between 2005 and 2012, gas production in the US grew 45% per year. Prices have dropped to record lows; an entire new industry and job opportunities have emerged.

The country also no longer depends on foreign relations for gas imports, implying a freedom that many developing countries, and several developed countries, would give an arm and a leg for.

However, in the UK, the movement in favour of shale gas exploration runs into three problems that are distinct yet intertwined. Firstly, although it is known that there are sizeable resources buried underground, it is not exactly clear how much there is. Reserve estimations vary. Secondly, the impact of hydraulic fracturing in the UK, whose geological composition is different from the US, cannot be accurately defined and therefore any estimate is a potential estimate. Finally, and crucially, the public have yet to be convinced.

Research conducted both by government bodies such as the Department for Energy and Climate Change and by Cuadrilla itself has indicated that the UK has significant reserves in the central part of the country, located around Lancashire. Other sites with potential reserves have been identified in the south-east (including Balcombe).

In their discovery of the large shale field under the Fylde Coast, made in 2011, Cuadrilla announced that there was potentially 200 trillion cubic feet (tcf) in the field, now known as the Bowland Basin, putting it on a par with Venezuela in terms of reserves. However, almost immediately both the government and the company said it was unlikely to recover the amount in its entirety, with Cuadrilla claiming it would be happy with “between 10-20% of that amount.”

The problem with energy estimations on UK reserves is that they are full of these caveats. At all stages the government has stressed “shale research is in its infancy”, simultaneously seeking to play down the resource’s importance while the media has sought to build it up.

In a report published in June, it was announced that “the British Geological Survey have estimated on a central scenario that there is likely to be some 40 trillion cubic metres (1,300 trillion cubic feet) of shale gas in the ground in this area.”

However, the report immediately added that “while this does not mean that this amount could be extracted for use, the report published today will give industry and regulators an indication of how best to plan future exploratory drilling, so that they can determine how much of the gas would be able to be commercially recovered.”

“This is expected to be substantially lower than the total amount of gas in place because of technical and commercial limitations on the level of extraction.”

The answer to how much shale there is: we don’t know. In order to get a better idea, Cuadrilla has secured exploratory licences, including one near the town of Balcombe, West Sussex. The reaction of local residents, who joined the initial protest organized by anti-hydraulic fracturing group ‘Frack Off’, has been one of outrage.

“The residents of Balcombe … feel trampled on by the government and the industry. They have now taken matters into their own hands and surveyed every single house in the village and publicly declared that 85% of villagers don't want fracking. At this point the village will do anything — including putting their bodies and their liberty on the line to prevent Cuadrilla from continuing work,” said Dylan Davis, a Frack Off campaigner, to the Buenos Aires Herald yesterday.

“A third of the UK has already been sold off to companies looking to extract unconventional-gas. Another third is due to be sold off in the next 6 months. What’s happening in Balcombe is waking the nation up to a threat that only three weeks ago was successfully sneaking under he radar of public consciousness.”

However, even if this flame has been somewhat fanned by the media, their outrage is understandable: it is unclear what actual impact hydraulic fracturing will have when it is introduced in the UK.

For one thing, geologists have determined that the thickness of the rock that will have to be drilled to extract the shale is not as great as that in the US. Reduced thickness implies reduced gas. At the same time, drills dug in the US were vertical, while wells in the UK are more likely to be horizontal. This has increased fears that drilling will have an impact on greater stretches of land, whether it is pollution or ‘seismic inducement’, as happened in April and May in Blackpool when Cuadrilla began its first fracking operation in the UK.

But the clearest problem about fracking is its popular appeal, which currently wavers close to zero. The debate is alive in the media, where the potential benefits of reducing gas prices and carving out energy independence for the UK are not lost on the mainstream. However, there is no nationwide consensus: the Telegraph on August 6 reported that the Co-Operative, a high street supermarket branch, is actively supporting the anti-fracking movement.

This lack of public interest in the issue is spurred by a lack of clarity from the government and political bickering. The fact that energy development is being debated at all by the establishment is positive in itself, but the government’s offer of tax incentives to companies involved in fracking operations (Cuadrilla is not alone in this field – it just has the highest profile) seemingly demonstrates that the Conservatives have made their mind up.

Matters were not helped in this regard when Lord Howell of Guildford, George Osborne’s father-in-law, gifted the media with a headline on July 30 when he enquired in the House of Lords as to whether fracking should not take part in “desolate, uninhabited areas” of the north-east. Once again, the government is revealing its ability to fudge the issues that matter both for the country and to its people.

Much has been made in recent weeks of both the potential benefits and negative impact of fracking in England, with a focus on the amount of jobs it could bring to a region set against environmental damages. However, some facts are clear: the UK still has a reliance on coal, and gas imports of 55 percent in 2012 represented a record high.

The UK has no choice but to develop its own industry. As the Financial Times said in an editorial published on August 6, “there does not have to be a rush. This gas is not going anywhere.” What needs to move is the British government and the companies it keeps in order to reassure the people that shale gas has real potential.

@archiewhit

First published in the Buenos Aires Herald on August 7, 2013.

CofE’s CEO through mirror of Pope Francis

The past week has seen the current incumbent of an oft derided and ridiculed religious establishment charm the international media and his flock through showmanship and humanity.

The Pope’s visit to Brazil, his first overseas trip since his appointment in March, was a spectacular occasion that saw streets and beaches fit to burst, images of which were broadcast around the world. The indications are that Pope Francis (and his PR team) are well aware of the opportunity they have to craft a new name and relevance for the Catholic Church in a modern age.

The Church of England (CofE) has long grappled with the same problem: it is the official religion of England, but falling attendance numbers and general apathy of the UK population towards the Church has seen its importance to life slide in what should be its most concentrated Anglican constituency.

The ageing populations of its parishioners, set against the rise of religions imported over the last 50 years (including Islam), has left the CofE adrift in British society. A YouGov poll published recently said that 58% of young people in the UK view religion as “completely irrelevant.”

In this context, the appointment of Justin Welby to the position of Archbishop of Canterbury, leader of the CofE, was seen at the time as a radical move. Welby originally worked in the energy sector for 11 years before moving into the Church, being ordained in 1992, and had only been appointed Bishop of Durham in 2011. In church terms, this is a meteoric rise, probably aided by his links to Holy Trinity Brompton (HTB), known for its evangelical approach to the Anglican faith.

Welby’s appointment was announced in November 2012, but he was eventually enthroned as Archbishop of Canterbury on March 21 eight days after Pope Francis was elected. The two religious leaders have a lot in common: they are both considered to be outsiders, to have been the surprise candidates for their jobs and both are tasked with making their respective religions more relevant in today’s world.

While Pope Francis woos millions across the world with an international brand of leadership not seen by the Catholic Church in generations, the Archbishop of Canterbury (or ‘Archbishop Justin’, as the CofE website refers to him) has so far focused on the real problems facing the UK. He has called for opposition to “lynch mobs” against bankers involved in the financial crisis, and pushed ahead with plans for women bishops in the Church. Welby is at work on relevance.

However, last week the Archbishop made a bold step and directly attacked loan companies, specifically Wonga, stating that the Church’s aim would not be to push for legislation against these companies but to “compete them out of existence.”

Welby stated that this would be achieved through the implementation of credit unions operating out of churches across the country. Speaking to the media on July 24, the Archbishop stated that “We’ve got to have credit unions that are both engaged in their communities and much more professional, and people have got to know about them. It’s a decade-long process.”

In terms of relevance to the population, this could not be a more potent issue. Loan companies have always existed, but the economic climate that has developed following the 2008 financial crisis and recession has seen the emergence of new and larger companies.

A notable growth area is payday loans, in which loan companies offer advances on monthly paycheques but with a painful bite. The Annual Payment Rates (APR) of the top ten payday loan companies in the UK range from a low of 1,734% to 5,853%; the latter rate is offered by Wonga.

Although the companies involved are quick to point out that the rate is representative rather than actual, as there are no payday loans for a year, the impact of these loans on the lives of the financially disadvantaged cannot be denied.

The hold that these companies have in society can be seen through their permeation in many facets of everyday life: from advertising on public transport to the sponsorship of football teams. Wonga and the rest represent the financial vice that the UK is still in, and provide a sobering counterbalance to any and all claims of recovery.

Therefore, the Archbishop chose a key target and launched an incisive strike, presenting the CofE’s credit unions and their suggested APRs of 70-80% as a viable long-term alternative. The media response was one of surprise giving way to respect. The Church was seen as striking a blow for the poor.

It was unfortunate, then, that Welby failed to do due diligence on his plans and enquire into the CofE’s own investments through the Church’s Ethical Investment Advisory Group which include a £75,000 indirect stake in Wonga.

Though the investment was made through a venture capital firm, Accel Partners, and only represents a small percentage of the Church’s total investments (which soar to approximately £5.5 billion, according to media reports), the July 25 revelation was “very embarrassing”, as Welby admitted in a radio interview with the BBC. That embarrassment was exacerbated by the Archbishop’s awkward statements in defence of Wonga: “I don’t support what they do, but I recognize that they are very professional.”

Wonga itself reacted with good grace to the situation, at least publicly. Errol Damelin, the company’s founder and CEO, stated on July 26 “that ‘the Archbishop is an exceptional individual, with our discussions ranging from the future of banking and financial services to the emerging digital society. On his ideas for competing with us, Wonga welcomes competition from any quarter that gives the consumer greater choice in effectively managing their financial affairs.” When pressed further, Wonga directed this journalist to its website, which lists its teasingly titled “10 Commitments” to customers.

The net result of the past week would therefore appear to be cut and dried. The affair apparently shows a new idealistic leader who is out of step with the realities of his organization, which saw returns of its endowment of an inflation-beating 9.7% in 2012, engaging in “kumbayah capitalism,” as The Telegraph put it. Reports at the end of the week suggested Welby’s “fury” at the revelations, which undermined a truly progressive stance and a move for relevance.

However, the Archbishop’s immediate response, admitting to error while insisting that the credit unions would go ahead, has also garnered support. As Welby said on July 29 during a sermon given to religious group New Wine, “when the church is real, people pay attention. The change has to start with us. We have to be transparent, accountable and self-aware.”

For a religious group that is isolated from the majority of the population and desperately seeking relevance, this is a good place to start.

@archiewhit

First published in the Buenos Aires Herald on July 31, 2013.