Risk Governance Guidelines for Unconventional Gas Development

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Report

Risk Governance Guidelines for Unconventional Gas Development

international risk governance council

international risk governance council Risk Governance Guidelines for Unconventional Gas Development

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All rights reserved, International Risk Governance Council, Lausanne, 2013. Reproduction of original IRGC material is authorised, provided that IRGC is acknowledged as the source.

ISBN 978-2-9700-772-8-2

Abbreviations and acronyms

AC Atlantic Council

ACC American Coal Council

API American Petroleum Institute

CBM coal bed methane

CGES Centre for Global Energy Studies

CNG compressed natural gas

CO2 carbon dioxide

DOE (US) Department of Energy

EAI (US) Energy Information Administration

EC European Commission

EPA (US) Environmental Protection Agency

ERA environmental risk assessment

ERCB Energy Resources Conservation Board

GHG greenhouse gases

GWP global warming potential

HAP hazardous air pollutant

IEA International Energy Agency

JRC (EC) Joint Research Centre

LCA life cycle assessment

LNG liquefied natural gas

NIOSH (US) National Institute for Occupation Safety and Health

NGOs non-governmental organizations

NOx nitrogen oxides

NORM naturally occurring radioactive material

NYSDEC New York State Department of Environmental Conservation

OECD Organisation for Economic Co-operation and Development

RAE (UK) Royal Academy of Engineering

SCER (Australia) Standing Council on Energy Resources

SOx sulfur oxides

SRI Siena Research Institute

tcm trillion cubic meters

TDS total dissolved solids

UG unconventional gas

UGD unconventional gas development

VOCs volatile organic compounds

Cover: photograph cta88/iStock.

Risk Governance Guidelines for Unconventional Gas Development international risk governance council

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Contents

Preface 5

Executive summary 6

Section 1: Global interest in unconventional gas development 8 Recoverable UG reserves: how much and where? 8The drivers of UGD 10 Recommendations 12

Section 2: Identifying and managing risks 13 Introduction 13Phases of UGD 13 Risk identification and risk governance recommendations 15 Land 15 Water 17 Air 24

Section 3: The need for political legitimacy 28 North America 28Europe 33 Asia 41 Recommendations 43

Section 4: The evolution of regulatory systems for UGD 44 Introduction 44Defining key policy instruments 44 How and why regulatory systems vary 45 Distinctive aspects of UGD and its regulation 48 Key components of a regulatory system 49 Stakeholder coordination, education and participation in the regulatory system 55 Recommendations 58

Section 5: Roundtable on responsible UGD 59 Organization 59 Functions 61

Conclusions 65

References and bibliography 66

Appendix: Tabulation of enhanced natural gas production resources 76

Acknowledgements 91

About IRGC 92

international risk governance council Risk Governance Guidelines for Unconventional Gas Development

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Tables, figures and boxes

FiguresFigure 1: Assessed shale gas and shale oil basins in the world 9

Figure 2: Recoverable natural gas reserves in trillion cubic meters (tcm) in 2011 9

Figure 3: Projected employment patterns, percent of highest employment, for each of the stages of development of a hypothetical shale gas development 10

Figure 4: Basic dynamics of shale gas extraction in a horizontal wellbore 15

Figure 5: Change from all developments (due to UGD and other activities) in percent interior forest by watershed in Bradford and Washington counties, Pennsylvania, from 2001 to 2010 16

Figure 6: Estimated fracture propagation determined by micro-seismic monitoring of hydraulic fracturing operations in the wells drilled in the Barnett and Marcellus shale plays 20

Figure 7: Greenhouse gas emissions: unconventional versus conventional 26

Figure 8: The dialogue process on UGD in Germany 38

TableTable 1: Total natural gas production and consumption in OECD countries for selected years 11

BoxesBox 1: Job creation and occupational hazards 10

Box 2: Induced seismicity 21

Box 3: Greenhouse gas emissions 26

Box 4: Dialogue process on UGD in Germany 37

Box 5: European public opinion about unconventional gas development 41

Box 6: Pennsylvania scrambles to address wastewater disposal issues 47

Box 7: Types of monitoring 50

Box 8: Shale gas regulations in the US 54

Box 9: The trend toward public disclosure of hydraulic fracturing fluids 55

Box 10: Recognizing and complying with existing EU environmental law will be crucial for UGD in Europe 56

Box 11: Examples of constructive roundtable discussions 61

Box 12: Industry associations involved in data and experience collection and sharing 62

Box 13: Knowledge transfer on technical, regulatory and policy issues between nations 62

Risk Governance Guidelines for Unconventional Gas Development international risk governance council

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Preface

Based on concerns that unconventional gas development is both under-regulated in some jurisdictions and also over-

regulated in other parts of the world, the IRGC offers a set of risk governance recommendations relating to the development

of this resource. The goal is that by applying these recommended actions, risks to the environment, climate, economy

or society will be significantly reduced while the benefits of utilizing this newly available resource will be strengthened.

This report was generated based on an expert workshop, held in November 2012, an extensive literature review and

numerous conversations with experts in academia, scientific institutions, industry, regulatory authorities and policymakers.

The aim of this report is to help experts, in various countries and context conditions, to design policies, regulatory

frameworks and industrial strategies to maximize the benefits that unconventional gas development could promise while

reducing the associated risks. It will be followed by a policy brief that focuses on providing policy recommendations.

international risk governance council Risk Governance Guidelines for Unconventional Gas Development

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Numerous countries throughout the world are exploring the

potential promise of unconventional gas development (UGD)

as a component of national energy policy. IRGC presumes that

policymakers seek to maximize the overall well-being of society,

taking into account the risks and benefits of UGD compared with

the risks and benefits of alternative energy sources. The global

interest in UGD has been stimulated by a rapid increase in shale

gas development in North America over the past 15 years.

This policy brief defines UGD as the use of advanced methods of

hydraulic fracturing, coupled with directional drilling (i.e. horizontal

as well as vertical drilling) to access natural gas resources that were

previously considered technically inaccessible or uneconomic to

produce. While this brief focuses on UGD from shales, many of

the briefs risk governance recommendations are also relevant to

gas development from tight gas sands and coal seams.

UGD could potentially provide a variety of benefits. Specifically:

Provide affordable energy to businesses and consumers in the

industrial, residential and transportation sectors;

Create direct and indirect employment and economic prosperity;

Contribute to a countrys energy security by lowering

dependence on imported energy;

Provide a basis for a new export industry, since many countries

seek to import natural gas;

Generate fewer greenhouse gas (GHG) emissions than coal

and oil;

Diminish damage to local environmental quality by replacing

some uses of coal and oil with a cleaner alternative;

Provide a backup energy source to solar and wind renewables;

and

Enhance the competitiveness of a countrys manufacturing

sector, especially subsectors (e.g. chemicals, steel, plastic

and forest products) that use natural gas as a key input to

production.

UGD also potentially poses a variety of risks. Possible threats

to human health, safety and the environment are prominent

concerns, especially if effective risk management practices are

not implemented. Potential threats include:

Degradation of local air quality and water resources;

Consumption of potentially scarce water supplies;

Habitat fragmentation and ecosystem damage;

Community stress and economic instability;

Induced seismic events;

Exacerbation of global climate change by triggering more

emissions of methane, which is a potent, climate-changing

gas; and

Slowing the rate of investment in more sustainable energy

systems.

While there are a series of both known and inferred potential

benefits as well as threats associated with the development of

this resource, there also may exist other impacts, both positive or

negative, that might occur in either the short and long term, which

are not yet fully understood.

In this report, IRGC examines the risks and benefits of UGD

and offers some risk governance recommendations to guide

the deliberations of policymakers, regulators, inve