May 29: A report released in London by the International Energy Agency (IEA), a special World Energy Outlook report on unconventional gas entitled, Golden Rules for a Golden Age of Gas; indicates that exploiting the world's vast resources of unconventional natural gas holds the key to a golden age of gas, but for that to happen governments, industry and other stakeholders must work together to address legitimate public concerns about the associated environmental and social impacts.
IEA Executive Director Maria van der Hoeven said, "The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way. But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place."
The reports Golden Rules underline the importance of full transparency, measuring and monitoring of environmental impacts and engagement with local communities; careful choice of drilling sites and measures to prevent any leaks from wells into nearby aquifers; rigorous assessment and monitoring of water requirements and of waste water; measures to target zero venting and minimal flaring of gas; and improved project planning and regulatory control.
According to a release, at their recent Camp David Summit [See WIMS 5/21/12], G8 leaders welcomed and agreed to review this IEA work on potential best practices for natural gas development. The G8 members said, "We are committed to establishing and sharing best practices on energy production, including exploration in frontier areas and the use of technologies such as deep water drilling and hydraulic fracturing, where allowed, to allow for the safe development of energy sources, taking into account environmental concerns over the life of a field." Van der Hoeven said, "To build on the Golden Rules, we are establishing a high-level platform so that governments can share insights on the policy and regulatory action that can accompany an expansion in unconventional gas production, shale gas in particular. This platform will be open to IEA members and non-members alike".
IEA Chief Economist Fatih Birol, the report's chief author said, "If this new industry is to prosper, it needs to earn and maintain its social license to operate. This comes with a financial cost, but in our estimation the additional costs are likely to be limited." Applying the Golden Rules could increase the cost of a typical shale-gas well by around 7%, but, for a larger development project with multiple wells, investment in measures to reduce environmental impacts may in many cases be offset by lower operating costs. The report argues that there is a critical link between the way governments and industry respond to these social and environmental challenges and the prospects for unconventional gas production. Accordingly, the report sets out two possible future trajectories for unconventional gas:
In a Golden Rules Case, the application of these rules helps to underpin a brisk expansion of unconventional gas supply, which has far-reaching consequences:
The reports Golden Rules underline the importance of full transparency, measuring and monitoring of environmental impacts and engagement with local communities; careful choice of drilling sites and measures to prevent any leaks from wells into nearby aquifers; rigorous assessment and monitoring of water requirements and of waste water; measures to target zero venting and minimal flaring of gas; and improved project planning and regulatory control.
According to a release, at their recent Camp David Summit [See WIMS 5/21/12], G8 leaders welcomed and agreed to review this IEA work on potential best practices for natural gas development. The G8 members said, "We are committed to establishing and sharing best practices on energy production, including exploration in frontier areas and the use of technologies such as deep water drilling and hydraulic fracturing, where allowed, to allow for the safe development of energy sources, taking into account environmental concerns over the life of a field." Van der Hoeven said, "To build on the Golden Rules, we are establishing a high-level platform so that governments can share insights on the policy and regulatory action that can accompany an expansion in unconventional gas production, shale gas in particular. This platform will be open to IEA members and non-members alike".
IEA Chief Economist Fatih Birol, the report's chief author said, "If this new industry is to prosper, it needs to earn and maintain its social license to operate. This comes with a financial cost, but in our estimation the additional costs are likely to be limited." Applying the Golden Rules could increase the cost of a typical shale-gas well by around 7%, but, for a larger development project with multiple wells, investment in measures to reduce environmental impacts may in many cases be offset by lower operating costs. The report argues that there is a critical link between the way governments and industry respond to these social and environmental challenges and the prospects for unconventional gas production. Accordingly, the report sets out two possible future trajectories for unconventional gas:
In a Golden Rules Case, the application of these rules helps to underpin a brisk expansion of unconventional gas supply, which has far-reaching consequences:
- World production of unconventional gas, primarily shale gas, more than triples between 2010 and 2035 to 1.6 trillion cubic meters.
- The United States becomes a significant player in international gas markets, and China emerges as a major producer.
- New sources of supply help to keep prices down, stimulate investment and job creation in unconventional resource-rich countries, and generate faster growth in global gas demand, which rises by more than 50% between 2010 and 2035.
By contrast, in a Low Unconventional Case where no Golden Rules are in place, a lack of public acceptance means that unconventional gas production rises only slightly above current levels by 2035. Among the results:
- The competitive position of gas in the global fuel mix deteriorates amidst lower availability and higher prices, and the share of gas in energy use barely increases.
- Energy-related CO2 emissions are higher by 1.3% compared with the Golden Rules Case but, in both cases, emissions are well above the trajectory required to reach the globally agreed goal of limiting the temperature rise to 2°C.
Several groups of investors with about $1 trillion in assets under management commented on the IEA report and said they are "seeing much they can support." On May 16, 2012, Boston Common Asset Management (Boston Common), the Investor Environmental Health Network (IEHN) and the Interfaith Center on Corporate Responsibility (ICCR) announced that 55 major investment organizations and institutional investors had united in support of "best practices" for the fracking of shale gas. The issued their own guidelines entitled, "Extracting the Facts: An Investor Guide to Disclosing Risks from Hydraulic Fracturing Operations." They said the IEA "Golden Rules" recommendations are "in the same spirit as the IEHN/ICCR guidelines."
Steven Heim, managing director and director of ESG Research and Shareholder Engagement, Boston Common, said, "Investors require full disclosure in accordance with IEA's golden rules in order to make fully informed judgments about wise investments in the energy sector that take full account of companies' management of environmental risks and social impacts."
Steven Heim, managing director and director of ESG Research and Shareholder Engagement, Boston Common, said, "Investors require full disclosure in accordance with IEA's golden rules in order to make fully informed judgments about wise investments in the energy sector that take full account of companies' management of environmental risks and social impacts."
Richard Liroff, PhD., executive director, Investor Environmental Health Network, said, "The substantial alignment between IEA's recommendations and 'Extracting the Facts' means that 'Extracting the Facts' provides companies with a practical tool for implementing the IEA recommendations." Sister Nora Nash, director of corporate social responsibility, Sisters of St. Francis of Philadelphia, and member of the ICCR, said, "The IEA golden rules reinforce the core messages of the investor guidelines we put forth in "Extracting the Facts" that companies need to fully engage communities to secure their social license to operate, and a critical element of such engagement is responding to community concerns and reporting fully on operational practices."
Access a release from IEA and link to videos of the announcement presentation, Q&A's and opening remarks (click here). Access links to the complete 150-page report, annex and presentation slides (click here). Access a release from the investors (click here). Access the 36-page Extracting the Facts investor guidelines (click here). Access a White House blog posting on the G8 Summit with links to extensive information including the G8 Declaration or Camp David Declaration, a slideshow from the weekend, President Obama's Remarks at the close of the G8 Summit and more (click here). [#Energy/Frack]
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