Numerous countries in various parts of the world are exploiting or exploring the promise of unconventional gas development (UGD) as one component of their national energy policy. IRGC 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 technologically non-recoverable or unprofitable.
The global interest in UGD had been stimulated by a rapid increase in shale gas exploration and development that has occurred principally in North America over the past fifteen years. While the IRGC project in 2013 focused on UGD from shales, many of the IRGC risk governance recommendations are also relevant for gas development from tight gas sands and coal seams.
The Benefits of Developing Unconventional Gas Resources
In addition to its potential as a practical source of affordable energy for residential, transportation and industrial users, the development of gas from unconventional reservoirs provides a variety of benefits:
- Contribution to a country’s energy security by lowering dependence on imported energy
- Basis s for a new export industry, since many countries seek to import natural gas
- Lower impacts on environmental quality by curtailing dependence on coal and oil
- Reduction in carbon dioxide emissions to mitigate climate change
- Enhanced competitiveness of a country’s manufacturing sector, especially subsectors (e.g. chemicals, steel, plastic, and forest products) that use natural gas as key input to production
The Risk Side of Unconventional Gas
However, unconventional gas production can also be a threat to human health, safety and the environment, especially if effective risk-management practices are not implemented. The development of natural gas from shale and other unconventional reservoirs utilise advanced drilling and completion technologies that are now being deployed on very large scales. While the application of such technologies has allowed access to gas resources that were previously unrecoverable, the production of gas using these advanced techniques carries additional implicit risks:
- The magnitude of these risks may vary considerably based on the specifics of the particular development. Risks may be related to inadequacies in technologies or procedures or may be based on problems with the implementation of appropriate techniques.
- The more localised and technology-specific risks are coupled with degradation of air quality and water resources, induced seismic activity, and methane emissions (which can increase the overall risk of climate change due to their increased potency relative to other fossil fuels).
- Other risks are more locally extensive and often found with large scale industrial development including land and nature impacts (habitat loss and ecosystem damage), nuisance risks (e.g. truck noise, air pollution), waste-water management and community changes associated with development in previously non-industrial areas.
IRGC’s Contribution: Better Understand and Manage Governance Deficits
IRGC has applied its experience with risk governance to unconventional gas development, with the intent to help politicians, regulators, and private sector decision-makers better understand how these governance deficiencies arise and how they can be minimised. It has developed risk governance guidelines as policy options concerning how UGD is explored and produced. The guidelines are based on presentations and discussions from an expert workshop held in November 2012, as well as further analyses and consultations.
The Importance of Regulatory Oversight
Regulatory oversight is particularly important for the management of risks that are inherent in the development of natural gas resources from unconventional reservoirs. Because of the variability within and between countries in political cultures, the assignment and administration of property rights and revenue, and the degree of trust by the public in regulators, science, industry and environmental organisations, there is no single regulatory model that can function comprehensively in all political jurisdictions.
Comprehensive and effective regulatory systems are required in order to ensure that the risks of unconventional gas production are managed in a responsible manner that benefits the maximum number of stakeholders. If regulatory systems are inadequate, irresponsible behaviour by developers can damage the environment, impact the health of humans and ecosystems, and inhibit effective and sustainable development. On the other hand, overly restrictive regulatory systems can lead to inefficient and prohibitive business conditions, again resulting in unsustainable development.
Stakeholder Participation is Crucial for UGD
A crucial component of the evolving regulatory systems is the participation of stakeholders in the process and the incorporation of their interests, especially of those stakeholders communities that are directly affected by development, into the governance of associated risks. Local communities may vary considerably in their receptivity to the rapid economic changes – as well as environmental risks – associated with intensive UGD. Their overall agreement will ascertain the societal legitimacy that is required for the establishment of a political legitimacy for unconventional gas development. Vice-versa, their opposition will undermine most industry or policy plans.
Alternative governance models for managing risks associated with UGD must be based on scientific and technical information, take into consideration the economic benefits of development, the global climate impact, and concerns of the effected communities. Specifically, models include types of public and local community participation that can inform public-acceptance decisions. Collaborative decision-making has been found to be critical for effective interaction between those stakeholders implementing the development and local communities affected by the consequences of the development. A combination of stakeholder’s interests with regulatory oversight and industry best practices will result in a more effective governance of development.
Recommendation: Roundtables for Sustainable Unconventional Gas Development
Among its recommendations to ensure adequate stakeholder involvement, IRGC suggests that independent roundtables be established for the purpose of regional and international information and experience sharing. Scientists, policy makers, regulators, industry and NGOs should interact regularly in a constructive and open manner (see here for more information). In a letter (pdf) to IRGC the President of the European Parliament, Martin Schulz, indicated inter alia support for the idea of such a platform, which should build upon existing structures.
Risk Governance Guidelines for Unconventional Gas Development, (Report, 2013)
The content is also available as a short Policy Brief here.