No economic case for fracking in Scotland

The Scottish Government is consulting the public before it decides whether to permit or ban Unconventional Gas Extraction (including Fracking). But what is most incredible is that it is even being considered. Its own review of the impact of the industry confirmed that it is virtually worthless to the Scottish economy as a whole. Other impact studies on health, decommissioning, regulation, transport, and climate gave an equivocal picture (which campaigners challenge). But KPMG’s 2016 economic report showed any benefits from this dirty business are so marginal as to be worthless. Here’s the key quote: ‘According to our estimates, the industry could represent an average of 0.1% of Scottish GDP (2015 figure) in our Central scenario and 0.3% in our High scenario which is not a large contribution to the Scottish economy’.

KPMG looked at High, Central and Low production scenarios. You’ll find Tory MSPs always use the High, so they often quote £4.6bn Gross Value Added (GVA) to the Scottish economy, but they never point out that this is over 42 years. So it actually represents about £110m pa. In the more likely Central scenario (which they never quote), the figure is £1.2bn GVA, about £30m a year.

The other myth is that fracking will create thousands of jobs. But the figure for the Central scenario is 1,400 FTE jobs over the whole 42-year life of the industry. And if it is simply one or two drilling teams going from location to location, the total will be even lower. Also, most of these jobs would be for specialists from outside the communities that could be fracked. Compare these broad projections to the actual economic impact of low carbon industries, which had an annual turnover of £10.7bn and supported 43,500 jobs (2014, most recent available).

Conservative MSPs are also giving a very partial picture of the climate impacts of UGE. Annie Wells told a Glasgow constituent: ‘Scotland will import 40,000 barrels of shale gas every day to Grangemouth for the next 15 years in the form of Liquefied Natural Gas (LNG), which is more carbon intensive than locally produced shale gas. The report published by the Committee on Climate Change (CCC) confirmed that ‘well-regulated domestic production could have an emission footprint slightly smaller than that of imported liquefied natural gas (LNG)’’. 

Unpicking this is complicated but crucial, because far from saying that fracking is fine, the Committee on Climate Change’s climate impact study said it could prevent Scotland meeting its climate targets unless three tests are met. First, the gas produced must displace other imports. But that won’t happen, because INEOS will continue importing gas from the USA and companies producing gas offshore will not cut production to enable fracking. Second, the emissions produced must be offset by reductions elsewhere. The largest forecast the CCC looked at is that UGE would produce 1.6m tons of CO2 equivalent per year by 2035. Other industries and activities – agriculture, public authorities and households – would need to make cuts to offset this. Why should they do that? How could they do that? And, third, the emissions produced by the industry must be monitored, well by well, with a regime in place for instant shut down if emissions targets are exceeded.

A study by from Andrew Watterson of Stirling University looked at all the UK monitoring arrangements, including Scotland, and confirmed that nowhere is there a structure for monitoring with such intensity and consistency.

The KPMG report confirms that fracking in Scotland (in the Central scenario) would supply enough domestic gas for just 5.5 years over the 42 years of the industry. Many believe even this estimate is too high because of the geology of the shale in Scotland.

In the United States, home of the only developed fracking industry (though Australia has one as well), things are looking very shaky. Global accountancy firm, Deloitte, warned clients that a third of global oil and gas exploration and production companies—with a combined debt of over $150bn—are at high risk of default or bankruptcy or default.

For us here in Scotland, the only potential benefit KPMG identified from UGE was to Scotland’s petrochemical industry, i.e. business and profits for INEOS. And that is, in my view, why the SNP government has been prepared to even consider it. At a time when there’s little growth in any area of the economy, petrochemicals are showing positives. That increases the pressure that INEOS can put on the government. And its growing monopoly of oil importation and refining gives Jim Ratcliffe’s company a clout disproportionate to its overall contribution to revenue and jobs.

That makes it all the more crucial that people take up the opportunity to give their views in the public consultation. There is still time to respond before the 31 May deadline. More details can be found at www.broad-alliance.org.uk/consultation and www.stopfracking.scot

Penny Cole is active in Frackwatch Glasgow, represents it on the Broad Alliance of communities against UGE and is co-author of Fracking Capitalism: Action plans for the eco-social crisis (Lupus Books, 2013).

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