Oil and gas development from unconventional techniques, such as horizontal drilling and hydraulic fracturing (“fracking”), have been hailed as a new step towards securing domestic energy supplies and states’ energy security. The national security benefits of developing unconventional oil and gas are well defined – both in terms of security of supply and in terms of independence from other states and groups, such as Russia or OPEC. While more diverse sources can signal greater security of supply, some environmental and social issues which affect the local contexts in which drilling and fracking take place, such as concerns around water contamination, land rights and economic impacts, can act as conflict drivers between affected communities and companies and within communities themselves.

Technological advancement and economic viability have enabled the rapid expansion of horizontal drilling and fracking, particularly in the US. As around 42 countries across the world have shale gas deposits, there is much speculation and investment in the development of these resources. Between 2009 and 2014 China has invested USD 3.7 billion in research and development of domestic shale gas fields and in the UK in 2014, Ineos announced its intentions to invest GBP 640 million in shale gas exploration.

Along with speculation has come heated debate. In Europe, both France and Bulgaria have issued ordinances on fracking, whereas the UK and Romania are creating favourable investment environments to encourage the development of shale gas. Debates over the advantages and risks of processes such as fracking have, however, centred on the environmental impacts of unconventional gas development. There has been little research, as well as inadequate and up-to-date regulation and enforcement, that focuses on the social impacts and conflict drivers of horizontal drilling and fracking.

What is unconventional gas?

In essence, gas developed from unconventional techniques is the same as that which comes from conventional methods: the difference is that additional processes are required to extract them.  For example, fracking is used to retrieve gas from shale rock deposits, by breaking apart rock and flushing out the gas under a high pressure mix of water and chemicals, opening up areas that were previously not commercially viable. In some cases, this is in existing oil fields and in others, new fields where there has been no previous industrial development. 

Conflict risks: the social and environmental impacts of horizontal drilling and fracking

Because of how and where they are produced, the impacts of gas extraction by horizontal drilling and fracking methods should be considered in relation to, but distinct from existing understandings of environmental and social impacts of conventional gas extraction and production. This includes conflict risks, both in terms of company-community conflict and conflict within communities.

Geography of Sources

Some states which do not have a recent history of large-scale domestic energy production are now able to extract and produce gas from shale. Both the US and China have large deposits of shale gas. Smaller but significant deposits of gas that require unconventional methods of development are found in Argentina, Israel, South Africa, across Europe. Additionally, many deposits of shale gas outside of the US are located near urban centres. In the UK, for example, major urban areas such as Manchester, Liverpool and Sheffield are located on the Bowland-Hodder Shale area.

Moreover, there are differences in the development of extraction and production of shale gas depending on the geographical and regulatory context.  Consequently, the impacts on societies will also differ. Within the US legal framework, for example, landowners also own the sub-surface petroleum which is not the case in states such as the UK. As such, in the US landowners have a tendency to favour the economic benefits of unconventional gas development over environmental concerns as they benefit financially from it.  The geography and legal frameworks are therefore key determinants as to who benefits and who does not from the development of shale gas. This in turn can have an impact on company-community conflict and conflict within communities based who is or who is perceived to be a shale gas ‘winner’ or ‘loser’.

Land Rights, Land Use and Community Relations

The nature of horizontal drilling and fracking have a significant impact on land rights. As gas does not necessarily collect, but is held within the rock, reserves are spread more thinly under the surface of the earth. To extract them, processes such as fracking and horizontal drilling end up impacting a larger surface area. As such, land rights and rights to sub surface minerals can become a key driver in community relations and conflict risk. Where landowners own and benefit directly and financially from gas from shale investment and development, environmental and social impacts can increase intra-community conflict. In order to minimise risks of both company-community conflict and intra-community conflict, effective regulation must be in place to ensure that land rights and impacts are fully understood and respected by all affected stakeholders.

Pennsylvania

Community relations between farmers and townspeople in Pennsylvania, USA have been damaged by the introduction of horizontal drilling and fracking for shale gas. This primarily relates to contentions over who benefits and who does not. Whilst companies secured permissions from some farmers and acted in accordance with state and federal level environmental regulations, permissions were not sought (nor were legally necessary) from local affected urban areas. Moreover, the speed with which the shale gas industry developed in the US meant that it was difficult to understand and to anticipate the impacts of introducing gas production onto agricultural land. In addition to this, the development of the shale gas industry in the US has generated a number of small extractive companies. Small companies are exempt from due the US Energy Policy Act of 2005 and various exemptions to the US Clean Air Act and the National Standards for Hazardous Pollutants passed around the same time.  These exemptions to environmental regulation, coupled with a lack of accurate information and evidence have fuelled arguments and debates based on perceptions of the industry and the impacts of shale gas rather than evidence based debate. This has led to mistrust between farmers and companies, as well as hostility between farmers and communities.

Impact on Water Use, Water Contamination and Wastewater

Competition over water use, water contamination and fracking wastewater are key conflict risks of the shale gas industry. Firstly, fracking uses very high volumes of water, increasing competition between water users. Due to the proximity of a number of shale gas sites to urban centres, particularly in Europe, competition over water can increase tensions between communities and companies, and between farmers and companies.

The impact of this water use competition is highly contextual. There is less risk of competition in Poland where water is abundant. However, there are much higher environmental risks in states such as China, where 40 per cent of shale gas reserves are in the five driest provinces which have seasonal water shortages. As such, water competition can negatively affect livelihoods and health, and could therefore lead to greater social unrest.

Wastewater and water contamination is an important environmental risk of shale gas fracking. The water solution used for fracking is a combination of water and chemicals and can pose a risk to drinking water and water used for agriculture if not disposed of safely.  As such it is important that companies implement and uphold effective procedures to ensure that groundwater isn’t contaminated, particularly in the disposal of wastewater.

The regulation of wastewater disposal is difficult to monitor and implement in part because some companies are reluctant to disclose the chemical makeup of the solutions they use, for competition reasons, although voluntary chemical disclosure registries in the US, Canada and Europe have gone some way toward addressing this. Moreover, it is both expensive to transport wastewater to safer disposal locations and expensive to develop wastewater treatments close to the fracking sites and urban centres. This can be a disincentive to dispose of wastewater safely.

Perceptions of impact and a lack of reliable information also plays a significant role in polarizing the debate over environmental impacts of wastewater disposal and fracking fluids more generally. Where there is a lack of disclosure from companies over policies and plans for meeting environmental standards and strong opposition from environmental groups, coupled with only nascent independent research and analysis on the environmental impacts of fracking and strong national and international anti-fracking campaigns can result in mis-information, thus clouding effective discussion and contributing to company-community misunderstanding and conflict.

Economic Impacts of Shale Gas Development

The growth of the shale gas industry in the US has brought significant economic changes. Between 2006 and 2012, the yearly employment rates in North Dakota reached 3.35 per cent compared to the US national average over the same period, of -0.05 per cent. These figures coincide with the growth of the shale gas and shale oil industry in the state. Growth of employment has been coupled with net increases in inward migration. Within a decade, the population of the town of Williston, North Dakota has increased from 12,000 to 40,000 people.

As industry and population develop rapidly, so does the pressure on infrastructure, institutions and food prices. Development may benefit some people, such as property developers, but real wages for some of those established in the area, such as retail employees, may not increase at the same rate as prices or rents, thus lowering the quality of living for some. These issues are magnified by the boom and bust cycle of oil and gas prices. As oil and gas prices fall due to oversupply, the local economy also declines, once again impacting on livelihoods of the local population, this is purported to be the case for those towns which have built up on the Marcellus and Utica shales in the US which are projected to be in decline as early as 2016. Already in August 2015 gas production for the US as a whole has fallen by 0.6 per cent. In both boom and bust there are economic ‘winners’ and economic ‘losers’ in shale gas development, both between locals who have not benefitted financially from the shale gas boom and those who have, as well as between companies and those in communities who are negatively impacted by the shale gas development.

Conflict Sensitive Development of Shale Gas

Conflict sensitive development of shale gas is imperative for the safer and more sustainable development of the industry. Conflict sensitivity entails fully understanding the direct and indirect impacts of unconventional oil and gas development on the environment and on society, as well as the ability and capacity to respond to risks that arise. It also requires in-depth appraisal of the local context and open communication with local stakeholders to facilitate understanding, discussion and negotiation over potential and actual conflict issues.

Understanding of the environmental impacts is still developing. As such, the development of research in this field would enable the improvement of practices and minimising risks associated with production. 

Conflict sensitive practices can be undertaken both in terms of governance and by companies developing mining sites. This includes an increase of independent, neutral research and distribution of information on the processes and impacts of shale gas extraction, as well as greater dialogue and information sharing by companies with local communities. Capacity building of local communities in order to better understand the potential impacts of shale gas development on the environment and the economy so as to support informed, collective advocacy and decision-making, could also mitigate conflict between companies and communities, as well as within communities themselves.

Conflict sensitive governance

Regulation is a key part of minimising and mitigating environmental and conflict risks of fracking and horizontal drilling. Effective industry regulation could address issues such as exemptions from environmental regulation for small companies  and directly address environmental impacts such as water competition and wastewater disposal, as well as encouraging full understanding of and full consultation with the local context and social dynamics.

Moreover, governments should incentivise companies to undertake the fullest possible actions in order to minimise environmental and social impact and to encourage disclosure of information on chemicals used through voluntary disclosure mechanisms such as FracFocus or NGS Facts. The 2012 Accenture report ‘Water and Shale Gas Development: Leveraging the US experience in new shale developments’ highlights that in Karoo in South Africa, the government suspended application processes for exploration and development thus prompting Shell to develop and present plans to use different sources of water so as not to compete with community users.

Conflict Sensitive Business Practices

Companies should develop conflict sensitive approaches to unconventional oil and gas development. Conflict sensitivity needs to be based on understanding the local context of shale gas developments, including mapping the needs and interests of the local population and understanding the dynamics between different stakeholders.  Development must also include giving full information to local stakeholders in order to allow fully informed decision making and the mitigation of consequences, both environmentally and socially.

To work with communities in an effective conflict sensitive way also entails an understanding of both direct and indirect and cumulative impacts of fracking. Understanding what environmental impacts there will be, who it will benefit who it will not benefit and the relationships between them are essential to gauge the social impact of the development and to adjust operations or community relations accordingly.

The development of the unconventional oil and gas industry has social as well as environmental impacts, and the strong environmental concerns of many communities also have a social dimension which present risks of both company-community conflict and conflict between community members. As a consequence, the development of strong regulation and oversight by governments as well as sensitive and effective policies and community relations should be pursued by companies to reduce and mitigate both environmental and social risks.