Francis Egan - Chief Executive, Cuadrilla Resources HARDtalk

Now, on BBC News, it's time for HardTalk.

Welcome to HARDtalk. I am Stephen Sackur. The oil price crash has put

four cell fuel producers under pressure. Profits are evaporating.

-- fossil fuel. And to top it all off, there is a rapid

decarbonisation of the world economy. Tough times for Frances

Egan, leader of the company leading the charge to bring fracking to be

UK. -- the. Could fracking have lost its appeal?

Frances Egan, welcome to HARDtalk. Hello. This is an incredibly

negative climate for a business such as yours, isn't it? Well... There

are good parts and that parts like any industry. -- bad. Like you said,

the oil price is at an historic low. It is certainly dropping. Of course,

we are in the unfortunate position... But it doesn't impact

our revenue. You are in a sense a speculative company that is about

exploration and strike to find new reserves, in your case, that you can

frack. -- and trying to. That is the worst place to be. We already have

investors on board and drilled wells in better times. But in drilling

them, we have proved there is an enormous quantity of gas in

Lancashire. The geological survey confirmed that it is across the

entire north of the UK. We have taken the technical risk out of it.

There is one important challenge. To demonstrate the quantity of gas in

the ground can be taken out of it. That is a technical challenge. But

also a major business model challenge, if the price goes down,

it will cross a threshold. It doesn't matter how much the race on

the ground, you will not make anything by getting it out. -- there

is. There has always been fluctuations. You know better than

me that the department of energy has slashed its projection of gas prices

going forward to 2020. This is not a one, it is a new reality. I would be

cautious about new reality. Remember the supercycle model... That was the

new reality. Now we have a new, new reality. That it will never go back

up again. What I say should be a concern for the UK is North Sea

production. Some of the highest production in the world, it is being

very badly hit. It will not come back, unfortunately. You can see how

resilient fracking and shale was in the US. Saudi Arabia undertook a

strategy of opening taps to dry the US sharemarket. That was 30, now we

are down to 20. We will undoubtedly see show production declining in the

US. It is easy for it to come back on because it is a low capital

investment. We will not see North Sea coming back up, though. I want

to talk more about the international perspective later. But for the

moment, your business model. A company committed to what I will

continue to call fracking. That it binds. The exploration of gas

reserves. -- fine. Rock that is far underground. That is what you do.

You say that investors are already in for the long-term and you know

the gases under the rock and you can bring it out to be but a comeback to

the political climate. -- gas is. -- But I come back. Most evil in

Britain, certainly where you want to frack, don't want you there. That

would be a problem if it were true. I spent a lot of time in Lancashire

and will not deny there are people opposed to it, but there are many

who are for it, including business people and unemployed people in

Blackpool. If you look at the actual data, you will find that there is a

small group of the separately opposed people, 20%. --

vociferously. An equal amount in favour. At the vast majority had yet

to make up their mind. -- But. But the polls I looked at show a shift

against fracking. 42% say it should not happen in the UK, shale gas

fracking. 2019 said were in favour. A big shift against. -- 29. I have

not seen those. The majority had yet to make up their minds. Well, let's

talk reality, then. You see your focus is the Northwest of England,

Lancashire, a significant gas field in the rock. By the democratically

elected local council have considered everything you want to do

and have refused to give you the planning commissions you need. --

But. That is democracy in action. They are elected by the people and

they are telling you you cannot operate. The planning process is,

rightly, a democratic process of. We tick every box on all the

environmental issues, but it is safe they turned it down. They turned it

down for what I would call traditional issues of traffic and

noise. We did not get approval. But the planning process takes note of

local needs, but we are looking at international needs. It is this

point about uncertainty. We talked about the prices. We will talk in a

minute that environmental concerns. But in terms of all the pics and

planning. I had an interview with you 1.5 years ago. You said you were

sure you would be fracking in Lancashire by the end of 2015. 2016,

there is still no sign of the getting the green light popular I am

amazed I said I am sure. I have been in this business long enough to

know... (LAUGHING). -- light. You know, the

argument that there is political and economic uncertainty... That is the

world we live in. Nowhere in the world can you exit for and produce

gas where there is no political uncertainty. Some of the places you

have to go, if you cannot develop your own indigenous resource, like

Russia, the Middle East, they have a lot more uncertainty. I would say,

do we want to be wholly reliant for energy sources on them? It is fine

while it is cheap and plentiful at the moment. That will not with the

DK. You talk about the US. -- the UK. The US have too much. They are

prepared to sell a lot of it into Europe and the UK. That changes the

calculation. Do we really, in a densely populated land, unlike Texas

and North Dakota with vast tracts of empty land for fracking, we don't

have that. Do we need it when we can get it from the US? That is the new

reality. Let me say two things about that. The first, the urban myth that

this is happening in the US in some kind of populated frack park when

nobody lives. Look at the Environmental Protection Agency

study. The statistics are that in 2013 there were 9 million people in

the US nearby to a fracking plant. Seven or 8000 resources were in

favour of it. The US is not just a lack I will tell you what is

interesting, in one of those areas with dense population in a frack

field, in the eastern part of the New York state... They have decided

to ban it because they believe that the health... The public health

issues are so uncertain. So many, to quote them, red flags, they have put

a ban on it. That is quite correct. It gets a lot of the city. But

nobody talks about the 23 states in the US where it has been going on

for the last 20 years with no environmental or health

repercussions. Lots of allegations. But not a single case in the US, let

me finish this point, where the water supply or anything like that

has been interfered by fracking. In this country, our water is... 99%

comes from public water supplies to be in ten years, no impact. --

supplies. I think you have brought us into the various environmental

arguments about the wisdom of fracking. Let's go into some of

them. You talk about water. Let me quote you the journal of

epidemiology. This is based on research in New York. They raise

substantial questions about the harm to help. People living in drilling

sites are presenting with symptoms like skin rashes, nausea, add a

model plane, respiratory problems, I could go on, there are many more. --

stomach pains. These demand further investigation. That is entirely

typical of claims against fracking. Not one single fact links any of

that to fracking. I think if you read the paper they would be

likewise. I have seen dozens of those. It is very easy, almost too

easy, in fact, to make assertions of negative health outcomes. If you

want to claim a positive one for a product you need enormous hoops to

jump through. If you say you are going to cure cancer you have to

jump through so many. But to say fracking killed my cat... There is

increasing evidence... There is no data... But this is a respected

journal. I am not a reader but it is highly respected in the United

States. So is the Environment Protection Agency. They looked at

Wyoming, not a place I know myself, but they have investigated

allegations it has affected the drinking water there and they seem

more investigation is needed. If you look to the conclusions, the

Environmental Protection Agency studied 38,000 or so wells for a few

years and discovered no evidence to systemic fracking pollution in water

supplies. Not a single case of it being affected in the US. I will

gladly be corrected if someone can point to one case... The New York

public commissioner basically said I would not want my children to be

brought up next to a fracking site. Isn't that part of the problem? You

by the Chief Executive, it is so easy to tell people it is safe in

the opposition. -- are. But when I tell you of serious doubt by people

who live there, you dismiss their fears. I am not doing that. They are

obviously genuine. I am not surprised with the degree of

scaremongering around fracking. But if you look at the data as opposed

to assertions, it is not supported. Here in the UK we would they inject

water, sand, and stuff like that miles away from public water sources

into a small hole. -- be injecting. You cannot contaminate groundwater

with methane, it already has it. There is a perception in the UK that

the aquifer is some sort of... You drill into it and it goes into your

tap. Water comes out of ground, it goes into a treatment plants that

extracts many things, and then goes into the public water supply. There

is little to know risk. What we are it boring... In the end it comes

down to how much independent research there is about this. --

ignoring. When you were trying to back in Sussex or drill their at

least they will launched a public petition saying they did not want

any of this going ahead until there was rigourous investigation. --

frack. -- launched. They say that never happened. Forgive me if I say

that the energy of the UK should not be driven by Paul McCartney.

(LAUGHING). The question is whether you're

prepared to accept a thu-going, rig nous, independent investigation

prepared to accept a thu-going, rig nous, independent investigation of

this area of uncertainty. Let me answer that and talk a little bit

because we rarely get the chance, of the benefits of fracking. There

already has been. The Royal Society, the Royal Academy of Engineering

have done that. Public Health England have done. The Environment

Agency looked at the permits for which we applied for activity in

Lancashire for 12-plus months and determined there was no risk to

health and gave us the permits we needed. The council turned us down

on the grounds of noise, not on any health or safety issues. They're

important but not what we've been talking about. Set against that, the

country is running out of gas. We're literally talking about running out

of gas. We've talked to the degree to which Britain could import gas

from all over the world. Where is the gas shortage? It is in the UK.

But you're reliant on where it's coming from... Well, it is all over

the world... It is not all over the world. To take gas, transform it

into a liquid, put it on a ship, ship it across the halfway again,

transform it into the gas and then put into your or my house. It is not

straightforward. And, lastly, it is hugely environmentally unfriendly

compared to producing it in ex-to the source of demand. The

environmental requirements for LNG have been shown in terms of CO2

emissions to be two to three times what domestically produced gas. I

guess we should come to the other huge issue facing you is the climate

change agenda and the idea is it makes sense to contemplate another

attempt to tap into the reserveses of fossil fuel under the ground when

political leaders across the world have committed, for the first time

really, to a serious and wholesale decarbon nisation of the world

economy. Can I come back a little to why you'd be wanting to do that.

I've been talking about the security supply, which is not a trivial

issue. I know you can in theory rely on your energy supply on imports but

it is not a position that many countries feel comfortable about

doing, and the US certainly didn't. Everybody your former Chairman Lord

Brown said if we do or do not develop the natural fracking gases

in the UK, it will no difference to the price of gas in the UK. The gas

will be available at the same price whether we frack in the UK or not. I

admire your faith in Lord Brown's broadcasting ability... Well, you

admired him, he was your chairman. Well, I think he himself would admit

that forecasting the price is a mug's game. He wasn't talking about

a specific price, it was a concept. You said you can tap into the huge,

we say world... We're not talking world. We're talking global gas

prices? No we're talking about a market for the UKmarket. I know

you're testing the three you can create an LNG plant and pop it onto

a ship and flick it over to us. You can't. Gas is not as transportable

as you might think it is. It requires a huge amount of capital

investment to do that. You have seen it in the US. Why is the price of

gas $2 in the US and $10 in Japan if it's so easy to transport gas from

one country to another. It is not. In my mind, it would be

irresponsible for us not to even look or explore our own resources. I

understand that. It has taken us back to an issue of markets an

prices, but let's get back to climate change. I'm sure you watched

events in Paris... Yes. You must have got the message, it is time to

accept that a lot of the fossil fuel on this planet needs to be left in

the ground. Let's talk about that. You would be well aware that at the

moment in the UK, about 85% of our energy comes from fossil fuels. By

energy, it is not just electricity - it is transport and heating as well.

That's about the same globally, if you look at the global supply and

demand of energy. 85% comes from fossil fuels, the rest is from

nuclear and renewables. Absolutely, there is a desire and intent - I

understand why - to move from 85% to 0%. But you can't do that in a flick

of a switch. All fossil fuels are all equal. We should not say the

perfect situation is we have all renewables. Gas is good. Up to a

point. Gas is good. There are people like Friends of the Earth,

Greenpeace, the solar guy, they all say there's significant evidence

that the methane leakage that comes with what you do is potentially so

se -- severe that fracking could be as damaging as coal-fired plants.

There is one study in the US, and that has been studied at length by a

chief scientist and he has concluded that gas produced from natural

fracking is as the same as natural gas... You can quote your studies,

itch mine. There is -- I have mine. There is a degree of uncertainty...

No, I would take issue with you there. There is one study and

numerabble other studies contradicting that. I think that

argument has been completely debunked. Your argument to me -

well, to the world is - that you accept that we need to be moving to

a decarbon nised economy, we need to be moving to a fully renewable,

sustainable economy, but in the meantime give us permission to bring

out the ground vast amounts of fossil fuel. Does that make sense?

My argument to you and to anybody else, frankly, is we need natural

gas in this country. In are people around this country watching this

now who have their central heater billers turned on. 85% use it for

heating, 60-odd percent use it for cooking. There will be natural gas

used in the country - no question. The only question is where are we

going to get it from. I repeat, I think it would be irresponsible not

to even look - bear in mind we're at the exploration phase - can we

produce that gas under the profound. We're talking about a handful of

wells to assess that? We're not even going to look at that and we're

going to import it from Russia and Nigeria? So what then do you need to

happen? I come back to the ambitions you have and the way they've been

thwarted. You hoped to be operating now in Lancashire. You're not

because you're not allowed to. In your view is it a political failure

to get this happening and what needs to happen? Like anything new in a

way, particularly anything new going through planning, and fracking is

not unique in this way. We've seen it with Heathrow and HS2 - you see

it with any infrastructure development. Is, it's a slow process

to get started. And until you get started, you're open to all these as

sergss that it'll -- assertions that it'll do this or that. It is very

hard to disprove an asshergs when you can't point -- assertion when

you can't point to anything happen. In the end, Prime Minister Mr Calm

calm says he wants to -- Mr Cameron says he wants to go for it when it

comes to fracking. In the end, is the your view - it is too important

to allowed to be blocked by local democracy? I think we don't have

what I describe as a pick and mix democracy. You don't take the bits

you like and discard the rest. We've been through the local planning

policy and ticked a lot of boxes. It is an issue of national importance,

which is way the Secretary of State has called it in. We're not the only

ones to get called in. They call in about 100 of these through the whole

spectrum of industries. But clearly it is an issue of national

importance. I say it again - it would be irrational of us not to

even explore our own resources. How long will you give this until you

give up? I won't be giving up any time. You quoted us that I'd be sure

that we'd be fracking at the end of 2015 but I intend to see this

through. We need to drill to see whether this can be technically

produced. We've always been upfront about that. We'll come back and

discuss this more but for now, Francis Egan, thank you very much

for talking to us on HARDtalk. Thank you very much.

The new working week certainly dawns on a mild note,