On the day after Scottish ministers announced a moratorium on fracking they were privately warned by a multi-millionaire oil tycoon that Scotland would lose £250 million worth of investment if they blocked plans to extract coal gas from under the Firth of Forth.

In a letter to the planning minister, Alex Neil, and the energy minister, Fergus Ewing, on 29 January 2015 veteran entrepreneur Algy Cluff said that including his plans for underground coal gasification (UCG) in the fracking moratorium would have a “potentially devastating” impact on his company’s “ability to operate and invest further in Scotland”.

A week later later Neil replied, reassuring Cluff that “the moratorium does not apply to the offshore underground gasification of coal”. But Cluff’s comments have now prompted a prominent SNP politician to call for the moratorium to be extended to include UCG.

Tommy Sheppard, the MP for Edinburgh East, said that UCG was “more problematic than fracking because it has a greater risk of underground explosions.” Cluff’s letter was “likely to be counter-productive”, he told the Ferret.

Sheppard added: “The Scottish Government’s moratorium applies to planning applications for unconventional gas extraction. By any measure UCG is unconventional. I would therefore have thought that if Cluff makes an application for land-based facilities to drill for coal gas under the Firth of Forth, he should be refused.”

Two other SNP politicians have publicly raised concerns about UCG. The Herald reported John McNally, the MP for Falkirk, saying it should be included in the moratorium, and Angus MacDonald, the MSP for Falkirk East, calling for clarification over its position.

If Cluff makes an application for land-based facilities to drill for coal gas under the Firth of Forth, he should be refused. Tommy Sheppard MP

The Labour Party accused Scottish ministers of working for Cluff. Angry environmental campaigners alleged that he had “guilt-tripped” ministers into backing UCG. 

Algy Cluff is a former gold miner and a former owner of The Spectator magazine. Now aged 75, he is chairman and chief executive of Cluff Natural Resources, which paid him £339,000 in salary, bonuses and benefits in 2014.

His company has been granted nine licences by the UK government to explore for coal gas under 690 square kilometres of the sea. Three of the licences are in the Firth of Forth, covering large areas off Kincardine and around Largo Bay.

The plan is to develop the area off Kincardine first, and Cluff Natural Resources has indicated that it would be seeking planning consent soon. The US oil giant, Halliburton, is providing technical support for “the proposed submission of a planning application for a UCG production test at Kincardine,” according to a company statement on 20 July.

UCG involves drilling from the shore into coal reserves deep under the seabed. The coal is ignited underground and the resulting gases trapped and piped ashore so they can be used like natural gas in homes and industry.

heavily redacted version of Cluff’s January letter was released by the Scottish Government on 19 May under freedom of information law. But after an internal review the government released a full, unredacted version on 23 July.

Cluff Natural Resources had committed to invest “a significant amount of money primarily through local firms or Scottish offices of larger organisations”, the letter said. “We anticipate that future investment in a commercial UCG operation in the Kincardine area would exceed £250 million ”.

Cluff pointed out that he had “certain fiduciary duties” which required him to request clarification of the status of his UCG project in the light of the moratorium announcement. “Given the potentially devastating effect that failing to clarify the announcement on the 28th January could have on our share price and on our ability to operate and invest further in Scotland, we respectfully request a written response,” he wrote.

He wanted a response that he could make available to stakeholders, shareholders and potential investors. “In situations where confidence is involved time is of the essence and we would therefore request a rapid response to these requests please,” the letter concluded.

Cluff also suggested three ways in which he thought that ministers could ensure that UCG was excluded from the moratorium on onshore, unconventional gas development. These included defining it as “a coal mining operation”, as “underwater” or “offshore rather than onshore”.

On 24 March Cluff wrote again to the energy minister, Fergus Ewing, stressing the benefits of UCG. “Even a temporary delay until 2016, and the uncertainties this would cause, would set us back considerably (maybe fatally) for the future,” said the letter, which was released in May.

At the same time Cluff also wrote to the former First Minister, Alex Salmond. But that letter, and any reply, have not been released by the Scottish Government.

The freedom of information requests for the letters were made by Ed Pybus, the spokesperson for the campaign group, Frack Off Scotland. He accused Cluff of successfully “guilt-tripping” ministers into providing a loophole in the moratorium for UCG.

“Cluff Natural Resources used every trick in the book to get an exemption and their desperation is shown by the list of excuses they use to persuade ministers that UCG should not be included. The Scottish Government delayed release of these documents for four months and has still failed to clarify its position.”

Labour’s Scottish energy spokesman, Lewis Macdonald MSP, accused the Scottish Government of refusing to use the powers it had to block UCG. “Cluff seemed to think that ministers worked for him, and nothing since suggests that he was wrong,” he said.

“Campaigners are bound to conclude that the announcement of a moratorium was no more than a crude attempt to appear hostile to unconventional gas development, while ministers were assuring businesses like Cluff Natural Resources that they will do everything they can to make it happen.”

Cluff seemed to think that ministers worked for him, and nothing since suggests that he was wrong Lewis Macdonald MSP

Dr Richard Dixon, director of Friends of the Earth Scotland, described UCG as the “most risky” form of unconventional gas extraction.  “Cluff’s heavy-handed letter shows that the moratorium announcement had panicked the company,” he said.

The Scottish Government reiterated that no fracking will take place while the moratorium remains in place. “Our planned public consultation will allow stakeholders and local communities to have their say,” said a spokeswoman.

“The Scottish Government is clear that the development of new energy technologies, such as underground coal gasification, must be consistent with our environmental objectives and we will continue to take a careful, evidence-based approach to such developments.”

A spokeswoman for Cluff Natural Resources told The Ferret that there was no-one available to comment. But when approached later by media following up the story, the company issued a statement in its defence.

It said: “We wrote to seek clarification on our project as it is not fracking and there would be no scientific or public interest in including deep offshore UCG in any moratorium. Ten years of publicly funded independent research was commissioned by the DTI [the former Department of Trade and Industry] and concluded in 2009. Its message was that there are no inherent risks associated with the process or the technologies employed in deep offshore UCG, so long as site selection and process-management procedures are in place.”

The company added: “The point of the fracking moratorium is to make an equivalent assessment of other technologies quite different to deep offshore UCG. We have a duty to put our case to ministers in the same way anyone else would. In reality UCG is a tremendous energy opportunity for Scotland.

“Over decades the country has created thousands of jobs and billions of tax revenue from both coal, oil and gas. Deep offshore UCG can deliver similar benefits with modern cleaner technology. The country should be excited about the potential which we hope to prove can work.

“We understand that environmental activists will wish to oppose all such energy production but in reality the country needs a balanced sustainable approach to where we source our energy cost effectively and with minimal environmental impact. We are investing a great deal in contributing to the next phase”.

The correspondence between Algy Cluff and Scottish ministers released by the Scottish Government is all available below.

26 August 2015 update

Following the publication of this story, Cluff sent a letter on 4 August 2015 to all MSPs and Scottish MPs. It was published on 26 August by the Scottish Green Party, and is below.

This story was published on 28 July 2015, and was edited on 29 July to include a statement from Cluff Natural Resources. It was edited again on 26 August to include a further letter from Cluff to all Scottish MSPs and MPs.

It was followed up by the BBC, STVThe Herald, The Scotsman, the Daily Record, The Times, the Dundee CourierCommon Space and others. A journalist was paid £110 for researching and writing it.

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Cover image: Friends of the Earth Scotland | http://www.foe-scotland.org.uk/fracking

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