Tax breaks and fast-tracked permits for controversial shale gas exploration will be on offer as part of a £100billion Government infrastructure package aimed at kick-starting sluggish economic growth.
The financial incentives come as the Government announces findings from the first independent survey of shale gas potential in the North of England.
Scientists from the British Geological Survey have estimated as much as 1,300trillion cubic feet of shale gas in the Bowland Basin, which covers Lincolnshire, Leicestershire, Derbyshire, Nottinghamshire, Staffordshire, Cheshire, Shropshire, Lancashire, Yorkshire, Greater Manchester and Merseyside.
The BGS is also looking at the amount of shale gas in the Weald Basin, in the south-east of England.
Technical limitations will restrict the amount of that Bowland gas which can be harvested, but the Government is still confident it can benefit local communities and the UK’s energy reserves.
“Shale gas represents an exciting new potential energy resource for the UK, and could play an important part in our energy mix,” said Energy minister Michael Fallon.
“The next step for industry is to establish how much gas is technically and commercially recoverable.
“With the package announced today on planning, environmental regulations, and community benefits, it is clear that we want to encourage a shale industry that is safe and that doesn’t damage the environment.
“Development must be done in partnership with local people. We welcome the commitments from industry on community benefits.
“This will provide a welcome boost for communities who will host shale exploration and production as well as offering strong assurances that operators will engage with them and work to the highest health, safety and environmental standards.
“From money off bills, playgrounds, sports halls or regeneration schemes, people will see real and local advantages from shale gas production in their area.”
The report was welcomed by Conservative MSP Murdo Fraser, convener of the Scottish Parliament’s energy committee.
“Nearly 40% of Scottish residents are stuck in fuel poverty and energy bills are rising faster than any other commodity, and for these reasons alone we must pursue paths towards creating cheaper energy,” he added.
“Across the central belt and Fife there are estimated to be significant reserves of shale gas and oil, for the sake of consumers, industry and the environment the Scottish Government must best utilise these resources.
“I would like to see it work with industry leaders and organisations such as the British Geological Survey to best calculate the specific nature of shale gas reserves under our soil.”
Onshore oil and gas body the United Kingdom Onshore Operators Group backed the BGS findings as a significant boost for the energy industry – if it is allowed to explore the shale opportunities.
“The estimate of 1300 trillion cubic feet underlines the true opportunity in the UK to be able to provide energy security, jobs and tax revenues,” he said.
“What is now vitally important is that the industry is allowed to get on with the important exploration phase which will give us the ability of calculating what could be economically and technically recoverable.
“Our footprint on the ground at 2 hectares per site* is moderate and we will work with local communities to ensure as stated in our engagement charter published today that we do so safely, environmentally sensitively and with effective communication, while also ensuring that communities have the opportunity to share in the success of hosting our sites.”
“The country deserves to understand how we can all benefit from the resource we have under our feet.”
Treasury Chief Secretary Danny Alexander revealed details of the new tax breaks to encourage shale exploration in the latest round of capital spending.
These include:
- A community engagement charter which will set out the industry’s commitments to consult with communities ahead planning permission applications.
- £100,000 in community benefits per fracking well-site to be paid when at the explorations stage
- 1% of revenues at production stage will be paid out to communities.
Operators will be required to publish evidence each year of how these commitments have been met.
There are already 176 licenses for onshore oil and gas exploration currently issued, with a 14th onshore licensing round planned for next year.
The fracking process is highly controversial as critics say it can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.
Ministers believe the experience of the US shows it could boost tax revenues, create jobs, reduce energy imports and reduce household bills.
But Labour’s shadow energy minister Tom Greatrex said the move was premature: “Announcing community benefits and tax breaks before we know how much shale gas is actually recoverable, or before anyone even has a licence to extract it, looks like a desperate attempt to draw attention away from the Government’s cuts to infrastructure investment in the Spending Review and its abject failure to get the economy growing.”
And MPs called for a debate on fracking in the Commons to get more detail on what the impact of the plans would be.
While shale gas is seen by supporters as offering a more secure alternative to imported gas, opponents warn that the UK needs to invest in low-carbon energy sources instead to cut emissions and tackle climate change.
The Co-operative is one of those that have raised concerns about the environmental impacts of shale gas, both for the UK and globally.
Ramsay Dunning, general manager of Co-operative Energy, said: “Co-operative Energy remains cautious on the issue of UK gas shales development, given the impact it could have on greenhouse gas emissions and groundwater pollution.
“We will seek to actively avoid gas derived from shales until the impact of such developments is better understood and support a moratorium on commercial development.”
Professor David Elmes, head of the Warwick Business School Global Energy Group, said: “How much shale gas can be produced commercially in the UK in ways that are seen as environmentally and socially acceptable is one of the big unknowns we face as a country.
“We still need to resolve what gas can be produced, how much is there, and how to make sure it is produced in an environmentally-sensitive manner and with an understanding of the communities it is in.
“It is true that shale gas production in the US has increased dramatically over the past few years and the resulting low gas prices have helped US industry and consumers.
“But not all the reasons why shale gas expanded so rapidly in the US can be expected to apply here in the UK.”
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