The UK Government has launched a bid to make Britain the world’s ‘most generous’ regime for controversial shale gas extraction after unveiling new tax breaks for fracking firms.
A new allowance will more than halve the tax due on a proportion of income from production in order to encourage exploration of the unconventional energy resource in the UK.
The backing from the Treasury comes after a recent report from the British Geological Survey revealed there was twice as much shale gas in the north of England as previously thought. Other areas of the country could also be exploited for the gas.
But green campaigners have urged the Scottish Government to block fracking activity north of the border.
Mr Osborne said: “Shale gas is a resource with huge potential to broaden the UK’s energy mix.
“We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.
“This new tax regime, which I want to make the most generous for shale in the world, will contribute to that.
“I want Britain to be a leader of the shale gas revolution – because it has the potential to create thousands of jobs and keep energy bills low for millions of people.”
The Government also published planning guidance, insisting decisions on the go-ahead for fracking, which is strongly opposed by local communities in some areas earmarked for shale exploration, would be “made by councils in a locally-led planning process”.
Ministers believe the experience of the US, which has seen a shale gas boom, shows it could boost tax revenues, create jobs, reduce energy imports – which have reached record highs in the UK – and bring down household fuel bills.
But opponents warn that the process for extracting shale gas, by hydraulic fracturing rock with high-pressure liquid to release the gas, or “fracking”, can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.
Questions have been raised about how much of an impact efforts to develop home-grown shale resources will have on household energy bills, and environmental campaigners warn a new “dash for gas” will undermine efforts to develop clean energy, cut emissions and create green jobs and growth.
The new tax regime, which is based on existing field allowances to back the development of technically or commercially challenging oil and gas resources, will reduce the tax on the income from shale production from 62% to 30%.
Lang Banks, director of WWF Scotland hit out at George Osborne’s tax breaks as “bribes” and said they were a “recipe for environmental and financial disaster“
And he urged the Scottish Government to use planning regulations to rule out the use of fracking north of the border.
“The massive tax breaks and bribes being offered by the UK Government to prop up polluting shale gas are a recipe for environmental and financial disaster,” he said.
“Scottish ministers must reject these moves and use all the powers at their disposal to close the door on shale gas fracking north of the border.
“Ministers could start by ensuring the current review of national planning priorities in Scotland rules out fracking and other forms of unconventional gas extraction.
“With renewable energy going from strength to strength in Scotland, there’s little need for us to follow the UK Government’s headlong rush to trash the environment and our climate.
“Instead of offering yet more tax breaks to drill for fossil fuels UK ministers would be better supporting initiatives that reduced energy demand for every household and deliver renewables projects even more quickly.”
The Government has also outlined measures to ensure local communities benefit from the development of shale, with £100,000 paid for each well where fracking takes place and 1% of revenues if the drilling proves to be commercially viable.
Shadow energy minister Tom Greatrex said gas would remain an important part of the UK’s energy mix and shale had the potential to help improve energy security if it could replace rapidly depleting North Sea reserves.
But he said: “Announcing tax breaks before we know how much shale gas is actually recoverable, before anyone even has a licence to extract it, and before anyone even knows whether fracking needs tax incentives, makes no sense at all.
“Only by fully addressing legitimate environmental and safety concerns about fracking with robust regulation and comprehensive monitoring, will people have confidence that the exploration and possible extraction of shale gas is a safe and reliable source that can contribute to the UK’s energy mix.”
Greenpeace energy campaigner Lawrence Carter said: “The Chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he’s had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.
“Experts from energy regulator Ofgem to Deutsche Bank and the company in receipt of this tax break, Cuadrilla, admit that it won’t reduce energy prices for consumers.
“Instead we’re likely to see the industrialisation of tracts of the British countryside, gas flaring in the Home Counties and a steady stream of trucks carrying contaminated water down rural lanes.”
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