Government gives councils fracking incentive


The British Prime Minister, David Cameron, has today (13 January) confirmed that government is to ‘go all out’ to promote shale gas exploration in the United Kingdom (UK) by allowing councils to keep 100 per cent of business rates they collect from shale gas sites.

Currently, councils can keep half of all revenue from business rates, but the government hopes that by doubling this figure, Britain will ‘be a leader of the shale gas revolution’, and create a ‘stronger, more competitive economy, create more jobs and secure a better future for Britain’.

The Prime Minister’s office estimates that by hosting hydraulic fracturing sites (‘fracking’ sites), councils could earn up to £1.7 million a year, and receive several million pounds in revenues if shale gas is discovered. This is on top of the £100,000 communities will receive for hosting a test well.

‘We’re going all out for shale’

Speaking today, Prime Minister David Cameron said: “A key part of our long-term economic plan to secure Britain’s future is to back businesses with better infrastructure. That’s why we’re going all out for shale. It will mean more jobs and opportunities for people, and economic security for our country.”

Government’s support of the shale gas industry has grown in recent years, as it believes it could help boost Britain’s economy and support the UK energy system (as around a fifth of Great Britain’s coal and oil-fired power plants are set to be decommissioned by 2020).

Indeed, in the Autumn Statement 2013, Chancellor George Osborne announced that on top of incentives for local councils to host fracking sites, it was to introduce tax breaks for shale gas operators.

Fracking process

The technique of hyrdraulic fracturing involves pumping water, chemicals, and sand into rock beds to artificially induce fractures through which natural gas can flow.

However, it has proved controversial, with environmentalists warning that fracking could prolong the country’s reliance on fossil fuels, contribute to climate change, cause air pollution, contaminate drinking supplies with methane and toxic chemicals, and trigger earthquakes. (Indeed, protests reached fever pitch last year, when a sit-in held at energy firm Cuadrilla’s Balcombe site led to the arrest of Green MP for Brighton Pavillion and former leader of the Green Party, Caroline Lucas.)

Speaking today, Jane Thomas, Friends of the Earth Senior Campaigner, warned that as well as environmental repercussions, giving local councils incentives to host shale gas sites could lead to conflicts of interest.

She said: "This latest government move highlights the depth of local opposition to fracking and the desperate lengths ministers are prepared to go to overcome it.

“People are right to be concerned about the impact of shale gas extraction on their communities - especially as experts say it won’t lead to cheaper fuel bills.

"This move raises potentially serious concerns about conflicts of interest, if councils that benefit from this money are also the ones who decide on planning applications from fracking firms in the first place.

Thomas added that government should instead be focusing on ‘encouraging the development of Britain’s huge renewable power potential, instead of coming up with new incentives that keep the nation hooked on climate-changing fossil fuels’.

Total invests in UK shale licenses

Though the technology has gained ground in the US, where 12 per cent of the country’s total gas production comes from shale gas – the technology is relatively new in the UK.

To date, no wells have been commercially fracked in the UK, although French energy company Total today announced that it has acquired a 40 per cent interest in two shale gas exploration licences in the UK.

The interests are in Petroleum Exploration & Development Licences 139 and 140 in the Gainsborough Trough area of the East Midlands region of the UK which cover an area of 240 km2

Commenting on the acquisition, Patrice de Viviès, Total’s Senior Vice President for Northern Europe, said: “This opportunity is an important milestone for Total E&P UK and opens a new chapter for the subsidiary in a promising onshore play. “The Group is already involved in shale gas projects in the US, Argentina, China, Australia and in Europe in Poland and in Denmark, and will leverage its expertise in this new venture in the UK.”

Other partners in the project include: GP Energy Limited (a subsidiary of Dart Energy Europe); Egdon Resources UK Ltd; Island Gas Ltd (IGas); and eCorp Oil & Gas UK Ltd.

IGas will be the operator of the initial exploration programme, with Total subsequently taking over operatorship as the project moves towards development.

Read more about shale gas in the UK or government’s plan to allow councils to keep all shale gas business rates.