UK Treasury Begins Shale Fund Consultation
The UK government’s Treasury department formally launched a consultation August 8 on how a ‘Shale Wealth Fund’ should be funded and whom it should benefit.
The previous day, Prime Minister Theresa May announced that the consultation now for the first time includes the potential option for payments to be made directly to households affected by shale gas ventures. But a producer organisation has so far declined to endorse her new idea.
The Treasury said that communities where shale development could take place are set to receive millions of pounds, with its proposed Shale Wealth Fund potentially worth up to £1bn in total, paying out over 25 years. Up to 10% of tax revenues arising from shale gas production will be used for the benefit of people who live in areas that host shale sites, it said.
No shale gas is produced currently in the UK, with even exploration that involves fracking put on ice since 2011. But Barclays-owned Third Energy recently secured consent to frack an existing gas well at Kirby Misperton in North Yorkshire, while a government planning inspector is due to submit her report by October 6 about two sites in Lancashire where Cuadrilla wants drill and frack. Others with shale gas licences include Total, Ineos and IGas. However many have been curbing costs, with funding for future exploration will bear in mind the halving of UK wholesale gas prices in recent years.
Cuadrilla's fracking operations in Lancashire in 2011 caused minor earth tremors which led the UK to suspend shale gas activity until recently (Photo credit: Cuadrilla)
Producer association UK Onshore Oil and Gas (UKOOG) which represents the shale gas industry welcomed the consultation and confirmed it will make a submission to the consultation.
Ken Cronin, UKOOG CEO, said his group believed that local people should share in the rewards: “That is why we launched the industry's community benefits scheme and community engagement charter in 2013. These are additional to the proposed Shale Wealth Fund.”
UKOOG has declined to tell Natural Gas Europe at this stage whether it welcomes May’s new idea of direct payments to households.
UKOOG said that imports today make up nearly half the UK’s gas demand, at a cost of £10mn per day, and that National Grid forecasts – without shale – that the UK could be 90%-reliant on imports for its gas supply.
Announcing the consultation, Jane Ellison, Financial Secretary to the Treasury said: “We are backing the safe development of shale gas because natural gas is absolutely vital to the economy.”
Lucy Neville-Rolfe, Energy Minister added: “Fifty years of safe regulation of oil and gas in the UK makes going for shale the right course of action. It is right that local communities should benefit from this new industry and that they should have a say in how such money can be put to best use.”
Greenpeace UK chief scientist Doug Parr however remarked on twitter: “The UK government has tried to sweeten the fracking pill with cash payments before, and it didn’t work.”
Opposition energy spokesman, Labour’s Barry Gardiner, also contrasted policy on wind farms, where nearby households got no compensation, with the proposed idea for shale developments. He added that wind farms can be stopped by local planning decisions, whereas the government can override local decisions regarding shale gas.
The new consultation closes in just over two months, at midday on October 26.
Mark Smedley