Osborne gives tax boon to shale gas developers

The UK’s first shale oil site near the West Sussex village of Balcombe could soon become operational.

The Chancellor, George Osborne, has cut by around half the production tax that shale gas developers in the UK will have to pay, mesmerised by the possibility of emulating the success of fracking experienced in the USA.

Simultaneously he has stipulated that energy companies must contribute a benefit for each well drilled of £100,000 to local communities, plus up to 1% of all revenues from production.

Most British oil and gas companies pay 62% reduction tax. Shale gas producers would pay just 30%, a tax break that would apply to a proportion of their income to be determined following a consultation.

George Osborne announced today that shale gas has "huge potential" to diversify energy supplies in Britain, create jobs, improve energy security and keep bills low.

“Shale gas is a resource with huge potential to broaden the UK’s energy mix,” he said. “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.”

Energy Minister Michael Fallon gave a rigorous defence of shale gas in Parliament on 18 July in which he made reference to the shale gas industry’s "community engagement charter" and the environmental protection already in place for the industry.

He added: "The industry has said that we can expect about 20 to 40 exploration wells to be drilled here in the next couple of years, but I am clear… that success will come only if development is done in true partnership with communities."

He also told Green MP Caroline Lucas that planning applications will be dealt with by the local minerals planning authority "in the normal way" and not at the national level.

Friends of the Earth's Andrew Pendleton immediately slammed the move. "Promising tax hand-outs to polluting energy firms that threaten our communities and environment, when everyone else is being told to tighten their belts, is a disgrace," he said.

"Ministers should be encouraging investors to develop the nation's huge renewable energy potential. This would create tens of thousands of jobs and wean the nation off its increasingly expensive fossil fuel dependency," he continued.

A recent report from the British Geological Survey estimated there may be 1,300 trillion cubic feet present in the north of England alone, much of it in the Bowland Basin beneath Lancashire.

Fracking has many passionate opponents. Amongst them is the high street chain Lush Cosmetics, which this week has given their 105 UK and Irish shops – their windows, their staff and their online channels – to grassroots activist group Frack Off to publicise their ‘Don’t Frack our Future’ campaign that has been devised by Frack Off and campaigners at Lush Cosmetics.

During the ten days of this campaign the UK’s first shale oil site near the West Sussex village of Balcombe could become operational. The preparatory work for a 914 metre shale well has been started.

Activists from Frack Off have hosted training sessions for all Lush staff. Tamsin Omond, head of global campaigns at Lush Cosmetics, said: “This campaign will educate tens of thousands of people about the threat of fracking to their communities. With the success of community-led activism in France, Bulgaria, Australia, the United States and all around the world, I have no doubt that we will keep the frackers from our land.”

Andi Walsh from Frack Off added: “Balcombe joins communities at Airth near Falkirk fighting coal bed methane, residents in Lancashire fighting shale gas and towns and village along the north east coast from Alnwick to Sunderland fighting underground coal gasification.

“When it comes to issues like fracking, where human health and our shared environment are under threat, we have to question whether those in power are even capable of putting the interests of the general public first.”

Mr Fallon told Parliament this week: "The Environment Agency will require disclosure of all substances proposed for injection into groundwater that might affect the water, and it will only approve the use of those chemicals if they are assessed as harmless in that context".

Shadow energy Minister Tom Greatrex warned that there was no proof that any shale oil bonanza would reduce gas prices. “Suggestions there is going to be cheap gas to extrapolate the US experience doesn’t stand up to much scrutiny, given the way gas is traded,” he said.

The impact of shale gas upon climate change is estimated to be greater than the use of conventional natural gas because of the risk of so-called fugitive emissions escaping through geological strata.

Picture: Frack Off campaign