UK: New PM announces plans of payments to families affected by fracking

Theresa May
Theresa May

On Sunday, Britain’s new Prime Minister Theresa May announced plans for households affected by shale development to receive direct financial compensation – a move immediately blasted by the green lobby as an attempt to bribe the British public to accept the controversial practice of fracking.

The US “shale renaissance” which has turned the country from an importer into an exporter of natural gas was partially made possible due to the fact that American landowners own the mineral rights to any resources found on their property. Consequently, they benefit from any oil or gas explored on their property. By contrast, in the UK mineral rights belong to the Crown and therefore there is no incentive for the local population to support exploration in their area.

Theresa May’s plan of direct payments to the public is aimed at incentivising the landowners to support fracking without actually granting them mineral rights to the resources – something that Boris Johnson – her party colleague and a one-time candidate for the top role – suggested in the past.

May, who took over as prime minister last month after Britain’s June 23 vote to leave the European Union, said she wanted to look at the option of this money being paid directly to residents rather than to local authorities.

“The government I lead will be always be driven by the interests of the many, ordinary families for whom life is harder than many people in politics realise,” May said in a statement on Sunday, ahead of the launch of a consultation on the fund.

“This announcement is an example of putting those principles into action. It’s about making sure people personally benefit from economic decisions that are taken, not just councils, and putting them back in control over their lives.”

The money would be paid via a shale wealth fund – originally established by ex-chancellor George Osborne in 2014. Up to ten percent of the tax proceeds from fracking was to be set aside to benefit communities affected by the shale development. Originally, however, the compensation was to be paid to the local councils in the affected areas. The big difference is that now the PM is considering paying the money directly to individual households instead of councils and local trusts.

The government said the new fund could deliver up to 10 million pounds per eligible community. It did not say how much each household could receive, but local media reported it could be as much as 13,000 pounds in some areas.

In the post-Brexit world, the question of how the UK is going to power its economy is a current one. With North Sea oil and gas reserves running out and uncertainties about the Hinkley Point nuclear development, it is of paramount importance that Britain finds alternative sources of fuel – not only for power generation but also to boost its declining manufacturing industry. Britain’s dependency on imported fuels and electricity has jumped from 17pc to 46pc since 2000.

At present, the Ineos-owned Grangemouth plant in Scotland is running on US-imported shale gas – something blasted as “madness” by Cuadrilla’s Franis Egan, who told The Sun: “They are taking ethane, turning it into a liquid, transporting it across the sea in a container, turning it back into a gas and then pumping it into Grangemouth. Just beneath Grangemouth are deposits of shale gas the Scottish Government is saying you can’t touch.”

Even from the climate goals perspective domestic exploration makes more sense than imports as, according to a study by by Cambridge Professor David Mackay, LNG’s carbon footprint is 20pc higher than shale gas.

The UK has three key shale fields: the giant Bowland gas basin in Lancashire and Yorkshire, the Weald oil basin in Sussex, and Midland Valley in Scotland. According to estimates by the British Geological Survey, there might be as much as 1,300 trillion cubic feet (TCF) of gas resource in the Bowland alone, enough in theory to replace the North Sea and profoundly change British fortunes.

“Four or five years ago the recovery rate in the US was 10pc and now they are moving towards 20pc. I don’t see why we can’t do that in the Bowland,” said Stephen Bowler, the chief executive of IGas. Anything like that would be enough to meet Britain’s entire annual consumption of 2.7 TCF through the 21st Century.

The plan to compensate households affected by shale exploration – the details of which are expected to be announced later this week – is clearly aimed at swinging the public opinion to support the new energy source.

Unsurprisingly, the announcement came under heavy criticism from the green lobby. Greenpeace said the government had “tried to sweeten the fracking pill with cash payments before, and it didn’t work”.

“If Theresa May wants to show the UK is open for business, she should reverse the policies that have harmed our vibrant clean energy sector, and back the technologies that can supply cheap, home-grown energy for decades to come,” Greenpeace UK’s chief scientist Dr Doug Parr told BBC News.

Green Party MEP Molly Scott Cato said the “misguided policy to encourage fracking demonstrates again that the government has no strategic energy policy. It is also another worrying indication of the failure of commitment to tackle climate change”.

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