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Fracking week in Westminster (May 12th-16th)

May 16th 2014

Transcripts of the last week of parliamentary debates and questions on:

  • Critique of the Public Health England report on shale gas extraction
  • Greenhouse gas emissions in the UK and US
  • Tax allowances for onshore oil and gas operators

With thanks to theyworkforyou.com

Question by Caroline Lucas (Brighton, Pavilion, Green)
To ask the Secretary of State for Energy and Climate Change if he will make an assessment of the British Medical Journal editorial Public Health England’s draft report on shale gas extraction: Mistaking best practices for actual practices published on 17 April 2014; and if he will make a statement.

Answer from Jane Ellison, Health Minister
I have been asked to reply on behalf of the Department of Health. Public Health England (PHE) has considered the British Medical Journal (BMJ) editorial on Public Health England’s draft report on shale gas extraction: Mistaking best practices for actual practices, published on 17 April 2014. PHE’s response to the article was published online on 30 April 2014 and can be found at: www.bmj.com/content/348/bmj.g2728?tab=responses

PHE’s response to the BMJ article states that the conclusion of the report that risks from the process of shale gas extraction will be low if operations are properly run and regulated was a considered judgment. PHE has identified those aspects of operations that are considered to pose the greatest risks. PHE has made a number of recommendations for the control of risks, as have others. If shale gas extraction does take place, PHE will work with regulators to help ensure that environmental monitoring and health surveillance programmes are implemented appropriately.

PHE agrees with Kovats et al (Lancet 383, 757-8; 2014) on the potential for health impact assessments (HIA) to play a role in informing policy and local planning processes, considering all issues associated with shale gas extraction which may affect health, including greenhouse gas emissions and climate change. PHE will seek to support HIAs and will continue to evaluate evidence on health risks associated with shale gas extraction and related technologies.

House of Lords questions on climate change

Lord Howell of Guildford
My Lords, I will put a rather more moderate question. Is it not a bit regrettable that, whereas in the United States carbon emissions are falling as a result of the huge switch from coal to gas, the opposite seems to be happening here? Is the Minister aware that virtually no new gas turbines are now being built, despite government measures to encourage them? Indeed, some brand new and efficient gas stations are being closed down. Is there not something basically wrong with the policy.

Baroness Warsi
One of the great successes in the United States has been the development of shale gas. It is, of course, a policy of which the Government are hugely supportive. Diversifying our energy consumption and investing in green energy, as this Government have clearly done, will both help ensure that we meet our targets.

Committee debate on Clause 64 of the Finance (No. 2) Bill on extended right fence expenditure supplement for onshore activities
The following are extracts from the debate. Full transcript
Martin Caton (Gower, Labour)
He proposed amendment 22:
(1) The Chancellor of the Exchequer shall, within three months of Royal Assent, undertake a review of the impact of creation of the onshore allowance introduced under this section.
(2) The report referred to in subsection (1) above must in particular examine
(a) the estimated total loss of tax revenue to the Treasury in the next 10 financial years;
(b) the impact on onshore oil and gas exploration and field development in the next 10 years; and
(c) the differential impact on individual shale fields.
(3) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’

Nicky Morgan, Financial Secretary to the Treasury
The clause and the schedule make changes to incentivise investment in onshore oil and gas projects. They introduce a new allowance, which exempts a portion of a company’s profits from the supplementary charge. The amount of profit exempt will equal 75% of the qualifying capital expenditure that a company incurs on onshore oil and gas projects on or after 5 December 2013. This allowance makes the UK’s tax regime for shale gas the most competitive in Europe. Shale gas and other onshore oil and gas represent a huge economic opportunity for the UK.

The Government are not minded to accept the amendment for the reasons I will set out. In the Budget, the Chancellor announced a review of the entire oil and gas fiscal regime to ensure it remains competitive and fit for purpose as our oil and gas basins mature. The review will look at all aspects of the fiscal regime, including allowances. It would therefore be unhelpful to review one allowance in isolation, rather than considering it alongside all the other aspects of the wider oil and gas fiscal regime.

Secondly, the amendment asks for the report to be laid before the House within three months of Royal Assent. Much of the onshore oil and gas industry—in particular the unconventional oil and gas industry—is in its infancy, with projects still at the exploratory or  pre-exploratory stage. Such projects, as I have said, typically have a long lead-in time and will not come to full development for many years. It would therefore not be possible to assess the full impact of the measure in such a short time scale

Catherine McKinnell, Shadow Treasury Minister
I should be grateful if the Minister confirmed the time scale for the review that is being undertaken on the broader issue. Also, she says it would be inappropriate to focus on one small item as part of a separate review, so by the same token is not it inappropriate to grant a separate tax incentive without first carrying out the review that she says is due to report?

Nicky Morgan, Financial Secretary to the Treasury
The tax regime is very much in line with the other tax regime that is already available to the oil and gas industry in its widest sense, as it is for the ring-fence proposals that I have just outlined with respect to clause 64. As to the fiscal review, the Government are currently working with industry—in fact, I shall travel to meet representatives of the oil and gas industry next Tuesday, and the fiscal review timings will no doubt be discussed. I am happy to be guided by industry.

We do not think it would it be possible properly to assess any loss in tax revenues or potential yield over a 10-year period so quickly. We have estimated the cost of the measure at £45 million over the scorecard period. Beyond that, we would expect an increase in Exchequer yield because of additional production and profits incentivised by the measure, but it is too early to provide specific forecasts. However, industry forecasts are positive for future activity on onshore oil and gas.

A majority on the committee voted to reject amendment 22

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