Landowners’ doubts over 4% royalty scheme for fracking

The offer to landowners of royalties from shale oil and gas drilling – described as a “game-changer” for fracking – does nothing to address concerns about liability, the Country Land and Business Association said today.

The CLA is already disappointed at government plans for legislation to give oil and gas companies the right to drill under land without the owners’ permission, despite opposition from 99% of those who took part in a consultation.

Yesterday, the chemicals company, Ineos, which has a licence to drill around Grangemouth in Falkirk, offered to pay 4% of gross revenues from oil or gas production to owners of the land above the shale. Details

In a statement, Ineos’s founder and chairman, Jim Ratcliffe, described the offer as “a game-changer for Britain’s shale gas industry. He told the Sunday Times it would “spark the industry into life”.

But the CLA’s energy adviser, Tom Beeley, said of the offer: “This does nothing to address the liability concerns we have if anything goes wrong, after operations have been wound up or companies have gone out of business.”

He added that landowners would need to take legal and other advice before entering a contract with an oil or gas company for royalties because of liability issues.

Tom Beeley acknowledged that Ineos’s offer may make some landowners more favourably disposed to fracking by recognising the erosion of property rights in the government’s underground access plans.

And he said a royalty scheme was closer to the CLA’s ideas on payments than the government’s. In its response to the consultation on underground drilling access, the CLA recommended payments should be made directly to landowners. It opposed the government proposals for a community fund payment.

  • In its consultation response, the NFU agreed to a change in the law only if individual owners were notified of underground drilling and compensated. It also opposed the community level payment. The NFU was not able to comment today on the government’s announcement or the Ineos plan.

Other reaction

Simon Clydesdale, UK energy campaigner at Greenpeace, said of the Ineos plan: “This is just more of the same bribes and bulldozers approach that has already proved a failure. With one hand the fracking industry goads the government into steamrolling people’s right to oppose fracking under their homes, with the other it offers cash incentives.

“The industry forgets people have legitimate concerns about fracking that won’t be easily assuaged by cash sweeteners. The simple fact that the shale lobby can’t win the argument on safety but has to buy up consensus instead will help convince people that nothing good will come from letting the frackers through the door”.

Mary Church, Head of Campaigns, Friends of the Earth Scotland, said: “This transparent attempt to bribe communities and homeowners to accept fracking in their backyards will be rejected by people who value their health, their community and their local environment. Fracking is a dangerous, dirty industry and all the money in the world can’t hide that.”

“Ineos’s offer relates to the production phase which is a good 10-15 years off, if indeed the industry ever gets that far. Even if climate, health and local environmental issues weren’t a factor, it’s far from certain whether there is an economically viable resource at all in Scotland. It is quite possible that communities across Scotland will see potentially hundreds of wells fracked in their back yards only for the industry to walk away without handing so much as a penny to the people who have lived with years of disruption. Once again, spin-masters INEOS appear to be trying to fuel the shale gas hype at minimal risk to themselves.”

A spokesman for IGas, told the Daily Telegraph: “The contribution to the communities in which we operate is wider than a percentage of revenue and includes the economic benefit of jobs, investment in skills and apprenticeships, business rate retention for local councils and regeneration through inward investment.”

John McGoldrick, chief executive of Dart Energy, said: “Discussion on the percentage available from revenues is purely academic until we as an industry drill and frack more shale gas exploration wells.”

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