Regulation

Research raises questions over industry payments to shale gas communities

Misson equipment

Equipment being delivered to the proposed Misson shale gas site

People living near proposed shale gas exploration sites have raised concerns over whether their communities will receive payments promised by the industry.

Within the next few months four shale gas plans in North Yorkshire, Nottinghamshire and Lancashire are likely to be decided.

But research by DrillOrDrop and people in Nottinghamshire shows that some shale gas communities may not receive money they’d expected because conditions restrict the exploration sites that qualify.

We’ve also confirmed that two pilot community benefit schemes are not yet underway. There is no definition of what is meant by “community”. There is no legal requirement for companies to pay the money nor details of how it will be distributed. Another scheme to compensate for underground access has no firm details.

Opponents of onshore drilling are critical. David Burley, of Frack Free South Yorkshire, said:

“It is now conceivable that operators could erect well pads and drill exploration wells all over the place and not pay a penny”.

These concerns coincide with suggestions today by a Professor of Geology at Edinburgh University that shale gas companies could use the legal definition of fracking to bypass some regulations.

£100,000 exploration offer

UKOOG logoIn June 2013, the industry body, UK Onshore Oil & Gas, announced its Shale Community Engagement Charter. This included a community benefit payment “at the exploration/appraisal stage of £100,000 per well site where hydraulic fracturing takes place”.

Companies that received exploration licences last year agreed to drill more than 60 shale gas wells in the next five years. And the community benefit scheme also covers earlier licences. So payments could run into millions of pounds.

But parish councillor, Jayne Watson, has discovered that her village of Misson, in north Nottinghamshire, will not qualify, even though the operator, IGas, wants to drill two shale gas wells.

The UKOOG £100,000 payment is restricted to sites where wells are fracked. IGas’s planning application, due to be decided by Nottinghamshire County Council in the summer, says the company will not frack at this stage.

What is fracking?

Even where fracking does take place, the UKOOG scheme may not pay out.

UKOOG has confirmed it will apply the definition of fracking in the Infrastructure Act, based on the volume of fluid used to hydraulically fracture a well.

So, for a site to qualify for the community benefit scheme, an operator must use more than 1,000 cubic metres of fluid at each stage of hydraulic fracturing, or more than 10,000 cubic metres of fluid in total.

Kirby MispertonThird Energy proposes to frack its existing KM8 well at Kirby Misperton using a total of 3,291 cubic metres of fluid. Only one of the five proposed fracking stages will use more than 1,000 cubic metres.

DrillOrDrop asked the Oil and Gas Authority whether this qualified as fracking under the Infrastructure Act. In response to our Freedom of Information request, the OGA said it did not.

The OGA said:

“Although stage 5 would exceed the 1,000m3 threshold specified in sub-section 4B(1)(b)(i) [of the Infrastructure Act], stages 1 through 4 would not meet or exceed the 1,000m3 threshold and condition 4B(1)(b)(i) would therefore not be met.

“The total volume injected would not exceed 10,000m3 and condition 4B(1)(b)(ii) would therefore also not be met. As neither of the two conditions is met, the example provided would not qualify as associated hydraulic fracturing.”

Third Energy told us it had “publicly committed to providing the £100,000 community benefit as set out in the UKOOG scheme” for the KM8 well. But other operators whose volumes of fracking fluid do not meet the Infrastructure Act definition may choose not to pay out.

This afternoon, Professor Stuart Haszeldine, of Edinburgh University, told The Guardian thousands of wells fractured in the US from 2000-2010 would not have qualified as fracking under the UK definition.

No obligation

Even if a well were fracked and the volume of fluid met the definition in the Infrastructure Act, the £100,000 community benefit is voluntary and not covered by legislation.

Last year, The Telegraph reported comments by Tom Crotty, of INEOS, that his company had not agreed to the upfront payments for exploration.

He told the paper:

“We want to share the benefits but there is also sharing of the risk. So if you drill and there is nothing there, there is no gas and there is no money.”

A spokesperson for INEOS told us last week that the company had signed up to the £100,000 scheme. It also proposes to pay 4% of gross revenues to landowners and 2% to communities.

We asked UKOOG what happened if a company decided it would not pay the money.

UKOOG replied:

“If a company does not abide by UKOOG’s Community Engagement Charter they will no longer be part of the organisation”.

What is a community?

Research by DrillOrDrop has also confirmed that there is currently no agreed definition of what is a “community” under the community benefit payment scheme.

UKOOG has said:

“Local communities will typically be defined as those groups of properties that are closest to the site and its main access routes.”

But it added:

“It would be impossible to define a community for example simply by drawing a circle round the site as each site will have different physical and logistical characteristics. Therefore, boundaries of the local community will be defined on a site-by-site basis in conjunction with the community.”

UKOOG said two pilot projects were “currently envisaged” in Lancashire, where Cuadrilla’s plans for two shale gas sites are being considered by a planning inspector, and in North Yorkshire. It said:

“These pilots are there to help us understand and formulate how to define communities. In general operators will discuss issues such as boundaries with as wide a group of stakeholders as possible.”

UKOOG said “local communities have been made aware of the process” and would get more details if the sites in Lancashire and North Yorkshire were approved.

It said the pilot projects would be facilitated by UK Community Foundations and its local organisations, Two Ridings Community Foundation and the Community Foundation for Lancashire and Merseyside.

Both local foundations issued identical comments:

“The Community Foundation will work with communities to help understand local social needs and local aspirations through an open and transparent consultation process, including establishing a community panel for a Community Benefit Fund, to decide how funds are allocated.”

But they added:

“We have no part to play in any planning or other processes before then, and would only start working actively on any fund once any such processes had been completed.”

Timing and payments

In December 2015, the industry-funded Task Force on Shale Gas said government and industry must “quickly give specific details” on how people living near shale gas sites would benefit. It said:

“Operators must give details if they expect public support”

“Operators should outline exactly how they intend to provide £100,000 of community benefits for exploratory well pads.”

“For all wider community payments, the industry and Government should define exactly what is meant by “communities”. (Link)

But as our research shows, UKOOG has not yet released specific details to the communities most likely to be affected. The Kirby Misperton planning application is expected to be decided within weeks and a decision on Cuadrilla’s sites at Preston New Road and Roseacre Wood could be made in the summer.

UKOOG has said any payment will be made only when “planning permission has been granted and drilling activity on site has started”.

No shale gas, no £100,000 payment

Cllr Jayne Watson, from Misson, also discovered that the community benefit scheme will not pay out for well sites that are not exploring for shale gas.

She asked UKOOG what payments had been made to communities living near the Barton Moss well site in Salford, where IGas drilled an exploratory well in 2013.

UKOOG told her:

“The onshore natural shale gas and oil industry wants to help local communities to benefit directly from hosting well sites not as compensation but to share the rewards of exploring and exploiting an important national resource.”

But it said the community around Barton Moss did not qualify for the £100,000 community benefit payment because the well was not hydraulically fractured. It was exploring for coal bed methane and UKOOG said the “community engagement charter is for shale gas only”.

Money for horizontal drilling

Communities could receive £20,000 payments where operators drill horizontal wells. The wells don’t need to be fracked and they don’t need to be for shale gas or any particular hydrocarbon.

But payment will be made only for every “unique lateral (horizontal)”. And to qualify the horizontal section must be at least 200 metres.

A government statement in 2014 described this as a “voluntary” industry scheme where payments would be made at a “community level”. But the Infrastructure Act required “that a scheme is in place to provide financial or other benefit for the local area” before a hydraulic fracturing licence can be issued.

We could find no recent details about the scheme or whether operators of horizontal wells where not fracking is taking place are obliged to pay the £20,000. UKOOG told us:

“The industry will discuss this [scheme] with as wide a range of stakeholders within the community as possible”.

We asked who will get the money. UKOOG said:

“It is likely to go to community organisations such as Parish Council”.

We asked how it would be distributed. UKOOG said:

“This will be discussed with the local community at the appropriate time”.

Reaction

David Burley, of Frack Free South Yorkshire, said the research suggested that companies could drill a well and avoid payments to communities.

“If a well pad is set up to drill into shale rock for core samples nothing will be paid. If a well pad is set up to drill for coal bed methane nothing will be paid, because it is not shale.”

“Even if fracking takes place, nothing will be paid if the operator decides not to. The £20,000 will not be paid if the company tells us the lateral well is not long enough.”

“We do not know who will be paid, or how or when.”

A spokesperson for IGas said the company had operated its own community fund since 2008 and had awarded grants worth £850,000 and communities around the Barton Moss site had received almost £150,000 since 2013.

The spokesperson added:

“Whilst the parish of Misson will not qualify for the £100k they will be eligible to apply to the IGas Community Fund if planning is granted and drilling takes place.”

Questioning the definition of fracking

There were renewed questions today over whether the UK’s definition of hydraulic fracturing was appropriate.

Stuart HaszeldineProfessor Stuart Haszeldine, of University of Edinburgh, told The Guardian that thousands of gas and oil wells drilled in the US would not count as fracking under the UK definition.

He said 43% of gas and 89% of oil wells fracked from 2000-2010 used less fluid than required to meet the Infrastructure Act limit.

“If a UK well is not officially ‘fracked’, then there is very large loophole, where a developer may not be enforced to take all these additional safety precautions”, he told the paper.

AndreaLeadsomThe UK has adopted a definition recommended by the European Commission in 2014. The Energy Minister, Andrea Leadsom, has denied that companies would try to get round the rules by using less than the minimum amount of fluid (link). Speaking in October last year, she told the All Party Parliamentary Group on Unconventional Gas and Oil:

“That absolutely would not be in anyone’s interests to play games like that. That would be an appalling thing to do. I would absolutely not permit that sort of game-playing to happen. There will be a very clear definition.”

“It won’t be the case that you can simply flout the rules by having a litre or two less of water. That will not be the case I can assure you of that.”

But Hannah Martin, energy campaigner for Greenpeace UK, told The Guardian today:

“If the government were as serious as they claim to be about regulating fracking, they would have chosen a definition of this technique that reflects what actually goes on at many drilling sites.”

Updated 14/4/16 to include response from IGas


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3 replies »

  1. This is a disgrace and so typical of the spin and nature of this industry. These companies care nothing for local communities and neither does the government. It is all about money and fat cats.

    The community benefit scheme is a sham and ill thought out from a legal perspective, it will not compensate people appropriately for actual losses incurred and I suspect will be challenged in court at some stage. The majority of people I have spoken to are not interested in money – they would rather have no fracking. But, it seems this industry really cannot be trusted with anything.

    Using the definition in the Infrastructure Act will give the industry the sort of loophole it absolutely loves – just like the Halliburton Loophole in the US. Fortunately the British public are more informed as they have seen what has occurred in other countries and I am sure the unconventional gas industry has just further strengthened opposition. A complete PR disaster.

  2. North Yorks CC were asked how the money would be spent at the meeting in February this year and were asked if it planned to give the money to those living nearby fracking if the scheme was allowed. No clear answer was given other than a vague ”we don’t operate like that” to the question or ”will the money be spent on ”other projects”’

    However, clearly North Yorks is in need of major road repairs as the new motorway past North Allerton to Northumberland’s water supply continues, ensuring water at Kielder can easily be piped down to Bowland frackers over the decades ahead, once Yorkshire water gets depleted.

    I fully expect, and here it is recorded for future reference, that the frackers will say money spent on this new motorway is the community benefit promised!!!
    Another tax subsidy to shore up fracker benefits offshore somewhere…..

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