Politics

Local people have first call on shale wealth fund, says government, as consultation opens

Kirby Misperton

People have 11 weeks to comment on government proposals for payments from a shale wealth fund in a consultation which opened today.

The consultation document said:

“Local communities should be the first to benefit from the shale wealth fund, and they should get to decide how a proportion of the funding is used”.

It also proposed part of the fund should be spent regionally on “enhancing the regional economy”. But the government did not recommend what proportion should be spent locally and regionally and only suggested the balance between the two payments should remain “flexible”.

Yesterday, Downing Street said Theresa May had intervened in the consultation proposals to include an option to make direct payments to local people affected by shale gas developments. Anti-fracking and environmental groups described this option as a “bribe that would not work”. DrillOrDrop report

Details of shale wealth fund

Shale wealth fund consultationThe consultation document gave details for the first time of how the government thinks the fund would operate. The document said:

  • The fund would initially consist of up to 10% of the revenue from tax on shale gas company profits
  • It could provide up to £1 billion over 25 years
  • The money would be shared between local communities and wider shale gas regions
  • The first payments would go to local communities
  • There would be a £10 million maximum pay-out to each community or region associated with an individual shale site over its lifetime, estimated at 25 years.
  • The fund would be new money and “would not be used to replace to replace existing government funding”
  • It would be additional to the shale industry community benefit scheme (£100,000 for each exploration well and 1% of production revenues)

Local priority

The government proposed the first priority of the fund would be communities local to shale developments.

“These proposals make clear that the benefits of shale will go to local people first, and individuals and communities who host developments will be directly involved in the decision making about how the tax revenues from shale are spent.”

The document raised the issue of how “local community” might be defined but made no proposal. It also discussed possible ways in which local funding might be governed and spent without making a recommendation:

“There will clearly be a trade-off for communities in either choosing to benefit from SWF [shale wealth funds] directly, which may result in a relatively small per-household payment, depending on the revenues and the size of a particular community, or in investing in an asset which benefits the community at large.”

Some newspapers have suggested individual payments could be variously £10,000, £13,000 or £20,000.

Yesterday’s MailOnline said:

“In the sleepy village of Balcombe, West Sussex – focus of huge anti-fracking protests – £10million split between its 735 households would result in £13,605 per home.”

But this assumed that the entire £10 million would go in direct payments, which is not government policy.

There is no figure in the consultation on what households in shale gas areas might expect to receive. But any payment from the fund, local or regional, relies on shale companies extracting gas for sale, making a profit and paying tax. Local payments under the scheme may not go to communities affected by exploration activity because exploration and production sites may be in different places.

Regional spending

The consultation said the fund could “contribute to a significant legacy for areas hosting shale developments”.

The regional part of the fund would take tax revenue from more than one shale site and, the document suggested, make larger investments. It said these could include infrastructure projects and gave as an example the Northern Hub and Transpennine rail upgrade. At £1 billion, this would use the entire fund, including the local element, over the estimated lifetime of the fund of 25 years.

Regional funding could make direct grants to local authorities or Local Enterprise Partnerships, the government suggested. Alternatively, there could be a regional fund to which organisations make project bids.

Consultation objectives

The government said the consultation sought to explore:

  • What the government’s priorities should be for the shale wealth fund
  • How funding should be allocated to different stakeholder groups
  • The extent to which the industry community benefits scheme and the Shale Wealth Fund should be aligned
  • How the funding should be delivered to ensure that households and communities benefit
  • How funds are spent and how the process should be administered

Consultation questions

  1. Are the priorities correct?
  2. Should local communities receive revenues before the regional level
  3. What proportion of funding should be allocated between the two priorities?
  4. Should there be flexibility on the proportion of funding to local and regional levels?

Local level

  1. How should “local community” be defined?
  2. Should it be defined on a case by case?
  3. Should there be a set of principles for defining “local community”?
  4. Should the government align any “local community” part of the fund with industry community benefits scheme?
  5. At a local level, should local people determine how the fund is spent?
  6. How could the government ensure that all local residents benefit as directly as possible from the fund?
  7. Should the fund be ring-fenced for a specific purpose and, if so, should this be determined locally or centrally?
  8. At the local level, would an appropriate use be to make direct payments to households?
  9. Who should make decisions on fund allocation at a local level? Should this be an existing body (eg parish or district council), the same community-led panel as the industry scheme, or a new body?
  10. How can government ensure decisions are as directly influenced by local residents as possible?

Regional level

  1. How should boundaries be defined for the regional strand of the shale wealth fund?
  2. What kind of investments should be made from a regional level of the shale wealth fund?
  3. Should the regional level of the shale wealth fund be administered? Should this be by direct grants to specific organisations or through an open bidding process? How can views of residents across the regions be best taken into account?
  4. How should a regional shale wealth fund be governed? Are there existing regional organisations, or local or national governance structures that would be particularly suited?

Consultation deadline

Responses should be made by Tuesday 25 October.

They can be

  • Online through Surveymonkey
  • By email to shalewealthfund@hmtreasury.gsi.gov.uk
  • By post to: Energy Branch Energy, Environment and Agriculture Team HM Treasury 1 Horse Guards Road London SW1A 2HQ

Link to consultation webpage

22 replies »

  1. Great News! Of course known member’s of Anti Fracking organisations who object to fracking should get nothing!

  2. So let’s get this right. This is taxpayers money.

    Will the Rt Hon Theresa May please explain why the many people in England who do not want shale exploration and production (which is neither needed or wanted, nor commercially viable), who are going to work today to pay their taxes from which the money for this fund is to be extracted, are to be offered a minuscule payment which could be better spent on things like clean energy production to meet our climate change targets (subsidies which have recently disappeared), in return for accepting the risk to their health and devaluation of their property?

    This comment comes to you from electricity wholly powered by the wind 🙂

    • Why is Shale Gas not needed in UK? Why are we importing Shale Gas from USA via Milford Haven? Get in real st and do not talk utter rubbish! So if the wind is not blowing you are not showing ! PMSL

      • Malcolm, clearly you have not been read the many credible sources on here demonstrating why we do not need, want or will have shale due to the economics?

        REAL is what I am. I’m still here.

        This comment comes to you from electricity STILL, and all day, wholly powered by the wind 🙂

      • Why is Shale Gas not needed in UK? You don’t seem to be following what is going on here. Shale gas is the dearest, dirtiest and most dangerous natural gas source. Precisely why it has been left in the ground till last. Our home grown North Sea gas industry is being strangled through a crippling tax regime.There are plenty of reserves and it is far cheaper than shale. We have an experienced workforce of over 400,000 and infrastructure in place to increase output. Shale gas cannot meet our base fuel needs. Listen to the experts.

        http://www.parliamentlive.tv/Event/Index/b05e83ee-5d8a-4f48-bc34-8d4b75f6a0db

        The answer to our energy needs is glaringly obvious. Maximise our home grown offshore industry whilst ramping up renewables quickly.
        Best economic solution, most jobs created, and leading the way in fighting climate change and meeting our targets.

  3. Barry Gardiner, the shadow energy and climate change secretary said today,

    “Does Theresa May really hold the British public in such high esteem that she thinks they can be bribed into fracking and a fossil fuel future?”

    https://www.theguardian.com/environment/2016/aug/07/fracking-bribe-public-accept-greenpeace-labour-cash#img-1

    This article also states:

    ‘Public support for fracking hit a new low of 19% in April according to the government’s long-running public attitudes tracker – while the numbers against the energy source had risen to 31%. Support for renewable power in the survey stood at 81%, with only 4% opposing it’.

    If Mrs May’s statement ‘ We will make Britain a country that works not for a privileged few but for every one of us’ is to be believed and acted on, it is clear that the people want renewable power not fossil shale. So why are we even wasting time (and taxpayers money) on a consultation of a ‘Shale Wealth Fund?’

    This comment comes to you from electricity wholly powered by the wind 🙂

  4. As the Mail on Sunday suggests, to get to a figure like £13,000 you have to assume

    a) fracking happens

    b) it’s really profitable

    c) we get loads of tax

    d) the full £10m is allocated

    e) it all goes to household payments (which is not even policy) and

    f) that the community in question has fewer than 1,000 households

    There won’t be payments during exploration. The whole point of the announcement is to build support for shale gas exploration in communities right now. Hence “derived from shale exploration in their area”.

    But the money it’s talking about only exists after shale exploration. It applies to the tax on the profits from full-on commercial gas extraction, which is totally different.

    Indeed, as the government’s own consultation highlights, exploration and production may not only be years apart, they may not even happen in the same place.

    So, more fracking hot air that reeks of desperation in the light of dwindling support, and to many , an intimation that fracking ( unlike other industrial processes) needs a spoonful of sugar in order to swallow the health and environmental impacts that come in its wake.

  5. Note that this crackpot frackpot scheme is based on the assumption that the fracking industry will be profitable, as all notional future payments are based on taxes from company profits. Given the perilous financial state of many fracking companies in the US, where they are going under on a weekly basis, and the fact that many fracking companies in the UK are effectively shell companies – such as Third Energy, who are already about £28 million in debt to their parent company, Barclays Bank – one wonders if the industry will be able to make a profit at all. And even if it did, would that profit not magically disappear due to internal tax avoidance strategies within these energy conglomerates? It seem that by admitting that fracking is so bad that people living near it need to get financial compensation – which has not been offered to people near other energy production systems or coal mines in the past, as far as I am aware – they are effectively shooting themselves in the foot with this. Won’t people think – hang on, if the government wants to pay me to allow this industry in our village, what problems is it going to bring? This seems like a desperate move by an increasingly worried government, who are now realising they have lost the argument with local communities and are resorting to the only trick they have left – paying people off.

  6. Amusing consultation document if it wasn’t so offensive and insulting and undemocratically delivered in the first place. I hesitate to fill in this document, when we were told local communities could decide what happens in their area, and lo and behold North Yorks County Council ignored all voices against fracking in that area, while the jury and constantly reappointed new communities minister, are still trying to make a decision against local democracy in Lancashire!

  7. Would you really take 13k without the reassurance that your house value won’t go down by more than 13k as a result of nearby energy exploration? Did you know that surveyors on bank lending panels can refuse to value your property if it does not meet the lenders lending criteria? Without a valuation how will you get a mortgage/remortgage? I have personally sent email to several home insurers asking if they will cover seismic damage to the home and the provision of water/alternate accomodation should it be affected by energy exploration/fracking and do you think I had a positive response? Fracking will render your home worthless.

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