Money cannot compensate for fracking, politicians told

Graham CrayA retired bishop who lives half a mile from Third Energy’s approved fracking site in North Yorkshire told a parliamentary group yesterday that community benefits would not compensate his village for the impacts of fracking.

The Right Reverend Graham Cray, from Kirby Misperton, was giving evidence to the All Party Parliamentary Group on shale gas regulation.

He told the meeting:

“The view in my village is that people don’t want fracking at any price.”

The shale gas industry has committed to paying £100,000 for each exploration site which uses fracking. If sites go into production, operators will pay 1% of revenues to local communities.

But Rt Rev Cray said

“Money cannot compensate for threats to health, jobs in agriculture and tourism or falling house prices. I know of no one in my village or surrounding villages who supports this.”

He said payments from the industry or from the government’s proposed shale wealth fund would be trivial compared with the loss of a home’s saleability or its value. He said people in Kirby Misperton saw payments as compensation for harm to their village.

But he was concerned that the money could divide communities.

“If you draw a circle what do you do with the people just outside. The potential impact of dividing communities is very substantial.”

Rt Rev Cray said if fracking went ahead, the industry should be required to put up an additional bond that would cover any damage to the community.

Industry proposals

The meeting also heard from representatives of shale gas operators, the distribution company Northern Gas Networks and the industry organisation, UK Onshore Oil and Gas (UKOOG), which has developed the community benefit scheme.

Ken Cronin, Chief Executive of UKOOG, said communities should feel the benefit of hosting a shale gas site. The proposed payments went much wider than compensation. He said there had been predictions that the value of homes near wind farms would fall but this hadn’t happened.

John Blaymires, Chief Operating Officer of the shale company, IGas, said the disruption from operations was comparable to other rural activities, including farming.

David Gill, of Northern Gas Networks, said his company was considering extending the gas network to villages that hosted fracking sites but were currently not on a pipeline.

But Rt Rev Cray said:

“Most of my neighbours, if this happened, would believe it was a very high price to pay [for a gas connection]”.

The meeting heard from Tom Pickering, Director of INEOS Upstream, that his company was preparing to go further than the UKOOG scheme. It proposed to pay 4% of revenues to owners of land below which shale gas was extracted and 2% to the wider community.

Mr Hollinrake asked IGas and Third Energy why they were not offering payments at this level:

“If you are going to make communities feel favourable, 6% is much more than 1%.”

Mr Blaymires and David Robottom, Chief Finance Director of Third Energy, said they first wanted to see the results of UKOOG’s community benefit pilot schemes, planned for Lancashire and North Yorkshire if fracking went ahead in these regions.

How community benefits will work

Fabian French, chief executive of UK Community Foundations, told the meeting how the money would be distributed.

  • Local community foundation trusts would select a panel of local residents
  • Local organisations that provided benefits to the community would submit applications to the panel, probably ranging from £200-£10,000
  • The panel would decide how the money was spent

Mr French said what defined a community would vary from place to place:

“It will be for the foundation to decide. That is why we are doing the pilots which will allow us to work out what is the correct definition.”

Who’s going to pay what to whom?

UKOOG community benefit scheme

  • £100,000 for each shale gas exploration site that involves hydraulic fracturing. Money will be administered by a panel supported by a community foundation trust
  • 1% of production revenues

INEOS community benefit scheme

Revenue from production: 4% to owners of land above which gas was extracted and 2% to the wider community

Payment for underground access

One-off payment from the shale industry of £20,000 for each horizontal well that extends by more than 200m laterally made to owners of land above

Business rates

100% of business rates from shale gas sites paid directly to local authorities

Shale wealth fund

10% of tax revenues from shale gas production to be used to benefit communities which host shale sites. Government consultation currently underway.

Other funds

IGas runs a community fund, which it says has allocated grants of £850,000 since 2008 to “help local communities” near the company’s oil and gas sites.

24 replies »

  1. When will the Government and these companies realise the UK people do not want outdated forms of energy. We want renewables and there is the money to do it but not the will. If poor countries like Costa Rica can do why can we not.

    • Susan – perhaps Costa Rica has a slight advantage in that it has a population of less than 5million.

      They are blessed with the geography and rainfall to allow nearly 80% of their electricity to be produced from hydropower and 12% from geothermal. Note that the wind contribution is very small and solar does not appear on the chart at all.

      In 2014 they had to burn a lot of diesel as they did not get their usual rainfall and hydro could not deliver.

      They have a new near 1 billion dollar geothermal plant being built – paid for by the EU and Japan.

      The link below tells you why we cannot go down this route:

    • There is a total lack of political will from the Tories who are mostly Old fossils and petrol heads! We need to call for another election. T May was not elected and yet she is able to force people into ‘loving’ fracking. This is not democratic but dictatorial! Were the Tories asleep last year during the COP21 climate change talks in Paris? Have they ratified the agreement yet? Do they even inform themselves by inviting expert Climatologists to show them what will happen if they continue burning Fossil fuels? Of course not! Far too ignorant and some probably have vested interests in the FF industry. Enough is enough. The corruption and hypocrisy is blinding and huriting!

  2. I’m interested to know why, if INEOS are prepared to pay 6% revenues, the UKOOG scheme is only 1%.

    Either INEOS must be fools and happy to throw away money or the UKOOG scheme is very miserly. Which do the panel think it is, or is there a third opinion?

    For clarity I wouldn’t regard either as appropriate or sufficient but the difference is quite marked isn’t it?

  3. A few things strike me; the first is how out of touch these industries are – extending gas pipes to villages currently without gas, is clearly being offered as some kind of bribe. This flies in the face of every principle of tackling climate change. Do they not get that we are supposed to be reducing our use and dependency on fossil fuels? Not increase use. Secondly the royalties paid to individuals (not communities) in the US because they own the mineral rights is between 12 and 21% so even at 6% they are laughing all the way to the bank and thirdly the sort of compensation, because let’s not beat about the bush that is what it is being offered though they can dress it up as a community fund or whatever, is completely inadequate. It will not adequately compensate people for the noise, disruption, fall in house prices etc. And given the shale industry talks about a 25 year industry that is a long time to “host” anything. Communities should be on par with HS2 or a third runway. These sites after construction will be drilled and fracked many times, as stated by Ineos. The government keeps saying this industry is of national importance so they should compensate people adequately – including planning blight. The public deserve far better.

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