Politics

Spending watchdog investigates costs of fracking

pnr 181121 Ros Wills5

Cuadrilla’s fracking site at Preston New Road, near Blackpool, 21 November 2018. Photo: Ros Wills

The potential cost to the public of decommissioning fracking sites is to be investigated by the government’s spending watchdog. 

The National Audit Office has announced it is working on a report on the potential costs and liabilities to government.

The report will also include the roles and responsibilities across government, the regulatory regime, government policy objectives and progress so far of the shale gas industry.

The NAO said the work was in response to “widespread parliamentary and public interest”.

Ministers have told parliament they expected operators of oil and gas licences to take responsibility for decommissioning costs.

But in March 2019, the public accounts committee reported evidence from senior civil servants that landowners and former directors could be liable if the operator went out of business.

A member of the committee, the North East Derbyshire MP Lee Rowley, had previously said he was disappointed that officials had been unable to give clear answers on decommissioning liability. He said he would continue to pursue the issue.

Mr Rowley, whose constituency has a site earmarked for shale gas exploration, said today:

“It’s very good news that the National Audit Office have decided to review fracking following our requests.

“There are clear gaps in Government thinking here and the NAO will bring an analytical and critical eye to evaluate many of the issues those of us with concerns have been raising.

“I would encourage everyone to get involved so that the NAO have the fullest evidence base to work off as part of their review.”

The NAO investigation is headed by Rob Prideaux, one of the organisation’s directors. Evidence can be emailed to enquiries@nao.org.uk with Fracking in the subject line.

A spokesperson for the NAO said there was no publication date for the report but this was likely to be autumn 2019. The NAO releases always coincide with a parliamentary term so the publication date is unlikely to be before 10 October 2019.

9 replies »

  1. Good job the public will not be expected to fund any of the N.Sea decommissioning costs.

    Oh-they are!

  2. The North Sea Oil & Gas industry has paid £Billions into the U.K Treasury.

    The cost of decommissioning is only a fraction of what the U.K has benefited from these past decades…

    • But Simon, if they have paid £Billions in tax then they must have made £Zillions in profit. Why on earth should the tax payer fund any of the industry’s decommissioning costs?

      • Ermm, because if they were not allowed to make profit they would have simply invested elsewhere (perhaps Venezuela where it is common just to leave the water ways polluted and gas and oil still bubbling) and then the UK tax payer would have had to pay more tax rather than have industry do their share of tax paying.

        Difficult to grasp for the antis that tax can be paid by industry and the individual, and one has the choice of not doing so, the other does not. So, encouraging the first to stay and pay helps the second. But of course the “alternative” is just to export the industry to somewhere else and then claim targets are being met! Meanwhile, how much brown coal does it take to build a BMW 3 litre diesel, and how much of that diesel is imported so reduced tax in UK?

        Not to worry. Nice Sir Jim is busy with his spanners bringing the Forties pipeline back on line, so loads of fuel available shortly (as long as the Royal Navy does their bit in the Gulf-more tax!) to allow Sainsburys to continue to offer their 10/12p litre discount. Good to see IGAS decommissioning with gusto after completing their operation ahead of schedule. Gold Standard. Not quite so from the MP covering Ellesmere Port moaning today about losing fossil fuel related jobs if no deal Brexit! Now, that is “alternative”!

      • The answer is simple John (is that right – I forget):

        The licences and tax system were set up to maximise upfront Government take (rightly or wrongly). It was very clear then that the Government of the day and future Governments were happy for future decom costs to be subsidised through tax breaks in the future.

      • Because John we the UK consumer benefited from this great resource as you say £Zillions in profits! The government sold the licences to the oil operators, they drilled wells and took up the liability, they created 100,000s of jobs, that in effect fed 100,000s families, the operator paid for intellect which benefitted universities, communities, the tax to the treasury benefitted the UK, Roads, School, the NHS! If you had bought shares and made £Zillions then you might not be so bitter! It takes so time to understand the way the energy industry works and you just haven’t got it! Oil and Particularly Gas is our last real clean energy! Theres hydrogen but you need fossil fuels in the mix to create this, the UK
        killed coal production but we still use coal as a life line from europe for electricity and many links are under construction or planned for the next decade between the UK and France, Belgium, Denmark, Norway and Germany. What do you think they will be using to generate this power?
        GAS, OIL & COAL!!

      • Refracktion

        It does not follow that North Sea industry profits would be a multiple of tax paid.

        In particular PRT took away a lot of profit, hence the ability to recover decommissioning costs against it, even though it only applies to pre 1993 structures.

        https://www.ogauthority.co.uk/exploration-production/taxation/overview/

        So, maybe tax to the tax payer and dividends to the tax payer and pensioners in the uk is a greater number than profit after tax?

  3. Exactly Kisheny.

    Perhaps if the UK wasn’t a bankrupt nation at the time revenue could have been put into some long term investment-shall we call it a Sovereign Wealth Fund-and then when the day came it would be there to be called upon. Cake and eating it leaves little cake.

    So, no I am not unhappy about that. It is the reality that is life.

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