UK fracking in spotlight following Prime Minister’s proposal
The U.K.’s new Prime Minister, Theresa May, is being watched closely as she makes decisions – or reconsiders others recently made – on the country’s energy policy.
Delaying a decision at the last minute to go ahead with an £18 billion ($23.5 billion) nuclear project at Hinkley Point is one such move by Mrs. May with ongoing repercussions. Unveiling a proposal to give cash payments to those individuals in a local community who are disrupted by fracking in the search for shale gas is another.
Fracking in the U.K. has not been welcomed by local communities and environmentalists and to date projects have often been stalled by protests and negative publicity. Now the U.K. government has suggested that residents affected by fracking could be paid some of the proceeds of shale gas projects.
Although a shale ‘wealth fund’ was first mooted in 2014 as a means of setting aside up to 10 percent of the tax proceeds from fracking to benefit communities in the U.K. hosting wells, the new Prime Minister is considering paying the money directly to individual households, and has launched a consultation on the structure of this fund.
While the government has not placed a figure on the amount potentially available to individual households, it is understood to be up to £10,000 ($13,040) each.
The response to this proposal has served as a reminder of the strong – and divided - emotions on this subject in the country.
"The plan to offer individual payments, little more than bribes, to households in areas affected by fracking demonstrates just how desperate the Tories are to force fracking through, come hell or high water. These plans may well appeal to the corporate interests of the fossil fuel industry but they ride roughshod over public opinion and our chances of securing a safe climate for current and future generations,” said Molly Scott Cato, Green Member of the European Parliament (MEP) for the South West U.K. and an outspoken opponent of fracking.
There is growing opposition to fracking, which is supported by only 19 percent of people in the U.K., according to Greenpeace. It says that by contrast, 81 percent of the population supports renewable energy. But the U.K.is almost certain to miss its EU 2020 targets for renewable energy, the National Grid (LON:NG) recently said.
Only last month the U.K. government’s own advisors said that shale gas fracking in the country needed to be tightly controlled if it was not to run counter to the U.K.’s targets on climate change.
While the critics are saying the proposal is an attempt to bribe the opposition in communities affected by fracking, the emphasis from the Prime Minister has been on rebalancing the economy in favor of “ordinary people.”
It is still early days as yet on potential energy from shale gas in the U.K. Scientists from the British Geological Survey (BGS) have estimated that the total volume of gas in the Bowland-Hodder shale in northern England is some 1300 trillion cubic feet (central estimate). The
current U.K. annual gas consumption of around 2.5 trillion cubic feet.
“The British Geological Society’s Bowland Shale Gas study is the first in the U.K. to provide investors, operators and regulators with an indication of where to target future exploratory drilling. But it is not possible to estimate how much shale gas and oil the U.K. can produce until there has been some exploration and testing,” says the newly merged U.K. Department of Business, Energy and Industrial Strategy (BEIS).
But where does that leave investors?
Energy company Cuadrilla has said reserves in the U.K. county of Lancashire alone could be worth £140 billion ($182.6 billion).
Cuadrilla is privately owned, but according to media coverage last year, owner Australian engineering and mining firm AJ Lucas’s (ASX:AJL) share price nearly doubled in the first week following the Conservative party’s surprise election win on May 7.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com