Government accused of 'overhyping' shale gas benefits

Government accused of 'overhyping' shale gas benefits

Prime Minister uses fracking industry estimates of up to £10m benefits, failing to mention independent government-commissioned research that it could be just £2.4m


The Prime Minister has this week faced a backlash from MPs over the scale of the benefits, with MPs in shale gas rich areas in northern England calling the 1pc offer “derisory”. Photo: Demotix


By Emily Gosden, Energy Editor
4:55PM GMT 17 Jan 2014


Ministers have been accused of overhyping the potential benefits of shale gas by using fracking industry figures that promise local communities up to £10m in cash – ignoring an independent government-commissioned report that suggested it could be as little as quarter of that.

Shale gas companies have promised they will pay local communities £100,000 up front for each exploratory well that is fracked, and then 1pc of any revenues from shale gas drilling.

The companies claim this could be worth £5m to £10m over the lifetime of a fracking site - likely to be at least 10 years. This is based on a report by the Institute of Directors, sponsored by fracking firm Cuadrilla.

But an independent Strategic Environmental Assessment report by consultants Amec, commissioned by the government and released just last month, estimates the share of the revenues would actually equate to between £2.4m and £4.8m per site.
Yet the government has since opted to use the IoD figures, making no mention of the Amec report.

The Prime Minister has this week faced a backlash from MPs over the scale of the benefits, with MPs in shale gas rich areas in northern England calling the 1pc offer “derisory”.
Challenged by MPs, Mr Cameron said that the revenues were likely to be “between £7m and £10m for a typical fracking well".

Tom Greatrex MP, Labour’s shadow energy minister, said that with “significant and legitimate environmental concerns from many people”, ministers had “a duty to be responsible and cautious” in assessing the potential benefits of shale and setting out safeguards.

“Instead, this week we have seen the Prime Minister using outdated figures for the community benefit, figures which were contradicted last month by a detailed assessment undertaken by the relevant government department,” he said.
“Even today, the Government website is boldly claiming that wells will deliver £5-10m in benefits to local communities, despite the most recent research, hosted on the same website, putting the figure at £2.4-4.8m.

“People will be rightly questioning the Government’s commitment to the evidence when it seems to do all it can to overhype the potential benefits of fracking.”
A spokesman for the Department of Energy and Climate Change said the discrepancy between the IoD and the Amec estimates was because the IoD assumed more intensive drilling at each site.

The IoD estimates one drilling site would have 10 vertical wells, each with up to 4 horizontal wells coming off them, while the Amec report assumed up to 24 vertical wells, each with just one horizontal well.

This means production and therefore revenues would be greater under the IoD scenario – although the disruption faced by the local community could also be greater.
“There is uncertainty at this stage about using any scenario for the future of the industry, which is why we are promoting exploration to determine the potential of shale gas,” the DECC spokesman said.

She defended using the IoD number, saying: “It’s the industry figure and we’ve been using it since they first announced the benefits scheme in June 2013, we’re consulting on the SEA. Also the IoD report set out a broad economic analysis of shale in the UK, but the SEA is specifically aimed at exploring potential environmental effects.”

As well as the accusations of deliberately over-hyping the benefits, ministers have been twice caught out for inadvertently overstating them.

A government announcement on fracking on Monday initially erroneously promised communities a sum of £5m to £10m each year, before being corrected to say it could be over the lifetime of the site.

And last year the Prime Minister mistakenly promised communities £1m up front for each well that was fracked, rather than the actual £100,000 on offer.
Separately, reports in Brussels suggested that another promised fracking benefit could face challenge from the European Commission over whether it complies with state aid laws.

Ministers on Monday promised that local authorities could keep 100pc of the business rates from shale gas drilling, rather than the usual 50pc, in a move that could be worth £1.7m a year.

[url=http://www.euractiv.com/energy/state-aid-row-engulfs-uk-shale-g-news-532827?utm_source=EurActiv newsletter&utm_campaign=a4ad7efc47-newsletter_daily_update&utm_medium=email&utm_term=0_bab5f0ea4e-a4ad7efc47-245766509]A report by Euractiv[/url] cited an EU source who said that the tax concessions were designed to advantage shale gas companies, implying it could be open to state aid scrutiny.

A DECC spokesman said: “100pc business rate retention for shale gas operations does not affect the amount of money operators must pay, but means that local government retains this rather than passing it to central government. It does not qualify as State Aid.”

http://www.telegraph.co.uk/earth/energy/10580255/Government-accused-of-overhyping-shale-gas-benefits.html