The Prime Minister has today announced that councils can keep 100% of business rates they collect from shale gas sites – double the current 50% figure (click here to view). This could be worth up to £1.7m a year for a typical site and will be directly funded by central government.

This news adds to the steps announced as part of the Autumn Statement 2013 to encourage activities in the shale gas sector.

In addition to the financial incentives for local authorities, the industry last year announced that local communities would receive £100,000 when a shale gas test well is fracked – and a further 1% of revenues if shale gas is discovered. This could be worth £5m to £10m for a typical site producing shale gas over its lifetime.  However, the Local Government Association has today called for the 1% revenue share to be increased to between 5% to10%, in line with arrangements elsewhere in the world (click here to view). 

Wherever the levels of these financial incentives are finally set, the monies could help both local authorities and local communities through new jobs and economic regeneration, energy security and potentially discounted energy supply. 

However, there has been much concern raised by anti-fracking campaigners about the environmental implications of shale gas drilling, including groundwater contamination and earth tremors, as well as air pollution and heavy traffic resulting from any large-scale shale gas sites.  Local authorities will need to carefully balance these issues against the potential benefits which shale gas may bring to any locality. 

Notwithstanding the criticism of fracking, there have been a string of investment plans announced by developers in the sector recently.  Today gas and oil giant, Total announced its financial plans to drill for shale gas in Lincolnshire, and last year Centrica (£160m) and GDF Suez (£25m) announced multi-million pound investments for shale gas sites in the UK. The 14th onshore Petroleum Exploration and Development Licences (PEDL) licensing round, planned for later this year, is expected to bring more new entrants to this market.

Bevan Brittan have been advising a number of UK public sector organisations (including local authorities and NHS Trusts) on unconventional energy (such as shale gas) projects. If you are approached by a shale gas developer or are looking at unconventional energy as part of your future energy needs, please contact us if you require any assistance. Areas we can help you with in relation to shale gas issues include:

  • the licensing regime, including PEDL licences
  • planning, health and safety and environmental matters
  • joint venture or partnership arrangements with developers
  • exploration agreements and site licences with developers
  • energy agreements with developers.

We provide updates on legal developments in the shale gas sector as part of our monthly publication, Energy Eye.  If you would like receive this, please subscribe here.

If you would like specialist legal advice on any of the above areas or on any energy generation or regulatory matters, please see the contact details below.