George Osborne Unveils Tax Breaks For Shale Gas 'Fracking'

Campaigners are concerned about the environmental impact of shale gas extraction
Campaigners are concerned about the environmental impact of shale gas extraction

The Chancellor George Osborne has unveiled tax breaks for controversial fracking in a bid to create the "most generous" regime for shale gas in the world.

A new shale gas allowance will more than halve the tax due on income from production in order to encourage exploration of the unconventional energy resource in the UK.

The backing from the Treasury comes after a recent report from the British Geological Survey revealed there was twice as much shale gas in the north of England as previously thought. Other areas of the country could also be exploited for the gas.

Ministers believe the experience of the US, which has seen a shale gas boom, shows it could boost tax revenues, create jobs, reduce energy imports - which have reached record highs in the UK - and bring down household fuel bills.

But opponents warn that the process for extracting shale gas, by hydraulic fracturing rock with high-pressure liquid to release the gas, or "fracking", can cause earthquakes, pollute water supplies, blight the countryside and affect house prices.

Questions have been raised about how much of an impact efforts to develop home-grown shale resources will have on household energy bills, and environmental campaigners warn a new "dash for gas" will undermine efforts to develop clean energy, cut emissions and create green jobs and growth.

The new tax regime, which is based on existing field allowances to back the development of technically or commercially challenging oil and gas resources, will reduce the tax on the income from shale production from 62% to 30%.

The Government has also outlined measures to ensure local communities benefit from the development of shale, with £100,000 paid for each well where fracking takes place and 1% of revenues if the drilling proves to be commercially viable.

New planning guidance on shale gas is set to be published by the Communities Department as the Government attempts to drive forward exploration.

Mr Osborne said: "Shale gas is a resource with huge potential to broaden the UK's energy mix.

"We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.

"This new tax regime, which I want to make the most generous for shale in the world, will contribute to that.

"I want Britain to be a leader of the shale gas revolution - because it has the potential to create thousands of jobs and keep energy bills low for millions of people."

Greenpeace energy campaigner Lawrence Carter said: "The Chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he's had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.

"Experts from energy regulator Ofgem to Deutsche Bank and the company in receipt of this tax break, Cuadrilla, admit that it won't reduce energy prices for consumers.

"Instead we're likely to see the industrialisation of tracts of the British countryside, gas flaring in the Home Counties and a steady stream of trucks carrying contaminated water down rural lanes."

Andrew Pendleton, Friends of the Earth's head of campaigns, said: "Promising tax hand-outs to polluting energy firms that threaten our communities and environment, when everyone else is being told to tighten their belts, is a disgrace.

"Ministers should be encouraging investors to develop the nation's huge renewable energy potential. This would create tens of thousands of jobs and wean the nation off its increasingly expensive fossil fuel dependency."