Should we all hail the shale?

The announcement of the Shale Wealth Fund brings a mark of consistency with the previous Cameron Government

In the short time since the new Theresa May Government formed, we have seen a lot of flux in UK energy policy. The abolition of the Department for Energy and Climate Change (DECC) and the creation of a new department that brings together energy and business policy has been met with cheers and cries. Meanwhile the “pause” by the Government on making a final decision on Hinkley Point C has called into question continuity in this area of policy.
Nevertheless, the announcement of the Shale Wealth Fund brings a mark of consistency with the previous Cameron-led Government, albeit in a way that sits with the new PM’s drive to rebalance growth across the regions of the UK. Indeed, the proposal for it was first floated by George Osborne in 2014.
So what is the new Shale Wealth Fund? First, it is new funding, i.e. it will not be used to replace existing government funding and it will be additional to benefits provided to communities by the industry through its community benefits package. Secondly, it will initially consist of up to 10% of tax revenues from shale production sites to benefit the communities which host these.
The Government is now consulting on how this new funding should be delivered as the question of who pays and who should benefit from local development is not one with a clear answer. The HM Treasury consultation proposes two priorities. The first priority is that benefits should initially be locally focussed on those who are most affected by development. The second priority is that the funding should then contribute toward regional economies and bring longer-term investment opportunities to these – creating a so-called “trickle-up” effect from the local to the regional.
Unpicking what defines “local community” is not straightforward for shale. Whilst the sites themselves are arguably less visible than other forms of infrastructure shale development will bring vehicle movements that impact on communities who may live some distance from sites. Additionally, the horizontal drilling nature of the technology means that drilling may be taking place a significant distance from the wellheads.
There is also the question of who administers the funds and who decides how they are invested and on what basis. For instance, a site may sit across a number of parish or district councils’ jurisdictions. To manage this, a community grants fund could be established, with clear terms of reference, through which local organisations can bid for funds to help deliver local projects that align with the fund’s objectives. The consultation cites other examples of community funding models, including the Landfill Communities Fund, and fund priorities for a renewable energy development.

Unsurprisingly, some have not welcomed the announcement with groups such as Greenpeace who have long been opposed to shale development on the grounds that it brings more fossil fuels into the energy mix when, they argue, we should be moving toward renewable technologies for power generation as well as heating. Additionally, both Labour and the Green party have criticised the funding as a “bribe” to local residents.
However, there is a clear rationale behind providing incentives to those that will be most impacted by a development. It should also be the case that industry should have an active and positive role in consulting with the local communities where plans are being brought forward, as effective consultation not only means people are more likely to support a proposal but a scheme will ultimately be improved. When the policy was announced a Number 10 spokesperson indicated that the model for the Shale Wealth Fund would be a “blueprint” for allowing people to benefit from other types of infrastructure developments as well.
The consultation closes on 26th October 2016.