Chancellor George Osborne has announced a 30% tax break for fracking companies in the UK in a bid to kick-start a shale gas revolution in the country.
The Government said it is the “most generous” regime for shale gas “in the world” – less than half the 62% rate that the oil and gas industry has traditionally paid. It is expected to attract investment into the new fuel source following a boom in the US recently, which has seen a fall in gas prices and experts predicting the nation could be a net exporter of natural gas by 2020.
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 the 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.”
The Government will also give communities that host shale gas sites £100,000 per well and up to 1% of all revenues from production for allowing fracking to be conducted near their homes.
The controversial technique involves drilling deep underground and opening the rocks with a mixture of water, sand and chemicals for the gas to flow out freely.
The news follows the British Geological Society’s increase in shale gas estimates at 1,300 trillion cubic feet, with experts claiming it could be enough to supply the UK with gas for 25 years. Last month British Gas owner Centrica bought a 25% stake in the Lancashire field to explore shale gas in the UK. Energy Secretary Ed Davey also confirmed his backing for shale gas last week.
The generous allowances, however, have been condemned by environmental groups.
Friends of the Earth’s Head of Campaigns Andrew Pendleton 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.”
WWF claimed there was no justification for giving tax breaks to the industry.
Jenny Banks, Energy and Climate Change Specialist at WWF-UK said: “Ministers seem to have swallowed hook, line and sinker the industry claim that the worries people have about fracking are simply scaremongering, despite strong evidence to the contrary. The Government must take local environmental concerns and their impact on communities more seriously and taking steps to rush shale gas through the planning and consenting process is misguided in the extreme.
“Rather than throwing tax breaks at oil and gas companies, the government must concentrate its efforts in providing policy certainty for the energy efficiency and renewable technologies of the future.”
A study in the US last month found people living near shale gas wells are at “higher risk” of contaminated drinking water.