Tax cut to boost shale gas production

22 July 2013

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23 July 2013 | Will Green

The government is hoping to keep down the long-term cost of energy with proposed new tax cuts to boost production of shale gas.

The measure would slash the amount of tax a company pays on a portion of its income from 62 per cent to 30 per cent.

The move comes as a British Geological Survey study revealed there is more than twice the amount of shale gas in the north of England than was previously thought to be in the whole country.

Chancellor George 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.”

The government has already announced that communities should benefit from fracking – which involves pumping water at high pressure into rock to release gases - with firms providing at least £100,000 of benefits per well site during the exploration phase and no less than one per cent of overall revenues.

A consultation on the tax proposals is now under way. But Water UK, which represents the interests of the UK’s water companies, has expressed fears fracking could contaminate drinking water with methane gas and harmful chemicals. 

Jim Marshall, policy and business advisor at Water UK, said: “There are arguments for and against fracking and the water industry is not taking sides. If it goes ahead we want to ensure corners are not cut and standards compromised, leaving us all counting the cost for years to come.

“We want greater clarity from the shale gas industry on what its needs related to water are really going to be and a true assessment of the impacts. This can be done through much closer working and understanding between water companies and the shale gas industry to tackle the many challenges we collectively face.”

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