Fracking: who benefits?

Last week was an interesting one for British energy policy. Theresa May seemingly put the brakes on the eye-wateringly expensive Hinkley Point project, while giving a boost to shale gas by announcing the possibility of direct payments to households in areas where fracking takes place. The government is now consulting on the options for its proposed Shale Wealth Fund.

The Shale Wealth Fund, first proposed in 2014, would be funded using tax revenues from the fracking industry. In the original conception,  payments would go to councils and local trusts in areas where fracking is undertaken. The idea of direct community benefits in the form of cash payments to residents is a dramatic step. Those opposed to fracking have been critical: the Shadow Energy Secretary, Barry Gardiner, asked whether the Prime Minister thinks people “can be bribed into fracking with a fossil fuel future.” Greenpeace UK’s chief scientist, Doug Parr, claimed that trying “to sweeten the pill with cash payments before…didn’t work.”

There are precedents for similar schemes. Here in the UK, wind farms often offer electricity discounts to their neighbours. In Alaska, profits from oil extraction go into a permanent fund that makes investments and pays a cash dividend to Alaskans. Both of these are well-received, as examples of people affected by an industry sharing in its proceeds. That is the crux of the argument that the government and industry must win: people must be convinced that payments are a reasonable way of sharing profits with the areas that provide them, and not solely a transaction for in exchange for permission.

This consultation will certainly generate a lot of responses, which will make for interesting reading. For an industry that has so far found it difficult to get started in the UK, the question is whether a direct community benefit scheme – not filtered through complicated systems of local trusts – can cut through the Gordian knot and convince local communities that fracking is worthwhile for them, and not just the country as a whole. It could change the whole conversation.

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