There was mixed reaction to the Chancellor's support for shale gas extraction in the Budget.
Generous tax breaks to encourage investment will be supplemented with new technical planning guidance by July 2013 and proposals to help local communities to benefit from the industry.
The North West is one of the regions likely to be most affected by the incentives for hydraulic fracturing operations, known as fracking. Lancashire is currently at the centre of the debate on the issue after energy company Cuadrilla began drilling at test sites across the Fylde Coast.
In announcing the shale gas field allowance, George Osborne said he wanted Britain to tap into new sources of low cost energy: "So I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment.
"And by the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit. Shale gas is part of the future and we will make it happen."
Francis Egan, chief executive of Cuadrilla, welcomed the move, he said: "At this early stage of the industry's development, the Government's decision to introduce tax reforms for shale gas will greatly incentivise companies such as Cuadrilla that are undertaking and investing in exploration work.
"We also support the Government's decision to accelerate the provision of planning guidance for local authorities. The country needs to move forward with vital exploration activities, so we can begin establishing the value of our significant onshore gas resources.
"Collectively, we believe the measures announced today will facilitate exploring for and, we trust, extracting shale gas, along with providing long-term benefits to the UK. These would include reducing our reliance on imported gas, creating jobs and generating significant tax revenues."
But anti-fracking campaigners and environmental groups have slammed the decision.
Tina Rothery of the Resident Action on Fylde Fracking said: "It wasn't unexpected but I still can't believe how much the Chancellor has incentivised them, giving more money to an already profitable sector, and nothing on renewables, it's quite astonishing.
"We're very frustrated with the government's stance but it in no way changes our opposition, we have very serious concerns with regard to the health and safety implications of this technology and today's announcement will only make us more determined to fight it."
And Philip Mitchell of Blackpool's Green Party added: "Concern about local impacts of the UK's first shale gas well in Weeton is growing, not receding.
"The cuts have clearly failed and instead of generous tax breaks incentives to build hundreds and hundreds more wells we now need urgent investment in nationwide green infrastructure which will stabilise the economy, tackle the environmental crisis and deliver clean and secure energy for the future, from, for example, offshore windpower."
Egan added: "Cuadrilla will work with the new Office for Unconventional Gas and Oil, Lancashire County Council, local communities and all other parties to realise the potential of shale gas in a safe and responsible manner. We will carry out our work in full accordance with all relevant planning and consultation processes.
"The Chancellor recognises, as do we, that local communities must reap long-term benefits from shale gas. Cuadrilla will work with the local communities concerned to get their views on the scope and structure of plans that will benefit the people of Lancashire. We also look forward to reviewing the Government's proposals later this year."