“Shale gas is part of the future. And we will make it happen.” 22Mar2013

This week the chancellor announced the government’s proposals to encourage shale gas exploration. The proposals include tax breaks for shale gas companies, community benefits, technical planning guidance and keeping under review whether the largest shale gas projects should have the option to apply to the major infrastructure regime.

The government are proposing to promote investment in the shale gas industry at an early stage by introducing a new shale gas field allowance and extending the ring-fence expenditure supplement from six to ten years.  The ring-fence expenditure supplement is intended to help prospecting shale gas companies that do not have any taxable income against which to set their costs and capital allowances. The detail of these proposals, including whether they should be extended to other forms of onshore unconventional gas, will be consulted upon.

To help “ensure an effective planning system is in place”, the government are proposing to produce “technical planning guidance” on shale gas by July 2013 providing “clarity” on planning for shale gas during the exploration phase. By the end of the year guidance will be produced to ensure “the planning system is properly aligned with the licensing regime and regulatory regimes principally: health and safety; and environmental protection.” The government will be keeping under review whether the largest shale gas projects should have the option to apply for consents under the major infrastructure regime, thereby removing the decision to grant planning permission from the hands of local authorities.

The government proposes to provide details of the objectives, remit and responsibilities of the new Office of Unconventional Gas and Oil (OUGO). DECC’s recent press notice highlighted that community benefits will be “one of the priorities” for OUGO. The government intend to develop proposals by summer 2013 to ensure people in host communities benefit from shale gas production. The details of the community benefits are yet to be unveiled, benefits offered by the renewable energy projects have included cash funds for local community projects as well benefits in kind. Research by SITA suggests that when community benefits are offered up to 70% of local people will support a development.

Hetty Tombs, Assistant Solicitor at Zyda Law