UK Government Announces Tax Breaks for Fracking

fracking

19th July 2013.

The UK government has given a huge boost to the fracking industry after announcing tax breaks for onshore shale gas production. The proposal outlines a 30% tax rate, which is approximately half that of new gas operations in the North Sea. The chancellor, George Osborne, hopes that the move will allow the shale gas industry to flourish rapidly, thus providing increased energy security for the UK. Fracking has proved to be a controversial issue and, in an attempt to get the public on side, Osborne has promised that communities hosting shale gas sites will receive £100,000, plus up to 1% of production revenues.

However, there is likely to be widespread hostility to the news, and both Greenpeace and Friends of the Earth have voiced their opposition to shale gas extraction. Part of the concern arises from the possibility of water contamination, as various fluids are injected into the ground during the process. Some of these fluids are carcinogenic, but more alarming is the fact that the identity of some chemicals can be withheld on the grounds of “trade secrets”. A second concern is that of fracking inducing seismic activity; although any tremors up to date have been small, these have been enough to cause public consternation. Finally, there is the fact that fracking results in significantly higher methane release to the atmosphere when compared to conventional gas extraction.

Clearly there is a need for new sources of energy, as traditional fossil fuels fall out of favour. Nevertheless, some may question the UK government’s approach of offering incentives to the burgeoning shale gas industry, considering that, once successfully established, the business is likely to be a lucrative one.

Relevant references:

Howarth, R.W., Santoro, R., Ingraffea, A. 2011. Methane and the greenhouse-gas footprint of natural gas from shale formations. Climatic Change, 106, 679-690.

Howarth, R.W., Ingraffea, A., Engelder, T. 2011. Natural gas: should fracking stop? Nature, 477, 271-275.

Photo credit: Daniel Foster.

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