UK Government Unveils Proposed Tax Regime for Shale Gas
The UK government has unveiled a proposed tax regime for shale gas on Friday, focusing on a new allowances to reduce taxes from 62% to 30% of a company’s production income.
At the same time, the government will try to tackle public resistance, granting local communities benefit from hosting shale gas exploration. As announced at the Spending Round 2013, operators would “provide at least £100,000 of benefits per ‘fracked’ well site during the exploration phase – and no less than one per cent of overall revenues”.
“This new tax regime, which I want to make the most generous for shale in the world, will contribute,” commented Chancellor of the Exchequer George Osborne on Friday, adding that “shale gas is a resource with huge potential to broaden the UK’s energy mix.”
A recent report by the British Geological Survey revealed that there is more than twice as much shale gas in the north of England than there was thought previously to be in the entire country.
According to the government, shale gas could lead to the creation of thousands of jobs and to increased tax revenues from oil and gas industry. UK intends to foster the industry with the so-called ‘pad’ allowance, based on the field allowances for oil and gas production. The government expects the field allowances to attract nearly £14 billion in investments for 2013, “the highest on record.”
“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,” Osborne said.
Europe is struggling to replicate the ‘shale gas revolution’ going on in North America, with Poland’s prospects losing momentum. The UK stated several times that it is committed to learn from the experiences of other countries.
The UK government lifted a temporary moratorium on hydraulic fracturing in December, paving the way for exploration and development of unconventional natural gas just days after UK Chancellor George Osborne announced a push for gas development in his Autumn Statement.
New guidance
The government also published a new guidance on Friday, explaining to industry and local communities how applications for exploratory shale gas development should proceed through the planning system.
“Our new planning practice guidance will provide certainty for councils, for residents and for business. A locally-led planning process will be complemented by robust regulatory checks and controls to safeguard the environment and provide reassurance to residents,” said Planning Minister at the Department for Communities and Local Government Nick Boles.
According to a note released on Friday, the guidance is intended to complement measures to “help support the shale gas industry… It makes clear that local councils are responsible for determining shale gas planning applications and sets out the environmental, health and safety issues that need to ben taken into consideration.”
“The government is minded to amend existing secondary legislation in relation to application requirements and fees for onshore oil and gas development. It believes that greater clarity in law will help provide certainty to councils and encourage investment,” explained Planning Minister at the Department for Communities and Local Government Nick Boles.
The consultation on proposals for a tax regime will be closed on September 13. According to another note published on Friday, the government will then publish a “summary of responses to this consultation later in the year. Where appropriate, legislation will be brought forward in Finance Bill 2014.”