Treasury set to cap community shale gas payments at £400,000 per year


one penceTreasury aims to cap payments to individual local communities where shale development takes place at £10 million over 25 years, equating to £400,000 per annum.

Setting out its initial views on how revenues from the Shale Wealth Fund might be allocated, Treasury also seeks further views on how any money raised from taxes on profitable shale wells might be divided up between households, local communities and regions.

The government outlined plans for the shale fund in last November’s Autumn Statement. The idea is to set aside 10% of tax revenues from shale gas so that communities in which fracking takes place receive some compensation. That money would be on top of the 1% of revenues operators have promised to make to local communities.

The government estimates the tax-funded pot could total £1bn over 25 years. However, it points out that tax revenues depend upon the profits made by shale gas operators. At current gas prices, these would be very little. However, the economics may change over time and developers would only sink wells when and where they know they will make money.

As such, Treasury is consulting on how a percentage of tax revenues might be allocated. It seeks views on what constitutes a local community, how the money should be allocated – such as whether households should receive a direct payment, which it points out could be relatively small –  and how regional spend should be directed.

Consultation responses are required by 25 October and can be made online here.

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