London, 19 July (Argus) — The UK government has put its weight behind developing the shale gas industry with proposed measures to encourage investment through lower corporate taxes and satisfy local communities with environmental regulation and community payments.
The treasury today launched an open consultation over a proposed tax regime to encourage early investment in the development of the UK's shale gas industry. The proposed ring fence expenditure supplement would reduce the ring fenced corporation tax to 30pc from 62pc for shale gas projects. And it would be extended from six to 10 accounting periods to offset the need for high and continuous investment that shale gas projects are expected to require.
And new planning practice guidelines have been published to outline the issues associated with the extraction of hydrocarbons, including the environmental factors that must be considered as part of the planning application process. The guidelines outline the main environmental issues of hydrocarbon extraction that need to be addressed by minerals planning authorities, including land stability and subsidence and water contamination. The guidelines specify that boreholes must be constructed to prevent uncontrolled discharge of water or contamination into or between individual aquifers or different geological formations.
These guidelines may go some way to allay local opposition to hydraulic fracturing to extract shale gas. The UK's high population density means that any environmental damage around a well site would be more likely to have a direct impact on a local community than in the US. If the community and environmental measures are successful in developing a secure and accepted shale gas industry in the UK, other European countries, many of which have similar demographic restrictions as the UK, may look more favourably on shale gas exploration.
Europe has an estimated 13.3 trillion m3 of technically recoverable shale gas but in some countries there is strong political opposition. France, which with 29.1pc of the estimated recoverable shale gas is the European country with the second-largest reserves, has banned hydraulic fracturing.
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