UK Budget: shale gas industry says it doesn’t need subsidies

By John Parnell

The shale gas industry does not need any subsidies to succeed in the UK, a lobbyist for the sector has told RTCC.

Wednesday’s UK Budget could include support for firms looking to frack for shale gas in Britain, but Nick Grealy, a pro-shale gas activist stressed that the industry is not asking for financial support.

His comments raise questions over why Chancellor George Osborne would contemplate backing gas in the budget, while support for renewable energy is gradually whittled away.

“There’ll be probably something but we want permission to drill,” Grealy said. “Tax, one way or the other is not the issue here. We’re not the nuclear or renewable industry”.

“No one is sitting around waiting for tax breaks to drill or not,” said Grealy. “Let’s drill, see what’s there first and then we can find out how much it costs to come out. Discussion of tax breaks sounds premature ahead of any drilling results on [gas] flow rates,” he added.

While supporters of shale gas say it could offer a low carbon alternative to coal, adoption on the scale of estimates that the industry has presented are likely to cause the UK to miss its binding greenhouse gas targets.

Exploration in the UK is currently on hold while the government conducts further reviews into its environmental impact.

The UK Chancellor George Osborne holds the budget box aloft ahead of delivering 2011’s budget statement (Source: Flickr/HM Treasury)

Osborne has already hinted that there could be support for the industry by confirming last year that a consultation on subsidies for unconventional gas was underway.

He also advocates an increase in the amount of gas in the UK’s energy mix up to 2030 in a policy that was at odds with the Government’s advisory Committee on Climate Change (CCC) and leading environmental groups, who insist renewables must remain the focus of government attention.

Osborne’s push is backed by some influential members in the government. Energy Minister John Hayes this week suggested that communities in areas where drilling is taking place should be the beneficiaries of government support, an idea promoted by Cuadrilla Resources, the only UK firm to have drilled for shale gas so far.

Its chairman, the former BP chief Lord Browne, told the Guardian last week the company would invest “whatever it takes” to drill for shale gas in the UK.

“This is about streamlining – we want certainty [but] making sure that it is as simple as possible, and do it speedily. Right now it is not speedy, and there is not certainty. We need to speed things up,” he added.

The company is struggling to gain a “social licence” for drilling, prompting its suggestion that the government could share the benefits of shale finds with the areas affected by the drilling.

Unlike in the US, where shale gas has had a transformative effect on the country’s energy mix, the government, not the landowner, is the beneficiary of any fossil fuel resources beneath.

Uncertain reserves

Speaking at the Institution of Engineering and Technology’s Clerk Maxwell Lecture on March 7, Chatham House shale gas expert Professor Paul Stevens said chances of a boom of the same proportion as the US were small.

“There were a number of characteristics that went towards ensuring the shale gas revolution could happen in the US. When you look at whether these same conditions exist in the EU you get a long list of no, no, no,” he told an audience.

The list includes the comparable geology, existing pipeline networks, public acceptance and weak environment regulations, all conditions absent in the EU Stevens said.

“Osborne’s strategy seems to be based on the there being a European shale gas boom so that we can all float on cheap gas forever. This is seriously flawed.”

As well as the specific conditions in each region, Professor Stevens notes that even if shale gas offers lower carbon energy than oil and coal alternatives, it still emits CO2 over and above limits proposed in UK legislation working its way through parliament and recommended by the CCC.

Better budgets

UK business lobby the CBI has called for energy efficiency measures to gain greater attention in the Budget, which it argues could create jobs and cut emissions – a position backed by the UK’s Green Building Council (UKGBC).

“A focus on green growth would boost the construction industry’s confidence to invest and create jobs, as well as helping the UK to meet its legally binding carbon targets,” said UKGBC CEO Paul King.

“We’ve heard David Cameron talk up energy efficiency and the green economy, but the Budget is the Chancellor’s opportunity to demonstrate that he is singing from the same hymn sheet.”

The UK’s main trade union body the TUC also backs calls for investment in the green economy in the 2013 Budget.

“It is not too late for the UK to take the lead in green industries, and to boost our supply chain capacity across the green energy sectors,” it said in a statement.

“In particular, we believe that Budget 2013 should explicitly reinstate the government’s commitment to deploy the full £1bn budget for Carbon Capture and Technology (CCS) technology in this Parliament.”

The UK missed out on EU grant money for CCS because the government failed to provide reassurances that it would pay its share of the bill should one of projects put forward be approved.

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