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01/02/2014

Blog: Unlocking shale power

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Prime minister David Cameron says the government is “going all out for shale”.

He adds that the business rates retention scheme in force since April 2013, allowing councils to retain 50 per cent of the uplift in business rates from development they authorise, will apply to shale projects at a full 100 per cent rate.  
 
This policy was recommended by the Institute of Directors report last May on the economic benefits from shale development in the UK. 
 
The report envisaged a £3.7 billion investment in UK shale and the government aims to use the business rates regime to channel some of this locally to assuage public resistance.
 
The benefits for a 12-well site could be worth up to £1.7 million to the council responsible for collecting rates. 
 
Critics will point to the cost of policing Cuadrilla’s operations at Balcombe last year and uncertainties about how and when rates valuations will take place. But there is a lack of a clear mechanism for getting these resources down to the level where they will sway local opinion. 
 
Business rates retention will not benefit the minerals planning authorities that will determine fracking applications.
 
But the money will not be a “local finance consideration” for planning approval purposes unless the local authority agrees to spend the retained rates on something related to the fracking project. Where decision-making is co-ordinated in this way there are some real benefits to weigh in the planning balance. It would be possible for the government to set the business rates retention amendments so that the extra 50 per cent, or a part of it, must be passed to a community interest company (CIC) or neighbourhood planning body. 
 
The UK Onshore Operators’ Group has launched its proposals for securing community benefits, which will rely on the national charitable trust UK Community Foundations to deliver £100,000 for local benefits where planning consent is given and exploratory drilling starts.
 
Local priorities will be set following consultation and a local panel will be appointed to decide how funds are spent. It is good to see the model for local benefits being worked up, but it remains to be seen how the 1 per cent of profits promised by the group and government will be calculated and paid, and whether the use of a national charity structure will give the flexibility that CICs could offer in using community benefits to go beyond mitigation projects to wider not-for-profit and social enterprise roles.
 
Roy Pinnock is a senior associate at Dentons
 

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