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UK Shale Gas Royalties May Go Directly To Residents

Therese May

Theresa May, the new Prime Minister of the UK, has announced a plan to pay more shale gas proceeds to residents than was originally planned. The new plan, which was announced on Sunday, will consider making direct payments from the Shale Wealth Fund to some UK residents.

Under the prior plan, payments from the fund were to go to local authorities and community trusts, but May wants the payments to include residents in impacted areas.

In North America, private property owners receive royalty payments from development on their own land, but since oil and gas are considered government property in the United Kingdom and Europe, no compensation is offered to property owners unless land for development is compulsorily purchased.

May commented: “This announcement is an example of putting those principles into action. It’s about making sure people personally benefit from economic decisions that are taken – not just councils – and putting them back in control over their lives.” According to a report from the BBC, there is potential maximum payout of USD$13,053 per household.

In 2013, the British Geological Survey conducted a study of shale gas in northern England. The study estimated that there was approximately 1,300 trillion cubic feet of shale gas. The current annual consumption of gas in the United Kingdom is in the neighborhood of 2.5 trillion cubic feet. Related: Surprise Natural Gas Drawdown Signals Higher Prices Ahead

While there are plenty of reserves, extraction has been difficult due to the drop in energy prices and the objections of residents and environmentalists to the practice of fracking. INEOS, which controls the lion’s share of gas sites in Britain, has pledged to increase the percentage of royalties it pays to impacted communities to six percent.

Ken Cronin, who is the chief executive of UK Onshore Oil and Gas commented: “The onshore oil and gas industry in the UK continues to believe that local people should share in the success of our industry and be rewarded for hosting sites on behalf of others in the country.” Environmentalists contend that the payouts will not get residents on board with shale gas development.

Lincoln Brown for Oilprice.com

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