This is another weasel myth. It is easy to put this out as a benefit and then portray anyone who questions it as a selfish Luddite NIMBY who is against progress and doesn’t want what’s best for the local area.
Let’s just take a look at the reality though.
Jobs in the local economy
The main claim is based on the employment possibilities which we have already dealt with here. Long term jobs will be measured in tens not thousands, and short term jobs are unlikely to offer great prospects for untrained local people in an industry which famously uses an itinerant highly skilled workforce. The majority of any jobs for local people will be low skill, low pay and short term. The well paid, skilled jobs will go to oil and gas industry specialists brought in from the US and elsewhere. Cuadrilla can set up as many showcase course with local colleges as they like. They are unlikely to change any of this.
Of course this doesn’t stop those who support Mr Osborne’s dash for gas like the Institute of Directors from bigging this idea up.
Here’s the Senior Economic Advisor to the Institute of Directors, Corin Taylor, backing up Francis Egan claims for the industry’s potential to boost regional employment figures.
A lot of these jobs would be in parts of the UK that really need them, it’s an important part of helping to balance the economy.
The trouble is that a lot of 50 isn’t really a meaningful number Mr Taylor, especially if you compare the numbers with those employed in other parts of the economy. The local tourist economy (Fylde, Blackpool and Wyre) employs about 17,000 people. We believe that turning the Fylde into an industrial area will have a devasting effect on this industry, even without any of the possible disasters which could occur.
Here is a rather more realistic assessment by local MP Eric Ollerenshaw (Lancaster and Fleetwood, Conservative) who stated this during a parliamentary debate on Shale Gas Profits on 19th December 2012
There is lots of talk about job creation, but as far as I can see, the thousands of jobs promised will not be created. As I understand the engineering process, once fracking wells are set up and the gas is being used, the jobs involved are support jobs. It is likely that the specialist engineers will be brought in from elsewhere…
But won’t local authorities benefit from extra taxes and economic contribution?
Possibly, but the income it is unlikely to be anything like the cost of additional repairs to roads, dealing with the environmental impact, and a hundred other ‘unintended consequences’ of drilling and the currently unregulated abandonment of over a hundred of fracking pad. As a tourist area we are likely to lose many times the amount we gain in taxes as the tourist trade drops off.
People come to the Fylde to enjoy the clean sea air and the rural surroundings, to experience locally produced meats, cheeses, fruits, beers and other produce of the countryside. They do not want to come here and have to drink bottled water because the sources are contaminated or eat food from other regions because the cows, sheep, pigs, ducks and chickens, vegetables and fruit are all suspect. If tourism business close then the loss on local authority income and contribution to the local economy could easily dwarf any gain from a few years of fracking.
What is clear is that gas companies may pay some upfront taxes and there may be some ‘planning gain’ (money paid to local authorities to allow otherwise unnecessary developments) but given Cuadrilla’s mostly offshore status (it is owned by an Australian company and an investment vehicle based in the Cayman Islands) they are unlikely to pay much tax from their profits into our local or national economy.
Local benefit from Cuadrilla’s charitable donation
On their website Cuadrilla do make some promises of local benefit
To provide support for those projects which matter most to the community, some funding is available around each of our sites during exploration activities. As Cuadrilla only has temporary planning permission for its sites (with the exception of Elswick) donations reflect the temporary nature of its facilities.
Some of the projects and organisations to have benefited from Cuadrilla’s presence are:
Elswick in Bloom
Weeton Village Hall fund
We think you should ask yourself why this company thinks that donating £2,000 to Weeton Village Hall fund or a bit of funding for Elwick in Bloom should persuade otherwise sane people of their good intentions. In the current regulatory environment we don’t believe that fracking should take place at all, but if it does then we agree with Eric Ollerenshaw from the same debate we quoted from before …
The point that I am here to make is that if shale gas operations commence on that scale and scores of wells are drilled, Lancashire should share in the rewards. At the moment, that is not likely to happen, at least not beyond any small-scale voluntary schemes that energy companies might decide to pursue themselves. To be fair to Cuadrilla, I understand that it has given a number of grants to various local parishes. The only other way is through section 106 agreements, which do not derive a vast amount of money for the local infrastructure.
The clear point is that the United Kingdom, and Lancashire in particular, is not Texas, where local landowners can strike it rich if oil or minerals are discovered on their land. The mineral rights in our area belong to the Crown, but mainly to the Duchy of Lancaster. Any farmer for whom fracking is proposed on their land will gain precious little, except perhaps a small amount of rent, and the local authorities will get a small amount of business rate. The company will get its profits, the Duchy will get its share from the mineral rights, and of course and as ever — unless Starbucks starts drilling operations — the Treasury will get its share of the proceeds from taxation. Local residents, who will have to deal with increased industrial activity, traffic movements, the movement of chemicals and so on, will not see a direct reward.
I want a fair and substantial share of the profits from shale gas for the people of Lancashire if this is to be a runner. In a way, the Government set a precedent with the introduction of the new homes bonus, whose principle is that communities that allow development in their area should share in the rewards. We could see a similar approach with shale gas or minerals more generally. Although I have a problem with the new homes bonus—it does not reward parish councils directly—any scheme for shale gas should send at least some of the rewards directly to the local areas or residents most affected, as well as to principal or top-tier authorities.
It is perhaps worth mentioning how such things are dealt with abroad. Alaska operates a scheme called the Alaska permanent fund, which is created largely from income from oil operations in the state and designed to ensure that future generations can share in the profits even when the oil is exhausted. Interestingly enough, the fund also pays out an annual cash dividend to all state residents. Apparently, people must reside there for only one year to be classified as a state resident. The payout varies; I think that last year it was $1,000, but in previous years it has reached $2,000. That is an interesting precedent.
In south America, the Brazilian constitution ensures that a share of oil revenue is provided to the states where oil is extracted. They can then use the money to fund infrastructure projects, community schemes or tax cuts as they see fit. That other foreign country, Yorkshire, has the newly established potash community fund, brought to my attention by my constituency neighbour and hon. Friend the Member for Wyre and Preston North. The extraction company York Potash has set up a fund of 0.5% of profits to be used for the local community. It is expected to provide between £3 million and £9 million a year to fund local projects.
Three different models are in use in different places—from the voluntary to the compulsory—varying according to how the payments are made and to whom. I should like a system to be put in place that provides direct compensation to the local residents and parishes most affected, and an income to the principal or top-tier authorities in the area for infrastructure projects, service provision or even council tax cuts. I should like the Government to give an “in principle” commitment to providing something along those lines before any decision is made on whether to expand shale gas operations. This should apply elsewhere in the country, too.
What I am proposing will be seen by some as trying to bribe residents into supporting shale gas, but that is not so. I know for a fact that many of my local residents would never be convinced of the merits of shale gas, whether it is extracted locally or not, even if they were offered a cheque for £1 million. Their objections are based on genuinely held fears about safety and concerns about the environment, particularly their own water supply. I am suggesting merely that there should be a fair reward for the communities that might have to host all that infrastructure, worry about safety and deal with increased traffic, and, as I have stressed before, that will not secure thousands or even hundreds of extra jobs.
I stress again that I am not proposing that we agree to a move to immediate shale gas operations. I still share my residents’ concerns about water safety and the adequacy of regulatory regimes, and want to see those dealt with in more detail. I support the Energy Secretary’s introducing increased regulation for the test site. It will be interesting to see over the next few months and years what those measurements say and what the safety record is, particularly regarding seismic activity and so on.
We are generous folk in Lancashire. We are loyal to our Duke and are patriotic members of the United Kingdom. But if others are to make millions, then it is only fair that Lancashire should have a share of those millions.
It seems there are a lot of spurious claims for benefits to the local economy made by those with vested interests, but what is clear is that the local area could only really benefit if the shale gas operators were forced to compensate us on scale which far exceeds buying a few flowers or pots of paint for a village hall.
Unfortunately, the government themselves admit that they don’t yet have a clue how to ensure that this happens
In the same debate which we quoted from above Gregory Barker (Minister of State (Climate Change), Energy and Climate Change; Bexhill and Battle, Conservative) stated
However, while I and my colleagues at the Department of Energy and Climate Change wholeheartedly agree with the principle articulated at length by my hon. Friend — perhaps we can call it the Lancaster and Fleetwood principle — at such an early stage I am afraid that we simply cannot propose exactly how that would be done or what mechanisms might be appropriate.
So there we have it – all we can say with some certainty is the the local area will not benefit in any meaningful way until somebody gets off their fracksides and works out how we can makes sure the companies involved do compensate us for the inevitable large scale loss of amenity value.
Let’s not allow ourselves to be hoodwinked into supporting fracking by insubstantial promises.
If we do have to have this let’s make sure the local economy extracts some real benefit at the same time as these foreign owned companies extract the gas.
That, by the way, means you making sure your own local MP gets onto the case! If you don’t do it nobody else will.