Exclusive: Communities could be cheated of shale gas compensation payments

Communities could be cheated of compensation payments for shale gas extraction under plans being drawn up by the government.

The draft community incentives paper currently being prepared by the Department for Energy and Climate Change could hand the benefits of shale gas to county councils instead of the specific communities affected, a source involved in talks with the government told Politics.co.uk.

The move, currently under consideration in Whitehall, will trigger concerns that those directly affected from shale gas drilling and the earthquakes triggered by the fracking process will lose out to councils absorbing the extra money amid shrinking funding from central government.

Shale gas has huge potential to boost Britain's energy security but could have adverse effects for those living close to wells.

The government is set to unveil its approach to shale gas alongside the publication of the British Geological Survey's assessment of the UK's shale gas reserves within the next month.

A range of community incentives are being discussed, including reductions from energy bills and investment in community projects.

But Politics.co.uk understands the government is leaning towards a revenue-based percentage per well, amounting to a straightforward cash payout.

Sources in the industry are suggesting communities will lose some funding to councils.

Doug Parr, Greenpeace's chief scientists, warned developers had to recognise they shouldn't just accept that local authorities "are the right way to go".

"There are legitimate reasons why people who are local to the development need to have a voice and be able to thrash out what the benefits should be and where they should go," he said.

"It doesn't seem to me intrinsically fair that it's given to a large local authority who plan a swimming pool in a town 15 miles away rather than giving something back to the community who are putting up with it.

"That said, defining what constitutes a local community and how to deal with them is a real challenge. But you shouldn't just take the easy route."

The coalition is yet to decide the balance of the benefits to be taken by local authorities.

Concerns about winning over those affected are dominating debate in the run-up to the government's assessment.

Energy bosses were criticised by one Conservative councillor for having "battered and bruised" his Frodsham ward in Greater Manchester at the Shale Gas World conference in Manchester.

Francis Egan and Andrew Austin, the chief executives of leading shale gas firms Cuadrilla Resources and iGas, had told senior figures in the industry that transparency would be sufficient to win over the public and safety was paramount in an environment where "nobody's going to agree with everything you're doing".

Andrew Dawson, Frodsham's councillor, told the pair: "I hear you and I despair. We need you to be very good neighbours. We need you to go beyond bus shelters."

Dawson suggested shale gas firms should be far more generous by providing more infrastructure and endowing universities with academic posts.

He added: "We will welcome you with open arms if you don't take us for mugs. Stop mugging us."

Austin, whose iGas firm has a licence to explore a 300 square mile area around the Wirral and north-west Cheshire, responded by acknowledging that "we need to work with the communities" and pledged "we will go beyond bus shelters".

But Egan – whose company Cuadrilla Resources is seeking planning applications for new exploratory wells from Lancashire county council – suggested Dawson's focus was too small-scale and that communities should consider the broader potential benefits of shale gas.

"I recognise there is an expectation the county will benefit, and those benefits will grow over time," he said.

"I take a much longer-term view of this. You do need to look beyond next month's activity.

"The real benefit should be sustainable for a much longer period of time. There's a much bigger prize to be played for than a bus shelter, believe me."

In a separate session on the environmental impacts of shale gas Kevin Anderson, professor in energy and climate change at the University of Manchester, suggested a broader view of what defines the 'affected community' is needed.

"The local community [affected by] shale gas to me are the 30 million people who live within one metre's sea level rise of the coastal strip of Bangladesh," he said.

"These will be hit by the impacts of yet another fossil fuel. Let's be honest about who those communities are, or let's be honest and say we just don't care about them."