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Publication - Research Publication

Unconventional oil and gas: decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities

Published: 8 Nov 2016

Research into decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities.

137 page PDF

2.6MB

137 page PDF

2.6MB

Contents
Unconventional oil and gas: decommissioning, site restoration and aftercare – obligations and treatment of financial liabilities
5 Community Benefits

137 page PDF

2.6MB

5 Community Benefits

5.1 Introduction

Decommissioning and restoration can deliver positive benefits for both former UOG sites or to the wider community. Planning permissions for UOG development normally set out restoration requirements for sites, typically requiring restoration to a site's original land use or to other beneficial use. The proposed community benefits package put forward by UOG operators (see below) could also be used to provide wider community benefits. Using the landfill tax credit regime as an example, this could be through land reclamation and restoration, funding of community based projects or groups, maintenance of public parks or other amenity, nature conservation, and the preservation of buildings or archaeological sites.

5.2 UKOOG Community Engagement Charter

UKOOG's "Community Engagement Charter" includes a commitment on behalf of its membership to pay:

  • £100,000 per site to the local community situated near to each exploratory (hydraulically fractured) well site. This will be paid by the operator, regardless of whether or not recoverable deposits are found; and
  • 1% of production revenues to communities during the production stage, before the operator has accounted for their costs;

Each year, operators will publish evidence detailing how the commitments within the community benefits package are being met.

UKOOG has committed to reviewing the community benefits agreement as the industry develops in the coming years and has pledged to consult further with local communities on an ongoing basis.

Based on production and gas in place scenarios produced by the Institute of Directors (IoD) in its May 2013 Shale Gas report (IoD, 2013), UKOOG has estimated that community benefits at the production stage under its scheme could be worth in excess of £1.1 billion across the UK over a 25 year production timescale, with much of this benefit coming in the first 10 years. UKOOG did however acknowledge that exact numbers will depend on local geology and flow rates. The IoD report in its mid-case scenario estimated 100 production sites, equating to a potential community benefit per site in the region of £5m-£10m.

One licence holder in Scotland (INEOS) has made public its intention to provide community benefits at a higher level (6%) than those specified by the rest of the industry in both England and Scotland.

5.2.1 Pilot Scheme - Exploration

In 2014 UKOOG announced the launch of a pilot scheme for community benefit packages at selected shale gas exploration sites in the UK, which involve exploratory drilling, hydraulic fracturing and flow testing of the exploration wells.

The principles that UKOOG has established for the pilot phase are that:

  • the scheme should be independent from the industry, operators or political organisations;
  • the funds to be managed and distributed by an organisation with experience and integrity;
  • the communities should have the lead role in identifying local priorities for the funds; and
  • the funds to be used for the overall benefit of local communities rather than individuals.

To ensure community benefit funds are managed and distributed appropriately, UKOOG has collaborated with UK Community Foundations ( UKCF) - to provide the ability to develop an independent national framework that establishes an industry standard with guaranteed quality and consistency.

Once a qualifying planning consent has been granted, the intention is for UKCF and the appropriate local community foundation to manage a consultation process aimed at defining local priorities and guiding the appointment of a community panel that would be responsible for deciding how the money will be spent.

The pilot scheme will be overseen by a joint steering group made up of UKOOG, UKCF and independent observers who will ensure local communities are informed about how the pilot schemes will work with respect to community benefits and how members of the community can be involved in the consultation phase.

5.2.2 Production Stage

Since announcing its Community Engagement Charter in June 2013, UKOOG has reported that it has received a significant amount of feedback with respect to how benefits during a production phase might be distributed including proposals with respect to direct payments to individuals affected. As a result of this feedback, UKOOG has confirmed its intention to launch a consultation programme across a range of stakeholders to gauge community opinion on a number of different potential schemes, including direct payments to individuals and broader based community funds.

5.3 Conclusions

Restoration can deliver positive benefits for both former UOG sites or to the wider community. Planning permissions for UOG development normally set out restoration requirements for sites, typically requiring restoration to a site's original land use or to other beneficial use. The proposed community benefits package put forward by UOG operators could also be used to provide wider community benefits. Using the landfill tax credit regime as an example, this could be through land reclamation and restoration, funding of community based projects or groups, maintenance of public parks or other amenity, nature conservation, and the preservation of buildings or archaeological sites.

The main points that emerge from the discussion of the community benefits that could be funded by UOG development are that:

  • the amount of funding for community projects which is potentially available is very considerable - particularly at a time of public spending restraint; and
  • the industry is open to views about how the spending should be prioritised, managed and targeted.

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