Give us a fracking break!

[andymadmak]

Is the Governments decision this week to grant a tax break to firms involved in the development of shale gas extraction in the UK a good thing? Or is it a dark Tory plot to ruin the environment whilst further enriching greedy billionaires and their chums in the city?
http://www.bbc.co.uk/news/business-23368505

[vonuber]

If there is such a profitable reserve of gas to be utilised, why would you need a tax break to exploit it. Surely the money is there to be made regardless.

[TheD]

vonuber said:

If there is such a profitable reserve of gas to be utilised, why would you need a tax break to exploit it. Surely the money is there to be made regardless.

Exactly what I was thinking. If there are decades of the stuff under our feet that will make a fortune for those getting it out. Why would they need a tax break. Doesn't seem right and seems like a buddy move to me.

[frank hovis]

It's the start up costs for these types of operations that is most likely prohibitive .
The tax breaks will hopefully encourage the bigger players like shell / bp/ centrica to invest and get the industry started

[JimPetrol]

I think I'd better kick off my employee share ownership scheme ASAP!

Looks like I'll make a killing!

[Prawnboy]

start up costs or not, if gas is running low and a gas company wants more they will exploit this new source. Tax breaks will just reduce income for the country, (which we may need for post earthquake clear-up).
Really short sighted move by the government hoping to speed up the start of this industry before the next election.
short termism as per.

[vonuber]

frank hovis said:

It's the start up costs for these types of operations that is most likely prohibitive .
The tax breaks will hopefully encourage the bigger players like shell / bp/ centrica to invest and get the industry started

Shell for example made a first quarter profit this year of £5.1bn - i suspect they could quite easily fund the startup (especially considering the return to be made).

Personally we should look to exploit it in a Norway style (i.e. invest for the countries future, rainy day fund etc) - sadly I know it will all go to a bunch of shareholders with a few MP's ending up on the boards of the companies.

[frank hovis]

Agreed that oil companies make loads of capital but we the Uk are in competition with low cost regions like Iraq hence the Govt needs to make this area very attractive for companies to invest

[London424]

Reducing tax from 62% to 30% doesn't sound too bad to me.

I'd rather 30% of profit, rather than subsidising green energy projects. In turn, you would expect energy bills to go down as well.

[SrMoreno]

Utterly ridiculous. Another national asset sold off on the cheap. The point above about a Norwegian-style fund is absolutely right. Sadly our politicians are only capable acting in their own short-term self-interest.

[IroningMan]

I suspect that this tax break is necessary in order to make fracking capable of hitting broadly similar margins to wind or solar - the subsidies for which are currently broadly unchallengeable.

[SrMoreno]

IroningMan said:

I suspect that this tax break is necessary in order to make fracking capable of hitting broadly similar margins to wind or solar - the subsidies for which are currently broadly unchallengeable.

If that's true, then the obvious difference is that wind and solar will be there forever, whereas the gas isn't.

In any case, if it's widely accepted that solar has unsustainable levels of subsidy, why should the government seek to reproduce that for a different industry? That argument makes no sense.

[s2art]

SrMoreno said:

IroningMan said:

I suspect that this tax break is necessary in order to make fracking capable of hitting broadly similar margins to wind or solar - the subsidies for which are currently broadly unchallengeable.

If that's true, then the obvious difference is that wind and solar will be there forever, whereas the gas isn't.

In any case, if it's widely accepted that solar has unsustainable levels of subsidy, why should the government seek to reproduce that for a different industry? That argument makes no sense.

Solar and wind are pretty useless without fossil fuel backup. This just creates a more level playing field, no different than new exploration in the North sea. Remember solar and wind are subsidised, this is taxed.

[SrMoreno]

s2art said:

Solar and wind are pretty useless without fossil fuel backup. This just creates a more level playing field, no different than new exploration in the North sea. Remember solar and wind are subsidised, this is taxed.

That's a separate argument. My point was that selling off a valuable non-renewable energy source cheaply is idiotic.

[London424]

SrMoreno said:

s2art said:

Solar and wind are pretty useless without fossil fuel backup. This just creates a more level playing field, no different than new exploration in the North sea. Remember solar and wind are subsidised, this is taxed.

That's a separate argument. My point was that selling off a valuable non-renewable energy source cheaply is idiotic.

But they aren't selling it off. The government are just saying they will be taxed less than the current 62%.

[jmorgan]

As an uneducated consumer, why do I get the feeling someone will make a lot of loot out of this and the general population will not see the benefit.

[Mo D]

London424 said:

Reducing tax from 62% to 30% doesn't sound too bad to me.

I'd rather 30% of profit, rather than subsidising green energy projects. In turn, you would expect energy bills to go down as well.

Yep, I've read somewhere that the energy costs in the US are about half what they are here and in parts of the EU, largley thanks to Fracking and the stupid taxes centred and massive subsidies around the useless renewable programmes (wind turbines etc).
I think this is great news.

As said above, the only ones unhappy are the silly grean peace / friend of the earth lunatics. Who don't see that all this green energy nonsense can lead to power outages that the government here and in Germany have just woken up to the risks of that.

[mondeoman]

SrMoreno said:

Utterly ridiculous. Another national asset sold off on the cheap. The point above about a Norwegian-style fund is absolutely right. Sadly our politicians are only capable acting in their own short-term self-interest.

How is it being "sold off" on the cheap? There is no mention of production licences being reduced in price, just a straight forward reduction in tax, which, when all is said and done, is legalised robbery anyway. Successful economies are always low tax, so why shouldn't we be one of them for once?

[SrMoreno]

mondeoman said:

Successful economies are always low tax, so why shouldn't we be one of them for once?

Norway is the obvious example of a successful energy-rich country which is not low-tax. They value their resources, control extraction to get maximum benefit, and invest for a future when the resource is depleted. All things we should be doing.

[Le TVR]

"It has proposed cutting the tax on some of the income generated from producing shale gas"

Not like its all being cut.
Maybe it it was 30% on national supply gas and 62% on exported gas... no, they need the income too badly.