Shale Gas (Lancashire)

Eric Ollerenshaw Excerpts

Tuesday 16th July 2013 Westminster Hall

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

It is a pleasure to be called after the hon. Member for Southport (John Pugh). As a Member from the embittered north, may I say that I am really pleased that Salford still regards itself as part of Lancashire? I am even more pleased that north Warwickshire now regards Lancashire as part of the United Kingdom. It is nice to know these things.

I congratulate my hon. Friend the Member for Fylde (Mark Menzies), whose constituency I have to drive through every week to get to a third of my constituency, on getting the debate. As he said, this is the second debate he has initiated on this issue. I have managed to get only one, but he has managed to get two, which shows the power he has. However, I have a part share of the debate on shale gas on Thursday, so perhaps things are more balanced. On Thursday, I will talk more about safety matters; today, in view of the time, I will talk principally about the compensation system.

In our earlier debates, virtually all of us stressed the need for the Government to commit, at least in principle, to some form of community compensation when a possible go-ahead with extraction was announced. In that sense, we are pleased with where we have got to. We have had the announcement that the compensation system will be established. We have learned that it will be run by the United Kingdom Onshore Operators Group. We have learned it will provide £100,000 per wellhead at the exploration stage, and I will be interested to hear the answer to the question from my hon. Friend the Member for Fylde about the distinction between wellheads and pads. We have also had the indication that, once production starts, 1% of all revenues generated over the lifetime of the well will be allocated to the local community. The suggestion is that one third will go to the county and two thirds to the local community, which I assume means the district.

In one sense a good start has been made, and I compliment the Minister on the work he has done to get things to that stage; but we want more clarity and certainty. We also want a guarantee of additionality, and ideally we want more money. I will begin by talking about clarity. At the moment the UK Onshore Operators Group has said that two thirds of the revenue generated will go to the local community. My hon. Friend the Member for North Warwickshire (Dan Byles) raised the question of what the local community is. There is a question in relation to the wellhead: that because of the engineering that could be used in Lancashire it will go down vertically and then horizontally. Will the local community be defined in relation to the extent over which the gas is extracted, or just where the wellhead is? I am not splitting hairs: those things will be brought up locally, for Members of Parliament to answer.

As to the figure of two thirds being directed locally, does that refer to the district councils, such as Wyre, in my case, or Fylde; or does it mean a unitary authority—Blackpool? My major concern is about what happens if those councils take the third or two thirds. What commitment do we have that that will really be seen as additional to the normal process of local government revenue grants? I have absolute faith in my right hon. Friend the Minister and, indeed, in the shadow Minister, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), but let us think of a future time, when other Ministers have come along. What if Lancashire county council, or, indeed, the district councils, are gaining a fair amount of money just on the basis of the 1%, and they apply for the normal general grant? Or what if there are regional growth fund applications for the area? Will not a future Minister say, “Well, Lancashire has that money; it does not need this other money”? That is my argument about additionality. We need some guarantees about it—that the money will be additional, above and beyond what the localities would normally expect under the local government or business funding systems or whatever, and they will not be disproportionately treated because there is extra money.

We are all struggling to find the right vehicle and I am sorry that none of us has the perfect answer—the hon. Member for Southport and others hinted at one—to whether the money should go into something like a sovereign wealth fund for Lancashire, or, indeed, a trust fund. That might be managed by professionals, but open to applications from the districts, parishes and counties for funds—and major, structural funds. My other argument will be that 1% is not enough. Big profits will be made. I understand the strictures of the hon. Gentleman: we are at the beginning of an industry. However, perhaps there could be a rising scale as the profits mount up. There is a serious issue about 1%: it is not enough. If the predictions about the productive capacity of the Bowland shale are right—and it stretches across Lancashire and parts of Derbyshire, and even that other county called Yorkshire—5% would be a substantial amount of money, which would guarantee to the people of those areas that something would be left after the shale gas was gone, as it eventually will be. That something might be renewable energy; it might be all kinds of things, but that is the kind of vehicle that I suggest.

There are other examples of such things, and we can learn from mistakes that have been made. I understand that the Shetland Charitable Trust has got itself into trouble over what it can and cannot fund. The Alaskan funds are quite interesting because of the dividends that they have been able to pay out, on top of the future capital investment that will be available to ensure that when the oil goes Alaska will be left with something. That is what we are looking for. It is certainly what I am looking for: to be able to tell people in Lancashire “We will be prepared to put up with all this”—because I am not sure there will be too many jobs in it—“as, at the moment, we, or some of us, are prepared to put up with wind farms out at sea and on the hills, and possibly a new nuclear power station, if some long-term investment will be coming back to Lancashire, and it will not be used as an excuse to deny Lancashire other funds.”

That is the principle that I would like the Minister to consider. I know he cannot give us direct answers today, and I am grateful for how far he has got on the question. There will be future meetings, until we reach a system. Members of Parliament of all parties from the part of the world in question need to prove that serious investment will come back to the boundaries of our county, however we define them, and those of other counties that will be affected in the future. Then, provided all the safety and environmental measures that we may debate on Thursday are secure, and, as my hon. Friend the Member for Fylde has stressed, there is absolute clarity and transparency and independent regulation, we can give our support and make a vital contribution to the United Kingdom, in the way that Lancashire has always been prepared to do.