Today in the news : British government lowers taxes for shale frackers.
Core of this story : The UK-government wants to lower mining taxes for shale frackers from 60% to 30% to mimmick the success of QE-financing (= free money for Mega Corporations) in the USA. Because the habitat of the people who live in the shale “plays” gets destroyed the communities will be compensated : 100.000 pounds before drilling + 1% of the profits made afterwards.
So how much does the community of Frackingdale* (pop. 10.000) get for having Cuadrilla destroy their town? Shall we get a sigare box and do some calculations? Gas costs 23 cents now, and this is clearly destroying local industry, many are threatening to leave for Houston if gas prices don’t come down to American levels: 6 cents. Let’s asume that British shale is as good as the best in the USA : Marcellus Shale. Drilling a frack will result in a daily flow of 9000 mcf ( 252.000 M3) or 92 million M3 per year. The field depletes in 5 years.
Now, we expect Cuadrilla to sell the gas for 6 cents, because that is what the competition in the USA pays. If the price were higher we might as well just buy Norwegian or Russian gas and not destroy the landscape. So 6 cents it is. Cuadrilla pays 2 cents in taxes, leaving 4 cents. A well managed company will make a profit of somewhere between 10% and 25% of turnover. Let’s be friendly to the Frackingdalers and asume Cuadrilla is well managed and makes a 25% profit.
That is a profit of 1 cent per M3, or a 920.000 pounds per year. The Frackingdalers get 1% of that, 9200 pounds, or just under one pound per person. Cuadrilla packs its suitcases after 5 years, never to be seen again, with a nice profit of 5 million in the bank, leaving the Frackingdalers to look after the leaking (“sealed”) gas wells forever.
Sounds like a really good deal to me! Glad I don’t live in Frackingdale.
*I wrote this piece before I heard of Balcombe