United Kingdom Onshore Oil and Gas announces next steps in the formation of its community benefits scheme
13 January 2014
United Kingdom Onshore Oil and Gas (UKOOG), the onshore oil and gas industry’s representative body is pleased to announce the next phase in the development of the industry’s community benefits scheme.
1. Pilot Scheme for exploration sites
The industry today is launching a pilot scheme of selected shale gas exploration sites in the UK which involve exploratory drilling, hydraulic fracturing and flow testing of the exploration wells.
Once planning consent has been granted and exploratory drilling operations have begun, each pilot exploration site will have £100,000 made available for the benefit of the local community. The principles we intend to apply to the pilot phase are:
- 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;
- The funds to be used for the overall benefit of local communities rather than individuals.
To ensure community benefit funds are managed and distributed independently of the operators themselves UKOOG, on behalf of the onshore oil and gas industry and operators, is partnering with UK Community Foundations (UKCF), which works for communities through a UK-wide network of community foundations. Operating in the UK for over 20 years, community foundations’ cumulative investment in communities will pass £750 million later this year.
Once planning consent is granted UKCF and the appropriate local community foundation will manage a consultation process to engage the local community in defining local priorities and needs, including the appointment of a community panel to decide how the money will be spent once the consultation is complete.
This process will be repeated in the communities of each pilot exploration site.
UKCF has helped many communities across the country on behalf of a number of major corporations and sectors. Examples of previous community initiatives have included:
- The purchase and running of a local village shop;
- Reinstatement of a micro-hydroelectricity plant;
- Commissioning of a local apprenticeship scheme with local businesses;
- Management of a local nature reserve;
- Setting up of children’s breakfast clubs.
Ken Cronin, Chief Executive of UKOOG said: “The pilot scheme approach will allow us to learn at an early stage what works for the communities that we are operating in and how we can develop our schemes for the future. Working with UKCF provides us with the ability to have an independent national framework that establishes an industry standard with guaranteed quality and consistency. The scheme will allow community benefits to be delivered and owned by local communities, for local communities, reacting to locally defined need and addressing local priorities. I am delighted to be working with UKCF, which has built up a wonderful knowledge and reputation of working with local communities for the benefit of local communities over the last 20 years.”
Stephen Hammersley, Chief Executive of UKCF said: “One of UK Community Foundations’ key roles is to ensure that funding made available for communities is used effectively to address local needs and priorities. We have developed a robust, effective process to work with local communities, helping them decide their priorities and manage the distribution of monies to deliver greatest benefit. We are impartial and independent. Our role is to work with and for the community, facilitate local decision making and maximise benefits for the community with these funds.”
This pilot scheme builds on the announcement made by the industry in June 2013 and its results will be used to shape the future development of how communities can benefit from payments and revenues from the shale gas sector in the UK. It is intended that the 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.
Individual operators will make announcements in due course with respect to the actual sites being proposed.
2. Further engagement on production scheme
Separate to the pilot scheme the industry announced in June 2013 that each operator would also be creating a community benefit mechanism based on 1% share of revenue from each production well, i.e. before all costs of production are taken into account. Based on production and gas in place scenarios produced by the Institute of Directors (IOD) in its May 2013 Shale Gas report, community benefits under the new 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. Exact numbers will depend on local geology and flow rates. The IoD report in its mid case scenario estimated a total of 100 production sites, equating to a potential community benefit per site in the region of £5m-£10m.
Since June 2013, UKOOG 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 will launch a consultation programme in the coming months 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.
Ken Cronin, chief executive of UKOOG commented: “Despite the fact that there are a number of years before the 1% production revenue scheme is likely to be operational, there is a recognition from the industry that communities should have more certainty at the earliest possible stage and should also have a mechanism in which they can input into the scheme design. Our announcement today intends to meet this requirement.”
3. Fact sheet on how communities can engage
Separately today UKOOG has published a fact sheet on how communities can engage in the planning and permitting process for shale gas in their area. The fact sheet outlines six separate opportunities for engagement as part of the overall regulatory environment in the UK.
UKOOG is the representative body for the UK onshore oil and gas industry. The organisation’s objectives are to enhance the profile of the onshore industry, promote better and more open dialogue with key stakeholders, deliver industry wide initiatives and programmes and to ensure standards in safety, the environment and operations are maintained to the highest possible level. Membership is open to all companies active in the onshore industry including those involved in the supply chain.
About UK Community Foundations:
UK Community Foundations is a registered charity that works for communities in the UK through community foundations. Community Foundations are charities located across the UK dedicated to strengthening local communities, creating opportunities and tackling issues of disadvantage and exclusion.
Each year the 48 quality accredited Community Foundations across the UK provide funding to more than 20,000 local charities and voluntary community groups, the organisations that are the lifeblood of thriving communities. In 2014, Community Foundations’ cumulative investment in communities since starting in the UK in the early 1990s will pass the £0.75bn mark.