On July 19, 2013, the British Government, having lifted its 18-month  ban on hydraulic fracturing late last year, proposed cutting its shale gas production income taxes from 62 percent to 30 percent in an effort to encourage shale gas development which would create more jobs and keep energy costs low for millions of people.

In June, a report from the British Geological Survey indicated that there was more than twice as much shale gas in the north of England than there was thought previously to be in the entire country (more than 1,300 trillion cubic feet of shale gas in Lancashire and Yorkshire).

A recovery rate of 10 percent (similar to US fields) would give the UK enough gas to meet demand for the next 47 years.

Chancellor of the Exchequer George Osborne explained that the slash in taxes “recognizes the high upfront costs associated with shale gas projects and ensures that the greatest support is offered to the industry in its early stages when costs per pad are likely to be highest.”

To ensure confidence in the hydraulic fracturing process, planning practice guidelines have been issued and operators have promised local communities a 1 percent share of output revenue plus at least 100,000 pounds ($152,000) for each fracked well.

According to Osborne, the government wants “to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.”

After a short consultation period, the proposed legislation will be put before Parliament.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright’s Energy Practice Group.