Unconventional oil and gas consultation: analysis of responses

5. Community benefit schemes (Q2)

5.1 This chapter discusses the views of respondents on the types of community benefit schemes which could apply if an unconventional oil and gas industry were to be established in Scotland. Community benefit schemes are intended to help communities who host industrial activity to share in the economic benefits of those developments.

5.2 The consultation paper included information about different types of schemes which could be established, and gave examples of schemes already in operation in Scotland (for example, with regard to wind farms and landfill sites). It also discussed the charter for community benefits, published by UK Onshore Oil and Gas ( UKOOG, the industry trade body), which voluntarily commits operators to giving communities certain one-off payments for each exploratory well site, as well as ongoing payments of (no less than) 1% of revenues during production. Finally, it was noted that the UK Government had publicly committed to putting 10% of all shale gas tax revenues into a Shale Wealth Fund, which would be invested in the North of England and other shale producing areas in England over the next 25 years.

5.3 The consultation paper sought views on such schemes, as follows:

Question 2: What are your views on the community benefit schemes that could apply, were an unconventional oil and gas industry to be developed in Scotland?

5.4 Altogether, 3,643 respondents addressed Question 2. This comprised 114 organisations, 10 discussion groups, 2,573 individuals and 946 standard campaign respondents.

Overview of responses to Question 2

The responses to this question did not mirror the pattern of responses to many of the other consultation questions – as described in Chapter 3.

There was a range of views offered with regard to community benefit schemes. Most commonly, respondents were opposed to such schemes in the context of unconventional oil and gas developments, seeing them as inappropriate given the perceived long-term negative impacts of the industry. In addition respondents were sceptical about how valuable such schemes would be to communities or how they would operate.

By contrast, and less often, some respondents expressed support for such schemes. This group believed it was right that communities in close proximity to drilling sites should be compensated for negative impacts and should benefit by sharing in the profits made by commercial companies. Respondents offering such views included those in support of developing an unconventional oil and gas industry in Scotland, but also those opposed to the industry who nevertheless thought that it was right that communities benefitted should an industry be allowed to go ahead.

5.5 Each of the sections below presents respondents' comments on community benefit schemes. These tended to focus either on broad opposition to, or support for, the principle of such schemes being linked to unconventional oil and gas projects. Respondents also commented on the design and running of such schemes, and possible other mechanisms for ensuring that communities benefitted. A final section covers a range of additional points. ^[12]

Criticisms of and reservations about community benefit schemes

5.6 Those respondents who were critical of community benefit schemes in the context of the unconventional oil and gas industry thought that:

• Such schemes amount to 'bribery' or are 'sweeteners' intended to overcome local opposition and persuade people to accept unpopular projects into their communities. It was noted that people may be swayed by community benefit schemes without fully understanding the impacts of the proposed projects.
• Such schemes would be unnecessary if the unconventional oil and gas industry were, in fact, beneficial for communities. That such schemes were being considered was seen to be a tacit acknowledgement of the industry's harmful effects.
• Such schemes would lead to community divisions with some individuals / communities supporting and benefiting from the schemes and others not.
• While it may be appropriate to 'compensate' local communities for the loss of amenity and inconvenience caused by unconventional oil and gas operations, community benefit schemes cannot mitigate or compensate for health impacts, long-term irreversible environmental impacts or disruption to the social fabric of communities. Respondents also argued that the impacts would be felt beyond the area immediately adjacent to well sites. As such, they did not think that community benefit schemes with a local focus should be seen as relevant; they thought that the future of unconventional oil and gas should be considered at a more strategic national level, with account taken of the risks to and benefits for the whole of Scotland.

5.7 Additionally, respondents were often sceptical about the likely value of such schemes to communities. They argued that companies would always prioritise returns to shareholders and that the schemes proposed by energy companies and discussed in the consultation paper were voluntary in nature and were wholly or partly based on a percentage of profits. Thus, payments were not guaranteed, and respondents expressed doubts as to whether companies would deliver on their promises. In particular, it was suggested that there was a lack of transparency about company finances, and schemes were potentially vulnerable to accounting practices which allowed companies to minimise their declared profits; it was also suggested that communities could also lose out if companies went out of business. In addition, there was a further concern that schemes would be short term and linked to the duration of individual projects, while the impacts of industry operations would extend beyond that. Some respondents also noted that while the UK government-backed UKOOG charter scheme included a payment for exploratory drilling, not all companies had signed up to this. Thus, communities could suffer negative impacts but not receive any community benefit payment if a commercially viable source of gas was not found.

5.8 It was also suggested that any payments distributed via a community scheme would not amount to much on a per household basis, would not go far in mitigating impacts, and would represent only a small proportion of company profits. Further, the percentage basis proposed for schemes (1% of revenues according to the UKOOG charter), combined with the lack of certainty about how valuable the unconventional oil and gas industry would turn out to be, meant that the real value of these schemes could not be known at this stage.

5.9 Such views were shared by respondents opposed to community benefit schemes and also by some of those who supported them in principle, but wanted to make sure that any schemes established were as beneficial as possible to local communities.

5.10 Respondents often distinguished between their views on community benefit schemes in general, and schemes which might be linked specifically to unconventional oil and gas operations. The former were largely viewed as an appropriate and positive way of recognising the localised impact that projects such as windfarms, seen as benefiting the country as a whole, had on host communities (although there was also some criticism of how such schemes have operated). Regarding the latter, however, respondents did not think it appropriate to link community benefit schemes to an industry that was perceived as causing long-term damage to public health and to the environment. A related view was that the decision about whether or not to allow unconventional oil and gas operations to proceed had implications beyond the level of individual communities and should not be able to be influenced by the offering of financial inducements and short-term gains to local communities.

5.11 Occasionally, respondents expressed opposition to community benefit schemes, stating that they were: (i) unnecessary since communities would benefit from the unconventional oil and gas project itself; (ii) unhelpful as they encouraged a 'dependency' culture; or (iii) unfair in rewarding communities that happened to be located close to potential sites. Respondents offering such views were mainly individuals who generally supportive of the unconventional oil and gas industry.

Support for community benefit schemes

5.12 Respondents who were positive about the possibility of community benefit schemes offered the following main reasons for their views:

• It was right that communities should receive some form of 'compensation' for negative impacts experienced as a result of industrial developments, and that the companies profiting from such developments should be expected to share their profits with the communities experiencing those negative impacts.
• Such schemes operated successfully in connection with other industries and brought important benefits to communities, and there was no reason not to extend them to any unconventional oil and gas industry established in Scotland.
• Such schemes had the potential to be transformational for disadvantaged communities.

5.13 Respondents expressing these views were generally supportive of the unconventional oil and gas industry. This group included industry representatives and other related organisations who often provided details of their existing commitments and proposals in this area. However, this group also included some respondents who were generally opposed to the establishment of an unconventional oil and gas industry but believed that community benefit schemes should be introduced if unconventional oil and gas extraction went ahead in Scotland and / or if it was assessed to be safe.

Design and operation of schemes

5.14 Some respondents offered suggestions as to how such schemes might be designed and operated. There were both positive and negative views about the voluntary UKOOG charter approach and the schemes currently in operation covering landfill / windfarm projects as possible models for unconventional oil and gas schemes. In addition, there were varied suggestions for how schemes might be structured and which bodies might be involved in their oversight and operation ( e.g. local community trusts, local authorities, organisations currently involved in administering other community benefit schemes). Respondents were keen for lessons to be learned from different models of community benefit schemes in operation in the UK and around the world.

5.15 Comments from respondents who discussed more specific aspects of the design and operation of potential schemes focused on the following:

• Underpinning principles and features: There was general agreement that community benefit schemes should be transparent and accountable, should adhere to best practice, and be subject to independent regulation and auditing. Respondents also emphasised the importance of community engagement and participation (which can in itself have wider, longer-term benefits) and the need to provide appropriate support for this, and partnership working involving all stakeholders.
• Financial arrangements: At a general level, respondents stressed the need for schemes to be 'fair and proportionate' and to reflect the wealth gained from unconventional oil and gas projects. There was one caveat noted by a few respondents – that scheme obligations should not be set at a level that undermined the commercial viability of the industry. While some were happy with the idea of percentage-based schemes, others favoured schemes which would make reliable regular payments throughout the life of a project (from exploration to decommissioning and beyond) – this was seen as important for planning purposes, for minimising time lags in terms of residents seeing tangible benefits, and for ensuring a recognition of impacts which appeared even after projects had concluded.
• Scope of schemes: The need for a satisfactory definition of 'community' / 'wider community' was raised repeatedly as an issue which needed to be addressed. Additionally, respondents suggested the need for flexibility to allow for strategic, cross-community projects to be funded, and to take account of multiple projects in relatively small areas.

5.16 Respondents also offered a range of specific suggestions on what should be funded from such schemes. These included, for example: community facilities, environmental projects, local infrastructure improvement and / or maintenance, and projects linked to renewable energy or improving energy efficiency in the homes of local residents. However, some respondents talked more generally about the importance of focusing on sustainable projects with long-term value for whole communities.

Alternative / additional proposals

5.17 Some respondents expressed a preference for alternative or additional mechanisms for allowing communities at national or local levels to benefit from unconventional oil and gas projects. By and large, these suggestions were based on statutory arrangements and the removal of corporate control or influence. They included variations on different tax-based schemes to benefit the whole of Scotland; the creation of a Scotland-wide 'wealth fund' with contributions made through ring-fenced taxation; and systems which provided additional funding to relevant local authorities. Other alternative suggestions were local communities being given a stake in the ownership of unconventional oil and gas developments; community wealth funds; and the establishment of community trusts to receive and control money from the industry.

5.18 Some respondents thought that the current planning processes and regulations also provided options for funding mitigation arrangements and securing community benefits.

Other points made

5.19 The following additional points were also occasionally made:

• It was important to be clear about the distinction between payments made to property owners to enable unconventional oil and gas operations to take place on their land, compensation payable to individuals for harm caused / losses suffered, and schemes that fund projects intended to benefit a whole community. Respondents argued that all of these should be adequately and fairly provided for.
• Research to date has indicated a mixed picture in relation to the effectiveness and operation of community benefit schemes, and the perceptions of the benefits received by communities. The evidence also shows that there is a wide variety of models for community benefit schemes, and that the extent to which people's attitudes and views towards prospective industrial projects are affected by the availability of such schemes is variable.
• Unconventional oil and gas extraction would lead to significant and widespread costs, both on-going and long-term, linked to infrastructure provision and repair, increased demands on health and other public services, environmental mitigation and restoration over potentially large geographic areas, clean-up costs related to incidents and decommissioning, etc. There were calls for companies to be required to contribute to or cover such costs.
• Regardless of the community benefit schemes proposed, it was important that local communities benefitted from unconventional oil and gas developments in terms of jobs, training, and economic investment.

5.20 Finally, a range of respondents, including those representing public bodies and professional bodies, stressed that the possibility of community benefit schemes should not be considered as a factor in the determination of planning applications.