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Prime Minister David Cameron’s “all-in” push for developing the UK’s shale gas reserves continues to generate what seems to be strong public backlash.

While vocal protesters receive much publicity, they do not represent the views of most of the population. A recent UK Onshore Oil and Gas poll found that 57 percent of residents were in favor of fracking and only 16 percent were opposed. While this survey was commissioned by an industry group, its results are similar to others that have found widespread support for fracking.

While more people in the UK are pro-fracking than anti-fracking, the results differ if fracking is going to take place close to home. Nearly half of people do not want a gas well within 10 miles of where they live, while only 14 percent do. This seeming inconsistency can be addressed by granting property owners legal rights to the valuable resources below their lands, which are currently owned by the Crown. Doing so would allow people to see direct benefits from increased local energy exploration.

It is clear that protestors only present one side of the issue. They focus on the costs without addressing the benefits. What most people want is affordable energy, economic growth, energy security, and job opportunities. Unlocking shale gas’s potential though fracking could go a long way towards realizing all four of these goals.

People desire the economic benefits that accompany increased oil and gas production and, if the experience of the United States is any indicator, these benefits are extensive.

As recently as 2004, the UK was a net exporter of natural gas. Now, only one-third of the UK’s supply of natural gas is domestically produced. Importing liquid natural gas from countries such as Qatar is expensive and raises the costs of heating homes. Some gas imports from Europe originate in Russia and, if tensions continue to rise, prices could jump further up in the future. While fracking will not cause UK prices to decline as much as did U.S. prices, the domestic job openings and economic growth that go along with fracking will be substantial.

The UK has sizable natural gas deposits. The British Geological Survey estimates these reserves to be at least 1,300 trillion cubic feet. To put this in perspective, tapping  just 10 percent could meet the UK’s needs for 25 years, according to Keele University Professor Peter Styles.

While parallels with the United States are not exact in terms of the economic gains from shale gas development, increased UK energy production, if done correctly, will lead to substantial economic gains. No U.S. state has taken advantage of the shale boom more than North Dakota.

In North Dakota, GDP grew by 9.7 percent in 2013 - 5 times the overall U.S. rate. The state’s unemployment rate is 2.8 percent, far lower than the U.S. rate of 6.2 percent. Since most of the UK’s gas reserves are found in the economically-depressed North, the economic and employment gains from fracking are desperately needed.

Fracking is unlikely to have a substantial negative effect on home prices. During the U.S. housing crisis, median sale prices fell nearly 30 percent. Prices are yet to fully recover. In North Dakota, thanks to fracking, home prices increased 13 percent over that same period. Homeowners in North Dakota have seen steadily-rising property values since 2005, and home prices now stand 55 percent higher than they were before the housing crash.

Additionally, North Dakota’s credit rating has increased from a middle-of-the-road AA- as recently as 2004 to a perfect AAA rating since 2013. As the UK continues to institute policies to right its fiscal affairs, and as its economy starts to grow, fracking will be of utmost help.

While the overall economy experiences immense benefits from fracking, homeowners perceive little benefit from allowing energy exploration in their back gardens.

A much better way to allow homeowners to gain from fracking would be to update UK laws governing mineral rights. Currently, while UK property owners have rights over the earth under their property, they do not own the rights to valuable resources such as fossil fuels and precious metals. This is the result of a legislative relic that was first passed in the 1930s.

Without updating laws to allow people to realize the value of the hidden resources on their property, it will be difficult to fully-capture gains from natural gas development. Private mineral rights have been one of the main drivers of the American energy renaissance. Homeowners are free to charge royalties or one-time fees in exchange for allowing drilling on their land.

Granting people the rights to the fuel under their homes and farms would be more equitable and efficient than Prime Minister Cameron’s plan to let local councils keep all of the revenues raised from fracking sites. People who are against fracking can express their opposition by refusing to sell their mineral rights.

Fracking can deliver affordable energy, economic growth, energy security, and job opportunities to the UK. Despite the claims of overzealous environmentalists, this is what most people want. Allowing them to benefit directly from increased energy exploration by giving them rights to minerals under their property would be a welcome change that would lead to extensive economic benefits.

 
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As in all IEA publications, the views expressed in this blog are those of the authors and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council or senior staff.

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