Prime Minister David Cameron is taken on a guided tour of the IGas shale drilling plant oil depot near Gainsborough, Lincolnshire, yesterday. French oil giant Total announced it will become the first major oil company to explore for shale gas in Britain, confirming a report in The Financial Times.

Reuters/London

Local councils that allow shale gas developments will keep 100% of a levy they collect from the sites under a government move to persuade communities to accept the fracking process used to extract the gas.

The local tax, known as business rates, is levied by councils on commercial properties in England and Wales. Councils use business rates to pay for local services.

Britain’s shale gas industry is still at the stage of exploration, not commercial production, but energy companies see it as one of Europe’s strongest prospects.

The government is pushing for further exploration despite fierce local and environmental opposition to the hydraulic fracturing process.

Prime Minister David Cameron’s office said in a statement yesterday that the full business rates take, up from 50% under previous rules, could be worth up to £1.7mn  a year to councils for a typical site.

Business Minister Michael Fallon earlier said Britain had to “embrace the extraordinary opportunities offered by shale gas”, despite protests from environmentalists about the possible contamination of groundwater.

“In the Seventies, North Sea oil helped salvage our economy from crippling stagnation,” he wrote in the Sun on Sunday. “We have a similar chance to create tens of thousands of jobs and energy security.

“A mile and more beneath us lies deposits of gas-bearing shale rock with the potential to guarantee energy supplies in an increasingly uncertain and competitive world,” he added.

Local councils have lost big chunks of the grants they receive from central government since 2010 as the Conservative-Liberal Democrat coalition tries to reduce budget deficit.

Hence any potential increase in alternative sources of revenue could be an incentive for them.

The Local Government Association (LGA), which represents all but two of the 375 councils in England and Wales, said the announcement on business rates was a step in the right direction but not enough to satisfy communities affected by fracking.

Environmental campaigners say fracking, which involves pumping water and chemicals into the ground, can pollute water supplies and cause earthquakes. “Local areas will be keen to hear more details on how the community benefits package will be strengthened to fairly renumerate those who will be most affected,” the LGA said in a statement.

“Given the significant tax breaks being proposed to drive forward the development of shale gas and the impact drilling will have on local communities, these areas should not be short-changed by fracking schemes.”

The central government has already announced measures aimed at encouraging companies to invest in shale gas.