The limits of compensation

It was also announced that the industry will further consult on how it plans to reward local communities. Last year, it was suggested that local communities would receive £100,000 when a test well is explored plus 1 per cent of revenues if shale gas is discovered. Options on how to use these funds are said to include direct cash payments to people living near the site, plus the setting up of local funds directly managed by local communities. The announcements sparked tension at a shale gas site in Barton Moss, near Salford, Manchester, where protesters confronted lorries entering the plant, then handcuffed themselves to the vehicles. The scene was reminiscent of a long series of protests that took place in the village of Balcombe (West Sussex) last summer, which became a national focal point for the campaign against fracking. Environmental groups have already come out condemning the announcements as nothing short of an attempt at bribery. These responses are not particularly surprising in light of research evidence on the nature of opposition to the siting of infrastructure facilities. First, a message that emerges fairly consistently from that literature is that financial compensation alone is not enough to overcome opposition. This derives directly from the complexities of the motivations that underpin support and opposition to infrastructure projects. They typically involve people’s perceptions about positive or negative impacts of a project, the trustworthiness of the participants, and the perceived fairness of the process and the outcome. Concerns about environmental impacts, especially risks of air pollution and contamination of surface and groundwater, are among the most influential drivers of opposition to shale gas developments. Financial compensation, on its own, is incapable of tackling these issues comprehensively and effectively. Combined with other top-down decision-making processes, it is instead likely to sharpen a perception in local communities that certain projects are being imposed, triggering further opposition. Setting the terms of compensation only after opposition is already active and giving developers discretion over the terms of compensation further increases the chances of it being interpreted as a ‘bribe’. In contrast, compensation combined with sophisticated forms of engagement with the local communities is more likely to lead to a more successful outcome. Second, as our review of the literature suggests, compensation is both more efficient and effective when specifically targeted at those that incur costs from development. Allowing for these costs should be the key motivation underlying compensation. This is starkly at odds with the current intention to channel compensation to local authorities. The Government is taking some steps in the right direction. It is exploring ways of allowing local communities to share in the benefits from development. It will ask licensees to carry out a comprehensive high-level assessment of environmental risks and to consult with stakeholders. But the detail of some of these efforts seems misguided. In the meantime, without a rethink and as we predicted before, shale gas developments will continue to make the headlines.