What can the UK learn from us fracking?
Photo credit: Daniel Foster
With the UK's fossil fuel imports at an all-time high in 2011 and domestic extraction at the lowest level since records began (based on data from the Office for National Statistics, ONS), it's clear that the UK needs to act fast in order to address its growing energy crisis. Shale gas may offer the perfect solution, with Energy Minister Michael Fallon describing it as, "an exciting new energy resource," and the DECC stating that,
"Though it is early days for shale in the UK, it has the potential to contribute to the UK's energy security, increase inward investment and growth."
The investment and growth impact of fracking, along with infrastructure development, makes a fascinating study. In the Bakken Formation area of North Dakota, oil fracking has led to an incredible influx of wealth into the state. The figures have stacked up so well that North Dakota's state land board was able to award $71 million of Energy Impact Grants in June 2013. The grants are designed to support the growth of communities impacted by the oil boom, through infrastructure projects such as water and sewer development. It is anticipated that a total of around $240 million of Energy Impact Grants will be awarded by North Dakota in the next two years alone.
In the UK, such benefits are already in the pipeline, with the BBC reporting that "community benefits" of £100,000, along with 1% of production revenues, have been earmarked for those communities affected by shale gas drilling. In addition, a report commissioned by Energy Secretary Ed Davey has suggested that Britain's gas prices could fall by up to 27% if shale gas reserves are successfully exploited - welcome news given that average UK household energy bills have topped £1,300 per year.
The impact on infrastructure is also likely to affect a wide range of other areas. Schools in certain North Dakota counties are predicting student numbers to more than double within the next three years. State-wide, North Dakota is currently building houses at a faster rate than any other state in the US, with a housing development growth rate of 2.3% against a national average of 0.3%.
Robert Gavin, CEO of specialist commercial and residential developer North Dakota Developments LLC, has first-hand experience of the enormity of the impact of the fracking boom: "The demand for accommodation in North Dakota has simply rocketed. We're building 174 single family homes at Horizons Ridge and construction is underway for our Great American Lodge development, which provides executive hotel suites for single workers. Despite all of this, demand just keeps on rising - we're already planning our next site in order to keep up!"
Investment in North Dakota Developments' projects has attracted huge interest. The projected 90% occupancy rates of the Great American Lodge are particularly popular with investors looking for long-term, strong-yielding properties. While in the UK the next few years are likely to herald significant infrastructure developments as a result of shale gas fracking, it may be a little premature to gamble on precisely where it will be successful (and thus drive up property prices).
As UK Prime Minister David Cameron recently summarised: "Whereas they are digging 10,000 wells a year [in America], so far in Europe we've dug just 100. So we are way behind."
Still, with shale gas exploration so high on the political and economic agenda, there's no doubt that Britain is going to see some large-scale infrastructure developments as communities race to keep up with the boom. And for those investors who can't wait for Britain, North Dakota Developments is perfectly positioned to assist in developing their international portfolio.