The Government's Shale Gas amendments

Detailed examination of the Infrastructure Bill took place in the Lords Grand Committee on 14 October.

Baroness Verma as Parliamentary Under-Secretary of State for DECC outlined the Government's aim to  simplify the current process by granting a right of use of land below 300 metres in order to access  petroleum and geothermal resources.

Baroness Verma stated: "Having carefully considered the various issues raised within the  consultation responses and whether any compelling new arguments had been presented, [the  Government] firmly believe that the proposed policy is the right approach."

This note summarises the issues raised in debate and the Government's response.

Scope of the deep-level land access right

Baroness Verma outlined the intention of the Government amendments as follows. The first clause  seeks to introduce a right to use land at least 300metres below the surface for the purpose of  exploiting petroleum or deep geothermal energy.

The second new clause provides details on the scope of the new right of use. This clause includes references to passing substances through or into land at depth and  includes leaving substances in that land. Baroness Verma noted that as this applies only in  relation to petroleum or deep geothermal energy, it would not (contrary to some recently reported  speculation), apply to nuclear waste. She emphasised that the operator would still require all the  necessary planning and environmental consents.

The third new clause provides the Secretary of State (SoS) with a delegated power to require  companies, by regulation, to make payments to landowners under whose land the right is exercised or  other persons as defined in return for the right to use. The regulations may also introduce a  requirement to the companies to provide specified information on these payments. Baroness Verma  emphasised that the provisions are included as a reserve power because both industries have made  voluntary commitments to make a one-off payment for each unique lateral well that extends by more  than 200 metres. She confirmed that the Government's preferred approach was the voluntary approach  as this provides the maximum flexibility for different sites which may require different  arrangements. But she also made it clear that, "in case these voluntary payment schemes are not  honoured, this clause will ensure that the SoS can through regulation render them mandatory". She  confirmed any such regulation would be subject to prior consultation.

The fourth new clause provides for a similar delegated power for the SoS to introduce a notice  scheme by regulations. Such regulations may provide for a notification scheme to: provide for  energy undertakers to give notice to specified persons; display notices; and publish notice of the  proposed right of use or its exercise, together with information on the application of any payment  scheme. The regulations may also require relevant energy undertakers to notify the SoS about the  proposed exercise of the right of use.

Baroness Verma confirmed that the details of a statutory notification scheme would be set out in  regulations only following consultation. The Government view is that at this very early stage in  the industry's development has the advantage of flexibility.

The proposed amendments also contain an enabling provision (sunset provision), which provides that  the SoS must review the payment and notice scheme provisions after 5 years and repeal relevant  sections if a power is not exercised within seven years and there is no convincing case for  retaining it. Find our full briefing on the proposed provisions here.

Amendments tabled in Grand Committee

A number of non-government amendments to the Government proposals were tabled for debate in the  Lords Grand Committee. These and the Government response are set out below.

Right to use in respect of Scotland

Firstly, Baroness Verma confirmed that for deep geothermal energy the right to use Scottish  deep-level land is limited to cases where the sole, or main, use of that energy is the generation  of electricity because under the Scotland Act 1998 generation is a reserved matter. She also  confirmed that discussions were underway with the Scottish Government as to whether they wish to  extend the scope of the clause to cover heat generation.

Proposed exclusion of National Parks, the Broads and AONBs

An amendment (ultimately withdrawn) by Baroness, Lady Young of Old Scone would have had the effect  of excluding from the Government's proposals from a number or areas including National Parks, the  Broads and AONBs. The Government referred to the recently clarified Planning Practice Guidance  (PPG) for these areas which provides that where applications represent major development, planning  permission can and should be refused in National Parks, Broads and AONBs except in exceptional  circumstances where it can be demonstrated in the public interest.

Report on fugitive green-house gas

An amendment was tabled seeking to oblige the Government, in consultation with the Committee on  Climate Change (CCC), to publish a report on fugitive green-house gas emissions from on-shore  energy extraction in the UK, and for it to be produced six months after the passing of the Bill. On  the basis that fugitive emissions are already reported on, at a national level and on an annual  basis, the Government did not accept the amendment.

A contingency fund for any liabilities

Lord Whitty proposed an amendment to establish a contingency fund for liabilities. His noted that  over the last 100 years licences have been given for onshore drilling mainly in England at more  than 2,000 wells; for 53% of those wells most of which have ceased operation, the ownership is  unclear. Noting that a number of the companies now being considered for licensing are relatively  small companies, he argued that reassurance was required that in the future there would be the  "wherewithal to meet the costs of clearing up that damage". Baroness Verma replied by noting that  the operator is liable for the shale gas well and any damage or pollution it may cause, and is  responsible for the safe decommissioning of the well.

Baroness Verma stated that it is Government policy that remediation of the damage, if any were to  occur, would be dealt with under the main regimes for dealing with contamination. She did  acknowledge that at present if a shale operator becomes insolvent and no rescue mechanism for the  company can be found, in limited circumstances the liability could ultimately pass to the  landowner. She referred to the power of the Environmental regulators and planning authorities to  require upfront financial bonds while acknowledging the potential expense for companies with this  mechanism. The amendment was not accepted, but she confirmed that the Government and the industry's  trade body UKOOG had been working together to ensure the development of an industry scheme that  will step in and pay for the liabilities in such a situation and any other where the liable company  cannot be identified.

Baseline monitoring

The Government agreed that baseline monitoring is essential prior to production, in addition to  ongoing monitoring throughout the period of activities. Baroness Verma stated that the Environment  Agency had confirmed that it would typically require baseline monitoring. The Environment Agency  would not normally require baseline monitoring for sites without fracking, but for fracked sites,  the length of time required would depend on the risks and characteristics at that site. She noted typically this would be a three-month period.

Environmental impact assessment In response to calls to make it a requirement to carry out an environmental impact assessment (EIA) the Government stated that the industry had publicly committed to carrying  out voluntary EIA for all fracking sites and this went beyond EU requirements. Baroness Verma  stated that it was the Government's view that legislation to require EIA for all shale sites even  those where hydraulic fracturing is not proposed and the development is unlikely to have  significant effects would be disproportionate. She noted that chemical disclosure is already  required on a well-by-well basis. She noted that the regulator would set out the chemical and the  maximum authorised concentration for use as part of the permit process. Further, she noted that the  industry had already voluntarily committed to publish this information.

Water companies as statutory consultees

In relation to the proposal to make water companies statutory consultees the Government stated it  was of the view that this would remove the important local discretion that a planning authority has  to decide for itself when it needs the views of others. She stated that the Government were not of  the view that this would enhance the level of environmental protection already in place.

Creation of a sovereign wealth fund

Finally, Baroness Verma stated that the Government will not be able to forecast the scale or timing  of shale revenues until more work is done to determine the extent of gas that can be technically  and commercially recovered. It would therefore be inappropriate to indicate now how potential  future revenue would be used. As a result, the Government have no current plans to access the  possibility of creating a sovereign wealth fund from this revenue.

Comment

As set out above a number of proposed non-government amendments were debated. None of these were ultimately accepted and so none have become part of the  Infrastructure Bill. Some of the issues raised may however see some further developments separate  from the progress of the Bill such as a fund for contingent liabilities.

The Report stage - further line by line examination of the Bill in the Lords - is scheduled for 3  and 5 November 2014 after which the Bill will proceed to the Commons.