The Planning Court has confirmed that a petroleum exploration and development licence ("PEDL") is capable of being varied by agreement between the licensee and the Secretary of State, notwithstanding the lack of an express power to do so within the Petroleum Act 1998 (the PA 1998).

In Dean v Secretary of State for Business, Energy and Industrial Strategy [2017] EWHC 1998 (Admin), [2017] All ER (D) 72 (Aug), the Planning Court dismissed a judicial review challenge to a variation to a PEDL granted to Dart Energy (West England) Limited. In doing so, the Planning Court confirmed that PEDLs are not governed entirely by the statutory code laid down by the PA 1998 and that the law of contract applies to a PEDL in addition to that statutory code. Accordingly, the Planning Court confirmed that the execution of the PEDL creates an interest in land.

Importantly, neither the PA 1998 nor any secondary or EU legislation contains any restriction on the variation of a PEDL. Therefore, the ordinary contractual law position applies and the parties to a PEDL are free to vary that PEDL as it is a normal dealing as part of a contractual relationship between grantor and licensee: there is no requirement for express statutory authority to enter into a deed of variation.

The Planning Court’s decision is welcome to the fracking industry, and the wider onshore and offshore industries, as it has clarified that a process that has been undertaken between the Secretary of State and licensees as a matter of routine is legally correct.

Other Consenting Regimes

When discussing the grant of PEDLs the Court distinguished a PEDL from other consents such as planning permissions granted pursuant to the Town and Country Planning Act 1990 ("TCPA"). This is because the decision of the relevant authority pursuant to an application for such consents, such as a planning permission, marks the final determination of that application, subject to a right of appeal, and does not require the applicant’s assent. However, the PEDL is an interest in the land that is created once the licensee and grantor have agreed terms and entered into a deed of licence and so the licensee’s assent is required.

The Planning Court’s ruling is important in providing certainty to PEDL holders that they may vary a PEDL. Without the ability to vary a PEDL, a project’s viability and its ability to react to the market, industry practice and the emergence of new technology would be threatened. In this case, the original licence was granted in 2008 but fracking technology has moved on in the interim.

Other consenting regimes in the energy sector have previously suffered from an inability to vary consents: for example, the Electricity Act 1989 (the EA 1989) contained no mechanism to allow for a variation, a problem which was exposed following the introduction of the Planning Act 2008 (the PA 2008). Because the EA 1989 represents a complete statutory code, Government remedied this by the introduction of a new section 36C into the EA 1989 to provide a power to vary such consents.

The grant of a PEDL is not all that is required for a fracking or conventional onshore energy project, and it is important to bear in mind the other statutory regimes that may apply and the extent to which they provide flexibility to the holder of a PEDL.

The PA 2008 and the TCPA, both of which are statutory regimes that are capable of applying to fracking operations and both of which are complete statutory codes, contain express mechanisms to cater for variations to consents. In the case of a development consent order ("DCO") pursuant to the PA 2008, both material and non-material changes can be made under specific procedures contained with the PA 2008.

Similarly, in the case of a planning permission granted pursuant to the TCPA, both minor-material and non-material amendments can be made under section 73 and section 96A of the TCPA.

On a related point, there are model clauses for a PEDL: these are contained within schedule 6 to the Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004, and PEDLs are capable of being assigned.

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