The government has today (June 4, 2014) announced a draft infrastructure bill in the Queen’s Speech to “enhance the United Kingdom’s energy independence and security by opening up access to shale”. It is anticipated this legislation will change the law on trespass, meaning that companies will be able to drill under private properties without individual landowner permission.
Although the Crown owns all sub-surface minerals in the UK, including oil and gas, and licences extraction to private companies, those companies still have to apply to the landowners under whose property the oil and gas is found for the necessary access rights to the minerals. Drilling without obtaining such rights constitutes trespass. This legal loophole has been particularly problematic for the shale industry where horizontal drilling, which can mean drilling under the land of multiple landowners, is the norm.
Norton Rose Fulbright dispute resolution partner, Neil Q Miller, advised Star Energy (now owned by IGas) in the 2010 Bocardo v Star Energy decision where the Supreme Court held that horizontal drilling by Star Energy under Mohammed Al Fayed’s estate in Surrey constituted trespass. However, the Court recognised that the drilling was at depths several hundred metres below the surface and caused no damage to Mr Al Fayed’s property and therefore declined to award damages based on a percentage of the revenue generated from the oil, instead ordering nominal damages of just £1,000.
Whilst the Bocardo decision was generally welcomed by the industry for capping the level of recoverable damages, the issue remained for companies that absent landowner consent to drill, they would be committing a trespass. This meant that landowners could apply for an injunction to stop the drilling or sue for damages.
The bill announced today coincides with the government’s consultation on simplifying the procedure for shale gas and deep thermal underground drilling access, the outcome of which is expected to inform the content of the draft bill. The proposals dispense with the need for individual landowner consent, instead introducing an underground right of access for shale gas below 300m. Companies would still be required to notify landowners of drilling plans and would be expected to pay a voluntary community fee of £20,000 per well drilled.
These changes will give companies greater certainty when planning shale projects, particularly in developed areas where drilling could extend below and through multiple landowners’ property. In principle it should also speed up the planning process and reduce initial costs. However, when it comes to actually drilling, there is little doubt that companies will continue to face public opposition from local residents and action groups.
Neil Q Miller, dispute resolution partner at Norton Rose Fulbright LLP, comments:
“This positive commitment by the government to support the exploitation of UK shale oil and gas by bringing in changes to the law on trespass will be welcomed by the industry.”
“It is anticipated that the legislation will mean that companies no longer need to apply to individual landowners for rights to access oil and gas beneath their properties. This could really speed up the planning process for developers and make exploration and development in populated areas more attractive.”
“The downside risk for industry is that the government’s proposals may fuel the popular backlash against fracking and that this will continue to impede exploration and development.”