Since our recent “Shale Gas Update 2015” published on this platform on 1 July 2015 (see link here) a number of further developments have again changed the landscape in which the UK’s shale gas industry hopes to develop. The key developments are all, prima facie, positive for the industry and the coming months will demonstrate how the steps being taken by industry players and the government will translate into forward momentum for exploration activities.

Cuadrilla appeal

On 29 June 2015, Lancashire County Council rejected Cuadrilla’s application for planning permission to drill and test the flow of gas from up to four exploration wells at its Preston New Road Site. This decision was contrary to the recommendations of the local planning officer and Cuadrilla has now announced that it intends to appeal the decision. This action by Cuadrilla marks the first appeal of a planning decision against an onshore exploration site application that included plans for hydraulic fracturing.

If successful, the appeal could send a message to other local authorities when considering planning applications in relation to onshore exploration sites. Due to the significant interest in the applications both locally and nationally, it is likely that any successful appeal decision will be challenged in the courts.

Statement by Amber Rudd – Secretary for Energy and Climate Change

Following Cuadrilla’s planning application rejection, the Secretary for Energy and Climate Change Amber Rudd gave a clear indication of the government’s support for the UK onshore shale gas industry in the Sunday Times on 9 August 2015. In her article she explained that the UK has a “national need to explore shale gas”. In particular, Rudd highlighted the need for the UK to create its own “home-grown energy supplies” rather than continuing to rely on energy from abroad to ensure energy security in the UK.

Rudd stressed that the establishment of a UK shale gas industry should not, however, come at a cost to affected local communities or the environment.  Rudd is confident that the extensive drilling experience gained over the UK oil and gas industry’s 50 year history will mitigate any risk of onshore shale exploration activities to the environment. Local communities are expected to benefit from shale gas development by retaining 100% business rate revenues and 1% of production revenues associated with onshore shale hydrocarbon production, and £100,000 for each exploration well site.

Rudd identified what she saw as the main obstacle to shale gas development in the UK as the inefficient and somewhat opaque planning system.  She has called for changes to speed up the planning application process as well as cooperation from planning authorities to enable shale gas exploration to be developed in a “safe, sustainable and timely” way.

Although the Secretary for Energy and Climate Change’s comments are a significant expression of political support for a shale gas industry, it is the latest in a long line of rhetoric from the government without any significant direct action. There is an obvious tension between the government’s perception of shale gas production being in the national interest and local resistance to industrial development within communities.

New planning guidance relating to applications for onshore exploration developments

On 13 August 2015, the Department of Energy & Climate Change in conjunction with the Department for Communities and Local Government, published guidance for local authorities relating to the treatment of planning applications for sites proposed for onshore exploration wells for shale gas. The guidance states that the government is aiming to ensure that such applications are dealt with faster and fairer, giving a clear indication that they seek that a decision can be achieved in a shorter time period than is typical. The most noteworthy headline measure in the guidance is the intention of the government to identify those councils that repeatedly fail to determine oil and gas applications within 16 weeks and allow the Secretary of State for Communities the ability to determine those applications directly on behalf of these “underperforming” councils. This could result in an application proceeding to the appeal stage more quickly and the government has also stated that it will actively consider using its rarely used call in powers.

The new guidance gives a clear indication that the government is willing to use existing powers to ensure that planning appeals for shale gas proposals are to be "treated as a priority for urgent resolution". To further this aim, the criteria used to decide which appeals the Secretary of State for Communities can recover have been revised to include the exploration and development of shale gas. The guidance also indicates that, based on the responses to its March consultation, the government will proceed with amendments to permitted development rights to allow the drilling of boreholes for groundwater monitoring without the need for planning permission. According to the guidance, the government is also considering extending these amendments to boreholes for seismic investigations.

Announcement of new onshore exploration blocks to be offered

On 18 August 2015, the Oil & Gas Authority (OGA) announced that it would award at least 27 new licences for onshore exploration blocks. This 14th licensing round was originally planned for 2012 and will be the first award of onshore blocks since 2008, again pointing to the government’s desire to continue to develop the shale gas industry. The 27 new licences will not be officially awarded until the result of a detailed habitat assessment in relation to 132 further blocks in more sensitive areas, which is expected to complete later in the year. A total of 95 applications were received from 47 companies in this licensing round which demonstrates the interest level from the industry itself.

It should be noted that an onshore oil and gas industry has existed in the UK for quite some time, with over 2,000 onshore wells having been drilled in the UK (with approximately 10% of those having been hydraulically fractured). However, the recently announced support and initiatives from government and renewed UK landward interest from existing onshore players and new entrants alike could prove to be the catalyst for thrusting the UK onshore industry forward.