In the last “Carbon Matters” (April 2014) we noted that the Government was considering reforming the law of trespass to make it easier for the operators of onshore shale gas projects to obtain rights to drill horizontally through land for the purposes of carrying out “fracking”.
In May DECC issued a Consultation Paper on Underground Drilling Access, and the consultation has just closed.
The scope of the Government’s proposal goes wider than providing new access rights for shale gas operators. It would grant underground access rights to land for companies seeking to extract not only petroleum (ie, oil or natural gas), but also geothermal heat, from land below 300 metres in depth from the surface. Deep geothermal heat provides heat for a district heating scheme in Southampton. There are a number of other geothermal district heating schemes planned, and in future, in certain geological locations, deep geothermal energy might provide energy for power supplies.
Under the current law, drilling operations would amount to a technical trespass, unless each owner of the relevant surface land has consented, because in legal theory a freehold owner of land has rights which extend upwards into space and downward into the earth as far as is reasonably necessary for the use and enjoyment of that land. In practice, there are a number of statutory restrictions on those rights. For example, under the Civil Aviation Act 1982, a landowner cannot bring legal proceedings against the owners or operators of aircraft engaged in normal flying operations at a reasonable height and in accordance with air navigation legislation. The courts have also in recent years limited the availability of injunctions, so that they will only protect reasonable enjoyment of the surface land and the surface owner’s legitimate economic interests in the sub-surface. DECC’s current proposal seeks to apply similar principles for the benefit of the operators of oil and gas and geothermal energy projects.
Under the Petroleum Act 1998, petroleum (ie, oil and natural gas) in its natural condition in strata is vested in the Crown, which grants licences to operators for its exploration and exploitation. For that reason landowners have no beneficial interest or rights to petroleum under their land, and cannot profit from its exploitation. That is one of a number of reasons why “fracking” for shale gas is unlikely to provide a similar bonanza in the UK to that in the US. However, onshore operators need to acquire rights to occupy surface land, and access to underground land, for the purpose of drilling operations. They may be able to acquire such rights as a result of a commercial agreement with landowners. Alternatively, if agreement cannot be reached, the Petroleum Act 1998 applies provisions of the Mines (Working Facilities and Support) Act 1966 which provides for the grant of rights of access. The 1966 Act provides for compensation for rights of access, as in other cases of compulsory purchase, but such compensation, as the courts have confirmed, will not reflect any element of the value of the petroleum.
In practice, the existence of the 1966 Act has generally enabled onshore petroleum operators to reach agreement with landowners for rights to occupy surface land for the purpose of drilling wells, and other activities associated with the exploration for, and exploitation of, petroleum.
This is just as well for operators, as the actual procedure under the 1998 and 1966 Acts is extremely time-consuming and costly, involving a reference both to the Secretary of State for Energy & Climate Change and to the courts.
However, the legislation contained in the 1998 and 1966 Acts was conceived in an age where oil wells were drilled vertically. Operators usually had to deal with only one landowner per well set, and could generally obtain agreement by offering more compensation than that provided for under compulsory purchase law. Horizontal drilling, which is now common practice in commercial onshore oil and gas operations, and an essential prerequisite for fracking for shale gas, may involve drilling through wide areas of underground land. It would be quite impracticable to invoke the 1966 Act procedures against a large number of landowners.
The position would be even worse for geothermal operators requiring access to underground land, as no statutory compulsory access procedures currently exist for their benefit.
The Consultation Paper now proposes statutory provisions which would grant a general right of access to land below 300 metres from the surface for operators extracting petroleum or geothermal energy. Any works at or above 300 metres from the surface would continue to require agreement with the individual landowner concerned or an order granting access rights. Presumably the legislation would also provide for geothermal operators to be able to invoke the 1966 Act in such cases.
In return, payment would be made under an industry payment scheme by the operator to a community body, for local public benefit, rather than split between individual landowners. The paper justifies this on the basis that, if the 1966 Act were applied, compensation would only be nominal. It is understood that the shale and geothermal industries have proposed a £20,000 one-off payment for each horizontal well extending more than 200 metres laterally. There would also be a provision for prior public notification, also delivered under a voluntary industry agreement. The Government would also take reserve powers to enforce payment by regulations if the voluntary scheme was not honoured.
There have been a number of criticisms of the proposal.
In particular, Greenpeace has suggested it may bring legal action to compel the re-running of the consultation, on the basis of a claim that the original paper misrepresented the position under the 1966 Act. The Scottish Executive has also stated that it would oppose the proposal. It is not clear how it could do so, unless the vote in the forthcoming referendum on independence goes in its favour. However, the Scottish Energy Minister has recently raised the matter in the context of the independence debate, claiming that the matter is fundamentally an issue of landownership rights, and has emphasised that a “yes” vote would give Edinburgh the final say.
In the mean time, following the acceptance of a strategic environmental assessment of its impacts, the UK Government is proceeding with the 14th Onshore Licensing Round for oil and gas exploration, which had been postponed following the “fracking “-related earthquakes in Lancashire. It is thought that 50-150 licences may be granted for exploration for the purposes of “unconventional” petroleum operations including shale gas “fracking”. The Government has however also issued special planning guidance for such developments in AON Bs, world heritage sites, national parks, and the Norfolk Broads. This provides for the refusal of significant developments in such areas “except in exceptional circumstances and where it can be demonstrated they are in the public interest”.