Fracking, oil and geothermal drilling – full speed ahead?
13th November, 2014
Fracking remains controversial but the Government has made an important move in the opening up of land in the UK for shale gas (fracking), oil and geothermal energy extraction.
What has happened?
The Government has added draft clauses to the Infrastructure Bill 2014-15 aimed at introducing an underground access regime for gas (including shale gas) oil and geothermal energy.
The move follows the publication by the Office of Unconventional Gas and Oil and the Department of Energy and Climate Change of the Government’s response to a consultation on a proposal for underground access for the extraction of gas, oil and geothermal energy.
What is being proposed?
The clauses set out the following:
- A right to use land that is at least 300 metres below the surface, in order to exploit petroleum or deep geothermal energy.
- Details of the scope of the right and how it may be exercised, including giving the right to pass substances through or into the land and to leave substances in the land.
- A delegated power for the Secretary of State to make regulations requiring companies to make payments to landowners under whose land the exercise is exercised. This power would only be exercised if the industries in question did not comply with the voluntary schemes for payment.
- A delegated power for the Secretary of State to make regulations setting up a statutory notification scheme. The Secretary of State would only exercise this power if the industries in question did not comply with the voluntary notification schemes.
- Supplementary provisions, including provisions on enforcement, on the powers to introduce payment and notice schemes.
What does this mean for energy producers and potential energy producers?
The amendments will make it easier for companies to facilitate shale gas and geothermal drilling as it relieves operators of the need to negotiate access rights with large numbers of owners in order to access underground land for a shale gas or geothermal project. Currently, drilling without permission from relevant landowners or a court order granting the necessary rights is a trespass.
However, it is important to note that the regime does not remove the requirement for planning and other environmental permissions that are required to develop shale gas or geothermal projects, and that any works above 300 metres will still require either an agreement with the individual landowner, or a court order granting access rights.
What does this mean for funders?
The proposed amendments offer funders in the extraction industry greater prospects that the companies they are lending to will be able to carry out their proposed plans with a potentially shortened timescale.
However, on the other side of the coin, landowners will have less say in what happens below the surface of their land and this will need to be taken into account when assessing the value of securities put up by landowners against lending.
What happens now?
The Bill is currently at the Report stage in the House of Lords prior to a third reading in the Lords.
A copy of the draft bill is available here.
How can I find out more?
For further information on the potential implications of these draft regulations or on any of the issues raised in this update, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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