Fracking and Shale Gas – The Legal Position and What to Expect

Some are labelling Blackpool as the Dallas of the North. Generally speaking, the only cowboys you find in Blackpool are builders, but the discovery by Cuadrilla Resources in 2011 of vast reserves of shale gas hidden beneath the surface means that the coming years could see the popular seaside resort move closer to its American counterpart.

The map on this link reveals the extent of the UK’s gas deposits. Experts expect that between 10-15% of this could be freed in the future, releasing enough gas to make the UK entirely independent for up to 15 years.

The problem is the manner in which this gas is freed. Fracking, although widespread across the USA without major issue, has been met in the UK with a frosty reception in some quarters. The process involves drilling a bore hole into the earth’s crust up to 20,000 feet deep, pumping water, proppants and chemical additives down at high pressure and releasing gas trapped in the sub-strata to travel back up the bore hole to the surface.

Who owns the gas?

The Petroleum Act 1998 (the ‘Act’) established that all natural gas, including shale gas, in Great Britain or the United Kingdom’s territorial seas belong to the Crown. Only the gas is vested in the Crown, however, not the land surrounding it.

It is a long established principle that a landowner owns not only the land and buildings in his property, but the airspace above and the ground below – right down to the core. Whilst the air space has been restricted by precedents laid out in cases like Bernstein of Leigh (Baron) v Skyviews & General Ltd [1978] QC 479 it is still the case that the ground below your property is yours – a fact reaffirmed by the Supreme Court in Bocardo SA v Star Energy Weald Basin Limited [2010] UKSC 35.

Under the Act the Secretary of State may grant licences to search or drill for shale gas and/or extract it. The compulsory purchase scheme that operates alongside this, enabling the acquisition of rights and easements such as access, laying pipes or erecting buildings for the purpose of mining now includes licences to search for, or extract, shale gas.

That means that compensation is payable for the compulsory acquisition of rights where fracking is exercised on private land. Calculating the compensation due, however, will not reflect the value of the gas or the potential profit, but rather only the loss of value to the landowner.

Trespassing

Fracking activity that is expressly covered by an ancillary right, granted through compulsory purchase, or for which the Landowner has given express permission is entirely lawful. Problems only arise in trespass, therefore, where activity that will cause damage to their land not expressly permitted by the licence and rights acquired is occurring.

Any potential action in trespass will therefore depend on the precise wording of any ancillary rights and permissions. In the USA, where fracking currently provides around 20% of their total gas production, many of the trespass, nuisance and negligence actions brought against fracking operators have been brought by landowners alleging their land or water supply has been contaminated by fracking operations. Experts expect to see similar cases in the UK as fracking becomes more prevalent.

Hurdles to Fracking Development The Town and Country Planning Act 1990.

Like any other form of substantial development, fracking operations need planning permission. That means they are subject to public objection and, given the scale of opposition to those small fracking installations and explorations already underway – this will likely be the primary battleground.

Lobbying of the Environment Agency and the Department for Energy and Climate Change will be frequent, with the two entities being a statutory consultee and the presiding Government Department respectively.

If plans do pass the planning stage, objections are most likely to take the form of Human Rights objections and Judicial Reviews. The former is unlikely to succeed if permissions are properly in place.

In the USA, most litigation has been after the fact – with claimants seeking compensation for damage caused to their land by the fracking operations. In general, the courts have seen such incidents as out-of-the-ordinary and not the consequences of an inherently dangerous process. Injunction orders are unlikely to be seen therefore, unless a claimant could prove that a particular fracking operation gave rise to a greater than usual risk of harm being caused to neighbouring property.

Thus, although a number of routes of recourse and opposition exist for protestors – fracking in the USA has shown that little will stand in the way of such progress. This, coupled with the Government’s desire to reduce imports and avoid re-opening old coal fired power stations, will likely see the rise of fracking in the UK and significant changes to gas-rich locations like Blackpool – or Dallas-on-Sea as it might become known.

01/08/2013                                                                                                         SRJ/LCB

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