We’re going deeper underground - consultation on access for shale and geothermal energy begins

The Department for Energy and Climate change has announced the start of its consultation on the property implications for underground drilling and access for unconventional oil and gas developers and geothermal energy operators. 

29 May 2014

On 23 May 2014 the Department for Energy and Climate Change (DECC) published its anticipated consultation on proposals to allow energy companies and developers easier means of underground access.  The consultation paper responds to calls from the expanding onshore unconventional oil and gas, and geothermal, industries to make exploration of shale resources, and use of land for thermal heating projects, economically viable and more efficient. 

At present the law of property requires operators to reach agreement with landowners on the surface for consent to drill, sometimes many metres or kilometres, below their land.  If developers do not obtain consent or a court order then, in accordance with the Bocardo SA v Star Energy Supreme Court decision in 2010, a trespass on to the property may be deemed to have taken place.  The decision in that case upheld in a modern day situation the long held principle that a freehold owner of property has not only rights on the surface, but also title down to the centre of the earth below and up to the heavens above.  As it happens, nominal damages for trespass were awarded; however, the case has been a focus for concern as developers may potentially be open to long running and expensive cases and consequential delays in projects.

Operators of shale gas and oil resources do have an alternative recourse, and can apply to the Secretary of State for rights under section 7 of the Petroleum Act 1998. However this is a time consuming and therefore often costly way of securing the land rights which may be required only for a short period of time, especially in the case of initial, conceptual exploration.  Geothermal heat developers cannot rely on similar powers and, in the case of proposals for district or shared public heating facilities, are likely to be building these out in suburban, densely populated areas with even more landowners affected.

The solution DECC proposes is to allow developers rights similar to those available under the Coal Industry Act for licenced areas (at depths below 300 metres only).  The solution would permit access and working without having to reach private agreement, while encouraging a voluntary payment scheme that has already been suggested by both representatives of both shale gas/oil and geothermal industries.  Payment of a sum of £20,000 would be made per unique horizontal drill or installation that occurs, and would be made to a relevant community body, but not necessarily split between landowners.  This should encourage community engagement and local buy-in.  DECC does acknowledge in the consultation paper the risk of ensuring that the affected landowners are part of that community body, and receive some benefit from the funds.  A public notification system is also suggested to start engagement at an early stage and maintain good relations throughout the lifetime of a development.

The next steps will be announced following closure of the consultation, which runs until 15 August 2014.  It is likely that the proposals would be introduced with minimal change in legislation. DECC accepts that it has to keep the option of secondary legislation open, especially if the voluntary payment scheme does not operate effectively.  There are no intended changes to the licensing, environmental or planning regimes as part of this process.

The UK government is committed to pursuing unconventional oil and gas exploration, and to the use of district and local geothermal heat storage solutions.  This consultation intends to deal with a difficult legal stumbling block, and, if the proposals are accepted, it should provide a boost to developers still seeking to commence exploration under licence or to build out their projects.  The consultation extends to Scotland, England and Wales.  Petroleum and geothermal energy matters are devolved to Northern Ireland, while the Scottish and Welsh administrations will be consulted on geothermal proposals separately.

For more information on unconventional oil and gas in the UK, see our Shepherd and Wedderburn briefing paper here.

The DECC consultation, which runs until 15 August 2014, can be found by clicking here.