Real Estate Matters Update - September 2013

02 Sep 2013

A fracking disaster or a load of hot air?

Hydrochloric fracturing, or fracking, is the process by which shale gas is extracted from the ground by drilling bore holes into the earth's crust and pumping a cocktail of chemicals and water into them under high pressure. It is also a hotly debated and fiercely disputed topic.

To the pro-fracking camp, it is one step short of the answer to all our energy woes; it will provide much needed employment, lower CO2 emissions and reduce dependence on foreign energy supplies. In the USA fracking, it is claimed, has revamped the energy market and helped to bring the country out of recession.

To those in the anti-lobby, and as recent reports show there are many of them, fracking is an environmental disaster; an earthquake causing, chemical leaking, water poisoning fiasco and a costly distraction from research into renewable fuels and green energy.

The Petroleum Act 1998 states that all natural gas in Great Britain belongs to the Crown. However, this does not include the land above or surrounding any gas reserves. So where does that leave a landowner sitting on shale gas? In the case of Bocardo SA v Star Energy Weald Basin Limited [2010] UKSC 35 the Supreme Court confirmed that a landowner owns the surface of their land and the strata beneath, including the minerals, unless someone else owns them by conveyance, common law or statute. Therefore, although natural gas might be owned by the Crown, the landowner owns his land all the way down to the core of the earth.

This would suggest that landowners and their land are protected from any unwanted fracking. Surprisingly this is not the case. Under the 1998 Act the Secretary of State can grant licences to search for and extract shale gas. The licence holder can then obtain ancillary rights under The Mines (Working Facilities and Support) Act 1966. Such rights can include the right to occupy land, obtain a water supply, dispose of effluent, lay pipes and erect buildings. If the licence holder and landowner cannot negotiate an agreement, then the licence holder can turn to compulsory purchase to acquire these rights.

Clearly, compensation is payable when the compulsory purchase route is employed. However, the compensation would be calculated according to the loss suffered by the landowner, not the potential profit of the licence holder. Ultimately, a licence holder who has compulsorily acquired ancillary rights will not be a trespasser and the landowner will have no lawful way to stop the fracking on his land.

Plainly, landowners should not ignore the grant of an extraction licence in relation to their own or adjoining land. The Department of Energy and Climate Change (DECC) website contains information on existing licences.

Landowners should also pay attention to local planning applications; planning permission is needed before a licence holder can start the fracking process. Planning applications will be processed in the usual way, so they will be open to local objection during the application process.

The DECC will also need to provide consent before any fracking can begin. Once licences and permissions have been granted and DECC consents given, it will be much harder for a landowner to call a halt to the fracking, so landowners must keep abreast of proposals in their area and make representations at the appropriate time.

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