LANDOWNERS AND FRACKING A Property Lawyer’s perspective Paul Stafford Ten Old Square, Lincoln’s Inn
Is fracking an opportunity or a threat? A landowner’s view may depend on the location, extent, nature and use of the land he owns. But for those with land beneath which shale gas lies, the question cannot be ignored. The time is coming, and may have come already, when an answer must be given and steps taken to deal with the consequences of that answer. Who is affected? Shale formations in England are located in the North-West, Lancashire and Merseyside, the Pennines, the eastern and western areas of the Peak District, Lincolnshire, the East Midlands, Oxfordshire and Gloucestershire, the South and the Weald. In Wales they are in southern Gwynedd, west Pembrokeshire, and along the coast in the Cardiff area. In Scotland they are in a belt from the lands around the Firth of Forth to the west coast. Although energy companies may explore elsewhere, it is landowners in these areas in particular who should be alert to the possibility of shale gas extraction and its potential impact on their property.
Government policy 1 The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.
Government supports fracking as a means of exploiting the UK’s large resources of shale gas lying deep beneath the ground. What drives the policy is the need to have secure and plentiful energy supplies that will reduce dependence on foreign imports and cut costs for industry and consumers. Shale gas offers great commercial opportunities for energy companies using modern techniques such as directional drilling where the drill string is not merely non-vertical but can be directed by geo-steering along a path predetermined by geologists and engineers. With this technique, developed in the USA for both oil and gas extraction, a drill pipe can be sunk vertically or at an inclination. Then, at a certain depth beneath the surface, the pipe can be sent in another direction, whether horizontally or otherwise, so that it can reach the reservoir of oil or gas. Current technology allows drilling to targets over 10km away from the surface location at depths of between 1,600 and 2,500 metres. The benefits of the technique are obvious because it allows drilling into a reservoir where vertical access is difficult or impossible. So oil and gas that lie beneath towns, or wet ground, or rock formations that are difficult to drill, can be reached by directional drilling. A further development of the directional drilling technique involves hydraulic fracturing or fracking. This is the high pressure pumping of fracturing fluid – water, sand and chemical additives – down the well and into the gas reservoir at a pressure high enough to create small fractures up to 30m long in the rock surrounding the pipe. The gas can then escape into the pipe and be collected. Environmental concerns and government response Energy companies have obtained licences from central government, acting through the Department of Energy and Climate Change, to explore for and extract gas in shale formation areas. However, the prospect of fracking has alarmed not only environmental activists but local communities. There are genuine and well-founded concerns that fracking can cause major environmental damage and endanger public health. In the USA, where fracking developed quickly after 2005, the side-effects have been reported as contamination of water supply and of soil as a result of the fracking fluid; leaks of 2 The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.
methane from under the ground causing air pollution; the risk of explosions due to the presence of methane in water; health problems, such as nosebleeds, rashes and breathing difficulties; and, last but not least, minor earthquakes measuring, at their greatest extent, 4.7 on the Richter Scale. The side-effects in Britain so far are limited to seismic disturbance. In spring 2011, when Cuadrilla Resources Limited was exploring for gas in the Bowland shale in Lancashire, there were two earth tremors in the Blackpool area measuring 1.5 and 2.2 on the Richter Scale. These were subsequently linked to Cuadrilla’s fracking operations. Although there was no structural damage or injury, DECC suspended fracking activity in the UK to allow investigation of the link. In December 2012, having concluded that appropriate controls were available to mitigate the risk of seismic disturbance, DECC allowed fracking to continue. The current position of government, supported by the energy companies, is that improved technology and regulatory control can reduce risk to acceptable levels.
The landowner’s involvement For the landowner, involvement in fracking may arise in a number of ways. First, he may be approached by an energy company seeking land for the construction and operation of a drilling site. Or he may be asked for access to such land if the energy company has identified or obtained adjoining or nearby land for that purpose. Second, he may be notified by a local authority that a planning application has been made for permission to conduct exploratory drilling on adjoining or nearby land. Or third, he may learn through the press or otherwise that such an application has been made even though his land is not adjoining the proposed site and he has received no notification from the local authority. A landowner’s response in any of these situations will of course depend on his evaluation of the relevant factors and his conclusion as to where his interests lie. But the legal context in which that decision has to be made is of great importance and needs to be 3 The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.
understood. From my own perspective as a property lawyer, it is striking that neither government nor energy companies appear to have shown sufficient appreciation of the legal issues involved.
The landowner’s consent The process of acquiring rights to drill and frack involves not only central and local government but also, critically, private individuals whose property will be affected. Oil and gas are vested in the Crown, and only the Crown can issue licences to explore for and extract them. The energy company will require both a licence from the Crown and planning permission from the local authority. But before it can start drilling or fracking it will also have to deal with, and in some cases obtain the consent of, those individuals whose land is affected by the proposed operations. Fortunately for landowners, their interests receive substantial protection under both common law and statute.
The cuius est solum principle The law of property in England and Wales recognizes the principle encapsulated in the latin tag: cuius est solum, eius est usque ad coelum et ad inferos. 1 (‘An owner of land is entitled to the surface itself and to everything above it and below it down to the centre of the earth.’) There are exceptions to the principle: it does not apply to the use of airspace above a certain height or to the rights of ownership to minerals vested in the Crown or lords of the manor. But those exceptions do not apply here, and where an energy company drills beneath ground belonging to another without his consent, it is committing an actionable trespass. It remains an actionable trespass even if the drilling is at so deep a level that it has no effect on the landowner’s occupation or enjoyment of the land, and it makes no difference that the landowner is unaware of it. If he later becomes aware of it, 1
In Scotland, landownership is a coelo usque ad centrum. So the law on this point, though not identical, is similar.
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The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.
he can sue the energy company for damages. If he becomes aware of it before the drilling passes under his land, or as it happens or after it happens, he could apply to court for an injunction to stop the trespass. There is, therefore, a crucial difference between public law rights and private law rights which the parties concerned must take into account. The energy company will acquire rights under public law to drill, and possibly to frack, when it has obtained the necessary licence from central government and planning consent from local government. But it will still need to acquire ancillary, private law rights of access to below surface land by obtaining the consent of any landowner beneath whose land its pipes run. A landowner entitled to rely on the cuius est solum principle could agree to grant the company ancillary rights on terms – involving payment - or he could refuse. Where there is lack of agreement or refusal, the company can apply to the Secretary of State who can decide if he supports the application and if so will refer it to the Chancery Division of the High Court. The court can decide what rights should be granted to the company and can fix levels of compensation, which include enhanced compensation awards and generous costs provisions for landowners which would be paid by the company. Where private agreement proves impossible, the process of obtaining court approval for an ancillary rights application is likely to prove time-consuming and expensive for both parties. At the end of the process, however, the landowner will be in the position where he has statutory protection against paying the costs of the company as well as a strong chance of the court requiring the company to pay his costs.
Fracking As a rule, fracking will occur where the target is gas embedded in the shale. And when fracking is intended, the energy company’s task of obtaining ancillary rights could be more onerous. Whereas access requirements to land are the same for fracking as for directional drilling, the land affected by fracking is likely to be more extensive than the land affected by drilling alone because the fractures may impact neighbouring sub-strata. 5 The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.
Owners of land whose surface lies above such sub-strata would not have been asked for access by the company; but they would clearly have an interest that operations emitting fracturing fluid from pipes under lands adjoining their own were conducted safely, and that the company should provide them with appropriate information about the site’s fracking activity. This, in turn, increases the number of landowners needing to be consulted by a local authority before permission for fracking is granted. It may also allow such owners to participate in an ancillary rights application to the court should a prefracking compensation agreement prove impossible.
Conclusions Landowners should realise that the cuius est solum principle puts them in a powerful position. This position can be exploited when an energy company drilling for oil or gas wishes to buy their land, or wants access over their land, or may run pipes beneath their land, or may intend to frack beneath nearby land which could have consequences for their land. Moreover, the rights to which the principle gives rise are proprietary rights which cannot be abrogated other than by primary legislation enacted by Parliament. Would such legislation be passed? Perhaps – but it would have to include some form of compulsory purchase provision which, so long as any risk of environmental damage remains, could well be in conflict with the Human Rights Act. If so, the enforceability of such legislation would be questionable. In short, landowners who have no wish to co-operate with energy companies could make life very difficult for them. Landowners who do wish to cooperate with them could make substantial profits.
Paul Stafford is a barrister specialising in property law at Ten Old Square, Lincoln’s Inn, London WC2A 3SU. w: www.tenoldsquare.com
e: clerks@tenoldsquare.com
t: 020 7405 0758
6 The right of Paul Stafford to be identified as the Author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patent Act 1988.