Underground Drilling: Consultation on Proposal for Underground Access for the Extraction of Gas, Oil or Geothermal Energy

by K&L Gates LLP

The UK government are currently inviting responses to the consultation paper issued in May into their proposals to introduce a statutory right of access to underground land (at a depth of 300 metres or below) in England in order to extract shale gas. This is the latest proposal by central government to support energy companies in the exploration and extraction of shale gas in order to improve energy security in the UK and will be followed by the launching of a new licensing round offering companies the rights to drill across the UK.

At present a company is required to obtain a right of access for underground drilling from the owner of the land, even though the owner has no mineral rights to the gas, which are vested in the Crown and thus no right to a share of revenues, generated by the development. Any company who fails to obtain such rights by agreement with the owner or through the courts will, according to recent case law (Bocardo SA v Star Energy UK Onshore Ltd 2010) commit a trespass if they commence drilling. This becomes problematical in the case of shale gas where typically drilling is both vertical and horizontal, as the need to negotiate with a number of landowners can frustrate, delay and/or significantly increase the cost of the development.

The legislative framework within which other industries including coal and electricity, obtain rights of access from landowners is set out in the consultation paper. A number of options considered by the government for obtaining rights of access underground to extract shale gas are highlighted in the consultation paper, ranging from do nothing, to the extension of compulsory purchase rights and the inclusion of this type of development as a nationally significant infrastructure project under the Planning Act 2008.

The consultation paper concludes that a statutory right of access to underground land, analogous to that enjoyed by the coal industry under s51 of the Coal Industry Act 1994 is the best solution. Under this Act licenced coal operators have the right of access to underground land for the purpose of coal mining operations without the requirement to pay compensation. It is proposed within the consultation paper that any statutory right of access to underground land for the extraction of shale gas would be subject to the payment of a one off voluntary contribution of £20,000 by the operators to the community, for each horizontal well extending more than 200 metres laterally. This would be coupled with an obligation to notify the public about the relevant area of underground land to be accessed. It is anticipated landowners will receive a nominal payment for these rights as land below depths of 300 metres underground is considered to be of little or no use to them.

An operator would only be able to exercise its statutory right to access underground land (300 metres or below) for the exploration of surface works or extraction of shale gas if all the necessary consents, including planning permission for the drilling rigs and other surface works and environmental permits e.g. for dealing with waste water have been obtained for the development from the appropriate regulators. Any drilling works above 300 metres will still require agreement with the owner or a court order granting such rights to an operator.

The government have invited consultation responses to the paper by 15 August 2014. Any legislative changes will be included in the Infrastructure Bill which was announced in the Queens Speech on 4 June 2014.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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